Where do mortgage rates go from here?

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%

Now the 10-year yield had a noticeable move on Friday as it was trading around 4.34% before the Jackson Hole comments from Powell came out, and then it drove bond yields down 10 basis points before closing out at 4.26%.

However, we still haven’t been able to break under 4.18% on the 10-year yield, despite a dovish stance from the Fed that the labor market is finally on its mind after the last jobs report. This tells me that the market really needs to see more economic weakness to drive yields and rates much lower. In two weeks we will have the final jobs week reports for the Fed to mull over before their September meeting. In a special Saturday episode of the HousingWire Daily podcast, I tackle this question about where mortgage rates are going.

Mortgage spreads

If you notice an improvement in mortgage spreads, take a moment to celebrate it because this improvement helped mortgage rates reach year-to-date lows this week. I predicted a decrease in spreads starting in 2024 based on the history of mortgage spreads. We basically hit my target level this week. However, some people in America believe that mortgage spreads could never improve without the Federal Reserve purchasing mortgage-backed securities (MBS) and might even worsen. These people likely lack a historical perspective on this issue and may belong to a group that pessimistically predicts doom always.

If the spreads were as bad as they were at the peak of 2023, mortgage rates would currently be 0.84% higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.46%-0.66% 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 5.86% % to 6.06% today, a notable difference.

Purchase application data

We have finally broken under the key level of 6.64% mortgage rates. Since 2022, any time rates drop from 6.64% down toward 6%, housing data gets better. We have had three weeks now with mortgage rates below 6.64% and all three weeks have shown positive week-to-week and year-over-year data for purchase apps. The week-to-week growth has been mild compared to the year-over-year growth. Last week, purchase apps were up 0.1% week to week and 23% year over year. 

Here is the weekly data for 2025 so far:

• 15 positive readings
• 11 negative readings
• 6 flat prints
• 29 straight weeks of positive year-over-year data
• 16 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%. We haven’t gotten close to 6% mortgage rates yet, but our total pending sales data has consistently shown slight year-over-year growth for sometime now. 

Total pending sales: 

• 2025: 376,916
• 2024: 367,527

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. We are still showing slight year-over-year growth in this data line. The pending sales data hits the existing home sales report 30-60 days out.

Weekly pending sales for last week:

• 2025: 66,711
• 2024: 65,267

Weekly housing inventory data

The surprising situation regarding inventory is that with just one week remaining, we could end up with a negative month of inventory in August. This is unusual, as inventory typically reaches its peak in October and November. Over the past two weeks, I had hoped to see some recovery in inventory levels, but last week saw very little growth, resulting in a slow week for inventory.

Now, the year-over-year inventory growth has gone from 33% down toward 22%, and this is happening without mortgage rates getting near 6%. Still, the best story for housing this year has been the inventory growth, which has cooled down home prices and helped housing affordability.

Last week, inventory rose just a little: 

• Weekly inventory change (Aug. 15-Aug. 22): Inventory rose from 860,068 to 861,238
• The same week last year (Aug. 16-Aug. 23): Inventory rose from 698,161 to 704,654

New listings data

The new listings data reached its peak for 2025 during the week of May 23, totaling 83,143 listings. Since that time, it has been trending slowly lower. We are in the seasonal decline period, and once again in 2025 — like what we saw from 2020-2024 — we haven’t seen the seller stress that so many fake housing experts predicted for many years. 

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: 66,819
• 2024: 64,817 

Price-cut percentage

In an average year, around one-third of homes see price reductions, which is a regular part of 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.

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:

The week ahead: Inflation, new home sales, pending home sales, home prices and more

We have a busy week ahead with several important economic data releases, including new home sales, pending home sales and home-price data. The Federal Reserve’s main inflation report, the PCE inflation data, will also be released this week. Additionally, we have bond auctions scheduled and comments from Fed members.

Now, more than ever, the critical jobless claims data will be significant, since this is the very last line of defense the Federal Reserve has to keep policy modestly restrictive. This week’s jobless claims data did rise.

We had a big week after the Fed statements at Jackson Hole, but now we know what to look for if we want to see lower mortgage rates. It’s all about labor data over inflation.