Higher mortgage rates to cool red hot housing market - Capital Economics
US Housing

Higher mortgage rates to cool red hot housing market

US Housing Market Outlook
Written by Matthew Pointon
Cancel X

After a bumper second half of 2020, housing market activity will lose steam in 2021 as higher mortgage interest rates and record low inventory weigh on home sales. House price growth will also fall back, as recent strong gains in prices combined with higher financing costs lead to worsening affordability. That said, strong economic growth, an easing in credit conditions, lots of savings and plenty of frustrated buyers looking for homes mean the slowdown in sales and prices will be modest. House price growth will ease from 10% y/y at the start of the year to around 5% y/y by the end. That will continue to support housing starts, which will average around 1.16m in 2021. As the labour market recovers and offices reopen, that will attract people back to cities, supporting apartment demand. We expect rental vacancy rates will drop from 5.3% at end-2020 to 5.0% by end-2021, helping rental growth rise to 2.0% y/y by the final quarter and total returns to average 6.7% this year.

  • Overview – After a bumper second half of 2020, housing market activity will lose steam in 2021 as higher mortgage interest rates and record low inventory weigh on home sales. House price growth will also fall back, as recent strong gains in prices combined with higher financing costs lead to worsening affordability. That said, strong economic growth, an easing in credit conditions, lots of savings and plenty of frustrated buyers looking for homes mean the slowdown in sales and prices will be modest. House price growth will ease from 10% y/y at the start of the year to around 5% y/y by the end. That will continue to support housing starts, which will average around 1.16m in 2021. As the labour market recovers and offices reopen, that will attract people back to cities, supporting apartment demand. We expect rental vacancy rates will drop from 5.3% at end-2020 to 5.0% by end-2021, helping rental growth rise to 2.0% y/y by the final quarter and total returns to average 6.7% this year.
  • Economic Backdrop – The combined strength of fiscal and monetary stimulus and the early success of the vaccination program mean that we expect GDP growth to be as strong as 6.5% this year and 4.0% in 2022. We would be surprised if economic growth turns out to be markedly stronger than that, however, since even a 6.5% gain would leave the economy facing supply constraints.
  • Homeowner Market: Valuation, Affordability & Activity – A steady rise in the 10-year Treasury yield will push mortgage rates up to around 4.0% by the end of the year. Combined with the recent surge in house prices that will stretch affordability. Alongside record low inventory that will bring home sales back to earth but, for the most part, they will remain above their pre-pandemic level.
  • Homeowner Market: Homebuilding & House Prices – Strong new home sales and tight inventory have supported homebuilder confidence even as lumber prices have surged to record highs. Builders have responded by delaying projects, and that backlog of permits will support starts even as sales fall back over the year.
  • Rental Market: Demand & Supply – The reopening of offices and entertainment will bring households back to major cities, boosting rental demand. Indeed, a balance of 81% of respondents to the second quarter NMHC survey reported tightening apartment markets, the highest reading since 2010. A large pipeline will support apartment completions over the next year or so, but beyond that multifamily construction will slow as worsening demographics weighs on apartment demand.
  • Rental Market: Rental Growth & Returns – Timely rental indicators are now showing a pick-up in growth, and that will continue as renters return to cities and vacancy rates drop back. Moreover, the fiscal stimulus and improving labour market are starting to bring rent arrears down. Faster rental growth will keep NOI yields low over the next couple of years even as risk-free interest rates pick-up, helping total returns average 6.7% this year and next.
  • State Chart Pack

Main Forecasts

Table 1: National Economic Indicators

2021

2022

Annual (% y/y)

 

Q1f

Q2f

Q3f

Q4f

Q1f

Q2f

Q3f

Q4f

2019

2020

2021f

2022f

2023f

GDP

(% q/q Ann.)

7.0

8.5

5.8

3.5

3.4

3.5

3.4

2.9

2.2

-3.5

6.5

4.0

2.5

Real House. Disp. Income

(% q/q Ann.)

46.4

-24.4

-6.4

-1.0

3.4

2.8

2.7

3.1

2.2

5.8

1.7

-0.8

1.8

Unemployment Rate

(%)

6.2

5.3

5.0

4.6

4.5

4.3

4.1

3.9

3.7

8.1

5.3

4.2

3.6

CPI Inflation

(%)

1.8

3.4

3.1

2.8

2.2

1.9

1.5

1.7

1.8

1.3

2.8

1.8

2.1

Fed Funds Rate2

(%)

0.13

0.13

0.13

0.13

0.13

0.13

0.13

0.13

1.63

0.13

0.13

0.13

0.38

10-Year Treas. Yield2

(%)

1.7

1.9

2.1

2.3

2.3

2.4

2.4

2.5

1.8

0.9

2.3

2.5

2.6

30-Year Mtge Rate2

(%)

3.1

3.7

3.9

4.0

4.0

4.1

4.2

4.3

4.0

2.9

4.0

4.3

4.3

Table 2: Homeonwer Market Indicators

2021

2022

Year Average Forecasts

 

 

Q1f

Q2f

Q3f

Q4f

Q1f

Q2f

Q3f

Q4f

2019

2020

2021f

2022f

2023f

Case-Shiller Prices

(%q/q)

3.4

1.3

0.6

0.6

0.7

0.8

0.8

0.8

(%y/y)2

11.8

11.8

8.9

5.0

2.8

2.7

2.9

3.0

3.4

9.5

5.0

3.0

3.0

Total Home Sales

(Mill, Ann.)

7.1

6.4

6.2

6.4

6.5

6.5

6.6

6.6

6.0

6.5

6.5

6.5

6.6

(%y/y)

13.9

26.2

-12.1

-15.1

-7.9

1.9

5.5

2.3

1.1

7.8

0.8

0.2

1.1

New Sales

(Mill, Ann.)

0.9

0.8

0.8

0.8

0.8

0.8

0.8

0.9

0.7

0.8

0.8

0.8

0.9

(%y/y)

21.3

16.6

-15.8

-9.2

-1.8

2.4

3.0

2.4

11.5

20.2

0.9

1.5

2.4

Existing Sales

(Mill, Ann.)

6.2

5.6

5.4

5.6

5.7

5.7

5.7

5.7

5.3

5.7

5.7

5.7

5.8

(%y/y)

13.0

27.8

-11.5

-15.9

-8.7

1.8

5.9

2.3

-0.1

6.2

0.8

0.0

0.9

Homes For Sale

(Mill.)

1.5

1.5

1.5

1.5

1.5

1.6

1.6

1.6

2.1

1.7

1.5

1.6

1.6

(%y/y)

-24.1

-17.3

-10.0

-2.2

6.5

6.3

4.9

3.1

-0.3

-16.3

-14.0

5.2

4.7

New

(Mill.)

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

0.3

(%y/y)

-7.6

-1.6

6.9

6.2

3.3

2.6

2.6

2.6

5.3

-7.9

0.7

2.8

2.5

Existing1

(Mill.)

1.2

1.2

1.2

1.2

1.2

1.2

1.3

1.3

1.7

1.4

1.2

1.3

1.3

(%y/y)

-27.5

-20.7

-13.5

-4.2

7.4

7.3

5.5

3.3

-1.3

-17.9

-17.1

5.8

5.2

Single-Family Starts

(000s, Ann.)

1155

1155

1165

1175

1190

1205

1215

1220

893

1000

1163

1208

1233

(%y/y)

19.3

50.8

12.3

-4.2

3.0

4.3

4.3

3.8

2.4

12.0

16.3

3.9

2.1

Table 3: Rental Market Indicators

2021

2022

Year Average Forecasts

Q1

Q2

Q3

Q4f

Q1f

Q2f

Q3f

Q4f

2019

2020

2021f

2022f

2023f

Multifamily Starts

(000s, Ann.)

458

330

300

300

310

320

320

320

403

395

347

318

320

(% y/y)

-11.2

5.4

-24.1

-32.3

-3.0

6.7

6.7

3.2

7.2

-1.9

-12.2

-8.5

0.8

Rental Vacancy Rate

(%)

5.2

5.1

5.1

5.0

4.9

4.9

4.9

4.8

4.7

4.9

5.0

4.9

4.7

Effective Apt Rents

(% y/y)

-3.0

-2.1

-0.1

2.0

2.7

2.7

2.8

3.0

4.2

0.3

-0.8

2.8

3.0

MSCI NOI Yield

(%)

3.90

3.90

3.90

3.90

3.90

3.90

3.90

3.90

4.06

4.04

3.90

3.90

3.90

MSCI Total Return

(%)

6.2

8.6

7.5

4.3

6.6

6.6

6.7

6.9

5.3

3.0

6.7

6.7

6.9

Sources: Refinitiv, REIS, Capital Economics. 1Seasonally-adjusted by Capital Economics. 2End Period.

Economic Backdrop

Policy stimulus to drive strong recovery

  • The combined strength of fiscal and monetary stimulus and the early success of the vaccination program means that we expect GDP growth to be as strong as 6.5% y/y this year and 4.0% y/y in 2022. We would be surprised if economic growth turns out to be markedly stronger than that, however, since even a 6.5% gain would leave the economy facing supply constraints. The bigger risk is a sustained pick-up in inflation, particularly given the Fed’s shift in focus.
  • The $1.9trn American Rescue Plan, which comes on the heels of the $900bn stimulus passed late last year, will generate a massive boost to household incomes and spending in the first half of this year. (See Chart 1.) Even as incomes drop back in the second half, spending will remain strong, as households run down their savings. (See Chart 2.)
  • As the vaccination program reaches critical mass within the next couple of months, the reopening of leisure and hospitality businesses should provide a big boost to both spending and employment. Approaching half of adults have already received one vaccination dose and COVID-19 case numbers remain relatively low. (See Chart 3.) Nevertheless, the latest resurgence in infections in midwestern states, partly due to the spread of new aggressive variants, is a reminder that there are still downside risks to the economic outlook if the coronavirus is not eradicated this year.
  • The Biden administration is seeking to add more than $3,000bn in additional spending on infrastructure and social welfare over the next eight years, although that would be, at least partly, funded by tax hikes. At this stage, however, since the Democrats appear divided on precise measures and these fiscal packages will be closer to revenue-neutral, we are assuming that the net stimulus ends up being a relatively modest $200bn, or 1% of GDP, in both 2022 and 2023.
  • With real GDP only 2.4% below its pre-pandemic peak at the end of last year and, thanks to the stimulus, GDP growth likely to be close to 8% annualised in the first half of this year, any remaining shortfall in output relative to potential will be eliminated by mid-year. We also expect the unemployment rate to continue its rapid decline, dropping below 5% by end-2021 and below 4% by end-2022. (See Chart 4.) By 2023 it should have returned to its pre-pandemic level of 3.5%.
  • It is widely appreciated that inflation will rise over the coming months due to a combination of base effects, supply shortages (see Chart 5), and a likely rebound in the prices of the goods and services hit hardest by the pandemic. But the conventional wisdom is that inflationary pressure will prove to be transitory. With signs of labour shortages and upward pressure on wages already appearing, however, we suspect instead that higher inflation will end up becoming entrenched. (See Chart 6.)
  • With Fed officials pushing the narrative that any rise in inflation will be “transitory” and focused instead on achieving its “broad and inclusive” full employment goal, we think that, even as inflation repeatedly surprises on the upside, the Fed will delay its first interest rate hike until late 2023.
  • Other forecasters are looking for rate hikes as soon as next year, which is helping to drive long-term yields higher. (See Chart 7.) But, as those expectations are dashed, we think the 10-year yield will stabilise at 2.5% in 2022 and 2023. (See Chart 8.)

Economic Backdrop Charts

Chart 1: Real GDP

Chart 2: Personal Saving Rate (% of Disp. Income)

Chart 3: COVID-19 Infections & Vaccinations

Chart 4: Unemployment Rate & Output Gap (%)

Chart 5: Business Inventory-to-Sales Ratio (%)

Chart 6: CPI Inflation (%)

Chart 7: Fed Funds Rate Expectations (%)

Chart 8: Fed Funds Rate & 10-Year Treasury Yield (%)

Sources: Refinitiv, C.E., John Hopkins, CDC, WSJ

Homeowner Market – Valuation, Affordability & Activity

Rising mortgage rates to stretch affordability

  • Mortgage rates are set to rise further. Our view that the 10-year Treasury yield will end 2021 at 2.25% and 2022 at 2.50% means we are now forecasting the 30-year mortgage rate to rise to 4.0% and 4.25% over the same period. (See Chart 9.) That implies an increase in mortgage rates of around 110bps over the course the year.
  • That rise in interest rates will weigh on home demand. Indeed, mortgage applications for home purchase and refinancing have both started to fall back since mortgage rates started rising. (See Chart 10.) Being more sensitive to interest rate movements, refinancing activity saw the largest drop, and by early April was down 40% compared to late January. Refinancing demand will continue to decline as the share of borrowers who can benefit from a refinance sees further falls.
  • Looking ahead, the further rise in mortgage rates we expect, coupled with the recent surge in house prices, will stretch affordability and weigh on demand. We expect mortgage payments as a share of median family income will rise above 17% by the end of the year. That is a significant increase from the five-year low of 13.7% last April. (See Chart 11.) That said, affordability will remain favourable compared to prior to the financial crisis.
  • Worsening affordability, coupled with tight inventory, will weigh on home buying sentiment. Indeed, in February Fannie Mae reported that the share of households that see now as a good time to buy hit just 48%, its lowest since records began in 2010.
  • However, while relatively few households think it is a good time to buy, we doubt that signals a crash in home demand. Indeed, a large share of households are still planning to buy, which reflects the pandemic forcing some households to find more space for home working, giving them no option but to move. (See Chart 12.) That will continue to support housing demand this year, particularly as many of those buyers have struggled to find a home given tight supply.
  • Demand should also benefit from some easing in credit conditions this year. Banks tightened lending standards during the pandemic to protect themselves from the elevated uncertainty surrounding the economic outlook. (See Chart 13.) But the strengthening of the economy and high levels of home equity mean that banks are now in a position to ease lending standards and accept higher debt-to-income (DTI) ratios. Indeed, the latest Fannie Mae survey points to a slight loosening in credit conditions over the next three months. (See Chart 14.)
  • But even with demand only set to see a modest decline, record low inventory will act to constrain sales. Despite a rise in housing starts, we expect inventory to remain tight by historical standards over the next three years. (See Chart 15.)
  • Overall, we expect total home sales will fall back this year to just above its pre-pandemic level of around 6m annualised. New home sales will drop to 820,000 annualised by the middle of this year before rising to 870,000 by end-2023. Existing home sales will drop to 5.4m annualised in the third quarter, and then climb gradually to around 5.8m by end-2023. (See Chart 16.)

Valuation, Affordability & Activity Charts

Chart 9: 10-Yr Treas. Yield & 30-Yr Mtge Rate (%)

Chart 10: Mortgage Applications (Index)

Chart 11: Mortgage Payments as Share Median Family Income (%)

Chart 12: Home Buying Sentiment & Plans to Buy

(%, 3-Mth Avg.)

Chart 13: Conv. Home Purchase Credit Score & DTI (S.Adj.)

Chart 14: Fannie Mae Mtge Credit Conditions Survey

Chart 15: Inventory of Homes for Sale (Millions)

Chart 16: Home Sales (Millions Ann.)

Sources: Refinitiv, MBA, NAR, C.Board, UoM, ICE, C. Bureau, F.Mae, C.E.

Homeowner Market – Homebuilding & House Prices

Large permit backlog points to solid housing starts in 2021

  • The number of new homes for sale remains close to record lows, which has helped support homebuilder confidence. (See Chart 17.) Indeed, the NAHB measure of builder sentiment edged up to 83 in April, not far off recent record highs. With market conditions set to remain tight, we except homebuilder confidence will remain historically high over the next year.
  • Homebuilder confidence is high despite significant constraints on production. Most notably, lumber prices are at a record high and may rise further in the short term. Indeed, futures prices climbed above $1,300 per 1,000 sq.ft. in April, over 50% higher than a month earlier. (See Chart 18.)
  • Record high lumber prices are causing homebuilders to delay housing starts, as they put projects on hold in the hope that prices will soon fall back. Indeed, the number of homes authorised but not started surged to a 14-year high of 130,000 in March. (See Chart 19.)
  • But builders can’t delay indefinitely, and that solid pipeline of permitted homes points to a decent number of starts this year. We forecast single-family starts will average 1.16m annualised in 2021, up 16% compared to last year. In fact, it would be the best year for starts since 2007. And looking further ahead, we think that easing production constraints will help starts to climb to 1.23m annualised by the end of 2023. (See Chart 20.)
  • Alongside tight supply, record low mortgage rates have helped drive a boom in house prices. Both Case-Shiller and FHFA reported annual house price growth of over 11% in January. (See Chart 21.) And the timelier Haus CHPI index, which tracks asking prices, accelerated to 16.8% y/y in the second week of April. That implies house price growth will see further solid gains over the next couple of months.
  • As will a rebound in house price expectations. According to Fannie Mae, in March consumers expected a 3.1% rise in prices over the next 12-months, a three-year high. (See Chart 22.) We have therefore revised up our forecast for house price growth this year. Compared to our earlier call for growth to slow to 3% y/y by end-2021, we now expect growth will end the year at around 5% y/y.
  • But, as the backlog of households looking for more space works itself through and worsening affordability takes its toll, house price gains beyond the next few months will be more modest. Indeed, holding the DTI ratio constant, higher mortgage rates mean the average mortgage size would need to decrease, putting downward pressure on house prices. (See Chart 23.) However, as noted above we expect banks will respond by easing lending standards and accepting higher DTIs.
  • That will offset some of the impact of higher mortgage rates on house price growth. As will the large amount of savings that households have accumulated over the past year thanks to lockdowns, some of which is being used to bolster down payments.
  • That argues against an outright fall in house prices over the next few years. After a 5% gain this year, we expect house price growth will then fall back to 3% y/y by the end of 2022, and 2023 will see a rise of a similar magnitude. (See Chart 24.)

Homebuilding & House Prices Charts

Chart 17: NAHB H’builder Confidence & Supply

Chart 18: Lumber 1st. Pos. Futures ($ per 1,000 Sq.Ft.)

Chart 19: Homes Authorised Not Started & Lumber Price

Chart 20: SF Housing Starts (000s Ann.)

Chart 21: House Price Growth (% y/y)

Chart 22: House Price Expect. (%, Next 12-Mths)

Chart 23: 30-Yr Mtge Rate & Purchase Mtge Size

Chart 24: House Price Forecast (Case-Shiller Index)

Sources: Refinitiv, NAHB, C-Shiller, Haus, FHFA, F.Mae, NY Fed, C.E.

Rental Market – Demand & Supply

Rental demand to rise as economy reopens and pent-up demand is released

  • Younger American workers were initially hit hardest by the pandemic. But since last spring, the young have also seen the strongest recovery in employment. (See Chart 25.) As the economy reopens, employment will see further gains, particularly in cities, and that will support rental demand over the next year. Indeed, the Q2 2021 NMHC survey showed a balance of 81% of respondents reporting tightening apartment markets, up from just 12% in Q2 2020. (See Chart 26.)
  • Rental demand will also be given a boost from substantial pent-up demand. While many of those who left cities to buy elsewhere are unlikely to return, there are also lots of households who have delayed a planned move to a city. That raises the prospect of two-years’ worth of inward migration over the course of the next year. A record low number of homes for sale will also mean some households will decide to rent until inventory improves.
  • On the supply side, the easing of lockdowns helped apartment completions recover in the third quarter of last year, with the Census Bureau SOMA survey reporting a record high 86,000 completions. (See Chart 27.) Admittedly, the arrival of the third wave of infections in the fourth quarter meant relatively few of those had been rented out within three months, but the roll-out of vaccines means absorption will pick-up again this year.
  • MF building permits surged in Q1 2021, perhaps making up for lost ground in 2020. But that has yet to fed through to higher MF starts. (See Chart 28.)
  • Surging steel prices provide one reason why developers were reluctant to break ground on new projects. Prices were up 110% y/y in March, and that coincided with a dip in the NAHB survey of MF production expectations. (See Chart 29.)
  • We expect steel prices will fall back this year, but we doubt that will spur a resurgence in MF starts. A large number of MF starts for rent in 2018 and 2019, coupled with construction site shutdowns, mean there is a significant development pipeline. That will support completions over the next year or so. We expect completions on the REIS measure will rise from 47,500 in Q4 2020 to around 65,000 in Q3 2021. (See Chart 30.) But they will then fall back, as demographic changes and an increased supply of homes for sale weigh on rental demand.
  • National apartment vacancy rates increased from 4.7% in Q4 2019 to 5.3% by Q4 2020. But big cities saw a larger impact, with vacancy increasing the most in D.C., San Francisco and NYC. (See Chart 31.) For the most part, those cities hardest hit by COVID-19 will see the largest bounce back in occupancy this year. But, given its large concentration of tech firms, where a substantial share of employees can work from home full time, San Francisco is likely to underperform.
  • At the national level, as rental demand recovers, we expect the vacancy rate to fall to 5.0% by the end of 2021, and 4.8% by end-2021. (See Chart 32.) It will stabilise at 4.5% in 2024 and 2025, as both rental demand and supply edge back due to demographic pressures and increased supply of homes for sale.

Rental Demand & Supply Charts

Chart 25: Employment by Age (Index Jan-20=100)

Chart 26: Surveys of Rental Market Tightness

Chart 27: SOMA Comp. & Absorption Rate (%)

Chart 28: MF Building Permits & Starts (000s Ann.)

Chart 29: NAHB MF Production Index & Steel Price

Chart 30: MF Starts for Rent & REIS Comp. (000s Ann.)

Chart 31: Change in Vac. Rate Q4 19 to Q4 20 (bps)

Chart 32: REIS Apartment Vacancy Rate (%)

Sources: Refinitiv, C. Bureau, NAHB, NMHC, REIS, C.E.

Rental Market – Rental Growth & Returns

Rental growth to pick-up as demand recovers

  • Landlords responded to the pandemic by aggressively cutting rents. The CPI measure of primary residence rental growth slowed to 1.8% y/y in March, close to a 10-year low. Apartment rents took a larger hit. REIS reported a drop in effective rents of -2.9% y/y in the final quarter of last year. (See Chart 33.) But as demand recovers and vacancy falls back, rental growth will recover, supported by the substantial fiscal stimulus. Indeed, more timely data on asking rents from Apartment List has shown annual rental growth recovering to zero by March.
  • Stimulus payments and enhanced unemployment insurance will also help keep rental arrears in check. After worsening in January, NMHC reported a decline in arrears in February and March. (See Chart 34.)
  • We expect effective apartment rental growth will accelerate to 2.0% y/y by end-2021 and to 3.0% by end-2022. (See Chart 35.) It will then stabilise, before a preference for larger units later in the forecast period starts to weigh on rents per square foot.
  • According to MSCI, apartment NOI yields dropped back to 3.8% in the final quarter of 2020. But we suspect that was due to rising arrears and vacancy. As both of those recover this year, NOI yields will also pick-up. We expect they will end this year at 3.9%, and will stay around that level until end-2024. Beyond that, a gradual rise in risk-free interest rates will bring yields up to 4.1% by end-2025. (See Chart 36.)
  • The recent rise in the 10-year Treasury yield has helped close some of the gap with apartment yields. (See Chart 37.) The decent outlook for apartment rental growth over the next couple of years means that gap is set to compress further, from 3 percentage points at end-2020 to just under 1.5 percentage points by end-2022.
  • After falling by around 2% y/y in 2020, apartment capital values are set to recover gradually over the next couple of years, with growth reaching 3% y/y by end-2022. Alongside faster rental growth, that will push total returns from an average 3.0% in 2020, to 6.7% in 2021 and 2022, and 7.0% in 2023. (See Chart 38.) After that, pressure on capital values from rising unit size will begin to weigh on total returns.
  • At the city level, we expect those cities hardest hit by COVID-19 will see the best returns, with NYC and D.C. averaging returns of over 6% p.a. over 2021-2025. (See Chart 39.) Boston, with a high concentration of well-paid life sciences jobs, will also perform well later in the period. At the other end of the spectrum San Francisco will struggle most as tech workers move away, and we expect total returns to average around zero over the next four years.
  • The value of residential REITs have been trending up since the start of last November. By mid-April, the NAREIT residential REIT index had returned to where it was at the start of last year. Within that, SF REITs have outperformed, and now trade at a value 18% higher than where they were at the start of 2020. (See Chart 40.) Apartment REITs are still 4% below that benchmark, which likely reflects concerns around the future of city living following COVID-19.

Rental Growth & Returns Charts

Chart 33: Measures of Rental Growth (% y/y)

Chart 34: Rent Paid by End-Mth (Diff. from Last Yr, pps.)

Chart 35: REIS Effective Rental Growth (% y/y)

Chart 36: MSCI Apt. NOI Yield (%)

Chart 37: Apt Yield Gap to 10-Year Treasury (%)

Chart 38: Total Returns (Ann. Avg, %)

Chart 39: Total Returns Yr-End Avg. 21-25

Chart 40: REIT Prices (Index, Jan-20=100)

Sources: Refinitiv, REIS, MSCI, NMHC, Apt List, NAREIT, C.E.

State & City Chart Pack

Chart 41: Employment Growth (Q1 2021, % y/y)

Chart 42: Homeowner Vacancy Rates Relative to 1990-2020 Avg. (Q4 2020, % points)

Chart 43: FHFA House Price Growth (4-Qtr Avg. to Q4 2020, % y/y)

Chart 44: House Prices to Personal Income Per Capita (Q4 2020, % Over/Undervalued vs 1991-2020 Avg.)

Chart 45: Share of Mortgages with Negative Equity (Q4 2020, %)

Chart 46: Building Permits Per 1,000 People, Deviation from 1995-2020 Avg. (4-Qtr Avg. to Q4 2020)

Chart 47: Rental Vacancy Rates Relative to 1990-2020 Avg. (Q4 2020, % points)

Chart 48: Zillow Observed Rent Index 20-Largest Metros (Feb-21, % y/y)

Sources: Refinitiv, Census Bureau, FHFA, CoreLogic, Zillow


Matthew Pointon, Senior Property Economist, matthew.pointon@capitaleconomics.com