The outlook for housing in a post-COVID world

Even after the immediate threat of COVID has receded, we expect as many as 50% of office-based employees will work from home at least once a week. But the move away from cities and toward the suburbs should prove short-lived. Most of those leaving cities will have brought forward a planned move, and changes in relative prices will rebalance demand. With…
Matthew Pointon Senior Property Economist
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US Housing Market Update

What’s driving the surge in rent expectations?

Consumer expectations of rental growth have surged to record highs over the past couple of months. But that appears to reflect optimism around the housing market in general, rather than the rental sector in particular. We therefore doubt actual rental growth will follow expectations to record highs. That said, a rise in demand as cities and offices reopen means rental growth will recover, albeit to a fairly modest 2% y/y by the end of the year.

10 June 2021

US Housing Market Chart Book

Home sales cool and prices will soon follow

Both new and existing home sales dropped back in April and the May pending home sales index points to further declines in existing sales over the next couple of months. House price growth of over 13% y/y and a rise in mortgage rates since the start of the year have stretched affordability and alongside record low inventory that is weighing on housing market activity. But unlike the mid-2000s, we doubt an unsustainable boom in house prices is on the horizon. Credit conditions tightened last year, and we expect only a gradual easing over the coming months. Price growth will therefore soon follow the downturn in home sales. Rental demand is recovering swiftly as the economy has reopened and vacancy rates are now falling. We expect that trend will continue, pushing rental growth up to 2.0% y/y by the end of the year.

8 June 2021

US Housing Market Data Response

Mortgage Applications (May.)

Home purchase mortgage demand continued its downward trend in May and is now broadly in line with its pre-virus level. Easing credit conditions and the reopening of the economy will provide some support to home purchase demand in the coming months. But with record low inventory constraining sales and affordability stretched, we think that home purchase applications have a little further to fall this year.

2 June 2021

More from Matthew Pointon

US Housing Market Chart Book

Home sales cool and prices will soon follow

Both new and existing home sales dropped back in April and the May pending home sales index points to further declines in existing sales over the next couple of months. House price growth of over 13% y/y and a rise in mortgage rates since the start of the year have stretched affordability and alongside record low inventory that is weighing on housing market activity. But unlike the mid-2000s, we doubt an unsustainable boom in house prices is on the horizon. Credit conditions tightened last year, and we expect only a gradual easing over the coming months. Price growth will therefore soon follow the downturn in home sales. Rental demand is recovering swiftly as the economy has reopened and vacancy rates are now falling. We expect that trend will continue, pushing rental growth up to 2.0% y/y by the end of the year.

8 June 2021

US Housing Market Update

House prices will avoid a dangerous bubble

House price expectations have taken off since the start of the year, and that raises the risk of a self-reinforcing bubble forming. However, there are no signs that lenders are rapidly loosening credit conditions on the back of higher house prices, and that argues against a repeat of a mid-2000s credit cycle. Rather, rising mortgage interest rates, a stabilisation in down payments and stretched affordability mean that house price gains will slow over the second half of the year.

1 June 2021

US Housing Market Update

Will expensive home sales keep booming?

Sales of expensive homes have done particularly well over the past year, with the share of existing homes sold for over $500,000 surging from 15% a year ago to a record high 26% in April. An extreme shortage of cheaper homes for sale, coupled with a jump in purchasing power thanks to larger down payments and lower mortgage rates, helps explain that shift. Inventory shortages will continue to drive buyers toward expensive homes, but purchasing power is set to ease. Overall, we expect the share of new and existing homes sold for more than $500,000 to edge back to around 20% to 22% over the next couple of years.

26 May 2021
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