United States : post-lockdown euphoria in the property market

Chart of the week

US home sales marked another monthly rise in August. New home sales surged 4.8% on top of an upwardly revised 14.7% increase for July to reach a high not seen since 2006*. The rebound has offset a sales deficit caused by the lockdown. In the resale market, data are also buoyant at an annualised rate of 6 million for all homes sold, of which 5.4 million were single-family homes. Contract exchange numbers indicate that the positive trend has further to go, as does the record level of the (1)NAHB index.

Against this backdrop, the stock of homes for sale has reached an all-time low.

Our analysis

How will the Covid-19 crisis affect demand for housing? The whole lockdown living experience could re-ignite interest for single-family homes. The increase in remote working may also shift household purchasing decisions towards this segment. The number of homes up for sale is linked to demographic factors. Demand clearly depends on a purchaser’s financial resources, which in turn hinges on incomes, especially salaries, and ultimately on employment. Should unemployment stay high, then younger cohorts may postpone purchasing property. That said, in terms of financing, potential buyers are looking at the lowest mortgage rates in a decade.

Years of moderate building activity have led to a sharp fall in vacancy rates, which are now at their lowest since the early 1980s. Buoyant demand for homes is therefore likely to continue. However, it remains to be seen whether the construction industry will step up activity to meet demand, which appears to be the case given recent building-permit figures, or if disequilibrium in supply and demand will drive prices up.

 

(1) NAHB index: Housing Market Index based on the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.

*Source : Bloomberg, 24th September

See also : https://lazardfreresgestion-tribune.fr/en/japan-money-supply-surges-higher/

 

The opinion expressed above is dated 28th September 2020 and is liable to change.

 

This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – a simplified joint stock company with share capital of €14,487,500 – Paris Trade and Companies Registry No. 352 213 599. 25, RUE DE COURCELLES – 75008 PARIS, FRANCE


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