US Housing & Mortgage Markets

TL;DR - Mortgage rates are rising again on geopolitical shock — a new headwind hitting a market that was just beginning to stabilize on January/February's sub-6.1% rates - Active inventory is up 12% year-over-year in early March data, keeping downward pressure on real prices that are already 2.3% below their 2022 peak - Shelter inflation is in a steady, measurable glide path down — Zillow projects OER at 3.02% YoY for March and 2.39% for full-year 2026 - High-cost coastal markets are structurally dependent on international migration to absorb chronic domestic out-migration — a dynamic that makes them resilient but vulnerable to immigration policy shifts

Rate volatility is back. McBride's early March market survey lands with a geopolitical asterisk: mortgage rates have risen since the conflict with Iran started, and local market contacts are already calling it out as a new headwind. That complicates what was otherwise a modestly constructive spring setup.
RATES: The Closing Lag Is Your Friend — For Now

March closed sales are largely reflecting contracts signed in January and February, when 30-year rates averaged 6.10% and 6.05% respectively. That timing buffer has insulated reported transaction data from the current rate spike. McBride's early March sample across key reporting markets shows closed sales up 2.4% year-over-year — a reversal from February's -0.6% — though a calendar quirk (22 working days in March 2026 vs. 21 in March 2025) inflates that comparison. Seasonally adjusted figures from NAR, due April 13th, will provide the cleaner read.

Las Vegas market contacts flagged the shift most directly: "with mortgage rates rising since the conflict with Iran started, the housing market is facing some new headwinds." The Pacific Northwest was similarly candid — "a continued rise in inventory, combined with renewed pressure from rising mortgage rates, defined Washington's housing market in March."

The forward pipeline — contracts signing now, closing in May and June — will bear the full weight of the rate increase.

INVENTORY: Building, But Still Historically Depressed

McBride's early March local market data shows active inventory up 12.0% year-over-year, holding the pace set in February (+12.1% YoY). New listings grew 3.0% YoY in March, a deceleration from February's 5.5% — worth watching, but not yet a trend reversal. The more sobering context: inventory in these markets remains well below March 2019 levels in most regions, with significant variation. The supply rebuild is real, but it's climbing back from a historically depleted baseline.

For sellers, the implication is a slowly normalizing negotiating environment. For buyers, more choice than 2 years ago — but affordability math remains punishing at current rates.

PRICES: Nominal Highs, Real Erosion

McBride's inflation-adjusted analysis is the clearest framing of where prices actually stand. The Case-Shiller National Index hit nominal all-time highs in January — but in real terms (CPI-adjusted), the index is 2.3% below its June 2022 peak, now 44 months into what McBride frames as a "real price purgatory." His baseline outlook: "mostly flat to a small decline in prices nationally in 2026," with rising inventory and sticky inflation both working against real price recovery.

The nominal/real divergence matters for affordability. A house that costs more dollars but represents a smaller real-terms premium than 2022 is still unaffordable if wages haven't kept pace — which, for many buyers, they haven't. McBride also flags that real prices remain 10.2% above the pre-crisis bubble peak of 2006, adjusted for the secular upward trend in real home values. There's no mean-reversion pressure from that level alone, but it underscores how far affordability has stretched.

SHELTER INFLATION: The Slowdown Is On Track

Zillow's Olsen projects March CPI shelter components to confirm the ongoing disinflation trend. Owners' Equivalent Rent is forecast at +0.21% month-over-month (+3.02% YoY), down from 3.19% in February. Rent of Primary Residence is forecast at +0.17% MoM (+2.55% YoY), down from 2.68%. Both are tracking close to Zillow's model predictions, which have been accurate in recent months.

The forward curve is notably flat: Zillow projects OER hitting 2.39% for full-year 2026 and Rent of Primary Residence at 2.15% — meaningful progress from the 3%+ pace of early 2025. Zillow's on-market rent indices are even softer: single-family rents forecast at +1.8% YoY by year-end, multifamily at +0.8%. The structural gap between on-market rents and the lagged CPI components remains wide, which is what sustains the glide path — the disinflation is mechanically locked in as older leases reprice.

For Fed watchers: if this forecast holds, housing's contribution to core CPI will continue to fall through mid-2026, giving the FOMC one less reason to stay restrictive — even if rate cuts remain complicated by tariff-driven goods inflation.

COASTAL MARKETS: THE INTERNATIONAL MIGRATION FLOOR

Lambert's ResiClub scatter plot analysis adds important structural context often missing from simple migration headlines. High-cost coastal metros — the markets that perennially top the "people are fleeing" coverage — are not experiencing population collapse. Seattle lost 2.0 net domestic movers per 1,000 residents in 2025, but gained 9.0 net international migrants per 1,000 — a net inflow that more than offsets domestic departures. Miami and NYC show similar patterns.

The mechanism matters for housing demand. International migrants skew toward high-income, high-skill profiles (particularly in Seattle's tech-driven labor market), sustaining demand for the expensive units that domestic movers are fleeing. This is why coastal markets can run chronic domestic out-migration and still see prices hold or rise: the replacement buyer pool is often higher-income than the departing residents.

The watch risk here is obvious: any policy shock to legal immigration flows — H-1B changes, visa processing slowdowns — removes the ballast. For housing bulls on coastal markets, international migration is not a rounding error; it's a load-bearing wall.

SYNTHESIS

The market is navigating a three-way tension: a supply rebuild that's progressing but remains historically incomplete, real prices under modest downward pressure that rising nominal rates now threaten to accelerate, and a shelter inflation slowdown that's proceeding almost exactly on schedule. The Iran-linked rate spike is the fresh variable — its duration and magnitude will determine whether spring 2026 prints as a pause or a more meaningful demand reset. McBride's NAR March report on April 13th is the next clean datapoint; Olsen's CPI shelter read on April 10th will confirm (or complicate) the disinflation story.