Key facts
- US housing demand has slowed due to rising mortgage rates above 6.64%.
- Geopolitical tensions from the Iran conflict and trade disputes are contributing factors.
- Purchase application data and pending home sales have recently shown negative year-over-year trends.
- Inflation remains above 3% year-over-year, supporting the Federal Reserve's hawkish policy.
- The Federal Reserve is using conflict uncertainty as a justification for maintaining higher rates.
The U.S. housing market is experiencing a slowdown in demand as mortgage rates exceed 6.64%, a level historically associated with declining housing data. This rise in rates is attributed, in part, to geopolitical tensions stemming from the Iran conflict and trade disputes, which the Federal Reserve is leveraging as a hawkish talking point. Recent data from the MBA shows purchase applications have shifted from a period of double-digit year-over-year growth to negative prints, indicating a cooling demand. Pending home sales have also seen a decline compared to the previous year. Despite inflation remaining above 3% year-over-year, which supports the Fed's tight monetary policy, the uncertainty surrounding global conflicts provides further justification for maintaining higher interest rates.