Should You Invest?
The economic state of the USA understandably starts alarm bells
ringing in investors' heads: rising inflation rates, high energy
and fuel costs and a tightening of the credit industry do not
create a healthy-looking economic environment and the prospects for
the future should be taken into consideration as they will effect
your property's potential. However, if entered into carefully,
investment in the US - most notably in the state of Florida - can
be profitable. Falling prices created by the weak dollar and
housing market crash mean that foreign investors with a strong
currency can find great bargains and the thriving tourist industry
makes for a reliably consistent rental market.
- United States has an economy that is traditionally very strong
so will rebound from the current lows back to being in a healthy
state, benefiting from more consumer spending and a consumer
confidence in the economy.
- The weak dollar is creating very favourable exchange rates and
a struggling property market has created prices that are still
dropping, thus property can be bought very cheaply by
foreigners.
- A booming tourism market – encouraged by the weak dollar - and
strong internal migration in Florida, largely motivated by a
healthy job sector that is stronger than in most other states,
means that the demand for rental property is strong. This is
augmented by former homeowners who can no longer afford to maintain
the costs of property ownership and are forced to rent.
- At some point the property market will recover and prices will
start to rise again, creating opportunity for high yields.
Price History
Following a decade of boom the US property market has suddenly
changed tack. In 2006 rising house prices could no longer be
supported and the housing bubble burst. This triggered a sub prime
mortgage crisis. The high-risk end of the lending market began to
stumble as people defaulted on their payments or were forced into
foreclosure on their property. As property prices began to fall
through 2006-2007 the situation worsened. According to
Realtytrac.com the total number of properties involved in
foreclosure activity in 2007 amounted to just under 1.3 million.
Banks and lenders became much more cautious and reduced lending,
leading to a severe drop in investment activity as a growing number
of corporations became unable to procure sufficient funds. The
economy began to suffer as its drivers, consumer and business
spending, dropped.
According to the Standard & Poor's/Case-Schiller national
index, house prices fell by 14.1% in the twelve months leading to
the first quarter of 2008, which is a greater rate than seen at any
point during the Great Depression. If the difference between the
deflation of the 1930s and the inflation of the current period is
taken into account then the falling rate extends to an 18%
difference in real terms over the last twelve months, and some
commentators are of the opinion that there is further for prices to
fall. Manhattan is one of the few, if only, exceptions to the
current state of the market. Defying national trends, the area has
seen an incredible 41% rise in property prices over the last twelve
months due to low supply and constant demand from individuals who
are less affected by the tightening financial situation. Areas
hardest hit by declining prices have been the 'bubble states' of
California, Nevada, parts of the Midwest and Florida.
Top