Look, according to HousingWire, we're watching mortgage rates hold steady above 6.64% right now, and that's creating some real headwinds for the market. The Iran conflict situation is pushing oil prices up, which is keeping the Federal Reserve talking tough on rates. What's interesting is that pending home sales came in essentially flat year over year last week, and purchase applications actually printed negative for the year, which doesn't happen often. So we're seeing some softening in demand signals, though nothing dramatic yet.
The thing that's kept the housing market from really struggling this year is mortgage spreads. These spreads have actually improved compared to where they were in 2023, 2024, and 2025, which means rates aren't as high as they could be given where the 10-year Treasury yield is sitting. Without that improvement, HousingWire's analysis suggests we'd be looking at rates in the 7% to 8% range right now, and the market would have already slowed significantly. The spreads widened last week to 1.97%, which is wider than the historical average range.
When it comes to inventory, things have been softer since mid-June of last year. New listings aren't reaching those typical seasonal peaks we usually see, though the levels are still better than we saw in 2023 and 2024. Price reductions have actually been lower this year compared to last year because inventory growth has slowed. According to the reporting, about one-third of homes typically get price reductions, but we're not hitting that consistently right now.
There's a bit of a mixed picture on foreclosures as well. According to HousingWire's citation of ATTOM data, foreclosure filings jumped about 21% in the first half of this year compared to the same period last year. That's worth monitoring, but it's coming off of very low levels from the pandemic era.
The broader question HousingWire is wrestling with is whether this market can hold up if the Iran conflict escalates and keeps rates elevated. Historically, the housing market struggles when rates get above 7%, and we're sitting uncomfortably close to that ceiling right now at 6.64%.
What I'm seeing locally here in the Bay Area and East Bay is that buyers are getting more selective, and sellers are holding their listings longer. The rate environment is making people think twice about big purchases, especially in our expensive market. If rates don't move lower soon, we could see more price adjustments coming, particularly in Fremont and the surrounding East Bay communities where inventory has been building. The good news is our local market has held up better than many other regions, but that geopolitical uncertainty combined with where rates are sitting is definitely something we need to watch closely in the coming weeks.
