Strong performance of US property market

Feb 16, 2004

16/02/04 - 2003 was a positive year for the US property market. According to figures announced by the NAR (National Association of Realtors), the US association that represents more than 972,000 agents operating in the US residential segment, total sales of existing properties amounted to about 6.07 million units (9.1% up on 2002) and sales of newly built properties totalled 1.08 million units.

New building site start-ups reached a record estimated 1.84 million units in 2003. The increase in demand has naturally affected prices. In 2003 the national average rose by 3.7%, while the existing property prices rose by 8%.

The region of the country most affected by these increases is the north-east, with a 13.1% increase in November 2003 over the corresponding period the previous year.

Downturn forecast for 2004

However, a downturn is expected in 2004. According to the NAR’s forecasts, sales of existing properties will drop to about 5.85 million units (3.6% down on the previous year) and sales of new properties will fall to about 1.01 million units (6.5% down on 2003). The number of new building site start-ups is also expected to fall by 7% to 1.71 million.

The rising mortgage interest rates are contributing to the fall in sales. Forecasts are pointing to an increase from 5.8% in 2003 to an average of 6.5% in 2004. According to the survey, property prices will also increase. The prices of existing properties will rise by 4.6% and new properties by 5.1%.

These negative effects will be partly offset by a positive trend in the labour market, a rising number of new family units and other factors that remain favourable overall for buyers.

As for inflation, another factor that affects sales volumes, the NAR expects the consumer price index to drop to 1.6% in 2004. As long as inflation remains so low, the Federal Reserve (the Central Bank of the United States) will probably maintain interest rates at the same level in order not to compromise the economic recovery. This will make borrowing easier for companies.

The in-depth sections contains the table with all the dataUS property marketmercatouseng.pdf