Record low mortgage rates, pent-up demand from the spring and some movement out of cities have helped drive home sales to 13-year highs. But with inventory falling to record lows, mortgage lending standards tightening and unemployment elevated, new and existing home sales will fall back over the remainder of the year. That will help take some of the heat out of the recent rebound in house price growth. After rising to 5.3% y/y in the third quarter, growth will slow to 2.0% y/y by the end of next year. In contrast to soaring home sales, rental markets have been getting looser, and we expect vacancy rates will rise further to 5.5% by the end of the year. That will push rental growth down to -1.5% y/y over the next couple of quarters. But, beyond that, the lack of homes for sale means rental demand should recover alongside the economy, and yields will ease back over 2021 and 2022.
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