The Iran conflict
Now, traditionally, when there is a military conflict in the Middle East, people would expect money to flow into the US dollar and the US bond market as a safe haven, and oil prices would rise. But in the last few years, this has not really happened.
Part of this, I believe, is that traders are not afraid of a wider expansion in the Middle East and see these developments contained. As the times near, there is no fear of a long, drawn-out war with Iran, and Trump seems to favor quick fixes and nothing too far when it comes to military action.
We will look at the trades on Sunday night and what happens on Monday morning, but if this goes like other recent events, it may not have a long-term impact. One key will be watching the supply of oil through the Strait of Hormuz. The bond market and mortgage rates haven’t had any wild moves this year despite some really wild headlines. The attack on Iran will be another test of this.
10-year yield and housing rates
In HousingWire’s forecast for 2026, I expect the following range:
- Loan rates are between 5.75% and 6.75%
- The 10-year yield fluctuates between 3.80% and 4.60%
Friday was a crazy day. Coming off a positive jobless claims report and a hot PPI inflation report, you’d think 10-year yields and mortgage rates would be higher. However, that was not the case. Stocks were selling off, there was a negative sentiment that AI is taking jobs and perhaps bond traders got their heads around the situation in Iran, which sent the 10-year yield straight to a key level on Friday. And this week is a work week!
I’m nearing the end of my 2026 forecast for 10-year yields and mortgage rates, so this week will be very critical to not only see how markets react to the Iran situation, but also jobs data.
Either way, the 10-year yield closed at a 2026 low and rates ended the week at a low of 5.99%, according to Mortgage News Daily, while Polly’s mortgage rate lock data showed the weekend rate at 6.23%.
Mortgage spreads
Mortgage spreads remain positive for housing in 2026, reducing mortgage rate volatility, and are close to normal levels.
Historically, mortgage spreads have varied from 1.60% to 1.80%. Last week’s spread closed at 1.93%.
If spreads match 2023 highs, mortgage rates could be 1.20 percentage points higher, at 7.17%. As spreads return to normal, mortgage rates may remain lower for longer than in previous years.
In fact, we only have 20-34 upgrade points left in circulation. If volatility is suppressed for a long time, better spreads could come later in the year, but the big improvement here has already started.
Weekly pending sales
Pending home sales data provides a week-to-week perspective, although results may be affected by holidays and temporary fluctuations, such as a major winter storm in January. We were showing year-over-year growth at the beginning of the year, and that snowstorm slowed things down.
We’ve just had consecutive weeks of good year-over-year growth; that was before the snow affected housing data. Now we should have one report available for real estate sales that will be affected by snow data and we can go over those reports, but you can find the best forward-looking data here.
Weekly pending sales for the past week for the past two years:
- 2026: 63,209
- 2025: 60,410
Mortgage application data
Shopping app data is a forward-looking data line: growth here leads to sales around 30-90 days, and we saw 12% year-over-year growth in this data line last week.
However, what I really appreciate is at least 12-14 weeks of good weekly growth. If you can find this in addition to year-over-year growth, we have something legit for sure. In 2026, each week showed positive year-over-year growth. In the past two weeks, the year-on-year growth percentage has increased significantly as the snow has melted.
As you can see in the chart below, we have some seasonality in the weekly data.
Here’s 2026 so far:
- 2 weekly fine prints
- 4 weekly negative prints
- 1 weekly flat print
- 4 weeks of double-digit growth year over year
- 7 weeks of great annual growth
Weekly housing inventory data
Housing inventory data fell last week, which is not too shocking, as this week has shown declines in the past, so I won’t put too much weight on this week’s data. Hopefully, we will see a general increase in the commodity season starting in March. Inventory is at much healthier levels now than it was a few years ago.
We went from 33% year-over-year growth in inventory to the highest point in 2025, to 8.04% last week.
- Weekly inventory change: (Feb. 20-Feb. 27): Inventory decreased from 700,259 to 690,357
- Same week last year: (Feb. 21-Feb. 28): Inventory fell 640,221 to 639,357
New listing data
The new listings data also showed a weekly dip, which I attribute to seasonality in the data. We should get more than 80,000 new listings data during the peak months of the season, which is a rough estimate of what new listings might look like in the end.
I hope that the new listing data ranges between 80,000 and 100,000 per week during peak seasons, as was the case from 2013-2019. For context, during the housing bubble crash, new listings ranged from 250,000 to 400,000 per week for several years.
Here is the last week’s listing data for the past two years:
- 2026: 50,245
- 2025: 60,410
Discount percentages
In general, about one-third of homes are discounted before they sell, reflecting the volatile nature of the housing market. As the loan and property values rise together, the percentage of the amortization increases.
However, prices are near multi-year lows, so we’re now seeing year-over-year price reduction percentage data. This should not be surprising given that demand has slowed and inventory growth has slowed. We start with high seasonal variation in price reduction data so that year-to-year data is key.
The percentage price reduction last week is now 1.25% lower than this time last year.
Last week’s price reduction percentage:
Next week: Iran, jobs week, retail sales and more
Keeping it simple, this week can be nuts! Not only do we have the situation in Iran, which can cool down or increase, but it’s a week of jobs! We also have the ISM and retail sales report, Fed statements and unemployment claims.
It may be busy this week, but also remember that improving mortgage spreads have suppressed volatility in rates. However, we are always watching how the bond market reacts to the jobs data, which for me has been the key.
