Housing demand still positive, but for how long with rising rates?

Lower mortgage rates and less volatility have been one of the key positive stories in 2026 for the housing market. Until last week, rates were under 6.25% all year and we didn’t see much volatility, which is a key variable for a healthy housing market. However, a lot of that changed last week as the conflict with Iran is still escalating, with no end in sight.

For now, our data shows housing demand is still positive year over year, but, as in previous years, whenever we get a mortgage rate spike toward 7% or higher, the demand curve fades, and we don’t really see any movement in home sales for the calendar year until rates fall again. So, let’s take a look at the data and see what it is telling us.

10-year yield and mortgage rates

In the 2026 HousingWire forecast, I anticipated the following ranges:

• Mortgage rates between 5.75% and 6.75%
• The 10-year yield fluctuating between 3.80% and 4.60%

Well, we had a good thing going; even early in the Iran conflict, the 10-year yield and mortgage rates were fairly calm, with good mortgage spreads. That has gone away; rates not only breached 6.25% but ended the week at 6.41% on Friday as mortgage spreads worsened. Taken together, these things flipped the low-rate, low-volatility story of 2026. The velocity of the move now begs the question of what will happen next with rates.

The 10-year yield is very close to its yearly high, but because mortgage spreads worsened on Friday, mortgage rates are also at their yearly high. Since September of 2025, the 10-year yield has remained below 4.30% and, as you can see in the chart below, we are testing the higher end range, but for now, we haven’t broken higher.

I talked about the 10-year yield and mortgage rates on Friday’s episode of the HousingWire Daily podcast and I also appeared on CNBC‘s Fast Money to provide some updates on housing regarding the Iran conflict.

Now, the PCE inflation report on Friday was still 1% above the Fed’s target and with the war still escalating, the 10-year yield hasn’t broken above this bowl pattern I have discussed for many months. However, if the war escalates, inflationary pressures persist and the economy continues to expand, yields and rates can rise.

If the economy is being negatively affected by this inflationary pressure, that would be a different story; however, it might take weeks or months for that to show up in the data. We went from a calm borrowing bond and mortgage market to the current, unsure chaos, so the key will be to follow daily updates on the conflict until we get some closure.

Rates ended the week at 6.41%, according to Mortgage News Daily, and Polly’s mortgage rate lock data shows a weekend rate of 6.14%. As you can see, the market rate variable is trending in the wrong direction.  Mortgage rates, when calm and under 6.25%, can work for the housing market. Until then, we will see how these higher rates impact the data going out. In the past, after we had a slight swing in positive data, rates getting toward 7% and higher have impacted the data.

Mortgage spreads

Mortgage spreads remain a positive story for housing in 2026, reducing mortgage-rate volatility, and are close to normal levels. However, last week we had a bad spread day on Friday, which isn’t reflected on this weekly chart. If spreads worsen on the premise that this inflation burst could cause a recession, which could then push up payment risk in the marketplace, we will lose another positive variable for 2026. For now, the progress in mortgage spreads has been a game-changer.

Historically, mortgage spreads have ranged from 1.60% to 1.80%. Last week’s spreads closed at 1.93%. Again, Friday’s single-day spread was not accounted for in this weekly data.

However, I wanted to show what rates would be this week compared to the worst levels of the spreads in the past three years with the 10-year yield where it is today.

• If we had the worst levels of mortgage spreads in 2023, mortgage rates would be 7.59% today, not 6.41%
• If we had the worst levels of 2024, mortgage rates would be  7.21% today.
• If we had the worst levels of 2025, mortgage rates would be 7.02% today.

Weekly pending sales

Pending home sales data provides a week-to-week perspective, though results can be affected by holidays and short-term fluctuations. The last four weeks have been positive in our weekly pending sales data. We shall see if that moves forward, especially if rates go higher. Weekly pending sales usually take 30-60 days to hit the sales data. The year-over-year growth in sales did cool down just a tad this last week.

Weekly pending sales last week over the last two years:

• 2026: 67,915 
• 2025: 66,184

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Mortgage purchase application data

Purchase application data is a forward-looking data line: the growth here leads sales roughly 30-90 days out and last week we saw 11% year-over-year growth with 7.8% week-to-week growth.

For this data line, what I really value is at least 12-14 weeks of positive weekly growth. If you can get this alongside year-over-year growth, we have something legit, for sure. For 2026, every week has shown positive year-over-year growth.

As you can see in the chart below, we do have some seasonality in the weekly data.

Here’s 2026 so far:

• 4 positive week-over-week prints
• 4 negative week-to-week prints
• 1 flat week-to-week print
• 6 weeks of double-digit year-over-year growth
• 9 weeks of positive year-over-year growth

Weekly housing inventory data

Housing inventory should be starting its annual seasonal increase. With that said, the growth rate of inventory has really slowed from last year’s peak levels, to the point that we might see some negative year-over-year prints in our weekly inventory. However, we are far from the unhealthy levels of 2021, 2022 and 2023. 

We have gone from 33% year-over-year growth in inventory at the highest point in 2025, to 6.35% last week. In the past, inventory growth did pick up amid higher rates, softening demand and rising year-over-year new listings. New listings data is still negative year over year, but for this week, it’s a good start to the spring seasonal increase. 

• Weekly inventory change: (March 6-March 13): Inventory rose from 686,879 to 697,251
• Same week last year: (March 7-March 14): Inventory rose from 642,479 to 655,625

New listings data

New listings data also showed a solid week-to-week increase last week, while it’s still down year over year. We should get new listings above 80,000 per week during the seasonal peak months, which would be on the low end of the number we would get in a normal period.

I am hoping for the new listings data to range between 80,000 and 100,000 per week during the seasonal peak periods, as it did from 2013-2019. For context, during the housing bubble crash, new listings ranged from 250,000 to 400,000 per week for several years.

Here is last week’s new listings data for the past two years:

• 2026: 67,041
• 2025: 68,192

Price-cut percentage

Typically, about one-third of homes undergo price reductions before they sell, reflecting the dynamic nature of the housing market. As mortgage rates and inventory rise together, the percentage of price cuts increases.

However, rates are near multiyear lows, so we are now seeing negative year-over-year price-cut percentage data. This makes sense given that demand has picked up slightly and inventory growth has slowed. We are starting the seasonal shift higher in the price-cut data, so the year-over-year data will be key.

The price-cut percentage last week is now 1.25% lower than this time last year.

The price-cut percentage for last week:

• 2026: 32.91%
• 2025: 34%

The week ahead: Iran, inflation, and the Fed meeting

On Monday’s podcast, Editor in Chief Sarah Wheeler and I will preview the Fed meetings, but just like last week’s theme, as long as this Iran conflict is ongoing, that will be more important than any economic data we get, because the data is still backward-looking vs. the current reality. 

The key surprise we might have with the Fed meeting on Wednesday is that some doves might sound hawkish, given that the war is still going on. Buckle up, folks, next week might be the craziest yet.