US market regains its lustre

Forecasters are wary of calling the bottom of property cycles, for obvious reasons. But what's happening in the United States has many hoping for the best.

Martin Bernhard, of Credit Suisse Global Real Estate Research, thinks that home prices, having fallen to pre-bubble levels in practically all markets, will now stabilise. 'Homes are very affordable again from an historical perspective when compared to incomes,' he says. 'Moreover, the current low interest rates make housing attractive.'

He feels that an uncertain labour market and high indebtedness in general will continue to deter owner-occupiers, but the resultant demand for rental properties is good news for investors. Bernhard's view is that the US residential market offers good value in many cities, adding that the west coast (San Francisco) and New York luxury residential sector 'always have robust international demand'.

Although it's his job to be optimistic, Lawrence Yun, chief economist of the National Association of Realtors (NAR), says there are reasons to believe that the US housing recovery is on the right track. 'Jobs are coming back, people are buying homes, and home prices are stabilising,' he says.

After six years of housing market gloom, Yun sees a shard of light appearing at the end of the tunnel. He points to NAR data that shows sales of established homes reached a 10-month high in November 2011, while the pending sales index (where contracts have been signed but not yet settled) reached the highest level in 19 months.

Concluding that 'clearly something is brewing out there', Yun says buyers are seizing the day, confident the worst is over. And with new home starts at their lowest since the end of the second world war, according to Yun, all indications point to an impending shortfall in years to come.