Mortgage demand still staying firm with elevated rates

Purchase application data

We observed a significant rebound in this data line last week after experiencing three consecutive weeks of week-to-week declines while maintaining positive year-over-year figures. Purchase applications increased by 11% week over week and 13% year over year. I focus on this index from the second week of January to the first week of May. Next week, we’ll see if we can achieve a 100% positive year-over-year data run during the heat months on this index. Tradtionally, total volumes tend to fall after May.

Here is the weekly purchase application data for 2025 so far:

• 8 positive readings
• 6 negative readings
• 3 flat prints

I go into more detail on why we are seeing this type of growth in data in 2025 in this recent article.

Total pending sales

The latest weekly total pending sales 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 housing. The total pending home sales data is slowing down, which shows some of the impact of higher rates, but not too much damage has been done. We must remember that mortgage rates moved higher at the start of April, and while rates above 7% didn’t last long, we saw some slowing down in the data. Still, home sales stayed firm compared to last year, with elevated rates. 

Weekly pending sales for the last week over the past several years:

• 2025: 398,653
• 2024: 393,788
• 2023: 368,490

10-year yield and mortgage rates

In my 2025 forecast, I anticipated 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%

The 10-year yield ended the week up, as we all are waiting to hear about what comes out of trade talks with China this weekend. We received positive jobless claims data this week and had a significant bond auction on Thursday. It’s encouraging to note that mortgage spreads are improving on days when bond yields rise, especially during substantial increases. Despite some fluctuations in the 10-year yield over the past week, mortgage rates remained relatively stable.

Mortgage spreads

Mortgage spreads have been elevated since 2022 but have improved since their peak in 2023. However, recent market volatility has worsened the spreads, which is typically the case historically. On a positive note, as the markets have been behaving better, the spreads have improved, which is good news, especially on days when the 10-year yield rises. 

If the spreads were as bad as they were at the peak of 2023, mortgage rates would currently be 0.66% % higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.64% to 0.84% lower than today’s level. That would mean nearly 6% mortgage rates. Historically, mortgage spreads should range between 1.60%-1.80%.

Weekly housing inventory data

The most encouraging development in the housing market for 2024 and 2025 is the increase in inventory. For the housing market to operate more effectively in the long term, we needed inventory to return to pre-pandemic levels. The seasonal increase in inventory is much needed as the country is working its way back to normal.

• Weekly inventory change (May 3-May 9): Inventory rose from 744,225 to 755,895
• The same week last year (May 4-May 10): Inventory rose from 556,291 to 568,557
• The all-time inventory bottom was in 2022 at 240,497
• The inventory peak for 2025 is 755,895
• For some context, active listings for the same week in 2015 were 1,109,727

New listings data

It finally happened—we recorded over 80,000 new listings! Last year, I predicted that the new listings data would easily reach 80,000 during the seasonal peak weeks, but that didn’t happen. In fact, the past two years have had the lowest new listings ever recorded in history. However, I held firm to that prediction again this year, and we finally achieved it in May 2025.

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 the market 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: 80,338
• 2024: 68,793
• 2023: 61,911

Price-cut percentage

In a typical year, about one-third of homes experience price reductions, highlighting the housing market’s dynamic nature. As inventory levels rise and mortgage rates increase, many homeowners are adjusting their sale prices. 

For my 2025 price forecast, I anticipate a modest increase in home prices of approximately 1.77%. This suggests that 2025 may again see a negative real home price forecast. A potential factor that could lead to an upward adjustment in my forecast is a decrease in mortgage rates to around 6%, which could make my estimates too low once more.

In 2024, my forecast of a 2.33% increase turned out to be inaccurate because it was too low, primarily due to mortgage rates heading toward 6%.

The rise in price reductions this year compared to last year reinforces my cautious growth forecast for 2025. Below is a summary of the price cuts from previous weeks over the last few years:

• 2025: 36.7%
• 2024: 33%
• 2023: 29%

The week ahead: China trade news, inflation week, housing starts and more

We have an important week ahead. We will receive updates on the outcome of the trade talks with China. Additionally, several Federal Reserve Presidents will be speaking. It’s also inflation week, and we will have housing starts data. As always, jobless claims data will be released on Thursday morning. Last week, we observed a decline in the number of jobless claims.

This week’s key focus is on observing how the bond and stock markets respond to trade news. It’s encouraging that some deal discussions occur, as the world was unprepared for Godzilla tariffs. We should also monitor whether the purchase application data can continue its positive year-over-year trend.