The economic fallout from the war with Iran is pushing mortgage rates higher, even as other housing market trends favor home shoppers, according to the Associated Press. As recently as the last week of February, the average rate on a 30-year mortgage dropped to just under 6%. It climbed this week to 6.46%, its highest level in nearly seven months, driven by surging energy prices that heighten worries about higher inflation, pushing up the yield on U.S. 10-year Treasury bonds, which lenders use as a guide to pricing home loans.
The conflict is also injecting more uncertainty into the U.S. economic outlook at a time when the job market is sputtering. While rates are still down from a year ago, their recent upward trend has already led to a slowdown in mortgage applications. Further increases threaten to put a damper on home sales during what’s traditionally the busiest time of the year for the housing market.
“The war in Iran has seriously complicated the spring buying season,” said Joel Berner, senior economist at Realtor.com. “I expect that many buyers will be put off by rising rates and mounting economic uncertainty, choosing to bide their time rather than jumping on board for a purchase before rates go up.”
Home shoppers who can afford to buy at the current mortgage rate of 6.46% this spring are likely to find a more buyer-friendly housing market than this time last year, according to the Associated Press. That means they’ll have more leverage when negotiating with sellers, who in many cases are watching their property go unsold for weeks, potentially making them more willing to lower their initial asking price or offer buyers money for closing costs, repairs or other concessions in order to get a deal done, real estate agents say.
While the inventory of homes for sale nationally is still low by historical standards, active listings — a tally that encompasses all homes on the market except those pending a finalized sale — jumped nearly 8% in February from a year earlier, according to data from Realtor.com.
According to Redfin, there were about 46% more sellers than prospective buyers in the market nationally in February. That’s up from about 30% a year earlier and represents the largest gap between buyers and sellers on records going back to 2013, according to Redfin.
The median price of an existing home sold in February was $405,300, according to the National Association of Realtors, nearly five times the median household income.