How much longer will we have to deal with higher mortgage rates?


After last week’s jobs week, everything gets more intriguing as each month passes. The labor market has gotten softer but hasn’t broken yet. As we approach the midway point of the year, let’s examine last week’s data.

10-year yield and mortgage rates 

Last week, the labor data, a vital driver of the 10-year yield and mortgage rates, significantly influenced the market. After reaching a critical level on the low end, the 10-year yield experienced a reversal as the labor report on Friday not only surpassed estimates but also revealed robust wage growth data, pushing yields higher.

I did an in-depth analysis of Jobs Week, complete with charts, discussing the labor market’s softening trend. Still, the labor market hasn’t broken yet. Our upcoming HousingWire Daily podcast will delve into these reports with even more detail, providing a comprehensive understanding of the market dynamics between the labor market and mortgage rates.

The chart below shows the 10-year yield right before the jobs report; once the labor report came, yields shot up and closed the week at 4.43%. 

Mortgage spreads

The spread between the 30-year mortgage rate and the 10-year yield has been an issue since 2022, and in 2023, things got worse after the March 2023 banking crisis. However, a positive story for 2024 is that the spreads are better this year than last year.

If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.48% higher. So, things could be worse on the mortgage rate front this year. However, if spreads get back into a normal range, mortgage rates would be 0.75%-1.00% lower today without any movement lower on the 10-year yield.

Purchase application data

The seasonality of purchase application data is over, as volume typically starts to fall after May. However, we always keep track of this data line because if rates fall like they did late in 2022 and 2023, we need to keep track of the weekly data. 

Since November 2023, when mortgage rates started to fall, we have had 12 positive prints versus 13 negative prints and two flat prints week-to-week. Once mortgage rates began rising in 2024, some demand was removed. As shown below, the year-to-date data isn’t even positive for 2024: we’ve had six positive prints, 13 negative prints, and two flat prints. As we can see, we aren’t getting any real mortgage demand growth with rates this high and the bounces we see in the data are coming from depressed levels.

Weekly housing inventory data

I can’t stress enough that the best story for 2024 has been that active inventory and new listing data is growing. We desperately needed to get off these record lows in inventory and create a buffer for breathing room when rates fall. While inventory didn’t hit my target growth number again, the fact that we have hit that level three times this year is a plus. If mortgage rates are high — 7.25% or higher — we should get some weekly inventory growth between 11,000 and 17,000. This week, we only hit 6,674.

  • Weekly inventory change (May 31-June 7): Inventory rose from 604,922 to 611-596 
  • The same week last year (June 2-June 9), Inventory rose from 437,007 to 443,749
  • The all-time inventory bottom was in 2022 at 240,194
  • This week is the inventory peak for 2024 at 611,596
  • For some context, active listings for this week in 2015 were 1,165,714

New listings data

New listings had their traditional rebound after the Memorial Day weekend decline, which isn’t shocking. However, the real story is that we see year-over-year growth, which is a plus. It doesn’t look like I will reach my assumed easy target of 80,000 new listings. I had hoped we could even get above 95,000 this year, something that was more common in the past decade, but I am simply running out of time before the seasonal decline of new listings. Here are the new listings for last week over the last several years:

  • 2024  72,061
  • 2023: 63,001
  • 2022: 85,068

Price-cut percentage

In an average year, one-third of all homes take a price cut — this is standard housing activity. When mortgage rates increase, demand falls and the price-cut percentage grows. When rates drop and demand improves, the price-cut percentage can fall. This data line is very seasonal, and we have seen consistent year-over-year price-cut percentage growth since the end of March. 

This is one of the reasons we will see a cooling in home prices from the start of the year. I recently discussed this in the HousingWire Daily podcast and explained why I believe this is the case. Here are the price cut percentages for last week over the previous few years:

  • 2024: 36%
  • 2023: 31%
  • 2022: 26%

Pending sales

One of the new data lines we will start incorporating in the tracker is Altos’ pending contract data — this will give people a better idea of how future sales will go. Below, you can see that the weekly pending contracts data has shown slight year-over-year growth, which aligns with the year-over-year increase in the new listing data. These are the pending home sales for last week over the past several years:

  • 2024: 393,636
  • 2023: 380,231
  • 2022: 455,678

The week ahead: Inflation and Fed Week! 

Last week we had a crazy jobs week and now we are going straight into the fire with CPI inflation and Fed meetings on Wednesday. We also have a few bond auctions happening this week with the PPI inflation report. So, there is no rest for anyone, as the coming week can make mortgage rates more volatile.



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