Mortgage interest rate and 10-year yield
The 10-year yield is key to all of my housing work, so I focus on it faithfully. For my 2024 forecast, I have set the 10-year yield range to be: 3.21%-4.25%there’s a critical line in the sand 3.37%.If economic indicators are strong, it shouldn’t fall below this. 3.21%But if labor data weakens, that line will be tested at 3.37%.
This means that mortgage interest rates should stay within the following ranges: 5.75%-7.25% It is based on the baseline assumption that spreads are bad for most of the year. 10-year bond yield rose above 4.25% Mortgage interest rates were not achieved this year. 7.25%so the spread worked better than I expected.
It recently dodged a bullet when the 10-year Treasury yield approached, but failed to break above 4.34%, potentially pushing mortgage rates back to 8%. We bounced around this important line several times and last week, despite the jobs report and Chairman Powell’s remarks to Congress, the 10-year Treasury yield headed lower and mortgage rates ended the week at 6.85%. The chart below shows 10-year Treasury yield trading over the past week (March 4th – March 8th).
If you look at the chart below, you can see why I have discussed the important levels of the 10-year Treasury yield in the past. The bottom is around the 3.80% level and the top is the 4.34% level. We are not broken yet. Given current economic data, this range should hold, barring any new significant global events. The fact that the dollar is slowly falling, rather than rising, is a positive for mortgage rates. The world cannot stand the strengthening of the US dollar. Chairman Powell said the Fed’s policy is restrictive, so if the 10-year Treasury yield rises above 4.34%, the Fed will become more dovish because it doesn’t want its policy to become too restrictive. I predict that it will.
To get an idea of the magnitude of the movement in recent years, let’s take a long-term look at the 10-year Treasury yield.
Purchase application data
Due to rising mortgage interest rates, 6.63% to 7.16% Earlier this year, purchase application data was negative for five consecutive weeks, something not seen last year. However, things changed last week. Lower interest rates led to an 11% week-on-week growth.
Since November 2023, after adjusting for holidays, 9 positive purchase requisitions and 5 negative purchase requisitions have been printed. Year to date, there have been 3 positive prints and 5 negative prints. This is a carbon copy of what happened in his 2023 when interest rates rose. However, the hurdles for selling a home have lowered in the last year. Everyone knows it, so it won’t take much to move the needle. Buyer is ready And home sales are at record lows.
Weekly housing inventory data
The bright spot for the housing market in 2024 is that inventory increased year-over-year. Yes, I know there aren’t a lot of houses, but growth is growth, people! The further I get from the deeply unhealthy housing market of March 2022, the happier I will be.
Now, when it comes to year-over-year inventory data, last year’s seasonal bottom was April 14th, which was the longest period to find a seasonal bottom. With this information in hand, year-over-year performance will represent greater growth than in traditional years, where seasonal troughs occur in January or February.
Last week’s inventory status looked like this.
- Weekly inventory fluctuations (March 1st to March 8th): Inventory has increased 498,339 to 500,579
- Same week of the previous year (March 2nd to March 9th): Inventory decreased compared to the previous year 419,419 to 413,199
- The all-time low for inventory was in 2022. 240,194
- The peak of inventory in 2023 is 569,898
- For some background, here’s this week’s active list: 2015 was 971,965
New listing data
New listing data is increasing year on year, but in 2023 this data line was hovering at an all-time low level, so I was hoping for further recovery, so it’s still a little too low for my liking in 2024. . But growth is growth. And if I can match my spring 2022 and 2021 levels, I’ll be a happy camper.
Weekly new listing data for the past few years:
- 2024: 59,243
- 2023: 50,687
- 2022: 59,661
For historical context, here is this week’s new listing data for 2011: 362,248.
price reduction rate
Every year, one-third of all homes have their prices reduced before they go on sale. This is regular housing activity and this data line is highly seasonal. If mortgage rates rise and demand takes a hit, discounts could widen further. When interest rates fall, interest rates are lower than normal.
Inventory is higher than last year, and the bottom of inventory may already be in sight, so the number of homes priced down should increase as the year progresses. The objective is to see how the mortgage rate variable affects this data line.
Last week’s price declines over the past few years are as follows: As you can see below, in 2022, when inventory was at an all-time low and mortgage rates were below his 4%, markdown data was at seriously unhealthy lows.
- 2024: 30.5%
- 2023: 30.6%
- 2022: 16.7%
Next week: Inflation week is here.
Employment week moves into inflation week, with the release of CPI and PPI inflation reports. The CPI data will be interesting because every geek in America said the same thing about his CPI report last time. The report contained a huge weird OER print that deviated wildly and made the data much hotter than it should have been. Let’s see if it normalizes in this report or the next one. As we all know, apartment booms and busts have produced even more disinflationary data when it comes to apartment rents. If the inflation report is much softer than expected, mortgage rates are expected to continue falling this week.