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%
The wild week kicked off last Sunday night when FHFA Chairman Bill Pulte boldly urged Powell to slash rates, declaring that “enough is enough.” Then Trump announced he wants to take the GSEs public with an implicit guarantee. Later on in the week, President Trump shared my article on the day he met with Fed Chairman Jerome Powell, emphasizing the urgent need for a rate cut to the Fed Chairman.
But that’s not all — Trump faced a setback in court regarding his Godzilla tariffs, only to bounce back and issue a staggering 50% tariff on steel late Friday night. What a whirlwind of developments! To top it off, we had tame PCE inflation data released on Friday, the market yawned at that and the 10-year yield closed the week around 4.40%, while mortgage rates finished slightly lower.
There’s even more news to unpack, so tune into the HousingWire Daily podcast on Monday.
Mortgage spreads
Mortgage spreads have been elevated since 2022 but have improved since their peak in 2023. We experienced some drama with the spreads as the markets dealt with the tariffs, but things have improved as the market has calmed down. It’s been essential to see spreads get better on days when the 10-year yield goes up because that limits the damage of a higher 10-year yield.
If the spreads were as bad as they were at the peak of 2023, mortgage rates would currently be 0.67% higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.83% to 0.63% % lower than today’s level. Historically, mortgage spreads have typically ranged between 1.60% and 1.80%.
Purchase application data
Last week, purchase application data increased by 18% year-over-year, up 3% from the previous week. The most unloved economic data of 2025 is likely due to confusion; I recently discussed this data line in this podcast. We have a 17-week winning streak on positive year-over-year growth and four straight weeks of double-digit growth during the peak seasonal month of May. Traditionally, after May, volumes tend to fall.
Here is the weekly data for 2025:
- 10 positive readings
- 7 negative readings
- 3 flat prints
- 17 straight weeks of positive year-over-year data
Total pending sales
The latest weekly data on total pending sales from Altos provides valuable insights into current trends in housing demand. Typically, mortgage rates near 6% are required to foster real growth in the housing market. While total pending home sales are slightly higher than last year, it is surprising to see this data remain steady despite elevated rates in 2025. We are clearly at the seasonal peak period for this data line in terms of volumes and will soon see the seasonal decline.
Weekly pending sales for the last week over the past several years:
- 2025: 413,771
- 2024: 406,136
Weekly pending sales
As I noted last week, I have added weekly pending sales data to this tracker. While this data provides the most up-to-date week-to-week information, it can be affected by the calendar year’s volatility and any events that may occur. Due to the Memorial Day weekend, this data line was affected, so that we will have a better idea of its performance in two weeks.
Weekly pending sales for last week over the past several years:
- 2025: 72,312
- 2024: 62,919
Weekly housing inventory data
The most exciting development in the housing market for 2024 and 2025 is the increase in inventory. Inventory needs to return to pre-pandemic levels for the housing market to operate more effectively. The seasonal increase in inventory is much needed as the country is working its way back to normal. Again, once we get to 2019 levels, all the low inventory talk goes away. For our data lines, we have reached the bottom end of the 2019 inventory.
- Weekly inventory change (May 23-May 30): Inventory rose from 787,049 to 803,519
- The same week last year (May 24-May 31): Inventory rose from 594,584 to 604,922
New listings data
As inventory has grown, we’ve finally gotten out of the two-year drought of new listing data, and we’re back above 80,000 per week during the seasonal peak months. I had forecasted this for last year, but it didn’t happen. I kept that forecast for 2025, and we are here today with the second print over 80,000. This data line, as it always does, gets impacted by holiday weekends; we should see an increase next week.
To give you some perspective, during the years of the housing bubble crash, new listings were soaring between 250,000 and 400,000 per week for many years.
- 2025: 70,421
- 2024: 63,463
Price-cut percentage
In a typical year, about one-third of homes experience price reductions, highlighting the housing market’s dynamic nature. Many homeowners adjust their sale prices as inventory levels rise and mortgage rates stay elevated.
For my 2025 price forecast, I anticipate a modest increase in home prices of approximately 1.77%. This suggests that 2025 will again see a negative real home price forecast. In 2024, my forecast of a 2.33% increase proved inaccurate, primarily because mortgage rates fell toward 6% and demand improved in the second half of 2024. As a result, home prices ended up increasing by 4% in 2024.
The rise in price reductions this year compared to last year reinforces my cautious growth forecast for 2025.
The week ahead: Jobs week!
As we approach jobs week, it’s an important time for economic indicators. Last week, we received a rather subdued PCE inflation report with headline PCE recorded at 2.1%, which didn’t seem to prompt much reaction from the bond market. However, the labor data remains a crucial focus for both the Federal Reserve and bond market participants.
Fed President Waller will speak on Monday, and we have some PMI data to consider. Although the mortgage market remained calm last week, the upcoming week may bring some volatility.
