A narrowing in the spread against the 10-year Treasury yield kept the 30-year mortgage rate close to 4% even as yields reached a three-month high in early November. Mortgage rates are likely to stay close to 4% over the next couple of years. But with the inventory of existing single-family homes dropping to an 18-month low in October, there is not much prospect of rise in sales. Indeed, a drop in the pending home sales index implies sales will end the year on a weak note. But tight markets have helped single-family building permits increase for six months in a row, and a shift to constructing cheaper homes will keep that momentum going in 2020. By contrast, a drop in production expectations points to a decline in multifamily starts next year, which will help to keep rental vacancy rates low.
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