Existing Home Sales (Nov.)

Existing home sales fell for the first time in five months in November, as record low inventory and the exhaustion of pent-up demand from the spring put a dampener on activity. Record low mortgage rates have provided a boost to affordability, but they are unlikely to fall further. Combined with surging house prices, that implies demand will ease back next year. From 6.5m annualised at the end of this year, we expect sales will have dropped back to 5.7m annualised by end-2021.
Matthew Pointon Senior Property Economist
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US Housing Market Data Response

Existing Home Sales (Dec.)

Despite a 6% m/m fall in existing home sales in December, 2021 marked an impressive year for existing home sales, with sales 11% higher compared to 2020. But looking ahead, a backdrop of rising mortgage rates and a record-low inventory means that sales will drop back and average around 5.88m annualised this year, less than most other forecasters expect.

20 January 2022

US Housing Market Update

Key US Housing Market Calls for 2022

A rise in mortgage rates to 4.0% by end-2022, coupled with the 25% rise in house prices seen since mid-2020, will boost mortgage payments as a share of earnings to their highest since mid-2008. That will lead to a 4% fall in existing home sales this year, a larger dip than most other forecasters expect. New home sales will do better and that will help single-family starts make further progress this year, although a lack of labour and materials will keep the gain to around 3%. Meanwhile worsening affordability will lead to a steady decline in house price growth to around 3% y/y by end-2022, toward the bottom of consensus.

19 January 2022

US Housing Market Data Response

Housing Starts (Dec.)

Single-family starts edged back in December, but they saw a 12.1% y/y rise in 2021 overall as strong housing demand and a lack of existing homes for sale supported new home sales. Rising mortgage rates will cool demand in 2022, and material and labour shortages will be a constraint for some months yet. Nevertheless, tight markets mean builders will be keen to break more ground, and we expect a further rise in single-family starts to around 1.18m annualised by end-2022.

19 January 2022

More from Matthew Pointon

US Housing Market Chart Book

Home demand drops as prices surge

Despite mortgage rates seeing little movement in recent months, mortgage applications for home purchase have dropped to their lowest level since April last year. That implies home sales have further to fall. Booming house prices, which reached a record high 15% y/y in April, and a shortage of inventory are constraining sales. While low mortgage rates mean affordability is still historically favourable, lenders are not easing lending standards and that will be weighing on purchasing power. By contrast, rental demand is recovering as cities have reopened. The recovery in the labour market will cut arrears, and strong earnings will help boost rental growth. Total apartment returns will average a healthy 6% p.a from 2021-25.

7 July 2021

US Commercial Property Outlook

Major Apartment Markets Outlook (Q2 2021)

With cities reopening apartment demand will see a substantial rise this year, boosted by the arrival of households who delayed a move last year. Vacancy rates will fall back in all six major cities covered in this Outlook with those hit hardest during the pandemic, NYC and D.C., enjoying the most vigorous recovery in demand as tenants return. Strong prospects for NOI growth mean yields will either edge back or hold steady this year, driving substantial capital growth in all the cities. Beyond that, a gradual rise in yields and shift to larger apartments will weigh on returns. But even San Francisco, which will suffer from its high concentration of tech workers, should see total average returns of around 5.0% p.a. from 2021-25. At the other end of the spectrum, D.C. will outperform with average total returns of 8.5% p.a.

29 June 2021

US Housing Market Update

Valuations still reasonable despite house price boom

The housing market hit a milestone in April, with real house prices rising above the previous peak recorded during the boom of the mid-2000s. But that doesn’t mean valuations are at dangerous levels. House prices look far more reasonable when gains in incomes and falls in mortgage interest rates are taken into account. With house price growth now set to slow, the prospect of another bubble forming is therefore low.

22 June 2021
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