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House prices have set new records in the United States and parts of Europe, as strong fiscal and monetary stimulus helps residential property markets continue to reject the impact of the coronavirus pandemic.
The average price of existing homes in the U.S. rose a record 23.6% year-on-year to a new high of $ 350,300 last month, with all regions of the country recording increases, the National Association of Homeowners said Tuesday. Real Estate Agents.
The European real estate market has also continued to climb despite the Covid-19 crisis. In the Netherlands, existing house prices rose 12.9% in May from the previous year, the fastest growth rate since 2001, the Netherlands Statistical Office said.
The number of residential property sales declined in both the U.S. and the Netherlands, although prices continued to rise, suggesting that demand exceeds supply. The Dutch Property Registry said it recorded 16,126 residential property transactions in May, a 12.1% drop from the previous year.
Sales of previously owned homes in the United States fell 0.9% between April and May to a seasonally adjusted annual rate of 5.8 million. The total U.S. housing inventory of 1.2 million units was 20.6% lower than in May 2020, NAR said, although it increased 7% from April .
Some economists said the drop in sales volume could be a sign that the US real estate market has peaked, after activity reached its highest level since 2006 last year.
“Falling sales and rising inventory mean extreme upward pressure on prices should soon begin to fade,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Others see future rises, driven by central bank policies. “Loose monetary conditions could further raise asset prices and risk a possible correction,” said Adam Slater, an economist at Oxford Economics. “For central banks, neither this result nor persistently higher inflation are attractive prospects.”
Rising home prices have caught the attention of U.S. Federal Reserve officials, especially in light of their $ 40 billion monthly shopping of securities with mortgage agency, which form part of its $ 120 billion bond purchase program.
Robert Kaplan, president of the Dallas Fed, recently warned that prices were at “historically high” levels and highlighted purchases of large amounts of residential property by financial investors. Blackstone, the private equity group, Tuesday agreed a $ 6 billion deal to acquire Home Partners of America, a buyer and operator of single-family rental properties with a portfolio of more than 17,000 homes.
“Increasingly, single-family buyers are being withdrawn from the market,” Kaplan said at an event organized Monday by the Official Forum of Monetary and Financial Institutions, a think tank. “At this stage, we wonder if the real estate market really needs that $ 40 billion a month Fed support.”
James Bullard, president of the St. Louis Fed, said at the same event that it might be time to consider whether to “withdraw” purchases from the MBS agency.
He said the European Central Bank a report this week, that in the fourth quarter of last year house prices in the euro area rose by 5.8% over the previous year, the highest growth rate since mid-2007.
He said Germany, France and the Netherlands accounted for almost three-quarters of the total rise in eurozone housing prices last year.
Rising prices and the scarcity of affordable homes have provoked public anger at the large commercial owners of several European countries. Ireland imposed a 10% stamp duty on anyone who buys 10 or more homes over a 12-month period to prevent financial investors from buying a large number of properties.
In Germany, the planned Merger of 18 billion euros between Vonovia, the country’s largest residential landlord, and rival Deutsche Wohnen, has led to the call for a rental limit and even the nationalization of companies.
The issue of house prices has also become a lightning rod for criticism of the ECB’s ultra-light monetary policy. Its president Christine Lagarde has been questioned about it in the European Parliament this week.
“Young people and middle-class families are being forced to take part in a rat race, paying too much in an overheated real estate market,” said Michiel Hoogeveen, a Eurosceptic Dutch MEP. “This is one of the consequences of your generous money creation and low-interest policies to keep the weakest countries in the eurozone afloat.”
In response, Lagarde said that “there were no strong signs of [a] the real estate bubble fueled by credit in the euro area as a whole ”, but added that there were“ residential real estate vulnerabilities ”in some countries and in some cities in particular.
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