Oil Prices Spike, Prompting Homebuyers to Hit Pause as Mortgage Rates Edge Higher

Q1 2026 VeroFORECAST points to modest national appreciation of 1.3%, as higher oil prices add fresh pressure on inflation and borrowing costs

Veros Real Estate Solutions (Veros^®), an industry leader in enterprise risk management and collateral valuation services, released its Q1 2026 VeroFORECAST^SM. The forecast projects an average-nationwide home price appreciation rate of 1.3% over the next 12 months.

VeroFORECAST evaluates home prices in over three hundred of the nation’s largest housing markets, and Veros is committed to the data science of predicting home value based on rigorous analysis of the fundamentals and interrelationships of numerous economic, housing, and geographic variables pertaining to home value.

The U.S. housing market finally had a reason to feel optimistic heading into 2026. After years defined by high mortgage rates, limited inventory and stretched affordability, early signals pointed to a shift. Activity was beginning to stir. Buyers were slowly re-entering.

Then geopolitics intervened. The war in Iran sent oil prices sharply higher, reigniting concerns about inflation just as it appeared to be cooling. Financial markets reacted quickly. Treasury yields moved up. Mortgage rates followed. After dipping below 6% in late February, the average 30-year fixed rate mortgage climbed back to roughly 6.4% by late March. That may not sound dramatic, but in today’s market, even small rate movements carry outsized consequences. For many households already stretched by elevated home prices and rising living expenses, a fraction of a percentage point can mean the difference between qualifying for a loan and staying on the sidelines.

And while inflation has moderated from its earlier peaks, it hasn’t fully disappeared. Rising oil prices introduce a new layer of pressure, feeding into transportation, goods, and services costs across the economy. That, in turn, keeps upward pressure on interest rates and limits how far mortgage rates can fall.

At the same time, the labor market is beginning to show weakness. While unemployment remains relatively low in the mid-4% range, job growth has slowed compared to prior years. That shift may seem incremental, but housing decisions are tied closely to confidence in income, job stability, and future financial security. When that confidence softens, so does demand.

Buyers don’t necessarily disappear, but they hesitate. They wait. They run the numbers again. And in many cases, they choose to delay.

On the surface, supply conditions appear to be improving. Inventory has started to rise, giving buyers more options than they’ve had in years. But this isn’t a surge of new listings hitting the market. It’s a slowdown in transactions. Homes are taking longer to sell. Listings are sitting. Meanwhile, many homeowners remain locked in place—literally. There are more homes available than before, but not enough. Mortgage rates are lower than their peak, but not low enough. Demand is still present, but increasingly selective.

But the national story only tells part of the picture. Beneath the averages, the housing market is becoming increasingly localized. In Northern California, for example, markets like San Jose are seeing renewed strength as capital flows into AI-driven companies, bringing with it a new wave of high-income buyers, many of them with significant cash resources. At the same time, buyers are increasingly drawn to parts of the Northeast and Midwest, where relative affordability and stable economic conditions offer a more accessible path to homeownership.

The strongest-performing markets include Reading, PA; Rochester, NY; Springfield, MA; Allentown-Bethlehem-Easton, PA-NJ; Rockford, IL; Hartford, CT; Racine, WI; Syracuse, NY; and Manchester, NH, alongside San Jose, CA, which stands out due to its exposure to the tech sector.

In contrast, several Sun Belt markets that saw rapid growth during the pandemic are now facing headwinds. Markets such as Cape Coral and Naples in Florida, Austin in Texas, and parts of coastal Florida like North Port and Panama City are among the weakest performers in the latest forecast. These areas have seen a combination of elevated home prices, rising insurance costs, and a surge in new construction, all of which are weighing on demand and increasing competition among sellers.

Other slower-performing markets include Corpus Christi and Sherman-Denison in Texas, Lake Charles in Louisiana, Pueblo in Colorado, and even Urban Honolulu, reflecting how affordability pressures and shifting demand are playing out unevenly across the country.

Contacts

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Heather Zeller, Vice President of Marketing
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(714) 415-6300

Source: Veros Real Estate Solutions (Veros®)