US Property Market – Stressed and Distressed?

With the US having been the first major economy to be hit by the current recession, it begs the question “When will it recover?”

With the US having been the first major economy to be hit by the current recession, it begs the question “When will it recover?”

According to a report in the Financial Times, the “major house builders are said to be very bullish this year after profits were reported by the second largest constructor DR Horton.” Taken alone for its merits, this news is great “the market is bouncing back!” is the phrase no doubt soon to be heard from the media at large.

Assessing the larger picture though one has to take into account all the factors regarding the US real estate market over the past 24 months or so. Most developers have been holding on to large quantities of land accrued during the run up to the crash, some of which has been purchased at what would now be inflated prices. As a result, a number of mergers and takeovers between companies are starting to happen, as well as offloading and downsizing by the cash-strapped larger entities.

Of course a good shake up and restructure of any industry has two sides, in this particular case, both sides have substantial upside benefits for the individual investor. In the first place, the turmoil created by the shake up will mean many investors of all sizes will sit on the side lines, preferring to “watch and wait” until it settles down. This in its own right will mean a reduced numbers of purchasers both at homeowner and investor levels, putting pressure on builders to get even more creative with their pricing.

The secondary and compounded knock-on effect of this will further open up and make yet more attractive the distressed property market. In 2009 some 918,000 properties were foreclosed upon in the US, more than 3 times the 2006 figure, this year is unlikely to see much, if any drop in those numbers whilst uncertainty remains in the market.

How to take advantage of this? Short of going to the US and shopping around yourself, (A little daunting if you are not familiar with the terms and processes to say the least) another option worth considering is one of the IPIN Distressed Real Estate Asset options.

- Monday 08 February 2010

*This page is provided for information purposes only and should not be construed as offering advice. Flex Profit Hub is not licensed to give financial advice and all information provided by Flex Profit Hub regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.