A spring without sub-6% mortgages? Blame the war in Iran 

Decisions in residential real estate are often based on market data — sometimes conflicting, often confusing. Housing Market Decoded, authored by economists and other market experts, helps put the data in context so you can make sense of the numbers.

As recently as February, hopes ran high for a strong 2026 spring selling season after the housing market failed to achieve liftoff in 2025.

Inventory was approaching pre-pandemic norms, giving buyers more options; the stock market had swollen savers' portfolios after three consecutive years of double-digit gains; unemployment dipped in January, reversing a troubling upward trend; and most importantly, mortgage rates fell to a 41-month low, dropping below the crucial 6% threshold for the first time since September 2022.

Those lower mortgage rates, coupled with flat home price appreciation in the last year (just 1.3% in 2025, according to the S&P Cotality Case-Shiller Price Index) meant that home buyers' monthly payments would go further this spring than they had in years.

The significance of 6%

When Freddie Mac's benchmark survey reported rates below 6%, mainstream media trumpeted the news: Mortgage Rates Fall Below 6% for the First Time Since 2022 (WSJ); U.S. Mortgage Rates Fall Below 6% for First Time in Years (NYT).

When declining mortgage rates make headlines, home shoppers often shift their perspective — moving from seeing rates as a reason to avoid buying ("they're punitively high") to a reason to act now ("they're the lowest in years").

And it's not just a psychological effect — those lower rates significantly boost purchasing power. For example, a $3,000 monthly payment could finance a $463,000 loan in late February of 2025 (at a 6.76% interest rate). This February, that same payment would support a $501,000 loan.

That's an 8% bigger budget for the same monthly payment, and consumers took notice. Google Trends data shows that the month of February had the highest search interest for the term "mortgage" since Spring 2022, when rates began to rise.

Spring, interrupted

Then the U.S. and Israel launched a war against Iran. Analysts' expectations of the long-term impacts of the war are changing by the hour right now, but its effect is already being felt in markets. Iran closed the Strait of Hormuz, cutting off Persian Gulf states that supply around 20% of the world's oil consumption. That restriction of supply has pushed oil prices up sharply, from around $60/barrel in December to the $90-100 range in mid-March.

Oil is a critical input across the economy, both directly in manufacturing and indirectly as fuel for transportation and heating/cooling. As a result, a sharp increase in energy costs tends to squeeze firms' profit margins, reduce production and employment, and erode household income — all while pushing up prices across a wide range of goods and services.

That puts the Federal Reserve in a bind. It threatens both sides of its dual mandate — to pursue stable prices and maximum employment — leaving its usual tools, like short-term interest rate adjustments, far less effective in the face of a supply shock. Cutting rates to support economic output risks fueling inflation just as higher oil prices are already driving costs up through supply chains. But raising interest rates to curb inflation would exacerbate the harm to employment caused by the energy crisis.

That's why most forecasters have shifted their expectations, predicting a delay in any potential rate cuts this year.

A disappointing replay?

In a world where inflation just got pushed up by the oil shock, most bond yields, including the 10-year Treasury yield, have risen sharply — and most importantly for real estate, higher mortgage rates have followed, spiking more than 50 basis points from their February lows.

If the Iran war and resulting oil shock drag on, the most likely outcome for the spring selling season is a replay of last year, when market turmoil from major tariffs shook consumer confidence and sidelined some buyers. It was far from a total bust, but it did contribute to a third straight year of existing-home sales stuck at an anemic pace of just over 4 million.

This year, sub-6% mortgages were beginning to help break the market out of that pattern; however, the Iran war is likely to delay that recovery for a while longer.

Jeff Tucker is the Principal Economist for Windermere Real Estate, where he analyzes economic data to explain its impact on national and regional housing markets. He previously spent five years at Zillow, researching housing market trends, authoring reports and presenting to policy makers. The views expressed in this column are solely those of the author.