Mortgage rates fell last week. Can they go down?

Mortgage spreads

The unsung hero for housing in 2024 and 2025 is better mortgage spreads, which is what happens at this stage of the economic cycle. The US would be worse off in 2024 and 2025 without better spreads. If we apply the worst-case spread levels from 2023 to today's rates, we get an additional 0.81% increase in mortgage rates – close to 8%. On the other hand, if mortgage spreads were at their typical levels, we could expect mortgage rates to be about 0.72-0.82% lower than they are today, which would mean mortgage rates closer to 6%.

For my 2025 forecast, I expect spreads to improve to an average of 0.27%-0.41%, compared to an average of 2.54% in 2024. We are close to reaching this average spread range and the goal is to improve and maintain spreads at this time. productivity decreases.

Buy app data

Now that we're past the holiday season, we're moving forward with the 2025 shopping application data. Be warned, however: this data's 27% week-over-week growth should be viewed with skepticism. Every year around Christmas and New Years there is a significant dip in this data line, and some so-called housing experts make a big deal out of it, only to be surprised when the data rebounds in the second week of January. This trend happens every year, so let's keep it in mind.

Last week, purchase requests were up 27% week-over-week and down 2% year-over-year. This data line was very negative last year, when there were 6.75%-7.50% mortgage rates, 14 negative weeks, two positive and two flat weekly prints.

Weekly expected sales

The latest weekly pending contract data offers critical insight into real-time trends in housing demand. The year-over-year winning streak ended as our pending sales contract data showed a slight year-over-year decline compared to 2024 data, but it is still positive against 2023 data. It's been a very positive line of data over the last few months of the year, obviously helped by mortgage rates heading towards 6% last year.

Expected weekly contracts for the past week over the past few years:

• 2025: 257,418
• 2024: 262,264
• 2023: 241,976

Weekly housing inventory data

As we begin this year, we aim to identify when the seasonal low in inventory will occur. Traditionally, this low occurs in January or February. However, since the COVID-19 pandemic, this outcome has become more difficult to predict – we have seen lows in March and April in recent years. Last year we had a favorable situation, the lowest point was in mid-February.

• Weekly Inventory Change (Jan 10-Jan 17): Inventory has gone up in price 624,419 for 632,118
• Same week last year (January 6 – January 13): Inventory rose 505,186 for 506,373
• The all-time inventory level was in 2022 240,497
• The inventory for 2024 was the peak 739,434
• For some context, these were the active listings for the same week in 2015 933,746

New listing information

I'm excited about 2025 because I can accurately predict my new listing growth this year by correcting my miscalculation last year. At first I was expecting 80,000 minimum peak seasonal data, but I'm down to just under 5,000. Seasonal data has historically been low in 2023 and 2024, so an increase from 80,000 to 110,000 in the peak season would be a positive development.

During the housing bubble crash years, this data line fluctuated between 250,000 and 400,000 per week. But we emphasized loan sellers then, not now. Last week's new listings over the last few years:

• 2025: 45,835
• 2024: 44,238
• 2023: 42,765

Price discount percentage

In an average year, it is common for about a third of all homes to reflect the normal dynamics of the housing market. We're in the seasonal slump for price cuts; we are now below the 2023 level but above the 2024 level.

Last week's price reduction percentages for the previous few years:

• 2025: 33.45%
• 2024: 31%
• 2023: 35%

Next week: Bond auctions, jobless claims and existing home sales

After two weeks of dramatic economic data that led to significant swings in productivity, we now face a softer week of reports. This includes unemployment claims and current home sales data. Jobless claims are the most important indicator of interest rates for 2025. Claims recently rose to 217,000, while we started with 203,000.

We have several bond auctions scheduled for this week. We will observe demand during these auctions and hope for a less eventful week. Of course, this will also be the first week of the Trump administration, so we'll be keeping an eye on that. Stay warm in the extremely cold week ahead!