Surging Treasury yields have pushed mortgage rates above 7.5%, higher than we had anticipated. If these borrowing rates persist, lending and sales volumes could fall even further in the near term creating a risk that house prices fall rather than stagnate as we forecast. However, we still expect a slowdown in the economy to lead to a reversal of the recent rises in Treasury yields and mortgage rates later this year, allowing buyer demand to strengthen. This should set the scene for a pickup in housing market activity in late 2024, as conditions for buyers slowly improve.
Meanwhile, higher risk-free rates have triggered an 8.7% fall in multifamily capital values to date, which we expect to grow to 25% from peak to trough.
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