End of eviction ban won’t stop recovery in rents

End of eviction ban won’t stop recovery in rents

The eviction ban has been extended to early October, but we doubt it will be renewed again. Given the strength of the labour market, significant government support and robust rental demand, the resumption of evictions will not boost the rental vacancy rate. In turn that will support rents, with REIS effective rental growth set to rise to 4.0% y/y by mid-2022. The threat of eviction will also cut arrears which have weighed on CPI rental growth in recent months, helping to close the gap with asking rent measures. In view of the wider interest, we are also sending this US Housing Market Update to clients of our US Commercial Property service.
Matthew Pointon Senior Property Economist
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US Housing Market Data Response

Mortgage Applications (Nov.)

A rise in mortgage rates to an eight-month high of 3.31% by the end of November failed to dampen home purchase demand, which surged to a nine-month high. The drop in 10-year Treasury yields from the arrival of the Omicron variant implies mortgage rates will fall back over the next couple of weeks, which may provide some further support to demand. But with affordability stretched we doubt the current level of home purchase applications can be sustained beyond the next few weeks.

1 December 2021

US Housing Market Data Response

Case-Shiller/FHFA House Prices (Sep.)

Annual house price growth fell for the first time in 16-months in September, and stretched affordability means it should continue to slow. It is too soon to say what impact the arrival of the Omicron variant will have on the housing market. But one immediate effect has been a fall in interest rates, which if sustained may give prices some support over the remainder of the year.

30 November 2021

US Housing Market Update

Why are pending and existing home sales diverging?

An increase in the quality of mortgage borrowers, and record low inventory, are boosting the mortgage closing rate and leading to an increase in the share of pending home sales converted into existing home sales. Those factors are not set to go into reverse anytime soon, so we don’t think existing sales will snap back to match the pending sales index over the next few months.

29 November 2021

More from Matthew Pointon

US Housing Market Focus

The death of house price cycles?

The housing market is highly cyclical, and the current price boom marks the fifth episode since 1970 where real house price growth has exceeded 5% y/y. But there are good reasons to think this will mark the last house price boom for next 30 years. Interest rates are already at record lows, and we expect they will rise gradually over the next 30 years. New regulations mean credit conditions have not loosened even as house prices have boomed, and that argues against a repeat of the mid-2000s boom. Overall, once the current cycle has passed, we expect house prices will grow more-or-less in line with earnings, leaving real house price growth at around 1.5% y/y from 2030 to 2050.

12 August 2021

US Housing Market Chart Book

Home sales and house prices to moderate

The share of households seeing now as a good time to buy a home has fallen to 39-years lows, as booming house prices, tight credit conditions and record low inventory have weighed on sentiment. But the share actually planning to buy has not seen such a large dip, so we expect existing home sales will moderate rather than crash. That easing in demand, and a gradual rise in mortgage rates, will help cool house price growth from record highs to around 10% y/y by the end of the year. In contrast to homebuying demand, rental demand has recovered strongly. Rental vacancy rates in some cities are now falling back, and timelier measures of rents are picking up. Given low risk-free interest rates that will boost apartment capital values and push total returns to 10.8% in 2021.

11 August 2021

US Housing Market Update

Conditions tighten in homeowner and rental markets

The second quarter Housing Vacancies and Homeownership survey showed market conditions tightening in both the homeowner and rental markets, with vacancy rates at 56-year and 37-year lows respectively. In the homeowner market that will act to constrain sales and support house prices. While in the rental market the lack of supply will help rental growth to recover quickly from its COVID-related dip.

28 July 2021
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