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US Property Investors Build Up Their Hopes
April 3, 2009Article by Ray Withers
US property investors are building up their hopes that the worst of their trauma may be over based on new house construction figures. The trouble is no one really knows whether the figures are good or bad even though they show an increase in new home building starts across the country. The US Commerce Department revealed residential building projects started in February jumped 22.2% to 583,000, up from 477,000 in January.
This represents the biggest percentage rise since January 1990 and new building permits also rose 3% to 547,000, from 531,000 in January – both are the largest rises since April 2008. The trouble is, many property professionals feel that the US has an up to 10 months of oversupply and building even more homes now will push prices down rather than up by making the oversupply stockpile even higher. Distressed US properties are still selling at well below market value, and while loans are still hard to come by, the market is for buyers who can afford to make rich pickings rather than for hard-pressed sellers trying to make a price.
Some of most distressed properties in the US are in California, Nevada and Florida. In the past few months, more than a third of property owners trying to get out of the slump have sold their properties at a loss. This includes developers with completed or partly constructed property on their hands that is now worth less than the land value and builds costs. A typical Orlando development is Cane Island at Kissimmee, just a few minutes from Disney and the major theme parks. The developers state that the current Kissimmee property market means selling prices are less than build costs for the apartments.
They need to sell to cover development finance and this means some strong negotiation can net bargains.
Just like the roller coasters at the parks, Cane Island resort has gone through ups-and-downs since launching in 2005 with prices starting from $319,990 for a 2 bedroom fully furnished apparent, the same size units today are selling for $149,990 an astounding 53% less. The apartments at Cane Island are delivered fully furnished as a turn-key development. Kitchens have a full-sized washer and dryer, refrigerator, microwave, glass-top range and dishwasher.