According to HousingWire, the housing market continues to show resilience despite significant headwinds. Last week, pending home sales remained positive compared to the same period last year, even as mortgage rates climbed to around 6.83% and the 10-year Treasury yield reached yearly highs. The key takeaway here is that housing demand hasn't collapsed the way some feared it might, though the growth we're seeing is slowing down. Inventory levels have ticked up to nearly 873,000 active listings, which is gradually moving the market back toward more normal conditions after years of extreme scarcity.
The real hero of the story, according to the reporting, is something called mortgage spreads. These spreads, which represent the difference between mortgage rates and Treasury yields, have improved significantly compared to historical norms. Last week they were sitting at 2%, up from 1.94% the week before. What this means in practical terms is that mortgage rates haven't climbed as high as they would have based on current Treasury yields and Federal Reserve policy alone. Without these improved spreads, rates would likely be pushing toward or past 7%, which historically creates much softer housing demand.
Another factor supporting the market locally and nationally has been wage growth outpacing home price appreciation. Over the past two years, home prices have grown only modestly at 1% to 2% annually, while worker earnings have moved faster. This has helped with affordability in a way that would have been impossible if we'd seen the double digit price growth we experienced during the pandemic years. When wages are growing faster than home values, it takes some pressure off the typical buyer trying to make the math work.
The data also shows the market is cooling, just not dramatically. Purchase applications, which offer a glimpse 30 to 90 days ahead, were down slightly week to week but still up modestly year over year. Weekly pending sales showed year-over-year growth, though that growth is shrinking as rates have climbed above the critical 6.64% threshold. Price reductions have been slightly lower than last year, though that's likely to change if rates stay elevated, as buyers become more selective and sellers have to adjust expectations.
What I am seeing locally here in the Bay Area and throughout the East Bay tells me we're in a transitional moment. The market isn't falling apart, but it's definitely not accelerating either. Inventory is coming back to more normal levels, which gives both buyers and sellers more choices than we've had in years. For my clients on the sell side, the message is clear: pricing smartly matters more than ever. For buyers, persistence is starting to pay off as competition eases and sellers become more realistic about market conditions. If mortgage spreads hold steady and rates don't spike dramatically higher, we should continue seeing a slower, more balanced market through the rest of the year.
