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Lower End Housing Set To Boom In The Usa

News Posted On: 11 January 2015

USA property news

The lower end of the American housing market is set for a boom year, according to data released by property firm Clear Capital. Most housing in the USA is expected to experience declining gains, including the previously market-leading luxury sector, but the market for houses selling for under $95, 000 (£57,000) is forecast to grow at about 3%.

Even that is a slowdown from the last months of 2014. In December, Clear capital’s figures show sub-$95,000 housing nationally growing at 10.4%. Across the year, prices grew nationwide by 5.5% to November, according to CoreLogic.

Region by region, the biggest gains are expected in the Midwest, which is thought likely to outpace the rest of the USA by 1.6% across the market as a whole. The Midwest’s low-tier market is set to grow by 7% this year, outpacing the West by 5.3%. Additionally, of the metro regions singled out for high growth in low-tier housing this year, several are in the Midwest.

Columbus, Dayton, Cleveland and Cincinnati, all in Ohio, are set to experience growth ranging from 2.2% to 4.5% in their low-tier housing over 2015. For some of these cities, it’s a departure from recent form: Dayton saw 16.5% median home price increase in 2014 – up from 2013’s less-impressive 2.3%. It’s a similar picture in Cincinnati, where median prices were up 17.2% on 2013.

However, these high gains won’t last. In fact, they’ve already begun to slow down. Growth in the West is down 10% to year’s end on 2013, and even in the Midwest it’s down 2.3% from 2013’s figures.

The low-tier trend isn’t confined to the Midwest: in California, low-tiered property prices are on average 10% higher now than a year ago. While the general market is levelling off towards something more sustainable, low-tier growth is accelerating.

‘Overall,’ says Alex Villacorta, Clear Capital’s vice president of research and analytics, ‘2014 was a good year with prices up virtually across the board, though the rate of price growth has declined consistently since the year began. As we turn the calendar, we expect this trend to continue.’

‘In 2015,’ Mr Villacorta went on, ‘we will see the natural progression of the housing market regressing back to normal rates of growth. Current price trajectories suggest that price growth at the national level will continue to moderate to 1% to 3% with distressed saturation still above historical norms in some of the top 50 metros.’

So why are low-tier houses seeing growth while the rest of the market is in a phase of moderation?

Much of it comes from upward pressure from reluctant renters. In many US metro areas it’s now almost twice as expensive to rent as it is to buy, and renters who sought access to the property ladder have had the bottom rung lowered into their reach by decreases in down payment requirements. Even with stagnant wage growth, the market still sees growth in low-tier properties under these conditions.

Is this a component of the American market’s long, wavering upswing, or the first intimation that buying power has fallen and the recovery is in trouble? Judging by the fact that new car purchases are rising too, it looks like part of a recovery that’s correcting itself.

Written by Les Calvert of www.property-abroad.com - overseas property reporter

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