Mortgage spreads keeping housing demand intact for now

Mortgage spreads are once again playing our friendly neighborhood housing hero by keeping mortgage rates under 7% in a crazy, hectic year. This has allowed housing to stay intact, sales-wise. While sales in our weekly tracker data have slowed down, as they typically do once mortgage rates get above 6.64%, they eked out a small positive year-over-year gain for the second week in a row. 

In previous years, rates would have already been over 7% months ago with the 10-year yield at this level, and sales trends would easily be negative year-over-year, but mortgage spreads being closer to normal has really helped in 2026. Let’s take a look on why we should all hug a mortgage spread. 

Mortgage spreads

In 2023, mortgage spreads were the villain, rising to over 3%, according to how we track them. The last time that happened was 1986. The Silicon Valley banking crisis and the Fed continuing to raise rates blew the spreads higher in 2023, and mortgage rates would have never reached 8% that year without this happening. In 2026, mortgage spreads have not only gotten better, but they have kept rates under 7% the entire year.

Over the last three years, housing has always slows down when rates get over 6.64%. From that level rates would rise to over 7%, which created a longer slowdown in sales, making it impossible to show growth in the year.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads were at 2.01%, up from 2.0% the week before.

Let’s compare last week’s mortgage rates to where they would have been over the last three years, given the 10-year yield’s current level:

• If we had the worst mortgage spread levels of 2023, mortgage rates would be 7.84% today, not 6.74%.
• If we had the worst levels of 2024, mortgage rates would be 7.46% today. 
• If we had the worst levels of 2025, mortgage rates would be 7.27% today.

10-year yield and mortgage rates

In the 2026 HousingWire forecast, I anticipated the following ranges:

• Mortgage rates between 5.75% and 6.75%
• The 10-year yield fluctuating between 3.80% and 4.60%

The Iran conflict has been the big driver of the 10-year yield lately, but last week was jobs week, and it wasn’t the best week for labor data. I discussed the labor report here. The 10-year yield didn’t react too much to the negative jobs number, as Fed hawks have been doing the rounds, talking about rate hikes, and without a real deal yet on the conflict, we are still closer to yearly highs with the 10-year yield.  It’s a complex situation with all these variables; Sarah and I tried to make sense of what is driving rates in the most recent episode of the HousingWire Daily podcast.

If you’re looking for stability and lower rates, this conflict with Iran has to come to an end first, as the hawkish Fed members are not happy with this situation.

Weekly pending sales

Our pending home sales data provides a week-to-week perspective, though results can be affected by holidays and short-term fluctuations. This weekly pending sales data typically takes 30-60 days to be reflected in the sales data. 

First, the housing market is slowing down; it’s just not having big negative prints in the data yet, meaning that weekly pending home sales, total pending home sales and purchase application data are not all showing negative year-over-year data. This week, the weekly pending home sales had a slight increase year over year. 

Here are the pending sales for last week over the last two years:

• 2026: 67,026
• 2025: 66,347

Total pending sales

Our total pending sales data is more of a moving average; our weekly pending home sales data will get ahead of this data, but for 2026, we are still showing growth here. Higher rates have cooled this off and should do that more if rates stay elevated; eventually, this data line will barely show growth as well. The year-over-year growth has cooled down here just like it has with our weekly pending home sales data

• 2026: 381,302
• 2025  374,025

Purchase application data

Purchase application data, which looks out 30-90 days, has shown the most softness due to higher rates compared to our weekly pending sales data. We were growing year over year almost every week in 2026, but recently we have had two negative year-over-year prints. This is not abnormal with mortgage rates above 6.64%. However, unlike previous years, we haven’t seen a big decline in purchase apps, mostly due to mortgage rates staying under 7%.  

Here are the stats on purchase apps so far in 2026:

• 12 positive week-to-week prints
• 16 negative week-to-week prints
• 2 flat week-to-week prints
• 10 weeks of double-digit year-over-year growth
• 25 weeks of positive year-over-year growth
• 4 negative year-over-year prints

Housing inventory

Housing inventory has slowed a lot since mid-June 2025, but as rates have gone higher recently, inventory growth has picked up a tad. However, even with the slight pickup due to higher rates, the year-over-year growth stands at 0.78%. Now, after mid-June, the year-over-year comps should be easier to show growth, but so far there is nothing big to report. This is slightly surprising to me, but then again, our weekly pending home sales data has been mostly positive year over year as well.

• Weekly inventory change (July 31-Aug. 7): Inventory fell from 872,932 to 865,709
• Same week last year (Aug. 1-Aug. 8): Inventory fell from 865,600 to 859,050

New listings

The new listings are in their traditional, seasonal decline. However, this year has had better new listings data growth than the past few years, as we have been able to break over 80,000 new listings a week four times this year, which has been a struggle the past few years. Normally, new listings range between 80,000 and 100,000. So while we are back to the levels we were accustomed to from 2013-2019, we are on the low end of normal.

Some context for those who believe that the new listings data resembles the housing bubble years: new listings during that time ranged from 250,000 to 400,000 per week for several years.  

Here is last week’s new listings data for the past two years:

• 2026: 67,301
• 2025:  66,341

Price-cut percentage

Typically, about one-third of homes undergo price reductions before they sell, reflecting the dynamic nature of the housing market. For the most part, price-cut percentages this year have been lower than last year. Now, as mortgage rates have risen versus last year, I do expect the year-over-year decline to compress and eventually become at par or go higher versus last year if rates keep heading higher. We are closer to being on par this week than previous weeks.

In my 2026 home-price forecast, I had a negative 0.62% call for the year nationally. Home-price growth really isn’t going anywhere this year, but the percentage of price cuts has been lower year over year for most of 2026. My forecast of negative -0.62% might be hard to achieve, as most of the home price indexes are showing price growth between 1% and 2%. However, with rates rising again, I might be right in 2026. 

The price-cut percentage for last week:

• 2026: 41.44%
• 2025: 42%

The week ahead: Iran news, inflation week and existing home sales

As always, the conflict with Iran is front and center. It’s also inflation week and the September Fed meeting is up in the air as far as a hike or no hike, and this inflation week will be key. Existing home sales will come out this week as well; don’t expect any fireworks from that report. We have retail sales and bond auctions, too. However, the inflation data is the most important to watch as last month’s CPI and PPI inflation report came in lower than anticipated.