USA

Growth returns to the USA market

In February of last year we released two Property Bulletins and it is worth reviewing them in the light of what is happening in the USA market.

Property Bulletin – 4/2012
US market regains its lustre

Florida: The state where the US housing slump started now shows the best potential, analysts say
Jobs are coming back and home prices are stabilising. America looks like a land of opportunity

Property Bulletin – 5/2012
Warren Buffet : I’d buy up a couple hundred thousand single family homes if I could

The point we stressed was that when people like Warren Buffet are saying now is the time to invest it is time to sit up and take notice. All markets recover in time and some recover quicker than others. The USA is a prime example of this. Not everyone agreed that it was time to enter the market though, and one person even questioned our sanity (humorously, we think).

Well, Mr Buffet was right and last year would have been a great time to enter the USA property market. It has certainly started recovering and prices have risen by 10% over the past year. The graph below from Case – Shiller shows the performance over the past 25 years. All 20 cities have just shown increases on an annual basis for at least three consecutive months. Atlanta, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, Phoenix, Portland, San Diego, San Francisco, Seattle and Tampa all posted double-digit annual returns.

The good news keeps coming – a recent report from CoreLogic showed there were 9.7 million properties underwater (whose owners owed more on the mortgage than the homes were worth) during the last quarter. This was down from 10.5 million in the previous three months. That amounts to 19.8 percent of all properties with a mortgage, down from 21.7 percent. In the past year, 1.7 million borrowers have regained positive equity. “We are still far below peak home price levels,” CoreLogic Chief Executive Officer Anand Nallathambi said in a statement, “but tight supplies in many areas coupled with continued demand for single family homes should help us close the gap.”

As you would expect in a market the size of the USA, the recovery is quite fragmented. Nevada had the highest percentage of properties in negative equity at 45.4 percent. Rounding out the top five were Florida, Michigan, Arizona and Georgia. These five states combined accounted for 32.8 percent of negative equity in the United States. These are the markets astute investors should target.

So why didn’t more overseas investors enter the USA market last year? Lack of familiarity with the market there is the reason most often cited. Investors in Hong Kong, Singapore and Malaysia are much more familiar with the London market and many are reluctant to go outside their comfort zone. The important thing to remember is that if you have the right adviser, investing in the USA can be a trouble-free and profitable exercise. A lack of knowledge and familiarity should not deter you. The right adviser will handle all aspects of the purchase process, ongoing letting and management and eventual resale of the property. The USA is a sophisticated market and the level of professionalism and service in the property sector is second to none. In addition to this, we have had over 20 years experience in serving the needs of international property investors.

Whether it is a freehold house, condo or development land, the USA is the place to invest at the moment. When you can buy land through a company with a hugely successful track record from as low as US$10,000 or a Tampa freehold house in a marina development close to shops etc for under US$250,000 there is no downside.