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

"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 has been positive week over week every week this year, and we are no longer working from an extreme level."

"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."

Existing home sales reached a 9-month high at the end of 2025 and are positioned for continued growth in 2026. Inventory has recovered from post-COVID lows, reducing price pressures and eliminating the severely unhealthy seller's market conditions. Purchase application data shows consistent week-over-week positive momentum, with recent data indicating 7.8% weekly growth and 11% year-over-year growth. Pending home sales data has also turned positive following winter weather impacts. The housing market's trajectory depends primarily on mortgage rates remaining below 6.25%. Historical patterns show that when rates approach or exceed 7%, sales demand declines and the market stalls. Mortgage spreads under 2% have supported rate stability this year.

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