Economists' Outlook

Housing stats and analysis from NAR's research experts.

A REALTOR® University Presentation on A Global Perspective on the U.S. Housing Market

U.S. housing prices have rebounded strong in the U.S. since the housing collapse in 2006. How does the U.S. recovery compare with other countries? And what is the impact of the collapse of oil prices and slower Chinese economic growth on the ongoing recovery of the U.S. housing market? This was the topic of discussion at a recent REALTOR® University Speaker Series, with Dr. Alessandro Rebucci, Assistant Professor of the John Carey Business School as speaker[1].

According to Dr. Rebucci, U.S. average house prices have increased fairly relative to national income from their 2010 levels compared to what has been happening in other countries (see Chart 1 below). Using the house price-to-income as indicator, he noted that prices have risen faster than income in countries such as Germany, Switzerland, the United Kingdom, Canada, and Australia.[2] So the increase in U.S. house prices after the housing downturn has actually been more moderate compared to the recovery in other countries.

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Regarding the impact of oil prices on housing prices, Dr. Rebucci stated that his analysis of past oil price collapses does not indicate that the current low oil prices will lead to a broad collapse of housing prices as well. Falling oil prices only lead to falling house prices if the oil prices decline is triggered by a recession. Even in states like Texas, there is no evidence of an association between oil price declines and falls in house prices in excess of the national average. He noted also that the oil price decline this time around arose from excess global supply rather than a demand collapse, although the impact might be felt on house prices at the community level where gas shale production is concentrated.

Regarding the Chinese housing market and its economy, Dr. Rebucci cited recent NBER[3] research showing that house price appreciation is out of line with fundamentals only in China’s Tier 1 cities such as Beijing, Shanghai, Guangzhou, and Shenzen. Meanwhile, house prices increased in line with fundamentals in Tier 2 and in especially less liquid markets in Tier 3 cities. If the housing bubble in the Tier 1 cities does burst and house prices fall, Dr. Rebucci expects the U.S. market might benefit because of the possible inflow of capital to the U.S., under progressively more liberal regulation governing international capital flows to and from China.

Dr. Alessandro Rebucci is Assistant Professor at the Johns Hopkins Carey Business School, E. St. John Real Estate Program. He held various research positions at the International Monetary Fund and at the Inter-American Development Bank. He can be reached at arebucci@jhu.edu.

 


 


[1] The REALTOR® University Speaker Series was held on October 19, 2015 at the NAR Washington Office.

[2] An index lower than 100 means house prices are increasing less than income, while an index greater than 100 means housing prices are rising faster than incomes, making a house purchase more unaffordable. The index is an indicator of changes in prices and incomes compared to a base year.  In terms of levels, it is possible that house prices are in fact “ too high” or “unaffordable” relative to the level of income.

[3] National Bureau of Economic Research

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