Those that are currently investing in US housing should feel confident. There are four reasons why this is a good decision despite the ups and downs on market prices.
Strong job growth
The US economy has paved the way for around 3 million private sector jobs over the past year alone. This could only mean that there could be more than 750,000 new jobs in the 25- to 34-year old-age group which is the segment for first-time homeowners. This is the highest in about 15 years. More jobs mean higher incomes leading to an increase in consumer confidence and more demand for homes
Decrease in inventories and an increase in pent-up demands
The level of inventories for new and existing homes and the percentage of households are at or near-15-year lows. Around 1.5 million new households have been formed in the past year. More than 30 percent of 18- to 34-year-olds live at home which means there is an increase in pent-up demands. Housing demands will surely increase towards 1.5 million units two or three years from now
Willingness to lend and increasing demand for credit
Banks are starting to lend again to customers and this resulted in mortgage origination growth in all of the four largest banks. As banks continue to lend, households are becoming more confident to secure for credit and buy. It is also foreseen that a large number of previously foreclosed homeowners could become eligible to take loans and possibly to purchase homes over the next five years.
Homes are becoming more affordable
Owning a home is now more affordable and even if experts have expressed their concerns about the effect of rising rates to home affordability, it would take a two percentage point rise in mortgage rates to go back to the previous average, an article from QZ mentioned.
Investors who would like to take advantage of these trends should consider increasing their support in US housing and housing-related sectors. According to the report, there is value in companies in areas such as building materials, home improvement, title insurance, homebuilding, banks, and specialty finance companies as well as in non-agency mortgage-backed securities.
