Uncertainty is running high among prospective homebuyers as elevated mortgage rates have pushed buying conditions to the worst levels in decades. While many are hoping for rate relief in the second half, a new Goldman “Housing and Mortgage Monitor” report suggests that relief is unlikely anytime soon.
Goldman analysts, led by Vinay Viswanathan, have revised their year-end forecast for 30-year conforming mortgage rates to 6.75%, up from a prior estimate of 6.1%, reflecting a higher rate environment through year’s end. The current yield on the 30-year mortgage rate currently trends around 6.94%, according to Bankrate data.
Viswanathan discussed the drivers of rate increases, noting that the rise is primarily due to higher Treasury yields. 10-year Treasury yields are forecast to reach 4.5% by year-end.
Between the two main components of mortgage rates – Treasury yields and MBS spreads – yields have explained more of the recent rise. The market’s pricing of the terminal rate now seems fair, in our view, leaving fiscal expansion and data surprises in the driver’s seat for yields.
Our rates strategists are expecting the 10-year yields to grind up to ~4.5% by year-end. Tighter MBS spreads are likely to drive any marginal relief to mortgage rates, consistent with our forecast for 30-year mortgage basis to tighten from 150bp today to 138bp by year-end. Near-term tightening will be driven largely by the OAS component of spreads (rather than interest rates volatility), underpinned by an uptick in bank demand amid potential SLR reform and excess deposit creation (Exhibit 2)
Our confidence that GSE privatization will not meaningfully impact mortgage rates has also grown over recent weeks. We think rates vol could eventually move lower if the tail risks of tariff policy continue to shrink and labor data emerges mostly intact, but a large compression is unlikely in the near term. As a consequence of higher mortgage rates, we think housing affordability will remain at challenging levels, placing downside risk to our forecast for +3.2% home price appreciation (HPA) in 2025 (Exhibit 3). We still do not expect home price depreciation at the national level given limited housing supply, strong structural demand, and limited risk of a foreclosure wave despite March’s surprising negative month-over-month print in the Case-Shiller National Index. That said, the March data point included the most acute period of tariff uncertainty, which may also weigh on the April and May data points to come.
Now, visualize the bad news for prospective homebuyers who are not using cash:
30-year mortgage rate likely to hover near 7% through the end of the year.
Challenging affordability levels are forecasted to stay at extremes through year’s end.
Other data points…
Pending home sales in April remain pressured by higher rates.
Supply of homes for sale has been increasing over the last year.
The pipeline of homes under construction “remains substantial” in Goldman’s view.
This is troubling.
Nearly Half Of $700B In Homes For Sale Have Gone ‘Stale’ As Sellers Outnumber Buyers By 500K https://t.co/Xpo1TBXAND
— zerohedge (@zerohedge) June 2, 2025
Goldman sees: “Sequential home price growth has slowed.”
The key takeaway: Housing affordability remains severely strained, and 7% mortgage rates are shaping up to be the new normal, for now.
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