Rising prices, insufficient supply, bidding wars. The current state of the housing market is not solely an Irish problem. As the United States emerges from the coronavirus pandemic and the economy opens up, a red-hot property market has become one of the fallouts of the Covid era.
The US recorded its fastest rate of annual house price growth since 2005 in the first quarter of this year. Prices were 13.2 per cent higher in March 2021 compared with a year earlier, according to a survey by estate agent Knight Frank published this week.
With summer approaching and social events now back on the agenda, dinner table chat is quickly turning to the latest property price changes as much as who has got their second Covid vaccine.
Washingtonian, a glossy Washington DC magazine, recently ran a cover story on the capital’s property boom, highlighting how buyers are now competing against dozens of other offers, and purchase prices are far exceeding the listing targets.
In a city that epitomises the US’s stark divide between rich and poor, the story of Washington’s property market encapsulates one of the grim paradoxes of Covid-19’s economic impact – that while many are struggling to get by having lost their jobs, others are using built-up savings to amass property.
The US’s property boom shares many of the characteristics evident in other major cities across the world. In line with global trends, buyers are being spurred by record-low interest rates, while restrictions in construction activity due to the pandemic have hampered demand – though the federal government never mandated a stop to all construction activity or a ban on in-person property viewings during the crisis as was the case in Ireland.
There are also more specific trends that reflect the broader recalibration of work patterns that have emerged from the pandemic.
As with elsewhere, rent in high-cost urban centres, such as Manhattan and San Francisco, have fallen as buyers swap city life for a suburban or rural option where they can get more bang for their buck.
According to the National Association of Realtors, among the areas that experienced the biggest rise in prices over the year were Kingston, New York, about 140km north of Manhattan, and Greenwich, Connecticut. Both saw price rises of about 35 per cent in 12 months.
As is the case in many western economies, first-time buyers are finding themselves priced out of the market, as many well-heeled Americans snap up second homes.
Responding to a question about the US’s spiralling home costs last week, White House press secretary Jen Psaki said the Biden administration was concerned. “The increase in housing prices we’ve seen does raise concerns for us about housing affordability and access to the housing market which is impacting many, many Americans.”
She pointed to the scarcity of supply, highlighting the role high construction costs were playing in pushing up prices. Like other countries across the world, the US is contending with surging raw material costs.
She pointed to initiatives like the neighbourhood homes tax credit – a federal tax credit aimed at encouraging the construction or renovation of up to 500,000 owner-occupied homes in low-income communities.
But critics of Joe Biden lay some of the blame for the runaway prices at the foot of the president, whose injection of trillions of dollars of cash into the US economy, coupled with loose monetary policy by the Federal Reserve, is putting pressure on prices.
Republicans, and some Democratic-leaning economists, have warned of a burgeoning inflation crisis. Together with disappointing job numbers – which Republicans say are due to overly-generous unemployment pandemic payments – Biden’s bold economic policies since taking office are now under scrutiny.
The Biden team has urged patience. Treasury secretary Janet Yellen has stood her ground, insisting that the road back to economic normality was always going to be uneven post-pandemic.
“We’ve had a very unusual hit to our economy, and the road back is going to be somewhat bumpy. We have to expect that there are a variety of bottlenecks,” she said, responding to the recent joblessness numbers.
But the shape of the economy recovery as the US seeks to bounce back from the pandemic, will be an important measure of Biden’s success as a president. The notion that the rich will get richer while lower-income Americans find themselves locked out of the property market threatens to undermine the president’s progressive economic vision.