Here's Why the Iran War Could Lead to a Dip in the Housing Market
Strong home sales recorded in July largely reflected buyer activity from June, before the end of the U.S.’s ceasefire with Iran.
The Iran war has caused a potential slowdown in the U.S. housing market, according to Zillow's latest analysis. While July saw strong home sales, they were largely based on activity from earlier in the month, before tensions escalated with Iran. Since then, rising mortgage rates, inflation concerns and economic uncertainty have cast doubt on the housing market's outlook for the rest of the year.
Joel Berner, a senior economist at Realtor.com, stated that the Iran war is negatively impacting the housing market, as the complications in the Strait of Hormuz keep oil prices elevated. Higher oil prices lead to higher costs for physical goods, contributing to inflation. This, in turn, makes a dollar tomorrow worth less than a dollar today, requiring more future dollars to finance home purchases through higher mortgage rates.
Mortgage rates have climbed from near 6 percent to around 6.5 percent following the end of the ceasefire. A half-percentage-point increase in rates can significantly reduce buying power for buyers, making homeownership less affordable. Disruptions in oil prices and trade due to the conflict have also made economic sentiment more uncertain, further affecting the housing market.
Housing data from early fall may provide a clearer picture of whether the recent slowdown in pending sales will turn into a broader market downturn.
Written by urgent.news from Newsweek's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
