Home price growth remains buoyant, despite moderation in new home sales. One of the main reasons for this is the demand-supply gap, owing to lower supply due to regulation, cost, etc. Growth (y/y) in private housing units authorized/started is negative, and that under construction has been deeply negative for quite some time.
Home ownership affordability has considerably reduced. Price-to-income ratio and ownership cost burden have risen, particularly for lower income quartiles. Median age of first-time home buyers has risen. With higher new mortgage rates, existing-home sales have also been weak. Home builders’ sales outlook has thus further weakened (see chart above).
The disparity between home/asset owners and others has risen, as the latter does not benefit from any wealth effect. Those in the lower income quartiles, for whom homeownership affordability is lower, are also hit worse by higher cost of living, thus impacting overall consumption spending in the economy as their marginal propensity to consume is typically higher.
Higher home prices also imply higher rents, through higher demand for renting (vs. buying), which puts pressure on inflation. ‘Rent of Shelter’ has a weight of 35.1% in the US Consumer Price Index (CPI).
Given housing supply is constrained, it remains to be seen how much home prices correct if/when economy (demand) slows further.
Source for the chart: CEIC, Bandhan MF Research. Note: NAHB – National Association of Home Builders.
Disclaimer:
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
The Disclosures of opinions/in house views/strategy incorporated herein is provided solely to enhance the transparency about the investment strategy / theme of the Scheme and should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of Bandhan Mutual Fund. The information/ views / opinions provided is for informative purpose only and may have ceased to be current by the time it may reach the recipient, which should be taken into account before interpreting this document. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision and the security, if any, may or may not continue to form part of the scheme’s portfolio in future. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. The decision of the Investment Manager may not always be profitable; as such decisions are based on the prevailing market conditions and the understanding of the Investment Manager. Actual market movements may vary from the anticipated trends. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alterations to this statement/document as may be required from time to time. Neither Bandhan Mutual Fund / Bandhan Mutual Fund Trustee Limited / Bandhan AMC Limited, its Directors or representatives shall be liable for any damages whether direct or indirect, incidental, punitive special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Past performance may or may not be sustained in future.