Eakinomics: the housing boom
One of the signatures of the COVID-19 recession is its inequality between sectors of the economy. While the service sector, especially the leisure and hospitality industry, has remained stable, other sectors have thrived. Among the most notable is the residential housing boom in the United States. According to the house price indexes based on mortgage purchases by Fannie Mae and Freddie Mac, house prices rose 5.3% between March 2019 and March 2020. In contrast, over the year from March 2020 to March 2021, house price growth more than doubled to 12.9 percent. The values ââreflect a sharp increase in the pace of new home sales; The sales growth was 66.8% from March 2020 to March of this year, in contrast to a drop of 12.6% in the previous period from March to March. Finally, this demand resulted in additional constructions (and upward pressure on construction costs). Housing starts increased 5.5% from March 2019 to March 2020; the most recent growth from March to March is 37%.
The last time the United States experienced a real estate boom – the last years of the early 2000s – house price appreciation was largely concentrated in so-called “sandy states” such as California, Nevada, Arizona, Florida and others. Interior states have experienced a boom in subprime mortgage creation, but this has not been matched by a vibrant housing market.
As is the rule with all pandemics, the housing market in 2021 is very different. As shown in the table below, the appreciation of house prices between 2020 (March to March) and 2021 (March to March) accelerated in all State. The smallest increase – 0.9 percentage point – occurred in Washington DC, while the largest increase – 14.4 percentage points – occurred in Connecticut. Just behind Connecticut is Idaho, up 14.1 percentage points for an impressive growth rate of 26.4%. More generally, the Idaho-Montana-Utah region is distinguished by the appreciation in housing prices.
A residential building boom can have powerful ripple effects, as building a new home also means purchasing HVAC equipment, appliances, carpets, asphalt and a myriad of things. ‘others products. Given the massive fiscal overstimulation already in place, keeping a close eye on real estate developments will make life harder for the Federal Reserve.