Positive Outlook on the US Housing Market
The US housing market is built on a solid foundation of sustainable and healthy growth and Walton predicts on-going demand for this sector. Doug Donald, Senior Vice President, Real Estate Acquisition and Disposition of Walton, said: “Today’s market is more disciplined—driven by strong U.S. economic indicators and job growth. The U.S. demographics and real estate trends will sustain ongoing positive market performance.”
What is driving today’s market?
The fundamental drivers for land absorption are job creation, population growth, housing permit issuance and housing affordability. These four highly correlated factors create a win-win scenario for development.
The pro-business environment in the U.S. has seen a number of diversified economic hubs emerge which create clusters of job growth. A good example is Orlando (Florida). It is one of the fastest job growth centres compared with other large metropolitan areas, growing around 4.3% annually from July 2017 to July 2018.
Other metropolitan areas experiencing an average annual growth rate of over 3.1% are all located in the Sunbelt region—Atlanta (Georgia), Riverside (California) and Dallas (Texas).
How does this regional performance impact the real estate market?
As population growth through in-migration continues to increase in the Sunbelt region, from both Millennials and Baby Boomers, a surging demand for the expansion of new communities in the secondary cities and well-situated suburbs should dominate the housing market into the next decade.
According to the National Association of Homebuilders, compared with the end of June 2017, the U.S.’s West saw the highest growth in single-family permits (+14.2%) while the South of the country had the highest growth in multi-family permits (+13.6%) across the country all of which are boosting pent up demand for industry-wide housing production.
Why are supply-side challenges still occurring?
Home-builder confidence is at its highest level since 1999, even higher than during the housing bubble from 2004 to 2006. However, the current housing starts continue to lag behind the starts of the previous cycle.
Stricter mortgage qualifications and supply side challenges for builders have essentially created a “missing middle” in the housing market. Qualifying potential home buyers for the “first and second time move up home” and solving the supply side challenges are pivotal in moving current housing starts beyond the levels reached previously.
After nearly a decade of absorbing excess inventory, created from over building, home-builders and home buyers are regaining their confidence as permits steadily rise and return to 1.3 million per year, the long-term historical average level.
Outlook for the U.S. housing market
The U.S. housing market is benefiting from the country’s economic performance, due in part to President Donald Trump’s 2018 tax reforms. Many U.S. corporations are supportive of the current federal government’s pro-business, predictable regulatory environment and job-creation mandate.
As a result, this has created strong drivers in employment and population growth and this combination is reflected in the demand for housing and the absorption of land in the Sunbelt region in particular. Many political and economic factors indicate that long-term and sustainable growth will continue in employment, population and housing numbers.