US PROPERTY INVESTMENT MARKET UPDATE – JULY 2008

First Two Quarters Gone: Where Is The Current US Residential Real Estate Market?

The residential real estate market in the United States is one of the most complex of all, but it offers ideal opportunities for those looking for a way in. This is especially true in the current state of the market, where investing often means a low cost, affordable way to get into the profitable real estate market. Now that the first two quarters of 2008 have officially passed, the current state of the market should be analyzed, and it will show various degrees of opportunity for the investor.

What Are The Facts?

One of the most significant signs that the real estate market is an ideal investment at the current time is the simple fact that interest rates are so low here. The Federal Reserve of the United States decided at the beginning of the third quarter to leave interest rates unchanged for the coming months. This key lending rate is at 2 percent, and is the rate banks are charged to borrow from the Federal Reserve. It directly correlates to the amount that mortgage lenders charge their borrowers for mortgages. Therefore, most investors can expect to pay between 5 percent and 7 percent for mortgages interest rates. This is slightly lower than at the beginning of the year.

What about house values, investors who are looking for low house costs to buy into the market will find exactly what they are looking for throughout the United States. In locations such as Florida, California, Nevada, Michigan, Ohio and other states, the housing values have dropped to considerable lows. In some locations in the Midwest, all increases in value of the last four to five years has been wiped clean, leaving many of these property values very affordably priced. Some areas have seen record drops of 25 percent or more. This offers a key opportunity to the investor who is looking to break into the housing market here. Ideally, prices should be as low as possible in order to see a low capital outlay on the part of the investor.

These two factors alone have allowed for an ideal opportunity for those investors who are looking for a way in. Foreign investment in the United States real estate market is ideal because prices are low and should you get a mortgage through US lenders, your rates will be considerably lower than they were just six months to a year ago.

A Closer Look At What Foreign Investors Are Doing

The best way to know what is happening within the residential real estate market may be to look at how foreign investors are playing a role in it. The Annual Foreign Investors in Real Estate, also called AFIRE, produces what is called the Annual Foreign Investment Survey, which tracks all of the preferences of those who belong to the group. This is often important because the members of AFIRE own somewhere along the lines of $700 billion worth of real estate around the globe, of which $230 billion is located in the United States.

The survey gives a good look at what is happening in the United States residential real estate, especially where foreign investors are putting their money and why. Here are some of the most important details about this survey.

Where Are They Investing?

According to the survey, the top cities to invest in throughout the United States include:

• New York City
• Washington, DC
• Los Angeles
• San Francisco
• Seattle
• Las Vegas

Fifty-six percent of the votes showed that the United States was one of the best locations for investment based on the amount of stability and security that the country's real estate market offers. This is a very common situation, though, as the no country in the world has ever gotten close to this top spot in the past and the second most invested country is the Germany, with just 10.5 percent of the vote.

What About The Falling Dollar?

The value of the United States' dollar has always been somewhat of a troublesome consideration for many investors. With the dollar weakening, this means that foreign funds are worth more in the United States then they are in home countries. Here are some examples, at the time of this writing (June-July 2008.)

• 1 Euro = 1.565 United States' Dollars
• 1 United Kingdom Pound = 1.978 United States' Dollars

As you can see, investing foreign money into the United States' is even more affordable than before.

While this is evident, most investors will not invest just for this reason. Your foreign money does mean more buying power in the United States, but this often only translates in terms of consumer goods. While many real estate investors will not buy property in the United States just for this reason, many still see this drop in the value of the dollar to be an opportunity for benefit.

The Future: A Look Ahead

The situation of the first two quarters of 2008 seems to be an ideal opportunity for those looking for an investment in the real estate market in the United States. However, what does the future hold?

While the current situation in the United States looks promising for the investors who are looking to get into it, the future may even look brighter. Here are some of the reasons why now is the best time to buy into the market.

• Interest rates are likely to start moving up. The Federal Reserve will need to start making some adjustments upwards to the interest rates charged to banks due in part to the worries of inflation. While they remain steadfast in the fight against inflation, there are signs of growth. The best route to slowing inflation is to increase interest rates. Therefore, you can count on the interest rates charged to borrowers to increase by the end of the year, most economists believe.
• The housing market is strengthening. Those who are homebuyers that have been on the fence about investing because they are waiting for the market to hit its lowest point are buying. This is a clear sign that inventory numbers will drop as more people buy into the market. For the foreign investor, this means that house flipping may become more of an opportunity by the end of the year (especially if the market continues to strengthen and sales are being made.) Currently, we are still in a buyer's market.
• Many housing markets are doing very well, spurred by the drop in housing prices. More people are interested in buying into these markets because they know prices are low.
• More people will qualify for loans in the next year, especially if Congress passes the housing bills working their way through the process. The key here is that more buyers will be available to buy property foreign investors are looking to sell.

In short, is now the time to buy real estate in the United State's market? It is because the current situation is rock bottom. The only place for property values to go and they will do so, is up. You want to be part of that growth because it allows you the opportunities to expand.

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