The latest predictions from Freddie Mac point to 2016 as the best year for property in the US for ten years. Bases its figures on solid job creation, continual household formation and steady price rises pushed upwards by demand, the federal mortgage corporation believes the US property market is set for an excellent year. BRIC Group explains why.
The title of the Freddie Mac report published at the end of March sums up the corporation’s predictions: Housing will have its best year in a decade. The report’s findings back up research carried out by other companies such as Forbes, also pointing to a particularly good year for US property.
Solid job creation
Freddie Mac underlines the resilience of the US employment market, which in the aftermath of the economic crisis has produced some impressive figures. Since 2011, an average of 205,000 new jobs have been created every month in the US. As a result, unemployment has dropped to less than 5 per cent.
This strong job creation is likely to continue, although at an uneven rate depending on the US state. Florida is expected to be one of the top performers this year with experts predicting a rate of 2.2 per cent for this year. In January alone, some 32,300 new jobs were created in the Sunshine State, the highest in the country.
Continual household formation
The steady rise in population and the increase in the number of jobs have led to a rise in the number of households in the US – all of which need housing. According to Freddie Mac, household formation decreased dramatically during the recession and has yet to recover lost ground. However, during the first six months of 2015, 2.2 million new households were formed year-on-year, although this dropped to 800,000 a year over the second half of last year.
The federal mortgage corporation believes this difference in data may well be due to lack of supply and pinpoints the single family home sector as one suffering particularly from a shortage. According to Freddie Mac, the seasonally-adjusted annual rate for single family homes was 822,000 in February, considerably higher than the previous year’s rate. However, this figure remains well off the level seen in 2005 when it was almost 1 million higher. More importantly, the level of new supply still sits “well below what the US will need to meet long-run housing demand,” says the report.
Steady price rises
Analysts are unanimously predicting more price rises for US property this year and they include Freddie Mac. For their part, the federal mortgage corporation believes that house prices will go up by 4.8 per cent by December (against an average of 6 per cent last year) and by 3.5 per cent in 2017. Their long-term forecasts points to an average of 3 per cent annually.
Other analysis expect higher price hikes, particularly in those areas of the country where the property market still has catching up to do. This is the case with Florida property – 7 out of the Forbes 20 2016 Best Buy Cities are located in the Sunshine States. According to Forbes, “the clear takeaway” for 2016 is “the good values to be had in Florida”.
In their conclusion, Freddie Mac highlight the good year ahead for property in the US – “on balance, the housing markets in the US are poised for the best year since 2006,” the report ends. They believe that sales, house prices and new builds will reach their highest level in a decade despite the challenges of a supply shortage and declining affordability.
“Our in-house market research also points to 2016 as ‘a golden year’ for US property,” says Dies Poppeliers, Managing Director at BRIC Group. “Not for nothing are analysts highlighting the excellent opportunities for investment, particularly in key states such as Florida where the buoyant job market is pushing demand for rental property sky-high.”
BRIC Group, an investment company specialising in global real estate opportunities, offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group is also developing The Coral resort, in Northeast Brazil, a luxury beachfront resort with land and villa investment opportunities. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.
Source: Freddie Mac