Real estate brokers say rising mortgage rates derail early 2026 housing rebound

Mortgage rates rose from 6.23% to 6.94% after Iran conflict escalation, and brokers now expect about 4 million home sales in 2026.

Brooklee Han · HousingWire

Heading into 2026, most economists and industry analysts were anticipating a stronger housing market than in past years. And for the first nearly two months of the year, it was looking like 2026 might be the year when things finally turned around for a housing market that has been stuck at roughly 4 million existing home sales since 2023.

“We really felt the breeze behind us at the beginning of the year and when the war started that changed,” Mike Pappas, the CEO of The Keyes Company and Illustrated Properties, told HousingWire.

The war he’s talking about, of course, is the ongoing conflict in Iran. Prior to the war starting in late February 2026, data from the HousingWire Mortgage Rates Center, which is powered by Polly, shows that the rate for a 30 year conforming mortgage was at 6.23%. As of July 28, rates were at 6.94%, after the war in Iran again began to escalate earlier in the month.

According to real estate brokers across the country, the mortgage rate rollercoaster has resulted in a year unlike many anticipated back in January and early February.

“It’s going to be another year of roughly 4 million home sales and early this year, that was not going to happen. We were well on the road to sales going up at least 10% if not 12%, which would have gotten us to around 4.5 million sales,” Anthony Lamacchia, the broker-owner of Lamacchia Realty, said. “In February, we were champing at the bit that this was going to be the year, and then the war and the rise in rates destroyed everything.”

By Lamacchia’s estimates, the war in Iran and its impact on mortgage rates will cost the housing market at least 400,000 home sales nationally this year.

Mortgage rates are not just a buyer problem

In New England, Lamacchia said not only are the higher mortgage rates causing buyers to sit on the sidelines, but they are also causing some would-be sellers to pull back on listing, as a move up purchase does not make a lot of financial sense for them.

Further down on the East Coast, Boomer Foster, the founder of Paul Wesley Real Estate, agreed that the inflation and uncertain interest rate environment caused by the conflict in the Middle East was one of his firm’s “biggest challenges right now.”

“We are heading into a traditionally slow month in August, so we’re seeing an increase in price reductions and some sellers are pulling their homes off the market,” Foster said. “For buyers, we’re seeing fewer people out looking, but the ones that are out there are still transacting.”

For the buyers that are still out looking, down in South Florida, Pappas said conditions are more favorable for those looking to negotiate a deal, as sellers realize that for many buyers, their budgets are being squeezed by the rising mortgage rates.

“We have a calculator that shows buyers that a permanent rate buy down is two and a half times more impactful to them than a price reduction and that a temporary buy-down is 10 times more impactful,” Pappas said. “So rather than reducing the purchase price by $15,000, we’re asking the seller to give the buyer a rate buydown to help them move that rate back down to a reasonable level, making the purchase more affordable for them.”

Foster shared a similar perspective, as he feels that in his market there’s a great opportunity for buyers, especially if more inventory comes on the market.

“We’re seeing more homes come on the market and while interest rates might be a bit higher, people normally buy based on payment, not overall price, and if a buyer can negotiate the price down to a monthly payment that works for them, they are still able to transact,” Foster said. “This is the first time since before COVID in our market that the ratio of buyers to sellers is starting to even out and providing buyers with opportunities to negotiate.”

Budget concerns aren’t just for buyers

Affordability and budgets are things Lamacchia said he is also focused on at the brokerage level. When rates began to rise in early March, Lamacchia said he and his team knew they needed to “pull their necks in.”

“If we don’t see good things on the horizon, we pull back on expenses,” he said. “In 2022, I saw things coming, so we dramatically cut expenses. Last year, things were better, so we started to open up those expenses, but now we’ve had to hold our fire. It is tough and I think a lot of firms out there are hurting.”

While brokers may be frustrated that 2026 is not turning out to be the year they had hoped in terms of home sales, Pappas said there are still opportunities.

“The war is an extraordinary thing affecting our business and it is creating uncertainty, which makes people more cautious. It takes a skilled agent to help a buyer or seller navigate this. In spite of rates being high, there are still motivated buyers and sellers out there who are willing to make a deal work.”

With the Federal Reserve expected to hold interest rates at their current level at its meeting on Wednesday, Foster said that instead of trying to predict the unknown, he and his agents are trying to remain focused on things that they can control.

“I think knowledge is power, so we spend a great deal of time educating our agents on what is happening in the economy and in the industry so that they can talk to their clients at a high level and not just be a real estate agent, but a trusted advisor to help them position themselves or their home in the best possible way for a successful transaction,” Foster said.