Exploring the Potential for Further Declines in Mortgage Rates: What to Expect

2025 Housing Market: Rates, Inventory, adn Key Trends

The housing market in 2025 continues to be a complex landscape, influenced by mortgage rates, inventory levels, and economic indicators. Experts are closely watching these factors to understand where the market is headed.This analysis provides a detailed look at current trends and future expectations.

Mortgage Rate spreads and Potential impact

Mortgage rate spreads, the difference between mortgage rates and benchmark Treasury yields, play a crucial role. Currently,these spreads are elevated. “Conversely,if spreads aligned more with historical norms,our current mortgage rates could be anywhere from 0.82% to 0.92% lower,” experts note. The impact of normalized spreads would be significant: “Imagine — if today’s spreads were back to normal levels,we would enjoy mortgage rates below 6%. What a game-changer that could be!”

However, spread improvements are not consistent. Spreads tend to improve when bond yields are higher, but not as much when the 10-year yield declines.Despite this, “the spreads improving since 2023 is vital for housing.”

Looking ahead, a modest advancement in mortgage spreads is anticipated. Expectations are for spreads to be around 0.27% to 0.41% below the 2024 average of 2.54%. “We’ve been close to reaching that forecast a few times this year.”

Purchase Submission Data: A Mixed Bag

Purchase application data, an indicator of home buying demand, presents a mixed picture so far in 2025. While slightly negative,it is performing better than the previous year.

• Two flat readings
• Three negative readings
• Two positive readings

This data suggests that while demand is not surging, it is also not collapsing, indicating a degree of resilience in the market despite affordability challenges.

Weekly Pending Sales: Slight Decline

Weekly pending sales data offers insights into current housing demand.After mortgage rates briefly fell toward 6% in 2024, there was a noticeable improvement in pending sales. However, as rates rose again and remained elevated in 2025, there has been “a slight but consistent decline in pending sales year over year.”
While still above 2023 levels, the growth is marginal.

Here’s a snapshot of weekly pending contracts:

• 2025: 324,432
• 2024: 337,271
• 2023: 317,190

Housing Inventory: Growth from Historic Lows

One positive aspect of the current housing market is the growth in housing inventory from the historically low levels seen in 2022. Though, recent data indicates a slight setback. “I had thoght for sure we would see a more noticeable increase in inventory before March came, but inventory fell last week.”

Key inventory data points include:

• Weekly inventory change (Feb. 20-Feb. 27): Inventory fell from 640,221 to 639,485
• The same week last year (Feb.23-March 1): Inventory rose from 497,657 to 498,339
• the all-time inventory bottom was in 2022 at 240,497
• The inventory peak for 2024 was 739,434
• For context, active listings for the same week in 2015 were 962,785

Despite the recent dip, the overall increase in inventory compared to 2022 is a positive sign, particularly if mortgage rates decline.

New Listings: Still Below Historical Averages

New listings data, reflecting homes coming onto the market, remains below historical averages. “The last two years were the two lowest years for new listings data in history,and they were also not healthy years for the latest listings data.”

Here’s a comparison of new listings:

• 2025: 53,394
• 2024: 52,189
• 2023: 48,156

The low number of new listings suggests that sellers are still hesitant to enter the market, possibly due to concerns about interest rates and price levels.

Price-Cut Percentage: Higher Than Usual

The percentage of homes experiencing price cuts is higher than in an average year, reflecting the challenges of selling in the current market. “As inventory increases and mortgage rates stay elevated, the price-cut percentage data has been higher than when rates were lower.”

Price-cut percentages for recent years:

• 2025: 33.7%
• 2024: 31%
• 2023: 31%

A higher price-cut percentage indicates that sellers are adjusting to market realities, and buyers have more room to negotiate.

Home price growth is forecast at 1.77% for 2025, indicating “another year of negative real home-price growth.”

Looking Ahead: The Importance of Jobs data

Economic data, particularly jobs data, will be critical in shaping the housing market. “We will have some Fed president speeches, manufacturing data, unit labor cost data and a few more reports this week, but jobs Friday will be key after a huge move lower in yields.” The labor market’s performance is closely tied to mortgage rate movements. “Every time we’ve seen a good move lower in mortgage rates, it has come with economic growth or labor scares, and 2025 is no different.”

Future Federal Reserve actions will also play a role. “When the Federal Reserve cuts 1% more at some point in the future,it will be easier to get mortgage rates to trend down toward 6%.”

Conclusion: Navigating a Complex Market

The 2025 housing market is characterized by elevated mortgage rates, fluctuating inventory, and cautious buyer and seller behavior. While there are positive signs, such as the growth in inventory from historic lows, challenges remain. Keeping a close eye on economic data,particularly jobs reports and federal Reserve policy,will be essential for understanding market trends. Whether you’re a buyer, seller, or homeowner, staying informed and adaptable is key to navigating this complex landscape.

What is the biggest risk Amelia Stone sees for the housing market in the next year, and how could it be mitigated?

Navigating the 2025 Housing Market: An Expert’s insight

We sat down with Amelia Stone, chief Housing Market Analyst at Premier Analytics, to discuss the latest trends and predictions in the 2025 housing market.Here’s what she had to say.

Mortgage Rates and Market Spreads: An Interview with amelia Stone

Archyde: Amelia, thanks for joining us.Let’s start with mortgage rates. How are mortgage rate spreads impacting the market right now?

Amelia Stone: It’s grate to be here. Mortgage rate spreads—the difference between mortgage rates and Treasury yields—are definitely a key factor. They’re currently elevated,which means mortgage rates are higher than they would be or else. if spreads normalized, we could see rates considerably lower, potentially even below 6%, which would be a major boost for affordability.

Archyde: So,are we expecting these spreads to improve in the near future?

Amelia Stone: The expectation is for a modest improvement. We’re looking at spreads potentially being around 0.27% to 0.41% below the 2024 average. We’ve almost reached that point a few times this year,so it’s definitely something to watch.

Analyzing Housing Demand: Purchase Applications and Pending Sales

Archyde: Moving on to demand, what are the purchase application and pending sales figures telling us?

Amelia Stone: Purchase application data is a bit of a mixed bag. We’ve seen some positive, some negative, and some flat readings. it suggests that demand isn’t collapsing, but it’s not surging either. Pending sales are showing a slight year-over-year decline as mortgage rates remain elevated. While we’re still above 2023 levels, the growth is marginal.

Inventory Levels and New listings: A Closer Look

Archyde: Inventory has been a hot topic. Are we finally seeing enough homes on the market?

Amelia stone: We’ve definitely seen growth in housing inventory compared to the historic lows of 2022,which is a positive. However, recent data indicates a slight setback with a dip in the past week. And new listings remain below ancient averages, indicating sellers are still hesitant, likely due to interest rate concerns.

Archyde: What does this mean for potential homebuyers?

Amelia Stone: It means buyers still have limited choices, but they also might have a bit more negotiating power, as evidenced by the higher-than-usual percentage of homes with price cuts.

The Importance of Economic Data: Jobs and the Federal Reserve

Archyde: Looking ahead, what are the key economic factors to watch?

Amelia Stone: Jobs data is crucial. Every time we’ve seen importent drops in mortgage rates, it’s been linked to economic growth or labor market concerns. Also,keep an eye on the Federal Reserve’s actions. If the Fed cuts rates further down the line, it could make it easier for mortgage rates to trend down toward 6%.

Final Thoughts on the 2025 Housing Market

archyde: Any final thoughts for our readers trying to navigate this complex 2025 housing market?

Amelia Stone: Stay informed and adaptable. The market is constantly evolving, so keep a close eye on economic data, mortgage rates, and inventory levels. Whether you’re a buyer, seller, or homeowner, being prepared and flexible is key.

Archyde: Amelia Stone, thank you for your valuable insights.

Amelia Stone: My pleasure.

Archyde: One last question for our readers: With all these fluctuating factors,what’s the biggest risk you see for the housing market in the next year,and how could it be mitigated? Share your thoughts in the comments below!