US Housing Market - Lessons For Us?

Is the US housing market about to stage a recovery? If so, will it have lessons for the UK?

The mood music is cheerful. Some 1.9m jobs have been created in the past five months - much of it thanks to federal spending programmes - and unemployment is down from 10.4 per cent to 8.3 per cent.

In the last quarter the expansion of the US economy, annualised, hit 2.8 per cent. The Dow Jones (at the time of writing) has risen to its highest level since May 2008 and the technology-sector barometer, the Nasdaq, is at its highest for over a decade.

All of this may still unravel but the economy is roughly where it was three years ago, when Barack Obama took office, with one exception - the housing market is still worse. Average residential prices across the country are 32 per cent down on their 2005 levels and housing starts are 75 per cent down.

From all this, there may be two lessons for the UK.

The first is that US housebuilders are reporting gentle rises in demand - from extremely low bases - and put that down to growing optimism (or perhaps reduced pessimism) about the wider economy, thanks to the national government’s injection of investment into service-sector jobs.

One mid-size, mid-market housebuilder, MDC Holdings, even reported a 32 per cent rise in orders for its new houses. Another builder in Atlanta, Beazer Homes, is one of the first to predict it will see more orders in 2012 than in 2011 - again, it says, because of a feel good factor in the wider US economy.

Is that feel-good factor one we could create in the UK, with wider job-creation and spending - perhaps old fashioned Keynesian spending on stations and roads and schools - of the kind now frowned upon by all three major political parties?

The second possible lesson is the cooperation that exists between the US property industry and the government.

The National Association of Realtors - a genuinely representative umbrella body for US estate agents, of which there is no comparative body in the UK - is backing Obama’s plan to ease the plight of the country’s 10m households now in negative equity.

Obama wants Congress to agree that these home owners could refinance through government-insured loans. There is at least some sign that the Coalition Government in the UK recognises the usefulness of underwriting loans, in its recently-extended NewBuy Guarantee scheme.

But the US government wants to go much further, and does not limit this to owners buying new property as in the UK. Could this country not go further and faster, as in the US but perhaps using its publicly-owned banks to do more to underwrite home ownership, until the market recovers?

The US and UK economies are not identical and there are no one-solution-fits-all remedies to the western world’s housing problems. But you do sense that the US now realises the scale of the issue and is doing something about it - and that there might just be light at the end of the tunnel, as a result.

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