USA Property Market – Overview
S+P/Case Shiller US National Index
• The average house price recorded an increase of approx. 76% from 1st quarter 2012 - 1st quarter 2021 (9 years)
Property Demand
• Young and growing population
• Population growth is a critical driver which underpins total demand for housing.
• OECD estimates that by 2030, the US population will be 355.1 million (annualised growth rate of 0.6%/annum).
• Migration rate is 2.820 per 1000 population in 2021 (1.3% decline from 2020 - 2.857 per 1000 population).
Demographic Profile
Information from the US Census Bureau shows increases in the level of homeownership occurs rapidly between the ages of 25 and 45.
• Currently (2020), 49.5% of the population sits in the under 35 age bracket.
• Based on historical trends, this group is on the brink of entering into the main homeownership stage of their lives, resulting in upward pressure on the total homeownership rate and providing long-term support to property purchasing demand.
Housing starts
According to a new Freddie Mac analysis in 2021, the housing market in the United States is 3.8 million single-family houses short of what the country needs to meet demand. In comparison to 2018, that estimate implies a 52% increase in the country's housing shortfall. According to Freddie Mac, the United States was 2.5 million units shy of meeting long-term demand in 2018.
The figures underscore the severity of the housing deficit, which is a significant factor fuelling the 2021 red-got housing market. According to Sam Khater, chief economist at Freddie Mac, the shortfall is particularly acute for entry-level properties, making it more expensive for first-time homebuyers to enter the market. The supply constraint might hinder US economic development if it continues to drive up home prices and makes it harder for first-time purchasers to enter the market and develop wealth.
According to Rob Dietz, chief economist at the National Association of Home Builders, based on current long-term demand projections, the US requires approx. 1.1-1.2 million new single-family homes per annum. In January of 2021, housing starts dropped by 10.3% to a seasonally adjusted annual rate of 1.421 million units, the lowest since August 2020. According to economists polled by Reuters, startups were expected to fall to 1.560 million units in February 2021.
Foreclosures
• The share of housing units with a foreclosure filing was at a record low of 1.16% in 2020. The foreclosure rate reached its peak in 2010, just after the financial crisis of 2007-2009. Since then, the rate has steadily fallen.
The Unemployment Rate is falling
• The US employment market is beginning to pick up again, and figures released at the end of 2020 indicate a steady decline in the unemployment rate.
Interest Rates
• The US interest rate currently (April 2021) sits at a low of 0.25%. When Mortgage rates are lower, homeownership is more accessible. As a result, property sales increase as more people can obtain a low-cost loan. Consumers with existing mortgages may also try to re-finance their loans, which means exchanging their current loan for a new, cheaper one.
Rental Market
• The US has a buoyant single-family residential rental market which typically means generous rental income - particularly when teamed with the reasonable property prices available in the USA.
• Rental data from the US Department of Housing and Urban Development and home price information from publicly recorded sales deed data from ATTOM Data Solutions 1st Qtr 2020 report shows that investors can achieve up to 20% annual gross rental yields in some locations.
• The average annual gross rental yield (annualised gross rent income divided by the median purchase price of single-family homes) among the 389 counties in the ATTOM report was 8.4% for 2020
US Dollar
• The US dollar is still regarded as a 'safe heaven' currency. Of all the international economies, regardless of a recession, the USA ultimately has the world's largest and most powerful economy.
Exchange Rate AUD - USD
• Average since floated in 1983 = 0.6906