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real estate market
US Property Market
Bureau of Labor Statistics
US Real Estate Recovery
Those considering property investment will have noticed a change in the US real estate market recently. The tide is turning and conditions are becoming favourable for buyers. This is thanks in part to historic low interest rates, making owning property more affordable than ever. In fact, according to research from Zillow, American homeowners paid almost 37 per cent less per month on their mortgage in the final quarter of 2012 than they did before the housing bubble. This is despite homes actually fetching 14.5 per cent more in Q4 than the historic average relative to US median incomes.These figures are based on current and historic median home values on the Zillow Home Value Index, and median income data from the US Census and the Bureau of Labor Statistics. This was then used to create an affordability index, measuring the portion of monthly income homeowners spend on mortgage payments and a price-to-income ratio.Zillow found that US homeowners now have more purchasing power, bolstered by favourable interest rates. This is contrast to the 1985 to 1999 pre-bubble period, when rates for 30-year fixed mortgages ranged from between six per cent and 13 per cent. During this time, Americans spent an average of 19.9 per cent of their median monthly income on mortgage payments. In the final quarter of 2012, this was much changed. Mortgage rates stood in the three to four per cent range and homeowners paid 12.6 per cent of their monthly income on mortgage payments. This is considerably less than the historic 36.9 per cent average.As the real estate market has rebounded, home values have also increased. In Q4, buyers across the country were spending three times their annual incomes on the purchase price of a typical home. This means investors were buying homes 14.5 per cent more expensive relative to their incomes than during the pre-bubble period.Stan Humphries, Zillow chief economist, commented: "The days of historically high levels of housing affordability are numbered. Current affordability is almost entirely dependent on low interest rates, and there's no doubt that rates will begin to rise in the next few years. This will have an undeniable effect on demand for housing, as homebuyers will have to spend more of their incomes to buy a home. Home values will have to either remain stagnant while incomes catch up or, quite possibly, home values will have to fall in some markets."
Thinking of investing in US property? Check out the Top 5 "Boomtowns" for Property Investment in the USA
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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.