Spring Housing Market 2026: Rising Rates & War Uncertainty Cool Sales

A realtor led a small group through a Palm Beach Gardens, Florida, home on January 11, 2026, as the spring housing market began to take shape amid growing economic uncertainty. Although traditionally the busiest season for home sales, the market is facing headwinds from unexpectedly persistent inflation and rising mortgage rates, fueled by geopolitical instability.

The Federal Reserve had signaled potential rate cuts earlier in the year to counter inflation, but the outbreak of conflict with Iran has altered that trajectory. Rising oil prices are contributing to renewed inflationary pressures, prompting the Fed to reassess its monetary policy. U.S. Bond yields are climbing, and mortgage rates are following suit. Mortgage News Daily reported Friday that the average rate on a 30-year fixed mortgage rose to 6.53%, just 18 basis points below the rate from a year prior, after briefly dipping below 6% at the end of February.

The increase in mortgage rates is expected to impact affordability, but other factors are simultaneously shifting the market in favor of buyers. Homes are remaining on the market for longer periods, sellers are increasingly willing to reduce prices, and the overall supply of homes for sale is increasing, though not at the rate desired by many in the industry. “As the housing market approaches the ‘best time to sell’ season, it sits in a precarious position, caught between long-term improvements and sudden short-term instability,” Jake Krimmel, senior economist at Realtor.com, wrote in a recent report.

Data from Realtor.com shows that active inventory was up 5.6% year-over-year as of March 14, while new listings decreased by 1.4%. This indicates that the rise in available homes is not driven by a surge in sellers, but rather by properties lingering on the market. Some potential sellers may be delaying listing their homes due to concerns surrounding the implications of the conflict in Iran.

Jonathan Miller, director of markets for StreetMatrix, a housing market data provider, believes inventory will be the key factor. “The idea that rates are going to noticeably come down this year, I think, is generally off the table,” he said.

Market conditions vary significantly by location. In February, Las Vegas, Seattle, Cincinnati, and Washington, D.C., all experienced active listings increases of over 20% compared to the previous year, according to Realtor.com. Conversely, listings in San Francisco, Chicago, Miami, and Orlando, Florida, were lower than the previous year.

Home price growth has slowed. Prices were only 0.7% higher in January than in January 2025, according to Cotality, a significant decrease from the 3.5% annual growth recorded at the beginning of 2025. Yet, rising mortgage rates are offsetting these affordability gains.

The Northeast and Midwest are currently experiencing the strongest price appreciation, led by New Jersey, Connecticut, Illinois, Wisconsin, and Nebraska, due to limited supply in those regions, according to Cotality. The firm classifies 69% of top metropolitan housing markets as overvalued, while identifying undervalued markets like Los Angeles, New York City, San Francisco, and Honolulu as potential candidates for price rebounds in 2027.

“locations with consistent job growth will remain the primary engines for price appreciation, but they also have larger inventory deficits which are driving pressure on home prices,” Selma Hepp, Cotality’s chief economist, wrote in a recent report.

The new construction market is also facing challenges, with builders struggling to reduce an oversupply of homes. Inventories reached a 9.7-month supply in January, according to the U.S. Census, as sales fell to their lowest level since 2022. A growing number of builders are reducing prices in March, according to the National Association of Home Builders.

“Affordability for buyers and builders remains a top concern,” said Bill Owens, chairman of the NAHB. “Many buyers remain on the fence waiting for lower interest rates and due to economic uncertainty. Builders are facing elevated land, labor and construction costs and nearly two-thirds continue to offer sales incentives in a bid to firm up the market.” Construction of single-family homes declined in January.

Miller anticipates a challenging year for the housing market. “I think This represents not going to be an inspiring year for the housing market. It started out with high expectations. I think the war, whatever the outcome, has really dampened enthusiasm and kept uncertainty really high,” he said.