Home prices set new records in the United States and parts of Europe, as massive fiscal and monetary stimulus helps residential real estate markets continue to shrug off the impact of the coronavirus pandemic.
The National Association of Realtors said Tuesday that the median price of existing homes in the United States rose to a record 23.6 percent year-on-year to a new high of $350,300 last month with increases recorded in every region of the country.
Europe’s housing market has also continued to climb despite the Covid-19 crisis. The Dutch Statistics Office said existing home prices in the Netherlands rose 12.9 per cent in May compared to the previous year, the fastest growth rate since 2001.
The number of residential property sales has declined in both the US and the Netherlands, even as prices continue to rise, indicating that demand is outstripping supply. The Dutch Land Registry Office said it recorded 16,126 residential real estate transactions in May, down 12.1 percent from the previous year.
Sales of previously owned homes in the United States fell 0.9 percent between April and May to a seasonally adjusted annual rate of 5.8 million. NAR said the total US housing stock of 1.2 million units was 20.6 percent lower than it was in May 2020, although it was up 7 percent from April.
Some economists said the drop in sales volumes could be a sign that the US housing market has peaked, after activity last year hit its highest level since 2006.
“The slump in sales and the rise in inventory means that the severe upward pressure on prices should start fading soon,” said Ian Shepherdson, chief economist at Pantheon Macro Economics.
Others see more hikes ahead, fueled by central bank policies. “Loose monetary conditions could push asset prices higher, risking an eventual sharp correction,” said Adam Slater, economist at Oxford Economics. “For central banks, neither this outcome nor persistently high inflation are attractive prospects.”
Booming home prices caught the attention of US Federal Reserve officials, especially in light of $40 billion a month Purchases of agency mortgage-backed securities, which are part of the $120 billion bond-buying program.
Robert Kaplan, president of the Federal Reserve Bank of Dallas, recently warned that prices were at “historically high” levels and highlighted large volumes of residential real estate purchases by financial investors. Blackstone, the private equity group, on Tuesday agreed 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 leaving the market,” Kaplan said at an event hosted by the Official Financial and Monetary Institutions Forum, a think-tank. “At this point, we’re wondering if the housing market really needs that Federal Reserve support of $40 billion a month.”
It may be time to consider whether to “retire” from agency purchases that MBS buys, James Bullard, president of the Federal Reserve Bank of St. Louis, said at the same event.
The European Central Bank said in report This week, in the last quarter of last year, house prices in the eurozone rose 5.8 percent from a year earlier – the highest growth rate since mid-2007.
She said Germany, France and the Netherlands accounted for nearly three-quarters of the eurozone’s total increase in house prices last year.
Price hikes and a shortage of affordable homes have sparked public outrage among large business owners in many European countries. Ireland imposed A 10 percent stamp duty on anyone buying 10 or more homes in a 12-month period to prevent financial investors from buying large numbers of real estate.
In Germany, the scheme 18 billion euros merger Between Vonovia, the country’s largest residential owner, and its rival Deutsche Wohnen, calls have been made for caps on rents and even the nationalization of businesses.
The issue of house prices has also become a deterrent to criticism of the very loose monetary policy of the European Central Bank. Its president, Christine Lagarde, was questioned about this in the European Parliament this week.
“Young people and middle-class families are being forced into the rat race, and are overpaying in an overheated housing market,” said Michel Hoogeveen, a skeptical Dutch MEP. “This is one consequence of creating generous money and low interest policies to keep weaker eurozone countries afloat.”
In response, Lagarde said, “There are no strong indications of [a] The credit-fueled housing bubble in the eurozone as a whole” but added that there are “residential vulnerabilities” in some countries and some cities in particular.