Is USA heading for another property bubble?

It’s been over a decade since the USA’s property bubble was at its height before that bubble burst, leaving many expat property owners out of pocket as the retail market crashed and the value of housing plummeted. As many British expatriates continue to head to America for work or retirement, there are renewed fears of another similar situation taking hold, causing concerns over whether it is wise to invest in property overseas.
The original United States property bubble affected over half of all US States, with housing prices reaching a peak in 2006, before they started to decline later that year and into 2007, and continued to drop rapidly over the following years until they hit record lows in 2012. News reports declared that British expat home owners in Florida had been hit hard, and the pattern was repeated across much of the country. Affected states included those areas where expatriate workers are most likely to settle, such as New York, California and Washington.
The property market did go into recovery and house prices stabilised, encouraging those relocating to the USA alone or with family to consider investing in property rather than renting. But data over the last year shows that house prices are shooting upwards, leading to fears that the issues of 10 years ago are about to hit homeowners once again.

Is another property bubble on the way?

There are certainly some outward signs that the US market is gearing up for another property bubble. House prices in June 2016 were back up close to the record levels at the height of the bubble’s peak in 2006. But what is important are the reasons behind the price rise. The causes of the first property bubble ranged from too many houses being built at one time, and mortgages being given out too freely, encouraging people to pay over-the-odds prices with their new-found credit freedom.
This time around, those same faulty mortgage products that triggered the original bubble do not exist. There are fewer homes available on the market creating a heightened demand and higher prices, as well as very low mortgage rates. These low rates are currently good news for affordability, making an investment in US property an attractive proposition for expats. Problems could start to occur if those low mortgage rates start to take an upwards rise, reducing affordability and causing house prices to lower as demand wanes.
With more people able to buy but less homes available, simple supply and demand is pushing house prices up. The low mortgage rates are encouraging homeowners to hold on to property after moving, to keep as an investment, meaning that there are less homes on the market. There are also significantly less houses being built than there were previous to the 2006 bubble, which many experts are attributing as the main cause of the current upward trend in house prices. A report on concludes that while it might look like a housing bubble is on the horizon, what is actually being experienced is “an above-normal home price growth trend” due to a low supply of available housing.
For now, it seems a very different situation to the original property bubble, and hopefully increased homebuilding in the USA will help to ease the situation.
If you’re moving to the USA, find out how our international removals team can help to arrange packing, storage and transportation on your behalf.
Information correct at the time of publication.