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Case-Shiller/FHFA House Prices (Jun)

House price growth surged above 18% y/y in June, setting record highs on both the Case-Shiller and FHFA measures. However, demand has fallen back since the start of the year, and the timelier Common Haus Price Index points to a slowdown in the second half of the year. We therefore expect annual growth will fall back from 18.6% y/y in June to 10% y/y by end-2021.
Sam Hall Assistant Property Economist
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US Housing Market Chart Book

Mortgage rate rise hits housing market activity

The rise in mortgage rates, to a 12-year high in mid-April, is now starting to weigh on housing market activity, with new and existing home sales falling back over the past couple of months. With rates set to increase to 5.6% by mid-2023, that decline in sales will continue. However, plenty of pent-up demand from the last couple of years means a substantial fall in sales is unlikely. We expect existing home sales to drop to 5m annualised by end-2022, with new home sales seeing a small decline to 700,000 annualised over that period. Single-family starts will also fall back, in part due to the large number of homes now under construction. Rental demand is easing, as the recent surge in rents stretches affordability. That will bring rental growth down from 15.7% y/y at the start of 2022 to around 5% y/y by the end of the year. Beyond that, the boom in apartment starts seen last year will start to boost supply, and vacancy rates will stabilise at around 4.5% from mid-2023.

10 May 2022

US Housing Market Update

Rise in rates to bring more vacant homes to market

Homebuyers looking for more space were contending with low numbers of larger homes for sale in the first quarter, not helped by an apparent rise in investor demand for bigger properties. But rising mortgage rates will encourage owners of vacant homes to bring them to market, which is set to provide some relief over the next couple of years. That won’t prevent a fall in home sales but will help avoid a crash. UK Housing Drop-In (10th May 10:00 BST/17:00 SGT): Economists from our property team are hosting a 20-minute briefing to explain why we think UK house prices are heading for a fall – and how bad the fallout will be. Register now.

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The sharp rise in mortgage rates over the past couple of months, to a 12-year high of 5.37% in the middle of April, is now weighing on mortgage demand. Home purchase applications dropped to their lowest since the height of the COVID-19 impact two years ago. A further rise in the 10-year yield over the past week means mortgage rates will rise further, placing additional constraints on demand. That said, plenty of pent-up demand from the past couple of years and a rising share of cash buyers still make a crash in home sales unlikely.

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New supply won’t have major impact on industrial rental growth

Despite a higher construction pipeline for distribution warehouses, we think that a high share of pre-let space, coupled with strong demand, means vacancy will only be 20bps higher over the next few years as a result. In turn, we don’t expect it to have a large impact on rents, though it does pose some downside risk to our forecast.

27 August 2021

US Housing Market Data Response

New Home Sales (Jul.)

After a run of declines, new home sales eked out a small gain in July. The recent weakness in sales data likely reflects homebuilders restricting sales as they try to catch-up with the surge in demand seen last year. We therefore expect sales to climb higher as supply improves, ending the year at around 850,000 annualised.

24 August 2021

US Housing Market Data Response

Existing Home Sales (Jul)

Existing home sales surprised on the upside in July, rising for the second consecutive month. But with demand easing and inventory at record lows, we doubt this is the start of a resurgence. Instead, we expect sales will resume their downward trend to around 5.6m annualised by end-2021.

23 August 2021
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