The US property market is so varied that it can sometimes be a little misleading to quote general figures. That said, many experts are predicting a number of trends in 2017 which could have a seriously positive impact upon the US real estate market. While we are still living in an economic environment not seen since the aftermath of the great depression there are signs that the worst may be over and a long-term recovery underway. So, what are the latest trends in the US property market?
US property and increasing base rates
December 2016 saw the Federal Reserve increase US base rates for only the second time since 2006. Experts believe there could be a further three US base rate increases during 2017 which would seem to indicate an end to the era of cheap credit. While there is no doubt that the US property market/economy has upturned quicker than the likes of Europe and beyond, mortgage rates will not necessarily return to traditional levels in the short term. Indeed, some members of the US Federal Reserve board believe that US mortgage rates will not go any further than 4.3% in the short term (on a 30 year fixed rate). This may well prompt some investors to lock in a relatively low long-term rate and take advantages of the last swish of the cheap credit tail to increase their property exposure.
Greater availability of credit
As US base rates bumped along the bottom over the last couple of years there was a perceived greater risk factor for mortgage companies lending money for property acquisitions. Interestingly, as US base rates continue to rise this will give more confidence that the economy is performing better and perhaps bizarrely increase the amount of credit available to the mortgage market. If you look at this on a risk/reward ratio any increase in US base rates would indicate a lower risk to lenders and a potentially higher reward going forward. It is also worth noting that Fannie Mae and Freddie Mac will enter the larger mortgage market in 2017 adding greater liquidity.
More new builds
Even though there was a slight reduction in the number of new build projects in the US during November the trend for 2016 was most certainly forward. On the whole 1.163 million new properties were built during 2016 an increase of 5% on the previous year. As the economy continues to improve and wages start to move forward many experts are predicting yet more improvement on new build numbers in 2017. This will be interesting because history shows us that any long-term economic recovery requires a strong real estate market, something which appears to be on the horizon?
Time and time again we hear about overseas investors, particularly Chinese investors, making a beeline for the US real estate market. While the likes of New York have seen property prices pushed to new highs, with overseas investors having a significant impact, property experts believe there is still further upside in the short to medium term. Even though there are signs of a recovery in the Chinese real estate market the US real estate market is seen as more of a “safe haven”. It will be interesting to see whether overseas investors continue to target the likes of New York, and other prominent real estate markets, or look for added value elsewhere.
Whatever happens, overseas investors will again play a major role in the short to medium term direction of the US real estate market.