It was a tough week for housing with oil prices rising further, wholesale inflation spiking, mortgage rates jumping, and the Fed more worried about inflation than the labor market. Let’s hope this war is over before the spring selling season really gets going.

Oil prices keep rising. Israel’s attack on Iran’s South Pars natural gas field, and Iran’s retaliatory strike on Qatar’s Ras Laffan LNG export facility pushed energy prices even higher. Brent crude prices have risen from $72 pre-conflict to $106 today (+47%). That is already having an impact on inflation, and rising inflation is bad for bonds and, by extension, mortgage rates.

Mortgage rates move up. In the first week of the war, average 30-year mortgage rates managed to stay in the low 6% range. But with the conflict broadening, oil prices jumping, and a shocking PPI (wholesale inflation) report, US treasury yields and mortgage rates moved up aggressively. Freddie Mac’s PMMS report came in at 6.22%, while Mortgage News Daily has average 30-yr rates at 6.36%.

TP: As I said last week, this is the last thing we need before the spring selling season gets going. Are spring/summer transaction volumes going to disappoint for the 3rd year in a row?

The Fed kept rates steady. At their March 18 FOMC meeting, Fed members voted to keep the Federal Funds Rate target range set at 3.50–3.75%. This was not a surprise, especially given the US/Iran conflict and its impact on global energy prices. Only one voter dissented: Stephen Miran wanted a 25 basis point (0.25%) cut.

TP: It’s a tough situation for Fed members: job growth is very low, inflation is rising again, and the war in Iran multiplies the uncertainty.

Wholesale inflation jumped. “Headline” PPI (Producer Price Index = inflation for businesses) for February rose 0.7% MoM, which was much higher than the +0.3% MoM expected. As a result, the annual figure climbed to +3.4% YoY (from 2.9% YoY in January). “Core” PPI also came in hot, up 0.5% MoM.

TP: The Iran war didn’t start until February 28, so the conflict had nothing to do with the PPI increase. The BLS attributed the PPI jump to a 49% rise in the prices of ‘fresh & dry vegetables’ (which explained 20% of the rise in goods prices) and a 6% rise in traveler accommodation services (which explained 20% of the rise in services prices).

Lowest rental rates in 4 years. According to Realtor.com, median asking (new) rents have been trending down for 30 straight months and are now 5.1% below their mid-2022 peak. Admittedly, that’s not a large drop, but it contrasts greatly with the 3–4% Rent growth included in the CPI.

TP: National rents may only be down 5%, but there are a number of markets in the South where the rental rates are down more than 10% from their peak: Austin (-18%), Birmingham (-17%), and Memphis (-16%).

New home sales plunged in January. The Census Bureau reported that new home sales fell 18% month-over-month (-11% year-over-year) in January to 587,000 (SAAR). That’s the lowest figure since November 2022.

TP: This looks bad, but I’m not sure that it actually is. New home sales in November 2025 (764,000) and December 2025 (712,000) were unusually strong, so the weak January 2026 figure could just be a case of a “pull-forward” of sales in late 2025. This is a volatile data series from month-to-month, but the 6-month moving average of monthly sales has barely budged.

Sort of encouraging news on pending sales. The NAR’s Pending Home Sales Index rose 1.8% month-over-month in February to 72.1. Despite the improvement, transaction activity remains very subdued in a historical context. As a reminder, an index level of 100 is equal to the average level of contract activity in 2001! So we are running 28% below the sales pace from 25 years ago. Yuck. [NAR]

Bond and Mortgage Market

Mortgage rates had been defying the gravity of the situation — until this week.

The yield on the 10-year US treasury is currently 4.28%, having bottomed at 3.95% two weeks ago. On Friday, March 13, Mortgage News Daily reported that the average 30-year mortgage rate had spiked to 6.41% (having been as low as 5.99% a few weeks earlier). They’re currently at 6.36%. As is usually the case, the Freddie Mac PMMS survey showed a lower number (6.22%) but that was also up significantly from 5.98% two weeks ago.

Note: The Fed Funds Rate policy range is currently 3.50–3.75%. The probabilities below come from the CME Group website and are implied from the Fed Funds Rate futures market.

• April 29 FOMC Meeting: 94% probability that the Fed Funds Rate target range is kept at 3.50–3.75% (was 93% last week). And here’s something new: a 6% probability that that Fed will raise rates 25 basis points.
• June 17 FOMC Meeting: 94% probability that the Fed Funds Rate will be kept at 3.50–3.75% (was 77% last week). So, no rate cut at either the April or June meeting.
• No rate cut in 2026? If I look way out to the last FOMC meeting of the year (Dec 9), the market is pricing in a 79% probability that the Fed Funds Rate will be exactly where it is today. In other words, the market now expects NO rate cuts for the entirety of 2026.

They Said It

“The slight gain in pending contracts appears to be driven by improved affordability conditions. However, those conditions could reverse if higher oil prices lead to an uptick in mortgage rates. The Midwest — the most affordable region of the country — was the strongest performer in February. But the Northeast was held back by a combination of higher home prices and a shortage of supply.” — Lawrence Yun, NAR’s Chief Economist