The impact of high oil prices on the U.S. housing market may be smaller than in prior cycles

Overview

This report discusses the asymmetric impact of oil-price shocks on the U.S. housing, mortgage, Agency MBS, and CMBS markets. The core conclusion is that high oil prices will pass through to the housing market mainly via mortgage rates and employment, but the impact in 2026 may be smaller than in prior cycles. On the one hand, higher rates will temporarily suppress home purchases and refinancing activity; on the other hand, the oil and gas sector's weight in the U.S. and Texas economies has declined, and companies are more likely to expand capital spending only when oil prices remain elevated for a sustained period, so the positive boost to employment and housing demand may be limited.

Core views

The report argues that the recent 40 bp increase in mortgage rates will weaken purchase and refinance originations, with refinancing affected more severely; however, rates remain about 25-30 bp below a year ago, so there is still room for a modest recovery in 2026 existing-home sales. The employment channel from higher oil prices to housing is slower, more regional, and more asymmetric: the gains are likely concentrated in a small number of MSAs in oil-producing areas, while other regions may face pressure from higher energy costs. Combining the job gains with losses elsewhere, Goldman Sachs economists expect higher oil prices to reduce nonfarm payroll growth by about 10,000 jobs per month through year-end and push the national unemployment rate to 4.6%, creating marginal downward pressure on HPA.

Analysis framework

The report uses channel decomposition and historical comparison: it first breaks mortgage rates into the 10-year Treasury, guarantee fees, servicing fees, option costs, and originator profit, then examines purchase applications, existing-home sales, mortgage origination, and refinancing sensitivity; it then compares the share of oil and gas extraction in U.S. and Texas GDP, the response of oil and gas employment to historical oil cycles, and home-price performance in Texas MSAs with high mining exposure in 2015-2016; finally, it combines the Dallas Fed Energy Survey to gauge energy companies' capital spending and hiring intentions under current oil prices.

Methodology notes

• Macroeconomic transmissionTwo-channel framework for oil-price shocks

  Mortgage-rate channel and employment channel

  High oil prices can push up rates and curb housing-financing demand in the near term; over the medium term, they can also affect regional housing demand through oil and gas capital spending, employment, and income.

• Regional analysisAsymmetric regional exposure analysis

  Divergent impacts on oil-producing and non-oil-producing regions

  Higher oil prices may benefit employment and local GDP in oil-producing regions, but for the rest of the country they are usually a cost shock, so the net effect depends on regional exposure and scale.

• Market indicatorsMortgage-rate decomposition

  10-year U.S. Treasury, primary-secondary spread, and mortgage rates

  The report explains the recent rise in mortgage rates and its impact on purchase and refinance applications by decomposing mortgage-rate components and changes in the primary-secondary spread.

• Survey validationDallas Fed Energy Survey

  Energy companies' business activity, employment, and uncertainty indicators

  The report uses a survey of 135 energy companies in Q1 2026 to assess whether firms view current oil prices as sustainable and are therefore likely to expand capital spending.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• U.S. housing market

  Affected by mortgage rates, employment, and income growth

  Strengths

  Rates are still about 25-30 bp below a year ago, leaving room for a modest recovery in existing-home sales; some household balance-sheet indicators remain resilient.

  Weaknesses

  Housing affordability remains poor, purchase applications are still being pressured by the recent rate increase, and month-over-month home-price growth is slowing.

  Comparison

  Compared with historical oil-price cycles, the oil and gas economy now carries less weight, so the positive pull on housing demand from oil prices may be smaller.

  Risks

  If mortgage rates stay elevated or employment weakens, home sales and HPA could come under further pressure.

• Mortgage origination and refinancing

  Highly sensitive to rate changes

  Strengths

  Total 2026 originations are still expected to grow 9% year over year, to about $2.24 trillion.

  Weaknesses

  The 40 bp rise in rates will curb purchase and refinance activity, with refinancing hit harder.

  Comparison

  A sudden rate jump like the one during the "Liberation Day" period may be temporary and not necessarily break the seasonal application trend.

  Risks

  If rates remain elevated or move higher, the origination forecast could be revised down further.

• Agency MBS

  Affected by prepayments, rates, and valuation percentiles

  Strengths

  Agency MBS returns over the past 12 months were +5.0%, above the +4.1% return for IG corporate bonds; valuations have improved recently.

  Weaknesses

  Prepayments on high-coupon loans are rising, and about 20% of mortgage borrowers are in a position to refinance profitably.

  Comparison

  The current coupon mortgage basis sits at the 52nd percentile of its distribution since 1997, so valuations are neither extremely cheap nor extremely rich.

  Risks

  Rate volatility, changes in the prepayment path, and a shrinking Fed MBS portfolio could affect returns.

• CMBS and commercial real estate credit

  Affected by commercial real estate prices, loan coupons, maturity refinancing, and spreads

  Strengths

  CMBS delinquency rates remain contained, and office mortgages accounted for only 14% of 2025 conduit CMBS, a decade-plus low.

  Weaknesses

  Higher CMBS coupons, pressure on commercial real estate fundamentals, and falling office and retail prices will make refinancing harder.

  Comparison

  Compared with the residential mortgage market, CMBS has more direct exposure to commercial real estate valuations and refinancing pressure on maturing debt.

  Risks

  If spreads continue to widen or commercial real estate prices fall further, risk in lower-rated or highly leveraged CMBS could rise.

• Texas and oil-and-gas-extraction MSAs

  Local beneficiary regions of higher oil prices

  Strengths

  A sustained period of high oil prices could lift oil and gas employment, tax revenue, and local GDP.

  Weaknesses

  High-exposure MSAs are usually small and cannot materially lift the national housing market.

  Comparison

  During the 2015-2016 oil-price decline, Texas MSAs with higher mining exposure saw weaker housing-market performance, indicating high regional sensitivity.

  Risks

  If companies view the oil-price shock as only temporary, the incremental capital spending and employment gains may be limited.

Key data

• Month-over-month increase in mortgage ratesabout 40 bpMainly driven by a 29 bp rise in the 10-year U.S. Treasury yield.
• 2026 mortgage origination forecastabout $2.24 trillionGoldman Sachs trimmed its forecast slightly but still expects 9% year-over-year growth.
• Current rate versus a year agoabout 25-30 bp lowerThe report says this could still support a modest recovery in 2026 existing-home sales.
• Change in purchase applicationsdown about 5% as of the week ended March 20Mainly affected by the rise in mortgage rates after the oil price increase.
• Energy companies' year-end WTI expectation$73/bblThe average 2026 year-end WTI expectation from Dallas Fed Energy Survey respondents, above the $34-$47/bbl operating cost range.
• Average WTI during survey periodabout $95/bblThe survey period was March 11-19, 2026, and responses indicated that price sustainability and commodity volatility still created uncertainty.
• Energy companies' business activity index21Rebounded from -6.2 in the prior quarter, showing improved sentiment.
• Energy companies' employment index0.8Close to neutral, but better than -10.8 in the prior quarter.
• Net impact of higher oil prices on payroll growthabout -10,000 jobs per monthGoldman Sachs economists estimate a negative net impact for the nation through year-end.
• Year-end national unemployment rate forecast4.6%The higher unemployment-rate outlook creates modest downward pressure on HPA.
• Share of negative-equity mortgages2.2%The report's chart shows the share of mortgages with negative equity remains low.
• Office mortgage share in 2025 conduit CMBS14%The lowest level in more than a decade, indicating limited office exposure in new CMBS issuance.
• Average recent CMBS loan coupon6.3%The higher coupon will be an obstacle to commercial real estate debt refinancing.
• 12-month return for Agency MBS+5.0%Return for IG corporate bonds over the same period was +4.1%.

Impact & implications

For investors, this report suggests that higher oil prices do not necessarily provide a meaningful tailwind to U.S. housing or real-estate-related assets. The negative impact of the rate channel is more immediate and can weigh on mortgage originations and refinancing, while the positive effect from the employment channel is slower and concentrated in only a few oil-producing regions, with the national net employment effect potentially negative. In Agency MBS, lower primary-secondary spreads and improved relative valuation help support performance, but prepayment sensitivity among higher-coupon loans still needs attention. In CMBS, defaults remain contained, but weak commercial real estate fundamentals, declining office and retail prices, and wider spreads combined with higher coupons will continue to increase refinancing pressure.

Risks

• Persistent oil-price volatility pushes up inflation expectations and long-end yields, leading to further increases in mortgage rates.
• Energy companies delay capital spending because of high uncertainty, so the positive employment-channel boost is weaker than expected.
• The national slowdown in employment is larger than expected, and the rise in unemployment puts greater pressure on home prices and housing demand.
• Housing affordability continues to deteriorate, and the recovery in purchase applications and transaction volume falls short of expectations.
• CMBS refinancing pressure intensifies, office and retail property prices keep falling, and credit spreads widen further.
• Changes in the prepayment path for high-coupon MBS create duration and valuation volatility.

What to watch

• The 10-year U.S. Treasury yield and 30-year mortgage rate trend.
• Whether the primary-secondary spread continues to narrow and buffer mortgage rates.
• Whether the MBA purchase application index, existing-home sales, and refinance applications recover after the short-term shock.
• The Dallas Fed Energy Survey's business activity, employment, and uncertainty indicators.
• Whether WTI can remain at a level that energy companies consider sustainable for long enough.
• Employment, local income, and home-price performance in Texas and other oil-and-gas MSAs.
• Whether 2026 mortgage originations come close to the $2.24 trillion forecast.
• Agency MBS prepayment speed, Fed MBS holdings, and valuation percentile changes.
• CMBS maturity walls, average coupons, AAA CMBS spreads, and commercial real estate price indices.