Economic unease threatens early-year housing market momentum
Concerns about the war in Iran are adding to widespread economic anxiety as mortgage rates — which recently hit three-year lows — start ticking back up.
Key points:
- The 30-year fixed-rate mortgage averaged 6.11% for the week ending March 12, according to Freddie Mac — up from 6% one week earlier. But daily mortgage surveys indicate that rates are rising even more.
- The current sense of economic unease linked to the war in Iran is similar to what consumers experienced a year ago, when tariff volatility began churning markets.
- Though rates are on the rise, mortgage applications have ticked up, suggesting some demand is returning to the housing market.
Housing market activity is starting to pick up — but after falling steadily for months, mortgage rates have also begun to climb.
These and other conflicting economic factors are making it difficult to predict the kind of spring homebuying season real estate agents are in for.
Mortgage rates back on the rise after hitting 3-year lows
Mortgage rates have jumped, according to Freddie Mac's latest weekly survey. The 30-year fixed-rate mortgage averaged 6.11% as of March 12, up from 6% last week. The 15-year rate has also climbed, averaging 5.5% this week compared to 5.43% as of March 5.
The daily average 30-year rate has risen quite a bit since the start of this week. Mortgage News Daily (MND), which uses a different set of metrics than Freddie Mac, pegged the rate at 6.35% on Thursday afternoon, up from 6.09% on March 10.
"The bond market doesn't look like it can catch a break as long as war persists in Iran," MND Chief Operating Officer Matthew Graham wrote in an online post. "If it's not oil, it's fertilizer, (natural) gas, military spending, or a host of other inflationary knock-on effects that bode ill for the fixed income sector."
War in Iran fueling economic uncertainty
This sense of unease harkens back to when tariff-driven volatility began upending markets around this time last year, noted Hannah Jones, senior economic research analyst at Realtor.com.
"As we move deeper into 2026, the primary risk is that this hard-earned early-year momentum could once again hit a wall," Jones said. "For the market to sustain its 'pep,' buyers require more than just favorable borrowing costs; they need the psychological green light provided by a stable economic outlook."
The war in Iran is also increasing the risk of stagflation, an economic situation in which inflation rises while the job market weakens, according to a March 12 report from Wells Fargo. The report's authors noted that they expect the Federal Reserve to hold short-term interest rates steady at its next Federal Open Market Committee meeting, which is now just days away.
According to a Redfin survey conducted in the first few days of the war, 25% of respondents said they are delaying buying a home, car or other significant item because of the international conflict — less than the share of Americans who said last year that they intended to postpone a major purchase due to tariffs.
New listings, mortgage applications up
Despite global turmoil, there are some indications that housing market activity is picking up.
New listings rose 0.5% year-over-year during the four weeks ending March 8, marking the first uptick since November, according to Redfin data. In some cases, these listings are actually resurfacing from the final months of 2025, when sellers were pulling listings at a record rate.
However, overall inventory dropped 2.2% during the same four-week period — the biggest decline since 2023. Redfin also reported a 16% year-over-year drop for its Homebuyer Demand Index, which includes touring data.
Meanwhile, there was an uptick in mortgage applications for the week ending March 6, according to the Mortgage Bankers Association (MBA). Overall activity increased 3.2% from one week earlier, driven mostly by purchase applications.
"The pace of homebuying continues to track ahead of last year's pace, with overall purchase volume up 10 percent. More inventory on the market is supporting more transactions," MBA SVP and Chief Economist Mike Fratantoni said.
An early-year chill in construction activity
But 2026 is off to a slow start when it comes to new construction. While multifamily building starts were up, building permits for single-family homes declined, according to the U.S. Census Bureau. Housing starts for single-family homes were also down 2.8% from December to January and dropped 6.5% year-over-year.
"All told, January new construction data shows us that builders are responding to the market, which is currently quite tough for those selling homes," said Joel Berner, senior economist at Realtor.com.
"They are focusing on the areas that need supply, like the Northeast and Midwest, and pulling back in segments that do not, especially single family homes in the South and West," he said, adding, "For the buyers of the future to avoid the inventory constraints of the present, we simply need more homes to be built."