More buyers, increased sales and higher prices are set to characterise the US property market for the rest of this year. With the job market booming and the US economy growing, experts predict the housing shortage will continue at least until 2017.
These are the main conclusions in the Economic and Forecast Update published at the beginning of this month by the National Association of Realtors (NAR). In the report, NAR Chief Economist Lawrence Yun takes a look at the current situation in the US economic and property markets, and finds that although the economy isn’t moving as fast as originally predicted, thousands of jobs are being created and Americans are buying plenty of property.
US Economic Outlook
In the economic section, Mr Yun predicts a 3 per cent growth in the national GDP rate for Q3 and believes the US economy will grow by around 2.1 per cent this year. He says this rate is “not bad, but not great”, although he points out that consumer spending is growing fast, particularly in the area of household furnishings and fittings. He believes that the 6 per cent rise in spending on these items in Q1 this year will be repeated in Q2, reflecting the surge in the property sales.
He also reports that the employment market in the US is buoyant with some 2.5 million new jobs expected to be created this year. This growth with the associated rise in household wealth is one of the main drivers behind the surge in the US property market.
US Property Outlook
Last May was an exceptional month for property in the US as sales for all types of homes reached their highest levels for some years. The number of sales of existing properties was the highest since 2009, new home sales the biggest for the last seven years and licences to build new homes soared to an eight-year high.
May’s surge in sales mirrors a trend for this year since “buyers are coming back in force,” says Mr Yun. The NAR report concludes that 5.8 million properties in the US will be sold this year, a 7 per cent rise on 2014. “The improving economy is providing the necessary incentive and financial capacity to buy,” said Mr Yun.
In a scenario where more people are buying, the US property inventory remains low. NAR highlights two extreme examples, Denver and Seattle where “the inventory condition is unreal – less than one month’s supply”, but the situation is similar across the board. The supply of single family homes in Florida dropped to 4.7 months in May and just 2.9 months’ inventory was available for properties in Houston.
The NAR report believes that the main reason behind the depressed supply is the low building rate for new homes. This has been the case for the last five years and although homebuilders are gradually constructing more, the rate still falls behind the typical level of 1.5 million new homes a year. 1 million were built last year and NAR believes that 2017 may be the year the figure reaches 1.5 million.
In the meantime, the NAR predicts a continued shortage of properties in the US and steady house price growth as a result. “House price gains are beating wage-income growths by at least three or four times in most markets,” says the report and predicts an increase of at least 7 per cent over this year.
Source: National Association of Realtors