Key facts
- The 10-year Treasury yield held at 5.35% last week, a key level for mortgage rates.
- Mortgage rates could reach 8% or higher if the 10-year yield closes above 5.35%.
- Mortgage spreads rose to 2.12% last week, up from 1.98% the prior week.
- Housing inventory declined slightly to 898,139 units last week.
- New home listings saw a year-over-year decline.
- The percentage of homes with price reductions reached 42.89% last week.
The US 10-year Treasury yield held at a critical 5.35% level last week, a key indicator for mortgage rates, preventing a further immediate escalation. However, the outlook for mortgage rates remains uncertain due to ongoing geopolitical tensions, rising inflation data, and a low unemployment rate, which collectively contribute to bond market volatility.
In the HousingWire forecast for 2026, mortgage rates were anticipated to range between 5.75% and 6.75%, with the 10-year yield fluctuating between 3.80% and 4.60%. The bond market has experienced significant volatility since July, particularly after a deal between Iran and the U.S. fell apart and President Trump indicated no deal would be reached before the midterms. This pushed the 10-year yield to a long-unseen technical point.
Mortgage spreads have become a central concern, worsening to 2.12% last week from 1.98% the week prior. Historically, spreads have ranged from 1.60% to 1.80%. If spreads were at their worst levels seen in 2023, mortgage rates would be 8.47% today, compared to the current 7.48%.
Housing inventory saw a slight decline last week, falling to 898,139 units from 902,112. New listings are also in a typical seasonal decline, with 2026 showing healthier new listings than previous years. However, sellers may be hesitant to list homes with rates near yearly highs. The price-cut percentage for homes rose to 42.89% last week, up from 41.08% the previous year, indicating increasing pricing pressure.
Pending home sales for 2026 stood at 54,060 last week, a decrease from 63,883 in 2025. Purchase applications were down 15% year-over-year, reflecting the impact of mortgage rates rising above 7.5% after being below 6.64% since mid-July.