Considering that our 2008 housing crash is held as a major lynchpin for the worldwide recession, it would seem odd to hold up our housing market as exceptionally healthy. However, it appears that a strengthening of various market foundations have turned our real estate into one of the world’s most promising property investments.
As I’d mentioned in a previous post, the burgeoning health of the American property market has not gone unnoticed by foreign financiers. In fact, Sweden’s Sovereign Wealth Fund publicly announced an upcoming purchase of $ 11 billion in American property holdings. This would be the investing body’s first purchase of foreign real estate, and represents an unambiguous endorsement of the growth value of American property holdings. Yngve Slyngstad, Norges Bank Investment Management chief economic officer affirmed national sentiment, stating directly, “The U.S. is the next real estate market to invest in.”
However, despite the bullish actions of external investors, much of the strength in the American housing market has been motivated by internal factors. This year’s Q3 reports from both major lending bodies as well as financial analysts painted a newly positive picture of the housing market. The rate of mortgage defaults has dropped appreciably, and this has occurred in tandem with a rise in home closes. Ultimately, we’ve seemed to clear the fence in terms of the default wave, and many Americans who had been hesitant to seek new purchases in the post-recession are unfreezing their assets and moving en masse to settle on homes.
To return to a global perspective, new reports are emerging which point to a distinctly different outlook for real estate investing across the western world as a whole. According to a new release from Bloomberg, economic growth outlook across the EU appears to be stagnating. The U.K. in particular seems caught in a stumble, as retail and consumer spending dipped last month, an inverse trajectory from that observed in the United States. The swift return in American consumer confidence seems motivated largely by the return of the housing market. While our export sales and new business investment remained relatively stable throughout even the immediate post-crash period, the newfound strength in the housing market is co-reinforcing business development and consumer spending.
The positive macroeconomic trends in our housing market are working in dual effort with broader market gains, and are now marshaling consumer confidence in the domestic market. These differing market silos are cross-pollinating our market recovery, and seem to be the reason why the United States housing market has become a comparative leader. As the previously mentioned Bloomberg report outlines, the growth in the U.S. economy outstripped Commerce Department projections, growing 3.1% annually above the predicted 2.7%. The crucial housing market health metrics have all demonstrated growth this year, with turnover, home starts, and median home prices rising on a national scale.
Other economic power players have not reported similarly positive returns in FY2012. Japan continues to experience problematic rates of inflation, which has consequentially extended their national recession. However, America’s climbing volume of new building permits as well as a surge in home appliance and furniture sales indicate that momentum is maintaining across various segments of our housing market. Whether or not these indicators translate into persistent growth in FY2013 ultimately remains to be seen.
Harrison Stowe is a writer for NVR Inc., a prime developer of new condos in Maryland. Addressing a range of real estate topics including investment, mortgages, and new construction, Stowe combines finance knowledge with additional experience working with Ryan Homes in the current real estate market.
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