It is sustainable real estate recovery in the United States?

March 31, 2014

It is a major key to understanding the economic recovery questions and, therefore , possible decisions regarding the end of QE3 that can take Ben Bernanke , chairman of the Federal Reserve.

Trevor explains Greetham , head of multi-asset funds at Fidelity , currently the Case Shiller index of housing prices ” is recording the largest increases since 1996 by falling mortgage rates and financial sector more willing to lend .” The American manager believes in a report on the sector that can help the real estate three ways to strengthen the U.S. economy. The first and most important , being the most direct impact is residential investment. “The volume of promotions initiated is increasing and real residential investment in the United States. grew by 14.4% , the fastest pace since 1994 , “they explain .

The second way is through the ” wealth effect on consumption ,” purely psychological ” When house prices rise, consumers feel more wealthy, which tends to make them spend more ,” says a Fidelity. At the same time , provide the following calculation : for every dollar increase in net household wealth , U.S. consumers have historically spent between 3 and 5 cents more . The third contribution is through mortgage underwriting seconds . ” As demonstrated in the boom period , rising housing prices allow homeowners to borrow more against the value of their property . The available evidence suggests that the propensity to spend that money is usually high “note from the manager.

Bart Van Craeynest , chief economist at Petercam notes that despite the rise of the 1% have experienced in the last two months the rates of 30-year mortgages , ” confidence builders in the United States in July has reached its highest level since early 2006 , ” coinciding with highs in the sector. The expert says that ” following the historical pattern , the U.S. housing market seems set to add 3 percentage points of GDP over the next two years.” So far, the baseline estimate has been to Goldman Sachs , which has been estimated that this year will contribute 0.5% to GDP.

Good evidence of the influence of the real estate in the country’s economy is, after Bernanke announced that the Fed is ready to start phasing out the QE3 (which includes monthly purchases 40,000 million in mortgage bonds) , the market fell by 16 % from the highs of May, and then rebound by 6% , notes manager AXA Investment Managers Frédéric Tempel . “It’s unlike the rest of the world, where recent falls seem uniform and indiscriminate , U.S. We have seen some subsector differentiation, where the business models of long-term leases , such as retail single tenant (-6 %) and health care ( 3% ) were the most affected and , conversely , storage ( 1%) and apartments (2% ) had the best performance , since the length of the leases ranging from one month to one year, ” Tempel specified .

” The survey data on the housing market are an indicator that foreshadows well before the evolution of U.S. interest rates ” continues Trevor Greetham from Fidelity. “The continued recovery of the housing increases the likelihood that the U.S. quit first trap of debt and the Fed begins to raise rates in the next two years ,” he adds . “Right now the housing recovery can somehow deal with higher interest rates . Continued recpueración sector is a good sign for the overall picture in the U.S. , “says the chief economist at Petercam .

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