REAL ESTATE INVESTMENTS
Investing in the Surging Demand in U.S. Housing Tim Haywood Regional Vice President of Middle East at Walton International Group explains that despite the ominous backdrop of the global pandemic, US housing is experiencing a positive market with factors ranging from shifting inventory models to demand for more affordable homes helping to fuel the market
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lthough a bleak economic outlook is not usually accompanied by a booming housing market, this is exactly what the U.S. has experienced during the global pandemic – arguably the least likely time for soaring demand for new homes. Yet fuelled by low inventory, among other factors, the evidence is compelling. Even the recent backdrop of emerging concerns in recent months about “an overheated market” hasn’t derailed the momentum. For example, annual home price gains hit a record high in June, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. Considered the leading measure of U.S. home prices, data released at the end of August showed continued increases across the country. Year-on-year, there was a 18.6% annual gain in June, up from 16.8% in the previous month. Further, while the market has begun to cool due to higher costs, estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban
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Development (HUD) showed that July recorded a slight gain of 1% for sales of newly-constructed single family homes. The annual rate, however, was 27% lower than a year ago. “Steady sales reflect the increased appetite among homebuyers due to low interest rates, especially in lowerdensity suburbs,” said Tim Haywood, Regional Vice President of Middle East at Walton International Group, the real estate investment and land asset management company. Interestingly, this also reflects a longerterm, pre-pandemic trend that creates enticing opportunities for investors – from wealthy individuals to family offices and institutions alike – to access robust, consistent supplies of developable land that can facilitate the current growth trajectory in the U.S. residential home market. At the same time, as the homebuilding industry has shifted to more of a “just in time” inventory model , there is reason to think about land investment in a new way.
Banking and Finance news in the MEA market
Tim Haywood Regional Vice President of Middle East, Walton International Group
Navigating new supply-demand dynamics Historically-low mortgage rates and the shortage of inventory are expected to continue to keep the U.S. housing market strong as far as demand goes. For example, the 30-year fixed-rate mortgage (FRM) averaged 2.87%, according to the results of the latest Freddie Mac Primary Mortgage Market Survey (PMMS), as of early September. This was down from 2.93% 12 months earlier. Notably, the agency has projected a relatively competitive average mortgage rate for 2022 – 3.7% for a 30-year fixed loan. Supply will also remain a key factor. The National Association of Realtors (NAR), for instance, believes the construction of long-term housing fell 5.5 million units short of historical levels over the past 30 years. Freddie Mac research, meanwhile, suggests the U.S. needs 3.8 million more homes to meet the housing demand. A significant chunk of the appetite in the past few years has come from millennials, both in the younger (22 to 30 years old) as well as older (31 to 40 years old) segments. These groups comprise the largest share of homebuyers, at 23% and 14% respectively, according to the NAR. In particular over the past 12 months, a growing number have been able to capitalize on lower mortgage rates to
