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Home sales to fall by 35%

Increasingly restrictive measures on people’s movement, and an imminent surge in unemployment, means we expect total home sales will drop by around 35% in the second quarter compared to the end of 2019. But the dip should prove short-lived. Assuming a strong fiscal and monetary policy response, pent-up demand from the spring buying season will help sales recover by the end of the year.
Matthew Pointon Senior Property Economist
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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 Matthew Pointon

US Housing Market Update

House prices will avoid a dangerous bubble

House price expectations have taken off since the start of the year, and that raises the risk of a self-reinforcing bubble forming. However, there are no signs that lenders are rapidly loosening credit conditions on the back of higher house prices, and that argues against a repeat of a mid-2000s credit cycle. Rather, rising mortgage interest rates, a stabilisation in down payments and stretched affordability mean that house price gains will slow over the second half of the year.

1 June 2021

US Housing Market Update

Will expensive home sales keep booming?

Sales of expensive homes have done particularly well over the past year, with the share of existing homes sold for over $500,000 surging from 15% a year ago to a record high 26% in April. An extreme shortage of cheaper homes for sale, coupled with a jump in purchasing power thanks to larger down payments and lower mortgage rates, helps explain that shift. Inventory shortages will continue to drive buyers toward expensive homes, but purchasing power is set to ease. Overall, we expect the share of new and existing homes sold for more than $500,000 to edge back to around 20% to 22% over the next couple of years.

26 May 2021

US Housing Market Data Response

Case-Shiller/FHFA & New Home Sales (Mar./Apr.)

House price growth accelerated in March, reaching a record high of 13.9% y/y on the FHFA measure. But there are signs that the boom in prices is now weighing on housing demand and activity. New home sales dropped 5.9% m/m in April, and a steady decline in mortgage applications for home purchase points to a further moderation in sales over the next couple of months. That will help take some of the heat out of the market and bring house price growth back down to earth by the end of the year.

25 May 2021
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