Tag Archives: crisis
Rents overtake home values in the US, latest index shows
Residential rents in the United States grew 4% year on year in April, overtaking home values growth which was at an annual rate of 3%, the latest data shows. It means that rents grew at their fastest pace in two years in April, and surpassed home value growth in 20 of the 35 largest US housing markets, according to the data from real estate market report firm Zillow. Rents reached $1,364 and home values reached an average of $178,400 and growth in home values is expected to slow further in the second half of the year as the for sale housing market stabilises. The switch comes after years of rapid home value increases and has been boosted by the improving economy. The Zillow report points out that US home values peaked in 2007, and then crashed during the recession between 2008 and 2010. Since then, they have risen rapidly, returning to their peak levels in many markets. Home values have both risen and fallen over the past decade, but rents have been steadily rising. Indeed, rental growth has been outpacing home value growth for several months in some of the nation's hottest markets. In San Francisco, rents started rising faster than home values in July 2014, and have been growing faster ever since on an annual basis. In Boston, annual rental growth has outpaced home value appreciation since August 2014. The report points out that low mortgage rates have helped make buying a home much more affordable than renting. On average, US home buyers can expect to spend about 15.3% of their income each month on a typical house payment. Renters can expect to spend about 30% on a monthly rent payment. ‘There are tremendous incentives to get into home ownership these days: mortgage access is improving, interest rates are low, and home values remain below prior peaks,’ said Zillow chief economist Stan Humphries. ‘But it will be increasingly difficult for many renters to realize these benefits as this country's growing rental affordability crisis continues to worsen. More income going to rent means less going to savings for a down payment and other costs, keeping renters renting longer and feeding into the high demand that is contributing to rising rents in the first place,’ he explained. ‘This cycle will be difficult to break, and is a symptom of the imbalances that still exist in the housing market as we struggle to get back to normal. New construction and rising wages will help, but neither is coming very quickly,’ he added. Over the next year, home value growth is expected to slow even further, to 2% annually, according to the Zillow home value forecast. In 2014, home values rose 4.9%. Continue reading
UK city home prices see highest three month price growth for a decade
House prices in key UK cities increases by an average of 1.4% in the three months to April, the highest three month rate of growth for a decade. Overall growth is being supported by house prices playing catch-up with average prices in 11 cities still below their 2007 peak with Belfast down 49.1%, Liverpool down 14.9% and Glasgow down 13.6%. The data from the Hometrack UK Cities House Price Index also shows that despite a recent pick up in housing turnover, the average time between moves in some cities is up to 28 years, twice the average between 2003 and 2007 which was a move every 14 years. It explains that a 30% decline in the proportion of moves by existing mortgaged home owners over the last decade is starving the market of a source of new supply and driving prices up. House price growth across the index is running at an average of 9% and continues to exceed the overall UK rate of growth of 6.8% year on year. At a city level the annual rate of growth ranges from 3.5% in Liverpool to 11% in London. This is the smallest spread in city level house prices since 1996, as the rate of growth in high value markets such as London and Cambridge moderates whilst house prices in regional cities continue to recover off a low base. However, 11 of the 20 cities have house prices that are still below their 2007 peak. The index report says that house price increases are being driven by the improving economic outlook boosting market sentiment, record low mortgage rates and a low churn of housing stock which is creating scarcity of supply. The average number of years between moves is calculated from the number of housing sales in a year relative to the stock of private housing in each city. In the 1980s, the average house was changing hands every 10 years and this increased to an average of 14 years between 2003 and 2007. This has now climbed to an average of 21 years cross all cities and is as high as 28 years in some cities such as Liverpool. ‘Home buyers and investors shrugged off the run up to the general election and continued to bid up the cost of housing,’ said Richard Donnell, director of research at residential analyst Hometrack. ‘Record low mortgage rates, which are more than half the level of 2007, are boosting buying power, while low rates of housing turnover creates housing scarcity and is keeping an upward pressure on house prices,’ he explained. He pointed out that one factor driving housing scarcity has been a marked decline in the proportion of housing sales by existing mortgaged home owners, down to just 35% of all sales in 2014 and almost half the level seen in 2007. ‘This group owns half of all owner occupied housing but fewer… Continue reading
Signs of mortgage market in UK recovering, says CML
Home lending appears to be on the brink of recovery after a dip due to new mortgage rules, the latest gross lending data from the Council of Mortgage Lenders suggests. The CML April estimate for total gross lending is £16 billion, 1% down on the previous month and 4% lower than the £16.7 billion of lending last April. But according to Mohammad Jamei, CML economist, lending appears to be in the throes of an incipient recovery even although lending in April was fractionally down on the previous month and year as this comes after a stronger March. ‘Overall, we now seem to be on the cusp of a modest lending recovery. Household finances are generally improving as earnings growth continues to outstrip inflation, and mortgages are being offered at extremely competitive rates. As a result, we expect to see stronger lending in future months,’ he said. Paul Smith, chief executive officer of haart estate agent, believes that the mortgage market is in rude health and despite the doom and gloom in the election run-up, consumers have been undeterred by the prevailing uncertainty. ‘Mortgage lending is still down on April 2014 but 2014 was an exceptional year where property prices and demand were speeding along beyond all expectation and an application of the brakes is no bad thing,’ he said. ‘Lower, but still strong, house price growth and levels of demand that aren’t dominating the headlines, is actually good for overall sentiment and both buyer and seller confidence. With the new majority government bedding in and the continued advantageous economic climate and government support for consumers, we expect mortgage lending to be on an upward trajectory for the rest of this year,’ he added. John Eastgate, sales and marketing director of OneSavings Bank, said that there is no doubt that pre-election jitters took their toll on borrower demand in April ‘But the mortgage market hardly ground to a halt. Mortgage rates remain near historic lows, and this continues to drive underlying activity,’ he pointed out. ‘On top of this, we have seen deflation take hold, pushing back the prospect of a hike in interest rates. Combined with improving earnings, this will boost the borrowers' budgets. With the new government now in situ, any lingering uncertainty has been put to bed, and sentiment has undergone a palpable bounce,’ he explained. ‘There are already signs that mortgage activity is on the increase, with big ticket purchases returning, and the market expects positive momentum to build as the year progresses. Yes, affordable mortgages for those with the smallest deposits remain thin on the ground, holding back first time buyer levels, but an increasingly buoyant buy to let market will support total lending in 2015,’ he added. Continue reading
