Iran conflict
Traditionally, when there was a military conflict in the Middle East, people expected money to flow into the US dollar and the US bond market as a safe haven, and oil prices to rise. But this really hasn’t happened in recent years.
Part of this, I think, is that traders are not afraid of a broader escalation in the Middle East and do not see these events being contained. With the midterm elections approaching, there is no fear of a long, drawn-out war with Iran, and Trump seems to like a quick fix and nothing too protracted when it comes to military action.
We’ll keep an eye on Sunday night trading and what happens Monday morning, but if this plays out like other recent events, it may not have a long-lasting impact. One key will be monitoring oil flows through the Strait of Hormuz. The bond market and mortgage rates haven’t seen too much movement this year, despite some really wild headlines. The attack on Iran will be a new test of this.
10-year interest rate and mortgage interest rate
In the HousingWire forecast for 2026, I expected the following ranges:
- Mortgage interest between 5.75% and 6.75%
- The 10-year interest rate fluctuates between 3.80% and 4.60%
Friday was a crazy day. Based on a good unemployment benefits report and a positive PPI inflation report, you would have thought that 10-year rates and mortgage rates would be higher. However, that was not the case. Stocks sold off, there was negative sentiment about AI job losses and perhaps bond traders got a warning about the situation in Iran, sending the 10-year yield immediately to a key level on Friday. And this week is job week!
I’m getting closer to the lower end of my 2026 forecast for 10-year and mortgage rates, so this week will be very crucial to see not only how markets react to the situation in Iran, but also to employment numbers.
Regardless, the 10-year yield closed at a 2026 low and ended the week lower at 5.99%, according to Mortgage news dailywhile Polly’s mortgage rate data shows a weekend rate of 6.23%.
Mortgage spreads
Mortgage spreads remain a positive story for residential construction in 2026, reducing mortgage rate volatility, and are close to normal levels.
Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week’s spreads closed at 1.93%.
If spreads were to match 2023 peak levels, mortgage rates would be 1.20 percentage points higher, at 7.17%. Now that spreads are returning to normal, mortgage prices may remain lower for longer than in previous years.
Realistically, we only have 20 to 34 basis points of improvement in spreads. The longer volatility remains contained, the better spreads could become later in the year, but the big improvement here has already run its course.
Weekly ongoing sales
The pending home sales data provides a week-to-week perspective, although results can be affected by holidays and short-term fluctuations, such as January’s massive winter storm. At the beginning of the year we were showing year-over-year growth, and that snowstorm slowed things down.
We’ve just completed consecutive weeks of positive year-over-year growth; this was the case before the snow affected housing data. Now we should have one more existing home sales report that will be affected by the snow data and we can move forward with those reports, but you can get the best forward-looking data here.
Weekly open sales last week for the past two years:
- 2026: 63,209
- 2025: 60,410
Mortgage purchase application details
Purchasing application data is a forward-looking data line: the growth here is driving revenue forward by about 30 to 90 days, and we saw 12% year-over-year growth in this data line last week.
What I really appreciate, however, is at least 12-14 weeks of positive weekly growth. If you can get this in addition to the annual growth, we definitely have something legit. For 2026, each week has shown positive year-over-year growth. Over the past two weeks, the year-over-year growth rate has increased as the snow impact has melted away.
As you can see in the chart below, there is some seasonality in the weekly data.
Here’s 2026 so far:
- 2 positive prints from week to week
- 4 negative prints from week to week
- 1 flat week-by-week printout
- Four weeks of double-digit year-over-year growth
- 7 weeks of positive year-over-year growth
Weekly home inventory data
Housing inventory data fell last week, which isn’t too shocking as this week has seen declines in the past, so I wouldn’t put much stock in this week’s data. Hopefully we will see the traditional seasonal increase in inventory from March onwards. The stock is now at a much healthier level than it was a few years ago.
We’ve gone from 33% year-over-year inventory growth at the 2025 high to 8.04% last week.
- Weekly Inventory Change: (February 20 – February 27): Inventory has decreased from 700,259 Unpleasant 690,357
- Same week last year: (February 21 – February 28): Stock fell from 640,221 Unpleasant 639,357
New advertising data
New listing data also showed a weekly dip, which I attribute to seasonal shifts in the data. During the seasonal peak months we should get data on new listings above 80,000, which would be the range of what normal new listings would look like on the low end.
My hope is that new listing data will be between 80,000 and 100,000 per week during the seasonal peaks, as they were between 2013 and 2019. For context, during the housing bubble crash, new home additions ranged from 250,000 to 400,000 per week for several years.
Here you will find the new advertising data for the past two years:
- 2026: 50,245
- 2025: 60,410
Price reduction percentage
Typically, about a third of homes experience price reductions before they are sold, reflecting the dynamic nature of the housing market. As mortgage rates and inventories rise together, the percentage of price reductions increases.
However, interest rates are near multi-year lows, so we are now seeing negative year-over-year price reduction numbers. This should not be a surprise as demand has picked up slightly and inventory growth has slowed. We’re starting the seasonal shift higher in the markdown data, so the year-over-year data will be critical.
Last week’s price reduction percentage is now 1.25% lower than this time last year.
Last week’s price reduction percentage:
Upcoming week: Iran, jobs week, retail sales and more
To keep it simple, this week can be crazy! Not only do we have the situation in Iran, which could cool down or escalate, but it’s also a jobs week! We also have the ISM and retail sales report, Fed speeches and unemployment claims.
Things may get hectic this week, but remember that better mortgage spreads have compressed interest rate volatility. However, we always look at how the bond market reacts to the jobs numbers, which for me has always been key.
#war #Iran #mortgage #rates #higher