Big investors remain bullish on the U.S. housing market. That’s according to a new report from Wall St. Journal’s Marketwatch, which notes that while home sales have been sluggish in recent months, there are three major reasons for continued optimism.
The first reason is there is nowhere to go but up. Construction and sales rates of single-family homes remain far below the peaks reached in 2005, and given the general strength of the overall economy, that doesn’t figure to last too much longer.
Here is what the CEO for one of the biggest home builders in the U.S. had to say:
“The new-home market is about the only part of the U.S. domestic economy that still remains in recession territory,” said Michael Shaoul of Marketfield Asset Management to Marketwatch. “I don’t think the normality of the U.S. economy and the abnormality of the U.S. housing market can coexist for too much longer.”
The second reason is the U.S. labor market is showing strong growth. Employers continue to ramp up hiring and employees are becoming increasingly confident of their job stability. That’s a recipe that history tells us drives home sales in this country.
It’s simply a matter of there now being enough economic support for workers to be confident enough to take the plunge and purchase their first homes, as well as for those with established careers to trade up to a new home.
The final reason for optimism in the U.S. housing market is households are now able to manage more debt, according to Marketwatch. With mortgage rates at historic lows, many borrowers have been able to refinance and drastically reduce their interest payments.
To illustrate that point, Marketwatch points out the household-debt-service ratio—which measures the share of household debt to disposable income—is at 9.9%, the lowest rate since 1980.
Given these facts, it’s easy to see why big investors are optimistic the U.S. housing market is on its way up and again a sound investment strategy.