Housing market is poised for growth in 2026 if Iran conflict doesn’t raise rates

The housing market is poised for growth in 2026: existing home sales rose in February, purchase application data has been positive year over year every week in 2026 and our weekly Housing Market Tracker shows positive pending sales year over year. But several new variables might change this by pushing mortgage rates higher.

Right now, the Iranian conflict has driven up oil, gas and diesel prices, and we still have a few Fed hawks left who might want to raise rates next. Can this end the positive start of the year?

First things first, let’s look at the demand data for 2026.

Existing home sales

Since we are working from an extremely low bar, it doesn’t take much to move the needle on existing home sales. The end of 2025 saw existing home sales close at a 9-month high. Then we had the holidays and the snow impact, which we are shaking off, but existing home sales are still poised for growth in 2026.

I don’t even have a high bar for growth in 2026 — as long as mortgage rates stay below 6.25%, we can get an additional 237,000 more home sales this year versus last year.

A big positive factor for growth in existing home sales is that inventory has grown from the desperate levels we saw after COVID, which has slowed price-growth down a lot. We no longer have a severely unhealthy seller’s market.

Purchase application data

Purchase application data has been positive week over week every week this year, and we are no longer working from an extreme level; last week saw 7.8% week-over-week growth and 11% year-over-year growth. So far, this looks fine.

Personally, I would like to see more week-to-week growth to go along with year-over-year growth so we can have the total purchase application data grow with more scale and get beyond the choppy week-to-week data.

Our weekly pending sales data

To round out the data trio, our weekly pending home sales data, especially the last three weeks now that the snow is gone, has been positive.

So we have established a positive trend here.

What can break this positive growth story?

We have had crazy, dramatic headlines this year, with no job growth, the escalating Iran conflict, and worries that AI will take all the jobs. But let’s keep it simple: It’s really about rates; in fact, it’s really been about rates since late 2022.

The key to a positive housing curve is to keep mortgage rates as close to 6% as possible and avoid a spike higher like we have seen at different times over the last three years. Every time rates head toward 7% or higher, the sales demand curve turns negative and the housing market stalls. The fact that mortgage spreads are under 2% has helped a lot this year to keep rates under 6.25%.

However, the Iran conflict, plus 15% tariffs, which the hawks in the Federal Reserve will point to as sticky inflation, and rising PCE inflation, which those same Fed hawks really care about — all of that can throw a wrench into the lower yields story.

The low 10-year yield that the housing market has enjoyed since September of 2025, under 4.30%, is at risk, especially if the jobs data just grows by a very small amount of jobs. So, this is something to monitor going out for the rest of the year. For now, we are still good for the existing home sales market, as the data shows above.