Coronavirus to weigh on housing market activity
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Coronavirus to weigh on housing market activity

10 March 2020
Matthew Pointon Senior Property Economist
10 March 2020
With growing evidence that the coronavirus is turning into a pandemic, a hit to housing market activity is inevitable. No hard numbers have been released yet, but home sales are vulnerable to any disruption the virus will cause. Delaying a major purchase such as a home is an obvious first step to take, and heading to open houses and viewing homes is not advisable during an outbreak. We therefore expect a drop in the share of households who view now as a good time to buy a home, which was relatively low even before the arrival of Covid-19. The drop in the 10-year Treasury yield to around 0.7% means mortgage rates are likely to fall below their past record low of 3.42%, but that won’t be enough to prevent a decline in home sales over the next few months.
US
Matthew Pointon Senior Property Economist
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Matthew Pointon Senior Property Economist

IN THIS PUBLICATION

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US Housing Market Chart Book

Housing activity surges even as mortgage rates rise

Housing market activity has surprised on the upside over the past month and home sales look set for a strong end to the year. Even as mortgage rates increased to an eight-month high, home purchase mortgage applications have surged, pending home sales are trending up, and a rise in buyer traffic points to a resurgence in new home sales. The arrival of the Omicron variant has also brought interest rates down, which may give activity an added boost over the next month or so. However, stretched affordability and a lack of inventory means the resurgence in existing home sales is likely to prove short-lived. Indeed, house price growth is slowing, and we expect it will fall from around 20% y/y now to 3% by end-2022. The rental market is also booming, with vacancy rates falling back even faster than we expected as cities have reopened.

7 December 2021

US Housing Market Data Response

Mortgage Applications (Nov.)

A rise in mortgage rates to an eight-month high of 3.31% by the end of November failed to dampen home purchase demand, which surged to a nine-month high. The drop in 10-year Treasury yields from the arrival of the Omicron variant implies mortgage rates will fall back over the next couple of weeks, which may provide some further support to demand. But with affordability stretched we doubt the current level of home purchase applications can be sustained beyond the next few weeks.

1 December 2021

US Housing Market Data Response

Case-Shiller/FHFA House Prices (Sep.)

Annual house price growth fell for the first time in 16-months in September, and stretched affordability means it should continue to slow. It is too soon to say what impact the arrival of the Omicron variant will have on the housing market. But one immediate effect has been a fall in interest rates, which if sustained may give prices some support over the remainder of the year.

30 November 2021

More from Matthew Pointon

US Housing Market Update

House prices will avoid a dangerous bubble

House price expectations have taken off since the start of the year, and that raises the risk of a self-reinforcing bubble forming. However, there are no signs that lenders are rapidly loosening credit conditions on the back of higher house prices, and that argues against a repeat of a mid-2000s credit cycle. Rather, rising mortgage interest rates, a stabilisation in down payments and stretched affordability mean that house price gains will slow over the second half of the year.

1 June 2021

US Housing Market Update

Will expensive home sales keep booming?

Sales of expensive homes have done particularly well over the past year, with the share of existing homes sold for over $500,000 surging from 15% a year ago to a record high 26% in April. An extreme shortage of cheaper homes for sale, coupled with a jump in purchasing power thanks to larger down payments and lower mortgage rates, helps explain that shift. Inventory shortages will continue to drive buyers toward expensive homes, but purchasing power is set to ease. Overall, we expect the share of new and existing homes sold for more than $500,000 to edge back to around 20% to 22% over the next couple of years.

26 May 2021

US Housing Market Data Response

Case-Shiller/FHFA & New Home Sales (Mar./Apr.)

House price growth accelerated in March, reaching a record high of 13.9% y/y on the FHFA measure. But there are signs that the boom in prices is now weighing on housing demand and activity. New home sales dropped 5.9% m/m in April, and a steady decline in mortgage applications for home purchase points to a further moderation in sales over the next couple of months. That will help take some of the heat out of the market and bring house price growth back down to earth by the end of the year.

25 May 2021
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