It appears the Americans have far more to worry about than a pesky rate increase
US PROPERTY COULD BE OVERVALUED BY 25% TO 60%
The 0.25% US rate hike, the first in nearly a decade, doesn’t appear to have had much of an impact on Amercian homeowners. Although, as always, the increase will affect first-time buyers and those who are already over-indebted.
In a poll conducted in November 2015, only 6% of respondents indicated that they were concerned about a pending increase. What worried more buyers was increasing house prices, with 26% noting this issue.
What US buyers appear to fear more is another price bubble. And there’s plenty of evidence that this concern is justified. An analyst quoted in Fortune Magazine estimates that US property is over-valued by 25% to 60%. He cites the San Francisco Bay Area as an example. Here, the price of an average property is $1.45m and the average salary is $180,000 a year. He notes that the average person who simply wants to put a roof over their head can only afford a property at $778,000, nearly 50% below the average.
What is driving prices to these new heights? Is it another subprime lending scheme, or perhaps international investors pouring money into the US bond markets? The short answer is no to both. This time round, price increases are linked to Americans who are investing in second, third and fourth homes, hoping for investment and capital gains.
Words: Lea Jacobs