Fynsa
We have not had annualized inflation of this magnitude in the U.S. since the early 1980s, reaching 8.3% in April. As you know, the Federal Reserve began withdrawing monetary stimulus and raising interest rates a couple of months ago, and economists expect it will continue to do so in order to return to reasonable price increases (3% YoY). We are all impacted by both rising prices and rising interest rates in different ways. Housing is one of them, and in the U.S., depending on where you live and the type of home you rent, it can have very different impacts. On the other hand, 30-year mortgage rates have gone from 3.5% to 5.5% in just over a year, and they will probably continue to rise. Another interesting fact is the housing deficit in the U.S. It is estimated to be close to 4 million homes, and this has been increasing since before 2020. There are many explanations: restrictions, regulations, labor shortages, rising costs, among others.
In summary, we have a housing deficit (4MM homes), rising prices (+20% in the last 12 months), rising rents (5.1% to 17% depending on the source) and rising financing costs (+57% in the last 12 months). Like "almost" everything in life, the U.S. real estate market will be adjusting and looking for a balance in the different variables that affect it today.
One of the most interesting markets in recent years has been Texas. It is the second largest economy in the US (USD 2 trillion), has a population slightly over 29 million, and many associate it with oil. However, it has a fairly diversified economy, with energy, technology, aerospace, telecommunications, health, etc. companies. It has the same number of Fortune 500 companies as the state of California. In addition, it has the largest medical center in the country, renowned universities, one of the busiest airports in the country, making Texas an economy that has attracted - and is expected to continue to attract - a large amount of migration from other states and, of course, other countries.
The state's two major metropolitan areas are Dallas-Fort Worth and Greater Houston, the fourth and fifth largest metropolitan areas in the U.S., respectively. Its real estate market has been buoyant in recent years. In Houston, home sales were up 7.4% YoY and leases were up 17.2% YoY to March 2022, with very high transaction volume. While transaction volume in the sub-$500,000 home segment was up 13%, in the $500,000 to $1 million range, transactions were up 45% according to the Houston Association of Realtors. The average value of a home passed USD 400 thousand for the first time, rising almost 15% in the last 12 months. The average value of Multifamily properties rose 25.7%. While in Dallas, the median home value rose 19% YoY to March 2022.
Surely the increase in property values will tend to normalize in the coming months, due to more supply, higher costs, or simply a slower growing economy. But it will undoubtedly remain one of the most resilient assets through economic cycles, because at the end of the day, most of us get to sleep in a house we call "home".
