Key facts
- Real estate brokers report that rising mortgage rates have derailed an anticipated housing market rebound in early 2026.
- The conflict in Iran is cited as a major factor contributing to the increase in mortgage rates.
- An expected 10-12% increase in home sales has been significantly curtailed.
- An estimated 400,000 home sales may be lost nationally due to the rate surge.
- Higher rates are causing both buyers to hesitate and potential sellers to delay listing their homes.
- Brokers are advising sellers to consider rate buydowns as a more impactful incentive than price reductions.
Real estate brokers are observing that rising mortgage rates, significantly influenced by the conflict in Iran, have disrupted the anticipated housing market recovery for early 2026. Initially, the year showed promise, with expectations for a stronger market than in previous years and a potential increase in existing home sales beyond the 4 million mark seen since 2023.
However, the escalation of the war in Iran in late February 2026 led to a notable increase in mortgage rates. Data indicates that the rate for a 30-year conforming mortgage climbed from 6.23% to 6.94% by July 28. This rate volatility has altered the market's trajectory, causing brokers to report that the year is unfolding differently than predicted in January and February.
Brokers like Anthony Lamacchia of Lamacchia Realty estimate that the war and subsequent rate hikes will result in approximately 400,000 fewer home sales nationally this year. He noted that the initial optimism for a 10-12% sales increase, which would have brought sales to around 4.5 million, was dashed by these events.
The impact of higher rates is being felt by both buyers and sellers. In New England, Lamacchia observed that buyers are sidelined, and some potential sellers are hesitant to list their homes due to the financial implications of a move-up purchase. Boomer Foster of Paul Wesley Real Estate echoed this sentiment, citing inflation and interest rate uncertainty stemming from the Middle East conflict as major challenges. His firm is seeing an increase in price reductions and sellers withdrawing properties, particularly heading into the slower August period.
Despite the challenges, opportunities exist for buyers, especially in markets like South Florida, where sellers are more amenable to negotiation due to buyers' squeezed budgets. Brokers are advising sellers to consider offering rate buydowns, which are more impactful to buyers' affordability than price reductions. Foster also noted that the buyer-to-seller ratio is evening out, providing buyers with more negotiating power.
Brokerages are also adjusting their own operations. Lamacchia mentioned that his firm has had to cut back on expenses in anticipation of a slower market. He believes many firms are struggling. Pappas emphasized that while the war creates uncertainty, skilled agents can still help motivated buyers and sellers navigate the market.
With the Federal Reserve expected to maintain current interest rates, agents are focusing on controllable factors and educating themselves and their clients to act as trusted advisors rather than just real estate agents.