RBC forecasts weak housing data following recent data
The US housing sector remains trapped in a deep freeze as high interest rates continue to weigh heavily on activity, according to a new analysis by RBC Economics. The report, written by senior economist Mike Reid and economist Carrie Freestone, said that while recent labor and inflation data have shifted expectations around monetary policy, housing will remain collateral damage of elevated borrowing costs.
The economists noted that recent revisions to nonfarm payrolls and a surprise increase in producer prices have complicated the Federal Reserve’s outlook ahead of its September meeting. While markets had anticipated a rate cut as early as next month, RBC now expects the Fed will wait until December before lowering interest rates.
Housing permits and starts remain weak
Indicators point to little relief for the housing market in the near term. Single-family building permit issuance was “exceptionally weak” in June, while multifamily permits bottomed out in May. As these feed into housing starts with a lag, RBC forecasts another soft print for starts this month.
The analysis anticipates only a modest uptick in building permits, which remain at “exceptionally low levels.” Mortgage loan volumes have edged higher on a year-over-year basis, but not enough to meaningfully lift supply.
Existing home sales to disappoint
RBC also projected that July’s existing home sales, scheduled for release this week, will likely show further weakness. Pending sales volumes in June were subdued, and Redfin data indicated the highest home cancellation rate in June since at least 2017. These cancellations underscore the challenges households face in the current rate environment, where affordability remains stretched.
“The US housing backdrop has been largely stagnant this year, as housing remains collateral damage of a higher rate environment,” the report said.
Jobless claims steady, but risks loom
Beyond housing, RBC economists highlighted jobless claims as another indicator to watch. They forecast initial claims of about 220,000 for the week of Aug. 16, broadly unchanged from a month earlier. Continued claims declined recently, offering some relief, but any future deterioration is expected to appear in trade-exposed sectors affected by tariffs.
The report stressed that inflationary pressures stemming from tariffs will continue to filter through the economy, while the housing sector—highly sensitive to interest rates—remains frozen.
“We continue to expect limited upside in the sector,” the economists wrote, adding that high borrowing costs at the long end of the curve remain a persistent drag.
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