Early indicators are hinting that the battered US housing market is showing signs of recovery. The NAHB index continues to rise and is close to a 5-year high.
We feel that the US housing market cheap on the below measures:
1) low house price-to-wage ratio,
2) low house price-to-rent ratios,
3) attractive rental yield versus mortgage rate and
4) low house prices versus their 100-year trend
5) further central bank policy on QE and Fed buying of mortgage backed securities
Further evidenced last week is the sharp jump in US 10 year bond yields by 33 basis points to 2.30% which signals that investors are now less fearful and is prepared to take on risk and switch from lower risk assets to higher risk. This is a positive signal for home owners.
This week's the latest report on US housing starts and sales figures for new and existing homes may just provide the confirmation to the recent trends.
Eric Tan,
London
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Improvement in housing related industries and an improving housing market is usually associated with increasing demand for white goods which will be positive for the overall economy.
With housing being a third of household wealth and mortgages accounting for about 40% of banks’ assets, if house prices rise by 10%, the savings ratio should fall by 0.3% points which will be a big boost to GDP growth
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