The US House Price Index has gained momentum over the last few years after a massive plunge in the late 2000s. In the last 4-5 years, the US housing market has recovered to match the highs achieved before the global financial crises of 2008/2009. The market hit an all-time high in 2006 and now looks set to reach those levels again in the next few years. Currently, without the impact of inflation, the housing market still lags 20% behind the levels reached in 2006.
As such, the Obama administration appears to have done a good job as far as fixing the economy is concerned. House prices have increased significantly this year, which indicates that investors are optimistic that the current growth could continue in the foreseeable future.
Illustratively, San Francisco is still the mainstay when it comes to the average US house price index. However, in some states, there are locations that have experienced massive spikes in house prices in real terms when compared to popular premium locations. For instance, those looking for a home for sale in Fairhope Al may have to pay 29% above last year’s prices as per the latest statistics.
As per the chart above obtained from Trulia, house prices per square foot in Fairhope Al increased from $115 in October 2015 to $150 in October 2016. This indicates a growth rate of 29% over that period. Now, it’s clear that most of that spike came between September and October, by the time in which it was already clear that the presidential election was going to feature two main candidates, Republican Donald Trump and Democrat Hillary Clinton.
However, expectations were also high that Clinton would win the election. Trump surprised most of the world by beating his rival against all odds, and markets tanked briefly before rebounding a few days later.
On the other hand, the country’s housing market index has failed to garner momentum after pulling back in October. As demonstrated in the chart below, the peak in September mirrors the same levels achieved last year in October.
This pullback may create an image, which would suggest that the rally witnessed at the start of Q4 in the housing market was a fallacy, and that, we could be set for a major decline in the coming months.
However, if the stock market is anything to go by, then it would be ideal to say that investors are convinced that the economy is on the right track, even after the election of Donald Trump as president.
Since the election of Trump, America’s two main parties (Republicans and Democrats) appear to have shifted their views on the immediate future of the economy. This has caused swings in the stock market but nothing was unexpected.
As such, there is a great degree of optimism that the two extremes will come to a consensus in the next few months once the whole transition process is completed. Currently, there are those who still hold the faintest of hopes that Trump won’t complete his four-year term in office. Some are hoping for an impeachment while others still believe the electoral college could turn things around.
These uncertainties are likely to result in a choppy market in the next few months, but that is only how long it is expected to last. Once Trump is inaugurated as the 45th president of the US, the reasonable thing would be to accept the outcome and concentrate on nation building. This is what is likely to sustain the current economic growth and consequently the bullish outlook in the US housing market.
Conclusion
In summary, barring the temporary impact of the US elections, the housing market appears to be backed by strong fundamentals as the country’s economy continues to outperform the performances of other developed nations.
The stock market and the US Dollar also look strong going into the new year, which should be enough to cull any short-term uncertainties during the first quarter of 2017.
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