I was a bit surprised at the market reaction, check out the 10 year treasury (above) on the Monday after the war began. I would have predicted the opposite reaction with yields falling. What are the three primary reasons rates are now rising? What impact does this have on real estate prices and mortgage rates? Will this cause a recession? What is the good news from the market reaction?
What happened to treasury yields after the war began?
U.S. Treasury yields moved higher on Monday even after the U.S. and Israel launched attacks on Iran over the weekend as investors failed to use the U.S. bond market as a safe haven. Typically, in times of uncertainty there is a rush to safe assets like US bonds, gold, etc… this did not occur. Ironically just the opposite happened with prices of bonds dropping leading to higher yields.
Why did yields rise when the war began?
Remember, the government does not control the yield curve, the long term yields are derived from the market via buyers and sellers to set the price. Long term yields anticipate future growth, inflation, safety, etc..
3 reasons that rates rose due to the Iran war
There are three reasons that yields rose and overcame the flight to safety
- Oil prices: anticipation oil prices would rise and further increase inflation due to supply constraints, initially oil prices spiked over 7% in one day.
- Government spending: a war is not cheap, a prolonged war in the middle east will lead to increased government spending further raising deficits
- Federal Reserve will sit tight: with inflationary pressures rising from the war due to government spending and rising oil prices, the consensus is that the federal reserve will sit tight on further rate movements until they get better clarity on inflation.
What does the Iran war mean for mortgage rates?
As we can see from the 10-year treasury, rates jumped on the Monday after the war began which has flowed through to mortgage rates. On the chart above look at the huge spike the first few days of March (far right on the chart). The million dollar question is how high will rates go? At this point we don’t know as it will depend on how long the war goes on and the ultimate impact on inflation and deficits.
How will the war with Iran impact residential real estate prices?
When looking at residential real estate prices the price impacts will vary based on the price points:
- Low/Mid priced houses: if interest rates rise further, this will definitely put a crimp on housing prices especially in lower/mid priced that are more rate sensitive.
- High end houses: High end houses might have the opposite effect. If there is a flight to quality assets some high net worth buyers might cash out of stock to diversify and buy a high end house. For example, you might see buyers looking to buy a house in a resort area like Aspen for diversification purposes.
How will the Iran war impact commercial real estate prices?
- Office market: companies will be reluctant to expand with business uncertainty which will lead to further erosion in the office market
- Apartments: Over a longer term horizon, rents will begin to rise as housing costs stay high and the number of available units shrinks due to less building. Apartments in many markets will turn the corner and outperform other assets.
- Light industrial: smaller spaces will continue to be in demand from small service workers which will be needed due to the aging of homes. Plumbers, carpenters, etc.. will continue to demand smaller spaces
- Retail: Retail will depend on the market, higher end retail will continue to do well, smaller operators will continue to come under pressure. In retail there is no clear direction with winners and losers
With the above said, if 10 year treasuries spike this will lead to downward pressure on all commercial real estate as cap rates would also need to rise.
Will the Iran war trigger a recession?
My initial read is that the Iran war will not trigger a recession. I’ll give a few caveats though. If the war drags on for a while, if the war expands, and if the war triggers other major conflicts then all bets are off. There is also the question of gas/energy prices that could spike, but should be manageable for the economy. With that said, my initial take is that the war is unlikely to be the trigger of the next cycle but there is a 20% chance that one of the events above occurs that alters my initial projections.
Summary Iran war impact on real estate
I was surprised at the market reaction to the Iran war. I would have thought that the opposite would occur where rates dropped due to a demand for “safe haven” assets like US treasuries. Instead the market was focusing on inflationary pressures which are increasing mortgage rates.
The positive is that based on the market reaction the general consensus is that the war will not lead to a full blown recession.
We will get to see how this unfolds over the next few weeks, but in the interim, mortgage rates will be a little higher which will further crimp the housing market in the busy spring buying/selling season.
Additional Reading/Resources:
- https://www.fairviewlending.com/tariff-impact-on-real-estate/
- https://www.fairviewlending.com/will-real-estate-prices-rise-are-the-predictions-wrong/
- https://www.cnbc.com/2026/03/02/mortgage-rates-jump-sharply-higher-after-iran-strikes-reversing-last-weeks-decline.html
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. I’m not an armchair reporter/writer. We are an actual private lender, lending our own money. We service our own loans and own commercial and residential real estate throughout the country.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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