Recent trends in mortgage rates and the 10-year yield reveal an evolving landscape for the housing market. Forecasts for 2025 suggest mortgage rates will fall within a range of 5.75% to 7.25%, while the 10-year yield is expected to fluctuate between 3.80% and 4.70%. The recent week saw a notable decrease in both the 10-year yield and mortgage rates, attributed largely to comments from Federal Reserve Chairman Jerome Powell and other regional Fed presidents. The 10-year yield dipped, indicating some easing in financial conditions.
Mortgage rates fell from 6.84% to 6.72%, a move welcomed by prospective homebuyers. Historical data shows that housing demand tends to thrive when mortgage rates decrease towards the 6% mark. This improvement can be observed in the purchase application data, which has demonstrated year-over-year growth for 21 consecutive weeks, with double-digit increases over the last eight weeks. This uptrend in applications suggests a positive shift in market sentiment toward home buying.
Moreover, mortgage spreads have generally improved since their peak in 2023. While these spreads had been challenging due to market volatility, recent data indicate better conditions, saving homebuyers approximately 0.65% on current mortgage rates compared to the peak.
The weekly pending home sales numbers also illustrate a resilient market, showing a year-over-year increase despite slight dips in total pending sales compared to last year. As of last week, pending sales stood at 74,130 compared to 66,645 in the same week last year.
Inventory levels are exhibiting positive growth, up 29% year-over-year. This increase is essential as it helps stabilize the housing market, although recent weeks have seen a slowdown in this growth aligned with falling mortgage rates.
New listing data has seen a welcome surge, surpassing the 80,000 mark, which is crucial for enhancing available inventory. While this is encouraging, the new listings need consistent growth for sustained market health.
As for home prices, a modest forecast indicates an expected increase of about 1.77% in 2025, following a more significant rise of 4% in 2024. Up to 40% of homes have recently undergone price reductions, suggesting an adjustment phase in the market amidst prevailing economic conditions.
Looking ahead, the upcoming jobs report will be pivotal. A weaker labor market could lead to a further decline in the 10-year yield, bringing mortgage rates below 6.64%, potentially stoking demand among buyers. The preliminary claims data remains stable but will be closely scrutinized as any changes could shift Fed policy in the coming weeks.
Overall, despite some challenges, the housing market shows signs of resilience and adaptability. The interplay of falling mortgage rates and increased inventory offers a glimmer of hope for homebuyers, suggesting that market stability may be within reach as 2025 unfolds.