New Home Sales (Jun.)

New homes sales dropped for the third month in a row in June, as homebuilders restricted sales in an effort to catch-up with the backlog of homes sold last year. But builders have reported continued strength in prospective buyers, and that implies sales will rise later this year as supply improves. We therefore expect new sales will end the year at around 850,000 annualised.
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 Outlook

Home sales to ease even as mortgage rates stay low

Even as mortgage rates have remained low, housing market activity has dropped back as booming house prices, tight credit conditions and a lack of inventory have put off buyers. We expect that dynamic to continue over the remainder of the year. While mortgage rates will see only a small rise to 3.5% by end-2021, total home sales will end the year at around 6.5m annualised, down 15% y/y. Low mortgage rates will however support house prices, and we expect growth to only slow to around 10% y/y by end-2021. Single-family housing starts have been constrained by a shortage of materials and labour. While the latter won’t be solved overnight, a sharp drop in lumber prices should help get some stalled projects off the ground and help starts average 1.16m in 2021, a 16% increase on 2020. Rental demand is recovering quickly as cities and offices reopen and households complete delayed moves. With supply also tight, that will drive up effective rental growth to 2.5% y/y by end-2021, and 4.0% y/y by mid-2022.

15 July 2021

US Housing Market Update

Will booming house prices translate into rents?

The recent surge in house price growth to record highs does not automatically mean rental growth is also set to take off. But a strong recovery in rental demand as cities reopen and households make delayed moves, coupled with low vacancy rates, mean rental growth will rise this year. From 1.9% y/y in June, we expect the rent of primary residence component of the CPI to rise to 2.5% by the end of the year, and 4.0% y/y by mid-2022.

14 July 2021

US Housing Market Chart Book

Home demand drops as prices surge

Despite mortgage rates seeing little movement in recent months, mortgage applications for home purchase have dropped to their lowest level since April last year. That implies home sales have further to fall. Booming house prices, which reached a record high 15% y/y in April, and a shortage of inventory are constraining sales. While low mortgage rates mean affordability is still historically favourable, lenders are not easing lending standards and that will be weighing on purchasing power. By contrast, rental demand is recovering as cities have reopened. The recovery in the labour market will cut arrears, and strong earnings will help boost rental growth. Total apartment returns will average a healthy 6% p.a from 2021-25.

7 July 2021
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