NAHB Economist Believes 7.5% Mortgage Rate Is New Normal In Current Geopolitical Climate

Washington, DC, October 12, 2026—On the latest episode of the NAHB podcast Housing Developments, NAHB chief economist Dr. Robert Dietz joined NAHB’s CEO Jim Tobin and COO Paul Lopez to discuss the latest economic forecasts and how they have changed this year due to geopolitical turmoil.

“It’s a really unbalanced economy right now,” said Dietz. “And I think the bond market is reflecting that.”

Dietz noted that the economy has a lot of investment opportunities right now, but most are tied to high-tech sectors, like data center hyperscalers facilitating AI projects. These huge investment opportunities are competing with bonds, sending Treasury bond prices soaring and taking mortgage rates along for the ride.

“We also have high inflation right now and that’s all tied to the Iran war,” said Dietz. “There’s just a lot of policy items that are keeping the market in this state of limbo and the result is higher interest rates.”

He noted that unforeseen policy moves, like starting a war with Iran, threw off housing forecasts for 2026 and their impact may stay through 2027.

“Unfortunately, I think this 7.5% range [for mortgage rates] is the new normal until we get a resolution on these geopolitical factors,” said Dietz.

However, Dietz noted the economy is still expanding and the risk of recession in 2027 is low. Still, he is forecasting a 35% chance of a broad pullback next year.

But when asked about potential “wild card” risks for the economy in 2027 that aren’t factoring into forecasts presently, Dietz did concede that a sharp, sudden pullback in the stock market could occur.

“I still think an early 2000s version of this is how it plays out,” said Dietz. “We get higher productivity growth resulting in higher wages.”

Dietz and his team are forecasting a 3% decline in single-family production next year, which would be three straight years of modest decreases.