Housing Market On The Rise In US

02 Dec 2013

Apart from the anticipated addition of 5 million more jobs by 2015 in US, the sale of existing single-family houses are expected to rise to 5.2 million in 2015 and 4.9 million in 2014 from 4.6 million this year.

Daniil Manaenkov from the RSQE (Research Seminar in Quantitative Economics) from the department of economics at the University of Michigan says that in the next 2 years, the housing sector is anticipated to be a solid contributor to growth, reflecting an expected rise in household formation, as well as increasing incomes. Manaenkov also said it is likely that with an improved payroll outlook and affordable rates, construction of housing will accelerate in the coming year.

During the forecast period, traditional mortgage rates will increase from this year’s 4% average rate to 4.6% in 2014 and 5% the year after.

Even other interest rates will stay relatively moderate. The 10-year Treasury note will take an upward swing from this year’s 2.3% to 3% in 2014 and 3.5% in 2015, while the 3-month Treasury bill rate will hold steady at 0.1% in 2014 and 0.3% in 2015.

Over the next 2 years, core inflation will stay below 2%, oil prices will hold steady around $95 per barrel through 2015, and the sales of light-vehicles will increase from this year’s 15.5 million units to 16 million in 2014 and 16.3 million in 2015.

Hall says that since 2009, the strengthening of domestically produced vehicles has helped drive the sales recovery and pent-up demand remains high. The average age of vehicles on the road is steadily increasing, and till date, younger drivers who are more likely to be debt-constrained or unemployed have been underrepresented in the market.

Hall added that together, these facts predict that as unemployment continues to fall, further growth in vehicle sales in 2014.

The forecast is based on the US Economy’s Michigan Quarterly Econometric Model.