House prices up 2.77% y-o-y in Q1 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 a modest 2.77% during the year to Q1 2020 (inflation-adjusted), an improvement from the previous year’s 1.78% growth. Real house prices increased slightly by 0.77% during the latest quarter.

The Federal Housing Finance Agency’s seasonally-adjusted purchase-only U.S. house price index rose by 3.52% y-o-y in Q1 2020 (inflation-adjusted), at par with the prior year’s 3.63% growth. The FHFA index rose by 1.24% q-o-q during the latest quarter.

Demand and construction activity now falling

Both housing demand and supply are now falling, mainly due to the economic fallout from the coronavirus pandemic. Sales of new single-family houses were down 6.2% y-o-y to a seasonally-adjusted annual rate of 623,000 units in April 2020. Likewise, existing home sales plummeted by 17.2% y-o-y to a seasonally-adjusted annual rate of 4.33 million units in April 2020.

New housing starts fell sharply by 29.7% y-o-y to a seasonally-adjusted annual rate of 891,000 units in April 2020, while completions were down 11.8% to 1,176,000 units. 

U.S. homebuilder sentiment remains negative at 37 in May 2020, sharply down from 66 in May 2019 and a record high of 76 in December 2019, 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.

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 shrank 4.8% in Q1 2020, ending a record streak of expansion, amidst social distancing restrictions and lockdowns. It was the first contraction since Q1 2014 and the biggest quarterly decline since Q4 2008. The world’s biggest economy is expected to shrink by 5.9% this year, the first contraction in 11 years, based on IMF estimates. The unemployment rate surged to a record high of 14.7% in April 2020 and could hit 20% in May.