The economy took another sharp turn this week as the war in the Middle East intensified and financial markets reacted swiftly. Concerns over the ongoing conflict with Iran, continued closure of the Strait of Hormuz, and rising oil prices created a difficult week for stocks, bonds, mortgage rates, and the housing market.
The stock market ended the week lower across the board. The Dow Jones Industrial Average officially entered correction territory, falling more than 10% from its recent high and closing Friday near 45,167. The S&P 500 fell to approximately 6,369, while the Nasdaq dropped below 21,000 and is now also in correction territory. Investors are increasingly concerned that higher oil prices and inflation could slow the economy and reduce corporate profits.
Energy prices remain the driving force behind nearly every economic headline. Since the war began in late February, Brent crude oil has climbed above $110 per barrel, while U.S. oil briefly approached $100. Much of this increase is tied to the continued closure of the Strait of Hormuz, where roughly 20% of the world’s oil supply normally flows. Higher fuel prices are already affecting transportation, groceries, travel, and utility costs.
Inflation concerns rose significantly this week. Rising oil and gasoline prices are making it more difficult for the Federal Reserve to lower interest rates. Investors now believe the Fed may have to keep rates higher for longer, or even consider another increase if inflation continues to rise. Treasury bond yields climbed sharply, with the 10-year Treasury moving above 4.4%, its highest level since last summer. When bond yields rise, mortgage rates usually follow.
Mortgage rates jumped again this week. The average 30-year fixed mortgage rose to approximately 6.43%, the highest level since October. Just a few weeks ago, rates had dipped below 6%, giving buyers hope that affordability would improve. Instead, the war-driven rise in oil prices pushed bond yields higher and sent mortgage rates climbing quickly. Mortgage applications also fell as buyers paused to reassess affordability.
The job market is showing signs of slowing, but not collapsing. Economists expect the upcoming March jobs report to show only about 55,000 new jobs added nationwide, with unemployment edging up to approximately 4.4%. Businesses remain cautious as they watch energy prices, inflation, and consumer spending. If the labor market weakens further, it could eventually help lower rates later this year, but for now the Fed remains focused on controlling inflation.
What does this mean for housing?
For home buyers, higher mortgage rates mean less purchasing power. A buyer who could comfortably afford a home several weeks ago may now qualify for less because monthly payments have increased. This is especially important in higher-priced markets like Westlake Village, Thousand Oaks, and the surrounding Conejo Valley, where even a small change in rates can increase monthly payments by hundreds of dollars. Buyers should be prepared, stay pre-approved, and move quickly when the right home appears. Locking in an interest rate early may become increasingly important if rates continue to rise.
For home sellers, this environment creates both challenges and opportunities. Some buyers may pull back due to higher borrowing costs, which can reduce the number of offers. However, inventory remains relatively limited in many Southern California neighborhoods, especially in luxury markets. Well-priced homes that are beautifully prepared and marketed correctly are still attracting serious buyers. Sellers who price realistically and present their homes well are continuing to succeed, even in a more uncertain economy.
The war is creating a ripple effect throughout the economy: higher oil prices lead to higher inflation, higher inflation pushes up bond yields, higher bond yields increase mortgage rates, and higher mortgage rates slow buyer demand. Until there is more clarity in the Middle East, expect continued volatility in the stock market, interest rates, and housing.
For buyers and sellers in Westlake Village and the Conejo Valley, now is the time to stay informed and have a clear strategy. In uncertain markets, preparation matters more than ever. If you are thinking about buying or selling, I would be happy to help you understand how these changes affect your specific situation and create a plan to help you move forward with confidence.
Tina Lucarelli, Global Real Estate Advisor - DRE 02102354 | (310) 738-8089
