Mixed Housing Data Amid Iran War and Tariff Turmoil

• Existing home sales rose 1.7% month-over-month to 4.09 million units in February but remain down 1.4% year-over-year, while housing starts increased 7.2% to 1.49 million homes annually, driven by a 29.1% surge in multifamily construction.
• Gas prices jumped approximately 20% in less than two weeks to $3.58/gallon following the Iran conflict, acting as a 'stealth tax' that diverts consumer income away from housing down payments.
• Homebuilder Lennar reports Q1 2026 earnings amid concerns over rate buy-down strategies pressuring gross margins to 15-16%, while rising material costs from tariffs complicate building plans.

Summary: Mixed Housing Data Amid Iran War and Tariff Turmoil

The U.S. housing market faces a critical supply-demand imbalance as new inflationary pressures threaten the anticipated 2026 recovery. February existing home sales rose 1.7% month-over-month to 4.09 million units (seasonally adjusted annual rate) but remained down 1.4% year-over-year. Housing starts jumped 7.2% in January to a one-year high of 1.49 million annual pace, driven by a 29.1% surge in multifamily construction, while single-family homes continue struggling.

Key Companies: Homebuilder Lennar (LEN) reports Q1 2026 earnings today, serving as an industry bellwether. Investors are monitoring building plans and rate buy-down strategies, with gross margins expected to decline to 15-16%. Other upcoming earnings include KB Home (March 24), D.R. Horton (April 21), PulteGroup (April 23), and Toll Brothers (May 19).

Inflationary Catalysts: Two major shocks are reshaping the outlook:

• Tariffs: A 15% global tariff implemented early March will increase imported building material costs and pressure consumer purchasing power
• Iran Conflict: U.S.-Israeli airstrikes triggered a 20% spike in gas prices within two weeks to $3.58/gallon nationally, with Iran closing the Strait of Hormuz despite 400 million barrel strategic reserve releases

Market Implications: The Federal Reserve maintains a "higher for longer" stance, with the first rate cut now projected for October 2026 (per CME FedWatch Tool). February CPI held at 2.4% year-over-year, but this predates recent tariff and energy shocks. Tax refunds are up 10.6% year-over-year but will likely offset rising living costs rather than fuel housing demand, potentially delaying the 2026 housing recovery until geopolitical and trade uncertainties resolve.