14. April 2026

Iran Effect: Homebuying Rebounds Stall as Higher Interest Rates Weigh on Consumers

WASHINGTON-- A week before the outbreak of war with Iran, the White House was touting a rare piece of encouraging economic news: interest rates on new home loans had fallen to their lowest level in nearly four years. Administration officials pointed to the decline as evidence that the long-sluggish U.S. housing market might finally be gaining traction, offering a measure of relief to prospective buyers squeezed by years of high borrowing costs and limited supply.

Less than two months later, that optimism has largely evaporated.

In the weeks following Iran’s closure of the Strait of Hormuz — a critical artery for global energy shipments — mortgage rates have climbed sharply, rising by nearly half a percentage point. The disruption has rippled through global supply chains, driving up energy costs, fueling broader inflation concerns and reviving fears that the U.S. economy could tip toward recession. The consequences are already showing up in housing data at a particularly sensitive moment, just as the spring homebuying season typically accelerates.

Existing home sales dropped to a nine-month low in March, according to data released Monday by the National Association of Realtors. At the same time, applications for new mortgages have declined for four consecutive weeks, signaling a pullback in buyer demand. Consumer sentiment has also darkened considerably, with surveys showing Americans are now more pessimistic about the economic outlook than they were even at the height of the COVID-19 pandemic.

“People are worried,” said Mike Simonsen, chief economist at the real estate brokerage Compass. “I was on a call with 500 agents today, and that was definitely one of the comments that kept coming up: We’re worried about war. We’re worried about what happens because of war.”

The emerging slowdown underscores how quickly geopolitical shocks can filter into the domestic economy, weighing on household decision-making in real time. While the Trump administration has sought to downplay the longer-term economic risks associated with the conflict, housing — one of the most interest-rate-sensitive sectors — appears to be reacting swiftly.

Affordability in the housing market has already been a persistent political vulnerability, particularly for Republicans, as high prices and borrowing costs have strained household budgets in recent election cycles. Any development that sidelines potential buyers or freezes activity in the market could complicate the party’s economic messaging heading into the midterm elections, when control of Congress will again be at stake.

President Donald Trump has attempted to address the affordability crisis through a series of executive actions designed to ease regulatory barriers to new construction and expand access to financing, particularly through community banks. Earlier this year, at his direction, mortgage finance giants Fannie Mae and Freddie Mac purchased roughly $200 billion in mortgage-backed securities in an effort to bring down borrowing costs. The White House also released an economic report Monday emphasizing how chronic underbuilding has exacerbated the nation’s housing shortage.

But those efforts are now being overshadowed by the economic fallout from the conflict with Iran.

“Rates have been migrating up again — especially since Iran — and that’s largely because of the inflation threat tied to higher oil prices,” said Stephen Moore, a former Heritage Foundation economist and longtime informal adviser to Trump. “The problem with higher mortgage rates is that it hurts both the seller and the buyer. The only party that really benefits is the bank. It’s a very negative dynamic.”

Moore added that the political stakes are significant. “If Republicans are going to prevail here, they have to convince Americans that this short-term pain is worth whatever long-term gain comes from confronting Iran,” he said. “But with traffic through the Strait of Hormuz effectively at a standstill, it doesn’t feel like a victory.”

Financial markets initially responded positively to Trump’s announcement of a ceasefire with Iran, but that optimism proved short-lived. Negotiations failed to produce a durable framework for peace, and the administration’s subsequent move to impose a blockade on Iranian port traffic has only heightened concerns about constrained global oil supplies. Analysts warn that sustained upward pressure on energy prices could push long-term bond yields higher — a key factor in determining mortgage rates.

In a statement, White House spokesperson Davis Ingle acknowledged the near-term turbulence but emphasized the administration’s longer-term focus. The president, he said, “has always been clear about short-term disruptions from Operation Epic Fury, but he remains committed to advancing policies that will improve housing affordability over time.”

The administration’s Council of Economic Advisers has estimated that the U.S. is facing a housing shortage of roughly 10 million units — a figure that exceeds many previous industry estimates. To address the gap, officials have outlined a range of policy recommendations aimed at streamlining construction processes and reducing regulatory hurdles at the state and local levels, where much of the bottlenecking occurs.

The severity of the affordability crisis has also prompted rare bipartisan cooperation on Capitol Hill. In February, House lawmakers overwhelmingly passed legislation to modernize federal housing programs, expand the availability of manufactured and affordable housing, and increase lending through community banks. Separately, Senate Banking Committee Chair Tim Scott, a Republican from South Carolina, and the panel’s top Democrat, Sen. Elizabeth Warren of Massachusetts, advanced their own housing bill. That proposal includes a Trump-backed measure to limit the ability of Wall Street-backed firms to purchase single-family homes — a practice critics say has driven up prices in many markets.

However, lawmakers remain divided over how to reconcile the competing bills, leaving the broader legislative path forward uncertain.

Meanwhile, the geopolitical crisis has made it more difficult for Republicans to keep the focus on housing policy as a centerpiece of their economic agenda.

“Overwhelmingly, what I hear from Republicans on Capitol Hill is that this is what they want to be talking about,” said GOP strategist Doug Heye. “But the effects of the war are compounding existing affordability challenges. It’s just not a conversation they’re able to sustain given everything else coming out of the administration.”

Before the conflict erupted, there were tentative signs that the housing market was stabilizing. Mortgage rates, while volatile, had generally been trending downward over the past year. Industry forecasts projected an increase in mortgage originations in 2026, and several key affordability metrics were beginning to improve. Federal Reserve officials were also expected to cut short-term interest rates as the inflationary impact of earlier tariff policies faded.

Jake Krimmel, a senior economist at Realtor.com, noted that despite recent increases, mortgage rates remain relatively low compared to some recent spring buying seasons. For buyers willing to navigate the uncertainty, the underlying fundamentals still present an opportunity.

“On paper, this could still be one of the more favorable spring markets we’ve seen in a while,” Krimmel said. “But that’s a big ‘if,’ given everything happening right now.”

Much depends on how long elevated oil prices persist. If the spike proves temporary, the broader economic impact could be limited, potentially allowing the housing market to regain its footing. White House officials have expressed confidence that borrowing costs will ease once the crisis subsides.

However, a prolonged period of high energy prices increases the risk that inflation becomes more deeply embedded across the economy. In response, several Wall Street economists have raised their estimates for the احتمال of a recession, reflecting growing concern about the combined effects of higher costs and weakening consumer confidence.

For would-be homebuyers, the calculus is becoming increasingly difficult.

“It’s not just mortgage rates that have made buying a home less affordable compared to six weeks ago,” Krimmel said. “It’s also the reality that people are tightening their budgets across the board. When everyday expenses go up, saving for a down payment becomes that much harder.”

As a result, even those who might otherwise be ready to enter the market may choose to wait, prolonging the slowdown and adding another layer of uncertainty to an already fragile housing recovery.