Will mortgage rates go higher with Iran escalation?

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how high mortgage rates could go with the new escalation in the Iran conflict.   Related to this episode:   How high can mortgage rates go with Iran conflict 2.0?  https://www.housingwire.com/articles/how-high-can-mortgage-rates-go-with-iran-conflict-2-0/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   The Top 5:   Can the housing market weather Iran conflict 2.0 and higher rates?  https://www.housingwire.com/articles/iran-conflict-664-mortgage-rates/  How ROAD aims to boost housing supply and cut red tape  https://www.housingwire.com/articles/how-road-aims-to-boost-housing-supply-and-cut-red-tape/  The housing market’s inventory rebound is shifting power to buyers, but not everywhere  https://www.housingwire.com/articles/the-housing-markets-inventory-rebound-is-shifting-power-to-buyers-but-not-everywhere/  Foreclosures climb 21% in first half of 2026, pushed by higher stress in FHA, VA mortgages  https://www.housingwire.com/articles/us-foreclosures-rise-2026-midyear-attom-report/  Compass files ethics complaints against Zillow in 26 states  https://www.housingwire.com/articles/compass-ethics-complaints-zillow/   Want more from Sarah? Don’t forget to subscribe!  https://www.housingwire.com/subscribe/   The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.

Transcript

00:10Welcome, everyone. My guest today is lead analyst Logan Modashami to talk about whether mortgage

00:15rates are going to go higher with the re-escalation of the Iran conflict. Before we get started,

00:21here are the top five trending articles on housingwire.com. Leading the list is Logan's

00:27housing market tracker, can the housing market weather Iran conflict 2.0 and higher rates?

00:32That's followed by how the ROAD Act aims to boost housing supply and cut red tape. And the housing

00:39market's inventory rebound is shifting power to buyers, but not everywhere. Then we have foreclosures

00:45climb 21% in the first half of 2026. And finally, Compass files ethics complaints against Zillow in

00:5226 states. Okay, we're ready to get started. Logan, welcome back to the podcast.

00:57It is wonderful to be here back in Irvine, California. And I got to tell you, I just,

01:03you know, going to Lincoln City, I just, I get weird looks because of the hair, you know.

01:08I can only imagine what people in Lincoln City, Oregon are thinking as you're walking down the

01:13street with your hair.

01:14I've had three different people, you know, over there say, are you an actor? You know,

01:18just because the hair flows. And then because it's windy, it's like, you know, my hair is just

01:22all over the place. So very, very interesting weekend, very interesting Monday morning.

01:30This is like, I think the 10th day of the conflict and more bomb, 10th straight day of bombing with

01:37missiles and drones. Oil prices last time I checked was like 82, 83. And what we've always talked about

01:43oil prices here is like 67 could be the bottom here. And, you know, 82, that's a very tradable

01:48range. That's a range that we were accustomed to, like 67 to 72 was like the area where the US

01:53would

01:53come in and buy to refill the reserves. But this is different now. We're no longer, you know, holding

02:02up shooting missiles and drones because of market hours. Now, oil prices haven't gotten back to the

02:11recent highs around 95. But the 10-year yield as we speak right now is at 460. So the bond

02:21market does

02:22not like the conflict, right? Oil prices have gone up and down like crazy. We went all the way down

02:28to

02:28like $68. Now we're at 82. But the 10-year yield just does not like this conflict going on. So

02:36the article

02:36that we wrote yesterday was trying to like take just a worst case scenario, but why? We always need

02:42to explain why we say something. We don't just make stuff up, throw stuff up in the air and like

02:47hope it sticks. And that's kind of the theme of today. And then, you know, kind of go over the

02:52tracker data. Okay. So since the conflict started in February, you have modeled out like if it's short

02:59term, these are the effects. If it's longer term. And one of the lines you had in the sand

03:03was if it goes past July 4th. Well, we had a ceasefire, then that got broken. So now we're

03:09way past July 4th. What do you think? Has your thinking changed about like, I mean, you were

03:14talking about like Mad Max scenario if we go into July. We got some oil into the system and the

03:21Chinese are doing their best on not importing as much. So as long as the Chinese are doing this

03:28and we're able to flow oil, the problem I see now is, you know, one of the things we talked

03:33about is

03:33like, do we know how to get out of this? And we, we attempted the first one, but, you know,

03:40Iran

03:40kept on shooting missiles because they wanted to control it. And now we're back at it again. We're

03:46trying to exert pressure. I'm not worried about, you know, the, the refinery stories. This is entire

03:53different subject or like Ukraine is just shutting down a lot of stuff in Russia, but we're exporting a

03:59lot of stuff where everybody's trying to minimize the damage as much as possible, but you can't have

04:06oil traffic down to zero again in the Hormuz. And then all of a sudden, if the Houthis come in

04:11the

04:12Southern part of the Middle East and block that, that's that, that gets problematic, but we were

04:16able to get some oil flowing very quickly. And to me, it's like, it's still a shock for people to

04:24see

04:24oil prices at a level to where nobody would say there's a conflict going on in the Middle East,

04:30but the bond market, the bond market is different. The bond market is more negative toward the

04:37conflict than oil prices. Oddly enough, we say this, but this is now the case. And every time I

04:43see conflict negative news, the bond market reacts very aggressively. We do get benefits when there's

04:49positive conflict as a 10 year old goes down, but we've already shifted the whole curve of Fed policy

04:56much higher. So the thing is that the U.S. can handle this. That's also one of the issues.

05:04We can handle higher oil prices. People don't realize the U.S. balance sheets, they can handle

05:10politically though. Politically, can you handle this? Like we're going into midterms. Like I'm not

05:16worried about the U.S. going into recession. I know a lot of people say, well, higher oil prices

05:20were recessionary. The higher oil prices with a credit market breaking has been recessionary

05:25recently. So we don't have the credit markets breaking. Private sector credit isn't breaking

05:29to impact, you know, consumer credit or anything like this. So we have the ability to withstand this.

05:36Can Iran withstand not having the money? So there's all these complicated scenarios here,

05:42but also the U.S. economy has been able to, you know, retail sales is still positive.

05:49Even with like a lot of people don't understand the credit card delinquencies with the New York Fed,

05:53they see all these, you know, 90 day plus percentages higher than 2008. They don't understand that's a

05:58charge. The charge offs aren't in that data line. So because we're able to handle it a better,

06:03the U.S. feels it has a little bit more kick to maybe try to force Iran into submission. But

06:10the Mad Max theory, you know, oil, we did get some oil flowing. China is trying its best to import

06:17less. But this is not a positive when you go back to almost near zero again. So we'll see how

06:25it goes,

06:25especially if the Houthis get involved and, you know, they start blocking ships again down there

06:31in the south. But the 10-year yield, for everyone listening here, you care about the bond market,

06:37right? You care about Fed policy. So that's why we wrote that article on like, how much higher can

06:42you really go from here with Fed policy? Because so much is already priced in. We have a hawkish Fed,

06:50we have a conflict, we have inflation, right? We have a 4.3% unemployment rate. So much is already

06:55priced into the 10-year yield. So this is the question that I keep asking you, right? It's like,

07:01how do you know how much is priced in versus how much is not priced in? And when you think

07:06about that,

07:06is that the 10-year yield during the, you know, it's been priced in there? Or are you talking

07:10about the Fed looking at that level and being like, no, we need to, we need to do something?

07:14You really want to look at the two-year yield and a two-year yield is pricing rate hikes and

07:19the 10-year

07:19yield is going accordingly. So we have a lot, a lot of it priced in, you know, so, you know,

07:24people tell me there's no way we could get a rate hike in 2026. We already did. The curve of

07:31the

07:31short-term rates have already gone higher and the 10-year yield has gone higher. We already got the rate

07:35hike. It's already priced into the market. You just haven't seen it in the Fed funds rate.

07:39And this is what the Federal Reserve wanted. You know, the Beth Hammocks, the Lori Logans,

07:43the Austin Goolsby's, the Neil Kashkari's, they wanted that easing bias out of the equation and

07:49they wanted rates higher and they got it. This is why I say that a lot is already priced in.

07:55If the two-year yield was at 375 or the 10-year yield was at 435, that's a different story,

08:02but that's not the case. So if you really want to see it, look at shorter durations. You can look

08:07at three months if you really want to get nerdy like me, but so much is already priced in with

08:13all this news. And then of course the spreads, right? The spreads are the saving grace of the

08:19mortgage and housing market because, you know, we already would have been above 7% most of the year

08:24and would have been near 8% in 2023. So, so, so much is priced in, but how, like, like

08:30what's the

08:30worst case scenario in this environment, as long as things are somewhat around the levels that we're

08:36talking about with the conflict and inflation and the labor data? Yeah, that's my question. And,

08:41and also where is that worst level coming from? So for instance, the Fed has been super hawkish

08:45when oil prices went up. They, you know, everyone had a lot to say about that when they came down,

08:50not so much, right? So when you feel like, you know, how much higher can they go? Are you looking

08:55at what the Fed can do for that or just what the bond market's going to do? Just the slow

09:00dance is

09:00how everything runs, right? The slow dance and the spreads, of course. Can the 10-year-

09:06The slow dance between-

09:07The 10-year yield and 30-year mortgage, right? It's, it's, it's to me, the Federal Reserve did this.

09:13They wanted rates higher, right? And, and the conflict was something they talked about

09:18negatively going up and they said nothing about it coming down. This is what they want. They run

09:26the show. I don't believe in like federal debt and, and, and, and we can't finance our debt. And

09:32that's something I think that's, that's, that's a boogeyman theory, but I do believe that 65 to 75%

09:37of where the 10-year yield and 30-year mortgage rate have gone for decades and decades and decades

09:41before I was even born is Fed policy. And the other 25 to 35% are these economic variables that

09:48happened out here. So with everything so much already priced in, right? You know, we don't see

09:55like the 10-year yield shooting up to 5%, but if you wanted to take a worst case scenario right

10:01now,

10:01because even today we're not at 6.75% mortgage rates, mortgage spreads are under 2% again. But to,

10:09even if you take the worst case scenario, it's really hard for me to model out mortgage rates getting above

10:14seven and a quarter. And that's kind of how, you know, we, we wrote the article for that to happen,

10:21to get rates above there, boy, the economy has got to be firm. The labor data cannot slow down.

10:26The conflict has to continue, right? The conflict is really creating an issue with the bond market.

10:32So that has to keep on going. And you need a more hawkish Fed, right? The Federal Reserve is talking

10:38about rate hikes, but they're not really saying we want three rate hikes right now, right? Or we,

10:43we want six rate hikes altogether, right? We want the Fed funds rate to get back up to five and

10:48a

10:48quarter or five and a half to be well enough above inflation to bring down the economy to,

10:54they're not doing that. So I'm taking every variable that I know today and taking what the

10:59hawks have said and what the doves have said and what Kevin Warsh has said, and then moving on with

11:04it.

11:04Now, of course, the labor data got a little bit softer. Fed doesn't care. The growth rate of inflation

11:11was missed estimates in a big way. They don't care. The conflict brought oil prices down under 70.

11:18They don't care. But now the question is, do they start talking about the conflict

11:24being a negative? That's something they have done. Even though oil prices aren't at 100 or 120, it is

11:34something that they have shown us. So that's something they think about going out in the future. Do we all

11:38of

11:38a sudden get Federal Reserve, conflict 2.0? They start going negative out there. That is to me the

11:45wild card because they've gotten what they wanted. The hawks won, right? They got their rate hikes into

11:51the system. They got the rate hikes in the two-year yield. They got their 10-year yield to go

11:56up. Their

11:56job is to try to impact the economy in such a negative way that they don't have breakaway inflation,

12:03right? And that's their belief. So it's not that people say, well, isn't higher oil prices a tax

12:09and that should slow the economy down? Yet they don't look at it in that. They see AI inflation.

12:15They see AI electricity inflation. They've talked about AI being inflationary. They see the labor

12:21market as full employment. That's a strong labor market in their eyes. So all these things are coming

12:26into play and we're still below 6.75, right? 6.75 was the peak forecast, but that was based on

12:32the

12:33economy rebounding and the labor data getting better. But this conflict is different and we're

12:372.0 now. So we have to look at it in a 2.0 fashion. Now, hypothetically, let's say 10

12:43days from now,

12:44everybody goes, okay, this is not working for anybody. Let's get a deal. Until that happens,

12:50today was about the worst case scenario. And how does it really look to housing data? Because we just got

12:55the weekend track. Well, you know, 7.25%, nobody would be excited about that, but there's at least

13:02a cap there. And that's what you're saying. You think that that would be the high. So that's like,

13:06what, half a point higher than where we are right now? A little bit more. I mean, I look at

13:11it as 0.37

13:12to 0.43 above 6.75. So you're like 4.18, 4.19, you know? So that's like my mindset

13:20of worst case

13:21because we're 2.0 now. If this conflict wasn't here, I'm not really having this discussion because

13:28the bottom market does, it doesn't get worse when the conflict is not there. But the Beth Hammocks

13:35and the Lori Logans won, right? They got their rate hikes into the system. The Neil Kashkari's and

13:41the Austin Goolsby's won. So do they try to push it to another level, right? So the market pricing

13:48already did it for them. That's why I always tell people the Fed already got their rate hike.

13:52You don't actually need it. There's nothing Kevin Walsh can do. The curve of the data has changed.

13:58And it's very rare to go into a year having two to three rate cuts. And then within a span

14:04of just

14:05two, three months, you now talk about two to three rate hikes. That's not normal. The Federal Reserve

14:12doesn't like to do something like that because it becomes, you know, too aggressive of a move

14:19to the marketplace. But a lot has happened this year, again, the 24 theme. And then we adjust to

14:26what do we think about the housing data going out in the second half of 2026?

14:31So after inflation week, you were, you know, pretty confident that you would say

14:35the Fed is not going to raise rates at the meeting next week? Still feel that way because

14:40they've already kind of gotten what they wanted. Yeah, they've gotten it. I mean, I can imagine

14:45Beth Hammock is smiling every single morning looking in that mirror. Lori Logan is smiling so big.

14:50They've got their rate hikes. The Hawks are winning in this. So they don't need to hike rates

14:58in the next meeting because all they need to do is... Now this becomes a question. What is Kevin

15:04Walsh going to do? Is he going to say anything? Is he going to shut everyone up? Are the dots

15:07dead? You know,

15:08there is another thing that we're all dealing with. A brand new Fed chairman that wants to change the

15:13entire apparatus of how the Federal Reserve has operated for a very long time. And we all have

15:18to adjust to that. Or people go, well, why? And they said no forward guidance and the Fed doesn't

15:22shut up. Well, their blackout period is now. But before then, there's no rules to tell them they

15:28can't talk. Right? So that's something going out in the future that does the Fed chairman say,

15:32hey, listen, no monetary policy discussion in any meeting ever again. You know, we'll see if that

15:38occurs. But there are a lot of moving parts here that are just not, you know, a perfect market is

15:45a boring market where the government or outside stuff doesn't really take the headlines. And the

15:51Federal Reserve, nobody knows what the Federal Reserve is doing because, you know, it's not a big

15:54issue. But we don't have that this year. We have a new Fed chairman. We have a new game plan

15:59to change

16:00things. We have a conflict. We have a conflict 2.0. Now we had a miss on the inflation data.

16:06Now

16:06we had the labor data a little bit. So there's a lot going on. It's not, this is not a

16:10normal year.

16:11So again, my job as the analyst is just to try to make sense of it all. And that's this,

16:15that's what

16:16the article was written for. And that's kind of how we look at it. Well, let's talk about the tracker

16:21because we had, of course, we had the July 4th weekend, which threw off the data for one week.

16:27And then last week we saw sort of that normal rebound. So what is the takeaway from the housing

16:32market tracker? Even though we saw week to week growth, having week to week growth is very normal

16:38as the second week after July 4th. So I don't put much weight in that, but going out for the

16:44rest of

16:45the year, we have harder year over year comps. It's not as easy as it was early in the year,

16:51early in

16:52the year, we could show growth and you know, that's, that's been evident, but going out in the future,

16:56our comps are going to be much harder. So we, we basically didn't have any year over year growth.

17:02We're pretty much kind of flat. Well, let's talk about comps for what,

17:05is that like purchase apps? Is that like everything purchase apps, a weekly pending home sales,

17:10total pending home sales, the comps are harder, but especially for the existing home sales market,

17:15the existing home sales market had a very low comp in the last report and it showed growth,

17:20but going out every single month, all the way to December, the comps get difficult, which means it is,

17:25it is harder to show year over year growth, especially with elevated rates. Last year was the

17:31complete opposite. The labor data was getting softer. The spreads were getting better. We were

17:35going to break through that 6.64 and head all the way down, you know, towards 6%, like we traditionally

17:41do, like every year we have that run at some point, but now it's different. Now we've stayed a little

17:48bit

17:48more time above 6.64. Uh, and to me, I've already seen the kind of slow down. I saw the

17:54purchase

17:54application data go negative slightly. I saw the weekly pending home sales data is just a smidge

18:00lower. So it just becomes, it's not a high velocity event, but you can see it now with harder comps,

18:07higher rates, right? And you know, again, in the past, it was always getting above 6.64 and then we

18:14get

18:14above seven and then things, things slow down. So it's what we call the flow of data. Why can't we

18:20grow sales? Cause usually it takes rates getting down towards six and have it stick there. You can

18:24grow sales, not a problem. No equivocation whatsoever. If rates were under six and a quarter,

18:29we have, uh, even my estimates might've been a little bit too low. Nothing spectacular in a big

18:34way, but just a couple hundred thousand. But now in the past rates get above 6.64 and head,

18:40you know, it's, it's harder, but the comps are going to be a bigger story than people think,

18:45because it's going to be a little bit more difficult to show year over year growth. And

18:48we have to adjust to it, uh, on the weekly data and the year over year data to see what

18:52is it really

18:53saying? Is it saying nothing is happening? We're just basically stuck in a flat year over year phase

18:58for the next course. That can be a possibility. The question is, do rates get high enough again to

19:03bring down the data to where we get some negative prints. There's just not a lot of velocity

19:08complexity in any of the data right now to, to choose a direction. So I think that's going to

19:12be the more complicated story out there, but there's, this is why the tracker was created to

19:17give, you know, what we look today is we're going to fall in sales data 30 to 60 days later.

19:22And then we kind of work off how the demand looks, what rate level, because the 40 building got a

19:27little bit better out there. And then we take it from, uh, uh, that standpoint.

19:32So on the other side of that equation, right? Supply and demand is that, um, we should see a little

19:37bit of growth in inventory. Yeah. So many of the weeks in the last eight weeks have had negative

19:42year over year prints by a smidge, but again, the comps get easier to show growth, right? Last year

19:48in 2025, at one point we were showing 33% year over year growth. So we were destined for the

19:54growth rate

19:55to slow down on a year over year basis, but now last week we're up 0.31%. Um, so it'll

20:02be, it'll be,

20:02it'll be very interesting to me to look how the inventory data looks the next, uh, uh, uh, six

20:08months using harder year over year comps and elevated rates. If rates were at six and a quarter,

20:14then, you know, probably inventory would be down just a smidge year over year, but, uh, uh, the comps

20:19are against you in the second half of 2016, where it wasn't the first half of 2026. And then rates

20:25are

20:26above 6.64. So you put those together. That's how we do the tracker to keep everyone a heads up

20:31last year,

20:32different story. Rates were heading lower, right? The comps were good enough to show growth. They did.

20:37I remember the whole line we did last year. We said, all the data from June, all the way to

20:42October,

20:42the reports, you know, it's in July coming, uh, uh, uh, those things should be positive year over year.

20:49They, they kind of, they were, but now it's a little bit different because of the year over year comps.

20:54You know, and as always, and if everything could change between now and when I talk to you tomorrow.

20:59So that, that's just always our caveat with the, especially with the, uh, conflict situation.

21:04It is. It's just that the fed really changed, you know, um, and with, even when the, the first,

21:13um, agreement was made, even with oil prices under 70, the fed didn't care. They literally,

21:20they had, they had ample amount of time to say something about that and they didn't.

21:25So even if the conflict is over, um, we still have a hawkish fed. It didn't matter to them that

21:33oil was under 70. Uh, now it didn't matter really that the growth rate of inflation fell

21:38bigger than they thought in the last two reports, they still stayed hawkish. They want to see

21:44a number of inflation reports come below estimates, right? You know, they want the conflict to be over.

21:51Those are the things that matter. Multiple positive inflation prints. And then also, um, how do you,

21:58how do you deal with this conflict? Now we have 2.0. So it's just, it's just changes the whole

22:05apparatus on how they, cause they don't like the conflict. They don't like the conflict when it

22:10wasn't here either. So I think the fed is part of it. And again, the labor data changed everything

22:15in their minds, the U S economy is in full employment. So there's no risk of a job loss

22:22recession. Jobless claims are too low. Uh, uh, so even if the conflict ended, I'm not sure if the

22:28fed would change with the 10 year yield can come down and we take the worst case scenarios away, but,

22:32but it's, I don't think they're going to turn on a dime because they did it already. And we had

22:39a

22:39softer labor report. We had a softer inflation report. We had under $70 and nothing, not one

22:45positive, uh, discussion throughout this whole thing. They want more. They need to see, uh,

22:50the growth rate of inflation, uh, uh, coming lower for multiple months.

22:54Logan, thank you as always for walking us through it. And thanks for writing some great

22:57articles just in the last few days.

22:59Pleasure Wheeler.

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