Overview of Mortgage Rates and 10-Year Yields
As we forecast the economic landscape for 2025, estimates suggest mortgage rates are likely to fall within the range of 5.75% to 7.25%. Concurrently, the 10-year Treasury yield is expected to fluctuate between 3.80% and 4.70%.
Recent trends show a decline in the 10-year yield, which has dropped from a peak of 4.43% to 4.24%. This decrease is contributing to a modest reduction in mortgage rates, offering some relief to individuals navigating a volatile market. However, mortgage spreads remain elevated compared to earlier values observed in 2025, indicating ongoing challenges.
The backdrop of softer economic indicators, including retail sales and labor statistics, contrasts with resilient metrics such as durable goods and new home sales. This resilience suggests that while some data may reflect the impacts of current trade tensions, broader economic fundamentals remain stable.
Continuous market evaluation will be critical, as fluctuations in bond yields and mortgage rates are largely influenced by these economic trends. There is cautious optimism that improvements in trade negotiations could foster market stabilization.
Analysis of Mortgage Spreads
Since 2022, mortgage spreads have consistently remained above historical averages, a trend exacerbated by crises such as the one involving Silicon Valley Bank in 2023. This disruption led to mortgage rates soaring to 8% during that time. However, improvements in spreads beginning in 2024 contributed to a decline in mortgage rates.
Looking ahead into 2025, while spreads have shown some improvements, recent market volatility has caused them to widen again. This has inhibited a more significant decrease in mortgage rates. If spreads were as unfavorable as they were in mid-2023, current mortgage rates would be approximately 0.68% higher. Conversely, a return to normal spread levels could result in rates being 0.62% to 0.82% lower than current figures.
Historically, mortgage spreads have typically ranged from 1.60% to 1.80%.
Trends in Purchase Applications
The recent rise in mortgage rates prompted expectations of a sharp decline in week-to-week and year-over-year purchase application statistics. While rates increased from 6.54% to 7.10%, the expected decline was less severe than anticipated. Observations will continue as rates have begun to settle slightly.
Despite these fluctuations, positive indicators are emerging. Historical data suggests that purchase application data tends to improve when mortgage rates drop from 6.64% to 6%. As of late April, purchase applications have demonstrated year-over-year positivity, providing a reassuring sign amid rising rates.
Pending Sales Insights
Current data from Altos regarding total pending sales indicates a nuanced picture. While year-over-year sales display slight growth, weekly figures reveal some cooling attributed to rising mortgage rates, rather than seasonal effects like the recent Easter holiday.
Pending sales data for recent years includes:
- 2025: 398,736
- 2024: 398,097
- 2023: 368,113
Weekly Housing Inventory Developments
One of the encouraging developments in the housing market through 2024 and 2025 is the uptick in housing inventory levels. Previously, there were concerns regarding the mortgage rate lockdown theory; however, this increase signifies progress towards a healthier market.
Recent inventory statistics have shown steady growth, indicating a positive shift:
- Week of April 18-25: Inventory rose from 719,400 to 731,989.
- Year-over-year increase for the same week: From 542,651 to 556,291.
- All-time inventory bottom was recorded in 2022 at 240,497.
Evaluating New Listings
The past two years presented challenges in listing trends, but there are signs of a favorable turnaround. Last year, projections indicated that new listings would stabilize at around 80,000 homes during peak seasonal months. While this goal was slightly missed by 5,000 listings, recent trends suggest we might be on track again.
New listing data for the previous week reflects:
- 2025: 69,891
- 2024: 72,089
- 2023: 63,236
Price Reduction Trends
Historically, about one-third of homes experience price cuts, a trend that underscores the dynamic nature of the housing market. As inventory levels increase and mortgage rates rise, many sellers are adjusting their property pricing.
In light of 2025 forecasts, a modest increase of approximately 1.77% in home prices is anticipated. This indicates another year with negative real price growth unless mortgage rates decrease toward the 6% mark.
Price-cut percentages recorded over recent weeks include:
- 2025: 35.6%
- 2024: 33%
- 2023: 29%
Looking Ahead: Upcoming Economic Data
The upcoming week is set to deliver significant economic reports, including job statistics, PCE inflation figures, and pending home sales. As market dynamics shift, the responses of the bond market to these reports will be closely monitored.
While jobless claims have held steady at the outset of 2025, expectations from economists suggest potential downturns in forthcoming data. Thus, while headlines can impact market conditions dramatically, close attention to these reports will provide crucial insights into the future trajectory of the economy.