Encouraging news for any clients thinking of investing in US property – there’s more evidence that the housing market is on the mend at last.
According to data analysis firm CoreLogic, home prices jumped by 9.7 per cent in January compared with 2012, and are on track for similar increases in February.
The January increase is actually the biggest year-over-year rise in over six years and the 11th straight monthly increase so far, helping to cement expectation that the housing market is finally on the mend – albeit at a slower pace during other recoveries – after the 2007-09 financial crisis and recession sent house prices crashing.
Growth was so broad in January that only Delaware and Illinois reported any price drops, and those were minimal at 0.1 and 0.4 percent respectively.
Prices showed “strong growth during the typically slow winter season,” says Mark Fleming, Corelogic economist. “With these gains, the housing market is poised to enter the spring selling season on sound footing.”
As many as 22 states experienced price increases of 6 percent or more in January compared with last year, with Arizona and Idaho experiencing particularly impressive rises, at 20 percent and 17.4 percent respectively, while California rose by 14.1 per cent.
The states with the fastest home price appreciation are largely those where the housing downturn hit the worst. They are also markets where the supply of homes for sale has tightened rapidly in the past year given increased demand and fewer foreclosures.
Alongside this positive data, home price surveys are also demonstrating a strong trend of increases. In fact, with all these gains, 14 states as well as D.C. are now within 10 percent of their peaks prior to the housing market crash. They included the Western leaders but also states such as Michigan, West Virginia, Vermont, Virginia and South Carolina.
Numerous home price surveys are showing strong price gains – for example, the Standard & Poor’s Case-Shiller index shows that prices were up by 7.3 per cent last year.
Another sign of the US property market recovering is the latest demand for rentals in South Florida. According to the Miami Herald, tenants are leasing more residential properties at a higher median rental rate than at any time in at least the last five years.
In 2012, tenants leased an average of 200 properties a day in Miami-Dade, Broward and Palm Beach counties at a median rental rate of more than $1,200 monthly for a 1,000-square-foot residence.
This represents a year-on-year increase of about 10 percent compared with 2011 when tenants leased an average of 182 residential properties in South Florida. In previous years, tenants leased an average of 168 properties per day in 2010 and 157 properties daily in 2009 in the tri-county region, according to an analysis of rental properties listed in the Southeast Florida MLXchange.
While this is all very encouraging, there’s the question and about how easy, or otherwise, it is to secure finance for the purchase of a property across the pond.
The mortgage market has changed significantly over recent years and although financing the purchase of a property there is not as easy as it used to be, it’s certainly not impossible, especially if someone has a healthy deposit to put down.
There are, in theory, no restrictions to foreign nationals owning property in the USA and mortgages are available for purchases up to 65 per cent of the property’s value depending on the state in which the property is located. Most are on a repayment basis, and interest rates and loan terms tend to vary depending on the property type and exact location. Total mortgage payments and other financial commitments must not exceed 38 per cent of a buyer’s gross monthly income.
Deals currently range from 3.75 per cent for a three year fixed rate, 4 per cent for a five year fixed rate, and 5.50 per cent for a long term (30 year) fixed rate. These mortgages have no early redemption penalties so lump sums may be paid off the balance at any time without incurring a penalty.
Conti continues to get a lot of interest from prospective investors who are thinking of buying a property across the pond. Top of the list is Florida, where property prices have fallen dramatically over the last few years. And if property is within easy travelling distance of the famous theme parks, year-round rental opportunities are good too.
It may be a good time to buy property in the USA, but as always, it’s imperative to take professional advice before making any decisions. Prospective buyers should always go through the same process that they would follow if they were buying a property in the UK, and this includes consulting a good independent lawyer, and ensuring that an independent valuation of the property takes place, even if it’s a cash purchase.
For more information regarding mortgages in the USA, contact Conti, the overseas mortgage specialist, on 0800 970 0985 or visit www.mortgagesoverseas.com