A rise in mortgage rates to 4.0% by end-2022, coupled with the 25% rise in house prices seen since mid-2020, will boost mortgage payments as a share of earnings to their highest since mid-2008. That will lead to a 4% fall in existing home sales this year, a larger dip than most other forecasters expect. New home sales will do better and that will help single-family starts make further progress this year, although a lack of labour and materials will keep the gain to around 3%. Meanwhile worsening affordability will lead to a steady decline in house price growth to around 3% y/y by end-2022, toward the bottom of consensus.
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