The Housing Market Deserves Some Attention

It's time to dive into some mortgage metrics and talk about housing. We will leave macro-commentary on rates and fixed income for a later day (coming very soon!) but there is a lot to say about housing. So here we go!

Using our go-to source for general rate information and commentary (Mortgage News Daily) you can see rate levels as of 2/18/2026:

https://www.mortgagenewsdaily.com/markets/mortgage-rates-02182026

Overall, mortgage rates are dropping and hovering around the 6% range. Looking at the National Mortgage Database and a post from Jon Brooks on X, there is a lot to be said for the current breakdown of where existing homeowners current mortgage rate really is. As Jon mentions, for the first time in awhile, more Americans now have mortgage rates above 6% than below 3%:

It was not that long ago that the average mortgage rate was around 3%. One of our good friends, Garrett Smith, had some cool commentary to share on this:

Rates ~3.2% "locked" most people into their current homes. If a homeowner moved or refinanced, they were going to have to accept a larger monthly payment or a cheaper house. Of course no one wanted to do that unless they had to. With practically no one selling (i.e. no supply), home prices held firm despite rising interest rates. Over the last couple years, however, some eventually capitulated and moved or refinanced for one reason or another …forcing them to trade in their low rate for a higher one. This was great for mortgage investors, who received the mortgage balance payment in full and then were able to reinvest their 3% investment into a 6+% investment …but not so great for homeowners. But now with fewer homeowners “locked” into the lower rates, the inventory of homes for sale has slowly started to normalize.

It remains that housing remains the most valuable source of wealth for Americans. So much so that US mortgages are near the lowest delinquency levels in over 20 years. Mortgage delinquencies are the lowest out of all loan types and make up just 2.2% of all 90+ delinquent loans.

Furthermore, the percentage of underwater mortgages have come down from 25% to 2% as measured by the percentage of borrowers with negative equity since Q2 2010.

But we cannot talk about housing without a discussion on inventory. The Trump Administration has put "housing affordability" as a part of their economic discussions. This includes: Frannie and Freddie purchases, institutional home buyer limitations, a new Fed chair, continued rate cuts, etc. We believe that these will have limited impact on supply although there could be marginal benefits associated.

The main issue is that inventory remains at 60-year lows as US homes for sale was only about 0.6% of total housing.

The housing supply gam is significant and especially so in the "starter-home" range for the 18-44 demographic.

The market is moving towards pre-pandemic norms in terms of active listings with an average 4.6 months of supply.

Interestingly enough, despite the shortage in supply, new builds were slower in 2025 than in 2024 and a lack of builder confidence seems to be the leading cause of the slip year over year.

As Garrett said above, "Over the last couple years, however, some eventually capitulated and moved or refinanced for one reason or another …forcing them to trade in their low rate for a higher one. This was great for mortgage investors, who received the mortgage balance payment in full and then were able to reinvest their 3% investment into a 6+% investment …but not so great for homeowners. But now with fewer homeowners “locked” into the lower rates, the inventory of homes for sale has slowly started to normalize."

With spreads as tight as they are, mortgage investing, because of the "strength" of homeowners, seems like a pretty good value. Housing affordability and availability for the demographic starting families...not as good.