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.
Cambodia Makes Progress Curbing Bear Tradei
X
Robert Carmichael
August 04, 2015 3:07 PM
Cambodia’s wild bears are under unprecedented pressure. Their native forests are being cut down at record rates, and China's huge demand for traditional medicine has made them targets. But experts say Cambodia's conservation efforts are setting an example that has put it well ahead of its neighbors in protecting bears. Robert Carmichael reports for VOA from Phnom Penh.
Video

Video Cambodia Makes Progress Curbing Bear Trade

Cambodia’s wild bears are under unprecedented pressure. Their native forests are being cut down at record rates, and China's huge demand for traditional medicine has made them targets. But experts say Cambodia's conservation efforts are setting an example that has put it well ahead of its neighbors in protecting bears. Robert Carmichael reports for VOA from Phnom Penh.
Video

Video Growing Number of E. Jerusalem Palestinians Seek Israeli Citizenship

Most Palestinians living in East Jerusalem have long rejected the option of full Israeli citizenship, seeing it as a betrayal to their political cause - the formation of a Palestinian state with East Jerusalem as its capital. But as that dream remains elusive, more and more Palestinians are applying for Israeli citizenship. Zlatica Hoke reports the decision is hard for many Palestinians who say they have to be pragmatic about it.
Video

Video With No Money, More Students, African Universities Struggle

Academics from around the African continent converged in Johannesburg last week for the African Universities Summit, a chance to tackle some of the major issues facing higher education in Africa today. VOA's Anita Powell reports from Johannesburg.
Video

Video Iraqi Yazidis Fear Death of Their Community

A year ago on August 3, Islamic State militants stormed the homelands of Iraq’s Yazidi minority, killing hundreds of men and enslaving thousands of women. The scenes of desperate Yazidi families crowding on the top of Sinjar mountain without food or water spurred Kurdish fighters into action, an emergency airlift and the start of the U.S. airstrike campaign against the Islamic State Sunni extremists. VOA's Sharon Benh reports from northern Iraq.
Video

Video Bangkok Warned It Soon Could Be Submerged

Italy's Venice and America's New Orleans are not the only cities gradually submerging. The nearly ten million residents of the Bangkok urban area now must confront warnings the city could become uninhabitable in a few decades. VOA Correspondent Steve Herman reports from the Thai capital.
Video

Video Inclusive Gym Gets People With Disabilities in Fitness Spirit

Individuals with special needs are 58 percent more likely to be obese than the general population. According to the U.S. Centers for Disease Control, they also have an increased likelihood of anxiety, depression and social isolation. But a sports club outside Washington wants to make a difference in these people's lives. With Carol Pearson narrating, VOA's June Soh reports.
Video

Video Wisconsin's Voter ID Law Still Mired In Controversy

Voter ID laws have sparked controversy across the US. More than 30 states enacted laws requiring citizens to show identification before they vote. Against fierce opposition, the state of Wisconsin recently enacted one the most restrictive voter ID laws in country. As Jeff Swicord reports, no one can predict its impact as the 2016 election nears.
Video

Video Astronauts Train Underwater for Deep Space Missions

Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Ebola Vaccine Hailed as Highly Effective

At last, there's a way to end the suffering from the Ebola epidemic that has ravaged West Africa for more than a year. Researchers say the vaccine is so effective, there may never be a major outbreak of Ebola again. VOA's Carol Pearson reports.
Video

Video Special Olympics Show Competitors' Skill, Determination

Special Olympics competitions will wrap up Saturday in Los Angeles, and the closing ceremony for athletes with intellectual disabilities will be held Sunday night. In a week of competition, athletes have shown what they can do through skill and determination. VOA's Mike O'Sullivan reports.
Video

Video Civil Rights Leaders Struggled to Achieve Voting Rights Act

Fifty years ago, lawmakers approved, and U.S. President Lyndon Johnson signed, the Voting Rights Act of 1965. The measure outlawed racial discrimination in voting, giving millions of blacks in many parts of the southern United States federal enforcement of the right to vote. Correspondent Chris Simkins introduces us to some civil rights leaders who were on the front lines in the struggle for voting rights.
Video

Video Shooter’s Grill: Serving Food with a Touch of the Second Amendment

Shooter's Grill, a restaurant in Rifle, Colorado, attracts visitors from all over the world as well as local patrons. The reason? Waitresses openly carry loaded firearms as they serve food, and customers are welcome to carry them, too. VOA's Enming Liu and Lin Yang paid a visit to Shooter's Grill, and heard different opinions about this unique establishment.
Video

Video Despite Controversy, Business Owner Continues Sale of Confederate Flags

At Cooter’s, a store in rural Sperryville, Virginia, about 120 kilometers west of Washington, D.C., Confederate flags are flying off the shelves. The red, white and blue battle flag, with 13 white stars representing the Confederate states, was carried by southern forces during the U.S. Civil War in the 1860s. The South had seceded from the Union over several key issues of disagreement, including slavery. VOA’s Deborah Block has the story.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.

VOA Blogs