The Iran War Is Now Crashing the Housing Market Too

The Numbers Are Bad. Like, Really Bad.

Existing home sales fell 2% in August from July, landing at a seasonally adjusted annual rate of 3.98 million units, according to the National Association of Realtors. That is the third consecutive monthly decline. Sales also dropped 1.2% compared with August last year.

To put that in context: the historic norm for annual home sales is somewhere around 5.2 million. The market has been hovering near 4 million since 2023. The US housing market has essentially been running on fumes since 2022, when mortgage rates started climbing out of their pandemic-era basement. Last year was the worst year for home sales in three decades. This year is not going great either.

The one number that refuses to go down is the one that hurts buyers most. The national median sales price rose 1.6% in August from a year earlier to $429,100, an all-time high for the month of August in data going back to 1999, per NAR. Home prices have now risen on an annual basis for 38 consecutive months. Thirty-eight. In a row. During a multi-year sales slump.

How a War in the Middle East Ended Up in Your Mortgage Payment

Here is the chain of causation the Guardian lays out, and it is worth following all the way to the end. The US went to war with Iran in late February. Oil prices surged. Surging oil prices stoked inflation expectations. Those inflation expectations pushed up long-term bond yields. Lenders use those bond yields to price home loans. So mortgage rates went up. They have been going up ever since.

The average rate on a 30-year mortgage hit 6.76% this week, its highest level in more than 14 months, according to the Guardian. Before the war started, that rate had briefly dipped below 6%. Lawrence Yun, NAR's chief economist, told the Guardian that rates could soon hit 7%, given that mortgage rates tend to follow the 10-year Treasury yield, which was sitting at 4.92% as of Thursday morning, levels not seen since late 2023.

So yes. The war is expensive in the obvious ways everyone talks about. It is also quietly making it impossible for millions of Americans to buy a house. That part is not getting nearly enough attention.

Who Is Actually Buying Homes Right Now?

If you are buying a home in this market, you are either very financially comfortable or very committed to a terrible decision. The buyers still active right now are largely people who can afford current mortgage rates outright or who have enough cash to skip the mortgage entirely.

First-time buyers made up just 30% of purchases last month, up slightly from 29% in July and 28% in August last year, NAR said. Historically, first-time buyers account for closer to 40% of home sales. That gap tells you something important: the people who need the most help getting into the market are the ones getting squeezed out the hardest.

Heather Long, chief economist at Navy Federal Credit Union, told the Guardian that affordability is the primary concern for shoppers right now, with home prices, mortgage rates, property taxes, and insurance costs all significantly higher than they were just a few years ago. Her summary of the situation: "Americans are hitting the pause button on homebuying." That is a polite way to say the market is frozen for anyone who is not already rich.

The One Sliver of Good News, and Its Limits

There are slightly more homes for sale than there were a year ago. Inventory at the end of August came in at 1.62 million unsold homes, up 3.2% from July and up 5.9% from a year ago, per NAR. That translates to a 4.9-month supply at the current sales pace, the highest level in over 10 years.

In normal market conditions, a supply in the four-to-six-month range signals a reasonably balanced market between buyers and sellers. So technically, we are there. Technically. The catch is that pre-pandemic, the market typically had around 2 million homes available. We are still well below that. And the reason inventory is rising is partly because homes are just sitting there unsold, which is its own kind of bad sign.

Realtor.com data cited by the Guardian shows the national median home listing price actually fell 1.2% from a year earlier in August, and roughly 20% of listings had their asking price cut. Sellers are starting to feel the squeeze. The market is not correcting so much as it is stagnating, with prices stubbornly elevated at the top while affordability collapses at the bottom.

The Northeast Is Doing Its Own Thing and It Is Not Great Either

Regionally, sales fell in August in the Northeast, Midwest, and South, while the West was flat. The Northeast, which already has some of the most expensive housing in the country, saw prices climb 4.3% from August last year, according to the Guardian, driven by a particularly severe shortage of available homes relative to other regions.

That is not a typo. The region where homes are most expensive is also the region where prices are rising fastest. If you are renting in Boston or New York or DC right now and wondering when the market might finally give you a window to buy, the NAR data is not offering you much hope.