"The improvement in mortgage spreads has been the most critical factor in rates moving toward a multiyear low. We have had a few times when the 10-year yield was under 4%, but rates weren't under 6%. If this were 2023, with the worst levels of mortgage spreads, mortgage rates would still be above 7%, and the housing market has a hard time getting traction with rates over 7%."
"Over time, the spreads can improve further, but the best levels I can ever go to are really between 1.60% and 1.80%. This is why in the 2026 HousingWire Forecast I have the low point of mortgage rates being 5.75%. Of course, for me personally, it's always about the slow dance between the 10-year yield and 30 year mortgage rate."
"For the first time in years, mortgage rates are under 6%, inventory is up, the spreads are almost back to normal and prices aren't rising out of control it's a good place to be in the housing market compared to the last several years."
Mortgage spreads have been the primary driver of rates moving to multiyear lows. While 10-year yields have occasionally fallen below 4%, mortgage rates remained elevated due to wide spreads. In 2023, worst-case spreads would have kept rates above 7%, hindering housing market activity. Currently, spreads are normalizing after recent volatility, which is typical market behavior. Optimal spread levels range between 1.60% and 1.80%, suggesting a 2026 mortgage rate floor of 5.75%. The bond market fundamentally drives rates through the 10-year yield, with spreads creating temporary fluctuations. Current conditions show rates under 6%, rising inventory, normalized spreads, and controlled price growth, representing significant improvement for the housing market.
Read at www.housingwire.com
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