- The Iran war wrecked housing's brief spring break, sending mortgage rates back to 2023 highs.
- Sellers are finally blinking with price cuts. Too bad would-be buyers are still holding out.
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Mortgage rates are delivering an unwelcome bit of deja vu.
After 2026 started with high hopes of a housing-market thaw, borrowing costs are back at 2023 highs. The affordability reprieve that was promised evaporated almost as quickly as it appeared. Prospective buyers are right back where they started.
For a fleeting moment, it looked like relief might materialize. Mortgage rates fell below 6% in late February for the first time since 2022.
Then the Iran war started.
The chart below speaks for itself. The war is a clear inflection point. It led to surging oil prices, a flare-up of inflation, and a surge in bond yields worldwide. What's transpired is the quickest four-week spike in the 30-year fixed mortgage rate since late 2024. It's now at 7.49%, the highest since 2023.
It's not an exaggeration to say the war spoiled best-laid plans for a housing-market recovery. While there's no guarantee it would've played out in perfect fashion, the war ensured it had no chance of doing so.
But ultimately, the mortgage surge is one symptom of a much bigger problem. Disruptions from the Iran war have pushed bond yields higher worldwide, raising borrowing costs for everyone from homebuyers to governments, and putting messy fiscal situations in an even harsher spotlight. (Looking at you, France.)
Sellers finally blink
There is, however, one new housing-market development worth watching: sellers are finally blinking.
Around 21% of sellers cut their asking price in the four weeks through September 20, the highest share for this time of year since Redfin started keeping track in 2022. Realtor.com also recently found price cuts at a four-year high.
That may sound like a simple bit of good news. It suggests that sellers are finally accepting the new reality, which means more room for buyers to negotiate.
A buyer's market, sort of
But it also creates the type of tension that's come to define the housing market. Buyers may have more leverage than they've had in years — more price cuts, more concessions, and fewer bidding wars — just as the higher cost of borrowing is shrinking the pool of people able to take advantage of it.
A lower asking price can certainly soften the blow from a higher mortgage rate, but it can't fully erase it.
Sellers who need to move — for a job, a divorce, or a growing family — have to meet buyers where they are. But there's still a legion of owners clinging to their ultralow pandemic-era mortgages.
If rates stay elevated, expect that divide to widen. There'll be more motivated sellers cutting prices, but enough others staying put to keep inventory from spiraling.
In the end, the housing market may be tilting toward buyers, but it is still a long way from being affordable.
The post The housing market is tilting toward buyers. Here's why nobody is celebrating. appeared first on Business Insider
