Housing demand is finally responding to a strong economic backdrop and record low mortgage interest rates. But with the numbers of homes for sale at historic lows, that increased demand is feeding through to higher prices rather than increased transactions. However, given the very high level of house prices, there is a limit to how much further they can rise. Beyond 2015 a gradual rise in interest rates, and increase in the supply of homes from both the new and existing sectors, will lead to a prolonged period of prices growing below earnings.
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