Mortgage rates have been stable at close to record lows since mid-July, but that hasn’t prevented a decline in housing demand. New home sales are down 28% from their peak last year and while existing home sales surprised on the upside in July, the pending index implies they will soon drop back. Soaring house prices, tight credit conditions and lack of inventory are weighing on buyer sentiment and sales. House price growth hit another record high in June, but with demand now easing we suspect it is approaching its peak. Indeed, a recent moderation in the size of home purchase mortgages points to an upcoming cooling in prices. Rental demand has bounced-back strongly, leading to rapidly tightening markets and accelerating rental growth. With the for-sale inventory set to remain tight, the outlook for rental demand is strong and that has spurred a swift recovery in apartment capital values and a boom in apartment starts.
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