Syndicated post from InmanNews.
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Few people buying homes in late February were thinking about the Strait of Hormuz. Many of them are now.
In the weeks since the Iran conflict started, the U.S. residential real estate market has been absorbing a compounding series of shocks, including spiking oil prices, elevated inflation, rate volatility and a creeping credit crisis unfolding on household balance sheets. It is all traceable to the war and its disruption of global energy markets.
The spring housing market, historically the busiest selling season of the year, has been a disappointment in many regions. Inman spoke with mortgage professionals, credit experts, and real estate agents across the country to understand what is happening and what buyers, sellers, and agents should expect.
‘An unusually chilly spring’
The mechanism by which a military conflict in the Middle East translates into a higher monthly mortgage payment is faster and more direct than most people realize.
“We saw a huge spike in mortgage rates right after the conflict broke out,” David Samuels, a Realtor with Keller Williams Westlake Village in California, told Inman. “I blame this on the increase in oil prices, yielding an increase in inflation, which is directly proportional to an increase in rates. Ever since that jump over six percent, the housing market has slowed down tremendously and has made this an unusually chill spring.”
Put another way: The spring 2026 housing market had all the makings of a breakout season. Then Iran happened.
Mortgage rates had just dropped below 6 percent for the first time in four years when the conflict broke out, sending them as high as 6.45 percent and rattling buyer confidence. Existing-home sales slid to a nine-month low, according to the National Association of Realtors.
But the market didn’t totally stall. Pending sales are running near their highest pace since the pandemic boom ended, and listing views on Zillow are up 32 percent year-over-year, according to Zillow’s March Market Report.
Inventory is finally climbing, and even homeowners with sub-5 percent rates are starting to list. Thirty-five percent of current sellers have rates below 5 percent and are listing anyway, according to a Coldwell Banker survey of more than 700 agents.
Prices are also easing. The national median list price is down 1.4 percent year-over-year for the ninth straight month, per Realtor.com’s April report, and the typical home is sitting on the market two days longer than a year ago. That’s the 25th consecutive month of year-over-year deceleration in sales pace.
Regionally, the picture is split. Coldwell Banker’s survey found 70 percent to 74 percent of agents in the Midwest and Northeast characterize their markets as seller’s markets. In the South and West, 46 percent to 56 percent of agents say it’s a buyer’s market.
It’s not the breakout spring many hoped for, but it may be the most functional market in three years.
The chain reaction hitting every deal
Cody Schuiteboer, President and CEO of Best Interest Financial, traces the chain of events precisely. Brent crude rose from $73 per barrel before the war to a post-war peak of $126 in late April, a roughly 73 percent surge.
Bond investors, anticipating inflation, sold long-duration Treasuries, pushing the 10-year yield from just under 4 percent in late February to approximately 4.4 percent. It was a peak reached in late March as the conflict showed no signs of resolution.
Mortgage rates followed in lockstep, rising from 5.98 percent on Feb. 27 to 6.30 percent as reported by Freddie Mac for the week ending April 30, and to approximately 6.45 percent on April 29 after the President signaled that the naval blockade of Iran would continue for the foreseeable future.
On a $360,000 loan, that nearly half-point increase translates to an extra $109 per month, $1,308 per year and roughly $39,000 more in total interest over the life of the loan. Across nearly four million expected transactions this year, Schuiteboer estimates tens of billions of dollars in net worth are shifting from buyers to bondholders every month.
Don’t expect the Fed to ride to the rescue. With recession probabilities around 30 percent, unemployment projected to rise to around 4.4 to 4.5 percent by year-end, and inflation running closer to 3 percent than 2 percent, Schuiteboer said the central bank’s hands are effectively tied.
“Everyone must operate on the assumption that 6 percent-plus is going to be the prevailing rate environment throughout this year,” Schuiteboer said.
Credit scores as collateral damage
While the rate increase appears on every loan estimate, Ali Zane, CEO of IMAX Credit Repair Services and a former mortgage bank director, argues that a second, less visible crisis is unfolding that will outlast the conflict itself.
Since late February, Zane says his office has seen a consistent pattern across mortgage applicants’ credit reports: balances rising, utilization ratios climbing, and FICO scores dropping. Not by 5 or 10 points, but by 30 to 60 points on average.
Gas averaging above $4.30 per gallon nationally by the end of April, groceries and utilities caught up in broader inflation running close to 3 percent, and rising financing costs across the board are forcing households to absorb excess expenses by charging them to credit cards, which carry an average annual rate of around 21 to 22 percent.
As utilization climbs — particularly above 30 percent — it begins to weigh more heavily on the FICO score used to determine mortgage eligibility, with higher balances signaling greater risk to lenders regardless of the ratio’s level.
“The conflict isn’t just pushing mortgage buyers to a 6.30 percent rate,” Zane told Inman. “In many cases, the buyer’s credit damage prevents qualification altogether.”
The numbers make the stakes concrete. A borrower with a 760 FICO score qualifies for today’s prevailing rate of 6.30 percent. The same borrower, after a 60-point drop to 700, may face a rate of 6.63 percent to 7 percent. And, for those putting less than 20 percent down, a higher PMI premium on top of that.
On a $360,000 loan, the difference between 6.30 percent and 7 percent is $167 more per month, $2,004 more per year, and roughly $60,000 more over 30 years, before accounting for the added PMI cost, which can widen the gap further. The rate environment accounts for a meaningful share of that increase, but for borrowers whose credit scores have slipped, the damage to their rate tier may now be the larger of the two costs.
Zane also flags a debt-to-income problem eroding mortgage eligibility. He’s seen non-mortgage DTI ratios among clients spike significantly since late February, driven by growing credit card balances, higher minimum payments, elevated auto loan obligations, and BNPL installment payments that underwriters are increasingly pulling from bank statements.
A household that moved from 28 percent non-mortgage DTI in January to 33 percent by April hasn’t necessarily taken on any new debt. Instead, rising gas, grocery, and utility costs are pushing more spending onto credit cards, and minimum payments rise with balances. The result, Zane says, is that many families have lost roughly $40,000 to $65,000 of mortgage approval capacity without realizing it, depending on household income.
Homebuying has become a gamble
Beyond rates and credit, Samuels points to a second trend that defies easy quantification: perception. Geopolitical uncertainty, he says, is keeping a meaningful share of prospective buyers on the sidelines altogether.
“A war can spring up at any moment for any reason, so there’s no predicting how the market will turn worse or better,” Samuels said. “It just makes homebuying a gamble for a large margin of people.”
The upside for buyers who do remain active: unusual negotiating leverage. “Especially among first-time homebuyers, I’m seeing we have a ton of leverage in negotiation because there’s hardly anyone else out there,” Samuels says. “Just last week, I got my clients a home that appraised for $60,000 over purchase price.”
What previous Middle East conflicts suggest
Comparisons to the 1973 oil embargo have circulated widely since the conflict began. Schuiteboer argues that the 1990 Gulf War is the closest historical parallel for housing.
Back then, oil prices rose by roughly 75 percent in two months, transaction volume fell — existing home sales dropped 4.3 percent for the full year — price appreciation stalled, and the market slugged along until oil prices retreated and the recession lifted in 1991. It’s worth noting that the housing slowdown of that period was amplified by a pre-existing real estate bubble and a broader recession, not by the Gulf War alone.
“The takeaway was that housing didn’t crash; it froze,” Schuiteboer said. “I believe that’s the course of action we should expect for 2026, unless Iran can manage to reopen the strait before mid-summer.”
Zane reaches further back, to 1979–1982, following the Iranian Revolution. It was a period when mortgage rates climbed to an annual average peak of 16.64 percent in 1981, with weekly rates briefly exceeding 18 percent under Paul Volcker’s inflation-fighting campaign.
Total bankruptcy filings rose from roughly 331,000 in 1980 to 380,000 in 1982 — about a 15 percent increase — before continuing to climb sharply through the mid-1980s.
Zane is not predicting a return to those conditions. His point is narrower: every protracted Middle East energy crisis since 1973 has produced credit-level damage to consumers that outlasts the conflict itself.
“The borrowers who preserve their credit profile during the next 24 months will find themselves in a drastically advantageous position regardless of the conflict outcome,” Zane said.
Buy smart, fix credit, price right
For buyers, Schuiteboer recommends locking a rate immediately after signing a purchase agreement. Rate volatility driven by oil market movements has produced single-day swings exceeding 25 basis points on the most turbulent days, making floating a high-risk bet.
He also encourages buyers to take seller-paid buydowns seriously, which can save some buyers upwards of $200 per month, and to reconsider the 7/6 ARM for anyone planning to move or refinance within 7 years. But he added that buyers should verify the current spread with their lender, as ARM rates have at times been comparable to or even higher than 30-year fixed rates in this environment.
Zane’s advice centers on credit hygiene. Bring every credit card’s utilization below 10 percent before applying, which can yield 30 to 50 FICO points within 30 to 60 days.
Don’t close old cards, even unused ones, Zane said. And pull all three credit reports now to dispute errors. The FTC found that 26 percent of consumers identified errors on their credit reports that might affect their scores, though the share with errors serious enough to result in worse loan terms is closer to 5 percent.
The figures are from a 2013 study that remains the most comprehensive government data on the subject. Either way, errors are common enough that checking before applying is worth the effort.
For sellers, Schuiteboer is blunt: The repricing is already happening whether sellers acknowledge it or not. “If anyone is likely to get this market wrong, it’s sellers,” he said. “The idea is to assume that higher rates mean fewer buyers, but the reality is more complex.”
Schuiteboer said there are still plenty of buyers, but they’re buying houses worth $40,000 to $60,000 less than those bought at a 5.98 percent mortgage rate. In other words, that home, valued at $475,000 in February, has now been revalued to $440,000 based on the new financing costs.
“Sellers who fail to take this into account are having their listings linger on the market throughout the spring months, and homes that linger on the market through spring tend to sell for less in summer,” he said. “The fastest movers in the last 60 days have been the sellers who have taken this pricing dynamic into account.”
