If you had asked me a few months ago how I felt about the 2025 housing market, I would’ve told you it looked pretty rough. When mortgage rates spiked to 7.26% earlier this year, there was real concern—between inflation fears and trade uncertainties, everyone was bracing for the worst. But then, something interesting happened. The 10-year Treasury yield took a dip, and mortgage rates followed. That shift injected some much-needed energy into the market, and suddenly, we started seeing a spark of life—particularly in purchase applications.
So now the big question is: will this momentum last as we step into spring? Or was this just a temporary bounce? Let’s unpack what’s been happening and what I’m keeping my eye on.
Purchase Applications: Signs of Life, But How Strong?
First off, mortgage rates have been bouncing around between 7.26% and 6.64% this year. What’s encouraging is that we’ve seen several weeks where purchase applications are showing year-over-year growth—something that’s been pretty rare in recent times.
To break it down:
• We’ve had 4 weeks of positive readings
• 3 negative weeks
• And 2 flat weeks
It’s worth mentioning that we haven’t quite dipped below that 6.64% mark into the 6% range yet—that’s the level where I’d expect to see true, sustained growth. Still, it’s encouraging that even in the mid-6s, the market is showing resilience.
It’s All About Duration, Not Just the Drop
The key isn’t just that rates dropped; it’s whether they stay lower long enough to make a real impact. Buyers take time to get off the sidelines, and sales data typically lags behind application data by a month or two. So, the longer rates stay at these more favorable levels, the better the odds are that we’ll see home sales pick up steam.
Last year paints a clear picture. When rates fluctuated between 6.75% and 7.50%, we barely saw any positive trends:
• 14 negative weeks
• Only 2 positive ones
Pending Sales & Short-Term Data
Pending home sales offer another window into buyer activity. Weekly contract data from Altos shows that while sales aren’t exactly surging, they’re holding up better than you might expect, considering how elevated rates have been.
Here’s how the numbers compare for the same week across the last three years:
• 2025: 333,385 contracts
• 2024: 345,502 contracts
• 2023: 320,804 contracts
Pending sales are down year-over-year but not alarmingly so. Again, a sustained period of lower rates could be the tipping point for improvement.
Mortgage Rates, Spreads & The 10-Year Yield
For 2025, I’m keeping my forecast steady:
• Mortgage rates in the 5.75% to 7.25% range
• 10-year yield between 3.80% and 4.70%
Interestingly, despite recent market volatility and stock corrections, bond yields haven’t budged much. That’s kept mortgage rates from dropping further—but spreads have improved significantly compared to 2023. If spreads hadn’t eased up, we’d be looking at rates nearly 0.75% higher.
If spreads were to normalize even more, it could easily pull mortgage rates toward 6%, which would likely supercharge buyer demand.
Inventory Levels: Slowly Climbing Back
Spring always brings an uptick in listings, and 2025 is no exception. Active inventory has been creeping back to healthier levels, although we’re still far from pre-pandemic norms.
Here’s a snapshot of inventory growth:
• March 7-14, 2025: Inventory increased from 642,359 to 655,626
• Same week in 2024: 500,579 to 507,160
• 2022’s inventory low: 240,497
For context, back in 2015, active listings for the same week were around 982,000—so there’s still plenty of room for improvement.
New Listings: Still Playing Catch-Up
One of the areas I miscalculated last year was the number of new listings. I had expected we’d see 80,000 new listings during peak weeks. We fell short by about 5,000 listings, which affected home price trends more than I anticipated.
That said, we’re moving in the right direction:
• Last week’s new listings: 68,191
• Same week in 2024: 59,542
• 2023: 41,415
The growth is clear, but we’re still chasing pre-pandemic norms where peak weeks would consistently hit 80,000+.
Price Cuts & Home Price Growth Outlook
Typically, about one-third of homes see price cuts during the year. Unsurprisingly, with higher mortgage rates and rising inventory, we’ve seen that percentage climb a bit early this year:
• 2025: 34% of listings had price cuts
• 2024: 31%
• 2023: 31%
Because of this, I’m sticking with my projection for modest home price growth of around 1.77% in 2025. Unless mortgage rates make a more aggressive move toward 6%, real price growth will likely stay in check.
What’s Coming Next?
This coming week is packed with data:
• The Federal Reserve’s meeting (always a market mover)
• Retail sales data
• Jobless claims
• Plus, plenty of housing-related reports, like builder sentiment, housing starts, and existing home sales.
All in all, I’ll be watching closely to see if mortgage rates can hold—or even dip slightly lower—as we move deeper into spring. If they do, we could be looking at a much stronger housing market story by mid-year.
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