Housing market slowdown to persist

Housing market activity has experienced a marked slowdown since the start of the year, with mortgage applications, home sales, housing starts and house prices all losing momentum. Higher mortgage interest rates look to be the primary cause, although a lack of affordable homes for sale is not helping matters. Interest rates are set for a further gradual rise this year and, with inventory levels likely to remain close to record lows, activity levels and house price pressures will be subdued for the next year or so. But the fact that supply is constrained will prevent an outright fall in house prices. Growth will instead slow to zero by 2020. The drop in home sale looks to be supporting rental demand, with evidence that the market is starting to tighten. Combined with higher earnings growth, that will offer some support to rental growth over the next year.