Spring is traditionally the busiest season for home sales, and while this year’s market dynamics have shifted strongly in favor of buyers, broader forces in the economy are creating significant challenges.

The most important factor in any season is mortgage rates. They were expected to be lower this year, as the Federal Reserve dropped its lending rate to counter inflation, but the war with Iran has turned that on its head. The cost of oil is shooting higher, leading to rising inflation and causing the Fed to reconsider.

Now U.S. bond yields are rising, with mortgage rates following suit.

The average rate on the popular 30-year-fixed mortgage had started this year lower, even briefly dipping below 6% at the end of February, but it rose sharply this week to 6.53% on Friday, the first day of spring, according to Mortgage News Daily. It is now just 18 basis points below where it was a year ago.

Higher rates will weigh on affordability, but other factors have flipped the market in favor of buyers. Homes are sitting on the market longer, sellers are increasingly willing to lower prices and the supply of homes for sale is rising, albeit not as quickly as it should be.

“As the housing market approaches the ‘best time to sell’ season, it sits in a precarious position, caught between long-term improvements and sudden short-term instability,” Jake Krimmel, senior economist at Realtor.com, wrote in a Weekly Housing Trends report. “Everything seems much more unsettled and uncertain than it did just a month ago.”

For the week ending on March 14, active inventory was up 5.6% year-over-year, according to Realtor.com, but new listings were down 1.4%.

This means the number of homes for sale is climbing not because there are so many more sellers, but because the homes on the market are sitting. That may be because potential sellers who expected to put their homes on the market are holding back due to concerns about the implications of the Iran war.

“I think inventory is the bigger decider,” said Jonathan Miller, director of markets for StreetMatrix, a housing market data provider. “The idea that rates are going to noticeably come down this year, I think, is generally off the table.”

Given the disparity in inventory across different markets, this spring is likely to be a tale of many cities.

For example, in February, active listings in Las Vegas, Seattle, Cincinnati and Washington, D.C., were all up over 20% from a year ago, according to Realtor.com. Listings in San Francisco, Chicago, Miami and Orlando, Florida, meanwhile, were lower than a year ago.

Home prices had been cooling off for much of the past year, and they continue to do so. Prices were just 0.7% higher in January than they were in January 2025, according to Cotality. That’s down from the 3.5% annual growth at the beginning of 2025. Higher mortgage rates, however, are taking away from that improved affordability.

The Northeast and Midwest are seeing the strongest price appreciation, led by New Jersey, Connecticut, Illinois, Wisconsin and Nebraska, due to tighter supply in those regions, according to Cotality.

Cotality ranks 69% of top metropolitan housing markets as overvalued, noting undervalued markets like Los Angeles, New York City, San Francisco and Honolulu could see a rebound in prices in 2027.

“Ultimately, locations with consistent job growth will remain the primary engines for price appreciation, but they also have larger inventory deficits which are driving pressure on home prices,” Selma Hepp, Cotality’s chief economist, wrote in a recent report.

As for new construction, buyers are likely to see better deals this spring, as builders are struggling to unload an oversupply of homes. Inventories hit a 9.7-month supply in January, according to the U.S. Census, as the result of sales falling to the lowest level since 2022. A growing share of builders cut prices in March, according to the National Association of Home Builders.

“Affordability for buyers and builders remains a top concern,” Bill Owens, chairman of the NAHB, said in a release. “Many buyers remain on the fence waiting for lower interest rates and due to economic uncertainty. Builders are facing elevated land, labor and construction costs and nearly two-thirds continue to offer sales incentives in a bid to firm up the market.”

Construction of single-family homes also dropped in January. While some are blaming rough winter weather for the weakness in the new home market, builders are consistently battling affordability for both their customers and their own bottom lines. Costs for land, labor and materials have not eased.

“I think this is not going to be an inspiring year for the housing market. It started out with high expectations. I think the war, whatever the outcome, has really dampened enthusiasm and kept uncertainty really high,” StreetMatrix’s Miller said.

Mortgage rates surged to their highest level since September on Friday as bond yields moved higher due to the war in Iran.

The average rate on the 30-year fixed loan hit 6.41%, according to Mortgage News Daily. That is the highest rate since the first week of September, but still below the 6.78% notched at the same time last year.

Mortgage rates loosely follow the yield on the 10-year U.S. Treasury, which were up again Friday.

“This is counterintuitive for those who expect bonds to serve as a safe haven in times of uncertainty, but when war has a direct impact on inflation expectations, it’s more than enough to offset any of the safe haven benefit that might otherwise be seen,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.

Even as rates began rising last week, mortgage demand from homebuyers rose, according to the Mortgage Bankers Association, but this week’s new surge could put a damper on the spring season, which is already plagued by other major headwinds.

Lennar, one of the nation’s largest homebuilders, reported disappointing first-quarter earnings. Its CEO, Stuart Miller, described headwinds for the broader market as including “high mortgage rates, constrained affordability, cautious consumer sentiment, and geopolitical uncertainty, especially now including the recent conflict in Iran.”

Just two weeks ago, rates had dropped to match a multiyear low, briefly touching 5.99%. Now, any savings from those lower rates is gone.

For someone buying a $400,000 home, around the national median, with 20% down on a 30-year fixed mortgage, the monthly payment is now about $115 more than it would have been two weeks ago.

Democratic Sen. Elizabeth Warren is calling President Donald Trump’s bluff after he claimed to be “ending” the affordability crisis during his State of the Union address, opening a new front in the battle that could determine November’s midterm elections.

“Your claims are directly at odds with the day-to-day experiences of American households, who are struggling with rising costs of essentials, including food, housing, health care, child care, and electricity,” Warren, D-Mass., wrote in a letter to Trump, which was shared exclusively with CNBC after being sent late Wednesday. 

“Despite your claims, you have not ‘solved’ affordability or ‘defeated’ inflation. Instead, over the past year, prices have skyrocketed for American households,” Warren, the top Democrat on the Senate Banking Committee, wrote.

Warren’s letter is the launching point for a frontal assault on Trump and congressional Republicans ahead of the 2026 midterms, which could be decided over affordability. Trump’s approval rating on the economy has plummeted as voters express concern about the high cost of living, a contrast with an economy he said was “roaring” during his State of the Union address. 

Now, Democrats are hoping to seize the opportunity to leverage affordability and kick Republicans out of power in Congress. Warren made clear the letter is only her first foray into knocking the president on affordability, as Democrats race around the country selling their economic message before November. 

“Over the coming weeks, I will be writing to Administration officials, companies, and industry representatives directly about your chaotic tariffs and failed economic policies — seeking answers for the American people who are being forced to pay more on everything from groceries to housing,” Warren said.

Warren late Wednesday also sent a letter to Amazon CEO Andy Jassy saying the online retailer was tardy in publicly saying that Trump’s tariffs had contributed to price increases on its platform since their enactment. She also asked Amazon to respond to a series of questions about its future plans on price hikes given Trump’s pledge to find ways tariffs in place. 

Trump has at times suggested he is getting serious about addressing affordability concerns. He’s called for a cap on interest on credit cards, which he did not mention in his speech. He’s also called for a ban on institutional investors from buying homes, which he did mention. Both are also priorities of Warren’s and the progressive left.

But in his State of the Union address, Trump laid blame solely on Democrats for affordability and argued his administration has solved the problem, as polls consistently show increased economic concern from voters. 

“You caused that problem,” the president said. “They knew their statements were a dirty, rotten lie. Their policies created the high prices, our policies are rapidly ending them.”

While overall inflation has cooled significantly from recent highs, the cost of many everyday goods remains high, especially compared to before the Covid-19 pandemic. Electricity prices have skyrocketed amid increased demand from data centers, grocery prices remain high and housing costs have remained inflated. Trump’s tariff agenda has also contributed to lingering high prices. 

Trump doubled down on issuing tariffs through other means during his address, after the Supreme Court knocked down the authority he had been using to implement them. 

The tariffs will “remain in place under fully approved and tested alternative legal statutes,” he said. 

To Warren, that only provided ammunition. 

“Rather than providing relief to consumers, you are pursuing additional across-the-board tariffs through other mechanisms — opening the door to yet another wave of price hike,” she said in her letter. 

Mortgage rates dropped sharply last week, and while that helped to prolong gains in refinancing, homebuyer demand seemed unimpressed.

Total mortgage application volume was essentially flat, rising just 0.4% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, decreased to 6.09% from 6.17%, with points falling to 0.53 from 0.56, including the origination fee, for loans with a 20% down payment. That was the lowest level since September 2022.

Applications to refinance a home loan increased 4% last week from the week before and were 150% higher than the same week one year ago, when rates were 79 basis points higher. Refinancing has been on a bit of a tear lately, as rates drop. While the comparisons to a year ago are quite large, it is important to take into account that refinancing was quite low at this time last year.

Applications for a mortgage to purchase a home dropped 5% for the week and were 12% higher year over year. While lower mortgage rates are improving affordability, home prices are still slightly higher than they were at this time last year and economic uncertainty is weighing heavily on consumers.

Redfin cited this uncertainty in a report showing that nearly 40,000 home sale agreements nationwide were canceled in January, equal to 13.7% of homes that went under contract. That’s up from 13.1% a year ago and the highest January share in records dating to 2017.

Borrowers also sought more savings in adjustable-rate mortgages, which are slightly riskier but offer lower rates.

“The ARM share stayed above 8 percent, as ARM rates remained more than 80 basis points below conforming fixed rates,” said Joel Kan, an MBA economist, in a release. “This is giving payment-sensitive borrowers or those seeking larger loans, an incentive to choose this product offering.”