Mortgage rates are lower this year compared to last, and while they haven’t dropped to 6% yet, many are wondering if we might see a pick-up in existing home sales driven by our early indicators. Today, I’m diving into this intriguing topic!
It’s important to note that my focus isn’t on last week’s existing home sales report, which far exceeded expectations – I delve into the reasons behind that big surprise in the latest episode of the HousingWire Daily podcast. I’m reviewing more recent data to figure out what is going on now.
Purchase application data
What a difference a year can make! Last year, when mortgage rates climbed from 6.63% to around 7.50%, it impacted the housing market negatively for a while. We saw 14 weeks of declining numbers, two weeks that stayed flat and only two weeks showing positive trends. Plus, there was no year-over-year growth to speak of. That’s a stark contrast to what we’re experiencing now. Here is what the weekly data shows in 2025:
- 4 positive readings
- 3 negative readings
- 3 flat prints
Overall, we’ve seen positive growth year over year with most of the weekly data in 2025. It’s not spectacular and it’s working from the lowest bar ever, but growth is growth. The purchase application data looks out for about 30 to 90 days, but I wouldn’t say demand is robust. However, if mortgage rates start heading toward 6% and stay there for a while, I think everyone would likely adjust their sales forecast up a bit — including ours, which is currently at 4.2 million. That would be my optimistic take for 2025 with lower mortgage rates.
Weekly pending sales
The latest weekly 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 the housing demand data lines, but we have recently seen some pick up on the weekly data with rates still elevated above 6.64%. If I shorten the duration, it will already show slight year-over-year growth. Our weekly pending contracts remain slightly negative, but they have been improving recently, as shown below.
Weekly pending contracts for last week over the past several years:
- 2025: 346,533
- 2024: 356,618
- 2023: 327,933
10-year yield and mortgage rates
In my 2025 forecast, I anticipate 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%
After another busy week filled with intriguing headlines, the Fed meeting and some softer economic data, we find ourselves at a pivotal point with mortgage rates and the 10-year yield. Last week, the 10-year yield tested a critical level again, bouncing off of it and closing around 4.25%.
As we discussed previously, the level of 4.15% to 4.18% will be a strong barrier to break below. Moving forward, we will likely need to see softer economic indicators, particularly regarding labor data, as labor weakness will get the attention of the Fed and the bond market.
Mortgage spreads
The current housing market would be significantly different if mortgage spreads hadn’t improved starting in 2024. Typically, these spreads range between 1.60% and 1.80%. If we were still dealing with the difficult mortgage spreads from 2023, mortgage rates would be 0.71% higher than they are now.
Conversely, if the spreads were similar to what we’ve observed in regular times, our current mortgage rates could be reduced by approximately 0.79% to 0.89%. Just imagine — if those spreads return to normal, we could see mortgage rates below 6% today.
Looking ahead to the rest of this year, I expect a modest decline in mortgage spreads, around 0.27% to 0.41%, working off the 2.54% average we saw in 2024. We’ve been close to reaching that forecast a few times this year but haven’t gotten there yet.
Weekly housing inventory data
Spring is here, and with it comes the promise of renewed active listings — it’s time for our annual inventory boost! The most uplifting aspect of the housing market in 2024 has been observing the active inventory make strides toward a more balanced level. While it hasn’t reached my goal of 2019 inventory levels yet, the progress we’ve seen is noteworthy. Last week was another good week for inventory.
- Weekly inventory change (March 14-March 21): Inventory rose from 655,626 to 668,155
- The same week last year (March 15-March 22): Inventory rose from 507,160 to 512,759
- The all-time inventory bottom was in 2022 at 240,497
- The inventory peak for 2024 was 739,434
- For some context, active listings for the same week in 2015 were 985,411
New listings data
While the growth of new listing data slowed last week, this year shines brighter than 2023 and 2024. Reflecting on last year, I truly believed we would reach at least 80,000 at minimum in the peak seasonal weeks, and although I missed that level by just 5,000 it was still a whiff. After a rocky start to the year, it feels like we’re finally inching closer to that elusive 80,000 minimum.
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. The growth 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: 69,701
- 2024: 60,328
- 2023: 49,993
Price-cut percentage
In an average year, approximately one-third of all homes see a price reduction, highlighting the natural fluctuations of the housing market. As inventory levels increase and mortgage rates stay elevated, it is noteworthy that the percentage of homes with price cuts has risen relative to times when rates were lower.
For the rest of 2025, I anticipate a modest increase in home prices of approximately 1.77%. This means another year of negative real home-price growth for me. Given the current availability of homes and elevated mortgage rates, this outlook is reasonable unless we see a decline in mortgage rates to around 6%. This shift in mortgage rates in 2024 was hampered by the 2.33% forecast last year, as it ended up being too low.
The percentage of price cuts is higher this year than last, which makes me believe I have a better shot of being right with my low growth price forecast in 2025.
The week ahead: Inflation, new home sales, pending home sales, Fed speeches and more
There’s plenty of data on the horizon this week and we all know that any headline about the trade war can shake up the markets! As we inch closer to Trump’s Liberation Day on April 2, the anticipation builds around what the government will do about tariff policies. The upcoming speeches from various Federal Reserve Presidents are set to shed some light on the ongoing drama and market sentiments. Also, don’t forget about jobless claims coming out this week. We saw a slight increase in jobless claims as the chart below shows.
On top of that, this week we will have new home sales and pending home sales data coming our way, which could provide valuable insights into the housing market with two national home price index reports. Let’s see what else unfolds — stay tuned!
