Lower mortgage rates pushed inventory lower in August

Weekly housing inventory data

In recent years, our weekly inventory data typically reached its highest point in October or November, which is later than in the pre-COVID era. However, around mid-June, when mortgage rates began to decline, I observed a slight shift in the data. If you had asked me whether I expected inventory to decrease in August, given that mortgage rates were still at 6.50% and higher, I would have said no. Yet, that is exactly what occurred.

Currently, year-over-year inventory growth has dropped from recent highs of 33% to 22%, despite mortgage rates not yet approaching 6%. If mortgage rates had been trending toward 6% earlier in the year alongside the level of inventory growth we experienced, it wouldn’t have surprised me. However, that didn’t happen. I will continue to monitor this situation for the remainder of the year. 

Last week, inventory rose just a little: 

• Weekly inventory change (Aug. 22-Aug. 29): Inventory fell from 861,238 to 860,728 
• The same week last year (Aug. 23-Aug. 30): Inventory rose from 698,161 to 704,654

Note: This is a holiday weekend so the housing data next week will impacted by that, but last week the data looked normal.

New listings data

The new listings data peaked during the week of May 23 this year, reaching a total of 83,143 listings. Since then, this number has been gradually declining. Initially, I was excited to reach my target of 80,000 listings for 2025, something I miscalculated the previous year. However, we haven’t seen consecutive weeks with listings above 80,000 during the seasonal peak period, which was somewhat disappointing. We are now entering the traditional seasonal decline.

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: 63,761
• 2024: 59,566

Price-cut percentage

In an average year, around one-third of homes experience price reductions, which is a common occurrence in the housing market. Homeowners often lower their sale prices when inventory levels increase and mortgage rates remain high. As a result, with more homes available and higher rates, the percentage of price reductions is greater than it was last year. This has been another great story for housing in 2025, as the housing market has become a much more friendly market for buyers in 2025. 

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. This data line growth rate has also cooled down recently.

Here are the percentages of homes that saw price reductions last week in the past few years:

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 fluctuating between 3.80% and 4.70%

During a week when many expected interest rates and bond yields to rise due to the ongoing drama surrounding the potential firing of Fed Governor Lisa Cook, we actually saw the lowest mortgage rates of the year. This has surprised a lot of people. I discussed this topic in the latest episode of the HousingWire Daily podcast, and even a significant inflation report on Friday did not lead to higher rates.

While the 10-year yield didn’t experience dramatic fluctuations, the fact that it decreased during the week and stayed below 4.32% did catch some by surprise. Next week is jobs week, so we can anticipate a lot of important data that will impact both the Federal Reserve and the markets.

Mortgage spreads

As always in 2025, we should appreciate the mortgage spreads. This year has seen favorable pricing largely due to improvements in mortgage spreads compared to the levels of 2023 and 2024. As long as there aren’t any major market disruptions and the Federal Reserve continues to cut rates toward neutral, this trend should continue.

If the spreads were as bad as they were at the peak of 2023, mortgage rates would currently be 0.80% higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.50%-070% lower than today’s level. Historically, mortgage spreads have ranged between 1.60% and 1.80%.

The best levels of normal spreads would mean mortgage rates at 5.80% % to 6.00% today, a notable difference.

Purchase application data

We’ve had our first month of testing the housing data with rates under 6.64% which has been the key level in the past. The data passed with flying colors, as we saw four straight weeks of positive weekly and year-over-year data. This typically occurs when rates fall below 6.64% and head toward 6%. I wrote about this last week as well. We saw 2% week-to-week growth and 25% year-over-year growth. We typically need to see week-to-week growth for 12-14 weeks to achieve something material, but it’s a good start. 

Here is the weekly data for 2025 so far:

• 16 positive readings
• 11 negative readings
• 6 flat prints
• 30 straight weeks of positive year-over-year data
• 17 consecutive weeks of double-digit growth year over year 

Total pending sales

The latest total pending sales data from HousingWire Data provides valuable insights into current trends in housing demand. Last year, we observed a significant shift when mortgage rates decreased from 6.64% to around 6%. While we haven’t reached 6% yet, the recent data with higher rates has shown slight year-over-year growth, and that trend has continued. 

Total pending sales: 

• 2025: 376,916
• 2024: 365,909

Weekly pending sales

Our weekly pending home sales provide a week-to-week glimpse into the data; however, this data line can be impacted by holidays and any short-term shocks, so expect next week’s data to take a big hit due to Labor Day Weekend. We are still showing slight year-over-year growth in this data line. The pending sales data is included in the existing home sales report 30-60 days prior.

Weekly pending sales for last week:

• 2025: 65,701
• 2024: 64,255

The week ahead: Jobs week!

It’s jobs week! This is a significant one as it’s the last jobs report before the Federal Reserve meets in September. The only reason the Fed might not cut rates during that meeting is if this week’s jobs report is impressive.

We have four labor reports scheduled this week, along with other economic data and statements from Federal Reserve members. The Lisa Cook story could take some more twists this week as well. So, just buckle up, folks, this week might be one of the wildest weeks yet in 2025.