POOR PERFORMANCE PREDICTED FOR US HOUSING MARKET THIS SPRING

Rising mortgage rates, a shortage of inventory and a new tax law that reduces incentives for homeownership are predicted to have a negative impact on the US housing market.

In recent history, around 40% of U.S. home sales within any given year are usually reported from March through June, as buyers prefer to complete closing formalities before the new school year.

But experts are less optimistic about America's housing markets this spring selling season. “Sales will remain flat for all of 2018 due to inventory shortages and eroding affordability, as both prices and mortgage rates rise,” says National Association of Realtors’ chief economist Lawrence Yun.

A total of 2.06 million homes sales were reported between March and June last year, compared to nearly 2 million in the same period during the previous year. But this year experts say sales will suffer – despite encouraging signs including a drop in unemployment- as not enough homes are coming on to the market to meet the demand, causing home prices to go up.

During the year to January home sales fell 4.8% - the highest annual drop in three years, while ending home sales - an indicator of activity in months to come - also dipped 4.7% in January to their lowest level in more than three years, according to the NAR.

The organisation now claims many millennial buyers have already been priced out of the market despite a rise in wages. In addition to this, fears are rife that the mortgage rates could cross the 5% mark in the next few months, keeping home buyers from the market.

The rate for a 30-year mortgage has already hit nearly 4.45%. On top of that, the new Republican tax bill that reduces the interest deduction available on mortgage debt to $500,000 — half the current ceiling – may affect high-end markets in the U.S.