Mortgage rates have continued to fall, hitting a record low 3.14% at the end of July. Alongside the reopening of parts of the economy, and pent-up demand from the spring, that has helped home sales bounce back strongly from their COVID-related dip. Indeed, the June pending home sales index implies existing home sales will reach a 13-year high in July. However, tighter credit conditions, a lack of inventory and elevated unemployment mean sales will soon hit a ceiling. The recovery in demand is good news for homebuilders and starts are set for a decent rise over the coming months. With so few people moving, apartment vacancy rates have seen only a small rise. But net absorption rates have fallen to 11-year lows, and we expect rental growth will continue to fall back.
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