Mortgage rates rose further in March, with the 30-year rate now up 50bps compared to the start of the year. Recent stability in the 10-year Treasury yield means mortgage rates are likely to move sideways over the next couple of weeks, but we expect they will soon resume their upward trend and end the year at around 4.0%. That, alongside record low inventory, will bring home sales back to earth. Indeed, the pending home sales index fell 10.6% m/m in February, pointing to a contraction in existing home sales in March. House prices saw another large rise in January, but even as house price expectations tick-up, higher mortgage rates should cool the market later this year. As the economy and offices reopen, apartment demand will recover this year, supported by the lack of homes for sale. We expect effective rental growth will rise from -2.9% y/y at end-2020 to 2.0% y/y by the end of this year.
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