The U.S. Property Market is Firing On All Cylinders

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The U.S. Property Market is Firing On All Cylinders

June 03, 2016

 If you have a property to sell in the USA, we have good news to report. The U.S. property market has never been healthier. Property prices have risen to the pre-2008 highs, but the difference is that, this time it is for real, and not fuelled by debt alone.

Now, the economy isn’t perfect. Wage growth still isn’t as fast as it should be and the stock market remains turbulent. Many big retailers are struggling, including Target and Macy. There’s been a hike in the oil prices, which has been alarming and could dampen consumer sentiment. 

The housing market, however, has been the standout performer. It is stronger than ever, and home prices are hitting record highs. Take for instance the shares of the #1 property portal in the U.S., the home price tracker, Zillow – it is up by 20 percent this year. This indicates that more people are buying property and the growth in home values is only natural.

Matthew Kaiser, MD and portfolio manager at Goldman Sachs Asset Management, said in an interview with The Sunday Times: "Real estate markets have largely healed from the damage done during the housing bubble and commercial property bubble of 2005-07. We see fundamentals in these markets nationally as being quite good."

"Importantly, the labour market remains quite strong, unemployment is down to 5 per cent, and that's certainly been a goal of the Fed and its policy, in terms of getting the economy to move again. That has positive implications for residential property markets as consumer confidence and incomes improve - they are more likely to move out of their parents' homes or buy their first home,” Mr. Kaiser added.

 Higher home prices could possibly lead to higher consumer spending. That’s because any bounce in housing sales and home prices causes consumers to start spending more. Luxury home builders such as Toll Brothers, for example, are experiencing a sharp increase in their share prices.

What this has created is a trickle-up effect. As more first-time buyers move out of their parents’ home and enter the property market, it becomes easier for people to sell. There is no reason to believe as yet that the rise in home prices could lead to a real estate bubble such as the one seen in 2007-08. 

But then it is important to understand that the cause of the previous recession rarely becomes a cause of a new recession. The cause of the 2008 recession, for example, had nothing in common with the cause of the 2000 recession. The 2000 recession was caused by the bursting of the tech bubble while the 2008 recession was because of the subprime mortgage crisis.

So even if a recession were to occur in the near future, it is likely to be because of a completely new set of reasons, unlike any that the U.S. property market has experienced so far. However, there doesn’t seem to be any sort of excess in the property market today as seen 2008 and even in 2000.  This is a good sign indeed.

The recovery in the energy markets should have a positive impact on home prices in oil producing states such as Texas, Louisiana and North Dakota. Banks in particular would feel relieved at the rise in home prices across America.

We are in an election year in the U.S., and there is a lot of uncertainty over who will be elected as the President in the election to be held this November. Is it going to be billionaire Donald Trump or is it going to be Hillary Clinton? But there is no question that whoever becomes the new President of the United States, will find the property market to be in a healthy state.