We all knew it would happen and now, the housing market in the U.S. is finally starting to get back on its feet, after five long years of an environment that can only be described as dismal and gloomy. Now though, the market south of the border isn’t only hitting expectations and predictions, but greatly exceeding them. And if there’s anything this market is in want of, it’s inventory if you can believe it.
According to the Bank of America, the “positive feedback loop has begun,” and the stats certainly back that statement up. While they had previously predicted that U.S. home prices would climb 4.7 per cent this year, they’ve now adjusted that to reflect an 8 per cent increase, almost doubling their original prediction. JP Morgan Chase & Co. did more than double their forecast for home prices in the U.S., estimating last week that prices would rise 7 per cent in 2013, and sail through increases of up to 14 per cent by the year 2015.
Paul Diggle, a property economist at Capital Economics, also sees a positive outlook for the U.S., saying that housing prices will rise 8 per cent this year, and 4 per cent for several years afterward. “They’re gaining momentum,” he said. “We think the rebound in the U.S. housing market is sustainable.”
There are several reasons for the rebound, including a steady decline in unemployment last year, and mortgage rates that hit rock-bottom lows. But the biggest reason is certainly a shortage of inventory on the market.
According to the national Re/Max report, February marked the 32nd consecutive month that saw a drop in inventory; and the inventory currently on the market is 29 per cent lower than this same time last year.
The shortage of inventory can also be seen when you look at the amount of time it would take to sell off all the inventory currently on the market. While six months is the amount that shows a balanced market, in 2010 it would have taken 9.4 months to sell it all. Now though, that amount has been reduced to only 4.2 months.
“Building activity has been coming around. It is still below the historical normal but it is on an upward trend,” says Lawrence Yun, chief economist at the National Association of Realtors. “The only relief can come from new builders. Some say the underwater homeowners, as they become above water with prices rising may help the inventory. But the logic is not there. They will be the same people who will be buying. They’re not a net supply to the inventory.”
And while this is obviously good news for our neighbours down south, it’s also good news for us here at home. Not only because a better economy down there means a better economy up here, but also because many Canadians have been eagerly anticipating entering the U.S. market, but have been fearful of the activity seen in it the past few months.
“Over the last three or four years,” says Kimberley Marr, a real estate broker with ReMax Legacy says, “I’ve spoken to a lot of Canadians who were looking at entering into the U.S. market with the intention of buying an investment property, or a property that they hope to use at some point in the future when they retire as snowbirds. Having said that, when a market just crashes, everyone backs off. When they hear reports come from the U.S. saying the market bottomed a year ago, people are feeling more comfortable.”
