Housing affordability threatened by rising mortgage rates

We expect mortgage rates to rise further this year, posing a threat to housing affordability for prospective home buyers. With average house prices already far too high relative to household incomes, higher mortgage rates will translate into even higher homeownership costs, easily outpacing expected household income growth. Accordingly, an increasing number of prospective home buyers will find themselves priced out of the market this year, reinforcing the drop back in existing home sales that already appears underway.