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U.S. Housing Prices on the Rise, but When Compared
to Global Markets Still Seems Appealing



Housing Prices Do you think U.S. home buyers are paying too much for their next home? It's no secret that prices have increased rapidly in the last year, but to understand why that's not such a bad thing, we must look at the global housing market.

The S&P CoreLogic Case-Shiller U.S. National Home Price Index reports that gains are up 19.7 percent through the end of July and setting a record for being the fastest pace for growth since records began in 1975. According to Fedprime rate, the average new home cost in the U.S. for August 2021 was $430,000 compared to August of 2020 at $386,300.

For sellers, this is phenomenal news. But for buyers trying to get their foot in the door, getting a house in this market probably feels impossible.

Housing prices globally are rising at their fastest rate since 2006. When we look at The Dallas Federal Reserve, which has collected housing data since 1975, we can see a stark change in housing markets in the past 24 months.

In the United States, the home price index has risen by 16.8 percent total. But when we look at other markets, we can see that Canada rose 36.3 percent and New Zealand rose 33.7 percent while other countries like Australia and Sweden rose 27.7 percent and 23.5 percent respectively.

But what does that mean? Here is a look at that change in dollars.

Average housing prices in Canada have increased from $486,796 to $663,503 according to WOWA. The Real Estate Institute of New Zealand reports current average housing prices at $850,000, up more than $200,000 from two years ago. And in Australia, the current national average housing value is $666,514 as reported by CoreLogic, up from $521,937 two years ago.

From what we have seen working with home buyers at Fulton Homes, this is not another housing bubble like the one that was seen in 2008. In that market, we saw low-interest rates and lax lending standards that encouraged families to borrow amounts far beyond what they could afford in order to purchase their dream homes.

What we are seeing in the current market is in part due to supply and demand on existing homes. There has been an increase in people moving for a variety of reasons including work from home opportunities that allow them to leave cities to the need for more space to accommodate a home office or classroom because of virtual learning. All of these issues are raising the demand on the housing supply.

The supply of existing home sales on the market is lower than it ever has been. This could be because of several homeowners feeling uncertain about selling their current home or wary of letting strangers tour their home during a global pandemic.

That doesn't mean the gains that are making up this nationwide trend of rising housing prices aren't abnormal, but supply and demand serves as just one of many reminders that there are many factors to look at in the domestic and global markets.

When we take a longer look at the global market in comparison with the United States, we learn that other housing markets are facing more than just rapid increases in home value.

The Organisation for Economic Co-Operation and Development (OECD) shows a dramatic rise in the price to income ratio since 1995, with countries like Sweden, the United Kingdom and Norway seeing increases higher than 90 percent.

Even Canada has outpaced the United States in the price to income ratio, rising 66.8 percent.

By comparison, the United States has only seen a 2.7 percent increase in the past 26 years, showing that our home prices and income have risen in lockstep with each other. It's a pattern we don't see in the price to income ratio growth for other countries.

Prices in the United States are still on the rise, but for all the right reasons: Low interest rates, changes in supply and demand because of the pandemic, and generations such as millennials putting down more permanent roots all play a role.

At Fulton Homes, the rise we are seeing in home prices is more than just the market. We've seen a trend of individuals and families wanting spaces that are more uniquely them. Buyers are upgrading finishes, fixtures, and appliances to create custom homes that will serve their individual family needs during these changing times.

That's not to say that it's not a tough market for first-time buyers. But when you look at it relative to other markets, it puts the domestic housing market situation into perspective.



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