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I’m writing a story about the US real estate market and have thought the unthinkable – that American house prices, now on the floor in many areas, may never recover.
Not many websites well-known to UK readers promote homes in the US – American realtors and developers recognise that these days few people on this side of the Atlantic can afford to buy overseas homes. But if you have a look through www.primelocation.com, www.findaproperty.com and in particular www.propertyshowrooms.com you will see some starting prices.
There are plenty of remarkably expensive homes in prime addresses, of course, but far more are remarkably cheap. Many have 70% reductions on prices expressly stated – and that, presumably, is just a starting point for negotiation. Many homes (apparently in reasonable condition) can be bought for £10,000 or far less.
That, of course, is what a free market does: has homes for tens of millions in the same country as those under £10,000. The latter are in areas with wider issues, such as a sharp loss of industry and/or multiple repossessions in the same streets. But can those cheap homes ever recover to the levels of their 2005 peak prices?
The Lombard Street Research consultancy clearly believes that may be possible – it now says overtly that US house prices may never return to those 2005 levels, the first think-tank to say the unsayable on the subject.
Has the psychology of the US now changed so fundamentally that just as Americans accept there are always homes costing £60m or more in prime waterfront locations, and in the best parts of Manhattan, so there will always be dirt cheap homes too?
Have people simply ‘got used’ to those cheap prices, just as they have to sky high prices for other homes in other locations? If they have, does that sentiment mean such bargain-basement values will never significantly rise again…just as prime property prices may never significantly fall, even in a recession?
Sentiment, so British property wise-heads say, moulds what happens in the market. If so, is there a risk that the UK will do the same?
You will be hard put to find a £10,000 home in the UK but plenty of houses and flats are stubbornly sticking at their 2006 prices, perhaps a little below, and certainly with no sign of rising noticeably higher. A poll by the curiously-named discount website MyVoucherCodes showed that of 1,721 people aged 16 to 21, some 58% believed they would never ever own a home.
Perhaps that sort of market is what we, too, have grown used to. Perhaps there is no appetite for prices of ordinary properties to change.
Psychology is important in the property market. Perhaps we need to stop talking about ‘recovery’. Instead, perhaps we have recovered. This, as they say, may just be as good as it gets.
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