Has the USA Property Market Bottomed Out?

Even though the USA property market bottomed out sometime between 2010 and 2012, now is the perfect time to invest. Many property investors aggressively bought homes in the last two years, but now the large investors are beginning to slow down and hesitate, leaving room for individuals.

The mad dash for property that occurred in 2012 and 2013 had the effect of helping the market recover after the devastating financial crisis that began in 2007.

Prices are now steady in most local housing markets in the United States, but they are expected to rise slowly and sustainably by the end of the year, which means there is plenty of time to invest. In addition, the amount of time required for most investors to realize a profit has decreased.

USA property marketAlthough the USA property market has already bottomed out, one of the most interesting factors that makes this a great time for buyers is the general attitude of Americans and home buying.

According to the U.S. Census Bureau, only 64.8 percent of residents are homeowners, which is the lowest rate since 1995. At the beginning of the last housing boom, homeownership stood at a record high of 69 percent.

Experts say that one of the problems is that many Americans are having trouble accessing credit, and Congress is addressing the problem by developing a bill on housing finance reform. Investors who can get into the market before the new bill becomes law will be in the most advantageous position.

Home sales were very high in 2013 because of the combined demand of private and institutional investors at the bottom of the price spectrum. These investors bought large numbers of single-family homes in the most distressed markets with direct cash payments, which had the effect of pushing prices upward. Now many institutional investors are decreasing or halting their buying activity, which is leaving more room for individual investors. This situation is new to the U.S. property market.

Robert Shiller, the co-founder of the S&P/Case-Shiller Home Price Indices said, “This institutional investor dynamic is a whole new era, I think. As institutional investors start to play in the single-family market, that just changes it fundamentally.” According to the S&P/Case-Shiller Indices, which are considered to be the most popular and accurate measure of U.S. residential home prices, the market was up by approximately 13 percent in February even though sales have been decreasing for nearly one year. This has created an environment where a wide assortment of properties with the potential to increase in value is available.

Many U.S. residents are unable to become homeowners because they do not have enough cash for down payments, and mortgage rates just increased last year, which made the situation worse. Anyone, regardless of where they are located, who has good credit and enough cash for a down payment will have a decent selection of homes that they can peruse. In addition, most of the new households that formed in 2013, approximately 423,000 in total, are renters, so finding reliable and steady tenants is not a problem in many cities.

In coming years, the formation of new households is expected to increase, which means demand for rental homes should surge. The usual rate is well over one million each year, and when it climbs to this level again, home prices will increase. The chief economist for Trulia, the large housing research company, said, “Household formation is critical for the housing recovery. With so many young people living with their parents or roommates during the recession, the housing recovery now depends on how quickly young adults re-enter the housing market,”

According to data from national analysts, the number of renters has increased to the highest level it’s been in 19 years, which could be a boon for the values of single-family rental properties and multi-family apartment buildings.

While the growth of home prices has slowed considerably since last year because of the increase in inventory, rises in values are expected to continue for several years before reaching a high mark. The slowdown is actually very beneficial because it is more sustainable than rapid growth, and it will keep the market geared toward buyers for several years.

The S&P/Case-Shiller Indices show that home values are up by 11.3 percent from April of last year to the present, but prices since the beginning of the year have dropped by 0.33 percent. The largest increases for the year so far are in San Diego, California, at 1.6 percent, Las Vegas, Nevada, at 1.03 percent, and San Francisco, California, at 0.75 percent.

Author: Simon Worthington

Simon is the International Sales and Marketing Manager at Ray White Surfers Paradise, Gold Coast, Queensland, Australia and Ray White USA, Atlanta, Georgia.

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