The Wrap: Hormuz Still Closed, Home Prices Stagnant to Down
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In this week’s edition of “The Wrap,” we feature our view of the top events in Washington and on Wall Street over the past week. Don’t forget to watch “The Wrap with Chris Whalen” on The Julia LaRoche Show every Saturday on YouTube to catch our discussion of what’s hot and what’s not in the world of finance and investing.
April 10, 2026 | Updated | The financial markets were whipsawed again this week as the situation between Israel, the US, Iran and Lebanon dominated the headlines. Gold futures prices for June delivery have bounced off of the lows of several weeks ago, the S&P 500 is moving sideways and bitcoin remains down for the past year.
Rather inexplicably, the Trump Administration agreed to a two week cease fire and “talks” with the Iranian government, but the Strait of Hormuz remains closed, as John Dizard noted in a conversation with The IRA earlier this week.
The latest turn of events in Washington has left the Saudis and Israelis profoundly annoyed. The US kicked over the hornets nest in Iran, but now Washington is seeking peace even as the Iranians continue to attack the Gulf states. A few ships carrying LPG for Pakistan have been allowed through the Strait after paying Tehran the extortionate sum of $1 per barrel, payable either in Chinese yuan or bitcoin.
The US seems to be a big loser in this latest change in policy, with President Trump vacillating from threatening to destroy all evidence of Iranian civilization to total capitulation in the face of growing domestic political controversy. Pakistan has presented itself as a possible intermediary for peace talks, but Dizard suggests that the Chinese are standing behind the silk curtain in Islamabad. And long-time American clients like Saudi Arabia and Israel are furious that Washington is not destroying Tehran.
Since we once represented the government of General Muhammad Zia-ul-Haq (1924–1988), the idea of a Chinese hand in Pakistan is most amusing. Pakistan as client state migrates from the British to the Americans to the Chinese in a single century? Wonderful. The Pakistani intelligence service engineered the crash of General Zia's C-130 in 1988 during the American involvement in Afghanistan.
The big question facing President Trump, of course, is what happens if the Strait of Hormuz is not reopened in two weeks. If the Strait is not opened in two weeks, will the US military resume attacks? Will American forces attack civilian targets in Iran as President Trump has threatened?
Meanwhile, the Chinese are the beneficiaries of Trump's bluster. Even if Iran ended any attacks on shipping today, it would take months to restore flows of energy and by-products. As Dizard reminded us, the ships needed to carry the fuel and by-products are all in the wrong places. As a result, energy prices are likely to remain elevated and will push up inflation, lowering the likelihood of a Fed interest rate cut.
Home Prices Stagnant
As the very real economic impacts of the Iran war come into sharper focus (“John Dizard: Watch for Rationing of Oil, Gas & By-Products”), particularly the idea that the FOMC may not reduce short-term interest rates this year, one of the key questions in the minds of our readers is what is going to happen to home prices? The answer is nada to lower.
We were in Washington this week to participate in the Executive Roundtable for Mortgage Finance. The general consensus in the industry is that mortgage interest rates are going to stagnate and this will pull new loan volumes down.
While some mortgage lenders were keeping excess capacity live to be ready for lower interest rates, getting the 10-year Treasury down to 4% and mortgage rates down to 6% is presently a distant dream. Look for more industry consolidation.
10-Year US Treasury
Source: dataQollab
We heard several senior officials of HUD reject the notion that Ginnie Mae MBS or Treasury debt is somehow out of favor with global investors. The popular narrative currently says that China is a seller of Treasury debt, a story that is not inconsistent with the spoiler role now being played by Beijing in the Middle East.
The more accurate assessment is likely that China’s state agencies have simply traded securities for cash deposits in banks. The Chinese have lots of dollars, you understand. Yet the dollar-collapsing narrative persists: “The US’s war with Iran has put a potentially irreversible strain on the global trading system, with gold reserves having eclipsed central bank holdings of valuation-adjusted dollar assets for the first time in several decades,” writes Simon White of Bloomberg.
The outlook for home prices is basically unchanged to down this year, depending on the market. Venues like Houston, TX, and Clearwater, FL, are seeing serious prices erosion. But the good news, of sorts, is that a lack of supply is likely to keep home prices stagnant in 2026. Was Q1 2026 the near-term peak for home prices? Probably, but inflation continues to push up replacement value for all homes.
The misery on the 8s that our friend Stan Middleman of Freedom Mortgage predicted in our 2024 book, “Seeing Around Corners,” may be a prolonged period of low or no price appreciation. After years of steady home price appreciation, US home prices may be going sideways for years.
The Mortgage Bankers Association projects that U.S. home price growth will be nearly flat in 2026, with an expected increase of 0.6%. This represents a significant cooling in price appreciation, characterized by stagnation or slight declines in some markets, rather than sharp national drops.
Yesterday for our discussion at the Executive Roundtable with Stan Middleman and Chris Abate, CEO of Redwood Trust (RWT), we prepared a couple of slides. The first two slides show the declining proportion of 1-4s and MBS on the balance sheets of the US banking industry. The third slide shows all US banks sorted by MSRs/CET1 bank capital. There are a lot of smaller US banks that have chosen to go above the 25% cap on intangibles which is set in stone in US regulation. The question is why. You can download the presentation using the link below.
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