US housing market shows signs of life

The sluggish US housing market seems to be regaining its footing.

America's "sluggish housing market" seems to be "regaining its footing", says Lucia Mutikani for Reuters. Housing starts and building permits soared to a 12-year high in August. New-home sales were up 7.1% from the previous month. Interest-rate cuts by the Federal Reserve, which feed through into lower mortgage rates, are boosting demand.

A speculative bubble in US housing was at the heart of the 2007 sub-prime mortgage fiasco that preceded the global financial crisis. Zack Guzman on Yahoo Finance notes that between 1997 and 2005 the median US house price rocketed 75% in real terms, as measured by the S&P CoreLogic Case-Shiller index. House prices then fell 33% and hit a nadir in the early 2010s. Yet as economist Robert Shiller notes, between 2012 and 2018 US house price have regained 35%. The US "is slowly returning to looking at housing as a speculative investment".

This is no bubble, says Justin Lahart for The Wall Street Journal. The housing recovery looks "underwhelming" given the broader health of the economy. The sector also faces long-term headwinds: "many millennials are saddled with high levels of student debt" and are thus wary of mortgages. "Combined new and existing home sales" are at the same level as they were in 2000, when the population was far lower. A country scarred by the housing bust has yet to regain its love of property.

Recommended

Why Wall Street has got the US economy wrong again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
What the race for the White House means for your money
US election

What the race for the White House means for your money

American voters are about to decide whether Donald Trump or Joe Biden will take the oath of office on 20 January. Matthew Partridge explains how vario…
15 Oct 2020
Why the world is going through a property price boom
Property

Why the world is going through a property price boom

Massive monetary stimulus from central banks and governments stepping in with fiscal support have driven house prices higher around the world.
9 Oct 2020
V-shaped bounce in UK housing
Property

V-shaped bounce in UK housing

UK house prices rose 5% in the year to September, the biggest gain in four years.
9 Oct 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
What would negative interest rates mean for your money?
UK Economy

What would negative interest rates mean for your money?

There has been much talk of the Bank of England introducing negative interest rates. John Stepek explains why they might do that, and what it would me…
15 Oct 2020
Last chance to secure a Bounce Back loan for your small business
Small business

Last chance to secure a Bounce Back loan for your small business

The government’s Bounce Back loan scheme will only run for another six weeks. Act now if you need to take advantage of it.
16 Oct 2020