US housing recovery sputters

The American housing market rebound seems to be running out of steam after a hefty two-year bounce. Sales of new single-family houses are down 4.2% year-on-year, while sales of previously owned dwellings are down 7%.

One problem is that a rapid bounce-back in prices has put off potential buyers, while mortgage interest rates have jumped, undermining enthusiasm among consumers already grappling with weak wage growth. Thirty-year mortgage rates are 1% up on last spring.

What’s more, credit is still being rationed. Mortgage financing remains “extremely tight”, says Ellen Zentner of Morgan Stanley, and builders are also having trouble getting loans.

Highly indebted young people now often choose to save money by living with their parents, further crimping demand. And investors such as hedge funds, who have helped drive the recovery, have stopped buying-to-let as prices have risen and fewer distressed houses come onto the market.

It’s far too early to conclude that the housing recovery is off. But its tentative nature means that housing may not make the contribution to overall growth – via construction and making consumers feel wealthier – that many had hoped in the next few years. It’s just another facet of America’s sub-par recovery.

Merryn

Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.