U.S. housing market remains surprisingly robust
After five years of strong house price growth, the U.S. housing market remains strong. Demand is strengthening, and residential construction activity is rising.
The was a 5.83% rise in the S&P/Case-Shillerseasonally-adjusted national home price index during 2016 (3.71% in real terms). This came after y-o-y rises of 5.27% in 2015, 4.52% in 2014, 10.74% in 2013, and 6.47% in 2012, according to Standard and Poor’s.
There was a 6.2% rise in theseasonally-adjusted purchase-only U.S. house price index from the Federal Housing Finance Agency (FHFA) (4.07% in real terms) in 2016.
All 20 major U.S. cities experienced relatively strong house price hikes, with Seattle posting the highest increase of 10.75% during 2016, according to Standard and Poor’s. It was followed by Portland (10.01%), Denver (8.89%), Tampa (8.33%), Dallas (8.06%), Miami (6.79%), Boston(6.31%), Detroit(6.27%), and Atlanta (6.21%).
The Mountain region had the highest house price increases of 8% during 2016, followed by the Pacific region (7.4%), South Atlantic (6.9%), Central region (6.2%), and the West South Central region (6.1%), according to the FHFA.
The average sales price of new homes sold in the U.S. rose by almost 12% during the year to February 2017, to US$390,400, according to the U.S. Census Bureau. In contrast, the median sales price of new homes sold dropped 4.9% to US$296,200 over the same period.
Demand has been shooting up. Sales of new single-family houses rose by 12% to 561,000 units in 2016 from the previous year, according to the U.S. Census Bureau. Likewise, existing home sales were up by 3.8% to 5.45 million units in 2016, the highest level since 2006, according to the National Association of Realtors (NAR).
“Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” said Lawrence Yun, NAR chief economist.
U.S. homebuilder sentiment surged to 71 in March 2017, up from 65 the previous month and the highest level since June 2005 according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). A reading of 50 is the midpoint between positive and negative sentiment.
Construction activity continues to rise strongly. In February 2017, new housing starts rose by 6.2% y-o-y to a seasonally-adjusted annual rate of 1,288,000 units, while completions were up 8.7% to 1,114,000 units, according to the U.S. Census Bureau. Building permits (private) rose by 4.4% y-o-y to a seasonally-adjusted annual rate of 1,213,000 units in February 2017.
The U.S. housing market is expected to remain strong. NAR projects about 4% increase in the national median existing-home price this year. In addition, sales are forecast to grow by around 2% to 5.46 million this year and by another 4% to 5.68 million in 2018.
The U.S. economy grew by 1.6% in 2016, down from 2.6% growth in 2015 and the lowest level since 2011, according to the U.S. Bureau of Economic Analysis. The economic deceleration was mainly due to the slowdown in private consumption, private inventory investment, fixed investment, and government spending. The world’s largest economy is expected to grow by 2.2% this year, and by 2.1% in 2018, according to the IMF.