Mortgage rates have gone wild, so what’s next for housing? 

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 I have observed in the bond market is that after the first MOU deal broke apart in June and we were fighting with Iran during market hours, the 10-year yield and oil prices have moved more in lockstep than before. Last week was very wild. Last week I talked about what could get mortgage rates toward 8%.

The case for 8% mortgage rates

From last weekend: For me, the case for 8% is simple: the conflict needs to get worse. We are seven months into this conflict, and we have other parties joining the war, as the Houthis bombed a Saudi Arabian airport over the weekend. President Trump has said nothing will change until the midterm elections are over. So, if there is no deal with Iran, the odds of things getting worse are in play. 

Last week, the Houthis continued their attacks on Saudi Arabia, and the bond market and oil prices jumped together. Also, the economic data was good, as I wrote about here, and Fed members sounded very hawkish last week in their speeches, which was a perfect storm to drive yields higher to levels we haven’t seen since 2006.

On Saturday, President Trump rejected the peace plan from Iran, then on Sunday he said there should be more talks this week, so it might be very crazy until the midterms are over — something I talked about on this episode of the HousingWire Daily podcast. The key level for me now is 5.40% on the 10-year yield; if the drama over the next few weeks takes us there, that is your base case for 8% rates, but a key level too.

Mortgage spreads

Mortgage spreads are now front and center and the most important housing story this year and the next two years. Mortgage spreads improving have not only kept rates below 8%, but also made it easier to get below 7% in the future. If mortgage spreads get worse again, it would be the most negative story in the housing market. But for now, mortgage spreads are closer to normal and haven’t gotten terrible lately, even though we are higher than the lows in 2026. 

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week, spreads rose to 1.98%, up from 1.97% 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 8.58% today, not 7.43%.
• If we had the worst levels of 2024, mortgage rates would be 8.18% today. 
• If we had the worst levels of 2025, mortgage rates would be 7.99% today.

It is a big deal that mortgage spreads stay calm now; the chart below is the history of mortgage spreads, and we do have about 20-40 basis points of downside left, but one of the benefits of better spreads is less rate volatility, which is a key positive for the housing market.

Housing inventory

Housing inventory growth has been very tame this year, with certain weeks being negative year over year. As always, it’s been hard to get inventory growth when mortgage demand is rising; it’s easier when mortgage demand isn’t growing.

With mortgage rates over 7%, demand tends to soften and inventory rises. Last week, the week-over-week inventory growth was mild. Also, year-over-year comps will be easier to show growth now, as last year rates were more than 1% lower, and demand was rising toward a nine-month high in sales in December. 

• Weekly inventory change (Sept. 18-Sept. 25): Inventory rose from 890,303 to 895,398
• Same week last year (Sept. 19-Sept. 26): Inventory fell from 863,022 to 862,590

New listings

New listings are in their typical seasonal decline; 2026 was the healthiest new listings year since 2022, with over 80,000 a few times this year. One concern I have with rates at the current levels is that sellers could just decide not to list, especially with this conflict heating up and maybe only ending after the midterms. Most sellers are buyers, so we need to have a healthy new listing data line even this late in the year.

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: 66,907
• 2025:  65,077

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 as rates keep rising and pricing pressure picks up.  Last year rates were 1% plus lower so the comps are easier to show growth here 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 forecast of -0.62% might be hard to achieve, as most home price indexes show price growth between 1% and 2%. However, with rates rising again, I might be right in 2026. 

The price-cut percentage for last week:

• 2026: 42.50%
• 2025: 41.5%

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. 

Housing typically slows when rates get over 6.64%, and especially over 7%. However, over 7% and crazy volatility is a double whammy for a weekly data line; this is the first real noticeable hit on our weekly demand all year not tied to a holiday. Last year at this time rates were over 1% lower too, so the year-over-year comps are rough here.

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

• 2026: 59,316
• 2025:  65,152

Purchase applications

Purchase application data, which looks out 30-90 days, has shown softness as mortgage rates have risen above 6.64% and are now above 7%. With higher rates, this data should see year-over-year weakness, especially now that the year-over-year comps will be harder. This was the case last week: purchase apps were down only 1% week-to-week but down 11% year-over-year.

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

• 15 positive week-to-week prints
• 19 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
• 9 negative year-over-year prints

The week ahead: Iran, jobs week, home prices and inflation

We have a lot on our plate next week. President Trump rejected the Iranian offer to off-ramp the conflict, so we’ll see how the market reacts now that he said today there will be more talks this week.. It’s jobs week, which will bring some volatility as well. We also have the home price index, inflation reports,and other economic data to add to the mix. We also have a ton of Fed speeches, which have already caused volatility last week. So buckle up, folks it can be another bumpy ride.