News

    U.S. Housing Boom

    The number of existing single-family homes sold in May jumped to a record-high level, up nearly 6% (5.7%) in a year's time. And, according to the National Association of Realtors, an industry trade group, the median price of a home jumped 15%, the strongest year-to-year price appreciation in 25 years.

    David Lereah is the chief economist for the National Association of Realtors. He says "baby-boomers", the generation that began in the years after World War Two, are now making plans for retirement. The supply of homes, says Mr. Lereah, is not keeping pace with demand. He says, "It is the biggest generation the country has ever had. They are in their peak earning years. They have a lot of built up equity in their primary residences, so they are buying homes at a record-setting pace, not just buying primary homes but second homes, vacation homes and homes for investment. So when demand exceeds supply, something has to give, and that is prices."

    According to the National Association of Realtors, the median price nationwide of single-family home is now $206,000, but in some areas prices are much higher. For example, in California the median price is over $500,000.

    Richard Brown is Chief Economist for the Federal Deposit Insurance Corporation, or F.D.I.C., which oversees the private banks that provide most of the home loans in the U.S. Mr. Brown says the hottest housing markets can be found in three regions of the country, all of which, he says, are desirable retirement areas.

    Mr. Brown says, "The fact that the boom markets are concentrated in California, the Northeast and in Florida is not surprising in a sense that coastal markets with supply constraints, where it is difficult to increase housing supply, tend to have more volatile home prices than the middle of the country."

    Some economists worry that speculative investment has created an unsustainable boom similar to what happened 10 years ago in the stock market.

    Amy Crews-Cutts is an economist with Freddie Mac, the congressionally chartered organization that provides money to mortgage lenders. She dismisses concerns that the housing boom is headed for a crash.

    According to Ms. Cutts, "Most people are buying these houses to live in them. They [home buyers] are not buying it just for the investment. Where house prices are growing rapidly, they are growing where people are moving in vast numbers; Washington, D.C., Florida, California, Las Vegas [Nevada] and cities like Boston and the New England area."

    Housing is one of the main engines driving the American economy. In the latest revision of growth figures for the first three months of the year, housing made up roughly 20% of all U.S. economic activity. F.D.I.C. economist Richard Brown admits there are housing bubbles in a few areas of the country but he says a downturn in one will not necessarily mean a downturn in all.

    "Something to remember in housing markets is that owner-occupants of homes do not tend to part with those homes at distressed prices," says Mr. Brown. "They go to extraordinary lengths to keep their home off the market. Clearly, we are seeing signs of speculative activity in some of the boom markets. That is one of the definitions of a boom market. But I think the telling factor, at least based on what history shows us, is going to be: what kind of local economic distress do we see in a market? If there is serious local economic distress, prices certainly could fall."

    During the height of the stock market bubble in the late 1990's, the nation's top banker, Federal Reserve Board Chairman Alan Greenspan, was critical of what he termed the "irrational exuberance" on Wall Street because soaring stock prices bore little relation to underlying economic fundamentals. But Mr. Greenspan is widely credited with creating the conditions for today's rapid escalation in home sales and prices. To lessen the effects of a mild recession in 2000, the Federal Reserve cut interest rates 13 times to a record low 1%, which resulted in the lowest mortgage interest rates in 50 years. Although the Fed has raised interest rates 9 times in the past year, mortgage rates have largely been unaffected.

    In fact, rates on a 30-year fixed-interest-rate mortgage, the most common type of home loan, are currently heading lower, according to economist David Lereah.

    Mr. Leureah says, "This is not unusual but sometimes that portends recession, so we need to be careful going forward about economic conditions. I think the Fed needs to be very careful right now."

    So far, the Federal Reserve Board, whose decisions on monetary policy affect interest rates on everything from credit cards to car loans to home mortgages seems reluctant to deflate the housing bubble. But most economists believe that unlike the rapid decline in stock prices five years ago, the national housing market is likely to cool gradually from its red hot pace of the last several years, sparing the U.S. economy and American homeowners, any major economic shocks.

    This report was originally aired on VOA News Now's "Focus" program. For other Focus reports, click here

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeasti
    X
    June 29, 2016 6:15 PM
    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeast

    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Clinton Leads Trump, But Many Voters Don't Like Either

    In the U.S. presidential race, most recent polls show Democrat Hillary Clinton with a steady lead over Republican Donald Trump as both presumptive party nominees prepare for their party conventions next month. Trump’s disapproval ratings have risen in some recent surveys, but Clinton also suffers from high negative ratings, suggesting both candidates have a lot of work to do to improve their images before the November election. VOA National correspondent Jim Malone has more from Washington.
    Video

    Video New US Ambassador to Somalia Faces Heavy Challenges

    The new U.S. envoy to Somalia, who was sworn into office Monday, will be the first American ambassador to that nation in 25 years. He will take up his post as Somalia faces a number of crucial issues, including insecurity, an upcoming election, and the potential closure of the Dadaab refugee camp in Kenya. VOA’s Jill Craig asked Somalis living in Kenya’s capital city Nairobi how they feel about the U.S. finally installing a new ambassador.
    Video

    Video At National Zoo, Captivating Animal Sculptures Illustrate Tragedy of Ocean Pollution

    The National Zoo in Washington, D.C., is home to about 1,800 animals, representing 300 species. But throughout the summer, visitors can also see other kinds of creatures there. They are larger-than-life animal sculptures that speak volumes about a global issue — the massive plastic pollution in our oceans. VOA's June Soh takes us to the zoo's special exhibit, called Washed Ashore: Art to Save the Sea.
    Video

    Video Baghdad Bikers Defy War with a Roar

    Baghdad is a city of contradictions. War is a constant. Explosions and kidnappings are part of daily life. But the Iraqi capital remains a thriving city, even if a little beat up. VOA's Sharon Behn reports on how some in Baghdad are defying the stereotype of a nation at war by pursuing a lifestyle known for its iconic symbols of rebellion: motorbikes, leather jackets and roaring engines.
    Video

    Video Melting Pot of Immigrants Working to Restore US Capitol Dome

    The American Iron Works company is one of the firms working to renovate the iconic U.S. Capitol Dome. The company employs immigrants of many different cultural and national backgrounds. VOA’s Arman Tarjimanyan has more.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.

    Special Report

    Adrift The Invisible African Diaspora