Mortgage rates are on the rise, and we expect the 30-year rate will increase to 4.0% by end-2022 and 4.5% by end-2023. While that only takes mortgage rates back to where they were in early 2019, house prices have risen 30% since then. With mortgage lending standards set to only be eased gradually, that means mortgage payments as a share of income will rise to their highest since late 2007. Alongside low inventory, that will cut existing home sales in 2022. But the lack of existing inventory will support new home sales and single-family housing starts, with completions set to catch-up as material shortages ease later in the year. Affordability constraints will also bring house price growth down to 3% y/y by end-2022. Strong rental household formation has led to swift fall in rental vacancy rates and a boom in rental growth. But there are signs that this is now easing, and the demand/supply balance will bring a further slowdown this year as more apartments are completed.
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