10-year yield and mortgage rates
In my 2025 forecast, I anticipated the following ranges:
- Mortgage rates will be between 5.75% and 7.25%
- The 10-year yield will fluctuate between 3.80% and 4.70%
Two jobs Fridays ago, I discussed that if the Godzilla tariffs weren’t part of the equation, the 10-year yield should be trading at 4.35%. Consumption in the economy is still holding up and the labor triggers that I would need to see to talk more about a recession haven’t happened yet. After another jobs week which shows the labor market not breaking yet, the fact that the 10-year yield is near 4.35% isn’t a shock to me.
Now the question is what the economy will look like in a few months. This is why President Trump is talking about wanting lower rates. Even he knows that we can see economic disruptions with the trade war going on, especially with no deals in place. Last week on Thursday and Friday we saw economic data exceed estimates, causing the 10-year yield to rise from 4.14% to 4.31%, pushing mortgage rates higher.
Mortgage spreads
Mortgage spreads have been elevated since 2022, but have improved since their peak in 2023. However, recent market volatility has made the spreads worse since the lows we saw earlier this year.
If the spreads were as bad as they were at the peak of 2023, mortgage rates would currently be 0.56% % higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.94% to 1.14% lower than today’s level. That would mean sub-6 % mortgage rates today.
Historically, mortgage spreads should range between 1.60%-1.80%.
Purchase application data
Since Feb. 5, the purchase application data has demonstrated 13 consecutive weeks of positive year-over-year growth. This is particularly noteworthy given that it happened at the end of April, even with mortgage rates exceeding 6.64% for most of the year.
Additionally, despite a recent increase of over 50 basis points in mortgage rates, the persistence of positive year-over-year growth is impressive. However, the growth rate for purchase applications has significantly slowed and is approaching a flat or potentially negative growth year over year. We will observe the upcoming data release to determine if this positive streak continues. The chart below illustrates that it has been a favorable year for purchase application data on a year-over-year basis.
Here is the weekly data for 2025:
- 7 positive readings
- 6 negative readings
- 3 flat prints
Total pending sales
The latest weekly total pending contract data from Altos offers valuable insights into current trends in housing demand. Usually, it takes mortgage rates to trend closer to 6% to get real growth in housing. The data has been showing good progress with elevated rates. Last week, pending home sales from the National Association of Realtors (NAR) did show a big beat of estimates and our weekly data tends to be ahead of the NAR reports. Higher rates have been cooling down the purchase application data recently; the growth rate is cooling. However, for demand to hold up this well with elevated rates just shows that if we can get just toward 6% and stay there, we can grow sales, which has been my theme since early 2023.
Weekly pending sales for the last week over the past several years:
- 2025: 402,366
- 2024: 397,305
- 2023: 368,490
Weekly housing inventory data
The most encouraging development in the housing market for 2024 and 2025 is the increase in inventory — it’s essential for the housing market to operate more effectively in the long term. We have had a solid bounce-back in inventory growth from the Easter Holiday.
- Weekly inventory change (April 25-May 3): Inventory rose from 728,755 to 744,225
- The same week last year (April 26-May 4): Inventory rose from 556,291 to 559,961
- The all-time inventory bottom was in 2022 at 240,497
- The inventory peak for 2025 is 744,225
- For some context, active listings for the same week in 2015 were 1,081,867
New listings data
Another positive story for 2025 is that new listings data is growing and I am very close to getting my minimum call of 80,000 during the peak seasonal period. We have another nice snap back here from the Easter holiday.
To give you perspective, during the years of the housing bubble crash, new listings were soaring between 250,000 and 400,000 per week for many years. The growth we see in new listings data is just trying to return to normal, where the seasonal peaks range between 80,000 and 110,000 per week. The national new listing data for last week over the previous several years:
- 2025: 78,078
- 2024: 70,943
- 2023: 57,862
Price-cut percentage
In a typical year, about one-third of homes undergo price reductions, highlighting the housing market’s dynamic nature. As inventory levels increase and mortgage rates rise, many homeowners are making adjustments to their sale prices.
In my 2025 price forecast, I anticipated a modest increase in home prices of around 1.77%. This means yet another year of a negative real home price forecast for 2025. What can make my forecast wrong is a drop in mortgage rates to near 6%, which can make my forecast too low again. In 2024, my price forecast of 2.33% was incorrect as it was too low, and I lost it when mortgage rates headed toward 6% .
The increase in price cuts this year compared to last reinforces the validity of my conservative growth forecast for 2025. Below is a summary of the price cuts from previous weeks over the last few years:
- 2025: 36.5%
- 2024: 33%
- 2023: 29%
The week ahead: Global PMI, bond auctions and Fed speeches
This week, we will get the global PMI data and bond auctions. On Friday, several Fed presidents will speak, providing valuable insights. This is an exciting time as they each bring unique perspectives on managing the trade war, informed by the feedback they receive from businesses in their respective districts. Also, on Thursday, we have jobless claims data, which last week showed a big spike related to two states.
Also, we will see if the purchase application data can continue its 13-week winning streak of positive year-over-year data. This has been the most surprising housing data line for me in 2025, as mortgage rates have remained elevated.