"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%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
Don't expect another crisis
-
Trouble brews in B&M as bargain shops take a hitOpinion Once a stock market darling, B&M's share price has slumped. What has gone wrong for bargain shops?
-
US and China reach a ceasefire in their trade war after talks in LondonThe US and China's trading relationship – the most important one in the global economy – is back on track. Will the truce last?
