— This is the script of CNBC's news report for China's CCTV on June 23, 2021, Wednesday.
According to the U.S. National Association of Realtors, housing prices have been on a steep rise since the outbreak of Covid-19 and the following deployment of monetary and fiscal stimulus. The newly released report shows that existing-home sales price recorded increases in every region of the country. The 23.6% year-over-year increase in May is the biggest since 1999 when NAR started to record. In Europe, housing markets in many countries witnessed a similar trend. In the Netherlands, the Dutch Statistics Office reported that existing house prices rose 12.9% in May from a year ago, the fastest growth rate since 2001. Thanks to low-interest rates and stimulus measures, real estate markets in many countries enjoyed a boom in 2020, and house prices have kept climbing till date.
Who are the buyers pushing up the prices? In the United States, the richer middle-class seems to play an important role. In May, sales of homes priced at $750,000 to $1 million jumped 178% from a year ago. But the wholesales of existing homes in the same month dropped for the fourth straight month. This means the supply is far below demand and some buyers who can not afford the rising prices were already squeezed out. The drop in sales volumes is regarded as a sign by some that the U.S. housing market has peaked, hence will cool down soon. But others hold the opposite expectation.
Economist and director of market research for Black Knight
"We're in an environment where we have 60% lower inventory than we should have, we continue to see a new inflow of inventory run at 25%, lower than it should be. And you can only sell what you're listing. So we could see quantities fall, applications fall, pending sales fall, and at the same time, home prices continue to rise."
Fundamentally, monetary policy is a major support to the real estate market. In the United States, the Fed not only keeps interest rates at ultra-low levels but also supports the housing market through its $120 billion monthly bond-buying program, in which there are $40 billion worth of mortgage-backed securities. Robert Kaplan, president of the Dallas Fed, recently questioned this security-buying support to the real estate market. Fed Chair Powell, however, still holds the stand that inflation is transitional though he admitted that the policymaker is watching carefully. He expects the rising house prices could be curbed once house start activities recover.
Chair of the Federal Reserve of the United States
"You know, it's not an unalloyed good to have prices going up this much. And we're watching it very carefully."
It is worthy of attention that on top of individual buyers institutional investors are pushing house prices up too. On Tuesday, Blackstone agreed a $6 billion deal to buy a property buyer and operator with more than 17,000 homes, further enlarging its footprint in the real estate market. And in Europe, rising prices are making affordable houses less, hence causing some public anger. Ireland announced to impose a 10% stamp duty on anyone buying 10 or more houses. In German, rental caps have been called. And Hungary central banks decided to increase interest rates on Tuesday, making it the first central bank in the European Union to enter the cycle of interest hikes.