Housing Trend in 2015
To understand the housing trend, let us first look at the overall economy:
After solid GDP growth of 3.9% in the second quarter, nearly all economic indicators in recent months have pointed to a sizable slowdown. Industrial production has been falling for several months, retail sales are barely rising, and exports fell while imports rose in the most recent month from a combination of a strong U.S. dollar and some big countries either already falling into a recession or very close to it. The GDP in the third quarter, therefore, may barely muster positive growth of only 1%, enough to start the flashing yellow warning lights for the risk of a recession.
As such, how is the real estate market playing out and what is the housing trend / outlook? In short there is plenty of pent-up housing demand to keep the positive momentum rolling. Home sales, new construction, and home prices have all been rising and will continue to rise. In fact, it will be housing market gains that will enable the broad U.S. economy to avoid a recession.
Here are the numbers on this year’s growth over last year’s on a year-to-date basis:
- Existing home sales up 7.9%
- New home sales up 17.7%
- Housing starts up 12.0%
- Median home price of sold homes up 6.4%
- Home price index (FHFA) up 5.5%
- Rents (CPI) up 3.6%
All figures are solidly positive. The smallest gain is in rents, but even they are rising at a near 8-year high. What explains such gains, and are there more left to keep the momentum up?
The simplest explanation, but a powerful one, is that the U.S. population is rising. If we go back to the turn of the century, there were 282 million people living in America. Today there are 322 million, according to the Census population clock, with one live birth occurring every 8 seconds and one death every 12 seconds, and one international immigrant arriving every 33 seconds. The net impact is that about 2 to 3 million additional residents live in America every year, and shelter is one of the most basic of human needs.
As we know, the housing market went through a frenzy bubble and hard crash before the current recovery. This big boom-bust cycle spanned roughly from 2004 to 2010. Back 15 years ago in 2000, the housing market did not garner too much media attention because it was boring. Boring also meant it was probably fairly normal without any hint of excesses. Well, back in 2000 the combined existing and new home sales totaled 6.05 million home sales.
Today, even with the solid gains in home sales, the total is expected to reach only 5.8 to 5.9 million home sales. That’s fewer home sales now compared to the boring year of 2000, when there were 40 million fewer people living in the country.
As long as Americans believe in the American Dream of steadily moving up the economic ladder – from renting to a starter-home to a better home to eventually a retirement comfort home – there are plenty of legs in America that will be moving around in the upcoming years to further boost the housing market.
Re-posted from Forbes.com – read the original article HERE.