Will the US real estate market follow the economy higher?
Ben Bernanke, the outgoing chairman of the US Federal Reserve, has issued a statement this week to coincide with this eighth year as head of the US central bank. Despite the fact that there is much doom and gloom surrounding the US economy at the moment, Ben Bernanke believes there are many reasons to be optimistic in the short to medium term. This will be great news for the US real estate market which has performed indifferently across-the-board amid concerns that the economy was struggling and the reduction in fiscal stimulus, from $85 billion a month to $75 billion a month, would hit economic growth.
It now looks as though the US economy is moving towards more substantial growth in the short to medium term and one factor which was highlighted was “greater balance in the housing market”. So, does this bode well for the US real estate market in the short to medium term?
Depressed real estate markets
It was interesting to see that 2013 saw an array of “oversold” depressed US real estate markets coming back into favour. It seems that both domestic and overseas investors were beginning to see value in the US real estate market despite, at the time, concerns about the overall economy. The fact that unemployment is now moving in the right direction and fiscal stimulus will still be around in some shape or form for some time to come should give more confidence to real estate investors.
Quote from PropertyForum.com : “The US government recently announced plans to cut back on the enormous amount of fiscal support offered to the US economy.”
Despite the fact that the US economy has struggled of late, it is easy to forget that there has been economic growth in 16 out of the last 17 quarters. This in itself seems to have assisted in building up some momentum behind the economy which obviously bodes well for the employment market and overall spending power.
Is the US economy out of the woods?
While Ben Bernanke was very positive about the US economy going forward, he did caution not to get too carried away because we have been here on numerous occasions since the 2007/8 downturn. There needs to be a careful approach in the short term, fiscal stimulus needs to be maintained as long as possible and the more balanced nature of the US real estate market is also a vital element of long-term recovery hopes.
At this moment in time it is unlikely that we will see any major increase in overseas investments in the US real estate market but, on the plus side, it is unlikely that prices will soften in the foreseeable future. While economic performance does vary from state to state across the US, the overall picture is improving, the economy is strengthening and thankfully we are starting to see the emergence of a much-needed feelgood factor amongst the population.
Conclusion
The fact that Ben Bernanke has taken his eighth anniversary as leader of the Federal Reserve as the moment to review prospects for the US economy should not be overlooked. He will be determined to ensure that the US economy leaves his stewardship on an upward trend despite the fact that he has overseen the most challenging economic period in US history since the great depression. It looks as though the US economy is slowly emerging from the doom and gloom of the 2007/8 mortgage crisis but nothing should be taken for granted.
Thankfully, there are signs of growing demand and more firm pricing in the US real estate market which will give confidence to both domestic and overseas investors. Slowly but surely the pieces of the economic jigsaw are starting to fit together and there is reason to be hopeful for the future.