The state of the US housing market & its impact on relocating employees

Carol Kelly, Senior Vice President Corporate Relocation Services at the Corcoran Group and Gail Rabasca, Executive Vice President of Chamness WorldWide, examine the state of the US housing market and its global impact on relocating employees.

USA flag infront of california housing
There is so much written about the state of the US housing market that it can be challenging to digest all the information and data. The statistics serve as a barometer of the general well-being of the country, an indicator of the health of the economy and job market. The state of the market can also have an impact globally and can affect corporate decision-making pertaining to relocating employees to specific locations in the US and the potential rental and budget challenges. The big picture of US housing statistics, while interesting, is only part of the picture. Taking a closer look at what is happening in a specific region and the local micro markets is key to understanding the indicators which ultimately may guide corporations in their destination choices.

Numerous factors affect housing market

There are many factors that impact the overall housing market: the national and global economies, geopolitical implications, stock market patterns, tax reform, mortgage rates, buyer confidence, and housing inventory levels to name just a few.If we select one of these factors as an example – inventory levels – we can see the impact of that indicator in a local market. Generally, increased inventory is a positive situation for a buyer or renter, a negative one for a seller/landlord. This circumstance provides a good reason to rent for someone that’s undecided about whether to buy or rent. At the local levels in areas such as Boston, MA and Washington DC, where inventory levels are down, they are seeing pricing pressures, bidding wars, and a tough buying climate. In this type of market, it disallows the opportunity for a wider rental inventory for those coming into these areas for a specific timeframe based on their relocation or international assignment. It becomes more difficult for renters to secure the type of property they might have hoped to find at a budget they need to stay within – less inventory to choose from and more people wanting the same property which drives the price up. This type of market can also impact the quality of inventory that is available. It is not just the quantity: high quality inventory becomes far more scarce under these circumstances.Whereas, in areas such as Atlanta, GA, Houston, TX, and Seattle, WA there is substantial inventory for buyers to choose from, making it is a less competitive environment and, thereby, offering relocating employees a broader rental inventory to choose from.There are well established key indicators that are followed when assessing the real estate market. The year-over-year changes in home prices, sales volume and the aforementioned inventory levels are the most important. Inventory levels, across the US are still struggling to get to a ‘normal’ level, which is generally a six-month supply of homes on the market. The slight increase of 2.4 per cent brings the level to just 3.9 per cent months of supply. 

Lowest level of house price increases in seven years

Looking at those indicators in the US, we see that the overall US average price change is up year-over-year 5.7 per cent. This is the slowest overall pace of home price growth in seven years.“Double digit price increases have vanished and existing single-family home sales are flat,” according to David Blitzer, Managing Director of S&P’s Dow Jones Index committee.Regionally, the Mountain and South Atlantic states have seen the highest increase at 8.11 per cent, 6.7 per cent respectively. The Mid- Atlantic and New England states saw the least gain in prices at 4.3 per cent and 4.8 per cent respectively. The highest price gains in local markets were seen in the warm weather areas of Tampa, FL, Phoenix, AZ, and Las Vegas, NV.Sales volume in the US is down by 5.4 per cent year-over-year which points to an annual pace of 5.21 million sales across the country. However, according to the US Census Bureau, the current Homeownership Rate is 64.2 per cent, which is virtually unchanged from the 2018 statistics. The homeownership rate has been hovering between 63.5 per cent and 64.2 per cent for the last five years. Of note is that the highest rate of homeownership over the last 25 years was in 2005 at 69.1 per cent.The housing market is affected by some softer issues as well. Analytical data points being monitored such as quality of life, coastal locations, job opportunities, proximity to family, and future retirement can all come into play when choosing an area to relocate.Cites with a wide array of amenities, an active lifestyle, and good career opportunities are expected to perform well over the next several years. California leads the list with a predicted 10 per cent increase in appreciation year-over-year in ten of that state’s major markets. What could offset these gains is a lack of inventory and affordability concerns.

How millenials impact the housing market

Next, let’s take a look at the often discussed millennials, as it pertains to their impact on the housing market: what do they want to do, and when do they plan on doing it!In a recent survey, 66 per cent of millennials who rent are determined to buy a home. Of this group, 56 per cent are confident that they will have the ability to afford a home in the future and 73 per cent of those plan to buy within five years.One of the biggest deterrents for millennials to buy now is their outstanding student loan debts, which may keep them from qualifying for a mortgage. According to the Federal Reserve Bank, this represents 400,000 buyers who did not make a home purchase because of student debt. As a result, more millennials remain in the renter’s pool, thus driving available inventory down and churning a more competitive rental market in many locations.

Top Ten US property hotspots

The top ten hot spots for millennials across the US, whether renting or buying, are: Bakersfield, CA; Denver, CO; Durham, NC; El Paso, TX; Grand Rapids, MI; Madison, WI; Oklahoma City, OK; Omaha, NE; Salt Lake City, UT; and Seattle, WA.Over the years, the standard course of action for employees being relocated globally has been to rent and not buy a home. For those on international assignment, where their term in the US can be generally defined by a two- or three-year assignment, it makes the most sense for them to rent rather than buy so they are easily extricated from their housing commitment at the end of the assignment and are freely able to move on or repatriate easily. Finding a suitable rental property for that term is often the biggest challenge, based on the destination’s housing market and rental supply not aligning with the allocated budget.Rental practices across the US are more fluid than residential sales, so it’s important to investigate local customs and common practices. In some markets the landlords are ‘king’ and in others, the tenants are in the position of power. As expected, this depends on the balance of inventory levels and demand.Who pays the real estate agency fees varies from market to market, as does dissemination of rentals available, amount of security deposits, documentation requirements and utilities included or not. Even the types of rental properties will vary dramatically in the suburbs versus a more urban environment. Many markets see rapid changes of activity and pricing based on seasonal demand.A few randomly chosen areas and their average rental costs:
  • San Francisco, CA: Single family home $5,500; 2BR apartment $4,000.
  • Dallas, TX : Single family home $2,000; 2BR apartment $1,873
  • Denver, CO: Single family home $2,500; 2BR apartment $1,500
  • Nashville, TN : Single family home $2,500; 2BR apartment $1,250
In summary, the state of the States’ housing market predicted for the remainder of 2019 is somewhat optimistic. Prices are forecast to continue to rise at a slow and steady pace, with the highest appreciation in the states of New York, California, Nevada, Maine, Hawaii and Oregon.According to Blitzer, “Given the broader economic picture, housing should be doing better. Mortgage rates are at four per cent, unemployment is close to a 50-year low, low inflation and moderate increases in real incomes would be expected to support a stronger housing market.”Working with a local professional is highly recommended, particularly for foreign nationals relocating to the US on assignment. The theory of supply and demand is very much at play in both the sales and rental markets throughout the US, and the local expert can provide the inside knowledge of an area and the expertise that is vital to the ultimate success of securing a home.Resources:
  • National Association of Realtors
  • S&P Dow Jones Indices
  • Case Schiller
  • Core Logic, Inc
  • U.S. Census Bureau
  • Federal Reserve Bank
  • RDC (Relocation Directors Council)
  • United Van Lines 42nd Annual National Movers Study
Authors:Carol A. Kelly, SCRP, SGMS-T
Senior Vice President
Corporate Relocation Services
Corcoran Group
Gail Rabasca
Executive Vice President
Chamness WorldWide
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