Why Sub-7% Mortgage Rates Are Back on the Table (and What It Means for Colorado Springs)

Mortgage rates are closer to 7% than 8% again, and there is a real path back under 7%. That is the headline from HousingWire this week, and it is worth paying attention to here in Colorado Springs, where every half point of rate changes what buyers can afford and what sellers can realistically ask.

Source: Logan Mohtashami, HousingWire, October 31, 2026

The Setup: October's Scary Moment Passed

Let's start with what almost happened. Through October, the 10-year Treasury yield had the potential to close above 5.35%. If it had, the article explains, it would have created a backdrop of bond-escalation selling that could have pushed mortgage rates above 8%. That did not happen. The yield held that key line.

Now the 10-year yield is below 5%, and mortgage rates are closer to 7% than 8% today. And here is the part that matters locally: the move over the last two weeks has stabilized demand in the weekly pending home sales data. Buyers who had been frozen are starting to move again, even at rates still above 7%.

"Housing demand has stabilized over the last two weeks as rates have fallen a tad, and we can finally see a clear path back to sub-7% mortgage rates."

The "Trinity" That Gets Rates Under 7%

Mohtashami's 2026 forecast called for mortgage rates between 5.75% and 6.75%, with the 10-year yield fluctuating between 3.80% and 4.60%. We are not there yet, but the direction matters. Last week was Fed week, and even Fed Chair Kevin Warsh said tighter policy has created financial pain for some AI companies. The Fed has been talking for weeks about AI being inflationary, so when AI companies run into debt-financing trouble and miss on their numbers, the 10-year yield moves lower, even with elevated oil prices and firm economic data.

Here is the "trinity" the article says would get rates under 7%:

• The Iran conflict ends. Oil would trade between $67 and $82 instead of where it sits now.
• The trade war doesn't get worse. Trade war 2.0 stays where it is rather than escalating.
• The AI slowdown eases inflation fears. Less AI-driven demand pressure gives the bond market room to breathe.

Nothing drastic, in other words. Just those three things, and the article's case is that sub-7% rates follow. We have all seen what mortgage demand can do when rates drop below 6.64%.

But there is a flip side. If the AI story rebounds, the conflict doesn't end, and the trade war continues, with economic data staying very positive, rates could stay above 7%. Since September 10, a clear head-and-shoulders pattern has formed in the 10-year yield, and the path to sub-7% rates runs through that pattern breaking lower.

Why Mortgage Spreads Matter

One of the most useful parts of this article is the explanation of mortgage spreads, the gap between the 10-year yield and the average mortgage rate. Spreads have worsened recently, but they are still near multi-year lows, and Mohtashami can't stress enough how important it is for spreads to be closer to 2% than 3%. If spreads were at their worst, mortgage rates would already be over 8% right now.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week they were flat at 2.23% week over week. Here is the comparison that puts it in perspective: given where the 10-year yield is today, mortgage rates would be 8.15% at the worst 2023 spread levels, 7.77% at the worst 2024 levels, and 7.58% at the worst 2025 levels. Instead, the average rate is about 7.27%. Spreads are why we are having a conversation about sub-7% rates at all.

Demand Is Stabilizing, Not Booming

Let's be honest about what the data shows. Weekly pending home sales came in at 52,050 last week, still a few thousand below the 55,214 posted the same week a year ago. But the key detail is the direction: pending sales are higher than they were two weeks ago. Lower rates, even above 7%, have stabilized demand. That is all we should take from this move.

Purchase applications, which look out 30 to 90 days, tell a similar story. They posted a 4% week-to-week gain last week, which Mohtashami expected, but they remain down significantly year over year. When rates were closer to 6%, nearly every week showed year-over-year growth. The rule of thumb he has used for almost four years: housing demand typically grows when rates are under 6.64% and heading toward 6%, and it doesn't show growth when rates are over 6.64% and heading above 7%.

Inventory and Price Cuts

On the supply side, national inventory rose slightly week over week, from 911,956 to 914,833. A year ago, the same week saw inventory fall from 862,924 to 856,751. That leaves year-over-year inventory growth running at about 6.78%, which is tame by recent standards, mostly because rates were lower at the start of the year.

New listings remain healthy, above last year's same week: 57,265 versus 55,716. In a normal environment, new listings run 80,000 to 100,000 per week at peak periods, so this is a modest seasonal decline, not a collapse. The one concern Mohtashami flags is that some sellers are also buyers, and high rates could keep some of them on the sidelines. So far, the data hasn't shown it.

Price cuts are the other number to watch. The price-cut percentage last week was about 43%, versus 42% a year ago. Roughly one-third of homes typically see a price reduction before they sell, so we are running above that norm, and the year-over-year gap is the direct result of demand softening once rates moved above 6.64% and then above 7%.

The Week Ahead: Jobs, Midterms, and the 10-Year Yield

This week has more variables that can move rates than most, and they are big ones. Jobs data and the midterms can create real bond volatility. The thing to watch is that head-and-shoulders pattern in the 10-year yield: whether it holds or breaks lower is the tell for whether rates break below 7% or stay put. Mohtashami's own line is that if the conflict ended and the trade war stopped worsening, we would already be under 7% today.

Jeff & Lane's Honest Take

Here is our plain-spoken read: rates are roughly where they have been, demand is stabilizing but not booming, and nothing about this week changes the fundamentals of buying or selling a home in Colorado Springs. El Paso County has about 5.8 months of inventory and a $475,000 median sold price this week, which tells you buyers have real choices, but the best-priced homes are the ones going first.

That last part is the whole game for sellers. The smart play is the same as it has been all year: price it right from day one. The homes that sell quickly in this market are priced to what buyers will actually pay, not what sellers hope to get. And for buyers, a stabilizing market with a possible path to lower rates is not a reason to wait forever. If the payment works for your life, it works. If rates do drop under 7%, you can almost always refinance later.

We read the national stuff so you don't have to, and we translate it into what it means for your street. If you want to know what a rate move like this means for your payment, your offer, or your list price, call or text us at 719-499-9394.

Source: Logan Mohtashami, HousingWire, October 31, 2026