Slightly lower mortgage rates finally pause slide in housing demand

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%

What a crazy week in the bond market! On Friday’s podcast, Editor and Chief Sarah Wheeler and I discussed the madness of what happened, but to be honest, the whole month has been based on the 10-year yield holding the 5.35% level.

Even with elevated oil prices and firm economic data, that key level holding and some weakness in the AI story brought the 10-year yield back below 5% last week, so mortgage rates are slightly lower than their peak. For now, the worst-case scenario of 8% and even 9% mortgage rates that people have been talking about is off the table—as long as we hold that 5.35% level, we can get this conflict over with and oil prices fall again.

Mortgage spreads

Mortgage spreads have worsened since the year’s lows, but they’re still trending near cycle lows since the Fed started its rate-hike cycle in 2022. I can’t stress enough how important it is for spreads to be closer to 2% than 3%. That said, when the 10-year yield moves sharply lower, spreads do tend to widen, since they’re designed to limit volatility, so their recent move higher makes sense.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads rose to 2.23%, up from 2.21% 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 8.21% today, not 7.33%.
• If we had the worst levels of 2024, mortgage rates would be 7.83% today. 
• If we had the worst levels of 2025, mortgage rates would be 7.64% today.

Weekly pending sales

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

This week, the bleeding stopped. As mortgage rates fell slightly, the week-to-week data finally stopped declining, and we saw a slight positive print. But I wouldn’t make too much of the improvement this week, as the weekly data was softening faster, and it doesn’t take much to stop the bleeding.

Housing demand typically grows like it did for the first half of 2026 when mortgage rates are under 6.64%. In fact, the only thing that slowed demand in the first part of the year was the holiday and snowstorm. However, rates above 7% have always created softer data in the last 3 years and 10 months. 

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

• 2026: 52,490
• 2025:  67,752

Purchase applications

Purchase application data, which looks out 30-90 days, has softened as mortgage rates rose above 6.64% and are now above 7%. This week’s print obviously doesn’t account for the rate move over the last few days, so we’ll see if we get week-to-week growth next week. However, you can see the damage done here with rates above 7%, as purchase applications are once again down week-to-week and year over year.

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

• 15 positive week-to-week prints
• 23 negative week-to-week prints
• 5 flat week-to-week prints
• 10 weeks of double-digit year-over-year growth
• 25 weeks of positive year-over-year growth
• 13 negative year-over-year prints

Housing inventory

Housing inventory growth has been very tame this year, with some weeks down year-over-year. However, as always, when rates rise, especially above 7%, inventory can grow faster. Inventory growth has been slower than in previous years, mostly because we are closer to normal inventory levels. With that said, inventory growth has picked up since mid-August, and the year-over-year comps are much easier to show growth, as mortgage rates were 1% lower last year and demand was heading toward a 9-month high in December 2025.

Inventory growth is running at 5.68% even with easier comps. 

• Weekly inventory change (Oct. 16-Oct. 23): Inventory rose from 905,166 to 911,956
• Same week last year (Oct. 19-Oct. 24): Inventory rose from 859,424 to 862,924

New listings

New listings are in their typical seasonal decline; 2026 has been the healthiest new-listings year since 2022, with over 80,000 at a few points this year. One concern I have with rates at current levels is that some sellers might not list because most sellers are also homebuyers. We saw a year-over-year decline this week — this is something I will keep an eye out for the rest of the year to see if this becomes a trend, but so far 2026 has been the best year for new listings in a while.

In a normal environment, new listings range from 80,000 to 100,000 per week during peak periods. For context, during the housing bubble years, 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: 60,151
• 2025: 64,191

Price-cut percentage

Typically, about one-third of homes see price reductions before they sell, reflecting the housing market’s dynamic nature. Overall, price-cut percentages this year have been lower than last year. This was true until rates moved above 6.64% and, once above 7%, with demand falling, the price-cut percentage is 1% higher year over year. 

In my 2026 home-price forecast, I called for a national decline of -0.62% for the year. Home-price growth really isn’t going anywhere this year, and my -0.62% forecast may be hard to achieve, since most home-price indexes show growth between 1% and 2%.

The price-cut percentage for last week:

• 2026: 43.%
• 2025: 42%

The week ahead:  Oil, Iran conflict, AI and the Fed meeting                                 

Unfortunately, oil prices are at yearly highs, and this still concerns rates. This is the last week of October, so Iran might try a lot of tricks to push oil prices even higher. Also, China might import more just to keep oil prices elevated and hurt President Trump in the midterm elections. 

Keep an eye on the AI story; we are all watching to see whether high-yield credit spreads widen, meaning it will be harder to fund more AI projects. And of course we have the Fed meeting this week, which should be very interesting in itself, But my whole goal for the month of October was to make sure that the 10-year did not close above 5.35% and have things escalate out of control, so as long as we can keep that in play, it’ll be a victory.