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.