What will this war do to real estate

Question

Thanks to this recent war with Iran, we've seen a significant decline in stock prices today, and a surge in mortgage rates. I recognize that these are short-term effects triggered by recent events.

Beyond these immediate factors, how do global conflicts, especially those involving the US directly, impact the housing market and investment properties?

Greg Scott · Answer

People still need a place to live.  Business still need physical spaces.  The war could create price spikes in oil or send us into a recession which will have some impact in the short term.  In the long run, the impact should be negligible.

One thing I have noticed recently, that I hadn't seen for about a decade, was people starting to post on BP about investing in Dubai.  I suspect that will come to an abrupt end.  I don't think you can get insurance for an Iranian drone attack on your building.

Michael Eskenasy · Answer

Most people try to answer this question by predicting what the war will do.

That’s usually the wrong frame.

Real estate doesn’t move because of the conflict itself. It moves because of the second-order effects that conflict creates in capital markets.

There are a few mechanisms that tend to show up historically:

1. Cost of capital moves first.

Global conflicts introduce uncertainty, which pushes money toward safety (treasuries, energy, defense sectors). Mortgage rates often spike in the short term because lenders price in volatility and inflation risk. When borrowing costs rise, transaction volume usually slows before prices do.

2. Liquidity tightens.

Banks and lenders become more conservative when macro risk increases. That doesn’t immediately crash prices, but it can reduce leverage availability. In real estate markets that rely heavily on debt, that tightening can slow acquisitions and development.

3. Inflation and commodity pressure.

Conflicts that touch energy markets (which Iran absolutely does) tend to ripple through construction costs, transportation, and insurance. That raises the cost to build and operate housing, which sometimes supports rents even while deal activity slows.

4. Migration and domestic capital shifts.

Historically, global instability often pushes capital into U.S. real assets because they’re viewed as relatively stable. That’s one of the reasons U.S. real estate has absorbed global capital for decades.

So the pattern you often see isn’t a simple “war = housing crash.”

Instead it tends to look more like:

• Transaction volume slows
• Financing becomes harder
• Construction costs increase
• Existing assets with stable cash flow become more valuable

In other words, wars usually change how deals get financed and structured, not whether people need housing.

The interesting question for investors isn’t really “what will the war do to housing prices?”

It’s how changes in debt markets and inflation shift which deals actually make sense.

That’s usually where the real opportunity shows up.

Gregory Schwartz · Answer

Thanks, @Greg Scott . Your last point hints at the idea that during times of global conflict, money generally moves to safer investments in areas away from the conflict. That would support the idea of foreign investors moving into the US markets. But I dont image that would have a huge impact on most markets... maybe NYC.