The Strategist

US residential property market recovering after housing bubble

04/28/2017 - 14:46

Number of new homeowners in the US was twice as larger as number of new tenants in the first quarter of this year. According to American observers, the situation in the real estate market indicates a change in the trend, which lasted more than ten years. Then, after the mortgage and financial crisis, people preferred to rent rather than buy.

Guy Kilroy via flickr
Guy Kilroy via flickr
According to the US Census Bureau, the number of new homeowners in the US amounted to 854 thousand in the first quarter, while the number of new tenants reached just 365 thousand. The Wall Street Journal quoted Ralph McLaughlin, an economist of specialized resource Trulia, who said the number of new owners has exceeded the number of new tenants for the first time since the third quarter of 2006. Back then, the US housing market has not yet begun to experience the problems that eventually led to the mortgage, and then the global financial crisis. Although the share of owners in the US as a whole has changed insignificantly from 63.5% a year earlier to 63.6% now, the overall decrease was affected by a significant decline in one region, precisely, the Middle West. As noted by the Census Bureau, this is the only region where the decline has been quite noticeable - from 68.9% to 67.6%, by 1.3%. At that, other regions of the USA have registered some growth. The share of owners increased by 0.2%, 0.6% and 0.3% in the North-East, South and West, respectively.

The economists believe that the increase in the number of new owners proves that the residential real estate market speaks is now reverting. Recall that the market could not have recovered after the crisis during several years. "The fact that now we are registering noticeably more new owners than tenants, says that soon we will see an increase in the share as a whole", Mr. McLaughlin said. Share of homeowners in the US in this century reached a peak during the mortgage lending boom: it was 69.2% in the fourth quarter of 2004. After that, the number started to decline and reached a minimum in the second quarter of 2016 - 62.9%, after which it began to grow again and reached 63.6%.

An economist and professor at the University of Maryland, Peter Morici, told MarketWatch that more young people are appearing among the new owners of housing. "Possession of housing is a good investment that really pays off", the expert said. "More and more young people are getting stable jobs, they do not have to move from state to state, which makes it possible to settle in one place for at least several years. And people who have lived in one place for a long time, always have the opportunity to think and weigh carefully whether they should move somewhere else or not".