Dhruv Arun — May 12, 2026
The conflict with Iran has become a new wildcard for American homebuyers already struggling with high prices and mortgage rates. For the second week in a row, borrowing costs for American homebuyers have climbed, and experts say relief is not coming anytime soon. Just as mortgage rates fell below 6% at the end of February, a drop homebuyers anxiously awaited for years, the War in Iran pushed them back up. The average rate on a 30-year fixed mortgage climbed to 6.37% this week, up from 6.30% last week, according to Freddie Mac. That brings the benchmark rate back to where it stood about a month ago, erasing recent progress and extending a two-week streak of increases. Fifteen-year fixed mortgage rates, the go-to option for homeowners looking to refinance, also moved higher. That average jumped from 5.64% to 5.72% in the same period.
Mortgage rates do not move in a vacuum. Mortgage rates and the 10-year Treasury yield moved in similar patterns with oil prices since the start of the war. They track closely with the yield on U.S. 10-year Treasury bonds, which lenders use as a benchmark when pricing home loans. That yield stood at 4.37% in midday trading on Thursday, a meaningful jump from the 3.97% it sat at in late February, just before the war with Iran broke out. Surging oil prices tied to the conflict have stoked inflation concerns among bond market investors, and that anxiety is feeding directly into borrowing costs for everyday Americans looking to buy or refinance a home.
Historically, military conflict in the Middle East has gone hand in hand with transportation difficulties among oil exporters. Prices customarily rise across the economy, as oil is essential for manufacturing and transporting goods. Investors, in turn, demand higher returns to compensate for heightened risk in an inflationary environment. During periods of economic uncertainty, investors move money into Treasurys and mortgage-backed securities because they are considered safer than equities. This is called the “safe haven effect,” and the increased demand typically drives bond prices up and yields down, which in turn pushes mortgage rates lower. Still, news about the economy, oil prices and inflation rates is going to lead to more volatility in rates.
Despite the traditional spring selling season, the housing market appears to be slowing, with many families hesitant to commit to a mortgage. Existing home sales fell 3.6% in March to a seasonally adjusted annual rate of 3.98 million, the lowest level since June 2025. Even as sales soften, prices remain high, with the median existing-home price at $408,000. Data from real estate firm Redfin show pending home sales declined 4.1% year over year in the four weeks ending April 12, marking the steepest drop in more than a year. Realtors say buyer activity, including home tours, is also notably weaker than last spring. Although Spring is traditionally the busiest stretch of the year for the housing market, this one has gotten off to a sluggish start.
The housing market is increasingly being shaped by the economic effects of the Iran war, especially through rising oil prices and inflation pressures that are pushing mortgage rates higher. As the war in Iran continues and oil prices climb, costs for transportation and building materials are increasing, squeezing homebuilders. The National Association of Home Builders reported that builder confidence fell four points to 34 in April, the lowest reading since September. Rising construction costs are making it more difficult for builders to maintain affordability, forcing many developers to either reduce the size of new homes or raise prices altogether. The growing pressure on builders is also being passed directly onto consumers, further worsening affordability concerns in a housing market already struggling with elevated borrowing costs and slowing demand.
When mortgage rates rise, the effect on monthly payments is not trivial. Even a modest increase can add hundreds of dollars to what a buyer owes each month, shrinking the pool of homes they can realistically afford. Lisa Sturtevant, chief economist at Bright MLS, said buyers should stop waiting for a return to those levels anytime soon. “The expectation of rates below 6% this spring has disappeared, and buyers and sellers likely will face rates in the mid-6% range into the summer,” she said, as per a report from ABC News. The market is softening. Whether rates follow suit remains the central question hanging over the housing sector heading into summer.
Extemp Question: To what extent will the Iran war continue to impact the U.S. housing market?
