March 31, 2026 – What a Difference a Month Makes

Economic Commentary

Let’s go back to the end of February.  After a year of tepid job gains, slow housing growth and higher-than expected interest rates, things were starting to look up.  We had a solid month of job growth in January and mortgage rates were moving down enough to entice prospective homebuyers to start shopping again. Plus, those who purchased more recently were starting to refinance in greater numbers. Even inflation, though it had not reached the Federal Reserve’s target, was stabilizing at a tolerable level. In other words, there were plenty of reasons for optimism.

Then the calendar moved on.  The first salvo was fired literally at Iran. Unlike the limited strikes of last year, this conflict represented a sharp escalation in intensity.  Immediately, oil prices surged, causing significant concerns about the future of inflation. Not surprisingly, mortgage rates rose from the recent lows, despite the labor department reporting that the growth of jobs we witnessed in January was erased the very next month.  The stock market reacted as we would expect, with heavy losses in reaction to slower growth and the fear of higher inflation.

 Thus, the term stagflation is being dusted off by market analysts. All this news is just a sober reminder that predictions are impossible. Plus, markets can change on a dime.  If the conflict is short-lived, the stock markets and mortgage rates could reverse their directions overnight.  If the conflict continues for a longer period, there is concern about long-term damage to the economy. One thing we do know is that the consumer is resilient. If mortgage rates head back down, there is a significant amount of pent-up demand for homes and there is still the potential for a bounce-back year in 2026.  

Weekly Interest Rate Overview

The Markets. Rates continued to march upward influenced by the war with Iran. Increased volatility continued as well. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 6.38% last week from 6.22% the previous week. In addition, 15-year loans increased to 5.75%. A year ago, 30-year fixed rates averaged 6.65%, 0.27% higher than today. Attributed to Freddie Mac: “Mortgage rates this week averaged 6.38%. The housing market continues to show gradual improvements compared to a year ago amid recent rate volatility. Purchase and refinance applications are up year-over-year, and rates remain lower than last year when they averaged 6.65%.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

According to First American experts and recent data, for homebuyers this year, spring break might come a bit early. For the first time in over three years, house-buying power exceeded the national median list price late last year. This could lead to a more active spring home-buying season than in previous years as more properties become affordable for buyers. This comes after housing affordability reached its highest level since the summer of 2022 and improved year-over-year for the ninth consecutive month in November 2025. Even though affordability is still more than 63% lower than its five-year pre-pandemic average, the improvement trend is becoming more pronounced and long-lasting. Fitting the mortgage payment inside their monthly budget, which is a function of their house-buying power, is more important to most families when purchasing a home than the list price. The ability to purchase a home increases when mortgage rates decline, along with rising household income. “House-buying power reached a significant milestone, surpassing asking prices at the national level for the first time in more than three years,” said Sam Williamson, Senior Economist for First American. Source: First American

The typical US homeowner now stays in their home for 12 years, up from 11.8 years a year earlier and close to the longest stretch on record, according to a Redfin analysis of county sales records through December 1, 2025. That longer stay, while short of the 2020 peak of 13.4 years, reinforces a years‑long pattern of households aging in place and throttling the supply of homes available to first‑time buyers. The real estate giant reported that homeowners in 2005 typically sold after 6.5 years, meaning tenure nearly doubled over two decades as the population grew older and millions of owners locked in cheap mortgage debt during the pandemic. Baby boomers and Gen Xers are especially likely to remain where they are, helped by paid‑off mortgages or monthly payments far below what a new buyer would have faced at current prices and rates. “High mortgage rates and home prices perpetuate a cycle that locks up housing inventory,” said Chen Zhao, Redfin’s head of economics research. “It can keep existing homeowners in place and financially discourage them from moving to a different home or a different neighborhood, which drives prices up even higher for first‑timers trying to break into the market. But there is good news: Homebuying affordability has improved as mortgage rates have come down, dropping below 6% for the first time in over three years last week. And home‑price growth has lost steam, and we expect it to improve more. That should push more Americans to move.”  Source: Redfin

In 2025, ground was broken on an estimated 1.36 million homes, a .6 percent drop from 2024. Many experts believe that is far below the number of starts needed to help address the housing shortage in the U.S. “It’s been a disappointing year for home construction,” said Robert D. Dietz, chief economist at the National Association of Home Builders.  According to research by Goldman Sachs, the country needs to build “3-4 million additional homes beyond normal construction” to alleviate the country’s housing crisis. To hit that mark, the number of annual housing starts would need to be a lot closer to two million in the coming years.  Not all that long ago, two million annual housing starts did not seem like an especially heavy lift. But there is good reason for the much more cautious approach many today take toward building homes.  When the housing bubble burst in 2008, it caused the devastating global financial crisis.  Since then, builders and banks have tried to avoid the kind of speculation that brought the American economy to the brink. But that caution has taken a toll on housing availability. In recent years, starts have hovered between 1.6 million and 1.3 million, with a peak in 2021 when builders were responding to a surge in demand spurred by the coronavirus pandemic.  “There are so many broken parts of the housing market right now,” said Ali Wolf, chief economist at Zonda. Dietz, of the home builders’ association, identifies these parts as five Ls: labor, land, loans, lumber and legal fees.  In response, despite their many differences, liberals and conservatives are uniting around the concept of “Yes in my backyard” (YIMBY).  Source: The New York Times.