Home sales surge as rental growth slows

Applications for home purchase have levelled off, but at a level 25% higher than a year ago. That is now feeding through to home sales, with the pending home sales index rising to a 15-year high in July. However, a lack of inventory will soon put a brake on home sales, and surging lumber prices will hold back single-family housing starts. Part of the rise in home demand may reflect households leaving cities for the suburbs. Indeed, apartment rental absorption rates have dropped back, and rental growth has slowed on most measures. While annual rental growth has not yet turned negative, we expect it will soon, with New York and San Francisco set to see the largest falls.