Norada Real Estate Investments

Benefits of US Property for International Investors

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flags_globe[1]For many individuals, the single largest “investment” of their lives will usually be their home, as opposed to investing stock, bonds, mutual funds or certificates of deposits (CD’s). This is because purchasing real estate is less risky than investing in the stock market and can be more rewarding than changing CD interest rates.

US investment property has been enticing foreign investors since the 1970s, and has become extremely attractive since 2008 based on the weakening of the US dollar.  Many financial institutions in this country are reluctant, if not somewhat skeptical, of providing mortgages to foreign investors who want to finance real property here in the US.

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The Housing Bust is Over

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“The bursting of the global housing bubble is only halfway through,” The Economist magazine wrote recently.

I disagree…

Here in the U.S. at least, the housing bubble is completely over.

It drives me nuts when I hear commentators say, “We're halfway through,” and, “We have more pain to come.”

The fact is, right now, houses in America are the best value they've been in many generations. It's not hard to understand…

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The Asset Class of Single-Family Real Estate

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If there’s one thing that Morgan Stanley would like to advise to you, it’s to take a look at single-family homes and consider it as part of your real estate investing strategy.

That’s right, these properties have become hot among real estate investors recently considering the shift in the US property market from home ownership to rentals (or as Morgan Stanley puts it, a “renter-heavy society”). It’s exactly the new real estate paradigm!  Even Bank of America and the Federal Housing Finance Agency have sought measures to reduce the impact of mortgage delinquency by working on an REO rental program for its underwater borrowers.

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The New Rental Real Estate Paradigm

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Morgan Stanley Research released its latest real estate report, Housing 2.0: The New Rental Paradigm to provide market insights to investors. It’s interesting to know that the research team observes how more Americans have become renters instead of homeowners, attributing to different factors in the economy.

The report states:

Across the country, more Americans are becoming home renters, and fewer Americans are becoming homeowners. The beginning of the rentership society is upon us. But all renters are not equal – of the roughly 40MM rental housing units in the country (representing roughly $6 trillion in asset value), about half are multi-family and half are single- family.

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National Economic Outlook (December 2011)

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Although the overall health of the economy is of interest to everyone, if you're a banker you particularly want to know when people will start borrowing money again.

Very roughly speaking, banks typically hold equal amounts of commercial loans, commercial real estate loans, home mortgages, consumer loans, government securities, and cash. With commercial, mortgage, and consumer lending sharply lower in the last few years, banks now hold more government securities and a lot more cash, both of which don't produce much income.

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Freddie Mac Needs 15 Years to Unload All REO Inventory

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Sales of Freddie Mac REO homes took a dip in 3Q11 compared to the first two quarters of the year as nonperforming loans surged consistently over the previous quarter.

The number of repossessed homes plunged to 25,300, falling by 13.5% quarter-on-quarter (q-o-q) or approximately 30,000 units in 3Q11. REO sales also stumbled from 31,600 in 1Q11, the highest number recorded in the government sponsored enterprise’s (GSE) history.

In 3Q11, Freddie Mac thrust back 24,300 homes into its current inventory while disposing 25,300 REO properties at the same time. At the end of the quarter, the mortgage capital provider has already accumulated 60,000 REO properties on its books, down by 25 percent year-on-year (y-o-y) as a result of newly completed foreclosures.

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What Can Foreign Investors Teach Us About Our Own Country?

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You’ve seen the headlines. The combination of lower prices, increased rents and a weak dollar are drawing investor capital from all around the globe and funneling it into American housing.  According to NAR, foreign investment is US real estate has increased by 20% in the 12 months ending march 2011, totaling $82 billion in just one year. What’s missing in most of these stories is why.

Why are overseas real estate investors, who are standing thousands of miles away with little if any personal experience in US real estate, pouncing on this opportunity? Low prices and great exchange rates don’t explain it. If you hear of a stock that has plummeted, would you buy it based on that fact alone? Or would you want to understand the fundamentals of the company behind the stock. What do they produce? Who are their customers? Why should you believe this investment will pay off, as opposed to seeing the new low price as an accurate reflection of the value of the company? In other words, if it’s a piece of junk, you wouldn’t care how cheap it is.

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2012 Housing Market Forecast

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The question most real estate investors often ask is, “Where do I invest now?”

As always, there are local housing markets around the country where homes are affordable, the underlying economy is strong, and appreciation is imminent.  These are markets you should consider for your next long-term real estate investment.

Norada Real Estate Investments tracks the economic conditions and real estate trends of nearly 400 markets across the country.  Because of the dynamic nature of real estate market conditions, we continually monitor and rank the top markets to make it easier for you, as an investor, to concentrate on the areas that will give you the greatest opportunity for success.

While you might be inclined to look for bargains in areas that have seen the largest price corrections in the past, watch out – there is no guarantee that home prices in areas of high speculation will ever rebound to boom levels.

Unlike the stock market, local real estate markets usually move in slow, predictable cycles. Appreciation is not luck or magic. It correlates closely with economic development and population growth in a local market.

If you missed out on Phoenix, Vegas and Florida (or if you rode those waves and know what it's about), download the current issue of our free report.

Download your free copy of the 2012 Housing Market Forecast Today!

Real Estate Resurgence Could Mark Early Months of 2012

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In the third quarter of 2011, nationwide statistics from the real estate market have revealed numerous indicators that multiple markets may hit a resurgence in the early months of 2012. Home building projects have increased, as well as mortgage applications with rates lowering.

States across middle America have proved to be retaining the strongest numbers as areas such as Texas and Oklahoma cities have continued to stay afloat with job creation. Not all markets are hitting a full rebound; instead they are achieving small improvements in different categories that have an influence over the total market.

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The New Real Estate Boom

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Home prices and sales may be flat, but the rental industry is booming. The percentage of renters is on the rise, the number of households is increasing, and more Americans are downsizing, all of which point in a single direction: rents are on the rise.

At the peak of the housing boom, home ownership in America reached an all-time high at 69.2%. Today that number has plummeted to fewer than 67%, which may not sound like a huge drop, but that represents roughly 3 million households that were owner-occupied and are now tenant-occupied.

The high foreclosure rate has accelerated the transition toward leasing, but there are a myriad of other trends coalescing to boost demand for rental housing.

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