Both inflation and buyer uncertainty could impact market demand
It only took three days into 2026 for a major news story to break. On January 3, the US captured Venezuelan leader Nicolás Maduro.
After a 2025 that saw news throw the markets into turmoil throughout the year, it was a sign that the new year may see more big news events.
And while the political and human effects of geopolitical unrest will be debated endlessly, what mortgage brokers want to know with any major news story is how it’s going to impact the housing market and mortgage rates.
Selma Hepp (pictured top), chief economist at Cotality, sees two possible impacts from a potential increase in US geopolitical activity. The first part of that revolves around a surge in oil supply into the market from Venezuela.
“Usually in times of this geopolitical uncertainty, you have this risk premium that gets built into the spreads,” Hepp told Mortgage Professional America. “At the same time, also potentially a fear of inflation, reinflation, or inflation from higher oil prices. But my reading is that it's a more disinflationary impact of the Venezuelan crisis, because it opens up more supply.”
Potential for more rate cuts
In the past, uncertainty led to more money being poured into the Treasury market. Hepp isn’t sure that’s going to happen in this case.
“Traditionally, one is higher inflation, higher spreads, higher Treasuries,” Hepp said. “Or it’s a flight to safe havens to Treasuries because of the geopolitical risk. But we've had so much geopolitical risk or geopolitical situations that it's not all about flight to Treasuries anymore. Treasuries are not what they used to be.”
Unlike the tariffs that hit in early 2025, which caused the Federal Reserve to keep rates steady, an influx of oil that lowers inflation may allow the Fed to more closely focus on the jobs side of the mandate, which could lead to more rate cuts.
“How does it ultimately impact the mortgage rates?” she said. “I think it's going to be more about the impact on the labor markets in the US. Do we really continue to see this softening of the labor markets, which gives the Fed ammunition to lower rates, versus their fears that there's going to be some reinflation down the road? In my opinion, the job market is going to dominate. And I think that will drive their decisions coming up in January, and further in 2026.”
Will buyers and sellers hold off?
While disinflation could lead to lower mortgage rates, which would typically bring more buyers and sellers into the market, heightened geopolitical tensions can also create an emotional component, especially in the Western Hemisphere.
During the recent government shutdown, many buyers and sellers backed off from potential purchases. Many were either directly concerned about their own employment stability or indirectly worried about overall market uncertainty.
Hepp said that because consumer sentiment is still relatively weak, an increase in concerning headlines could force those buyers and sellers back onto the sidelines once again, as another spring buying season approaches, especially if there isn’t a major drop in interest rates.
“We already have such weak consumer sentiment around,” Hepp said. “Is it a good time to buy? Consumers are saying, ‘No, probably not a good time to buy. But if mortgage rates come down, I'll consider it.’ I think if mortgage rates come down significantly, like to the mid-5s, that would dominate people's decision-making over what's happening internationally.
“But if mortgage rates don't move much, and you have international situations, it doesn't help. ‘The world is so uncertain. I may just hold out, because I just don't like uncertainty.’ People don't like uncertainty. So that's how I think it would play out.”
Sam Williamson of First American says the Fed will likely proceed cautiously in 2026, with one or two rate cuts expected despite leadership changes. Policy remains data-driven, balancing inflation and employment. Read more and share your thoughts.https://t.co/2nyZa0eFbW
— Mortgage Professional America Magazine (@MPAMagazineUS) December 16, 2025
As many brokers know, perception often becomes reality when it comes to getting buyers and sellers back into the market. Hepp said it’s important for brokers to help customers get past sensational headlines and focus on what works for them instead.
“The headlines can be so disruptive to people's perceptions of the world and what they should do,” she said. “I had an appointment yesterday, and the person said, ‘Oh, what do you do?’ I said, I'm an economist. She's like, ‘Can you fix this economy? This is a horrible economy.’ And I'm thinking, ‘Well, you got a job, and you are charging me now more than you were charging me before.’ These are silly things, but people cut off those expenses when they're struggling.
“In people's minds, things are a certain way, whatever their sphere of influence is, about how the world is. Yeah, it can definitely be disruptive.”
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