In this week’s epic battle over mortgage rates, we’re straight out of the movie Gladiator when he says, “Hold the line, stay with me.” For the 10-year yield, the key 5.35% level held last week, preventing further escalation of rates in October. No matter how crazy the news has been over the last week, we held the line. The question is: have mortgage rates peaked for 2026, or will this unresolved conflict drive rates toward 8% or higher?
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%
Since the first MOU deal between Iran and the U.S. fell apart in July, the bond market has been extremely volatile. When President Trump said in September that there would be no deal until after the midterms, it pushed the bond market further, pushing the 10-year yield to a critical technical point not seen in a long time.
Despite significant bad news last week, the 10-year yield held its ground. I discussed this with Editor in Chief Sarah Wheeler on this episode of the HousingWire Daily podcast, emphasizing how October can set the housing baseline for the next 15 months.
For now, that critical level has held as we await the second full week of October. The coming weeks will be crucial as President Trump announced that he has no intention of attacking Iran before the midterms; however, it remains uncertain what may happen after. The conflict, along with rising inflation data and a low unemployment rate, has made it difficult for bond yields to fall. And things could get much worse, as many variables are still up in the air.
One of my other concerns about what’s going on right now is that we have a lot of other players involved. Syria, Turkey and Pakistan are coming to the aid of Saudi Arabia against the Houthis, who are attacking now — and the escalation between Ukraine and Russia has gone into another stage. I totally regret saying in the first week of this year that I felt this year might be like the TV show 24 — that has proven to be too accurate!
In the upcoming week, we will get the CPI data and Fed members speaking, so buckle up. We don’t know what will happen, but the key is for the 10-year yield to not close above 5.35% and have follow-through bond selling, because that might create even more chaos in the bond market and take the term premium value of bonds much higher, which means higher mortgage rates.
Mortgage spreads
Mortgage spreads are now front and center and the most important housing story. If spreads worsen, the housing market could get much worse, affecting not only existing home sales but also housing starts for years to come. For now, spreads, although they have worsened since the lows of 2026, have not accelerated to levels we saw in 2023, 2024 or even the low levels of 2025.
Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads rose to 2.12%, up from 1.98% 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 8.47% today, not 7.48%.
- If we had the worst levels of 2024, mortgage rates would be 8.09% today.
- If we had the worst levels of 2025, mortgage rates would be 7.90% today.
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, unlike the past few years when we were working from the lowest levels ever recorded.
Last week, we saw a slight decline in inventory; it’s late in the year and the seasonal decline in active listings should happen soon. Also, year-over-year comps make growth easier to show, as mortgage rates were much lower last year and existing home sales were heading toward a 9-month high in December of 2025.
- Weekly inventory change (Oct. 2-Oct. 9): Inventory fell from 902,112 to 898,139
- Same week last year (Oct. 3-Oct. 10): Inventory fell from 863,972 to 856,873
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 sellers could decide not to list, especially with rates as high as they’ve been lately. We saw a slight year-over-year decline last week; that isn’t a big deal, but for most of the year we have been positive year over year, so it isn’t the best data point, especially with rates near yearly highs.
Normally, 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: 63,427
- 2025: 64,774
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 until rates moved above 6.64%. About a month ago, I wrote that as rates rise, we should catch up and eventually pass last year’s data. We are seeing that now as rates keep rising and pricing pressure picks up. Last year, rates were 1% or more lower, so comps show growth more easily with rates near 7.5%.
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 might be hard to achieve, since most home price indexes show growth between 1% and 2%.
The price-cut percentage for last week:
- 2026: 42.89%
- 2025: 41.08%
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 be reflected in the sales data.
For years, I have followed the same premise: housing data improves when rates are below 6.64% and head toward 6%, and it worsens when rates rise above 6.64% and move past 7%. The sharp move from 6.64% to 7.48% since mid-July has been very fast, and housing demand is naturally getting hit harder. Now it’s about how long rates stay here and where demand bottoms out. It was a much different story last year at this time, when rates were much lower, and we were heading toward a 9-month high in sales in December.
Here are the pending sales for last week over the last two years:
- 2026: 54,060
- 2025: 63,883
Purchase applications
Purchase application data, looking out 30-90 days, has softened as mortgage rates rose above 6.64% and are now above 7.5%. With higher rates, this data should show year-over-year weakness, especially now that year-over-year comps will be harder to match. This was the case last week: purchase apps were down 2% week-to-week but down 15% year-over-year.
Here are the stats on purchase apps so far in 2026:
- 15 positive week-to-week prints
- 21 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
- 11 negative year-over-year prints
The week ahead: World conflict, inflation, existing home sales, and Fed speeches
I can’t overstate how important it is for the 10-year yield to hold at 5.35%, because the bond market can get much more volatile if this conflict worsens, the trade war worsens and the economy keeps running hot.
This week, Cleveland Fed president Beth Hammack talks on Monday — expect a very hawkish tone from her. We’ll get existing home sales this week, and it won’t be pretty. It’s also inflation week and the October rate hike — which is priced out for now — could come back into play. We have a lot of economic data on top of conflict news to make the bond market wild.
