Thanks to mass media generalisations about the state of the property market in America we are left thinking that the entire US real estate market is in meltdown and that it represents a toxic investment opportunity to overseas investors at the current time. However, as the following facts and information will show, the truth about the American property market could not be further from this misconception.
In a bid to present as accurate and balanced a perspective of the property market in the United States as possible, we called on the expertise of both Robert Shemin, the multi millionaire American real estate investment guru, and Danny Silver, Managing Director of Property Direct America, US property experts to help us dispel the top 10 myths about the US housing market.
Myth 1: The entire US is experiencing a property slump
Not true, says Robert Shemin, there are pockets of the American housing market experiencing growth: “Look for markets that are growing – growing with jobs, that have growing economies and that are growing with population. Take a look at Utah, Alabama, Texas – all states that are growing because they have emerging economies. This equals property value growth, it equals a huge need for rentals, it equals higher rents! Then you have states like Mississippi that has all of the above and more. After Hurricane Katrina, less than 24 percent of Mississippi’s housing stock was habitable – this represents opportunity.”
Myth 2: Subprime has affected the entire market
According to Robert: “The sub prime market has dried up and gone away due to the amount of sub prime loans that have defaulted.” Looking to the longer term this will result in more mature lending practices in a market and it will result in greater numbers of potential tenants because those considered sub prime will not be in a position to buy, only to rent housing stock.
Myth 3: Vulnerable people are being forced to sell their homes because they can’t afford their mortgage repayments
Our real estate guru Robert Shemin sums up the situation: “in years gone by getting a mortgage was credit driven, then somebody had the bright idea, ‘let’s make some big money by offering mortgages to people who were not credit worthy enough to get a mortgage the traditional way,’ thus the sub prime boom was born. They put so many people who couldn’t afford house payments into homes that they never should have in the first place, assuming that real estate would keep going up. If real estate had continued to rise at the rate it was going, everything would have been fine – except the market experienced a slow down which created a snowball effect which caused the market to collapse. Because the values tripled in some areas, the taxes naturally rose to those same levels, making it even harder on homeowners who could barely afford where they lived in the first place to continue to afford the homes they lived in.” Now these people represent waiting tenant demand for would-be property investors.
Myth 4: Mortgage financing is no longer available
Danny Silver sets the record straight: “Mortgage financing is certainly harder to come by than it was at the peak of the lending boom, however not only are those who are in a strong position to purchase welcomed by mortgage lenders, in states like Mississippi where the public and private sector are working side by side to rebuild sufficient property stock and get it inhabited by the waiting tenant demand, we have cases where guaranteed mortgages are available to the right buyers. Our Bayside Park project in Hancock County, Mississippi is one such development that’s considered so strong an opportunity that we have up to 90 percent LTV mortgages available.”
Myth 5: The government is doing nothing to help the situation
Again, according to Danny Silver this is just not the case. He cites the situation in the Gulf Opportunity Zone (GO Zone) where the government has done and is continuing to do all it can to rebuild the communities affected by Hurricane Katrina. “In the Bayside community over 70 percent of all housing was wiped out due to Hurricane Katrina in 2005. Yet the jobs are still in the area and the citizens of Mississippi, families that have been the community for generations, are still in the area, it’s just the lack of housing that’s hurting folks which is why the government provides governmental and taxation incentives to encourage individual and corporate investment into the area.” Robert Shemin concurs: “after Hurricane Katrina our government had no choice but to get involved, it was a natural disaster. The state of Mississippi along with The United States government got involved and created huge benefits for small investors to come in and help regenerate the communities devastated by Hurricane Katrina, giving them previously unheard of tax incentives as well as financial incentives to get involved with helping people who could not help themselves. As a result a unique real estate investment opportunity now exists in the state.”
Myth 6: The US is in recession and will be for some time
According to Robert Shemin we actually need to get things in perspective here: “Less than 50 percent of all Americans own the homes they live in – most are rental tenants. Yes foreclosure rates have risen, yet the levels they have reached accounts for less than two percent of all properties in the United States. This is not a recession. As stated, there are markets where there is strong opportunity – an investor simply has to target those markets! It’s not rocket science.”
Myth 7: Florida, for example, has vast oversupply of property
True, parts of Florida’s market have suffered from oversupply and the greed of constructors, but front line and high end homes are still selling for top dollar – in fact, Florida is a perfect example of what Robert Shemin has been illustrating. Parts of the market are flat, parts are thriving still. An investor just has to look at where demand exists and why it is likely to still exist, and it is in these areas that there are opportunities to profit. “Florida is becoming a great buyer’s market and folks are starting to realise it.” So says Robert Shemin.
Myth 8: There is nothing in America for overseas property investors currently
As Danny Silver points out: “As just one example of the massive property investment opportunity that exists in pockets of America for overseas buyers, the greater Harrison and Hancock county areas of Mississippi are booming and will continue to boom because of the strong need for good quality rental housing for hard working Americans. To say there is nothing in America for overseas investors overlooks this fact, it overlooks the financial and taxation incentives in place to buy in the GO Zone, and it overlooks the fact that there are areas of the United States where, as Robert mentioned, booming economies and jobs markets are emerging.”
Myth 9: With the global credit crunch, now is not the time to be buying property abroad
In recent days the pound has fallen against the dollar – while it is still in a strong buying position Stateside, it still highlights the fact that America is far from down and out! Buyers who are aware of this fact will also be aware that they can move quickly at this point, buy in America when the American economy is starting the long, slow process of recovery, benefit from depressed property prices, a weaker dollar, continued and continuous demand for real estate and a potentially very long period of positive property price adjustment. For many, now is actually the perfect time to buy and in the words of Robert Shemin: “I always say get in way below market and don’t try and guess the market. No matter what it’s doing you can make money if you make good deals – it’s the deals that make you the money! And at the moment, with all due respect, the media is talking down the market and you have a lot of motivated sellers out there. When sellers are keen to sell it’s a great time to buy!”
Myth 10: Taxes in the US are high and complicated
Taxes vary from state to state and a buyer has to factor these in to any buying decision, or, as Danny Silver points out: “You could just save yourself the headache of taxation and buy in the GO Zone and benefit from tax breaks and governmental financial incentives to invest!”
Property Direct America has a development available for sale to overseas investors that qualifies for all the Gulf Opportunity Zone taxation and fiscal incentives and benefits, what’s more, investors have access to up to 90 percent LTV mortgages. The development in question is of energy efficient, eco friendly family homes designed specifically to house the massive waiting tenant demand that exists in the state of Mississippi following the destruction of Hurricane Katrina. The properties are steel framed homes consisting of four bedrooms and two bathrooms, individual entry into the market is as low as £87,000/$169,900.
