America's real estate market is facing another cruel summer

Making it in real estate requires a certain degree of blind optimism: a belief that, despite the market's ups and downs, the buyers will come knocking, the home inspection will come up clean, and both parties will shake off the jitters and sign on the dotted line. Never does that faith flow more freely than in the weeks leading up to the busy spring selling season in March and April, when better weather tends to coax buyers and sellers out of hibernation and into a flurry of dealmaking that sets the tone for the rest of the year.

In the past few years, this eternal optimism has not been rewarded. Most recently, President Donald Trump's sweeping tariffs spoiled hopes of a spring rebound in 2025. With would-be buyers feeling uneasy about borrowing rates, the economy, and their jobs, many decided to stay put. Not to be discouraged, real estate agents came into 2026 daring to dream again. Mortgage rates had drifted lower, and home prices were easing in much of the country, sweetening the math for buyers. The labor market wasn't roaring, but it was holding up. Plus, the thinking went, buyers could only put off big life changes for so long. Eventually, people had to get moving again. Maybe 2026 was finally the year.

"We were all excited," Neil Brooks, a Phoenix-area real estate agent, tells me. "Everybody was doing good, thinking, 'Okay, maybe this will be it. Let's hold our breath and hope nothing else happens.'

Brooks pauses: "But then something else happened."

For the second year in a row, sellers, agents, and analysts are mourning a spring bump that failed to materialize. And once again, they're pointing the finger at geopolitical turmoil: this time, it's the war in Iran, which sent borrowing rates skyward and made everyday items, notably gas, more expensive. The conflict has weighed on both consumers' finances and their psyches — if there's one thing homebuyers hate to hear before the biggest purchase of their lives, it's "uncertainty." To top it all off, the war began just as sellers would typically start planting for-sale signs in their thawing front yards.

"The timing of all this couldn't have been worse from a housing perspective," says Rick Palacios Jr., the director of research at John Burns Research and Consulting.

Real estate agents, ever the optimists, aren't ready to throw in the towel quite yet. They're holding out hope that things could still turn around in time for the peak of the selling season in June. And of course, people always have to move for life reasons, regardless of the macroeconomic morass. The upside for buyers is that they have more leverage than in recent years — that may be enough to convince some to go bargain-hunting, perhaps at one of the many new-home communities where builders are offering big perks to keep sales moving. Rate buydowns and finger-crossing can only go so far, though. It'll take a lot more than wishful thinking to jolt the housing market back to life.

The housing recovery was on shaky ground even before the US entered another war in the Middle East. Affordability had improved, sure, but not enough to incite a mad dash to open houses. Still, there were good reasons for optimism. The biggest bright spot was the typical mortgage rate, which in late February slipped below 6% for the first time since 2022. It was a vast improvement from a year earlier, when rates were hovering near 7% — a single percentage-point drop can reduce homebuyers' monthly payments by hundreds of dollars. Nationally, wages were growing faster than home prices. The job market was weird, but not terrible. Despite companies not hiring much, the unemployment rate remained relatively low at 4.3%. All of this suggested friendlier waters for homebuyers.

Some economists predicted a rip-roaring market in 2026 — the National Association of Realtors, for instance, forecast existing-home sales to jump by a whopping 14% this year (if this had indeed come to pass, I think you might have caught your friendly local Realtor turning cartwheels in the street). Most took a more measured, but still upbeat, approach. Zillow, for instance, expected to see 4.26 million existing-home sales this year, a modest 4.3% increase from last year — more of a thaw than a heat wave. Mike Simonsen, chief economist at the brokerage firm Compass International Holdings, forecast a pickup of between 4.25% and 5%. John Burns also predicted an uptick in the low single-digit percentages.

"We were not forecasting a boom coming into this year," Palacios tells me, describing his outlook as "more kind of realistic, or I guess, cautiously optimistic."

Even the more guarded forecasts are now being revised down, showing how much has gone wrong for buyers and sellers this spring. The typical rate for a 30-year loan jumped to nearly 6.5% in early April, per Freddie Mac, though it recently slipped lower to around 6.25%.

Consumers are still spending, but they're getting slammed at the gas pump and feeling rotten about the economy. It's also hard to feel secure in your job when the bosses keep talking about AI-driven "efficiencies" and sending out layoff notices in all-lowercase corporatespeak.

"It's really the volatility," says Jason Waugh, an executive at the real estate brokerage Coldwell Banker. "I mean, that is what causes people to just pause."

Buyers began the year with plenty of options on the market, which meant they could take their time and see how things shake out. Active inventory was up about 5.44% in January compared with the same month in 2025 and 32% higher than the same point in 2023, Redfin data shows. "Any time you have more supply, it weighs on prices," Palacios tells me. "It kind of washes out any urgency."

Simonsen, the chief economist at Compass, sees signs that this trend is shifting — in May, he says, the number of homes for sale may actually be slightly lower than at the same point last year. The big reason is that many would-be sellers are also playing the waiting game. People aren't moving for new jobs, and the low unemployment rate also means fewer people are forced to sell their homes after a layoff or financial disaster. Plus, homeowners are largely in no rush to give up their plum mortgage rates.

"Really, it looks like these are sellers who are perfectly happy to wait," Simonsen tells me. "They just don't have to sell."

If you're shaking your head and muttering, "Not in my area, homes are still selling like hotcakes," you're probably sitting somewhere in the Midwest or Northeast. Homebuilders didn't flock to these areas during the pandemic like they did to Austin or Phoenix, meaning they didn't see the kind of supply boost that would tamp down prices and tip the scales in favor of buyers. A recent survey of 700 Coldwell Banker agents reveals the geographic split: 70% of agents in the Midwest and 74% in the Northeast said their areas were sellers' markets, compared to a mere 13% in the South and 22% in the West. Pandemic-era hot spots are still battling a hangover. Take the once-sizzling Phoenix metro, where the number of pending home sales — houses under contract but not yet closed — was down about 2% from last year as of late April, Redfin data shows.

"Buyers are kind of like, 'If I wait, I'll probably get it cheaper,'" says Brooks, the Phoenix-area agent.

The recipe for a turnaround is pretty simple: a swift end to the war in Iran, steady job growth, and stability in the mortgage market. Or as Brooks succinctly puts it to me: "Interest rates and jobs."

"In Phoenix, we're doing pretty good job-wise right now," he says. "If that stays strong and interest rates drop a little bit, we'll be right back in action."

Don't count on a dramatic rebound, warns Palacios. A pickup this summer isn't impossible, he says, but the clock is ticking, given that most home sales take a month or two to close and people generally want to wrap things up by August or September, when vacations wind down and kids head back to school.

Things aren't all doom and gloom. In 22 of the country's largest housing markets, John Burns data shows that home prices are either "affordable" or roughly in line with historical affordability levels. "You've had muted home-price appreciation, if not down over the last few years in a handful of markets, and you've had steady income growth," Palacios tells me. "So that's just a boring, glacial pace of solving for affordability. It's just not something that's, like, super sexy."

Even in troubled markets like Phoenix, homes may draw multiple offers and sell quickly if they're priced appropriately, Brooks says: "When you're in a down market, you want to be the first guy to sell." On the other side of the table, buyers can win concessions such as repair payments, covered closing costs, or favorable move-in timelines. "I'm getting more concessions than I've gotten in at least a decade," he adds.

Mischa Fischer, Zillow's chief economist, is sanguine about the twists and turns in the housing market this year. "I think it comes down to what one's expectations are," he said. He's still betting that sales volume grows by about 2% or 3% this year — hardly cause for celebration, but a positive development all things considered. Following a couple of rough weeks after the start of the war in Iran, Simonsen says, buyer activity has indeed picked up slightly compared to last year. But he also acknowledges that "any growth we have now is very fragile."

The days of dreaming big for this year seem like a distant memory. Waugh, the Coldwell Banker executive, has resigned himself to the fact that this year will look a lot like 2024 and 2025 — historically slow years for real estate. Coming into 2026, he says, there was hope that it would mark the beginning of a new real estate cycle: an end to the doldrums and a return to for-sale signs and moving trucks. Nobody was expecting a record-setting performance, but they hoped for a noticeable shift, he says.

Waugh has weathered previous cycles, though, and he's not one to let dreams die altogether.

"If we can have some rate stability and less volatility, affordability will improve," Waugh tells me, "and 2027 should give people a lot of optimism."

James Rodriguez is a correspondent on Business Insider's Discourse team.