While in France borrowing rates continue to rise, challenging the access to homeownership for many households, the situation is not much better across the Atlantic. The United States is in the midst of an intense housing crisis that forces thousands of Americans to sleep on the side of roads, particularly in California, in trailers, vans, and other recreational vehicles.
The average rent reaches $2,950 in Los Angeles
The images are striking. Along certain American boulevards, it is not uncommon to see numerous trailers parked in a row on the side of the road. These vehicles, along with chairs, tables, bicycles, and other makeshift installations, belong to thousands of residents who are victims of the housing crisis that is hitting the country hard. This forced settling on the pavement is particularly visible in California. This state in the American West has one of the highest average incomes per capita in the country, but also the highest number of homeless individuals.
In the United States, the increase in real estate prices reached +6.5% in 2022. This has forced some workers to opt for less expensive solutions. Trailers, vans, RVs, mobile homes… These housing options have become the norm for many residents of Los Angeles who, for some, would have had to hold down three jobs just to afford an apartment. In June 2023, the average rent reached $2,950. These figures are concerning and not really comparable to the rates applied in France. However, the housing crisis is also taking hold in France.
In France, the rise in interest rates erodes households’ borrowing capacity
On the other side of the Atlantic, the issues may not be exactly the same, yet the real estate market remains mired in a negative trend. Between May and July 2023, the number of mortgage loans plummeted by 50% compared to the same period a year earlier. Borrowing rates now exceed 4% in certain regions for a loan term of 25 years, or even 20 years for certain profiles of buyers with modest incomes. The average borrowing rate across the entire country reached 3.61% in July, compared to 3.45% the previous month.
At the same time, households’ borrowing capacity is diminishing rapidly. It has decreased by 12.6% since January 2023 according to the Credit Housing Observatory CSA. In other words, a household that could borrow €200,000 at the beginning of the year can now only hope to borrow €174,800.
A glimmer of hope and a decrease in prices in the third quarter of 2023?
And what if prices were to slowly decline? According to projections based on preliminary contracts at the end of July 2023, the trend is heading in that direction. The price of existing homes in mainland France is decreasing by -1%. The price of existing houses appears to be slightly decreasing by -0.2% across the entire country excluding the Île-de-France region by the end of July 2023. In the Paris region, specifically, the annual price decline could become widespread in July 2023.
Apartment prices could decline by -4.8% and -3.2% for houses. This downward trend could even continue into the third quarter of 2023 according to the real estate outlook note from the French notaries, a trend that could push the average price per square meter below €10,000 in Paris. We’ll find out in the coming weeks.