UK house prices dropped in June after remaining stable for two straight months, signaling that the property market remained subdued, mortgage lender Halifax reported Friday.
House prices fell 0.2 percent month-on-month in June, in contrast to the expected increase of 0.2 percent. A typical UK house costs GBP 288,455.
Compared to the last year, house prices climbed 1.6 percent, the same annual rate as reported in May. This was the seventh consecutive increase.
The continued stability in house prices reflects a market that remains subdued but overall activity has been recovering, Halifax Head of Mortgages Amanda Bryden said.
It is the shortage of available properties, rather than demand from buyers, that continues to underpin higher prices, Bryden noted.
Bryden said mortgage affordability continued to be the biggest challenge facing both homebuyers and those coming to the end of fixed-term deals.
Through a combination of lower interest rates, rising incomes, and more restrained growth in house prices, this issue is likely to be eased gradually, added Bryden.
Halifax expects property prices to rise modestly through the rest of this year and into 2025.
At the June meeting, the Bank of England had retained its key policy rate at a 16-year high for the seventh straight session despite inflation easing to the 2 percent target.
Halifax data showed that London continued to be the most expensive region, with house prices averaging GBP 536,306, up 0.9 percent from the last year.
U.S. house prices rose less than expected in April, after stagnating in the previous month, latest data from the Federal Housing Financing Agency showed Tuesday.
The seasonally adjusted house price index increased 0.2 percent from the previous month. Economists had forecast a 0.3 percent gain.
March’s 0.1 percent increase was revised down to 0.0 percent.
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House prices rose 6.3 percent year-on-year in April, which was more than double the 3.1 percent gain registered in the same month last year.
“U.S. house prices continued to rise in April,” Anju Vajja, deputy director for FHFA’s Division of Research and Statistics, said.
“However, the appreciation rate slowed in April amid a slight rise in both mortgage rates and housing inventory.”
“The housing market in general began to show some signs of normalization,” Vajja added.
The FHFA said the seasonally adjusted monthly price changes from -0.2 percent in the West South Central and Middle Atlantic divisions to +1.4 percent in the East South Central division.
The 12-month changes were all positive, ranging from +3.0 percent in the West South Central division to +8.5 percent in the New England and Middle Atlantic divisions, the agency added.
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House prices in Germany declined for a sixth consecutive quarter in the first three months of the year, extending the severe slump from last year that was triggered by high interest rates and rising cost.
The residential property price index fell 5.7 percent year-on-year in the first quarter, following a revised 7.2 percent decline in the previous three months, the statistical office Destatis said Friday.
House prices plunged 10.2 percent in the third quarter of 2023, which was the worst fall in the current cycle.
Residential property prices decreased 1.1 percent sequentially in the first quarter.
In the full year 2023, German house prices decreased 8.4 percent, which was the sharpest year-on-year decline since the beginning of the time series in 2000 and the first decline since 2007.
Earlier this month, the European Central Bank cut interest rates for the first time in five years as policymakers were convinced that inflation is finally returning to the 2 percent target. Economists expect the bank to lower rates once again for the rest of the year.
ING economist Carsten Brzeski said the financing conditions remain restrictive despite the ECB rate cut and this will continue to damp housing demand, thus making a strong rebound of the market unlikely.
“The tense situation in the construction sector and the lack of new housing supply should exert upward pressure on prices while also weighing on volumes,” Brzeski said.
“Although demand will continue to recover in the months ahead, a swift return to levels seen prior to the ECB’s interest rate hike cycle is unlikely. It will be a gradual recovery.”
ING expects German house price growth of about 1 percent this year.
A recent survey by the ifo Institute showed that German builders remained pessimistic regarding their business situation in May but were hopeful of better future as they think the worst of the economic downturn is behind them.
Many companies are trying to counteract the order shortage by cutting prices, the ifo said.
The ifo Institute raised the German economic growth forecast for this year to 0.4 percent from 0.2 percent, on Thursday. The think tank retained its prediction for next year at 1.5 percent.
“The German economy is slowly working its way out of the crisis,” ifo said.
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In New Jersey’s Bergen County community of Alpine, the population is small (around 1,700), but the estates are grand.
Only 15 miles from New York City, the residential enclave is perfectly positioned geographically for those who desire big-city amenities and small-town advantages.
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Upscale Alpine offers a “refined” yet “friendly and welcoming ambience,” said Dennis McCormack, a real estate agent at Prominent Properties Sotheby’s International Realty.
With its casual vibe, Alpine makes itself right at home: It’s the kind of place where people walk their dogs or ride their bikes.
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“While residents do value their privacy,” said Taryn Byron, an agent at Corcoran Infinity Properties, “of course, it is a friendly neighborhood.”
Boundaries
Alpine is across the Hudson River from the Bronx and Westchester County’s Yonkers and Hastings-on-Hudson. It borders the New Jersey boroughs of Closter, Cresskill, Demarest, Norwood, Rockleigh and Tenafly.
The most exclusive section of Alpine is Rio Vista, the four streets just off Sylvan Avenue (Route 9W): the Esplanade, Rio Vista Drive, Stone Tower Drive and Tulip Tree Lane.
Price Range
While the average sale price of a single-family home from June 2023 to June 2024 in the borough stands at $4.7 million, Byron noted that current listings range from $2.4 million to $24.5 million.
“Luxury homes in Alpine start at around $5 million,” she said, adding that that’s typically for a 7,500-square-foot house on 2 acres with a pool, a basketball or tennis court and a three- to four-car garage. “Prices can go well into the $20 millions and even up to $30 million.”
In 2023, a house on the Esplanade sold for $11.5 million, the highest sale price in Bergen County for the year, McCormack said.
Housing Stock
The estates in Alpine have custom houses in a variety of architectural styles ranging from contemporary and modern mansions to French chateaus, Neoclassical manors and English Country homes. Generally, they are 20 to 30 years old and are on 2-acre plots.
What Makes It Unique
McCormack said that “Rio Vista Drive stands out for its breathtaking beauty, lush landscapes and prestigious reputation.”
“Food, proximity to New York City, airports both international and private—you can really have it all living here and still maintain a nice balance of a small town with the excitement of the big city so close, and most importantly, privacy,” Byron said.
Luxury Amenities
The exclusively residential community is surrounded by neighboring towns that offer stellar dining and nightlife.
Fine-dining restaurants include the River Palm Terrace, a steakhouse in Edgewater; Sofia, a farm-to-table Italian steakhouse and lounge in Englewood; and Lefkes Estiatorio in Englewood Cliffs, which serves Mediterranean fare with a modern twist using local ingredients.
In addition to access to all the luxury-brand boutiques in New York City across the river, residents shop at several luxury malls that are close to Alpine. The Shops at Riverside is a shopping, dining and entertainment destination in Hackensack whose brand-name boutiques include Tory Burch and Tiffany & Co. Westfield Garden State Plaza in Paramus is anchored by Macy’s and Nordstrom. Closter Plaza, in Closter, has upscale shops and restaurants.
With more than 450 stores, American Dream Meadowlands, a retail and entertainment complex in the Meadowlands Sports Complex in East Rutherford, is the second-largest shopping mall in the country.
The Alpine Country Club offers dining, tennis and golf. The Alpine Marina, a full-service venue on the Hudson River, offers charters and tours and boat, ship and kayak rentals.
Montammy Golf Club, in Alpine, offers not only golf but also tennis and a 45,000-square-foot clubhouse.
The Rockleigh Equestrian Center, which offers boarding and riding lessons, is another nearby amenity.
For outdoor activities, residents go to the Palisades Interstate Park in Alpine, the Tenafly Nature Center and the Overpeck County Park in Leonia.
Residents have the choice of several nearby private schools. The Dwight-Englewood School, an independent co-ed college-preparatory day school in Englewood, enrolls students from pre-kindergarten through 12th grade. The Elisabeth Morrow School, a co-ed day school in Englewood, is for students from nursery school through eighth grade.
Bergen Catholic High School in Oradell is for boys in ninth through 12th grades. The Academy of the Holy Angels in Demarest educates young women in grades six through 12.
Who Lives There
Noting that Alpine is a “melting pot,” Byron said that the borough is home to native New Jerseyans as well as “a multitude of residents from other cultures and countries from all over the world.”
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McCormack added that “the neighborhood appeals to those seeking a luxurious and tranquil lifestyle, including affluent families, executives and professionals.”
Notable Residents
Comedian Chris Rock is a longtime resident of Alpine, according to published reports. Singer/songwriter Stevie Wonder, rapper Lil’ Kim and comedian Tracy Morgan are among the many other celebrities who live there, according to published reports.
Outlook
In Rio Vista Drive, “it’s a strong seller’s market, with high demand for luxury properties driving up prices,” McCormack said.
He noted that houses sell quickly, often within days of listing, and “bidding wars are common.”
Prices, he said, have risen by an average of 5% annually over the past five years. “The real estate market in Rio Vista Drive is expected to remain robust, with continued appreciation in property values. The neighborhood’s exclusive appeal and limited inventory contribute to its long-term investment potential.”
More: Tech Founder Wants $50 Million for Waterfront Home on Lake Tahoe
Calling the luxury residential market in Alpine “stable,” Byron said that prices have increased over the last five years, with the average sold price rising from $2.5 million to $4.5 million since pre-pandemic days.
“The $2.5 million is now entry-level pricing for a home in need of work,” she said. “New homes are coming on the market at an average of $6 million and are selling, in an average of four to five months, for 93% of their asking price. This shows the strength of the New Jersey real estate market, even at the higher end.”
UK house market remained broadly stable with a marginal fall in house prices in May, data from the mortgage lender Halifax showed on Friday.
House prices dropped unexpectedly by 0.1 percent month-on-month in May after remaining flat in April. Prices were expected to grow 0.2 percent.
A typical house now costs GBP 288,688 compared to GBP 288,862 in the previous month.
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On a yearly basis, house price growth accelerated to 1.5 percent from 1.1 percent in the previous month. This was the sixth consecutive increase.
Halifax Head of Mortgages Amanda Bryden said UK house prices were largely ‘static’ in May.
Bryden observed that market activity remained resilient throughout the spring months, underpinned by robust nominal wage growth and improving confidence.
“This has been reflected in a broadly stable picture in terms of property price movements, with the average cost of a property little changed over the last three months,” said Bryden.
“While homebuyers and those remortgaging will continue to respond to changes in borrowing costs, set against a backdrop of a limited supply of available properties, the market is unlikely to see huge fluctuations in the near term,” Bryden added.
Last week, data from Nationwide Building Society showed that house prices rose 0.4 percent in May after two consecutive falls.
In May, the BoE had kept its interest rate unchanged for the sixth straight meeting at 5.25 percent, which was the highest since early 2008. The bank also signaled that the first rate cut since 2020 is on the horizon.
UK house prices increased in May after two consecutive falls as the housing market showed signs of resilience amid ongoing affordability pressures, the Nationwide Building Society said on Friday.
House prices gained 0.4 percent month-on-month in May, offsetting April’s 0.4 percent decrease. House prices were forecast to climb 0.1 percent.
As a result, the annual increase in house prices more than doubled to 1.3 percent from 0.6 percent in April.
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The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer term interest rates in recent months, Nationwide’s Chief Economist Robert Gardner said.
Gardner noted that stronger wage gains and lower inflation has lifted consumer confidence over the past few months.
Regarding the impact of general election on the housing market, Gardner said for most homebuyers, elections are not foremost in their minds while buying or selling property.
The Bank of England is set to publish mortgage approvals data for April later on Friday. Economists forecast approvals to rise to 61,500 from 61,300 in March.
In May, the BoE had kept its interest rate unchanged for the sixth straight meeting at 5.25 percent, which was the highest since early 2008. The bank also signaled that the first rate cut since 2020 is on the horizon.
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Britain’s supply of homes for sale is at its highest point in eight years, according to research, in a trend experts say will limit house price rises for the rest of 2024.
Zoopla, the property website, said the average estate agent has 31 homes for sale, up 20% on the same point last year and the highest number since 2016.
The statistic equates to about £230 billion-worth of homes on offer, as sellers continue returning to the housing market in growing numbers.
Many existing homeowners delayed moving decisions in the second half of last year, Zoopla said, as the impact of higher borrowing costs on house prices and buyer demand knocked confidence.
Just below one-third of homes for sale were also listed for sale in 2023 but failed to find a buyer. But an expected fall in mortgage rates this year, combined with rising sales volumes over the last six months, has boosted sentiment.
Experts think the Bank of England is now likely to cut interest rates in the coming months, after headline inflation eased to 2.3% in the 12 months to April 2024, down from 3.2% in the 12 months to March.
The number of house sales agreed also rose by 13% since this point last year, but stayed behind the level of supply – giving buyers the pick of the market.
The trend is expected to keep house price inflation in check. Zoopla’s latest index found yearly house price inflation is minus 0.1%, meaning prices have fallen slightly over the last 12 months.
There has been an increase in house price inflation over the last quarter, at 0.4% up, in response to more sales and firmer pricing, but this quarterly growth rate has slowed over the last month. The property website said it expects inflation to be flat for the year.
Richard Donnell, executive director at Zoopla, says: “the growth in the supply of homes for sale is evidence of renewed confidence amongst homeowners, some of whom delayed moving decisions in 2023.
“The quarterly rate of house price inflation has picked up in recent months as more sales are agreed and prices firm.
“The announcement of the election will slow the pace at which new sales are agreed while greater choice for buyers will keep house prices in check over 2024.
“It’s essential that those serious about moving in 2024 price their homes realistically if they want to achieve a sale.”
Annual home-price growth in the U.S. held at a fast clip in March, likely helped by gradually easing mortgage rates as Federal Reserve interest-rate cuts come into view.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices across the nation, rose 6.5% from a year earlier in March, the same as the prior month, according to data published on Tuesday.
“On a seasonal adjusted basis, national home prices have reached their ninth all-time high within the past year, with all 20 metropolitan markets posting positive annual gains for the fourth consecutive month, indicating widespread and sustained growth in the housing sector,” said Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones Indices.
The Case-Shiller 10-city index rose 8.2% on year in March, following a 8.1% increase in January. Meanwhile, the 20-city index rose 7.4%, a small uptick from the 7.3% in February, in the prior month. Economists surveyed by The Wall Street Journal expected the 20-city index to rise 7.3%.
San Diego posted the highest on-year increase in house prices, with an 11.1% annual gain, followed by New York, Cleveland and Los Angeles, indicating strong demand for urban markets, the data said.
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While the pandemic was a boon for Sunbelt markets, the bigger gains in the last couple of years have been the northern metro cities, with the Northeast region the top performer, Luke added.
The index, which measures repeat-sales data, reports on a two-month delay and reflects a three-month moving average. Homes usually go under contract a month or two before they close, so the March data is based on purchase decisions made earlier last year.
Write to Ed Frankl at edward.frankl@wsj.com
Housing Prices Are Stuck Until We Beat Inflation
About the author: Susan Wachter is the Sussman professor of real estate and professor of finance at The Wharton School of the University of Pennsylvania and co-director of the Penn Institute for Urban Research. She is currently an advisory committee member of the Bureau of Economic Analysis of the Department of Commerce.
The U.S. Federal Reserve has been hoping for rent declines to slow inflation as measured by the consumer price index, where shelter costs make up more than 30% of the index. This hasn’t happened, and the evidence suggests that rents may now be on the increase. While housing has been a major channel for monetary policy to work to bring down inflation, this time around neither rent nor house-price declines are likely to assist.
Housing came to the Fed’s rescue in past episodes of inflation. Historically, the single-family, owner-occupied market has been the transmission vehicle for monetary policy. As the Fed tightened, higher mortgage rates dampened demand, causing declines in housing prices.
Not this time. Mortgage rates have doubled, but housing prices persist at all-time highs and affordability at 40-year lows. And while rents were falling, they are now moderating and, in many markets, rising. What happened?
The hope was that as pandemic bottlenecks resolved and housing supply increased, rents would decelerate. Rental supply in fact surged to more than 500,000 units a year in 2022 from a pre-Covid annual average of 300,000. Observers expected this would slow the pace of shelter costs, as accounted for in the CPI, with a lag. But markets have a mind of their own.
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Lags are due to the way shelter costs are measured in the CPI. Owners are asked to estimate their owners’ equivalent rent, what their home would rent for, at six-month intervals, and renters are asked for their contractual rent. In contrast, newly leased rental units reflect current market conditions, and existing rents take time to catch up. In this case, a helpful lagged effect of market rents on shelter costs was expected due to the supply surge. But that supply surge is currently being absorbed, while current rent and asset-price levels don’t justify new supply.
Rental prices had initially shot up starting in 2021 driven by economic stimulus, an overall recovery in aggregate demand, and the decision of many households and firms to move to the Sunbelt. Rents jumped by 10% in 2021-2022. This kicked off a wave of development. With the delivery of these new properties to market, vacancy increased and rent growth dropped below 2%.
With supply and vacancy growing and market rents decelerating, observers expected rents and OER rates to come down with a lag and lower the aggregate measured CPI inflation rate. The CPI data for May contained some good news: The overall rate of inflation decreased, in part due to declines in energy costs. Consumer prices increased 3.3% in May compared with a year earlier, slowing from April’s 3.4% reading. And for the first time since July 2022, the overall price level stayed flat from the month before. But shelter inflation increased at a rate of 5.4% on an annualized basis, more than offsetting the energy decline.
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Instead of continuing to decline, market measures of rent growth are now once again accelerating. Market rents are likely to move back to their long-term pattern of increasing faster than overall inflation. Since 1980, rents have increased at an average annual real rate of 1%. Rent increases vary by market, with rent softer in the Southeast and stronger in coastal markets (the Northeast and West), and by property type. Overall, recent rent-index numbers in the single-family rental market, which most closely mirrors the OER market, show rents increasing at about the same rate as the CPI year over year from April 2023 to April 2024, at 3.4%. Rent-growth rates had fallen to the 2%-3% range. The high-tier sector, which is disproportionately newly built, was in the lower part of that range. Rent growth fell less for low, low-middle, and high-middle market tiers.
But recently, all of these rent growth rates have trended upward. High interest rates and the Fed’s restrictive policies have decreased rental supply by pushing multifamily asset prices below construction costs. New multifamily housing starts fell back to about 300,000 units in 2024 and, with high housing prices discouraging moving homes, rent growth rates are reaccelerating.
In the owner-occupied space, the locked-in effect is part of the cause of low supply and persistently high prices, as high rates keep inventories low. Equally important are supply-side fundamentals. Construction costs are increasing faster than inflation due to scarcity of developable land, regulations, and labor costs. These cost increases also contribute to the lack of supply in the rental sector.
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The Fed can’t count on weak housing markets to dampen inflation, in the absence of a recession. But that doesn’t mean we’re stuck. Overall, it appears that inflation is once again falling. Economists widely expect the Fed to cut interest rates this year. That will help lower mortgage rates, and will make owner-occupied housing more affordable. Resulting inventory increases will help to meet demand.
Nonetheless, supply-side pressures will persist. Pent-up demand from millennials who have put off ownership will put upward pressure on prices as rates come down. Lower inflation and mortgage rates will help lower housing-finance costs, but we will also need to ease supply-side barriers to make housing more affordable.
Guest commentaries like this one are written by authors outside the Barron’s newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to ideas@barrons.com.
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