10-year yield and mortgage rates
In my 2025 forecast, I anticipated the following ranges:
- Mortgage rates between 5.75% and 7.25%
- The 10-year yield fluctuates between 3.80% and 4.70%
We had a lot of drama again last week, with speeches by Federal Reserve Chairman Jerome Powell and other regional Fed presidents, and then President Trump starting to implement the shadow Fed president protocol. With all the Fed drama, the 10-year yield declined for the week and mortgage rates also fell.
However, housing data tends to perform better when mortgage rates move lower from 6.64% toward 6%. We are getting closer, as mortgage rates fell from 6.84% to 6.72% by the end of the week. Additionally, the 10-year yield fell to a peak of around 4.40% and then to a weekly low of around 4.23% this week, indicating some movement to the downside. Now with the move lower in rates, we have seen some stabilization in our weekly data lines.
Mortgage spreads
Mortgage spreads have been elevated since 2022 but have improved since their peak in 2023. We experienced some drama with the spreads in April as the markets dealt with the tariffs, but things have improved as the market has calmed down. It’s been critical 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 0.65% higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.85% to 0.65% lower than today’s level. Historically, mortgage spreads have typically ranged between 1.60% and 1.80%.
Purchase application data
The most confusing data line in America today is the purchase application data related to the existing home sales market. It has now experienced 21 weeks of year-over-year growth, with the last eight weeks showing double-digit year-over-year growth. However, nobody wants to discuss this because they don’t understand what it means.
To keep it simple, since the bar is so low over the next five months, we will show year-over-year growth in sales, even if home sales data remains flat. Since we are working from record-low levels, simply having mortgage rates fall this year, combined with new listing data growing year over year, has boosted this index to show double-digit growth over the last eight weeks. The percentage of cash buyers in sales is falling, but mortgage buyers have been applying in a pro-growth manner in 2025. Just look at it as small year-over-year growth over the next five months.
Here is the weekly data for 2025:
- 11 positive readings
- 9 negative readings
- 4 flat prints
- 21 straight weeks of positive year-over-year data
Weekly pending sales
Our weekly pending home sales provide a week-to-week glimpse into the data; however, this data line can also be impacted by holidays and any short-term shocks. Still, last week’s data showed year-over-year growth in our weekly pending sales and we are close to year-to-date highs, showing that data has stayed firm, without mortgage rates breaking below 6.64% and heading toward 6%
Weekly pending sales for last week over the last two years:
- 2025: 74,130
- 2024: 66,645
Total pending sales
The latest weekly data on total pending sales from Altos offers valuable insights into current trends in housing demand. Typically, mortgage rates around 6% are necessary for significant growth in the housing market. For this week, our total pending home sales data decreased slightly to levels below those of last year.
Weekly pending sales for the last week over the past several years:
- 2025: 396,741
- 2024: 397,765
Weekly housing inventory data
I couldn’t be happier to see the active inventory grow as it has this year. Just getting the active inventory back to the bottom of 2019 levels is a healthy development, as I wrote about here. Year over year, inventory continues to increase at an impressive rate, up 29%. However, over the past two weeks, inventory growth has slowed as mortgage rates have fallen closer to the year-to-date lows.
I will keep an eye out for this throughout the rest of the year if mortgage rates fall further. The next two weeks of our weekly data will be hit with the July 4th holiday.
- Weekly inventory change (June 20-June 27): Inventory rose from 828,890 to 831,110
- The same week last year (June 21-June 28): Inventory rose from 634,120 to 645,713
New listings data
The new listing data had a nice snap-back last week, reaching above 80,000 again, which is the minimum target level I set for 2025. We haven’t been able to achieve back-to-back weeks of growth above this level, which has been disappointing, but I will take the inventory victories as they come. This data line will get impacted over the next two weeks as well.
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. Here’s last week’s new listings data over the past two years:
- 2025: 81,063
- 2024: 70,553
Price-cut percentage
In a typical year, approximately one-third of homes experience price reductions, highlighting the dynamic nature of the housing market. Homeowners adjust their sale prices as inventory levels rise and mortgage rates stay elevated. This data line has stabilized over the last two weeks, as mortgage rates have fallen.
For my 2025 price forecast, I anticipated a modest increase in home prices of approximately 1.77%. This suggests that 2025 will likely see negative real home prices again. In 2024, my forecast of a 2.33% increase proved inaccurate, primarily because rates fell to around 6% and demand improved in the second half of the year. As a result, home prices increased by 4% in 2024.
The rise in price reductions this year compared to last year reinforces my cautious growth forecast for 2025. Here are the percentages of homes that saw price reductions in the previous week in the previous two years:
The week ahead: Jobs week!
Jobs, jobs, jobs. It’s a short week because of the holiday, but a huge week because this is the last jobs week before the next Fed meeting. As pressure mounts on Jerome Powell to cut rates, the labor market must hold up for the Fed to maintain its wait-and-see monetary policy. While the continuing jobless claims data has been rising toward three-year highs, the weekly initial claims data is still not at a level that concerns the Fed yet.
This is an important week because if the labor report shows weakness, it could push the 10-year yield low enough to bring mortgage rates below 6.64%, which could increase demand. However, the bond market needs to believe that the labor market is weakening for this to happen.
