Excerpt from the 4Q18 Witten Advisory: The “double-barreled blitz” of rising mortgage rates and solid increases in home prices should result in waning homeowner affordability. Home appreciation reached nearly 6% over the past year, while mortgage rates rose by 60 bps, pushing principal and interest payments up almost 14%. Double-digit P&I increases should continue through 2019, after which price increases should ease.
While a forecast of slowing home prices might sound scary, there’s no repeat of the housing bust on the horizon. The above chart points out that the reason is because we currently have a severe housing shortage across the country, and this dearth should continue in the coming years.
Despite household growth ebbing to 1.2 million annually and new completions firming to near 1.3 million, overall vacancy rates would edge only slightly higher as the overall housing market remains undersupplied.