US housing stages ‘lopsided’ recovery
2015-07-06
The lasting legacy of the US housing crash has ranked at the top of the so-called "headwinds" that Federal Reserve policy makers such as Janet Yellen cite when discussing America's economic prospects.
A host of indicators are suggesting now that, even if the property market remains well below its boom-time highs, it is firmly in recovery mode.
An acute lack of construction at the lower end of the market is creating a tight supply of housing, driving up rents and pushing up prices of affordable homes to levels reached in 2006.
With access to credit far more constricted than it was before the financial crisis and income growth depressed, home ownership rates have fallen to 20-year lows, as many younger Americans are locked out of property ownership.
Mr Khater said: "The property market is strengthening, but it's a complex picture that's by no means good news for all Americans."
Back in 2013 US housing hit a setback associated with a 100 basis-point upward lurch in mortgage rates induced by the Fed's so-called "taper tantrum". In recent months it has seen renewed momentum, however. Existing home sales rose to an annual rate of 5.35m in May, according to the National Association of Realtors, the fastest pace since 2009.
Rising values are pushing up equity in the housing market, with low interest rates helping for those who can qualify for home loans. In addition, real disposable incomes have risen 4 per cent nationally over the past four quarters.
While an increase in interest rates by the Federal Reserve could impact affordability, Tim Hopper, chief economist at TIAA-CREF, a financial services company, argued that US households are better positioned to weather higher borrowing costs. "The consumer is in much better shape than just a few years ago," he said.
Nevertheless, there were still 5.1m mortgaged houses in negative equity in the first quarter, compared with 5.4m at the end of last year, according to CoreLogic data. Poorer neighbourhoods tend to have very high concentrations of negative equity, underlining the long shadow of the property crash and deeply divided fortunes now characterising the housing market.
Among the lasting legacies of the downturn have been tightening lending standards, a shift to renting, and a decline in rates of home ownership. The home ownership rate at the end of last year was at 64.5 per cent, erasing most of the increase over the previous two decades. Between 2006 and 2013, there was a 3m increase in single family home rentals.
With construction of housing remaining depressed, households are encountering a tight supply and surging rents — with the national vacancy rate near its lowest in 20 years. This is putting acute pressure on many people's finances. In 2013 almost half of renters had housing cost burdens, including more than a quarter with "severe" burdens — paying more than 50 per cent of income for housing, according to Harvard's Joint Center for Housing Studies.
Prices of lower-end homes — defined as properties at up to 75 per cent of the median price in the metro area — broke through their 2006 peaks in April, according to data from CoreLogic, as values were boosted by low levels of affordable property construction and heavy demand from rental landlords.
"While there generally isn't a lot of inventory anywhere, inventory of for-sale homes at lower prices is especially scarce," said Leonard Carl Kiefer, economic research director at Freddie Mac. Investor demand for rental property has "put more upward pressure on lower-priced homes relative to higher-priced homes".
That said, the property market has been strong enough to propel a rise in construction activity, with 273,000 workers taken on in the past year. Household formations picked up sharply last autumn, which could support demand for newly built homes.
There are also signs of more new entrants into the property market, with the share of first-timers rising to 32 per cent in May, from 27 per cent a year earlier, bringing new blood on to the market.
Yet the rate of new home starts is still far below the highs before the financial crash, and building activity has been skewed towards high-end apartments.
David Crowe, chief economist at the National Association of Home Builders, said that the industry had no choice but to respond to the strongest areas of demand. As mortgage underwriting standards become more "reasonable" and as the economy strengthens, builders will react and "affordable homes will be available", he said.
Ultra-low interest rates are helping a recovery, but the US property market is some distance from the effervescent conditions that reversed so spectacularly in the financial crash of 2007-09. It is also a market that is seeing a widening divide between the housing haves and have-nots.
Source：CNBC
A host of indicators are suggesting now that, even if the property market remains well below its boom-time highs, it is firmly in recovery mode.
The Case-Shiller index of home values in 20 cities rose 4.9 per cent from a year earlier in April, according to data released Tuesday, with values in Denver and San Francisco rising around 10 per cent from a year earlier. That came after the National Association of Realtors index of pending home sales hit its highest level since April 2006.
An acute lack of construction at the lower end of the market is creating a tight supply of housing, driving up rents and pushing up prices of affordable homes to levels reached in 2006.
With access to credit far more constricted than it was before the financial crisis and income growth depressed, home ownership rates have fallen to 20-year lows, as many younger Americans are locked out of property ownership.
Mr Khater said: "The property market is strengthening, but it's a complex picture that's by no means good news for all Americans."
Back in 2013 US housing hit a setback associated with a 100 basis-point upward lurch in mortgage rates induced by the Fed's so-called "taper tantrum". In recent months it has seen renewed momentum, however. Existing home sales rose to an annual rate of 5.35m in May, according to the National Association of Realtors, the fastest pace since 2009.
While an increase in interest rates by the Federal Reserve could impact affordability, Tim Hopper, chief economist at TIAA-CREF, a financial services company, argued that US households are better positioned to weather higher borrowing costs. "The consumer is in much better shape than just a few years ago," he said.
Nevertheless, there were still 5.1m mortgaged houses in negative equity in the first quarter, compared with 5.4m at the end of last year, according to CoreLogic data. Poorer neighbourhoods tend to have very high concentrations of negative equity, underlining the long shadow of the property crash and deeply divided fortunes now characterising the housing market.
With construction of housing remaining depressed, households are encountering a tight supply and surging rents — with the national vacancy rate near its lowest in 20 years. This is putting acute pressure on many people's finances. In 2013 almost half of renters had housing cost burdens, including more than a quarter with "severe" burdens — paying more than 50 per cent of income for housing, according to Harvard's Joint Center for Housing Studies.
Prices of lower-end homes — defined as properties at up to 75 per cent of the median price in the metro area — broke through their 2006 peaks in April, according to data from CoreLogic, as values were boosted by low levels of affordable property construction and heavy demand from rental landlords.
"While there generally isn't a lot of inventory anywhere, inventory of for-sale homes at lower prices is especially scarce," said Leonard Carl Kiefer, economic research director at Freddie Mac. Investor demand for rental property has "put more upward pressure on lower-priced homes relative to higher-priced homes".
There are also signs of more new entrants into the property market, with the share of first-timers rising to 32 per cent in May, from 27 per cent a year earlier, bringing new blood on to the market.
Yet the rate of new home starts is still far below the highs before the financial crash, and building activity has been skewed towards high-end apartments.
David Crowe, chief economist at the National Association of Home Builders, said that the industry had no choice but to respond to the strongest areas of demand. As mortgage underwriting standards become more "reasonable" and as the economy strengthens, builders will react and "affordable homes will be available", he said.
Ultra-low interest rates are helping a recovery, but the US property market is some distance from the effervescent conditions that reversed so spectacularly in the financial crash of 2007-09. It is also a market that is seeing a widening divide between the housing haves and have-nots.
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