Morgan Stanley’s home price outlook is unchanged, but it does see something new in affordability, after a painful year for most homebuyers, as mortgage rates bit in a way they haven’t since the 1980s. James Egan, the bank’s co-head of U.S. securities products research, crunched the data on mortgage rates falling from their recent 8% peak to the 6% range, and sees affordability improving as early as next month to a point unseen since February 2021, which was less than halfway through the pandemic housing boom.
This is needed since “home prices have once again broken through to a new record high,” the note said. Egan and his team cited data showing October’s year-over-year increase of 4.8%. The catch, they say, is that mortgage rates decreased more than 50 basis points in December and close to 70 basis points the prior month. The average 30-year fixed mortgage rate is sitting at 6.8%—much lower than October’s 23-year high, but more than double the 3% range that put a floor under the pandemic era housing boom.
