US housing demand is already strong and a recent article by a leading analyst of the US property market expects it to soar. This pent-up demand will lead to even higher prices and buoyant sales. And the southern states such as Florida and Texas are set to benefit hugely.
In a recent column for Forbes, Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), looks at the likely direction of US housing demand over the next decade. To make his predictions, he examines the recent performance of the US housing market, sales in January this year and population predictions. His conclusions make good reading for those planning to invest in US property in the near future.
Job creation boosts US housing demand
Sales boomed in the US last year and the first month of this year also saw brisk movement. Yun, however, believes that sales will set a more moderate pace for the rest of the year and eventually rise by 2.2 per cent.
He points out that supply is generally well below demand. “Inventory is still at grossly inadequate levels,” he says, particularly in a scenario of continual job creation. 2016 saw some 2.2 million new jobs while this year got off to an exceptional start with 227,000 new jobs in January.
According to Yun, historic figures show that one new housing unit is needed for every two new jobs. In 2017, there will be demand for 1.6 million new homes while just 1.3 million housing starts will take place.
Along with job creation, population growth plays a huge part in US housing demand. The US population is set to grow by 27 million over the next ten years, although this growth will not be uniform across the demographics.
The number of people in their 20s will see one of the smallest increases while those in their 30s will rise by 12 per cent to 48 million. This population group is traditionally made up of first-time buyers so demand for starter homes will see a corresponding increase.
The group with the largest growth in size will be those residents over 65. According to statistics cited by Yun, the number of people over retirement age in the US will go up by 35 per cent by 2026. This rise will have an important effect on US housing demand, particularly in states popular with retirees.
“Housing demand in warm weather and the income tax-free states of Florida, Tennessee and Texas is set to boom,” Yun concludes.
Property predictions for 2026
Barring unforeseen economic conditions Yun expects sales to continue at a rate of around 6 million a year over the next decade. This trend continues the current one. House prices will also reflect their current upward tendency, although continued US housing demand will pressurise prices further. Yun believes that median prices will reach US$330,000 by 2026, a rise of 41 per cent on the current US$234,000.
“Given the continual US housing demand and rising prices, investment in an area with strong job creation or one that appeals to the retiree population certainly makes sense,” says Dies Poppeliers, Manging Director of BRIC Group. “In this respect, both Florida and Texas are worth considering.”
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.