This Week In A Nutshell: Rates may continue to be volatile as the Middle East conflict expands and new inflation data is released.
Upcoming Attractions
Our attention will be on the ever-changing situation in Iran and associated market reaction.
It’s also a consequential week for economic data, with the February CPI report coming on Wednesday. This data was collected prior to the Iranian conflict. For monetary policy and rates, the key metric is still core CPI, which excludes food and energy prices. That is expected to abate slightly, from a 0.3% monthly increase in January to a 0.2% increase in February.
On Friday, we’ll get the PCE inflation report for January, which should have little impact on the market. This data should have been released in late February, but was delayed by the short partial government shutdown. Based on already released January CPI and PPI data, core PCE should come in fairly close to an estimated 0.4% monthly increase (3.1% annual increase).
Last Week’s Highlights
As developments in the Middle East pointed to a longer, more expansive conflict, oil prices and the 10-year treasury yield both rose, but mortgage rates stayed relatively stable.
The jobs report was surprisingly weak, which revived recession fears. But rates didn’t react much, given the broader context.
Diving a Little Deeper
The waters look especially muddy for housing, with both the Iranian conflict and weak labor market data.
How do we make sense of all of this? The simple answer: As has been the case for tariffs and the immigration crackdown, we’re at risk of stagflation in the short term. Stagflation is both stickier inflation and a slower economy at the same time, which is the worst of both worlds for housing because it means less demand from nervous buyers and elevated rates for longer. However, it’s possible that, should the Iranian conflict become truly protracted, a weaker labor market will dominate, which means the Fed could need to cut more and earlier than expected.
- Middle East conflict: The main channel to financial markets is oil, with prices nearing levels last seen at the start of the Russian invasion of Ukraine. Higher energy costs push up headline inflation and slow growth, but the Federal Reserve focuses on core inflation, which excludes food and energy. Unless the conflict lasts much longer than expected, the Fed is unlikely to react to the oil spike. A prolonged war could slow growth as higher gas prices reduce other consumer spending; estimates suggest a 10% rise in oil prices cuts GDP growth by about 0.2 percentage points.
- Labor market: Job growth has been volatile for the last two months, but overall employment has been essentially flat since early 2025. Immigration restrictions explain part of the slowdown, though the breakeven pace of job growth is still around 30–50k per month. While the unemployment rate remains low and AI-driven productivity may be supporting growth, a labor market where it’s hard to find a new job could still hold back homebuyers—even if mortgage rates fall.
Redfin Housing Market Reports
The Typical U.S. Homeowner Hangs Onto Their House For 12 Years. In Los Angeles, It’s 20 Years.
- Homeowner tenure peaked at 13.4 years in 2020, roughly doubling the average tenure from 2005. Then it declined marginally for four years before ticking up in 2025.
- People hanging onto their houses can be an obstacle for first-time homebuyers because it limits inventory and pushes up prices.
- Tenure is longest in California, largely because state tax laws incentivize homeowners to stay put. In Los Angeles, the typical homeowner hangs onto their house for 20 years, followed by San Jose, where it’s nearly 19 years.
- Tenure is shortest in relatively affordable metros, led by Louisville and Las Vegas.
For Real Estate Investors, the West Coast Is Hot and Florida Is Not
- Investor activity is sluggish on a national level, with purchases rising just 2%—but it varies widely from metro to metro.
- In Seattle, investor purchases jumped 37% year over year in the fourth quarter—the biggest gain among the metros Redfin analyzed. Orlando posted the biggest decline, down 16%.
- U.S. investors bought more single-family homes, and waded deeper into the luxury market.
Back on the Market: Relistings Jump as Home Sellers Bet on Stronger Spring Market
- Nearly 45,000 sellers who delisted their homes last year relisted them in January—the highest January number in records dating back a decade.
- This could further boost housing supply, enabling homebuyers to score even bigger discounts than they’re already getting.
- Relistings are most common in pricey West Coast markets like the Bay Area, and least common in affordable parts of the Northeast and Midwest, such as Pittsburgh.
