Mortgage rates eased as demand held up and listings shrank

Article Summary

10-year yield and mortgage rates

In the HousingWire forecast for 2026, the expected ranges were:

• Mortgage rates between 5.75% and 6.75%
• The 10-year yield fluctuating between 3.80% and 4.60%

Bond markets have been unusually volatile, and the important 5.35% level in the 10-year yield has held since early October. That reversal has been notable, and political changes in Washington have added another factor to the mortgage-rate outlook. For now, the 10-year yield still appears to be working within a head-and-shoulders pattern, even as traders try to push it lower.

Mortgage rates should not be expected to fall sharply unless the 10-year yield breaks below 4.70% and is followed by sustained buying in bonds. Even so, rates have eased and demand has steadied over the past several weeks.

Mortgage spreads

Mortgage spreads have widened recently, but they remain close to multiyear lows. In normal conditions, when mortgage rates rise with the 10-year yield and then reverse quickly — as happened after the 10-year yield peaked near 5.35% and moved down toward 4.82% — spreads often worsen as lenders try to reduce rate volatility.

Without spreads sitting near multiyear lows, mortgage rates would have little chance of dropping below 7.25%, and demand would likely not have stabilized. Because spreads have risen from this year’s low point, it is clear that mortgage rates could move back below 7% if spreads return to those levels.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads increased to 2.27% from 2.23% the week before.

Here is a comparison of mortgage rates with the best spread levels seen this year and the worst levels of this cycle:

• If spreads matched the best levels seen this year, mortgage rates would be 6.72% rather than 7.17%.
• If spreads matched the worst levels of 2023, mortgage rates would be 8.11% rather than 7.17%.

Weekly pending sales

Weekly pending-home-sales data offers a short-term view, although holidays and temporary swings can influence the numbers. These pending-sales figures usually take 30 to 60 days to show up in completed sales data.

The main takeaway over the past three weeks is that lower rates, even when they are still above 7%, have helped stabilize demand, as reflected in weekly pending sales. That does not mean demand is growing; it simply means the market has stopped slowing as sharply as it did when mortgage rates were moving toward 7.60%. Over the last several years, housing demand has tended to improve when mortgage rates fall below 6.64% and move closer to 6%. Above 7%, there is limited growth data beyond normal seasonal patterns. Comparisons will remain difficult for a while because rates were moving toward 6% at this point in the prior year.

Pending sales for the latest week compared with the same period two years ago:

• 2026: 51,764
• 2025: 59,164

Purchase applications

Purchase-application data, which looks 30 to 90 days ahead, has softened as mortgage rates moved above 6.64% and then above 7%. There was a slight week-to-week decline, but the data also suggests stabilization. Year-over-year comparisons will remain difficult because rates were falling toward 6% at this point last year. Earlier in the year, when rates were lower, nearly every week showed growth.

Purchase-application statistics so far in 2026:

• 16 positive week-to-week prints
• 24 negative week-to-week prints
• 5 flat week-to-week prints
• 10 weeks of double-digit year-over-year growth
• 25 weeks of positive year-over-year growth
• 15 negative year-over-year prints

Housing inventory

Inventory growth has been fairly muted this year, and some weeks have been down year over year. Still, when mortgage rates moved above 6.64% and later approached 7.60%, inventory growth picked up somewhat. Because rates were lower a year ago and demand was trending toward a nine-month high, the comparisons should become easier for showing inventory growth.

Inventory growth is running at 7.18% even with easier comparisons.

• Weekly inventory change: inventory fell from 914,833 to 902,740
• Same week one year earlier: inventory fell from 856,751 to 842,257

New listings

New listings are following their usual seasonal decline. This year has been the strongest year for new listings since 2022, with more than 80,000 new listings per week several times. One concern was that higher rates might cause sellers to pull back, as they did in the second half of 2022, which would have reduced supply and demand. That has not happened in any meaningful way. Since many sellers are also buyers, the slight easing in rates suggests the year could end on a positive note for new listings.

In a normal market, new listings usually range from 80,000 to 100,000 per week during peak periods. For comparison, during the housing bubble years, weekly new listings ranged from 250,000 to 400,000 for several years.

Last week’s new-listings figures compared with the same period a year earlier:

• 2026: 54,479
• 2025: 55,486

Price-cut percentage

Roughly one-third of homes typically undergo price reductions before selling, which reflects how dynamic the housing market is. This year, the share of price cuts has generally been lower than last year. That changed once rates moved above 6.64% and then above 7%, as demand weakened and the year-over-year price-cut rate rose by 1%.

In the 2026 home-price forecast, a national decline of -0.62% was projected for the year. Home prices are not showing much momentum, and that forecast may be difficult to hit because most home-price indexes are still posting gains of 1% to 2%. Even so, higher rates and a rising price-cut percentage would move the market closer to that projection. If rates had not risen above 6.75%, pricing data would not have shown the recent slowdown.

The price-cut percentage for the latest week:

• 2026: 43.%
• 2025: 42%

The week ahead: Inflation reports, geopolitical risk, Fed speeches and AI stocks

AI stocks are worth watching in the coming week, especially CoreWeave and the way the 10-year yield responds. For now, the two appear to be linked, although that connection is likely to fade over time.

The calendar also includes major inflation releases, with both CPI and PPI due. Over the next year, if the conflict with Iran ends and the trade war does not worsen, bond traders may place less emphasis on current inflation readings and more weight on those developments, especially if inflation improves later. That would be a significant positive for mortgage rates, but resolving the trade war and the conflict will not be easy.

There will also be numerous Federal Reserve speeches, making it important to watch both the comments and the bond market’s reaction. With the election behind us, it will be worth noting whether policymakers begin to frame an end to the conflict and trade war as a favorable factor for the outlook.