Navigating the Evolving Housing Landscape: A Comprehensive Outlook
Understanding the Current Inventory Landscape
Despite elevated borrowing costs, the expansion of available housing units is showing signs of deceleration. As the market enters a period of seasonal decline for new property introductions, it appears that the peak rate of year-over-year inventory growth for the current year may have already passed. This recent stagnation has subtly contributed to a reduction in the annual growth percentage.
The Influence of Mortgage Rates on Future Inventory
For the remainder of the year, a keen eye will be kept on whether a decrease in mortgage rates might lead to an earlier-than-anticipated decline in housing stock. Conversely, a significant surge in mortgage rates, surpassing 7%, could trigger an increase in inventory, reminiscent of late 2023 when rates climbed to 8%. The current week's market monitoring provides further insights into these potential shifts.
Recent Trends in Housing Stock Figures
As highlighted throughout 2024 and the current year, the rise in housing availability has been a positive development, signaling a move from an acutely imbalanced market to a more normalized state. While some expressed surprise at the slight dip in existing home inventory reported last week, it's worth noting that data for existing homes typically peaks during the summer months. Our proprietary weekly data offers a real-time perspective on properties ready for sale, independent of sales contracts. Last week, the pace of inventory growth experienced a slowdown compared to the preceding week. Specifically, inventory increased from 856,751 to 860,426 units between July 18 and July 25 this year. In comparison, during the same period last year (July 19-July 26), inventory rose from 668,358 to 677,246 units.
Analysis of Recent Property Listings
It seems that the highest volume of new property introductions in 2025 occurred in the week of May 23, with a total of 83,143 listings. While meeting the target of 80,000 new listings weekly was a welcome achievement, it was less than ideal not to observe several weeks with figures between 80,000 and 100,000, which would be typical for a peak listing period. Nonetheless, this represents a significant improvement, especially considering that 2023 and 2024 marked the lowest years for new listings in the nation's history. To illustrate the scale, during the period of the housing market collapse, new listings frequently ranged from 250,000 to 400,000 per week over many years. The latest weekly data for new listings over the past two years shows 71,521 for 2025 and 68,404 for 2024.
Percentage of Price Adjustments in the Market
In an average year, roughly a third of properties undergo price reductions, reflecting the responsive nature of the real estate sector. Homeowners frequently adjust their asking prices as the supply of available homes increases and borrowing costs remain high. With greater inventory and elevated interest rates, the proportion of price reductions this year exceeds that of the previous year. For the current year's price outlook, a modest increase of approximately 1.77% was anticipated, suggesting that real home prices might again be negative. In the preceding year, a forecast of a 2.33% increase proved inaccurate, primarily due to a drop in rates to around 6% and a subsequent rise in demand in the latter half of the year, leading to a 4% increase in home prices. The increase in price reductions this year, relative to last year, underpins a cautious growth projection for 2025. The percentages of homes with price reductions in the recent week were 41.6% for 2025 and 39% for 2024.
Trends in Mortgage Application Volume
Last week's data on mortgage applications for home purchases indicated a 3% increase week-over-week and a 22% rise compared to the previous year. This metric has notably perplexed many observers this year, prompting a detailed examination of the underlying factors contributing to this growth. A crucial insight for 2025 is that the surge in purchase applications has occurred despite mortgage rates remaining stable, not decreasing from 6.64% to 6%. This specific rate corridor has been the only one where an improvement in application data has been observed beyond the typical seasonal demand patterns. For 2025, there have been 13 weeks of positive readings, 10 weeks of negative readings, 5 weeks of flat performance, 25 consecutive weeks of positive year-over-year data, and 12 consecutive weeks of double-digit year-over-year growth.
Weekly Pending Home Sales Performance
Our weekly data on pending home sales offers a snapshot of short-term trends; however, this metric can be influenced by public holidays and sudden market disruptions. Last week showed some week-over-week growth and remained slightly higher than the previous year. For the past week, pending sales were 70,609 in 2025 and 64,765 in 2024.
Overall Pending Sales Overview
The latest cumulative pending sales figures provide crucial insights into current housing demand. Last year, a significant shift was observed as mortgage rates decreased from 6.64% to approximately 6%. The year-over-year growth witnessed this year is largely attributable to a low baseline. It's important to remember that comparable data for the previous year will remain quite low until November for the existing home sales report. The total pending sales for 2025 stood at 384,307, compared to 382,429 in 2024.
Yield on 10-Year Treasury Bonds and Mortgage Interest Rates
For 2025, the projected ranges were mortgage rates between 5.75% and 7.25%, and the 10-year Treasury yield fluctuating between 3.80% and 4.70%. The past week, despite notable political events, saw minimal change in mortgage rates. The 10-year yield remained relatively stable, with mortgage rates starting the week at 6.78% and concluding at 6.81%. With upcoming economic announcements, including employment data and a Federal Reserve meeting, market volatility is anticipated.
The Dynamics of Mortgage Rate Spreads
The improvement in mortgage rate differentials this year has been a significant support for the housing sector, mitigating what could have been a greater decline in demand. Further reductions in interest rates and a more accommodating stance from the central bank could gradually lead to additional improvements in these spreads. Initially, a 0.27%-0.41% improvement was sought for 2025, building on a 2.54% average from 2024. While that level hasn't been reached yet, it's been approached closely. If the spreads were as wide as they were at their peak in 2023, current mortgage rates would be 0.76% higher. Conversely, a return to normal spread levels would result in mortgage rates being 0.54%-0.74% lower than today's figures. Historically, these spreads have typically ranged between 1.60% and 1.80%. Achieving optimal normal spreads would mean mortgage rates today ranging from 6.07% to 6.27%, a considerable difference.
Anticipating the Week Ahead: Key Economic Reports
The coming week is poised to be highly significant for economic news, featuring four labor market reports and a crucial Federal Reserve meeting. Recent jobless claims data have shown positive signs, an important indicator closely watched by the Fed. The private sector payroll data, which excludes government employees, along with wage growth trends, will be key components of Friday's employment report and are critical metrics for the Federal Reserve. Regarding the Fed, the precise wording of its announcements, as well as the discussions during the press conference, will be of utmost importance.