Rising mortgage interest rates are starting to bring housing demand down from its recent elevated level. At 3.26% in the first week of March, mortgage rates were at an eight-month high. Coupled with severe weather in the south, that lead to a steep decline in February mortgage applications for home purchase, which in turn points to a drop in new home sales. Total home sales will also be constrained by record low inventory and worsening affordability due to surging house prices. Indeed, even as the economy has started to reopen, Fannie Mae reported a drop in the share seeing now as a good time to buy to 48% in February, a joint record low. But the relaxation of lockdowns and latest round of fiscal stimulus will help the rental market recover. We expect the apartment rental vacancy rate will decline from 5.3% at end-2020 to 5.0% by end-2021, and rental growth will recover from – 2.1% to 2.0% y/y over the same period.
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