Mortgage spreads are the only thing keeping rates under 7%

Mortgage spreads

Mortgage spreads have improved over the last few weeks and they are almost back to the lows in 2026, which is a multiyear low. Even with the oil shock and market drama, spreads haven’t gotten close to the levels seen in 2023 or 2024. The recent high was 2.11%, a big improvement over prior years.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads closed at 1.93%, flat from the week prior. However, let’s compare last week’s rates to the worst levels of spreads over the past three years, given the 10-year yield’s current level:

• If we had the worst mortgage spread levels of 2023, mortgage rates would be 7.62% today, not 6.44%.
• If we had the worst levels of 2024, mortgage rates would be 7.24% today.
• If we had the worst levels of 2025, mortgage rates would be 7.05% 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%

Last week the 10-year yield came close to testing recent highs as oil prices escalated and mortgage rates had a negative week. As I stressed above, if mortgage spreads weren’t at 1.93%, rates would be above 7%. Earlier this year, rates got as high as 6.64%. However, spreads have improved recently and mortgage rates started the week at 6.32%, peaked at 6.50% and ended the week at 6.44%.

Jerome Powell had his last Fed meeting as chairman last week and now a new Fed Chair, Kevin Warsh, will be presiding over the internal civil war between hawks and doves. I discuss that change in this episode of the HousingWire Daily podcast. Amid rising oil prices and the Fed’s hawkish tone, yields pushed higher last week to a high of 4.44% but ended the week at 3.38%.

Weekly pending sales

Our weekly pending home sales data provides a week-to-week perspective, though results can be affected by holidays and short-term fluctuations. Home sales aren’t booming in any way, but they have held up very well considering all the drama this year — from the epic snowstorms to war with Iran and higher oil prices. 

• 2026: 78,649
• 2025: 71,037

Mortgage purchase application data

Purchase application data is a forward-looking indicator: growth here leads home sales by roughly 30-90 days. Last week, we saw a 10% week-to-week gain and a 12% year-over-year increase.

For purchase apps, what I really value is at least 12-14 weeks of positive week-to-week data. If we can get that positive week-to-week data to go with year-over-year growth, then we have something cooking. For 2026, we are basically flat on the week-to-week, while showing positive year-over-year growth for most of the year. 

Here’s 2026 so far:

• 8 positive week-over-week prints
• 7 negative week-to-week prints
• 1 flat week-to-week print
• 9 weeks of double-digit year-over-year growth
• 14 weeks of positive year-over-year growth
• 2 negative year-over-year print

Housing inventory

Inventory growth has been slowing down since mid-June 2025. Two weeks ago, we had a nice pickup, but this week we saw a small decline from the previous week. 

Inventory growth is running at 2.33% year over year, down from 33% last year, but even if we go negative year over year for some weeks, we are currently in a much better spot with inventory, which is at a multiyear high with our data and far from the savagely unhealthy levels of 2021 and early 2022. 

• Weekly inventory change: (April 27- May 1): Inventory fell from 765,048 to 761,604
• Same week last year: (April 25-May 2): Inventory rose from 728,758 to 744,228

New listings

I was really excited by the new listings data from two weeks ago because we broke the 80,000 weekly mark. What I want to see is some weeks where we grow between 80,000 and 100,000. Last week we actually saw a decline week to week, but I’m hoping we see that change over the next few weeks. This is not something we saw last year. We are also entering the seasonal peak period for new listings, so there’s not much time left to get more growth here. 

Context for those who think the sky is falling anytime we get growth in new listings: during the housing bubble crash, new listings 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: 73,649
• 2025: 78,078

Price-cut percentage

In my 2026 home-price forecast, I had a negative 0.62% call for the year nationally. However, mortgage rates were lower than I thought they would be at the start of this year, and the FHFA’s announced purchase of mortgage-backed securities pushed mortgage spreads lower than I expected earlier in the year. I believed we would get toward the 1.80% level later. Not much is happening with prices this year, which is exactly what housing needs: another year of wage growth growing faster than prices. 

The price-cut percentage for last week:

• 2026: 35.82%
• 2025: 36%

The week ahead: Iran, jobs week, Fed speeches and new home sales

We have a busy week of events and economic data ahead, so this will be a good test for the bond market and mortgage rates as the Iran war continues and oil prices remain over $100.

Regarding jobs, as long as job growth is above 30,000 per month, the Fed won’t flinch from its hawkish stance on no more rate cuts this year, as long as the war continues. From now on, under Kevin Warsh, speeches by voting and non-voting Fed members will matter as this will be a true civil war within the Federal Reserve.