Kanka News quotes Pacific Union CEO Mark McLaughlin on U.S. house prices
May 31, 2018
U.S. house prices continue to rise, economic warming, rising wages are in short supply
According to S&P CoreLogic Case-Shiller data released on May 29th, it showed that house prices in major US cities continued to rise, with an annual growth rate of 6.8%. The main growth force is West Coast cities represented by Seattle, Las Vegas, and San Francisco.
The Case-Shiller Index released by S&P is an important measure of the change in the price of ordinary housing in the United States. In the latest report, the annual growth rate of the housing prices in metropolitan areas was 6.5%, which was an increase of 0.1% from the previous month. The annual growth rate of comprehensive housing prices in 20 cities was 6.8%, unchanged from the previous month. The growth of house prices in Seattle, Las Vegas, and San Francisco has seen the fastest growth, reaching double digits, of which Seattle’s house price growth index is as high as 13%. In many cities, Chicago’s housing prices have the lowest annual growth rate, but they also have 2.8%, which is one percentage point higher than the inflation rate.
House prices in the United States are 7.8% higher than during the soaring period of house prices in 2006. If they continue to develop, the working class will not be able to afford buying a home in the future. Mark McLaughlin, CEO of Pacific Union International Real Estate, said: “We can undoubtedly see the pressure of the home buyers. Taxes are on the rise, interest rates are on the rise, and house prices are also growing. To a certain extent, buyers will certainly eventually unable to afford it. When that happened, the high housing prices will also slow down the market.”
In the recent years, the persistently high demand for homes and the housing supply that has fallen to the bottom have been the main reasons for the higher house prices. This situation is particularly serious in the middle and low pricing housing market. The warming economy in the United States in the past two years has led to a higher demand for home purchases by all ages. On the contrary, the housing reserve (inventory) has reached the lowest point in decades.
Larry Foster, President of Long and Foster Real Estate, the largest private real estate company in the United States, think that the reason of current housing supply shortage is complicated. On the one hand, the baby boomer is facing retirement, but they are comfortable with their current home makes them reluctant to move and unlikely to sell ; on the other hand, due to the low supply of home on the market, many people worry about not able to buy a home after selling their home. Therefore, they are not willing to sell existing properties. Importantly the increase of steel prices in the international market and the shortage of labor in the construction industry have resulted in a substantial increase in the cost of building construction. Builders have invested heavily in building high-end residential buildings. Builder/ developers’ margin have been decreased; as a result, they are more inclined to build bigger, more luxurious homes. Such products are not what most of people want and cannot alleviate the stock shortage that we face.”
For many years, the highest value of the annual growth index of house prices has been maintained on the west coast of the United States. High housing prices in the West Coast are directly linked to local wage levels. For example, in California, the hourly wage of the state’s labor force has continued to increase since 2001. Compared to 2008, the growth of average wage in 2016 exceeded 70%. The unemployment rate fell by 46% compared to 2013. Selma Hepp, Pacific Union International Chief Economist: “Despite the heightened housing prices are worrying, it also points out a major trend in the U.S. economy. After all, the increasing demand of real estate is coming from high-speed employment growth and stability economic status.”
Compared to other parts of the United States, New York has already passed the peak period of house prices and is therefore considered a relatively safe real estate market. Xu Meifang, a New York state real estate agent, said, “The real estate market in New York is very safe, so many foreign buyers tend to invest in New York. There has always been a very good buying opportunity.” Larry Foster, President of Long and Foster Real Estate, believes that despite the continuous rise in housing prices, compared to the chaos in 2008 when a large number of buyers could not afford to purchase real estate, the current government’s supervision of mortgage loans is stronger and the house market still in a stable state.
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