As in 2008: how rising property prices threaten the economy. Digest

For attentive investors, the state of the residential real estate market is one of the key indicators of the "health" of the economy, since many industries are associated with it, and the demand for real estate reflects the well-being of the consumer.Consider the trends in this market

Almost everyone knows that the financial crisis of 2008 began with a rapid decline in the cost of residential real estate in the United States . But not everyone has been watching how quickly the price of real estate around the world has risen in the past few years, how it has become more difficult to rent and buy a house in the US and Europe, and how the number of building permits issued for new homes in North America is starting to decline.

Important

Where to look: ZG, RDFN, BAM, AMT, CCI

Economy marker

The COVID-19 pandemic , which led to the massive movement of office workers to work remotely, subsequently led to a significantly increased demand for homes, which, of course, was fueled by historically record low loan rates. So, from June 2019 to June 2022, the median cost of a house in the United States increased by 46%, reaching $ 388 thousand. But after the 2008 crisis, we are especially well aware that the real estate market is a completely cyclical story and in the current increasingly difficult macroeconomic conditions, we are unlikely to see another cycle of growth.

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Inflation, rapidly rising mortgage rates and record high housing prices are undermining demand and affordability. According to a Zillow report, the average monthly mortgage payment is 75% higher today than it was in June 2019. And the growth of salaries does not keep pace with the costs “inflated” by inflation. Wage growth in June amounted to 6.7%, which lags behind inflation at 9.1%. Rental housing has traditionally been a temporary refuge for the young population, saving for a down payment on a mortgage, which is 5-20% of the value of the property. However, rents have also risen, with rents up 5.8% year-over-year after the biggest monthly jump of 0.8% since 1986. Since January 2021, the average cost of renting a home in some states has risen in price by 40%. Housing affordability index,