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Young Americans driven to rent as housing market recovery gets firmly underway

July 8, 2015Article by Charlotte Ashton

The US housing market recovery is now firmly underway. According to the National Association of Realtors, pending home sales have hit their highest level since April 2006. At the same time, the Case-Shiller index in April showed a 4.9% rise in home values in 20 cities across the US.

Constricted supply

While the market recovers in many ways, construction of affordable homes is yet to pick up, constricting supply and causing many young people to be unable to buy their first property. Ray Withers, Chief Executive of leading property investment specialists Property Frontiers, comments,

“Prices are being driven up by the lack of supply of entry level properties, so many young professionals are being driven to rent. Lack of access to credit is also playing a part. The situation is creating some interesting opportunities for investors, with pockets of the country attracting considerable attention.”

The South Carolina town of Gaffney, known for its ‘Peachoid’ water tower – the giant peach-shaped water tower featured in the hit TV show House of Cards – is an excellent example of the opportunities that the market’s recovery is creating. According to the SC Association of Realtors, both home sales and the median price of homes in the state are on an upward trend, with a busy season for real estate ahead.

Yet despite the Labor Department reporting an addition of 223,000 to the economy during June 2015 and the unemployment rate dropping to a seven year low of 5.3%, wages in the US have remained flat, leaving many workers finding themselves unable to get a foot on the housing ladder.

Youngsters look to rent for longer

“The impact in places like Gaffney is that youngsters are looking to rent for longer,” continues Withers. “They start renting when they go to college, then continue into their professional lives. It’s similar to the situation we have seen here in the UK, where the private rented sector has boomed due to supply lagging far behind demand and pushing prices up, leaving would-be first time buyers lingering in the rental sector for longer.”

For investors, it means that developments like Chandler Oaks in Gaffney offer excellent long-term income potential. Perfect for students and young professionals, Chandler Oaks provides one and two bedroom apartments just a mile from the Limestone College campus. Investment is from $48,671 for a one bedroom apartment.

Chandler Oaks offers an 8% underwritten income to 2020, with many apartments set to exceed this. The two bedroom apartments, for example, offer a minimum of 11.4% gross yield thanks to contracted income from Limestone College, which has guaranteed tenants until May 2019.

With management undertaken by a local company, the opportunity is ideal for those looking to take advantage of the US market recovery with a hands-off property investment.

For more information about opportunities in the US housing market, contact Property Frontiers or call +44 1865 202 700.

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