As the year comes to a close, the housing market is experiencing some unexpected positive developments. Initially, there were concerns that tariffs might drive mortgage rates up and dampen housing demand, but recent trends suggest otherwise. The stability of the 10-year yield at a crucial technical level has led to improved mortgage rates, and housing demand has remained resilient despite the higher rates. It’s time to dive into the latest housing data to gain valuable insights into the current market dynamics.
10-year yield and mortgage rates
Here are projections for the mortgage rates and 10-year yield for 2024:
- A range for mortgage rates between 7.25%-5.75%
- A range for the 10-year yield between 4.25%-3.21%
The recent drop in mortgage rates can be attributed to shifts in the bond market and the sentiment among bond traders. Favorable opportunities in purchasing the 10-year bond at its current level have emerged, particularly as the Citigroup Economic Surprise Index shows signs of a short-term peak. Past concerns about inflation driving interest rates higher have subsided, keeping bond yields below 5% and mortgage rates below 8%.
Mortgage spreads
2024 has seen improvements in mortgage spreads compared to the challenges faced in the previous year. This positive shift has prevented mortgage rates from soaring past 6%, a scenario that could have unfolded without the improved spread situation in the market. Although spreads have slightly increased since September, they are still considerably lower than the peak levels seen in 2023, reflecting progress in the mortgage market.
Weekly pending sales
The weekly pending contract data enables real-time insights into housing demand. Despite higher mortgage rates hovering around 6%, pending contracts have maintained year-over-year stability, showcasing strong performance in the face of challenging conditions. The recent data on pending sales indicates positive growth trends, which is a promising sign for the market.
Purchase application data
Recent purchase application data has surprised many with a 12% week-to-week growth trend, marking a positive streak over the past seven weeks. Even during periods of rising mortgage rates, the purchase applications show optimistic signs, with growth momentum evident when rates approach 6%.
Weekly housing inventory data
Housing inventory typically declines towards the end of the year, and this trend is visible in recent data. Despite the seasonal decrease, 2024 has seen healthy inventory growth compared to previous years, with the year-over-year figures painting a positive picture of the housing market. New listings data, however, reveals a historic low in inventory levels, highlighting an ongoing challenge in the real estate landscape.
Conclusion
The housing market is navigating through various challenges with resilience and showing signs of stability amidst fluctuating mortgage rates and inventory levels. As we head into ‘Jobs Week,’ with critical economic data releases on the horizon, it will be interesting to observe how the market responds to these developments. Stay tuned for an exciting week ahead in the housing sector, where more surprises and insights await.
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