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Last week, the housing data demonstrated stability even as we approach potential tariff enforcements. Mortgage rates have remained largely unchanged, and there has been a slight decrease in housing inventory. Furthermore, pending contracts reflected a modest year-over-year decline, while purchase application data remained flat from week to week. At this juncture, it’s important to monitor whether the significant tariff plans announced by the Trump administration will be enacted, something I discussed here.
10-year yield and mortgage rates
My 2025 forecast includes:
- A range for mortgage rates between 7.25%-5.75%
- A range for the 10-year yield between 4.70%-3.80%
The 10-year yield closed the week at 4.54%. Despite news of larger tariffs looming, we only experienced some mild volatility on Friday due to confusion regarding the tariffs. The 10-year yield did rise from 4.51% to roughly 4.58% before falling a few basis points toward the close of the day. In reality, mortgage rates did not change much over the past week even with all the news headlines.
Mortgage spreads
A true blessing over the last year is that mortgage spreads improved and still are much better this week than the peak mortgage spread of 2023. If we had the mortgage spreads of 2023, mortgage rates would be closer to 8% today rather than near 7%.
If we were to apply the worst spread levels from 2023 to today’s mortgage rates, we would see an increase of an additional 0.72%. This could lead to headlines questioning whether mortgage rates might surpass 8%. Fortunately, that is not the case. In fact, if mortgage spreads were at their typical levels, we would see mortgage rates approximately 0.81% to 0.94% lower than current rates. This would bring mortgage rates down near 6%, which would undoubtedly drive a strong recovery in home sales.
In my 2025 forecast, I predicted that average spreads would improve to between 0.27% and 0.41%, a positive reduction from the 2.54% average in 2024. We are on track to achieve this target spread range and if we can achieve that 0.27%-0.41% improvement in spreads, it will be helpful when the 10-year yield falls. The key thing to remember is that mortgage rates would be a lot worse if the spreads did not improve in 2024 and now in 2025.
Purchase application data
As we begin the year, the purchase application data has shown a mild positive trend, despite elevated mortgage rates. Here’s a summary of the recent data: Â
- 2 positive readings Â
- 1 flat reading Â
Last week, the weekly data was flat, but there was a decline of 4% year over year. Historically, when mortgage rates are high, the purchase application data tends to reflect negative trends. For instance, last year, the purchase application data showed 14 negative readings, 2 positive readings, and 2 flat readings when mortgage rates ranged between 6.75% and 7.50%.
We will keep a close eye on the data in February and we will be discussing this and other housing economic topics at our big Housing Economic Summit Feb. 26 in Dallas.
Weekly pending sales
The latest weekly pending contract data from Altos Research offers valuable insights into current trends in housing demand. This dataset has shown a notable improvement since the summer of 2024, primarily fueled by a decrease in mortgage rates, making home-buying more affordable for many consumers. Compared to the same time frame in 2022 and 2023, the data reflects a stronger housing market over the last 12 weeks of 2024.
However, I want to note that in recent weeks, we have seen negative year-over-year growth when comparing our current figures last year. This is nothing too big, but it is a slight decline. However, mortgage rates rising from 6% to 7.25% did zap some of the demand from the housing market.
We are still showing higher growth versus 2023 levels. This trend warrants careful monitoring, especially in February.
Weekly pending contracts for the past week over the past several years:
- 2025: 282,172
- 2024: 287,779
- 2023: 271,842
Weekly housing inventory data
The best story for me in 2024 was inventory growth as we were working our way back to normal. That story has continued in 2025, even though we saw a slight decline in housing inventory this week. This is very normal, and we will see the seasonal bottom soon and then the traditional seasonal increase for spring.Â
- Weekly inventory change (Jan. 24-Jan. 31): Inventory fell from 636,580 to 634,979
- The same week last year (Jan. 26Â -Feb. 2): Inventory fell from 503,192 to 497,347
- 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 936,263
New listings data
Our new listing data from Altos Research reflects homes that come to the market without an immediate contract, providing us with a real-time view of any selling pressure in the market. Over the past five years, we have seen the lowest activity levels in history. This year, we should get to regular new listings data above 80,000 per week during the peak seasonal months of May, June and July. I made that call last year but fell short by about 5,000 per week.
Note: during the housing bubble crash years, this data line was running between 250,000-400,000 per week. The new listing data for last week over the last several years:
- 2025: 48,886
- 2024: 44,162
- 2023: 42,843
Price-cut percentage
In an average year, it’s typical for about one-third of all homes to experience a price cut, which reflects the usual dynamics of the housing market. Last year, I had a low forecast of only 2.33% nominal price growth, which turned out to be too low. For 2025, I am forecasting growth of 1.77% this year, indicating another year of negative real home-price growth. If you examine the data, it shows that the percentage of price cuts is already forming a bottom. This trend is due to a combination of higher inventory and increased interest rates.
Price cut percentages for last week over the previous several years:
- 2025: 33.09%
- 2024: 31%
- 2023: 33%
The week ahead: Buckle up, it’s tariff and jobs week!
We have a busy week ahead! First, we’ll find out what tariffs are in place and whether they will be enforced or not. I recorded an episode of the HousingWire Daily podcast on Friday that will air on Monday, discussing this topic.
More importantly, it’s jobs week! We have four reports coming out, culminating in the significant Jobs Friday report. Last week, we received data on jobless claims, and it showed improvement.
This week may be much more volatile compared to last week. Just remember to ignore the noise until you see something in writing or in an economic report. We will be here every day this week to help make sense of it all.
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