Spring housing market stalls as war, high mortgage rates keep buyers sidelined

(CNN) — The war in the Middle East — and the economic uncertainty it has fueled — is clouding what is usually the hottest season for home sales, leaving some sellers facing a dwindling pool of buyers.

The conflict with Iran has driven up borrowing costs and rattled markets, adding to economic uncertainty. The shift is already visible: Existing home sales fell to a nine-month low last month, according to the National Association of Realtors.

“Lower consumer confidence and softer job growth continue to hold back buyers,” said Lawrence Yun, NAR’s chief economist, in a statement.

Markets are closely following the conflict in the Middle East and, after the United States and Iran announced a two-week ceasefire last week, Wall Street reversed most of its losses since the start of the war. Treasury yields, the main benchmark for mortgage rates, have also eased. That shift could offer some relief to buyers, potentially giving the spring housing market a late boost.

Eric Haugen doesn’t want to take any chances right now, though. He was planning to list his Parker, Colorado, home this spring so that he and his wife could relocate to Texas. But he’s been watching the housing market in his area and has decided to wait it out for now.

“I don’t think people feel safe or ready to make a big purchase,” Haugen told CNN. “We just want to have a little bit more competition in the market to hopefully drive up more bids.”

Just seven weeks ago, before the United States and Israel began joint attacks on Iran, the average 30-year mortgage rate fell to 5.98%, dipping below 6% for the first time in three years and offering a hopeful signal for the spring housing market.

This week, the rate was 6.30%, according to Freddie Mac. It has eased slightly from a recent peak of 6.46% earlier this month as markets have steadied.

“Compared to one year ago when rates were at 6.83%, this is a meaningful improvement for homebuyers during what is typically the busy spring homebuying season,” said Sam Khater, Freddie Mac’s chief economist.

‘If we walk away with zero, we’re fine’

When Brent Wachter, an Air Force servicemember, bought a home in Albuquerque in 2023, he expected to stay for years. His previous posting, in Wichita, Kansas, had lasted more than a decade.

But a new overseas assignment upended those plans. He listed his home in November for $689,000, just above the $679,000 he paid — and found few takers.

Wachter said he would have been content to break even on the sale since the main goal had been to make space for his mother to live comfortably.

“It’s not like we’re trying to make money here. If we can walk away with zero, we’re fine,” he added.

With his May move approaching, he grew increasingly anxious. A handful of offers came in below asking; one buyer backed out.

This week, he accepted $620,000 – less than he hoped, and well below his list price.

The slowdown hasn’t been uniform. While higher mortgage rates have sidelined some buyers, they have also kept many homeowners from listing at all, reluctant to give up the ultra-low mortgage rates they locked in during the early years of the pandemic.

In some markets, that scarcity of listings has helped sustain competition. Nationally, home prices are still climbing, though growth is slowing. The median home price rose to a record high for March at $408,800, according to NAR.

When her mother passed away last summer, Jennifer Moriarty and her brother decided to fix up their parents’ home they lived in for more than 50 years in Springfield, Massachusetts.

“They were 19 and 20 when they bought the house,” she said of her parents.

“We didn’t want to just sell it to a flipper. We thought, ‘let’s see if we can get it to some sort of way that a new homeowner, ideally a first-time homeowner, could buy it.”

“We wanted to try to give somebody a shot,” she added.

Moriarty and her brother spent weekends cleaning the house. They redid the floors and the staircase, replaced the HVAC system and added a new front door and trim.

The Springfield area is designated as a “strong seller market,” according to Zillow’s Market Heat Index, indicating that buyer demand in that area remains strong and the market tilts in favor of sellers.

They listed the home for $299,000 and received three offers in eight days. They accepted an offer above the asking price from a first-time homebuyer and are set to close later this month.

“I felt sad selling the house we grew up in,” Moriarty said. “But knowing there’s going to be another first-time family moving in and there will be more joy in the house feels great.”

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