The Spring Market Gets Off to a Rocky Start as the Fed Holds on Rate Cuts

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Sometimes it seems like a substantial drop in interest rates is akin to a myth, like the Loch Ness Monster or Bigfoot. Despite a combative relationship with President Donald Trump, Federal Reserve Chair Jerome Powell—known for his caution on rate cuts—recently indicated he is not going anywhere, and with the war in Iran rattling energy markets, the wind has been knocked out of hopes for a spring housing market rebound.

Powell Stays, Cuts Wait, Uncertainty Grows

Powell has made it clear that he intends to stay on the board of the central bank while a Justice Department investigation into Fed building renovations concludes, saying in a press conference that he has “no intention of leaving the Board until the investigation is well and truly over.”

His term on the board runs through January 2028, and his potential replacement as chair, Kevin Warsh, is stalled in the Senate. For landlords expecting rates to drop the moment Powell steps out of government, they could be in for a long wait.

Fed Vice Chair for Supervision Michelle Bowman told Fox Business that she still has three rate cuts penciled in for this year, but emphasized that it is heavily dependent on incoming data and the economic outlook, including geopolitical risks.

Powell underscored the uncertainty of these cuts in his March news conference, saying of the economic fallout from the Middle East conflict that “we don’t know what the effects of this will be, and really no one does.”

Wild Card Conflict

While the Fed is trying to keep an even hand on policy, the war involving Iran, Israel, and the U.S. has introduced a new inflation wildcard in the form of higher energy prices caused by disruption around the Strait of Hormuz, a critical global oil chokepoint.

A report from Institutional Property Advisors concluded that U.S. and Israeli strikes on Iran have turned the conflict into a “global energy-market risk,” adding that the economic impact on real estate depends on the duration of the conflict and the extent of damage to energy infrastructure.

Bloomberg struck a similar chord, saying that “Iran shock” upended what many in the commercial property world had hoped would be a steady recovery, with “valuations hypersensitive” to interest rates. According to Bloomberg’s March analysis, even before the conflict, investors remained unconvinced about the value of large amounts of commercial real estate, despite shrinking new supply and rising rents. The war has added another level of risk.

As for the U.S. residential market, Realtor.com observed that the Iran war could add “further economic uncertainty among homebuyers,” with short-term instability affecting consumer confidence.

For smaller U.S. landlords, these macro risks show up in day-to-day expenses, such as higher fuel and utility costs, increased volatility in borrowing costs, and tenants worried about job security and fearful of lease increases.

Could Interest Rate Concerns End the Conflict?

President Trump has made lowering interest rates and making it easier for Americans to buy homes a core goal. The constant attacks on Jerome Powell for his hawkish approach to rate cuts, initiatives to stop large-scale investors from buying single-family homes, buying mortgage-backed securities with Fannie and Freddie money, and easing access to mortgage credit have all been part of a concerted effort to revitalize the residential housing market.

However, the Iran War could be a major thorn in that effort, one the president would clearly want to avoid. In late March, interest rates had climbed to a three-month high.

National Association of Realtors chief economist Lawrence Yun called this “terrible timing,” given the pent-up demand from would-be buyers, echoing concerns about higher inflation and interest rates the longer the war drags on.

Marcus & Millichap CEO Hessam Nadji told Bisnow:

“Coming into 2026, we all wanted to see that improvement continue, and so far, it has. But six more months of what we’re seeing in the Middle East and the effect on interest rates and inflation could start to disrupt that—to say nothing about the impact on consumers and, ultimately, companies in terms of their hiring decisions… Things will definitely have repercussions if they’re stretched beyond a matter of months.”

In another interview with Multi-Housing News, Nadji expounded: “An extended conflict with significant damage to infrastructure would push energy prices higher for longer, potentially weighing on economic growth. A slowing economy could further restrain job creation and household formation, reducing new demand for apartments.”  

Final Thoughts: The Takeaway for Small Investors

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Veteran investors understand that to be successful in real estate, you need to have bulletproof skin. If every geopolitical crisis, interest rate fluctuation, and economic downturn had stopped people from transacting in real estate, no houses would have been bought or sold over the last two decades.

However, successful people insulate themselves from the variables that other investors, who check news cycles every five minutes in hopes of lower rates, worry about. They never overleverage and always have cash on the sidelines to bail themselves out of bad situations, such as sudden rent losses, unforeseen repairs, or unexpected legal fees. Those types of investors will not be too affected by the Iran War in the short term.

For investors thinking about buying real estate but worried about interest rates, the question to ask yourselves is, Would you have purchased a property three months ago? Because that’s where rates are now. If the difference between then and now kills a deal for you, you probably shouldn’t buy anyway.

Other investors, even those who have great rates and surplus cash, fear that job and tenant losses and increased operating costs will worsen the longer the war drags on. Their concerns are real and understandable. We are not there yet, though, so waiting to see what develops and maintaining a conservative approach to spending is probably the best option.

Despite the spin, this is not a war like the Russia/Ukraine conflict that can continue indefinitely. It’s extremely expensive, with global repercussions, while enriching Putin’s war chest and offering no clear victory lap for the U.S. That is not an outcome likely to sit well with the White House, for whom the end probably cannot come soon enough.