US house prices rise 14.9% according to the National Association of Realtors

US house prices rise 14.9% according to the National Association of Realtors

A housing mania is headed to the US.

There is the perfect storm of low rates, remote working and wanting some space to breathe right now. Add in a boom in home renovation TV shows and all the people captivated by the housing market.

A skit from this week's Saturday Night Live captures it:

I think it goes way beyond where it is now. A Bank of Montreal report published this month says US home prices are 40% cheaper than in neighbouring Canada.

Although the US is substantially richer per capital than Canada, I don't think that gap completely closes but it won't be far off. It's easier and cheaper to build in the US owing to climate and land-use regulation but there is so much to like about housing right now.

I think this would have happened years ago save for the scars from the housing collapse. Those are fading now and remote work is opening up the country. These are absolutely early innings in the housing boom. If/when prices rise, it's going to leave Americans with significant amounts of housing equity that they will recycle back into the economy and that will lead to years of economic strength -- so long as the Fed doesn't spoil the party.

Reuters today has a great story about people buying up old homes and fixing them up and the lady quoted in the story (who bought a beautiful house in Connecticut for $88,000) captures more than just the feeling on housing:

"The mantra of real estate has always been 'location, location, location.' For the first time that's being flipped a little bit on its head," Finkelstein said. "We are living in a time when people are willing to kind of take risks, maybe risks that they've been wanting to take their whole life."

Data from the US National Association of Realtors showed the median prices of a single-family home up 14.9% this year to $315,000. It was the largest one-year gain since they began collecting data in 1990. US prices are now above the 2005 peak. The gains were led by Fairfield County in Connecticut, up 39% but that's indicative of the deep suburban boom.