America’s property markets are sinking

I hope you’re not thinking about investing in US property!

I find it interesting that there are still local promoters recommending buying US property at a time when the American property markets are sinking.

Now I recognize that there is not one “US property market”, but with news of more than 1 in 4 homeowners now ‘underwater’ and with the rate of new foreclosures up to over 10% a month, I wouldn’t be putting my money into US real estate.

Here’s why… Nearly 30 percent of American homeowners owe more on their mortgages than their homes are worth, according to a new report from the real estate website Zillow.

Analysts are suggesting that defaults and foreclosures are likely to increase as homeowners decide to walk away from their houses, rather than continuing to make mortgage payments on property they can’t sell or refinance.

Forecloses are already twice what they were this time last year and the number of homeowners who haven’t made a mortgage payment in at least two months rose for the first time since 2009.

‘We’re in uncharted waters. More than one in four homes underwater and about 9 percent unemployment is a recipe for more foreclosures,’ Zillow chief economist Stan Humphries told MSNBC.com.

The increase in the number of houses underwater – from 21 to 23 percent a year ago – is the result of a backlog in foreclosures, Humphries said.

The rate that mortgage holders were late with their payments by 60 days or more also rose. In the June-to-September period, it increased for the first time since the last three months of 2009, according to TransUnion.

Obviously there are many markets in the US and some areas of the country have been hit harder than others. In Phoenix, almost two-thirds of homes are underwater. Atlanta, Riverside, Calif., Tampa and Sacramento all have more homes under the water line than above it.

Prices could drop a further 10%.

The higher foreclosure rates mean more houses on the market and U.S. housing prices will probably fall another 10 percent before stabilizing, according to Fitch Ratings.

Sure properties in the US looks cheap but are they good value?

I think it was Warren Buffet who said- “Price is what you pay – value is what you get.”

If you want some idea of what’s happening in the US economy check out this blog where I quote 50 Amazing Numbers about the US Economy.

I’ve given my thoughts on why not to invest in the US in a previous blog.

There are much better investment opportunities back home.



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Michael Yardney

About

Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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