The housing market is a hot topic, and the question on everyone's mind is: Did we reach the peak of housing inventory this year? The data suggests an intriguing story.
A Shifting Market Landscape
Housing inventory growth, which was once at a robust 33% year-over-year, has now slowed to a more modest 17%. And here's where it gets controversial: we might have hit the seasonal peak in August, which is highly unusual compared to recent years.
Let's dive into the numbers.
Weekly Housing Inventory: A Declining Trend
In the past, the peak in active listings typically occurred in October or November, especially when mortgage rates started climbing towards the end of the year. However, this year, we've seen some interesting shifts. Mortgage rates dipped below 6.64%, a level that usually sparks higher demand.
If the seasonal peak occurred on August 1st, 2025, it would be a significant departure from recent trends, resembling the pre-COVID era. Last week, inventory took a noticeable dip.
Inventory Change (Oct. 3-Oct. 10):
- 2025: 863,972 to 856,870
- 2024: 734,257 to 732,378
Regardless of the final inventory numbers for 2025, this year has been a positive chapter for the housing market. Supply has increased, price growth has cooled, and we've achieved a healthier market balance.
New Listings: A Stable Outlook
New listings peaked early this year, during the week of May 23rd, with a total of 83,143 listings. While this is a very early peak, recent data shows stability, which is encouraging given the late year. 2025 will still be one of the lowest years for new listings in history, with weekly numbers far below the housing bubble crash years, where new listings soared between 250,000 and 400,000.
Last Week's New Listings:
- 2025: 64,770
- 2024: 62,879
Price-Cut Percentage: A Buyer's Market
In a typical year, about a third of homes experience price reductions before selling. This year, with increased inventory and elevated mortgage rates, the percentage of price reductions is higher. This has made the market more favorable for buyers.
My forecast for 2025 anticipated a modest 1.77% increase in home prices, suggesting negative real-home prices. Last year's forecast of a 2.33% increase was off the mark due to rates dropping to around 6% and improved demand in the second half. As a result, home prices rose by 4% in 2024. The increase in price reductions this year reinforces my cautious growth forecast for 2025.
Price Reductions:
- 2025: 41.8%
- 2024: 39%
Mortgage Rates and Yields: A Volatile Dance
In my 2025 forecast, I predicted mortgage rates between 5.75% and 7.25%, and the 10-year yield to fluctuate between 3.80% and 4.70%. However, recent events have impacted these predictions. Trump's escalation of the trade war drove the 10-year yield closer to 4%, and mortgage rates lower. This is due to market fears and a shift towards the bond market.
Labor data is softer now compared to the start of the year, and we're close to the bottom of my bond market forecast. Further economic weakness and market drama could drive yields and rates lower.
Mortgage Rates:
- Mortgage News Daily: 6.32%
- Polly Rate Lock Data: 6.38%
Mortgage Spreads: A Favorable Outlook
This year has seen improved mortgage pricing due to better spreads compared to 2023 and 2024. As long as there are no major market disruptions and the Federal Reserve continues its rate cuts, this trend is expected to continue.
Historically, mortgage spreads have ranged between 1.60% and 1.80%. If spreads were at their 2023 peak, mortgage rates would be 0.95% higher. If they return to normal, rates could be 0.55% to 0.35% lower. The best-case scenario for normal spreads would mean mortgage rates between 5.79% and 5.99% today.
Purchase Application Data: A Positive Trend
We've tested housing data with rates under 6.64% for 10 weeks, and the trend is positive. This week saw a -1% decline week-to-week, but a 14% increase year-over-year. This marks seven positive weeks and three negative on a week-to-week basis, with 10 straight weeks of double-digit year-over-year growth. However, the week-to-week data has slowed recently.
Weekly Data for 2025:
- Positive Readings: 19
- Negative Readings: 14
- Flat Prints: 6
- Positive Year-Over-Year Data: 36 straight weeks
- Double-Digit Growth Year-Over-Year: 23 consecutive weeks
Weekly Pending Sales: A Slight Growth
Our weekly pending home sales data shows slight year-over-year growth. This data typically reflects in the existing home sales report 30-60 days after the sale. Last week's home sales data was the highest since the 2022 market crash.
Weekly Pending Sales:
- 2025: 63,883
- 2024: 61,238
The Week Ahead: Trade Wars and Market Drama
Next week could be intense if the China tariff situation escalates further, with both stock and bond markets experiencing volatility. The government shutdown has postponed economic reports, but the Consumer Price Index (CPI) inflation report is scheduled for Oct. 24. We'll also have builders' confidence data.
Until the government shutdown is resolved, we'll have limited economic data, but expect market drama. Many Federal Reserve members, including Chair Powell, will speak next week. Get ready for a potentially wild ride in the headlines.
