Recent fluctuations in the financial markets, particularly the surge in the 10-year yield, have raised concerns regarding mortgage rates and their subsequent effect on the housing market. Despite a positive trajectory in purchase application data and pending home sales contracts, the recent uptick in rates begs the question: has this finally disrupted the momentum we’ve witnessed this year?
Understanding Purchase Application Data
Imagine if the market were not burdened by the aftereffects of significant tariffs—housing data would have painted a more optimistic picture this year, despite prevailing high mortgage rates. The latest purchase application data indicates an encouraging trend, with a week-over-week growth of 9% and a year-over-year increase of 10%. Notably, mortgage rates have remained above 6.64% for much of this year.
In summary, the weekly purchase application data for the current year includes:
- 7 positive readings
- 3 negative readings
- 3 weeks with flat data
This year’s momentum starkly contrasts with last year when mortgage rates surged towards 7.50%. Last year, we observed a prolonged period of negative data prints corresponding to purchase applications. Anticipating a downturn in the coming week seems reasonable, given the historic pattern of purchase applications reacting negatively to rapid interest rate increases. However, if mortgage rates dip back to around 6%, the outlook for existing home sales in 2025 could improve significantly, thanks to a historically low baseline.
Recent Trends in Weekly Pending Sales
Current insights from Altos regarding weekly pending contract totals illustrate notable housing demand trends, showing positive year-over-year growth in pending sales. Typically, effective growth in housing demand coincides with mortgage rates approaching the 6% mark. Still, there has been recent improvement in weekly sales data:
Pending contracts for the past week are as follows:
- 2025: 377,633
- 2024: 371,457
- 2023: 335,017
10-Year Yield and Its Influence on Mortgage Rates
Looking ahead, predictions for mortgage rates in 2025 suggest they will fluctuate between 5.75% and 7.25%, while the 10-year yield is expected to hover between 3.80% and 4.70%. In prior discussions, it was indicated that the 10-year yield would struggle to remain below 4% without the implications of major tariffs. Recent market volatility, however, has raised alarms regarding potential spikes in yields, leading to stress within the bond market.
The current challenges in mortgage rates, attributed to this volatility, are expected to impact purchase applications in the near future. Stabilization in market conditions will be crucial for fostering a more reliable environment for both consumers and industry professionals.
Mortgage Spreads: Current Trends
Midway through 2024, improvements in mortgage spreads were evident, but recent market turbulence has negatively affected these spreads. Despite worsening conditions, current mortgage rates remain significantly lower than they would if spreads were as dire as observed in 2023. For context, had spread conditions mirrored those of 2023, mortgage rates could have approached 8%, fundamentally altering the housing market’s landscape this year.
Weekly Housing Inventory Overview
Spring has brought a welcome uptick in housing inventory levels, a positive development for the market. While we have not reached pre-2020 inventory levels, the increase is notable:
Recent inventory changes:
- Weekly Inventory change (April 4 – April 11): Rose from 691,197 to 702,434
- Corresponding week last year: Increased from 512,930 to 526,479
- All-time inventory low was observed in 2022 at 240,497
- Expected peak for 2024 was noted at 739,434
- For context, active listings in the same week in 2015 stood at 1,021,567
Trends in New Listings
The landscape for new listings remains promising for the housing market in 2025. Last year, an estimate of 80,000 homes listed during peak seasonal months was closely accurate. This year, it is projected that we will meet or exceed that target. Recent data illustrates the following new listing trends:
- 2025: 76,270
- 2024: 66,776
- 2023: 48,556
Analyzing Price Cuts in the Market
In typical market conditions, around one-third of homes experience price reductions. Current inventory growth and high mortgage rates have led to an increased number of homes adjusting their prices, indicative of evolving market dynamics. Recently, there has been a degree of stabilization in this trend. With rising mortgage rates, we will observe their potential ramifications on price adjustments in the coming weeks.
For the remainder of 2025, a modest home price increase of approximately 1.77% is anticipated, which still suggests negative real price growth. A substantial drop in mortgage rates to 6% could significantly reshape this projection. The data surrounding price cuts reinforces a cautious outlook for price growth in 2025:
- 2025: 35%
- 2024: 32%
- 2023: 30%
Looking Ahead: Awaiting Market Stability
As excitement persists regarding market dynamics, clarity remains essential. Recent economic data, including CPI and PPI inflation figures, have been overshadowed by other impactful events. Upcoming weeks will feature key insights from several Federal Reserve Presidents, as well as important retail sales and housing start data, critical metrics for market analysis.
Stay tuned for my upcoming podcast, where I’ll discuss a compelling topic: the potential for President Trump to dismiss Fed Chairman Jerome Powell, along with the implications of the latest developments affecting the economic landscape.
