What was expected for spring 2026?
Before the war, the housing market was poised for growth. Mortgage rates had fallen below 6% for the first time since 2022, and experts predicted a strong spring buying season with more inventory and gradually falling rates. (HousingWire)
What changed?
The Iran war reversed the positive momentum almost overnight:
- Mortgage rates: Jumped from 5.99% back to 6.11% in just two weeks
- Buyer enquiries: Dropped 26% month-over-month
- Consumer confidence: 1 in 4 Americans delaying home or car purchases
- Seller activity: The “lock-in effect” returned as homeowners with low-rate mortgages refuse to sell
(Yahoo Finance) (CNN)
Will home prices drop?
Unlikely in most markets. Even though demand is falling, supply is falling too. Sellers aren’t listing because:
- They don’t want to give up their low mortgage rates
- Economic uncertainty makes moving risky
- Construction of new homes is slowing due to higher energy and material costs
The result is a frozen market — fewer transactions, but prices holding steady or even rising in supply-constrained areas.
What should buyers do?
- Get pre-approved now so you’re ready to act if rates dip
- Focus on affordability, not trying to time the market
- Negotiate harder — sellers are getting fewer offers
- Consider adjustable-rate mortgages (ARMs) if you plan to refinance when rates drop
- Look at less competitive markets where inventory is better
What should sellers do?
- Price realistically — overpriced homes will sit longer
- Highlight energy efficiency — buyers are now more sensitive to utility costs
- Be flexible on closing dates and concessions
- Consider waiting if you don’t need to sell — market may recover once conflict resolves
When might the housing market recover?
If the Iran war ends within 1-2 months, mortgage rates could drift back toward 5.5-6% by summer, and the buying season could see a late recovery. If the conflict drags on, expect a slow market through the rest of 2026. (Marketplace)