One of the great tragedies of the current recession is the enormous growth in distressed property owners losing a lifetime of work and savings when their family home is foreclosed.
With some, it is a case of financial mismanagement whist for others it is unforeseen circumstances – a failed business due to the current economic climate, banks failing, inability to qualify for relief, etc.
Although I own my home outright and have no debt, I often ponder that if I had a serious medical condition tomorrow and needed several hundred thousand dollars to pay medical expenses, then I would have to sacrifice my home. I would be in exactly the same position as many thousands across the country!
Property prices across the USA are reportedly down by 30% from their highs in 2006. That figure varies from state to state. For example, in Florida where I am based, they are down in some areas by a whopping 55% whilst a colleague of mine in Las Vegas has told me of even greater price reduction there.
Great buys are everywhere. For example:
A 30% reduction on a quality property such as above represents great buying as the one sure thing about property is that historically, prices claw back and eventually exceed their last high. It’s all about supply and demand.
According to USA Today, “for the 12 months ending in March, 31% of Florida’s home sales were to foreign buyers up from 10% in 2007”.
They cite the example of Miami where overseas investors are flocking in to buy condominiums for rental purposes and fueling the property recovery there.
Foreign buyers are not new to the USA property market. They have represented a strong segment of the market for a very long time. However, the USA property market represents great value at the moment, hence the continuing demand from offshore buyers – 224,000 properties in 12 months – at a time when there is economic uncertainty everywhere.
This demand is fueled in part by investment advisers around the world who conduct regular seminars encouraging their clients to invest in USA property.
Plus of course, people still view the USA as the world’s leading nation, a great place to migrate or retire to. There are groups here who can assist foreign buyers get residency within 6 months and full citizenship within 5 years and many find that attractive.
Is strong foreign buyer demand a good thing?
This subject came up at a recent dinner party I attended and the universal response was YES as it:
- Stimulates demand and therefore helps to arrest prices now and, with time, will help drive prices upwards.
- This stimulated demand gives current home owners seeking to sell a guideline for setting their price should they decide to sell.
- Gives hope to those who are threatened by foreclosure as there are more potential buyers in the market.
- Properties are being sold rather than sitting vacant, thereby increasing the rental pool where demand is as strong as ever.
- It represents investment in the USA. At a time when the nations’ borrowings are at an enormous level, any investment is a good investment.
As a licensed realtor and consultant to a leading realtor group, I tender the following advice to:
- Non-forced sales: Avoid placing your property at too low a price for a quick sale. If you do, you will be the loser considering that the property market appears to be recovering due in part to strong demand by foreign buyers. (Salespeople in one office I frequent are currently each averaging 2 sales a week at fair prices which is as good as they were achieving back in 2007.)
- Under foreclosure threat: Take whatever action you can to protect your credit rating so you can easily start over again. That has to be your over-riding priority.
- Focus on quality property rather than price or what appears to be a bargain. Quality properties will always provide a better guarantee of rental plus, when the market turns, will appreciate more than low quality property.
- Beware what you are told in investment seminars. If the group has no on-the-ground representation, then they could be giving you bad advice.
- Deal with realtor groups rather than small independent offices so you can take advantage of exclusive property listings and generally better advice. .
The key to remember with property is that regardless of the current drop in property values, historically, prices always claw back and eventually exceed their last high.
If you are a buyer, then now is a great time to be in the market.
If you are a seller, then selling now at say a 30% lower price may sound terrible. However, it is OK if you are selling with a plan to re-enter the market as you will be buying at a similar discounted price as well.