We anticipate that mortgage rates will continue to fall in 2024, but more gradually than they have recently from 6.8% now to 6.25% by the end of the year. That won’t be enough to bring a great deal of stock on the market. At the same time, we expect a moderate pick-up in demand as easing interest rates improve affordability. Against that backdrop, we expect existing home sales to remain subdued in 2024, while we think house prices will post another solid 5% gain.
Although the US 10-year Treasury yield has now dropped back to be in line with apartment yields, a further increase in NOI yields seems inevitable. The upshot is that total returns will be negative in 2024, before turning positive in 2025.
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