filer Premium Link Generator
Copyright © 2018-2023 myuploadedpremium.de - Design by B88Xplorer.
Real Estate Market in the USA: 2022 Update
Home ownership is deeply embedded in the culture of the United States. In 2008, the real estate bubble in the U.S. burst, and with it the dreams of many Americans. In 2022, there are growing ...signs that the United States could face another crisis in the U.S. housing market. We take a look at current trends and the background to this development.
In the United States, property prices rose enormously during the pandemic. Mortgage interest rates and real estate prices in the land of opportunity rose more sharply than at any time in four decades. In many places, the dream of owning a home is just becoming a distant memory for the middle class. The median price of single-family homes rose nearly 16 percent from the spring of 2021, and mortgage rates have also risen since the end of 2021, from 3.1 percent to 5.1 percent in May 2022.
Under these circumstances, it is not surprising that some people are thinking back to 2007/08, when the U.S. housing bubble burst. However, the current situation is hardly comparable with the crisis back then. Credit is becoming more expensive in the USA and buying real estate on credit now accounts for a much smaller share than back then. The rising prices are a global phenomenon, triggered by the economic stimulus policies during the pandemic. The development of real estate prices in the USA is worrying. However, there can be no talk of an American real estate bubble in mid-2022.
If one wants to understand the U.S. real estate crisis of 2008, one must first go back a little further into the past: In the 1990s, real estate in the USA increasingly became objects of speculation - not only for companies, but also for private individuals. Old houses were bought cheaply, refurbished and then resold at a high profit. This "house flipping" caused real estate prices to grow steadily upward. When the dotcom bubble burst on the U.S. stock markets at the end of the 1990s, this trend was further fueled. That's because the stock crash raised the profile of buildings as a safe investment, so more money flowed into the real estate sector. Added to this was the FED. In response to the threat of recession following the stock market crash, the U.S. Federal Reserve cut the key interest rate from 6.5% to 1% to get the economy moving again. The interest rate cut had a positive effect on real estate prices. Banks now lent cheap money to homebuyers. However, many of them had poor credit ratings. The banks outsourced this credit risk to third parties through financial constructs.
When interest rates rose again in the following years, weak borrowers were no longer able to pay their debts. Starting in 2006, this set off a chain reaction. Borrowers were forced to throw their overvalued houses onto the market at rock-bottom prices. The real estate bubble in the USA burst as the crisis drove more and more homeowners to ruin and caused prices to fall.
Cheap money drives real estate prices higher in the USA
What was intended as a short-term measure to support the economy after the turn of the millennium has now become the norm. Since the crisis of 2008, the U.S. Federal Reserve has been supplying the financial markets with cheap money. The low key U.S. interest rate again drove investors into the U.S. real estate market in search of yields, causing prices to rise. Around a decade after the crisis, the real estate market in the USA is setting off on new highs. In 2019, the nominal house price index in the United States is 40% above the 2009 low and has surpassed the 2006 peak (just before the onset of the crisis).
This is reflected in the price performance of real estate in various U.S. cities. The following is based on data from Zillow, a company that analyzes data from millions of properties in the United States. According to Zillow, different trends can be observed in the sale prices of real estate in the United States:
Geographical differences in US real estate prices
While real estate prices are rising massively in the United States in 2022, the values differ greatly from region to region. In many major cities, the increases are well above the national average. Price increases are particularly substantial in:
In areas that are less popular due to their remote location, social problems or the weak labor market, we see in some cases even stagnating real estate prices in 2022. Examples of this are;
Reasons for hope
The current situation differs from the last housing bubble in a few ways: for one thing, no increase in the federal funds rate is expected at this time. Rather the opposite. The influx of money into the U.S. real estate market will thus continue, making a crash like the one ten years ago less likely. Moreover, according to analyses by the U.S. bank J.P. Morgan, unlike in the mid-2000s, there are now only a few cities in the U.S. where real estate prices are rising at a time when the supply of new houses and apartments is also growing. Accordingly, the real estate market is overheated in only a few regions, such as New York or the San Francisco Bay Area.
Another argument for a continuation of the positive trend: With the Millennials, a large population group is reaching the age for buying houses and apartments. The expectation of many observers is that demand for real estate will rise again as a result. Whether this will happen, however, depends heavily on the availability of affordable housing. And this is currently relatively scarce, especially in the low price segment, as project developers have focused particularly heavily on the luxury segment in recent years.