Home prices exhibit a stronger correlation to GDP growth and employment growth than interest rates due to the generally pro-cyclical nature of housing values.
We expect structural imbalances in the U.S. housing market will continue, leading to further tightening of fundamentals and higher shelter costs.
Pretium is constructive on the near-term outlook for the U.S. economy, but risks to forward growth are mounting from late-cycle headwinds and potential downside risks from domestic and global policy.
In our view, the sharp change in homeowner affordability, coupled with strong housing demand and tight supply, is likely to drive significant rental demand from households priced out of homeownership due to cost or credit.
To compare credit cycles, we look at three critical factors including the length of a default cycle, its magnitude, and severity of loss.
The U.S. economy is performing well, supported by healthy job growth, corporate tax reform and elevated consumer and business confidence.
The compression in housing availability during a period of improving economic growth and sustained housing demand drove another year of rental rate and home price growth.