Mortgage rates are poised for more turbulence as markets brace for the first inflation reading since the Iran War began.
Chen Zhao | Credit: Redfin
The uncertainty arrives at a critical moment, according to Redfin economist Chen Zhao. Inflation data due Friday will offer the first look at how the Iran War is reshaping prices.
Meanwhile, jobs numbers have swung wildly month-to-month in a pattern Zhao said reflects a measurement change at the Bureau of Labor Statistics, not an economic reversal.
Rates hinge on Iran War, Friday inflation report
Now in its sixth week, the Iran War remains the largest single driver of mortgage rate movement. Any new developments affecting energy prices will have the most immediate impact on rates, Zhao said.
Absent new developments in the conflict, markets will next turn to the March CPI data, due Friday. Headline inflation is expected to rise to 3.4 percent annually, up from 2.4 percent in February, marking the first inflation reading since the war began.
Core inflation, which excludes food and energy prices and is the Federal Reserve’s primary focus, is expected to increase to 2.7 percent from 2.4 percent, driven by factors unrelated to the conflict.
The Fed releases February Personal Consumption Expenditures (PCE) data Wednesday. While PCE is the Fed’s preferred inflation gauge, the release is unlikely to move markets. February CPI and Producer Price Index (PPI) data are already available, leaving little new information for markets to digest.
Rates fell last week as investors unwound bets on a Fed rate hike in 2026, pulling back from highs reached the prior week.
Jobs data swings reflect methodology shift
The Bureau of Labor Statistics’ monthly jobs report has produced three months of readings that are difficult to interpret on their face. The economy added 160,000 jobs in January, lost 133,000 in February and added 178,000 in March.
Zhao attributed the volatility to a methodology change in the BLS birth-death model, introduced in February 2026. The birth-death model estimates jobs added or lost at new and closing businesses not yet captured in the agency’s monthly employer survey. BLS updated the model because the previous version produced larger-than-usual errors after the pandemic, when business openings and closings diverged from the historical patterns the model relied on.
The updated model incorporates more current data from the monthly employer survey, making it more responsive in real time. That responsiveness comes with a tradeoff: monthly figures are now more volatile.
Zhao said the more reliable read is a three- or six-month trailing average. By that measure, the labor market is weak with little new hiring, but has stabilized in recent months rather than deteriorated. The current level of volatility is comparable to 2022 in the immediate aftermath of the pandemic, though noisier than both pre-pandemic data and 2025 figures.
Stale listings hit a record for this time of year
The turbulence is landing on a housing market already under strain. More than half of U.S. home listings have sat on the market for more than two months, amounting to $347 billion in stale inventory, the most ever recorded for this time of year, according to Redfin data.
The backlog reflects an imbalance between supply and demand, with significantly more sellers than active buyers in the market. Florida has the highest concentration of stale listings among major states. California’s Bay Area has the lowest.
Boomers hold large homes as millennial families wait
A generational gap in homeownership is compounding the inventory problem. Empty-nest baby boomers own 28 percent of large homes in the U.S., defined as properties with three or more bedrooms, while millennial families with children own just 16 percent, according to Redfin.
Boomers have limited financial incentive to downsize, and the inventory of smaller, single-story homes priced within reach of that demographic remains thin. Millennial families, meanwhile, are contending with both affordability constraints and a shortage of larger homes available at accessible price points.
The gap holds across every major U.S. metro. Austin, Texas, and Columbus, Ohio, have the largest share of homeownership by millennial families. Los Angeles has the smallest share.
