5-week rate climb ends — but sustained drop is ‘unlikely’ 

While the spring homebuying season has had a decidedly slow start, there are signs that it could still get back on track if the situation in the Middle East begins to stabilize.

The impacts of the Iran war and the energy shock caused by the conflict are already showing up in the latest housing market data. Though home prices and price reductions are comparable to a year ago, there has been a decline in mortgage applications, new listings and pending sales.

The war "really sapped any positive momentum we might have had early in the year," Compass Chief Economist Mike Simonsen said in his weekly housing market update on YouTube.

After climbing for 5 weeks, rates begin ticking down

With a fragile U.S.-Iran ceasefire currently in place, mortgage rates — which spiked to seven-month highs after the war started — have begun trending down. Freddie Mac estimates that the 30-year fixed-rate mortgage averaged 6.37% this week, down from 6.46% the week before and ending the five-week run of consecutive increases that began in early March.

Mortgage News Daily, which uses a different set of metrics to gauge rates, pegged the 30-year rate at 6.4% on April 8, down slightly after the ceasefire was announced one day earlier.

Depending on what the next inflation report reveals and what happens in the Middle East, the recent mortgage rate dip could be short-lived. Forecasters are expecting March's inflation report — due out April 10 — to come in at 3.3%, well above February's reading of 2.4%.

"Until a more permanent resolution emerges, the fog of uncertainty is unlikely to fully lift from the housing market," said Jiayi Xu, an economist at Realtor.com.

For now, the market is on pause

The instability in the Middle East is keeping the U.S. housing market "in a holding pattern," according to Lisa Sturtevant, chief economist at Bright MLS.

"The market remains skeptical of a permanent resolution for the Strait of Hormuz," Sturtevant said. "With energy and shipping costs keeping inflation figures 'sticky,' a sustained drop in rates appears unlikely for the foreseeable future."

The housing market slowdown has shown up quickly in mortgage applications. The unadjusted purchase index for the week ending April 3 was 7% lower than the same week a year ago — the first year-over-year decline since January 2025, according to the Mortgage Bankers Association (MBA).

The silver lining? Applications for lower rate options — such as adjustable rate mortgages and FHA loans — are up, MBA VP and Deputy Chief Economist Joel Kan noted. And while overall market activity has slowed, buyers still appear to be engaged. In its March Market Report, Zillow noted that average daily page views of for-sale listings on its website — an indication of buyer interest — were up 32% compared to a year ago.

Sellers also sensing a slowdown

But new listings have dropped 2.6% compared to a year ago, according to Redfin's four-week rolling average ending April 5. That dip can be partly attributed to Easter weekend, which the report noted arrived earlier than in 2025.

Meanwhile, overall inventory continues to slow — and could fall behind last year's pace by this summer, according to Simonsen.

"Inventory shrinking would be a real surprise for a lot of people," Simonsen said. However, this probably wouldn't happen if mortgage rates continue to climb. "If demand slows, inventory grows," he added. "If you are waiting for both lower rates and more selection, you are unlikely to see both."