Investors are taking advantage of the low prices and plethora of foreclosed property
in the US real estate market, with many believing that now is the time to buy.
Many property purchasers in the destination are confident that prices have reached rock bottom and will begin to pick up once again as the economy recovers. Indeed, some investors are looking to capitalise on the growing rental market which is now appearing within the country.
According to MPF Research, the number of occupied apartments shot up by 215,000 in the 64 largest US markets during the first six months of the year. The figure represents almost double all the units added in 2009 and is the biggest growth since the firm began tracking the data in 1992. Added to this, MPF Research says that the vacancy rate declined to 6.6 per cent last month from 8.2 per cent in December.
One of the driving factors behind this growth is the great number of foreclosures which have been enacted by banks.
The recent RealtyTrac Midyear 2010 Metropolitan Foreclosure Market Report highlights the sheer volume which the distressed market
has now reached. It shows that 154 out of the 206 US metropolitan areas - with a population of 200,000 or more - posted year-on-year increases in foreclosure activity.
"While we're seeing early signs that foreclosure activity may have peaked in some of the hardest-hit markets, foreclosures continued to rise in three-quarters of the nation's metropolitan areas in the first half of the year," James Saccacio, chief executive officer of RealtyTrac, explains.
Leading the way in terms of foreclosure filings is Florida, although seemingly this has served to help attract many overseas property investors to the market. Overseas Property Professional (OPP) reports that the Sunshine State witnessed a rise in the number of homes sold in June of 15 per cent, making that 22 months of continuous growth.
Discussing the rise with OPP, John Sebree, vice president of public policy at Realtor Florida, said: "Florida is bucking all trends … investors are realising that prices are rock-bottom and that now its the time to buy."
Indeed, the expert believes that now concerns over the Gulf of Mexico oil spill are beginning to fade the property market in the region could pick up even further, with investors looking to capitalise while prices remain low.
Builders Continue to Buy Land
Meanwhile, the University of Florida recently released a report which pointed to further optimism in the market, with it revealing that "whilst there is uncertainty and many respondents are negative about the current market, builders are continuing to buy finished lots on which to build".
Southern Florida, in particular, continues to attract overseas property buyers and still has a lot of money coming to its shores, says the report. Timothy Becker, director of the University of Florida's Bergstrom Center for Real Estate Studies and author of the report, said that "even Miami's condo market, with thousands of empty units, has improved, with investors purchasing large chunks of condo properties downtown and placing them on the rental market".
Poor Job Prospects
However, full recovery in the US market is unlikely to occur unless unemployment and a lack of available credit are addressed. Mr Saccacio explains that job growth is the only thing that can sustain the fragile stability which can be seen in a number of US markets. "If unemployment remains persistently high and foreclosure prevention efforts only delay the inevitable, then we could continue to see increased foreclosure activity and a corresponding weakness in home prices in many metro areas," he added.
Indeed, this is also likely to be affected by the ending of government tax incentives in April. The initiative, which provided up to $8,000 for new buyers and $6,500 for current owners looking to move, had injected a much-needed boost to the market and its withdrawal is expected to lead to a fall in sales.
It would appear that the US market could present some opportunities for shrewd investors and low prices in certain destinations may well appear to offer a fantastic real estate investment opportunity
. However, as with any recovering market, it is unlikely that significant short-term gains can be made.
- Wednesday 04 August 2010