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Mortgage Applications (Apr.)

The rise in mortgage rates to a seven-year high of 4.8% over April has had contrasting impacts on refinancing and home purchase applications. Refinancing applications fell, approaching a 10-year low, while home purchase applications jumped to within sight of a nine-year high. But once the surge in applications from households seeking to beat further rate increases passes, the lack of inventory implies demand for home purchase mortgages will fall away over the next year.
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More from US Housing

US Housing Market Update

Mortgage debt service ratio to remain low

The surge in mortgage rates has led to a sharp deterioration in home affordability. But that doesn’t mean the mortgage debt service ratio, the share of disposable income spent on mortgage payments, will also surge from its current low level. Existing borrowers are protected by long-term fixed mortgage rates, and tight credit conditions argue against a large rise in debt-to-income ratios for new buyers. While home sales will take a hit from higher interest rates, the housing market will remain resilient to future shocks.

19 May 2022

US Housing Market Data Response

Existing Home Sales (Apr.)

Existing home sales fell once again in April, although for now they remain above their pre-COVID-19 level. But, with mortgage rates set to stay high and credit conditions unlikely to loosen significantly, sales will fall further this year. Indeed, buyer traffic dropped sharply in April. We expect sales will fall back to around 5m annualised by end-2022.

19 May 2022

US Housing Market Data Response

Housing Starts (Apr.)

Housing starts dropped by a marginal 0.2% m/m in April, driven by the single-family sector which also saw building permits fall for the second month in a row. Housing demand is faltering due to a surge in mortgage interest rates to a 12-year high, which helped push homebuilding confidence to a two-year low in May. That said, pent-up demand from the past couple of years means we are not expecting a crash in housing market activity, and single-family starts will fall gradually to around 1m annualised by end-2022.

18 May 2022

More from Capital Economics Economist

Emerging Europe Economics Update

What should we make of Russia’s data revisions?

The upwards revisions to Russia’s industrial production figures have raised concerns about the quality of the data but, based on the figures released so far, the new series does seem to reflect economic conditions more accurately than the older series.

29 June 2018

Middle East Economics Update

Egypt rates on hold, easing cycle to resume in September

The Egyptian central bank’s decision to leave interest rates on hold (rather than lower rates) was a response to recently-announced subsidy cuts that will push up inflation. But the easing cycle is likely to resume at September’s MPC meeting. And we still think interest rates will, ultimately, be lowered by more than most analysts expect over the next couple of years.

28 June 2018

Energy Focus

Is the sun setting on the oil market?

Slowing economic growth and rapidly rising fuel efficiency, partly due to a surge in the number of electric vehicles, mean that growth in demand for oil will slow and eventually peak over the next twenty years. At the same time, plentiful oil reserves mean that supply should be ample. Indeed, the marginal cost of production is likely to fall as OPEC loses its pricing power and advances in shale technology force more expensive forms of production out of the market. As a result, we expect real oil prices to trend down over the next two decades.

28 June 2018
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