Mortgage Rate Drop Boosts Housing Demand

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Analysis of Purchase Application Data

Recent trends in mortgage rates are making waves in the housing market, with current rates dipping to their lowest levels of the year last week. This shift is influencing the volume of purchase applications, which struggled last year due to rising mortgage costs that escalated from 6.63% to approximately 7.50%. The impact of these rising rates was significant, as evidenced by a prolonged decline in purchase applications that lasted for 18 weeks, featuring 14 weeks of consecutive downturns and minimal positive performances.

Conversely, 2025 has initiated a more optimistic trajectory, highlighting:

  • 6 weeks of positive growth in purchase applications
  • 3 weeks of negative readings
  • 3 weeks that remained unchanged

Encouragingly, many reports indicate a year-over-year increase in purchase applications for 2025, with a notable 9% growth observed last week. This upswing occurs even though mortgage rates have persistently remained above the 6.64% threshold until recently. Historical patterns suggest that significant improvements in application data manifest when rates dip below 6.64% and steer towards the 6% mark.

Review of Weekly Total Pending Sales

Recent insights from Altos regarding pending sales contracts reveal a budding demand for housing. Although typical growth in housing data usually coincides with mortgage rates nearing the 6% benchmark, recent observations indicate a positive trajectory in weekly sales data. The most recent figures for pending contracts are as follows:

  • 2025: 367,776 contracts
  • 2024: 363,834 contracts
  • 2023: 335,017 contracts

Both the growth in purchase applications and pending sales show that when mortgage rates move above the critical growth threshold, positive outcomes can still be anticipated. A recent dip below the 6.64% mark seems to have contributed to this trend.

Forecast: Mortgage Rates and 10-Year Yields

Looking forward into 2025, the forecast for mortgage rates is bounded between 5.75% and 7.25%, with the 10-year yield projected to vary between 3.80% and 4.70%. These predictions take into account recent fluctuations influenced by tariff developments that have impacted market stability, causing the yield to drop to approximately 3.87% in intraday trading. Without these tariffs, the yield would likely be around 4.35%, contributing to higher mortgage rates near 6.75%.

Market participants should remain attentive to economic news, particularly regarding tariffs, as they can significantly influence market perceptions and contribute to volatility.

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Mortgage Spread Trends

Mortgage spreads, which have shown positive trends since 2024, experienced setbacks last week due to market volatility. Despite less favorable spreads, mortgage rates have hit year-to-date lows. If spreads had held more favorably, current rates might have been around 5.75%. In a contrasting scenario where spreads reflected last year’s worst levels, rates could have been as high as 7.25%.

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Overview of Weekly Housing Inventory Data

As spring unfolds, inventory levels have started to see steady growth, which is a pivotal aspect of the housing landscape for 2024 and 2025. Current trends indicate:

  • Latest inventory levels surged from 675,558 to 691,197.
  • Compared to the same week last year, inventory decreased from 517,355 to 512,930.
  • All-time inventory low: 240,497 (2022).
  • 2024 inventory peak: 739,434.
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New Listings Data Insights

The arrival of new listings in the housing market remains a bright spot, with an anticipated trend of 80,000 homes being listed weekly during peak seasons. Recent data suggests:

  • 2025: 71,775 new listings
  • 2024: 54,769 new listings
  • 2023: 55,008 new listings

Such figures reflect a shift that is contributing to a more balanced market.

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Price Cut Trends

Historically, about one-third of homes typically experience price reductions, a trend that has intensified with rising inventory levels and higher mortgage rates. For the remainder of 2025, a modest increase of approximately 1.77% in home prices is projected. However, this reflects ongoing negative growth in real home prices, primarily due to the current market conditions.

  • 2025: 35% of homes saw price cuts
  • 2024: 32%
  • 2023: 30%
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Looking Ahead: Monitoring Market Conditions

The upcoming week will be crucial for inflation indicators, particularly CPI and PPI data, as well as federal speeches that may affect market sentiment. However, amidst the current volatility, the reaction of the bond market may overshadow these factors. What is needed is a restoration of stability in financial markets, particularly within credit sectors, to foster a more predictable economic environment.

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