Economic slowdown to weigh on housing market

Mortgage interest rates have dropped sharply since the end of last year, and the 30-year fixed rate is set to fall to 4.2% by the end of 2019. But that won’t spur a significant rise in housing market activity. After all, interest rates are falling because the economy is slowing. That will hit homebuyer confidence, and with inventory levels still low that implies existing home sales will do no more than tread water over the next year or so. Subdued housing demand means house price growth will continue to slow, to around 2% by the end of 2019. Rental growth will also fall back as earnings growth slows, but the decline should be modest, and gross yields are set to edge up over the next couple of years.