Property Market watchers ever keen to get a steer on the future will be encouraged by three key indicators from statements that have been made by highly respected sources over recent days.
A global investment management firm has said that despite the concerns over rising interest rates U.S. property will experience a double-digit rise in home prices over the next two or three years. The same company has also said that it is encouraged by the “pick up in credit” by job growth and demand that they say will more than offset any modest increase in mortgage payments.
The third string comes from the National Association of Home Builders survey on the level of confidence amongst their members, which continues to rise.
The housing industry will grow 10% over the next two to three years despite the anticipated rise in mortgage rates, Pimco’s Mark Kiesel is predicting. He says that he believes that it will come at least in part from frustrated millennials who have seen job prospects grow significantly of late. Keisel pointed to the 700,000 jobs added in the 25 to 34-year-old range and to the 30% of 18- to 24-year-olds who are currently living with their parents.
Turning to credit, Kiesel, Pimco’s chief investment officer of global credit, said that recent corporate earnings reports indicated that previous homeowners that were lost in the crash may now be in a position to return to the housing market.
“You literally have 5 million people who lost their homes in the prior recession. Over the next five years they could potentially come back and buy houses again.”
Kiesel dismissed concerns over rises in interest rates as he anticipates they will go only “a little bit higher.”
“The reality is the job growth and the pent-up demand for housing more than offsets a modest rise in longer-term rates,” he added.
Home Builders confidence is high for the same reasons as Kiesel cites and although current sales are sluggish the expectation of increasing traffic is at a 10 year high. Any confidence reading of over 50 points is seen as positive with the monthly sentiment level currently at 61 points
“Today’s report is consistent with our forecast for a gradual strengthening of the single-family housing sector in 2015,” said NAHB Chief Economist David Crowe. “Job and economic gains should keep the market moving forward at a modest pace throughout the rest of the year.”
