We expect mortgage rates to continue falling, but not by enough to fully offset the effects of mortgage rate ‘lock-in’. As a result, although we expect existing home sales to rebound, we forecast that they will still be a muted 4.8 million even in 2026. The corresponding lack of resale home listings means borrowers will continue to look more to new homes. We expect new home sales to rebound to 750,000 annualised by end-2026, providing support to single-family home construction as well. Nevertheless, home listings have crept up this year and we expect that trend to continue given the degree of pent-up selling demand. Rising supply will slowly erode seller power, with house price growth slowing to 3.0% in 2025 and 2.5% in 2026. In the rental market, even though demand remains strong, it is being outpaced by growth in supply. We expect that imbalance to persist through to mid-2025, before the vacancy tops out at 6.1%. When new supply drops back from late 2025 onwards, rental growth will rebound, but only to between 2% and 3% y/y. The sector still looks overvalued so we think values will fall by a further 10%.
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