Record low inventory constrains sales and lifts prices

Housing starts have stalled over the past year, there has been no increase in the number of homes listed and inventory levels have fallen to record lows. That is constraining housing market activity, and putting upward pressure on house prices. There seems little chance of an improvement in inventory this year, so home sales will struggle to gain traction and prices will rise by around 6%. A shift to single-family construction will see inventory levels start to improve in 2018, but progress will be slow. Accordingly, even as housing demand is held in check by tight mortgage lending standards, we expect a further rise in prices of around 4%.