Donald Trump might not be doing very well in his effort to defeat Iran, but he’s scoring serious points in his attack on the U.S. housing market. The war on Iran has pushed long-term interest rates up by 0.7 percentage points, with the 30-year bond rate hitting levels not seen before the collapse of the housing bubble in 2007-2009.

The jump in rates had the predictable effect on the housing market. Starts in July fell to 1,239,000, the lowest level since the early days of the pandemic. The monthly data are erratic, but a three-month moving average tells the same story.

The monthly average for the period from May to July was 1,279,000, the lowest three-month average since May-July 2020, when the economy was largely shut down due to the pandemic.

The plunge in construction is bad news for those hoping for lower house prices. As I noted recently, real house prices have been drifting downward, following the pandemic surge. Affordability fans might have hoped that a more rapid pace of construction would accelerate this decline.

However, an uptick in construction does not seem a likely prospect for the near future. There is no obvious end to the war any time soon, and as long as the war continues, rates are more likely to go higher than lower.

The other big factor is immigration. A large share of the workers in construction are immigrants. Research shows that a reduction in the number of immigrants results in a decline in construction. This means that Donald Trump’s mass deportation drive is likely to slow construction even if the war ends and interest rates fall back to their pre-war level.

Therefore, we are not about to see robust construction numbers any time soon. Real house prices may still drift somewhat lower, as the pandemic surge fades into the distance, but we are not likely to see large price drops in the next couple of years, barring an economic collapse.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.