The US and UK housing markets have experienced many similar trends during the financial crisis; with both experiencing the same trends, usually one followed by the other. We recently ran a feature on how the massive boom in the UK rental market threatened to turn the UK into a nation of landlords and renters by 2020, and similar trends in the US now make the same thing a very real possibility.
It is no secret that the US housing market is still in a lot of trouble:
- House prices are still falling sharply
- Repossessions are still happening at almost the same rate as at the height of the crisis, and if for any reason they are slowed a backlog is created.
- The mortgage market is still restricted, with only those with immaculate credit and/or a huge deposit being considered for loans
But, all of these symptoms are of a disease affecting the buying market, people still need somewhere to live, and that demand is fuelling a growing rental boom, with demand for rental property rapidly reaching capacity and above in many areas. It is a great irony that the symptoms of the housing crisis would lead to its one beacon of hope being lit.
Because that is exactly what it is: a beacon of hope. The rental boom is fuelling another boom, property investment. Since 2009 the number of foreigners buying up bargain properties in America has grown consistently and steadily month in month out. To begin with they bought on the strength of the fact that low prices could/should mean good rental yields, but now they are able to buy properties knowing that they will earn good rental yields.
So, obviously the growth in foreign investors continues, and now they are being joined by Americans as well. Experts report a new wave of Americans investing in property not to flip, but to rent out over the long term. Experts believe this investment is the main reason why home sales are now 34% above the cyclic low of mid-2010 as reported by the NAR in its latest data.
Investors are investing at the private level, like attorney and business coach LeTonya Moore who has just bought a town house in Tampa, Fla., for $37,000 in a foreclosure sale. She'll live there for one to two years and then rent it while shopping for more properties in the area. Overall, she plans to make three real estate investments a year over the next four years so she can achieve her goal of financial independence.
"Real estate is as good, if not better, a long-term investment than the stock market," she says.
But massive institutions are also getting in on the action. Earlier this year investment funds and such like began buying up apartment buildings in distressed but recovering cities, but now they have moved beyond that and are actually constructing new units to meet the demand.
"A surge in new multifamily construction in November resulted in the strongest month for U.S. residential builders since April 2010, with a number of large apartment projects breaking ground over the last two months. This led to a whopping 180% year on year growth in multifamily starts in November. While construction levels are still low by historical averages, construction is currently seeing its best performance since April 2010, and this is now without the wad of government stimulation. A beacon of hope is being lit.
- Friday 23 December 2011