My subscription
...
Filters
My Subscription All Publications

Housing Starts (Apr.)

Housing starts dropped by a marginal 0.2% m/m in April, driven by the single-family sector which also saw building permits fall for the second month in a row. Housing demand is faltering due to a surge in mortgage interest rates to a 12-year high, which helped push homebuilding confidence to a two-year low in May. That said, pent-up demand from the past couple of years means we are not expecting a crash in housing market activity, and single-family starts will fall gradually to around 1m annualised by end-2022.
Matthew Pointon Senior Property Economist
Continue reading

More from US Housing

US Housing Market Focus

Looser mortgage standards won’t keep the party going

In contrast to the mid-2000s, there seems little chance of a significant loosening in mortgage lending standards in response to higher interest rates today. Traditional banks have not forgotten the financial crisis and, after a 37% rise in house prices in just two years, they are understandably being cautious. Non-banks have a larger incentive to compete standards lower, but with the private label securitisation market still small they are limited to selling to the Government Sponsored Enterprises, who have strict eligibility standards. Accordingly, the surge in mortgage rates will not be offset by an easing in lending standards, and that means housing market activity has further to fall. Real Estate Drop-In (6th July, 2022): Join our US Commercial Property team for this 20-minute briefing on why we think this is the market top – and how far we expect returns to fall. Register now.

1 July 2022

US Housing Market Data Response

Case-Shiller/FHFA House Prices (Apr.)

House price growth is finally showing signs of slowing, in line with measures of housing market activity which peaked at the start of the year. Soaring mortgage rates are shutting some buyers out of the market and forcing others to cut their budgets. While a tight market argues against a house price crash, a small fall to around -5% y/y by mid-2023 now looks likely.

28 June 2022

US Housing Market Update

The anatomy of a housing market downturn

Measures of housing market activity and prices tend to follow a predictable sequence in downturns. In this Update we highlight the key US and UK variables that clients should follow to track the housing downturn and identify turning points. With most indicators already softening in both countries, it is just a matter of time before house prices fall. In view of the wider interest, we are also sending this US Housing Update to clients of our UK Housing Service.

24 June 2022

More from Matthew Pointon

US Housing Market Chart Book

Mortgage rate rise hits housing market activity

The rise in mortgage rates, to a 12-year high in mid-April, is now starting to weigh on housing market activity, with new and existing home sales falling back over the past couple of months. With rates set to increase to 5.6% by mid-2023, that decline in sales will continue. However, plenty of pent-up demand from the last couple of years means a substantial fall in sales is unlikely. We expect existing home sales to drop to 5m annualised by end-2022, with new home sales seeing a small decline to 700,000 annualised over that period. Single-family starts will also fall back, in part due to the large number of homes now under construction. Rental demand is easing, as the recent surge in rents stretches affordability. That will bring rental growth down from 15.7% y/y at the start of 2022 to around 5% y/y by the end of the year. Beyond that, the boom in apartment starts seen last year will start to boost supply, and vacancy rates will stabilise at around 4.5% from mid-2023.

10 May 2022

US Housing Market Update

Rise in rates to bring more vacant homes to market

Homebuyers looking for more space were contending with low numbers of larger homes for sale in the first quarter, not helped by an apparent rise in investor demand for bigger properties. But rising mortgage rates will encourage owners of vacant homes to bring them to market, which is set to provide some relief over the next couple of years. That won’t prevent a fall in home sales but will help avoid a crash. UK Housing Drop-In (10th May 10:00 BST/17:00 SGT): Economists from our property team are hosting a 20-minute briefing to explain why we think UK house prices are heading for a fall – and how bad the fallout will be. Register now.

5 May 2022

US Housing Market Outlook

Home sales and prices to cool as affordability worsens

Mortgage rates have risen faster than we originally anticipated and we now expect them to peak at 5.6% in mid-2023. That’s below the level of around 6% which we think risks tiggering a housing market correction, but higher interest rates mean we have cut our home sales and house price forecasts.  We now expect existing home sales to drop 12% in 2022, with pent-up demand from the last couple of years preventing a larger fall. More plentiful inventory means new home sales will see a smaller decline of 3% in 2022, but that will still weigh on single-family housing starts which will drop by 1% in 2022 and by 9% in 2023. House price growth has significant momentum coming into 2022, but with affordability at its worst since the mid-2000s we expect a rapid slowdown to 8% y/y by end-22, with no change in 2023. The rise in risk-free rates will also push up apartment yields this year. Coupled with a slowdown in rental growth that means we now expect total annual returns of 6.4% in 2022, down from 18.6% in 2021.

29 April 2022
↑ Back to top