Geopolitical tensions are impacting America’s housing market, adding to the financial strain on homebuyers. The average rate on a 30-year fixed mortgage climbed to 6.55% — its highest level in nearly a year — after renewed strikes in Iran rattled financial markets.

Impact on Homebuyers

The increase all but extinguishes the optimism that defined the start of the spring homebuying season, when many economists expected falling mortgage rates to help thaw the housing market. In February, the average mortgage rate briefly fell below 6% for the first time in three and a half years. However, fighting that erupted in the Middle East days later upended that trajectory, pushing bond yields and mortgage rates higher as investors worried the conflict would keep oil prices and inflation elevated.

Pending home sales in June fell by 5.4% month-over-month and by 0.3% since last year, according to a report from the National Association of Realtors. Mortgage applications also fell 7% last week and were 2% lower than last year, according to data from the Mortgage Bankers Association.

Expert Insights

“The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers,” said NAR Chief Economist Dr. Lawrence Yun. Kara Ng, a Zillow senior economist, noted that “Mortgage rates are caught between cooler inflation data and renewed energy risks.”

Despite recent economic disruptions, Zillow still expects mortgage rates to drift lower, albeit not by much, to 6.4% by the end of 2026. That would still be higher than where rates ended last year, though.

Original reporting: KTVZ (Central Oregon) — read the source article.