Last week we saw a noticeable slowdown in housing inventory growth that I hope has more to do with a holiday week than a trend.
Last week we saw a noticeable slowdown in housing inventory growth that I hope has more to do with a holiday week than a trend. Mortgage rates fell last week after the debt ceiling issues were resolved, but the damage from higher rates took its toll on purchase application data again.
93%.
For the year, we are at a wash: after making some holiday adjustments, we have had 10 positive prints versus 10 negative prints. Since Nov. 9, 2022, we have had 17 positive and 10 negative prints. After the big existing home sales report in March, we haven’t had much going on with purchase applications and it will be interesting to see if we get a positive print this week. Mortgage rates fell and this year purchase applications have traditionally come back with a positive print after a week where the 10-year yield fell, something I talked about earlier in the year on CNBC. The 10-year yield and mortgage rates We had a keystone cops week with the bond market and mortgage rates. After the debt ceiling drama ended, we saw a noticeable move lower in bond yields, and rates fell. After the jobs report, the yield increased on Friday, leading to higher mortgage rates. In my 2023 forecast, I wrote that if the economy stays firm, the 10-year yield range should be between 3.21% and 4.25%, equating to mortgage rates between 5.75% and 7.25%. I have also stressed that the 10-year level between 3.37% and 3.42% would be hard to break lower. I call it the Gandalf line in the sand: “You shall not pass.” So far in 2023, that line has held up, as the red line in the chart below shows. Mortgage rates have been in the range of 5.99%-7.14%. However, we do have some issues in the mortgage market. Since the banking crisis started, the spreads between the 10-year yield and 30-year fixed mortgage rates have gotten worse, keeping mortgage rates higher than usual. This has been going on for some time, but the spreads were getting better before the banking crisis started and the Federal Reserve went into emergency clean-up mode. Getting better spreads can send mortgage rates back to the low 6% level without any help from the bond market. However, there is no sign of that happening anytime soon. Another aspect of my 2023 forecast was that if jobless claims break over 323,000 on the four-week moving average, the 10-year yield could break under 3.21% and head toward 2.73%. This would send mortgage rates significantly lower than we have seen in 2023 if the spreads improve. From the St. Louis Fed: Initial claims for unemployment insurance benefits increased by 2,000 in the week ended May 27, to 232,000. The four-week moving average declined, to 229,500. The week ahead: A light economic week This week doesn’t have much economic news, just the traditional purchase application data and jobless claims with some ISM reports. However, we should have some exciting bond market auctions after the debt ceiling drama ended since the government was running on fumes and needed to issue bonds to pay the bills. Also, it will be interesting to see how the bond market reacts after the last labor report, which I wrote about here. OPEC is making one of its occasional cuts in oil production because a few countries need oil prices to be above $83 a barrel to make the math work for their budgets.We’ll see how the market responds to that.
However, outside of that, we will be tracking to see if the lower mortgage rates helped the weekly purchase application demand data, and, hopefully, inventory growth will pick up this week. As we get closer and closer to July 4th, I will be keeping an eye on the new listing data, as we are getting closer to the time when we start the seasonal decline in new listing data since we are trending at all-time lows already. The last thing I want to see is this data line take another leg lower toward the end of the year. Related Housing market faces headwinds as mortgage rates move above 7% September 12, 2026 In “Housing Market” Housing year-over-year comps need context for the rest of 2026 September 5, 2026 In “Housing Market” Mortgage rates have gone wild, so what’s next for housing? September 27, 2026 In “Housing Market”
