USA Property Market Predictions 2011

I have noticed over the past couple of months that an increasing number of our investor clients are choosing our USA investment locations over the UK. Why?

Pristine residential condos set in tropical, landscaped gardens might look more attractive than distressed portfolios in the northern climes of Blighty. However, this escalating interest is not just because of the gorgeous sun-kissed photos. Rather, it is because of the figures! 

Recovery in "number one" investment location

Certainly, recovery is underway in the US property market. According to separate reports from the National Association of Realtors (NAR) and CNN Money (both February 2011), home sales are on the rise and this is pushing values up again.

Bloomberg's Global Poll (January 2011) cited the USA came as "number one" investment location for international investors. Economists at the World Economic Forum in Davos-Klosters (also January 2011) also cited "much optimism" being centred on the US, with "growing confidence" in the economic outlook.

What does this mean for property investors? Firstly, the window of opportunity to buy at the lowest prices in the US market is starting to close. Secondly, investors who act now will benefit enormously from the recovery of the market!

Property sales bounce back

US home sales bounced back in 49 states during Q4 2010, with 78 markets (just over half) seeing values rise year-on-year. Total existing-home sales, including single family houses and condos, jumped 15.4% to a seasonally-adjusted rate of 4.8 million.

The national median single family home price was $170,600 in Q4, up 0.2% from $170,300 in Q4 2009.
Distressed homes (foreclosures, short sales, REOs etc) accounted for 34% of Q4 sales, which is little changed from 32% in Q4 2009.

Condo sales, in particular, are booming and jumped a massive 13% in Palm Beach Florida and 6% state-wide.

Improved housing market and job growth "hand in hand"

Lawrence Yun, chief economist at NAR, explains: "Consumers in the hard hit regions such as Florida were able to scoop up condos at absolute basement prices."

He continues: "Home sales clearly recovered in the latter part of 2010 and are helping to absorb the inventory, including many distressed properties. Even with foreclosures continuing to enter the pipeline, they've been selling well and housing supplies have trended down."

Yun adds: "An improved housing market and job growth will go hand in hand. The housing recovery will mean faster job growth. I project 150,000 to 200,000 jobs will be added to the economy from the anticipated 300,000 additional home sales in 2011."

Recovery "puts floor beneath price decline"

Dr. Sean Snaith, leading US economist and director of the University of Central Florida's Institute for Economic Competitiveness, also comments: "It's important to note the rate of price decline is decelerating. As the labour market recovery takes hold in 2011, it will help put a floor beneath price declines and ultimately will provide the basis of housing's recovery."

So, which areas are set for the fastest recovery?

CNN Money talks

According to the report from CNN Money, Florida comes in at number two (second to Tacoma, Washington), with Memphis, Tennessee at number three and Rochester, New York at number four. This is great news for clients of Axis Property Investment, as we offer excellent investments in Florida, Memphis and Buffalo, New York (which is in the same region as Rochester).

Florida

CNN Money's report for Florida was centred on the Palm Bay area. Palm Bay is on the east coast and is situated just south-east of Orlando and north of Miami. However, Florida's unique ‘micro climate' style economy means specific area reports are typically indicative of Florida's market cycle as a whole.

Florida, generally being ahead of the game in the USA, fell earlier and further than any other area in the whole of the USA. Why? Because the area was overbuilt on expectations that baby boomers would flock to the area on-masse. These expectations were pushed back by the housing bust and economic crisis.

However, as home prices crashed and fell 37% between mid-2007 and mid-2010 alone, foreclosures ballooned. Prices in Florida are typically now 50% below replacement costs, but the market is expected to come roaring back with a double-digit jump between September 2011 and September 2012.

The median home price in Florida is currently $141,000.

Download the Axis Florida Property Investment Guide for free to find out more about our Florida properties and Florida investment strategy.

You can also watch video of Florida investment locations and interviews with our Florida partners.

Memphis, Tennessee

Economic recovery heated up in Memphis in 2010, with unemployment dropping a full point to 9.4%. This in turn slowed foreclosures, which dropped 22% throughout the year. The recovery of Memphis definitely appears to be a steady one, with 2009 also seeing a 31% drop in foreclosure filings.

Dr. John Gnuschke, director of the Sparks Bureau of Business and Economic Research at the University of Memphis, tells us: "This means fewer homes going to inventory and a better balance between supply and demand, which will contribute to the steady home price improvement over the next two years."

Commenting on the Memphis economy in general, he adds: "We have added jobs lately and hope to add a lot more in 2011."

The median home price in Memphis is currently $280,000 and a 7.5% forecast gain is expected by Q3 2012.

Download the Axis Maximum Profits Investment Guide for free to find out more about our Memphis properties and Memphis investment strategy.

Rochester, New York

Situated on the Erie Canal, close to Buffalo, Western New York, was one of the USA's first boom towns. Now an important centre for optical research and technology development (for Eastman Kodak, Bausch and Lomb, and Xerox), Rochester is also attracting many small businesses to the area.

Rochester, as with its neighbouring Buffalo, has a large supply of good, affordable, family homes. However, property prices remained so low in the area, the bust had little impact. Sandy Parker, CEO of Rochester's Business Alliance, tells us: "Foreclosures have not been a problem."

Rochester has only experienced a 4% drop in values since the market peak, with the median home price currently at $125,000 and a 5.3% forecast gain expected by Q3 2012.

You can find out more about Axis properties and strategies in the neighbouring area of Buffalo on our Buffalo property pages.

Capital is king for clever investors

As the US market recovers, the window of opportunity for investors to achieve maximum results is closing.

Ron Phipps, president of NAR, explains: "For people with good credit and long-term plans, it's hard to imagine a better opportunity than what we see today."

Of course, "good credit" can also mean capital to invest! The majority of our USA investment opportunities are cash purchases only (with the exception of occasional developer/vendor finance options in Florida).

Explore our available now USA investment property today!

22% yields + 300% ROI = USA property investment

USA property investment opportunities for Axis clients start at around just $25,000 USD (circa £16,000). This is exceptional! Especially considering rental yields in the US stretch up to a massive 22% NET and, depending upon the location and strategy, you can achieve short-term returns of 30% to 50% in just 12 months, or 100% to 300% in 3 to 5 years.

Lawrence Yun, chief economist at NAR, concludes: "A good portion of sales activity has been driven by investors taking advantage of discounted foreclosures, with high levels of all-cash transactions."

Why invest in the USA?

So, you can see how the figures stack up, but why choose the USA over, say, another ‘booming' location?

1. It is a mature, ‘first world' market, with first-class communications, finance and property sectors and a wonderfully entrepreneurial approach to business. This sets the USA above emerging markets, such as China and India, where risk is higher.

2. The USA is an English-speaking nation, which makes all communication clear and simple throughout the whole process.

3. The legal system is clear, easy to understand and fully accepted. Registration of property is also effective and you can insure against defects in title. This is not necessarily true in less well-developed countries.

4. The USA is an enormous country, with over 300 million people and a gross domestic product (GDP) of $14 trillion - the highest in the world and representing almost a quarter of the whole world's wealth creation. This expands your property investment opportunities!

5. The laws and customs make it easy to buy and sell, quickly and smoothly, often in just one day. This opens up opportunities for short-term profits.

6. It is easy to visit for holiday or business and you don't have to worry about the language, sanitation, or quality of food and accommodation. Plus, you can charge your travel expenses against your USA investment income!

7. The tax regime in the US is generous to business owners, with lower tax rates and greater allowable expenses than in the UK.

8. The USA is a high-reward, low-risk property investment destination!

Why invest now in the USA?

In our view, today's market conditions in the USA present a ‘once in a generation' opportunity for investors who want to build capital as fast as possible, generate high levels of income and create exceptional capital growth.

This exceptional window of opportunity is due to a number of reasons: market cycle; foreclosure activity; US Government incentives; high rental demand creating high yields; the exchange rate; and local factors. I cover these in more detail on our USA investment property pages and in our USA Investment Guide.

Call us today to discover more about our USA investment locations; our bespoke investment strategies; the US market in general; and exactly why 2011 is THE year to invest in US property.

Posted in USA Property

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