House prices and rents both boomed in 2021, but are set for a quieter 2022. Mortgage rates are now rising and we expect the 30-year rate will end the year at around 4%. Combined with the rise in house prices that will push mortgage payments as a share of income to their highest since 2008. That will shut some buyers out of the market, weighing on home sales and bringing house price growth down to 3% y/y by end-2022. Record low existing home inventory will however support new home sales and housing starts. After surging in the middle of 2021, rental household formation stalled in the final quarter. Worsening affordability and tight markets help explain that development and we expect rental demand will see further moderation in 2022. Alongside a boom in apartment construction, that implies the recent softening in rental growth will continue. After peaking at 14% y/y in Q2 2022, we expect effective rental growth will slow to 4% y/y by end-2022.
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