US housing market on shaky foundations
The US property market has seen some of the weakest data since house prices finally began to recover after the financial crisis.
"It's not a general trend yet, but that's how corrections begin with property: not suddenly but gradually," the economist Robert Shiller told Finanz und Wirtschaft. The US housing market is turning down.The number of US homes sold fell by 11% year-on-year to December, according to data from the National Association of Realtors. In Seattle 22% fewer houses were sold; in Los Angeles 20%.
This is some of the weakest data seen since house prices finally began to recover after the financial crisis shock in 2012. Shiller argues that is a reason for concern, especially given that the US housing boom, which began in 2012, has been the third strongest since 1890. Prices for existing homes, as opposed to new-builds, have gained nearly 55% in seven years.
House price gains are now slowing the most in large markets, "where... prices had overheated over the past three years," says Diana Olick on CNBC. The Case-Shiller National Home Price index (measuring average house prices in major metropolitan areas across the US) slowed from 5.3% year-on-year in October to 5.2% in November. In December, LA house prices grew by just 1%.
Demand has dropped
No wonder, then, says Richard Henderson in the Financial Times, that US homebuilders' confidence has slipped to a four-year low. The softening housing market and the slide in homebuilders' stock prices "could be a sign of big trouble ahead," says Henderson. The Dow Jones Home Construction index and sales volumes started to slide in 2005, before actual house prices began to weaken in 2006. A broader downturn followed 12 months later.