Market Stability Amidst Turbulence: Analyzing Recent Trends in Mortgage Rates and Housing Data

During one of the most tumultuous weeks in recent financial history, mortgage interest rates surprisingly held steady, contrasting sharply with the chaos triggered by the recent surge in tariffs. This unexpected stability raises questions about the longevity of this calm-will it persist or give way to further volatility?

Despite the persistent rise in mortgage rates, the absence of extreme daily fluctuations has fostered a more predictable environment for homebuyers and industry professionals alike. Let’s delve into the key developments from this week to understand the current landscape better.

Interest Rate Trends and the 10-Year Treasury Yield

Looking ahead to 2025, my projections indicated that mortgage rates would hover between 5.75% and 7.25%, while the 10-year Treasury yield was expected to fluctuate within a 3.80% to 4.70% range.

The week’s turbulence began unexpectedly last Sunday evening when FHFA Chair Bill Pulte publicly urged Federal Reserve Chair Jerome Powell to halt rate hikes, stating, “enough is enough.” Meanwhile, former President Trump proposed taking government-sponsored enterprises (GSEs) public, with an implicit guarantee, adding to the market’s uncertainty. Later in the week, Trump shared my analysis during a meeting with Powell, emphasizing the urgent need for a rate cut to support economic growth.

Adding to the week’s drama, Trump encountered a setback in court regarding his tariffs, culminating in a hefty 50% tariff on steel imports announced late Friday. Despite these headline-grabbing events, Friday’s release of tame PCE inflation data was largely ignored by markets, which closed the week with the 10-year yield around 4.40%. Mortgage rates, meanwhile, edged slightly lower, reflecting a cautious market sentiment.

Stay tuned for a comprehensive analysis on the HousingWire Daily podcast this coming Monday, where we’ll unpack these developments further.

Mortgage Spreads: A Measure of Market Confidence

Mortgage spreads-the difference between mortgage rates and the yield on the 10-year Treasury-have been elevated since 2022 but have shown signs of narrowing in 2023. Although recent market tensions caused some volatility in spreads, they have since stabilized as investor confidence gradually returns.

Currently, if spreads were at their historical lows, mortgage rates would be approximately 0.67% higher. Conversely, if spreads revert to their typical range of 1.60% to 1.80%, mortgage rates could decrease by roughly 0.63% to 0.83%. Historically, these spreads tend to fluctuate within the 1.60% to 1.80% band, serving as a key indicator of market health.

Mortgage Application Trends: A Sign of Market Resilience

Last week, mortgage application volume increased by 18% year-over-year, marking a 3% rise from the previous week. This surge is particularly notable given the ongoing confusion surrounding housing market data, which I discussed extensively in recent podcasts. The current streak of 17 consecutive weeks of year-over-year growth underscores a resilient housing demand, even amidst rising mortgage rates.

Here’s a snapshot of recent application data:

• Positive readings: 10
• Negative readings: 7
• Flat readings: 3
• Consecutive weeks of growth: 17

Pending Home Sales: A Barometer of Market Momentum

Recent data from Altos Research indicates that pending home sales continue to trend upward, providing valuable insights into housing market momentum. Typically, mortgage rates around 6% are necessary to sustain healthy growth in home sales. While current pending sales are slightly higher than last year, they remain below pre-pandemic levels, suggesting the market is still recovering from recent disruptions.

Weekly pending sales figures are as follows:

• 2025: 413,771 units
• 2024: 406,136 units

Weekly Pending Sales: Tracking Short-Term Fluctuations

Adding to our understanding of market dynamics, recent weekly pending sales data reveal fluctuations influenced by seasonal factors and holiday effects. Last week’s figures-72,312 for 2025 and 62,919 for 2024-highlight ongoing growth, though the upcoming weeks will clarify whether these trends are sustainable or affected by holiday-related slowdowns.

Housing Inventory Levels: Approaching Pre-Pandemic Norms

One of the most promising signs for the housing market in 2024 and 2025 is the gradual increase in housing inventory. The current low stock levels, while still below pre-pandemic norms, are inching closer to those levels, which is essential for restoring market balance. The seasonal rise in inventory is a positive development, as the market works to return to its traditional capacity.

Recent weekly inventory changes include:

• From July 23 to July 30, inventory increased from 787,049 to 803,519 units.
• Compared to the same week last year, inventory rose from 594,584 to 604,922 units.

New Listings: A Sign of Market Revival

After a prolonged drought, new property listings are finally on the rise, surpassing 80,000 per week during the seasonal peak months. This marks a significant recovery from the lows experienced during the housing bubble burst, where weekly new listings ranged between 250,000 and 400,000 for years. The current figures-70,421 in 2025 and 63,463 in 2024-indicate a strengthening market, although holiday weekends may temporarily distort these numbers.

Price Reductions: Indicators of Market Adjustment

In typical years, approximately one-third of homes undergo price reductions, reflecting ongoing adjustments as sellers respond to market conditions. For 2025, I forecast a modest decline in home prices of around 1.77%, suggesting a cautious outlook for home values. Last year’s forecast of a 2.33% decrease was overly optimistic, as mortgage rates fell closer to 6%, and demand improved in the latter half of 2024, leading to a 4% increase in home prices.

The rising percentage of price reductions this year-38% compared to 35% in 2024-supports a conservative growth forecast for 2025, indicating ongoing seller adjustments in response to market pressures.

Upcoming Economic Highlights: Jobs Data and Market Volatility

As we approach Jobs Week, all eyes are on upcoming employment reports, which are critical indicators of economic health. Last week’s subdued PCE inflation data-at 2.1%-did not trigger significant market reactions, but the labor market remains a key focus for the Federal Reserve and investors alike.

On Monday, Fed President Waller will speak, and investors will scrutinize PMI data for further clues. While the mortgage market remained relatively stable last week, the upcoming economic releases could introduce volatility, making this an important period for market watchers.