Sales to remain weak, despite fall in mortgage rates

A fall in mortgage rates from 20-year highs supported the first rise in home purchase demand in eight months in November. Given that mortgage rates are likely to continue to trend lower from here, sales should soon bottom out. But the big picture is that market conditions will remain unfavourable for buyers. Stretched affordability, falling employment and tighter credit conditions will weigh on demand next year, resulting in the weakest year for sales since 2011. House prices will also continue to decline, with leading indicators supporting our call of an 8% drop.