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."

"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."

Mortgage rates broke above 6.25% and ended the week at 6.41%, marking a significant shift from 2026's previously stable, low-volatility housing market environment. The 10-year yield approached its yearly high near the upper end of the forecasted range, while mortgage spreads widened considerably. Geopolitical tensions with Iran contributed to increased market volatility. Pending sales and purchase applications remain positive year-over-year, but historical patterns indicate housing demand typically weakens when mortgage rates approach or exceed 7%. The sudden rate spike represents a departure from earlier 2026 conditions, raising questions about future rate trajectories and market stability.

Read at www.housingwire.com