How does the US Housing Market Compare to other World Powers?

May 30, 2017

Many real estate reports are nationally focused, comparing statistics across states, cities, and neighborhoods. International reports that compare the US housing market to those in other countries can also be very useful. Goldman Sachs recently published a report that compares the real estate markets in Group of Ten, or G10, countries. The G10 is a group of industrialized states that regularly consult and cooperate with one another on international financial matters. Countries include Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States.

US Housing Market Still Lagging Behind After the Recession

The report published by Goldman Sachs points out several illuminating trends in the G10 markets and illustrates the consequences of the US recession. According to the report, even though US home prices have been rapidly rising lately, they are still significantly below those in other G10 nations. There was a clear departure from the prices increasing in other countries as the recession hit the US in 2006.

Overvalued or Undervalued?

The measure whether markets are overvalued or undervalued, the report compares real house prices, the ratio of home prices to household income, and the ratio of home prices to rent. In the US, the ratio of home prices to rent stands at approximately 15 percent above its long-term average. Its ratio of home prices to household income stands at approximately 30 percent above its long-term average. This was significantly lower than the most overvalued market, New Zealand, which stands at approximately 100 percent and 115 percent, respectively.

US Housing Market: Overbuilding or Underbuilding?

Unsurprisingly, the US is also significantly behind other G10 countries in new construction of homes. The average number of residential homes being built in the US has decreased by approximately 20 percent over the last five years, while that of Australia has increased by approximately 40 percent. The US is underbuilding and Australia is overbuilding.

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