When America sneezes, the rest of the world catches a cold, as the saying goes, proved to be more than a cold in this last crisis. However, when the US starts to show signs of recovery, the rest of the world should follow.
“We are cautiously optimistic that we see signs of recovery in the U.S., and some optimism should reach Europe in six to eighteen months”, said Tony Osust, CEO and founder of Holprop.com.
“As an active investor, I am seeing Properties in some U.S. cities have reached bottom and are showing signs of recovery, albeit slow due to foreclosures and reluctant lenders. Cities with smaller populations and less stock will recover faster than the larger cities,” he said.
”We remain cautious because this is an election year in the US and often the employment figures and markets look brighter, a false economy you might say, However, I still believe the market will reach bottom this year”, Said Mr Osust. “Investors should seriously consider buying up foreclosures or short sales this year, turn them into rentals and see a good return. Banks are making it tougher for people to qualify for home loans and they have to live somewhere, the rental market is where they turn”.
This sentiment is echoed by others in the property business.
For Investors looking into the U.S. housing market, it is thought prices may fall further under the weight of foreclosures and may not rebound until 2013, even as the economy builds momentum and mortgage rates fall to record lows. When property values do rise, the gains probably won’t match those seen in the years prior to the bubble bursting in 2006.
Prices for resold homes are down 31% since the July 2006 peak, based on the S&P/Case-Shiller Index that tracks 20 major metropolitan areas. Values have increased 3.1 % since bottoming out in March, though more than a quarter of homeowners with a mortgage are “upside down,” or owe more than their property is worth.
Prices may drop an additional 7%, according to Scott Simon, head of the mortgage- and asset-backed securities teams at Pacific Investment Management Co. in Newport Beach, California. Homes are more affordable now than at any time on record, setting the stage for a turnaround, he said in a telephone interview.
“The new normal is that, if you can get a mortgage, housing is dirt cheap,” Simon said, using the term to describe the extended period of below-average economic growth forecasted following the 2008 financial crisis. “You’re going to look at a graph someday, and it’s going to look like somewhere between Jan. 1, 2012, and June 30, 2013, housing bottomed.”
U.S. home values probably had their smallest decrease in four years in 2011, according to Zillow, whose survey found that prices may find their floor in late 2012 or early 2013 and will begin rising by 3% a year through 2016. That appreciation is modest compared with the last decade, when double-digit annual increases were common, the Seattle-based provider of real estate data said.
“Negative equity, unemployment and low consumer confidence remain the key factors delaying a true recovery,” Stan Humphries, Zillow’s chief economist, said in a statement.
Prices will fall 1% in 2012 and rise 2% in 2013, Frank Nothaft, chief economist for mortgage-finance company Freddie Mac, said in a Dec. 14 report. “A full recovery in the housing sector will likely elude the U.S. in 2012, but new construction and home sales are expected to be greater than in 2011,” Nothaft wrote.
Sales of new single-family homes this year are on track to fall to 301,000 from 323,000 in 2010, which was the lowest in Commerce Department data going back to 1963. While housing starts hit a 19 month high in November, led by a surge in multifamily construction, the annual rate of 685,000 for the month compares with a January 2006 high of 2.27 million.
Existing home sales rose to 4.42 million annualized in November, the highest in 10 months after figures were adjusted, the National Association of Realtors said yesterday. The data showed that annual sales were an average of 14% lower than previously reported since 2007, magnifying the impact of the downturn.
“Even before the revisions things were bad, now they are even worse,” said Lawrence Yun, the group’s chief economist, at a news conference.
As lenders tightened credit standards, 33% of Realtors reported sales being cancelled last month because of problems such as mortgage denials or low appraisals, the Chicago-based group said yesterday. That’s up from 9% a year earlier.
Americans are taking advantage of low interest rates to refinance rather than buy, according to the Mortgage Bankers Association. Refinancing accounted for 80.7% of home-loan applications for the week ending Dec. 16, the most in 13 months, the Washington-based group reported yesterday.
The average rate for a 30-year fixed loan fell to 3.91% in December 2011, the lowest since 1971, from 3.94%, Freddie Mac (FMCC) said in a statement. The average 15-year rate matched last week’s previous all-time low of 3.21%, according to the Virginia-based company.
Foreclosure filings, which slowed in 2011 as banks and loan providers faced investigations over the use of improper documentation to seize homes from delinquent borrowers, are not expected to change much in 2012, according to RealtyTrac Inc. A total of 224,394 properties received default, auction or repossession notices in November, down 14 % from a year earlier, the Irvine, California-based real estate data service reported Dec. 15.
Owners of more than 14 million homes are in foreclosure, are delinquent on their mortgages or owe more than their houses are worth, creating a shadow inventory that is holding down sales and prices, RealtyTrac CEO James Saccacio said.
Home prices fell 0.2% in October from the previous month, the Federal Housing Finance Agency said today. For the 12 months ending in October, home prices fell 2.8%.
Moody’s Analytics Inc. expects home prices to drop about 3% in 2012 as more foreclosed homes go on sale, Celia Chen, one of the firm’s housing analysts, said in an interview. By midyear, the distressed share of the market, foreclosures and short sales, in which the lender agrees to a price below the mortgage balance -- will begin to shrink and average prices will start to rebound, perhaps as much as 5% in 2013, she said.
“By the end of next year, prices will begin to appreciate,” Chen said. “The fundamental driver of normal home sales is going to improve because we expect the economy will start generating jobs by the end of next year.”
The U.S. unemployment rate fell to 8.6 % in November, the lowest since March 2009, as retailers hired workers for the holiday season. Moody’s estimates the unemployment rate will be little changed next year. Should a housing recovery occur, it won’t be uniform nationwide.
As distressed properties in deteriorating condition drive down the overall average, the prices for non-distressed existing and new homes command a premium, Stephen Kim, a homebuilding industry analyst with Barclays Capital Inc. in New York, said in a Dec. 5 note to investors.
“We believe this newly established stability in non-distressed home prices is the leading indicator to home buying sentiment improving in 2012 and this is the linchpin to our bullish thesis,” Kim wrote. Kim rates homebuilders D.R. Horton Inc., Lennar Corp. (LEN), PulteGroup Inc. (PHM) and Toll Brothers Inc. (TOL) “overweight” because they have the capital and land to take advantage of a revival of demand.
Rentals will Rule - The Year of the Landlord.
Oliver Chang, a Morgan Stanley analyst in San Francisco, expects prices for distressed housing to recover before non-distressed, as more investors buy foreclosures to operate as rentals. He calls 2012 “The Year of the Landlord,” because rents will rise as the homeownership rate continues to fall and non-investors are unwilling or unable to buy.
President Barack Obama’s administration invited investors to submit ideas in September to help Fannie Mae (FNMA) and Freddie Mac turn their repossessed homes into rentals, a program that has the potential to speed up absorption of the distressed inventory, Chang said. “We expect investor activity to pick up in 2012,” Chang said in a telephone interview. “In some markets, this has started to cause upward movement.”
Detroit, where property values rose 3.7%, and Washington, up almost 1%, were the only cities in the Case-Shiller 20 metro-area index to report gains during the most recent 12-month period. Atlanta, down 9.8%, and Minneapolis, where prices dropped 7.4%, were the biggest losers.
Larry Alexander said he plans to buy and rent out four foreclosed homes next year in the Omaha, Nebraska, area, where he owns Great Plains Mortgage Co. Foreclosed three-bedroom homes sell for less than $50,000 and rent for at least $650 a month, he said.
“There are so many deals to be had,” Alexander said. “If you’re a cash investor, you can usually get them for 60 cents on the dollar.”
More than two-thirds of Great Plains’ $20 million in mortgage originations this year have been refinancing, because interest rates are so low and because people are reluctant to buy, Alexander said. Most people fear the economy won’t recover or politicians will make things worse, he said. Others still stinging from the burst of the housing bubble have lost faith in homeownership as a good investment, he said.
Let’s look at some of the main points to consider when taking those steps to buying a property in the USA
1. Pick your location wisely. This is an important first step.
2. Enlist the help of a reputable realtor (property agent) that knows the area and will guide you through the process.
3. It is prudent to allow for approximately 5% of the property value to cover costs such as notary fees, title insurer and any other various legal costs.
4. Once the ideal property has been found and price negotiated, it is usual for the purchaser to put down a deposit. It is at this point followed by a formal offer, accompanied with a purchase contract. Once this is signed, the sale is binding.
5. One of the most important criteria when purchasing property in the USA is timing. Contracts are usually date specific and should be adhered to, or risk losing your deposit.
6. It is possible to find finance in the USA as a foreign buyer and US mortgages are available from 70% - 80% loan to value.
7. Obviously it is up to the individual to fully understand all visa requirements, which will be needed for various durations of stay in the country. All information on this can be found at your nearest American Embassies, Consulates, and Diplomatic Missions in your country.
By Gary - www.holprop.com News (March 6, 2012)
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