‘It’s never been like this’: Spiraling US house prices worry policymakers
Ten years ago, the average home in Columbus, the state capital of Ohio, sat on the market for almost 100 days before being sold. Today, a similar property sells in just 10 days.
“It’s never been like this,” said Michael Jones, real estate agent at Coldwell Banker Realty with over 20 years of experience in central Ohio. “This is unheard of.”
U.S. policymakers are increasingly concerned about rising house prices for landlords and renters, as the biggest global spike in house prices in at least two decades pushes up the cost of living.
“Today, finding affordable housing in America is harder than at any time since the 2008 financial crisis,” Marcia Fudge, US Secretary of Housing and Urban Development, said in a recent hearing. in Congress.
Nationally, house prices in May were 16.6% higher than the year before, according to the latest update of the S&P Corelogic Case-Shiller Index – the biggest jump in more than 30 years of data and against 14.8% in April.
“A month ago, I called April’s performance ‘really extraordinary’ and [now] I’m running out of superlatives, ”said Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices.
The pace of price and sales growth has been particularly rapid in small towns, suburban enclaves and towns.
Columbus’ housing market has exploded since the start of the pandemic as historically low interest rates, remote working, increased demand for larger homes and a relatively limited supply of homes for sale sparked a food frenzy among potential buyers and a godsend for sellers.
Homes in Columbus have sold faster than in any other major metropolitan area in the United States, according to Zillow, the real estate website. Almost three-quarters of Columbus properties were under contract within a week in April. Other rapidly changing regions included Denver, Colorado, and Salt Lake City, Utah.
The fierce competition means that many properties are selling for a significant premium over their listing price, favoring higher income earners or young first-time buyers whose parents are willing to fork out the cash to win a bidding war.
The average Columbus selling price has jumped 15.8% in the past year, according to Columbus Realtors, the local industry body of which Jones is chairman.
FT Series: Global Real Estate Prices – Raising the Roof
House prices are rising in many large economies, but is it sustainable?
Part 1: How the pandemic sparked the world’s biggest house price boom in more than two decades
Part 2: Buyers are flocking to small towns in America, renewing concerns among policymakers about affordability and risk
Part 3: The Netherlands grapples with the social consequences of rapidly rising house prices
Part 4: Why Berlin tenants want to expropriate their homes from listed German landlords
Part 5: Should house prices be factored into inflation data and what can central banks do about the economic effects?
“People say to me, ‘You don’t like this market?
“I say ‘Not especially’ because I represent both buyers and sellers,” he added. “Someone is a loser here.”
Other places saw even more frantic sales. Median home prices in Austin, Texas increased 40% year-over-year, according to online real estate broker Redfin. Buyers have also flocked to Phoenix, Arizona, where prices have risen nearly 30% over the same period. In Detroit, Michigan, they increased 56%.
Suburban enclaves and small towns have also benefited. Redfin reported last month that median home prices in ‘car-dependent’ US regions had risen twice as fast as those in ‘transit-accessible’ cities since the start of the pandemic – the former gaining 33% while the latter increased 16 percent.
In the 30 largest metropolitan areas in the United States, Columbus, as well as St. Louis, Missouri and Tampa, Florida, have seen some of the largest net increases in the number of people arriving in the region, according to an analysis of records from US Postal Service mailing addresses. changes by commercial real estate and investment company CBRE.
Most of the moves were from the “surrounding area,” defined as being within a few hours’ drive of the owner’s previous address, according to the analysis.
The spiraling house prices are also reflected in the rental market. According to Apartment List, an ad website, the national median rent has risen 11.4% so far this year, more than three times the average increase over the same period over the previous three years. .
“The high cost of housing prevents millions of families from sleeping every night,” Fudge warned. “They wonder if they can afford to keep a roof over their heads – and still manage to keep their lights on, pay for their prescriptions, put food on their tables.”
Industry experts say the pace of price growth is expected to slow as supply begins to catch up with demand.
The number of existing home sales rose 1.4% month-on-month in June, according to the National Association of Realtors. Lawrence Yun, the industry body’s chief economist, said supply had “improved moderately in recent months due to increased housing starts and existing homeowners listing their homes, which has resulted in increased sales “.
Real estate experts and economists surveyed by Zillow expect price growth to peak this year and then come back down.
“At a general level, house prices are unlikely to decline due to tight inventory conditions, but I expect prices to appreciate at a slower pace by the end of the year. “Yun said.
Daryl Fairweather, chief economist at Redfin, said that “homes that have received 20 bids are now only getting two or three.”
But she added that even though “we are already seeing demand starting to stagnate” prices were not dropping significantly, suggesting that concerns among policymakers about affordability are likely to persist.
Fed Chairman Jay Powell recently said the trend today was markedly different from a decade ago which prevented what was then the worst recession since the Great Depression – but he called the housing affordability problem “big”.
“House prices are rising across the country at a high rate,” he told a congressional committee last month.
Although he admitted he was “not motivated by the kind of irresponsible and irresponsible lending that led to the housing bubble that led to the last financial crisis,” he warned that it “makes it harder for entry-level buyers to enter the housing market, so this is a concern.