House prices up 5.51% y-o-y in Q3 2020

After seven years of strong house price growth, the U.S. housing market remains surprisingly vibrant. The S&P/Case-Shiller seasonally-adjusted national home price index rose by 5.51% during the year to Q3 2020 (inflation-adjusted), a sharp improvement from the previous year’s 1.46% growth. Real house prices increased 2.19% during the latest quarter. In fact the Federal Housing Finance Agency showed a more rosy picture with its seasonally-adjusted purchase-only U.S. house price index rising strongly by 6.51% y-o-y in Q3 2020 (inflation-adjusted), up from the prior year’s 3.21% growth and also the biggest y-o-y increase since Q3 2005. The FHFA index rose by 1.94% q-o-q during the latest quarter.

Demand and construction activity rising strongly again

Both housing demand and supply continue to rise strongly, despite the economic fallout from the coronavirus pandemic. Sales of new single-family houses surged 32.1% y-o-y to a seasonally-adjusted annual rate of 959,000 units in September 2020. Likewise, existing home sales rose strongly by 26.6% y-o-y to a seasonally-adjusted annual rate of 6.85 million units in October 2020.

New housing starts rose by 14.2% y-o-y to a seasonally-adjusted annual rate of 1,459,000 units in October 2020, while completions were up 5.4% y-o-y to 1,343,000 units.

U.S. homebuilder sentiment soared to a record high of 90 in November 2020, sharply up from 85 in October 2020 and 71 in November 2019, as homebuyers sought more space in less urban areas, amidst limited supply, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Sentiment plunged to 30 in April 2020 when the COVID-19 pandemic shut down the US economy. A reading of 50 is the midpoint between positive and negative sentiment.

Rents, rental yields: poor yields in New York, at 2.91%

New York apartment costs are very high, at around $17,191 per sq. m. 

United States: typical city centre apartment buying price, monthly rent (120 sq. m)
  Buying price Rate per month Yield
New York   $2,037,340   $4,942 2.91%

Recent news: The U.S. economy expanded by a whopping annual rate of 33.1% in Q3 2020, almost fully offsetting the declines of 31.4% in Q2 and 5% in Q1, according to the Commerce Department. In fact, it was the biggest growth ever recorded, as the economy rebounds from the COVID-19 pandemic.

Recently, the IMF revised upwards its 2020 economic forecast for the world’s biggest economy to a contraction of 4.3%, an improvement from its earlier projection of an 8% decline. The unemployment rate dropped to 6.9% in October 2020, down from 7.9% in September and a record high of 14.7% in April 2020. However, it remains far above the prior year’s 3.6% jobless rate.