House Prices Climb to Record Levels in US & Europe

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House prices have set new records in the US and parts of Europe as vast fiscal and monetary stimulus help residential property markets to continue shrugging off the impact of the coronavirus pandemic. The median price for US existing houses rose a record 23.6 per cent year-on-year to a new high of $350,300 last month with every region of the country recording increases, the National Association of Realtors said. Europe’s housing market has also kept climbing despite the Covid-19 crisis. In the Netherlands, existing house prices rose 12.9 per cent in May from a year earlier, the fastest growth rate since 2001, the Dutch Statistics Office said. The number of residential property sales declined in both the US and the Netherlands, even as prices continued to rise, suggesting that demand is outstripping supply. The Dutch Land Registry said it recorded 16,126 residential property transactions in May, a 12.1 per cent drop from a year earlier. Sales of previously owned homes in the US fell 0.9 per cent between April and May to a seasonally adjusted annual rate of 5.8m. Total US housing inventory of 1.2m units was 20.6 per cent lower than in May 2020, NAR said, though up 7 per cent from April. Some economists said the drop in sales volumes could be a sign that the US housing market has peaked, after activity last year hit the highest level since 2006. Others see further rises to come, fuelled by central bank policies. “Loose monetary conditions could push asset prices even higher, risking an eventual sharp correction,” said Adam Slater, economist at Oxford Economics. “For central banks, neither this outcome nor persistently higher inflation are attractive prospects.” Booming home prices have caught the eye of officials at the US Federal Reserve, especially in light of its $40bn monthly purchases of agency mortgage-backed securities, which make up a portion of its $120bn bond-buying programme.