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Last Updated: Apr 01, 2017




After five years of strong house price growth, the U.S. housing market remains strong. Demand is strengthening, and residential construction activity is rising.

The was a 5.83% rise in the S&P/Case-Shillerseasonally-adjusted national home price index during 2016 (3.71% in real terms).  This came after y-o-y rises of 5.27% in 2015, 4.52% in 2014, 10.74% in 2013, and 6.47% in 2012, according to Standard and Poor’s.

There was a 6.2% rise in theseasonally-adjusted purchase-only U.S. house price index from the Federal Housing Finance Agency (FHFA) (4.07% in real terms) in 2016.

All 20 major U.S. cities experienced relatively strong house price hikes, with Seattle posting the highest increase of 10.75% during 2016, according to Standard and Poor’s. It was followed by Portland (10.01%), Denver (8.89%), Tampa (8.33%), Dallas (8.06%), Miami (6.79%), Boston(6.31%), Detroit (6.27%), and Atlanta (6.21%).

The Mountain region had the highest house price increases of 8% during 2016, followed by the Pacific region (7.4%), South Atlantic (6.9%), Central region (6.2%), and the West South Central region (6.1%), according to the FHFA.

The average sales price of new homes sold in the U.S. rose by almost 12% during the year to February 2017, to US$390,400, according to the U.S. Census Bureau. In contrast, the median sales price of new homes sold dropped 4.9% to US$296,200 over the same period.

Demand has been shooting up. Sales of new single-family houses rose by 12% to 561,000 units in 2016 from the previous year, according to the U.S. Census Bureau. Likewise, existing home sales were up by 3.8% to 5.45 million units in 2016, the highest level since 2006, according to the National Association of Realtors (NAR).

“Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” said Lawrence Yun, NAR chief economist.

U.S. homebuilder sentiment surged to 71 in March 2017, up from 65 the previous month and the highest level since June 2005 according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).  A reading of 50 is the midpoint between positive and negative sentiment.

Construction activity continues to rise strongly. In February 2017, new housing starts rose by 6.2% y-o-y to a seasonally-adjusted annual rate of 1,288,000 units, while completions were up 8.7% to 1,114,000 units, according to the U.S. Census Bureau. Building permits (private) rose by 4.4% y-o-y to a seasonally-adjusted annual rate of 1,213,000 units in February 2017.

United States house pricesThe U.S. housing market is expected to remain strong. NAR projects about 4% increase in the national median existing-home price this year. In addition, sales are forecast to grow by around 2% to 5.46 million this year and by another 4% to 5.68 million in 2018.

The U.S. economy grew by 1.6% in 2016, down from 2.6% growth in 2015 and the lowest level since 2011, according to the U.S. Bureau of Economic Analysis. The economic deceleration was mainly due to the slowdown in private consumption, private inventory investment, fixed investment, and government spending. The world’s largest economy is expected to grow by 2.2% this year, and by 2.1% in 2018, according to the IMF.

Analysis of United States Residential Property Market »


RENTAL YIELDS
Last Updated: Jun 15, 2017



Manhattan property has held up well through the crisis and beyond.

How much will you earn?  Studio apartments will earn relatively more than one-bedroom apartments (in terms of return-on-investment), and those in turn will earn relatively more than two-bedroom houses, etcetera. To earn higher returns, buy smaller units.
  • a studio apartment can rent for around $2,700 per month, earning a rental yield of around 7%
  • a 1-bedroom apartment  can rent for around $3,500 per month, earning a rental yield of around 4.4%
  • Larger units earn proportionately lower returns.  A 3-bedroom apartment is likely to earn a rental yield of around 2.4%

Round-trip transaction costs are moderate for buyers of U.S. residential property. See our U.S. residential property transaction costs analysis.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Sep 12, 2016



united states houses for saleRental Income: Rental income is categorized as either Effectively Connected Income, wherein it is taxed at progressive federal tax rates, or Fixed Determinable Annual Periodical income, wherein it is taxed at 30% withheld by the tenant.

States also levy income taxes at varying rates.

Capital Gains: Capital gains tax for properties held for more than a year is 5%; otherwise the tax is 15%.

Inheritance: Federal estate tax is progressive with rates at 18% to 45% and an exemption of up to US$2,000,000. A Generation-Skipping Transfer Tax is also being levied on transfers to beneficiaries who are more than one generation younger than the transferor.

Residents: Resident foreigners, like U.S. citizens, are taxed on their worldwide income.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Sep 13, 2016



Roundtrip transaction cost is around 9% to 11%. Significant costs include the 6% real estate broker's fee and real property transfer tax, at around 1.425% in New York City. Total costs for legal fees, title search and insurance, and registration fees range from 1.70% to 3.50%.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Feb 06, 2008



Strong anti-discrimination laws make the US slightly pro-tenant.

Rent Control: There are subtle rent control laws in 5 states; however their laws also have provisions to give landlords a fair return of investment.

Tenant Security: It is advisable for landlords to write a report citing all the allowable reasons when declining a prospective tenant. Tenants can also charge landlords with intentional infliction of emotional distress to fend off eviction.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Apr 01, 2017


Economic slowdown, low unemployment

United States GDP inflationThe U.S. economy grew by 1.6% in 2016, down from 2.6% growth in 2015 and the lowest level since 2011, according to the U.S. Bureau of Economic Analysis. The country’s sluggish economic growth was one reason behind President Donald Trump’s election. Trump promised to doubleeconomic growth through an ambitious stimulus program featuring tax cuts, deregulation and higher infrastructure spending.

The world’s largest economy is expected to grow by 2.2% this year, and by 2.1% in 2018, according to the IMF.

The budget deficit widened to 3.2% of GDP in 2016, after reaching an eight-year low of 2.5% of GDP in 2015, according to the Congressional Budget Office (CBO). Despite this, the deficit remains far lower than the deficit of 10.1% of GDP recorded in 2009.

The deficit is expected to increase in coming years as President Trump and congressional Republicans plan to cut taxes and boost infrastructure spending.

United States unemploymentConsumer prices continue to rise. In February 2017, the nationwide inflation rate stood at 2.7%, up from 2.5% in the previous month and the highest level in five years, according to the US Bureau of Labor Statistics. Overall inflation is expected to be 2.3% this year, from 1.2% in 2016, 0.1% in 2015, 1.6% in 2014, 1.5% in 2013, and 2.1% in 2012, according to the IMF.

The labor market remains fundamentally strong. Unemployment in the U.S. was 4.7% in February 2017, down from 4.9% a year earlier, according to the Bureau of Labor Statistics (BLS). The recent peak year for unemployment was 2010, with 9.6% unemployment.

“The jobs market is strengthening and we are near full employment,” said Ryan Sweet of Moody’s Analytics.

Moreover, the total number of people seeking first-time unemployment benefits, an indicator of the pace of layoffs, reached a 44-year low in February 2017 – another indicator of strong labor market fundamentals.

In February 2017, average weekly earnings increased by 2.5% from the same period last year, to US$897.50.







  • Strong and stable economy
  • Low to moderate transaction costs
  • Yields now moderate to poor
  • Complicated tax system
  • Pro-tenant rental market
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $17,191 For a 120 sq. m. property, usually an apartment.
Rental Yield: 2.91% For a 120 sq. m. property, usually an apartment.
Rent/month: $4,942 For a 120 sq. m. property.
Income Tax: 30.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 9.82% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 5.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

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