Bargain-hunting US homebuyers will lay foundations for recovery
Few groups in the world will be as important to global recovery as the US
consumer, and to that group no figure is as important as the value of their
homes.
The return of the US consumer is a requirement for world growth. Only
once consumers start buying property again will the direction of home prices
reverse. But
we're getting close to the bottom.
Consumer confidence in America is returning. This month's
index figure from the Conference Board, published yesterday, hit 54.9 from
40.8 in April, well above market expectations of 42 and the biggest
one-month jump since April 2003.
As is typical at or near a turning point, data can be read equally
confidently by both pessimists and optimists and that's certainly true of US
house prices. But
the overwhelming impression being given by real
estate is value.
As Capital Economics pointed out yesterday, US prices are now back to 2002
levels in nominal terms and 2000 levels in real terms. Depending on whether
you choose a price-to-rents ratio or a price-to-incomes ratio,
US
homes are between 9pc-18pc undervalued versus 35pc-45pc overvalued three
years ago.
Consumers can now start to see a compelling case for buying. And that will
mark the start of a wider recovery.
Posted: 27 May 2009
Source: The Daily Telegraph
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