Home sales and house prices to moderate

The share of households seeing now as a good time to buy a home has fallen to 39-years lows, as booming house prices, tight credit conditions and record low inventory have weighed on sentiment. But the share actually planning to buy has not seen such a large dip, so we expect existing home sales will moderate rather than crash. That easing in demand, and a gradual rise in mortgage rates, will help cool house price growth from record highs to around 10% y/y by the end of the year. In contrast to homebuying demand, rental demand has recovered strongly. Rental vacancy rates in some cities are now falling back, and timelier measures of rents are picking up. Given low risk-free interest rates that will boost apartment capital values and push total returns to 10.8% in 2021.
Matthew Pointon Senior Property Economist
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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

US Housing Market Update

Why are pending and existing home sales diverging?

An increase in the quality of mortgage borrowers, and record low inventory, are boosting the mortgage closing rate and leading to an increase in the share of pending home sales converted into existing home sales. Those factors are not set to go into reverse anytime soon, so we don’t think existing sales will snap back to match the pending sales index over the next few months.

29 November 2021

More from Matthew Pointon

US Housing Market Update

Conditions tighten in homeowner and rental markets

The second quarter Housing Vacancies and Homeownership survey showed market conditions tightening in both the homeowner and rental markets, with vacancy rates at 56-year and 37-year lows respectively. In the homeowner market that will act to constrain sales and support house prices. While in the rental market the lack of supply will help rental growth to recover quickly from its COVID-related dip.

28 July 2021

US Housing Market Data Response

Case-Shiller/FHFA House Prices (May)

House prices showed no signs of slowing in May, with annual growth setting new records on both the Case-Shiller and FHFA measures. But with housing demand falling back since the start of the year, and lenders not set to ease credit conditions, we expect annual growth will soon peak. From 16.6% y/y in May, we expect it to slow to 10% y/y by end-2021, and 3% y/y by end-2022.

27 July 2021

US Housing Market Data Response

New Home Sales (Jun.)

New homes sales dropped for the third month in a row in June, as homebuilders restricted sales in an effort to catch-up with the backlog of homes sold last year. But builders have reported continued strength in prospective buyers, and that implies sales will rise later this year as supply improves. We therefore expect new sales will end the year at around 850,000 annualised.

26 July 2021
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