{"id":9350,"date":"2026-05-26T19:32:01","date_gmt":"2026-05-26T19:32:01","guid":{"rendered":"https:\/\/siliconvalleymovingpost.com\/?p=9350"},"modified":"2026-05-26T19:32:01","modified_gmt":"2026-05-26T19:32:01","slug":"mortgage-rates-could-hit-7-if-iran-war-doesnt-end-soon","status":"publish","type":"post","link":"https:\/\/siliconvalleymovingpost.com\/?p=9350","title":{"rendered":"Mortgage rates could hit 7% if Iran war doesn\u2019t end soon"},"content":{"rendered":"
\n

How much will the war with Iran rankle the housing market? That depends on the economist and interest rates.<\/p>\n

Read more Supreme Court rejects Meta\u2019s appeal in Vermont social media addiction case<\/a><\/p>\n

Some economists expect 7% rates if the war isn\u2019t over by the end of June.<\/p>\n

Mortgage rates are going crazy. And not in a good way.<\/p>\n

This week the Freddie Mac 30-year fixed rate hit 6.51%. Less than three months ago on Feb. 26, the rate was at 5.98%. That\u2019s an increase of 53 basis points in an incredibly short period of time. Holy smokes!<\/p>\n

The war with Iran and the subsequently higher oil prices are triggering a bond market selloff.<\/p>\n

So, it\u2019s time we turn to the economic experts and ask them where are we headed? I polled seven of them about the war and its effect on consumers in respect to mortgages and housing.<\/p>\n

Mark Fleming, the chief economist at First American, called the war an \u201cexogenous shock.\u201d<\/p>\n

\u201cMortgage rates could be pushing closer to 7% this year. Higher mortgage rates dampen demand,\u201d he told me. \u201cMy best guess is no change to short-term rates.\u201d<\/p>\n

\n<\/div>\n

On housing market challenges, he said construction of new houses is not keeping up with demand (and new household formation).<\/p>\n

Since 1981 when rates were 18.1%, rates have steadily come down. This means every time a homeowner sold and then bought another home, they were likely to benefit from a lower mortgage rate.<\/p>\n

But since the pandemic\u2019s low-rate environment faded, interest rates have been rising, creating what Fleming calls a \u201clock-in effect.\u201d<\/p>\n

Homebuyers are now seeing higher rates, a \u201ctrade-up effect,\u201d if you will, which has locked homeowners in place with those low pandemic-era rates.<\/p>\n

\n<\/div>\n

\u201cWe\u2019ve never experienced the rate lock-in effect,\u201d said Fleming. \u201cThis changes behavior.\u201d<\/p>\n

Others believe the Iran conflict is pushing the economy closer to stagflation.<\/p>\n

Chen Zhao, head of economic research at Redfin, explained how simultaneously high inflation and stagnant or slow economic growth would hinder the marketplace.<\/p>\n

\u201cHow long the Strait of Hormuz stays closed then determines the inflationary shock,\u201d said Zhao. \u201cThe longer you have energy price shock, the longer it bleeds through the rest of the economy.\u201d<\/p>\n

Zhao thinks mortgage rates could fall if the war ends soon. \u201cIf it goes past June, I\u2019m pretty worried,\u201d she said.<\/p>\n

So, should you buy or not? Zhao advises never to try to time the housing market (as a buyer). Housing is a personal choice based on life circumstances, she said.<\/p>\n

Zhao said don\u2019t expect a lot of bargains, either. It\u2019s a tricky time to expect falling home prices with very few foreclosures.<\/p>\n

Foreclosures across California and across the country are just a tiny sector of the housing market.<\/p>\n

Christopher Thornberg, founding partner at Beacon Economics, believes the higher inflation numbers are a transitory (temporary) shock, and not a sustained one.<\/p>\n

As for incoming Federal Reserve Chairman Kevin Warsh, Thornberg said, \u201cHe took the job by selling his soul to Trump. Cutting interest rates (as President Trump wants Warsh to do) is not liable to do a lot of good.\u201d<\/p>\n

Thornberg sees Warsh shrinking the Fed balance sheet through quantitative tightening.<\/p>\n

Fannie Mae\u2019s definition of quantitative tightening pushes mortgage rates higher because when the Fed shrinks its balance sheet, it stops actively purchasing mortgage-backed securities. This withdrawal increases the MBS supply on the open market, forcing private investors to demand higher yields, which translates to elevated consumer borrowing costs.<\/p>\n

Mark Vitner, chief economist at Piedmont Crescent Capital, was the only economist with whom I spoke who confidently believes the war with Iran is going to end soon.<\/p>\n

Read more What does it mean that I am \u2018the trustee\u2019?<\/a><\/p>\n

Pointing to the soft defense stock prices, he said, \u201cI think a good deal is coming. Smart money smells the end of the war.\u201d<\/p>\n

Vitner expects the next Fed move to be a rate hike, not a cut.<\/p>\n

He\u2019s not alone in that assessment. The Fed\u2019s meeting minutes also showed that bankers are not ruling out a rate hike if inflation continues to push higher.<\/p>\n

Raymond Sfeir, director, Anderson Center for Economic Research at Chapman University, also sees the Fed increasing rates by one-quarter percent if the war goes on for two more months.<\/p>\n

\u201cCertainty is horrible under Trump. Businesses hate uncertainty,\u201d Sfeir said. \u201cHe misjudged Iran\u2019s reaction. He doesn\u2019t know how to get out of it (the war).\u201d<\/p>\n

Sfeir sees a 2% home appreciation rate and mortgage rates slowly coming down by the end of the year.<\/p>\n

Steven Thomas, chief economist at Reports on Housing, sees a balanced market (sellers and buyers) with a slight downward price pressure as inventory levels rise.<\/p>\n

\u201cThe market is not going to crash,\u201d Thomas said. \u201cThere will be no wave of foreclosures.\u201d<\/p>\n

What keeps Robert Kleinhenz, principal economist and founder at Kleinhenz Economics, up at night is the housing stock shortage.<\/p>\n

Homeownership in California is 55% versus the national average of 65%, he explained.<\/p>\n

Affordability adds to the challenges for California buyers. \u201cHigh interest rates, limited supply equals low affordability,\u201d he said.<\/p>\n

Only 22% of California homebuyers have sufficient income to afford a median-priced home. That\u2019s with a conventional mortgage and 20% down.<\/p>\n

My thoughts?<\/p>\n

It\u2019s hard to predict or guess at what Trump is going to do in respect to the war with Iran. If the war goes on for another 30 days, I think mortgage rates are going to hit 7%. If mortgage rates hit 7%, I expect we\u2019ll have a sharp decrease in home sales and mortgage purchase and refinance activity.<\/p>\n

Even so, a homebuyer could use an adjustable mortgage, an interest-only mortgage or a permanent rate buydown to make the payment more affordable.<\/p>\n

Then you just hope and pray mortgage rates eventually come down so you can refinance into a lower rate.<\/p>\n

Freddie Mac rate news<\/h4>\n

The 30-year fixed rate averaged 6.51%, fifteen basis points higher than last week. The 15-year fixed rate averaged 5.85%, fourteen basis points higher than last week.<\/p>\n

The Mortgage Bankers Association reported a 2.3% mortgage application decrease compared to one week ago.<\/p>\n

Bottom line:<\/strong> Assuming a borrower gets an average 30-year fixed rate on a conforming $832,750 loan, last year\u2019s payment was $193 more than this week\u2019s payment of $5,269.<\/p>\n

What I see:<\/strong> Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.875 %, a 15-year conventional at 5.625%, a 30-year conventional at 6.375%, a 15-year conventional high balance at 6.25% ($832,751 to $1,249,125 in LA and OC and $832,751 to $1,104,000 in San Diego), a 30-year high balance conventional at 6.75% and a jumbo 30-year fixed at 6.375%.<\/p>\n

Eye catcher loan program of the week:<\/strong> A 30-year mortgage, 30% down, 5.5% for the first five years payments, and 1 point cost.<\/p>\n

Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com.<\/em><\/p>\n

Read more Supreme Court sides with Trump in dispute over immigration judges\u2019 speech restrictions<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Rates are going crazy. And not in a good way.<\/p>\n","protected":false},"author":1,"featured_media":9349,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9,20],"tags":[],"class_list":["post-9350","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion-columnist","category-represents-the-opinion-of-the-author-who-is-either-a-paid-columnist-or-an-unpaid-guest-columnist"],"yoast_head":"\nMortgage rates could hit 7% if Iran war doesn\u2019t end soon - Silicon Valley Moving Post<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/siliconvalleymovingpost.com\/?p=9350\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Mortgage rates could hit 7% if Iran war doesn\u2019t end soon - Silicon Valley Moving Post\" \/>\n<meta property=\"og:description\" content=\"Rates are going crazy. 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