Key facts
- Escalation of the Iran conflict caused mortgage rates to rise.
- Housing demand remained positive year-over-year despite holiday impacts.
- Purchase applications saw 5% year-over-year growth.
- Housing inventory experienced a slight year-over-year decrease.
- Mortgage spreads were 1.95%, contributing to lower rates than in previous years.
- The 10-year Treasury yield reacted negatively to the Iran conflict.
Escalating geopolitical tensions in Iran, marked by missile strikes, have influenced market dynamics, leading to an increase in mortgage rates. Despite this, the U.S. housing market demonstrated resilience, with demand holding firm and showing positive year-over-year growth.
Weekly pending home sales data, though impacted by the July 4th holiday, still indicated positive year-over-year demand. Purchase application data, a forward-looking indicator, also showed a 5% year-over-year increase, although there was a 1% week-to-week decline. Housing inventory experienced a slight year-over-year decrease, but levels remain healthier than those seen from 2020 to 2023.
New listings data for 2025 and 2026 are performing better than in previous years, with demand slightly exceeding early 2025 levels. The percentage of homes undergoing price reductions has been lower year-over-year for most of 2026. The 10-year Treasury yield reacted negatively to the events in Iran, closing near its forecasted peak, though oil prices did not significantly break out.
Mortgage spreads have played a crucial role in keeping mortgage rates lower than in the preceding three years. Last week, spreads were recorded at 1.95%, down from 2.01% the week prior. If mortgage spreads had mirrored those of 2023, 2024, or 2025, current mortgage rates would be significantly higher.