From the Erie Canal to the Strait of Hormuz

In January, I reported that Rochester ranked second in Realtor.com’s 2026 Top Markets. This ranking was earned not by momentum but by scarcity, particularly of new home construction. Active listings last November were off 60% from November 2022 (compared to a 48% decline for the Northeast and 12% nationwide). The local inventory never rose above 310 homes throughout January and February. The “top” market label is directed at sellers, not buyers, of course. Rochester remains a very difficult market for buyers.

Yet Rochester’s spring market held promise. By the end of January, 30-year mortgage rates  dipped under 6%, and Boreas (the Greek god of the cold north wind winter) began to loosen his icy grip after one of the longest and most unrelenting winters in recent memory. A better spring market was beginning to take shape. This was supported both by a decline in the cost of borrowing to purchase a home and the simple reality that more properties typically come to market as the season turns.

What changed?

When the United States started firing missiles into Iran on Feb. 28, markets reacted immediately. Oil prices moved higher, inflation expectations followed, and the yield on the 10-year Treasury soared—pulling mortgage rates upward to 6.5%. Like a late winter frost arriving just as vernal fruit trees begin to bloom, the early optimism of the season was cut short. What shifted wasn’t the housing market itself. It was the environment surrounding it.

In a market like Rochester—where inventory is already measured in the low hundreds and the average property sells in eight days (often for 10-12% above asking price)—there is no buffer to absorb external shocks like these. Every disruption further challenges an already strained foundation.

U.S. economy weakens

The American economy was already beginning to soften before the first Tomahawk struck Tehran—and Rochesterians had been feeling it for months. It showed up in everyday conversations, in small moments—over ice cream along the Erie Canal—long before the January and February data made it official. The data emerging from the first few months of the year was not signaling strength; it was signaling strain. The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures price index, rose to 3.0% year-over-year and job growth turned negative, with 92,000 jobs lost in the most recent report.

The consequences were instantaneous. Gasoline prices rose more than $1 a gallon in a matter of weeks. Markets didn’t wait for clarity. Faced with a choice between a weakening economy and a surging inflation threat, they did what markets always do when fear wins—they made borrowing more expensive.

That shift is beginning to show up not just in markets, but in how people feel. The University of Michigan’s consumer sentiment index recently fell to 55.5—near an historical low and below where it stood at the onset of every recession since the index began. Buyers don’t need to understand financial markets to feel uncertainty—they experience it directly at the gas pump and at the Wegmans checkout line, where rising costs show up in ways that are immediate and unavoidable.

Housing doesn’t operate independently of these forces. It is downstream of interest rates, which are reacting in real time to inflation, energy prices, and geopolitical risk. The housing market remains constricted and it is becoming more sensitive to these shocks. Higher borrowing costs are sidelining first-time buyers, mortgage applications have softened, and activity is beginning to slow. The system is not unlocking; it is becoming more fragile. Rochester is not immune to that fragility—it simply expresses it differently.

Rochester’s distinct condition

In Rochester, housing market inventory remains not just tight, but decimated—down roughly 72% from 2017 levels, which was a relatively normal market. And unlike other parts of the country, new construction is not stepping in to close the gap. Nationally, about 16-17% of home sales involve new construction. In Rochester, that figure is closer to 6-7%. At the same time, construction costs are ballooning. The result is a market where new construction is not providing relief. 

In most markets, higher mortgage rates slow demand. Locally, they don’t eliminate demand, they concentrate it. Because there are so few opportunities, many buyers don’t step back—they step in more aggressively when the right home appears. That said, rising borrowing costs and geopolitical uncertainty are causing some buyers to pause and reassess. The hesitation is real. But it does not change the underlying math; there are still far more buyers than there are sellers, and the conditions that have defined this market for the better part of a decade are not going to resolve themselves until the larger market settles.

In January, I suggested that home values in Rochester would likely rise approximately 7.5% this year and noted that Realtor.com’s forecast of 10% felt aggressive. Today, those higher expectations no longer appear exaggerated but increasingly possible. Zillow also predicts that Rochester price increases in 2026 will be among the highest in the nation (ranking No. 5), but the actual number they predict is lower at 3.8%. The constraints that defined this market in January have not eased—they are now being tested in real time by a far more uncertain economic backdrop. 

Scarcity built this market. The duration of this conflagration will influence how long current headwinds persist. But in Rochester, the shortage of homes predates this conflict and will certainly outlast it.

Mark Siwiec is CEO/broker with Elysian Homes.

The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. See “Leave a Reply” below to discuss on this post. Comments of a general nature may be submitted to the Letters page by emailing [email protected].