- by New Deal democrat
“Trump take egg” was a social media meme popularized by MTSW at Bluesky, highlighting prices that T—-p had promised would come down, but increased instead.
The spike in egg prices was due to avian flu, but when it comes to internet memes, nevermind.
Which is by way of introduction to saying that the economic damage done by the Iran war is spreading out.
At the end of February, mortgage rates hit a 3.5 year low at 5.98%. As of yesterday, according to Mortgage News Daily, they made a new 7 month high at 6.62%.
I have been writing for nearly a year that the housing market was recessionary, and that the last dominos were falling. But recessions do end and turn into recoveries, and in the last few months there have been signs of “green shoots” in things like mortgage applications that suggested that left to its own devices, any such recession would likely be short. Well, the Iran war is in the process of killing those green shoots.
First, let’s take a look at 10 and 30 year Treasury interest rates (dark and light blue, right scale) vs. mortgage rates (red, left scale) since the Fed first started raising rates 4 years ago:
Note that in the first year, mortgage rates reacted more strongly to the change in the interest rate climate than did long term Treasurys. In the past two years, they gave back that premium, as mortgage rates declined from a high of about 7.80% to the aforementioned 5.98%. Now here is the short term look to emphasize the reversal in the past 4 weeks:
Note that the mortgage rate in the above graph is weekly, and does not include the further increase in the last few days, which would take us all the way back to last August.
And the increase in mortgage rates has already had an effect on new purchase mortgage applications (blue, left scale) in the graphs below) as well as refinancing (gray, right scale). Here’s the longer term look, showing how that after almost completely drying up in 2023-24, mortgage applications generally rose during 2025 and into this year, in response to lower mortgage interest rates:
Now here is the close-up of the past year:
Note that both types of applications fell sharply in the past several weeks - and the two graphs above end as of one week ago.
Refinancing is particularly sensitive to mortgage rates. As the below graph shows, it is virtually a mirror image:
Again, this graph does not include the further increase in mortgage rates this week.
As a result, we can expect both purchase and refinancing mortgage rates to decline further. This is almost certainly going to put an end to the “green shoots” that were beginning to appear in the housing data. And if those higher rates persist, if there is a recession this year, it is only going to be made deeper and longer.
