At last some substantial signs of a turnaround in the US property markets! Reports published by the NAR (National Association of Realtors) show substantial positive advances across a number of areas in the US housing markets during March.
Existing home sales
- Up 6.8% from February this year, and up 16.1% from March 2009
Total housing inventory
- Total homes available for sale rose by 1.5% to 3.58 million units, this is 1.8% less than 12 months ago, and 21.7% under the record high in July 2008
Breakdown of buyers
- 44% of properties were bought by first time buyers, up from 42% in February.
- Investors made up 19% of property purchases, unchanged from the previous month.
- The remaining sales were made to repeat buyers. (People selling a previous home and buying a new one)
Breakdown of sales
- Cash sales accounted for 27% of transactions, unchanged from February.
- Distressed sales (which on average are sold at a 15% discount) accounted for 35% of all purchases – a figure also the same for the previous month.
What does it all mean?
The figures themselves show that the US is gradually getting its housing situation under some control now and finally back into the black. The rise in both existing home sales and first time buyers shows there is some consumer confidence returning to the market place, much of it undoubtedly spurred on by the Home Buyer Tax Credit scheme drawing to a close at the end of April.
The scheme was introduced under the Obama administration specifically to encourage turnaround within the failing market place, and it would appear it has finally started to do just that. The Tax Credits scheme offers tax relief of $8,000 and $6,500 (for first time buyers and repeat buyers respectively) up to 10% of the property purchase price.
The relatively low drop in housing inventory, whilst small, does go to show that developers in general have cut back substantially on new projects and have sought to clear the oversupply that had built up at the peak just before the market crash.
So what now?
The continued downsizing of inventory, coupled with positive moves in the market place means that the US as a property investment destination is gaining momentum again. There is no question that this turnaround has been largely due to the Tax Credit scheme stimulating the domestic market, the return to positive numbers has begun. With national interest on the rise, and further rises expected, it would seem the bottom of the US housing market has now been seen. This is not to say that all has returned to “normal” but the long term effects of figures like these show that consumer confidence which is invariably what drives housing prices, has returned. Over the longer term, capital appreciation will return again and developers will start building on larger scales once more.
How can I take advantage of it?
Of course, outright buying of property in the US just for capital appreciation is one way, as is investment into residential based REITS (Real Estate Investment Trusts). Property buying of course will mean holding the asset for an indeterminable amount of time, and REITs are a bit complex if you are not familiar with the inner workings of them. Another option recently released by IPIN is The IGA Programme (Income Generating Assets)
IPIN’s IGA Programme enables investors to benefit from the distressed property sector at its lowest, and take advantage of the programmes rental management company – either through the Government Section 8 rental scheme (Guaranteeing rental payments to owners) or through the more traditional rental route. All properties in the programme are fully renovated to high standards before being made available to investors. Both versions, whether Section 8 or open market rental, give investors a hands off, hassle free method in which to invest into US real estate.
Learn more about IPIN’s Income Generating Assets Programme
- Wednesday 28 April 2010