US home prices set for 8pc surge, says Bank of America report
Low interest rates, a tight inventory of properties for sale and record affordability are fuelling accelerated price gains, Michelle Meyer, a Bank of America economist, and Chris Flanagan and Justin Borst, mortgage-backed securities strategists, said in a note to investors entitled "Someone say house party?"
US home prices will probably rise 8 per cent this year, up from a previous estimate of a 4.7 per cent increase, according to Bank of America.
Low interest rates, a tight inventory of properties for sale and record affordability are fuelling accelerated price gains, Michelle Meyer, a Bank of America economist, and Chris Flanagan and Justin Borst, mortgage-backed securities strategists, said in a note to investors entitled "Someone say house party?"
"We believe a positive feedback loop has begun, where the rise in home prices fuels expectations of further appreciation and easing credit conditions, which in turn stimulates homebuying," they said in the report.
"It is a powerful positive relationship especially in this environment of historically low interest rates and a Federal Reserve determined to keep policy accommodative."
Home prices began rising last year after the worst housing crash since the Great Depression as unemployment declined, mortgage rates fell to record lows and a shrinking pool of listings sparked competition among buyers.
Prices last year climbed 7.3 per cent, according to the report.