Despite a continuous slowdown in population growth over the years, the United States maintained an approximately 0.9% high growth rate until last year, significantly surpassing the population growth rate of China, due to the large number of births and net immigration. Last year, the U.S. population was about 307 million, with an increase of approximately 2.6 million, primarily due to over 4 million births and a net immigration inflow of over 1 million. Additionally, the estimated number of marriages last year was about 2.1 million, while the number of newly completed homes was only over 700,000!
Entering this year, the population growth rate in the United States remains high, and with the economic recovery, employment numbers are also on the rise.
New housing supply continues to be low.
Although the U.S. real estate market rose from 2003 to 2006, attracting a lot of speculative demand, leading to an excess inventory of second-hand homes in 2007, after three years, much of the second-hand home inventory has been absorbed. It is believed that this year, the inventory of second-hand homes should drop to a sustainable level. If the U.S. population continues to grow rapidly while new housing supply remains low, the inventory of second-hand homes may even be insufficient next year!
The average price-to-income ratio of second-hand homes in the U.S. has already dropped by about three times to a historically low level, indicating that housing prices are very affordable and there is no bubble! As the U.S. economy recovers, especially with the non-manufacturing sector having resumed hiring by May, personal income accounts are showing signs of recovery!
The household net worth, which reflects the financial strength of U.S. households, has already begun to rise again, as private asset prices have significantly rebounded, while private debt has gradually decreased. As a result, private net worth has recovered, directly driving an increase in private consumption, which accounts for over 70% of the U.S. economy! Economic growth will inevitably drive up the prices of various assets, including stocks and housing!
Private net worth is recovering.
The extremely rapid population growth in the U.S. not only far exceeds the growth of consumer product inventories but also significantly surpasses the growth of new housing completions, creating a highly favorable market condition of supply not meeting demand! Historically, whenever such a supply-demand imbalance occurs, U.S. housing prices tend to rise for three to four years! Moreover, the long-term rise in the U.S. real estate market has often been accompanied by prolonged economic growth!
The European debt crisis has revived the U.S. real estate market, pushing mortgage rates down to below 5%.
The European sovereign debt crisis, which has caused turmoil in global markets, has unexpectedly brought good news to U.S. property buyers— as overseas hot money flows into the U.S. to avoid the storm, mortgage rates in the U.S. have been pushed down to below 5%, reaching a nearly 50-year low. Another set of data released on the same day showed that sales of existing homes in the U.S. increased by 7.6% month-on-month in April, reaching a high level not seen in five months.
In fact, at that time, the Federal Reserve had ended its $1.25 trillion bond purchase program, and the market was concerned that mortgage rates would rise as a result, leading to a return to a sluggish real estate market. However, in April, the spread of the eurozone sovereign debt crisis caused hot money to flee the European market and continuously flow into the U.S. for safety, resulting in U.S. mortgage rates hitting new lows, unexpectedly boosting home sales for the month. According to data provided by the National Association of Realtors, sales of existing homes in the U.S. increased by 7.6% month-on-month in April, seasonally adjusted at an annual rate of 5.77 million units, indicating that the foundation for the continued recovery of the U.S. housing market has been established.
"The European sovereign debt crisis is the 'driving force' behind the decline in U.S. mortgage rates." Economists generally agree with this view, while also expressing concern that it may adversely affect global economic recovery. U.S. mortgage rates are closely linked to the yield on 10-year U.S. Treasury bonds. Analysts believe that a large amount of capital fleeing Europe for safety will push up U.S. Treasury prices. Historically, this phenomenon (the decline in borrowing costs due to a debt crisis) is not the first time. In the fall of 1998, when emerging markets, especially Russia, faced debt defaults, U.S. homebuyers also benefited significantly.
However, as the U.S. government's tax relief policy is set to expire on June 30, it is expected that the booming demand in the housing market may be impacted in the coming months.
In the U.S. housing market, sales of existing homes are the main force, accounting for about 85% of total housing market sales. Since the bursting of the U.S. housing bubble in early 2006, the U.S. housing market has been undergoing severe adjustments and has become the root cause of this financial crisis.
U.S. housing prices may gradually rebound starting next year.
92 economists and real estate analysts surveyed by investment firm MacroMarkets believe that U.S. housing prices will gradually begin to rebound starting next year.
The analysts surveyed expect, on average, that the S&P/Case-Shiller National Home Price Index will rise by about 12% over the five years ending December 31, 2014. As of December 31 last year, the index had fallen by about 28% from the peak reached in mid-2006.
Some respondents have expectations for housing price trends that diverge significantly from the average. Deutsche Bank economist Joseph LaVorgna predicts that housing prices will rise by 37% by the end of 2014. Anthony Sanders, a professor of real estate finance at George Mason University, and Gary Shilling, president of economic research firm A. Gary Shilling & Co., both believe that U.S. housing prices will decline by about 18% by then.
Shilling's firm provides economic consulting and investment advice, and he believes that the oversupply of housing, including foreclosures, will weigh on prices. LaVorgna, on the other hand, believes that the rapid rebound in the job market should be able to absorb most of the housing supply. He adds that most of the excess supply is located in remote or economically depressed areas, which have little relevance to most potential buyers, who will drive up prices in desirable locations.
One of the co-founders of MacroMarkets, based in New Jersey, is Robert Shiller, an economist from Yale University who was involved in creating the S&P/Case-Shiller Home Price Index. The securities portfolio established by MacroMarkets allows investors to bet on the direction of various assets, including changes in housing prices. MacroMarkets states that this survey is the first monthly series to interview about 100 analysts.
Shiller's own opinion was not reflected in this survey. In an interview, he stated that the average forecast of a 12% increase in housing prices over the next five years is "a reasonable scenario." During the peak of the real estate market, Shiller received significant attention for his bearish comments on housing prices. His views were much more pessimistic than those of most people at the time, but ultimately, he was the only one who accurately predicted the outcome.
