“It started with house prices. It won’t end until house prices in the US stop falling.” That’s what Tim Price (who writes our Price Report) told me when this great financial crisis began. I’ve been waiting for US house prices to bottom ever since.
Last year, we started to think that even if house prices hadn’t bottomed, they were at least looking cheap. I told you in an editor’s letter to go to Florida and buy a house, fast. Now they might even have begun to bottom.
Prices in some areas have risen (prime Miami, for example) and elsewhere there are increasing numbers of signs that if you buy now you won’t necessarily lose money. Renters are finding fewer vacancies and slightly higher rates, while US housing permits for single family homes – which utterly collapsed from 2007 on – seem to have bottomed – and are even turning up a tiny bit.
At the same time, the percentage of mortgages that are delinquent for 90 or more days has fallen off significantly (from around 8% to more like 6%).
We are also seeing a little loosening in bank lending conditions – something that should push demand just high enough to offset the rise in supply of very cheap foreclosed houses coming to the market.
There are also a few suggestions that the US economy, free as it is, really does operate and recover better than any other economy, and also that consumers are beginning to feel a bit better.
Vehicle sales in America hit a four-year high in February, and look as if they are getting a bit of momentum behind them – partly thanks to the fact that loan rates are falling as defaults on car loans fall.
None of this means that we are likely to return to the boom days any time soon (nor that we should want to): it is worth remembering that 11.1 million, or nearly 23%, of all residential properties with a mortgage were in negative equity in the US at the end of the fourth quarter of last year. That’s going to keep a dampener on confidence for a while.
But it does suggest that the very worst for the property market might be over.
Overall, says Capital Economics, the odds are that the “rebound in housing demand should be strong enough to bring an end to the five-year long fall in house prices this year” – assuming that the European crisis doesn’t escalate to the point that we see another global credit crunch.
We’ll be looking at all this in more detail in a cover story in the magazine in the next month or so – and suggesting ways for you to get into the market.