Key Highlights 

  • Pending Home Sales Index: Rose 1.8% in February to 72.1, beating the consensus forecast of a 0.5% decline 
  • Year-over-Year: Pending sales remain 0.8% below February 2025 levels 
  • 30-Year Mortgage Rate: Eased to 5.98% in early March before rising back to 6.11% following the Iran conflict 
  • Median Home Price: $398,000 in February, up 0.3% year-over-year, the 32nd consecutive month of annual gains 
  • House Price Outlook: Prices are expected to rise modestly through 2026 and 2027, though well below the pace seen in 2021-2022 

 

What Drove the February Rebound? 

The Pending Home Sales Index (PHSI), a forward-looking measure of signed purchase contracts that typically close within one to two months, climbed 1.8% in February to 72.1, its strongest reading in several months. The primary driver was a meaningful drop in mortgage rates at the start of 2026. 

The 30-year fixed mortgage rate fell close to 5.98%, partly due to a policy shift directing Fannie Mae and Freddie Mac to expand their purchases of mortgage-backed securities. For many prospective buyers who had been priced out at 7%-plus rates, this represented a genuine window of opportunity. Regionally, contracts rose across the West, South, and Midwest, while the Northeast saw a modest decline. 

The data suggests that affordability remains the single most powerful lever in the U.S. housing market. When rates ease even modestly, latent demand surfaces quickly, a sign that buyer interest has not disappeared, only been suppressed by cost. 

 

The Iran War: A New Headwind for Housing 

That window may now be closing. The outbreak of the U.S.-Israeli war with Iran has introduced a significant new variable into the housing market calculus. Oil prices have surged, inflation expectations have risen, and U.S. Treasury yields, which mortgage rates closely track have moved higher in response. 

The 30-year fixed rate, which had dipped to 5.98%, climbed back to 6.11% within days of the conflict beginning. If hostilities escalate or persist through the spring, mortgage rates could remain stubbornly elevated during what is traditionally the busiest home-buying season of the year. Higher oil prices also feed into construction costs through energy, materials, and transportation - adding further pressure to an already supply-constrained market. 

The Iran conflict is not merely a geopolitical risk in the abstract. For the housing market, it translates directly into the cost of borrowing and building two of the three factors that have made housing unaffordable for millions of Americans. 

 

Structural Challenges Remain 

Even setting aside the geopolitical situation, the U.S. housing market faces deep-seated structural problems that a temporary dip in mortgage rates cannot resolve: 

  • Chronic shortage of entry-level homes, keeping prices out of reach for first-time buyers 
  • Elevated building material costs driven by import tariffs, reducing the economics of new construction 
  • Labor cost pressures linked to tighter immigration enforcement, slowing builder timelines 
  • Housing starts fell to approximately 943,000 units in 2025, down from over 1 million in 2024 
  • A growing inventory of unsold new homes limiting builders' incentive to break ground on fresh projects 

The median existing home price of $398,000 - while up only 0.3% year-over-year - still represents a historically high affordability burden relative to household incomes. Monthly mortgage payments at current rates on a median-priced home consume roughly 28-30% of median household income, above the traditional 25% threshold considered manageable. 

 

Political Dimension: Affordability in Election Year 

Housing affordability has become a live political issue ahead of the November 2026 midterm elections. The current administration has moved to ease mortgage credit access and reduce regulatory barriers to construction, but the practical impact on supply has so far been limited. Builders remain cautious given persistent cost pressures, and the pipeline of new affordable homes has not materially expanded. 

The risk for policymakers is that the Iran conflict - by reigniting inflation - could force the Federal Reserve to hold rates higher for longer, further constraining mortgage affordability and undermining the administration's housing agenda heading into election season. 

 

Outlook: Cautious Optimism 

February's rebound is a genuine positive signal. It confirms that buyer demand remains alive and responsive to rate movements. If the Iran conflict is contained and mortgage rates stabilise in the 6.0-6.2% range, the spring selling season could sustain modest momentum. 

However, the base case should be one of caution rather than confidence. Supply constraints, geopolitical uncertainty, tariff-driven cost inflation, and affordability strain are not short-term problems. Home prices are expected to continue rising through 2026 and into 2027, but at a far slower pace than the pandemic era, reflecting a market in gradual adjustment rather than full recovery. 

For buyers, the message is straightforward: act when rates dip, because the structural forces keeping housing expensive are not going away soon. 

 

 Frequently Asked Questions 

Q: Why did US pending home sales rise in February 2026? 
A: Pending home sales rose 1.8% primarily because mortgage rates eased to near 5.98%, improving affordability for buyers who had been sidelined by higher borrowing costs. A policy shift directing Fannie Mae and Freddie Mac to expand mortgage-backed securities purchases contributed to the rate decline. 

Q: How does the Iran war affect the US housing market? 
A: The conflict has pushed oil prices and Treasury yields higher, which drives up mortgage rates. It also raises construction costs through energy and materials. Together, these effects threaten to reverse the affordability improvement that produced February's rebound, particularly during the spring selling season. 

Q: What is the Pending Home Sales Index? 
A: The Pending Home Sales Index (PHSI), published monthly by the National Association of Realtors, tracks signed purchase contracts on existing homes. Because contracts typically close within one to two months, it is widely used as a leading indicator of future completed home sales. 

Q: What are current US mortgage rates in March 2026? 
A: As of mid-March 2026, the 30-year fixed mortgage rate stands at approximately 6.11%, up from a recent low of 5.98% reached just before the Iran conflict began. 

Q: Will US house prices fall in 2026? 
A: A broad price decline is unlikely given persistent inventory shortages. Prices are expected to rise modestly in 2026 and 2027, but the pace of appreciation is well below the levels seen during the pandemic-era boom. Affordability constraints and higher mortgage rates are acting as natural caps on price growth.