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Housing Starts (Nov.)

Single-family housing starts rebounded in November, following a weak four months. While strong new home demand, limited inventory and surging house prices will incentivise builders to increase construction, the recent surge in lumber prices will add to the supply-side challenges weighing on starts.
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.

5 May 2022

US Housing Market Data Response

Mortgage Applications (Apr.)

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.

4 May 2022

More from Sam Hall

US Commercial Property Data Response

Commercial Property Lending (Nov.)

Commercial real estate debt recorded its largest gain in November since the onset of the pandemic. And with investment volumes on track for a record-breaking year, we expect lending activity to remain elevated in the coming months.

13 December 2021

US Commercial Property Data Response

US Metro Employment (Oct.)

The easing of the Delta wave of infections in the South boosted leisure & hospitality hiring in October. Meanwhile, office-based jobs rose in all 30 metros, following widespread declines in September. That left office-based employment above its pre-COVID level in 17 metros.

2 December 2021

US Commercial Property Valuation Monitor

Industrial overvalued, but supported by rental outlook

Rising equity earnings yields and government bond yields squeezed property valuations in Q3. While pricing still looks reasonable at the all-property level, the industrial sector is starting to look overvalued on a historical basis, with yield falls showing no sign of slowing. At this stage, we think that industrial valuations are justified by the sector’s solid prospects for rental growth. But we expect 10-Year Treasury yields will rise to 1.6% by end-2021 and 2.25% by end-2022, which will squeeze property valuations further.

24 November 2021
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