House prices have set new records in the United States and parts of Europe, as a broad fiscal and monetary stimulus helps residential property markets continue to dampen the impact of the coronavirus pandemic.
The average price for existing homes in the U.S. rose a record 23.6 percent year-over-year to a new high of $ 350,300 last month with all regions of the country recording increases, the Association said. National Real Estate said Tuesday.
The housing market in Europe has also continued to scale despite the Covid-19 crisis. In the Netherlands, existing house prices have risen 12.9 percent in May from a year earlier, the fastest growth rate since 2001, the Dutch Statistics Office said.
The number of residential property sales declined in both the United States and the Netherlands, even as prices continued to rise, suggesting that demand exceeded supply. The Dutch Territorial Registry said it recorded 16,126 residential property transactions in May, down 12.1 percent from a year earlier.
Home sales in the United States fell 0.9 percent between April and May at a seasonally adjusted annual rate of 5.8m. The U.S. housing inventory of 1.2m units was 20.6 percent lower than in May 2020, NAR said, even though it was 7 percent in April.
Some economists have said the decline in sales volumes could be a sign that the U.S. housing market has peaked, after last year’s activity hit its highest level since 2006.
“Falling sales and growing inventory mean extreme upward pressure on prices should soon begin to fade,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Others see further rises to come, fueled by central bank policies. “Loose monetary conditions could push asset prices even higher, risking a possible sharp correction,” said Adam Slater, an economist at Oxford Economics. “For central banks, neither this result nor persistently higher inflation are attractive prospects.”
Rising house prices have caught the eye of U.S. Federal Reserve officials, especially in light of their $ 40 billion monthly bill. purchase of securities backed by the agency’s hypothesis, which constitute 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 the acquisition of large amounts of residential property by financial investors. Blackstone, the private equity group, Tuesday agreement 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 squeezing out of the market,” Kaplan said at an event hosted Monday by the Official Forum of Monetary and Financial Institutions, a think-tank. “At this stage, we’re wondering if the housing market really needs this Fed support of $ 40 billion a month.”
James Bullard, president of the St. Louis Fed, said at the same event that it might be time to consider whether to “withdraw” the MBS buying agency.
The European Central Bank said in a report this week that in the fourth quarter of last year house prices in the euro area grew by 5.8 percent over the previous year – the highest growth rate since mid-2007.
He said Germany, France and the Netherlands had made almost three-quarters of the total rise in eurozone housing prices last year.
Rising prices and the scarcity of affordable housing have sparked public outrage among large commercial property owners in many European countries. Ireland tax a 10 percent 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 € 18 billion merger between Vonovia, the country’s largest residential owner, and its rival Deutsche Wohnen sparked calls for lease caps and even nationalization of companies.
The question of house prices has also become a lightning rod for criticizing the ECB’s ultra-loose monetary policy. This week its president Christine Lagarde was questioned in the European Parliament.
“Young people and middle-class families are being forced to take part in a rat race, paying too much in an overheated housing market,” said Michiel Hoogeveen, a Eurosceptic Dutch MEP. “This is one of the consequences of your generous creation of money and low-interest policies to maintain the flow of the weakest countries in the eurozone.”
In response, Lagarde said that “there were no strong signs of [a] housing bubble fueled by credit in the eurozone in general ”but added that there were“ residential real estate vulnerabilities ”in some countries and in some cities in particular.