Key facts
- Mortgage spreads have helped maintain mortgage rates below 7% in 2026.
- Housing sales have shown slight year-over-year gains for two consecutive weeks.
- In 2023, mortgage spreads widened significantly, contributing to rates exceeding 8%.
- Current mortgage spreads are around 2.01%, historically higher than the 1.60%-1.80% range.
- Purchase application data has recently shown negative year-over-year prints.
- Housing inventory growth year-over-year is currently 0.78%.
- The percentage of homes with price cuts is lower year-over-year for most of 2026.
Mortgage spreads have acted as a buffer, preventing mortgage rates from exceeding 7% in 2026 and thereby supporting housing demand. Despite a typical seasonal slowdown and mortgage rates hovering above 6.64%, sales have managed slight year-over-year gains for two consecutive weeks. This stability contrasts with previous years where similar 10-year Treasury yields would have pushed rates above 7% and resulted in negative sales trends.
In 2023, mortgage spreads widened to over 3%, a level not seen since 1986, exacerbated by the Silicon Valley banking crisis and Federal Reserve rate hikes, which contributed to mortgage rates reaching 8%. In the current year, spreads have tightened, keeping rates below 7% throughout. Historically, mortgage spreads have ranged between 1.60% and 1.80%; last week they stood at 2.01%. Without the improved spreads, current mortgage rates would be significantly higher, potentially reaching 7.84% if 2023's spread levels were in effect.
The 2026 HousingWire forecast anticipated mortgage rates between 5.75% and 6.75%, with the 10-year yield fluctuating between 3.80% and 4.60%. Recent fluctuations in the 10-year yield have been influenced by the conflict in Iran and labor market data. Hawkish commentary from Federal Reserve members regarding potential rate hikes also contributes to the current yield environment.
Weekly pending home sales data shows a slight year-over-year increase for 2026, with total pending sales also indicating growth, albeit a cooling trend. Purchase application data, which offers a 30-90 day outlook, has shown more softness, with recent negative year-over-year prints, a common occurrence when mortgage rates exceed 6.64%. However, the sustained rates below 7% have prevented a significant decline in purchase applications.
Housing inventory has seen a modest year-over-year growth of 0.78%, with a slight pickup in growth recently due to higher rates. New listings are in a seasonal decline but have shown better growth this year compared to recent years. The percentage of homes with price reductions remains lower year-over-year for most of 2026, though this trend may compress as rates continue to rise. The national home-price forecast for 2026 predicted a slight decrease, but current indexes suggest modest growth.