By Samantha Delouya, CNN
(CNN) — The US housing market was supposed to turn a corner this year, but economic uncertainty and a jump in mortgage rates fueled by the US-Israeli war in Iran are casting doubt on a potential recovery.
After years of sluggish sales, economists expected 2026 to bring lower mortgage rates and more homes for sale, breathing new life into the market after home transactions fell to 30-year lows last year.
But the average 30-year fixed mortgage rate rose to 6.38% this week, climbing for the fourth-straight week to levels not seen in more than six months, according to data released Thursday by Freddie Mac.
Higher mortgage rates due to the conflict in Iran and a weakening job market are making buyers more cautious, real estate experts told CNN.
“What we really want to see is healthy demand going into the spring selling season,” Kamini Lane, CEO of Coldwell Banker, one of the country’s largest real estate brokerages, told CNN. “Now, there’s a lot of volatility. The geopolitical landscape, coupled with the macroeconomic landscape, means a lot could change, and it could change on a dime.”
Home sales were sluggish in January and February, but that may have had more to do with winter weather than weak demand, Lane said. The housing market usually gains momentum in the spring, when listings rise and buyers return.
“Nobody wants to list their home when you have to shovel (snow) out your driveway,” Lane said. “Nobody wants to go to a bunch of open houses when it’s negative 10 degrees outside.”
By late February, early signs suggested home sales could pick up. Mortgage rates slipped below 6% for the first time in more than three years — a key threshold many economists believed could lure buyers and sellers back into the market.
But the optimism was short-lived. The United States and Israel launched joint attacks on Iran in late February, rattling global markets and pushing mortgage rates higher as bond traders braced for renewed inflation.
Mortgage rates track the US 10-year Treasury yield, which has climbed as the war in Iran has sparked concerns about higher inflation. The 10-year yield last week rose to 4.39%, its highest level since July. On Monday, it climbed as high as 4.44% before paring gains.
On a $450,000 home with a 20% down payment, a buyer who locked in a 30-year fixed mortgage rate one month ago would pay about $1,120 less per year than someone securing a rate today. That amounts to more than $33,000 over the life of the loan.
“I think global concerns are definitely on the forefront of people’s minds,” Manny Maza, a real estate agent based in New Jersey, said. “I think people are little bit more cognizant of their budget and their bank account.”
Tilting into a buyer’s market
Still, conditions overall are more favorable for buyers in 2026 compared to recent years, said Daryl Fairweather, Redfin’s chief economist. Home prices are still rising, but at a slower pace than overall inflation – and wages continue to grow.
And despite the recent rise in mortgage rates, they are still lower than this time last year, when rates hovered above 6.6%.
Buyers have more options this year, as well. More homeowners are listing their homes after years of constrained supply: There are currently 630,000 more home sellers than buyers, according to Redfin. That’s the biggest gap in at least 10 years, Redfin said.
“When sellers outnumber buyers, buyers can just move on from one seller who doesn’t want to negotiate with them and go down the street and negotiate with a different seller of a home,” Fairweather said.
Plus, home shoppers are more cautious given a faltering job market and growing economic uncertainty, meaning fewer homes are being snapped up quickly, Fairweather said.
Last week, mortgage applications fell by 10.5% from the week prior, according to the latest data from the Mortgage Bankers Association.
Maza said he is seeing homes get fewer offers and buyers who are less willing to participate in bidding wars compared to previous years.
“The uncertainty is on everyone’s radar,” Maza said. “People are getting a little more hesitant. They’re still touring properties, they’re still submitting offers, but they’re more realistic.”
Buyers are also increasingly backing out of deals, rather than settling for homes that may not be the perfect fit.
More than 42,000 homebuying contracts fell through in February, equal to nearly 14% of all homes that went under contract that month, according to a separate Redfin report. That’s the highest share in February since Redfin began collecting data in 2017.
Still, Lane, the CEO of Coldwell Banker, remains optimistic.
“I think there’s a lot of pent-up demand,” Lane said. “So if we get a bit of stability in all those macroeconomic factors, including mortgage rates, you’re going to see a really healthy spring selling season.”
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