Assetz® News - New signs of green shoots for US investors?

New signs of green shoots for US investors?

20th August 2009 |

For property investors in the US, the last couple of years have often had very little to do with mortgages. Those who have been best placed to do well have had the money to act as cash buyers, picking up distressed property and foreclosed bargains at auctions.

This has been a highly profitable route for some, not least because the worst-hit locations for foreclosures have tended to be places popular with tourists, such as Florida, California and Las Vegas. All of this may interest those thinking of tourist rentals, as well as expats who fancy a place in the sun somewhere fashionable.

However, with many hints that the US economy is starting to display green shoots and will soon be out of recession, investors may be keen to see evidence not just that a damaged market can offer bargains, but that the sector is starting to pick up.

In the UK, this process has emerged in the past few months with mortgage lending increasing again, albeit from a low base. This has happened as other indicators have shown higher demand for housing and, recently, increased prices.

Should investors be interested in seeing signs that mortgage lending is on the up, then they have had it provided this week by the Mortgage Bankers Association. The organisation's weekly mortgage applications survey for the seven days to August 14th revealed a seasonally-adjusted 5.6 per cent rise on the previous week. On an unadjusted basis this was 4.8 per cent. Moreover, lest one week's figures be regarded as too short a time to hint at any definite trend, the tally was 25 per cent up on the same week in 2008.

Of course, there is a school of thought that the homeowner loan approvals total is not necessarily a key indicator of market revival at all. Such a view was expressed by the president of real estate portal Foreclosure.com Brad Geisen. For him, price is the most important issue.

He stated: "During the housing boom, a lot of first-time home buyers were squeezed out of the market, but now property values have come down enough where they can afford it."

Of course, lower prices are a factor that will attract many buyers, be they first-timers or investors, but the outcome of a healthy market will in time be a rise in prices, with the very low prices that could attract back the buyers pushing values up again as demand rises.

Against this, of course, the most recent Realtytrac figures showed that during July foreclosures were seven per cent up on June and 32 per cent above July 2008 levels, with 360,149 US properties receiving at least one filing during the month.

All of this may suggest that prices in the US may stay down for some time, due to the availability of such knock-down bargains. But if people who cannot afford to buy in cash are increasingly able to purchase through the normal routes, this would suggest that the market is starting to normalise at least a little. For investors, this could bring the reassurance that the kind of market in which long-term stability and gains in value are likely is starting to emerge.