Rise in U.S. house prices to halve next year, affordability to worsen -
Reuters poll
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[December 07, 2021] By
Hari Kishan
BENGALURU (Reuters) - The rise in U.S.
house prices will slow to half its double-digit rate next year but still
outstrip increases in consumer prices and wages, according to a Reuters
poll of property analysts, who said affordability would worsen over the
next two to three years.
Often viewed as the bedrock of financial wellbeing and consumer
confidence, the U.S. housing market has not only weathered the
pandemic-induced economic slowdown, it has outperformed the broader
economy.
Ultra-low interest rates and initial pandemic-related demand for more
spacious accommodation to allow for home offices has pushed up property
prices at a blistering pace.
The S&P Case-Shiller index of 20 metropolitan areas has risen at a
double-digit rate over the past 10 months, a pace the Nov. 17-Dec.6 poll
of over 25 property analysts said would continue for the rest of the
year to average at 16.8%.
That was expected to drop to 8.0% in 2022, according to the poll.
Forecasts were in a 3-15% range.
"Overall housing demand remains strong, but there have been quite a few
developments that have raised some red flags about the overall health of
the housing market," said Mark Vitner, senior economist at Wells Fargo.
"We look for sales and new home construction to moderate in 2023, as the
bulk of pent-up demand is likely to have been met by then. Price
appreciation is also expected to moderate."
(GRAPHIC: Reuters poll graphic on the U.S. housing market outlook -
https://fingfx.thomsonreuters.com/
gfx/polling/
dwpkrzaxzvm/U.S.%20housing%20graphic.png)
Underscoring the strong demand for housing, U.S. existing home sales,
which make up about 90% of U.S. home sales, were forecast to average at
an over six million unit annualized rate until end 2022 at least.
However, higher consumer inflation and the U.S. Federal Reserve's recent
overtures to tighten monetary policy earlier than expected are likely to
rein in the pace at which prices have risen over the past year.
[to top of second column] |
Newly constructed single family homes are shown for sale in
Encinitas, California, U.S., July 31, 2019. REUTERS/Mike Blake/File
Photo/File Photo
A lack of new supply, which has squeezed many new home buyers out of the market,
will also remain a major challenge next year. Inventory levels are only about
one-third of what is considered healthy.
When asked what will have the biggest impact on the U.S. housing market next
year, all but one of the 27 analysts who answered an additional question chose
either supply constraints (14) or higher interest rates (12).
"It's all about supply. Reduction in supply of new home construction will lead
to home prices rising above people's income growth and lead to widening wealth
inequality," said Lawrence Yun, chief economist at the National Association of
Realtors.
That supply squeeze, which has a direct bearing on affordability, was not
expected to ease any time soon.
A near-80% majority of analysts, 22 of 28, who answered an additional question,
expected housing affordability to worsen over the next two to three years.
"Affordability is becoming a very serious concern. Many people are going to get
priced out of purchasing a home, and more will be forced to rent," said Brad
Hunter at Hunter Housing Economics, a consultancy.
"A lot of millennials are already turning to renting detached single-family
homes. They are having kids now, so they need that house in the suburbs with a
yard, parks nearby, other kids in the neighborhood, and good suburban schools."
(For other stories from the Reuters quarterly housing market polls:)
(Reporting by Hari Kishan; Polling by Prerana Bhat, Swathi Nair and Arsh Mogre;
Editing by Ross Finley and Bernadette Baum)
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