LOS ANGELES, California: A mix of easing housing conditions and rising borrowing costs is shaping the U.S. home market this spring, with buyers gaining negotiating power even as the war involving Iran pushes mortgage rates higher.

The conflict has driven up energy prices, stoking inflation concerns and lifting yields on U.S. 10-year Treasury bonds, a key benchmark for home loan rates. As a result, mortgage rates have climbed in recent weeks, adding fresh uncertainty to an already fragile housing recovery.

The average rate on a 30-year mortgage, which dipped to just under six percent in late February — its lowest in more than three-and-a-half years — has since risen to 6.46 percent, the highest level in nearly seven months.

That increase is beginning to cool demand. Mortgage applications have slowed, and further rate hikes could dampen home sales during what is typically the busiest buying season of the year.

"The war in Iran has seriously complicated the spring buying season," said Joel Berner, senior economist at Realtor.com. "I expect that many buyers will be put off by rising rates and mounting economic uncertainty, choosing to bide their time rather than jumping on board for a purchase before rates go up."

Even so, buyers who can afford current borrowing costs are entering a more favorable market than a year ago.

Housing inventory remains low by historical standards, but active listings rose nearly 8 percent in February from a year earlier, according to Realtor.com. In many major metro areas — including Seattle, Las Vegas, Houston, and Denver — listings jumped between 10 percent and 38.5 percent.

As homes take longer to sell, sellers are increasingly adjusting expectations. Median listing prices declined in just over half of the 50 largest U.S. metro areas, with notable drops of nearly nine percent in Austin and Memphis, and more than five percent in Washington D.C., San Diego, and Los Angeles.

That shift is giving buyers more leverage.

In the Dallas-Fort Worth area, for example, more homes on the market and softer pricing have forced sellers to become more flexible, said Matthew Crites, an agent with Coldwell Banker Realty. "It's been a really good buyer's market to kind of start the year off with," he said.

Anne King, a homebuyer in Fort Worth, negotiated a significant discount on a three-bedroom home listed at US$275,000. She offered $10,000 below the asking price and secured an additional $5,000 in closing costs. After an inspection revealed roof damage, the seller agreed to cover another $12,000 in repairs.

"Fortunately for me, the seller was in a position they needed to sell," said King, 57.

She finalized the purchase just before the Middle East conflict escalated and locked in a 6 percent mortgage rate, with plans to refinance if rates fall.

"I feel like I got a good deal on this property, and that's all that matters," she said.

Data from Redfin underscores the shift in market dynamics. In February, there were about 46 percent more sellers than buyers nationwide, the largest gap since at least 2013 and a sharp increase from roughly 30 percent a year earlier.

Still, affordability remains a major hurdle.

The U.S. housing market has been in a prolonged slump since 2022, when mortgage rates began rising from pandemic-era lows. Sales of previously owned homes remain near a 30-year low, and activity has stayed subdued so far this year.

At the same time, home prices remain elevated relative to incomes. The median price of an existing home sold in February was $398,000 — nearly five times the median household income, well above the historical norm of roughly three times income.

Higher mortgage rates are adding to the strain. On a $400,000 home near Dallas, a buyer putting down 20 percent would face monthly payments of about $2,248 at a six percent rate. At 6.4 percent, that rises to around $2,331.

For sellers, the market has become more challenging.

During the pandemic-era boom, homes often attracted multiple offers and sold above asking price. That dynamic has largely faded.

Jo Chavez, a Redfin agent in Kansas City, said sellers now need to price homes realistically and be prepared for longer wait times.

"We have a lot of sellers who have that idea of like, ‘well, my neighbors sold for this much, and so I think I should price $10,000 above them,'" she said. "And that's obviously not a logical approach, because there were fewer sales last year."

Some homeowners are already feeling the pressure. Gail and David Sanders, who listed their home in Olathe, Kansas, in late February, have yet to receive an offer despite cutting their asking price.

Their plans to buy another home closer to family remain on hold until their current property sells.

"We just didn't think it was fair to somebody else to put a contingent offer on (another house), but then also lock ourselves into something when we weren't sure how fast ours was going to move," said Gail Sanders. "I don't want to be stuck with two house mortgages on the off chance."