How much longer can the U.S. housing market grow at this amazing rate?
January 18, 2017
Nothing seems to stop the U.S. housing market. House prices continue to rise; demand is strengthening, and residential construction activity is also rising.
During the year to April 2016, S&P/Case-Shiller seasonally-adjusted national home price index increased 5% (3.3% in real terms), slightly up from a y-o-y rise of 4.3% a year earlier, according to Standard and Poor’s. The seasonally-adjusted purchase-only U.S. house price index from THE Federal Housing Finance Agency (FHFA) rose 5.9% (4.6% in real terms) y-o-y in April 2016.
All 20 major U.S. cities experienced relatively strong house price hikes, withPortland posting the highest increase of 12.32% during the year to April 2016, according to Standard and Poor’s. It was followed by Seattle (10.67%), Denver(9.45%), Dallas (8.65%), San Francisco (7.77%), Tampa (7.77%), Atlanta(6.51%), Miami (6.44%), and San Diego (6.34%).
The Pacific region had the highest house price increases (8.6%) during the year to April 2016, followed by the Mountain region (7.7%) and the South Atlantic region (7.1%), according to the FHFA.
The median sales price of new homes sold in the U.S. rose by 1% during the year to May 2016, to US$290,400, according to the U.S. Census Bureau.
Demand has been shooting up. New home sales rose by 17.9% y-o-y to Q1 2016, to 132,000 units, according to the U.S. Census Bureau, rising in all regions. Likewise, existing home sales increased 5.1% in March 2016, to an annualized 5.33 million units, according to the National Association of Realtors (NAR).
U.S. homebuilder sentiment in June 2016 was at 60, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) – the highest reading this year. A reading of 50 is the midpoint between positive and negative sentiment.
Construction activity is also rising. New privately-owned housing unit starts were up by 10.1% y-o-y during the first four months of 2016, while housing completions increased by 8.9%, according to the U.S. Census Bureau.
CoreLogic projects a 4% to 5% increase in its national home price index this year. NAR expects existing home sales to rise by 3% to 5.45 million in 2016, with the formation of 1.25 million new households.
The U.S. economy grew by an annualized 1.1% in the first quarter of 2016, after growth of 1.4% in Q4 2015, 2% in Q3 2015, 3.9% in Q2 2015 and 0.6% in Q1 2015, amidst weakening exports and investment caused by strong dollar and lower oil prices, according to the U.S. Bureau of Economic Analysis. The world's largest economy is expected to grow by another 2.4% this year, at par with the growth rates seen in the past two years, according to the IMF.