Existing Home Sales (Aug.)

Existing home sales dropped back in August as booming house prices and a lack of affordable inventory shut out first-time buyers. A small recovery in home purchase mortgage demand suggests sales may tick-up next month but with mortgage rates set to rise and inventory to remain tight that improvement won’t be sustained, and sales will end the year at around 5.7m annualised.
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Matthew Pointon Senior Property Economist
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US Housing Market Chart Book

Rising mortgage rates will help cool booming prices

Mortgage rates are on the rise and we expect they will see further gains to end the year at around 3.5%. That, alongside relatively tight credit conditions, will help cool rampant house price inflation. From close to 20% y/y in July, we expect a slowdown to 15% y/y by end-2021 and 3% by end-2022. Stretched affordability will also weigh on home sales, although the drop in first-time buyers has at least arrested the fall in inventory. After four months of consecutive falls single-family building permits were unchanged in August. But with lumber prices rising again and shortages of other materials and labour, we don’t expect a strong rise over the remainder of the year. The lack of homes for sale and the reopening of cities have been positives for the rental sector. Vacancy rates are falling and rental growth is picking up, driving strong investor demand and pushing yields to record lows. We expect yields will stay low for the next year at least.

15 October 2021

US Housing Market Update

Will sales of condos continue to outperform?

Sales of condos have been on tear in recent months, with their share in total existing home sales reaching a 14-year high in June. The reopening of cities helps explain that development, and condo sales have also benefitted from comparatively favourable inventory and pricing. With house prices not set to decline and mortgage rates on the rise, demand for relatively affordable condos is set remain high.

7 October 2021

US Housing Market Data Response

Mortgage Applications (Sep.)

Home purchase applications rose for the first time in six months in September, even as mortgage rates increased to a 14-week high by the end of the month. But we expect a further rise in mortgage rates to around 3.5% by the end of this year and, combined with soaring house prices and tight credit conditions, that will weigh on home purchase mortgage demand. We therefore expect home purchase applications will drift lower over the remainder of the year.

6 October 2021

More from Matthew Pointon

US Housing Market Data Response

Housing Starts (Aug.)

A boom in multifamily construction has supported housing starts in recent months, with multifamily building permits rising to a 31-year high. On the single-family side, homebuilders have reported strong demand but material and labour shortages are preventing builders from getting to work on the large backlog of homes that have been authorised. Those constraints will not be solved overnight, so we except single-family starts will see only a gradual rise to around 1.16m annualised by the end of this year.

21 September 2021

US Housing Market Update

Stimulus cheques help explain house price rebound

After beginning to slow at the turn of the year, house price growth has since got a second wind. We suspect the key driver behind that resurgence was the arrival of the third round of stimulus cheques, which drove up the saving rate and helped boost first-time buyer down payments by 12% between February and May. But with no more cheques on the horizon and the saving rate stabilising that support for house prices will dissipate, supporting our call that annual house price growth will soon peak.

17 September 2021

US Housing Market Update

New apartments will start to get larger soon

Apartments kept getting smaller in the second quarter of this year, with the median floor space of units falling to under 1,000 sq. ft., the lowest since records began in 1999. That trend seems at odds with rising demand for larger units to accommodate increased working from home. We suspect that dichotomy in part reflects lags in the development process, not helped by COVID-19, as well as surging steel prices. But with demand for bigger units here to stay, we don’t think it will be long before units start to get larger. We expect median floor size for multifamily starts will be back above 1,000 sq. ft. by the end of the year. In view of the wider interest, we are also sending this US Housing Update to clients of our US Commercial Property service

14 September 2021
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