In the last few of months the amount of positive data about the American housing market has been increasing.
The trusted Case-Shiller index began recording price increases in Q2, and these were matched by reports of increasing demand, and in line with reports that the US economy was also on the road to recovery.
The US economy grew by 0.9% in the third quarter, but is the US housing market really on the fell of a V-shaped recovery, or is this simply a bounce?
It all started back in Q2... Case-Shiller ended months and months and months of falling prices across the board in August, when they reported that prices had only fallen in 5 out of the 20 states covered in the index. Prices had either risen or stayed the same in the other 15.
This is when reports began to circulate from various sources that the US housing market had stabilised and was on the road to recovery. Throughout July and August more positive data was revealed for June, US construction spending saw an unexpected rise of 0.3%, compared to a 0.8% fall the month before, sales increased by 11% on the month, and pending sales by 3%.
But at the same time, there were also countless news stories on the rising number of repossessions throughout August. Even now there are literally thousands of homes entering the repossession process every week, and many more struggling to avoid it. Unemployment also showed some signs of turning around, but has as yet failed to do so in any real way.
And the picture has remained pretty much the same since August: there have been many positive reports of increased and increasing sales, a lot of positive data on prices, while the problems of repossession and unemployment loom large, threatening to pull the rug out at any moment.
Bringing it back to today, a Wall Street Journal report reads:
Home sales have increased from the severely depressed levels of 2008. The inventory of unsold homes listed for sale also is down. Bidding wars are breaking out for foreclosed homes in the sorts of neighborhoods (near jobs and decent schools) that attract both first-time buyers and investors seeking rental properties.
But more than 6.7 million U.S. households with mortgages, or about 13%, are behind on their payments or are in the foreclosure process, according to the Mortgage Bankers Association. Eventually, many of them will lose those homes, sending more supply onto the market. Unemployment has continued to rise, and the housing market is unlikely to show a sustained recovery until job growth resumes.
The picture of the US housing market as a whole is very similar to that of the UK, but on a much larger scale: there are some positive signs; the people who can afford to buy in cash or get affordable finance, are taking advantage of the bargains and repossessed properties. Meanwhile continually rising repossessions and unemployment threaten to send prices back into freefall at any moment.
Some people have also suggested that it was only the government incentive package, which paid a percentage of a first time buyer's house purchase that was causing the positive data. That scheme terminates this month.
So, the answer to the question: is the US housing market recovering is a resounding maybe according to official data and mainstream sources.
In my personal opinion: what we have seen is not the beginning of the recovery proper, it has been a bounce caused by the government stimulus and improved sentiment. Repossessions and unemployment will begin to re-exert downward pressure on prices in the next 6 months. The proper recovery will only begin when unemployment begins to fall, and even then price growth will be subdued for 2-5 years as America get's back on its feet and the repossession problem is finally brought under control.
That said: there is always criticism of me and others for even reporting on UK house prices as a whole, when every region is different. And this is even more true in the US.
The same WSJ report tells us that house prices in Summit, N.J., known for good schools and an easy, 45-minute train commute to Manhattan, the median home price in September was up 1.2% from a year earlier, according to Otteau Valuation Group, an appraisal company. While in Atlantic City, N.J., which suffers from too much speculative building of condominiums and weak demand for vacation homes, the median price is down about 12% from a year ago.
I agree, it is slightly pointless to report countrywide prices if you look at it from that perspective, but the average US house price and whether it is rising or falling will always be a focus for global property pundits, especially now we have all witnessed the effect it can have on the global economy.
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