From Fortune:

Morgan Stanley’s co-head of U.S. Securities Products Research, James Egan, indicates that mortgage rates have fallen from 8% to the 6% range, improving housing affordability. Report finds that despite the significant year-on-year increase of October’s 4.8%, residential mortgage rates substantially declined in December and affordability calculations. Morgan Stanley predicts home prices mildly decreasing through 2024.

Affordability forecasts show expectation of a mild decrease home prices despite improved affordability and increasing sales. If interest rates remain at their current levels, affordability at its lowest level since April has already improved. Pending sales and mortgage purchase applications have seen declining rates of decline. Sales could increase 2.5% in existing home sales year-over-year and 7.5% in new home sales.

Existing home sales have dropped as homeowners refuse to sell for fear of losing low mortgage rates. Nearly 87% of borrowers have a rate less than or equal to 5%, with almost 75% having a rate less than or equal to 4%. Even still, home supply will increase, as existing home sales saw a rise in November. Months of supply have increased to its highest level since May 2020.



Read more: Morgan Stanley home price outlook unchanged, sees affordability of early 2021 levels