Is the United States heading into another property boom?
The US property market continued to strengthen last month with all indicators pointing towards increased growth for the year ahead. An imbalance of low supply and increasing demand has driven up values in even some of the most troubled locations. Domestic and foreign demand is being fueled by historic low financing rates and buyers seeking to capitalize on the price discounts still lingering from the 2008 housing meltdown.
American interest rates hit a historic low last month of 3.25 per cent for a 30-year conventional fixed rate mortgage according to Freddie Mac. Interest rates are projected to begin modest escalations throughout the year but will likely remain below four percent through the second quarter.
The dominating story across the country is low inventory, increasing demand and price appreciation. According to the National Association of Realtors (NAR) total national housing inventory fell 8.5 percent last month to a 4.4 month supply representing the lowest supply since the height of the last housing boom in May 2005. Set against the decreasing demand, total existing home sales are up 12.8 percent compare to December of 2011.
Decreasing inventories and increasing sales pushed the December median price for existing homes up 11.5 percent compared the 2011. The appreciation is the strongest increase since November 2005 and represents the tenth consecutive month of year-over-year price gains. The 2012 annual median home price gain of 6.3 percent is the largest annual gain since 2005.
The new home industry which has been anemic since the 2008 meltdown is also showing signs of recovery. The NAR report indicated healthy growth with new homes sales volume up 8 percent and median price up 13.9 percent compared to last year. The limited supply of new homes provides support for continuing price growth this year as developers attempt to fulfill the new market demand.
While most first tier US markets bottomed out in late 2009 many of the hardest hit regions languished until last year. One of the last to recover was the Florida market which saw property values plummet up to 70 percent in 2008. But even the hard hit Florida market has rebounded and is projected to be one of the fastest growing markets in 2013.
The Florida Realtor Association’s report lists December home and condominium sales up 15.8 percent and 8.6 percent with pending sales up a dramatic 39.7 percent and 31.8 percent respectively compared to last year. Median price increases are up 14.1 percent for home and 26.3 percent for condominiums. In the Florida market of Orlando near Walt Disney World, median homes prices have climbed 38.88 percent since January 2011 continuing an eighteen month streak of increasing values.
The NAR International report stated that first time buyers accounted for 30 percent, 21 percent were all cash and 21 percent were investor sales. Chinese buyers remain the second largest international group investing in the America and the state of Florida is the number one choice for international investors making up 26% of all foreign purchases in the United States.
Patrick W ONeill is a 30 year property veteran and CEO of the ONEILL Group Hong Kong. The firm specialises in international purchases of US properties with offices in Hong Kong and the United States.