Linz’s Blog – 5 Reasons Why a ‘Perfect Storm’ is Brewing in the US Residential Property Market

We have finally come to the end of 2020 – a memorable beginning of a new decade… just not in the ways we anticipated.

People can’t seem to decide whether the year has gone too slowly or too quickly. Many seem to have lost their sense of time, but can we really blame them?

Because of the COVID-19 outbreak, millions of people have lost their jobs, and the restrictions put in place have caused a massive change in our lifestyles.

So for a majority of workers, progress for both personal and career plans had since been put on hold.

It was not long ago that we were told that the current global recession will be the deepest since World War II, and with how fast the downturn happened, we had no reason to doubt that. 

Understandably, many still fear taking great leaps to build their wealth. Making big career and financial choices involves a level of risk, which perceivably look much higher given the circumstances we’re in today.

Potential investors are backing out of their plans and waiting for the global economy to return to its previous peak. However, forecasts say that this won’t happen until late 2022.

But wait, don’t go yet! There’s good news.

The situation is different in US real estate. The market has been doing a lot better than expected, and it’s forecast to bounce back at the beginning of 2021 and be even more positive as we enter 2022.

With the US residential market booming, economic indicators are showing that there has never been a better time to invest in US property.

So if you were waiting for an opportunity amidst the economic slump, now’s your chance.

5 reasons why investors should capitalise on the US property market  

Many will tell you that you can’t do much to propel yourself to success given the pandemic and its effects, but the data speaks for itself.

US property investors should be confident heading into 2021, and here’s why:

1. Despite economic conditions, the US residential market is booming

It’s an unfortunate fact that many industries have been suffering since the start of the global lockdown.

Hundreds of thousands of businesses had to temporarily shut down and it will take many more months (or even years) for most of them to recover from this recession.

In the face of tough economic times, opportunities may be limited, but it’s counterproductive to assume that they don’t exist at all.

Because these opportunities ought to be taken, especially if they’re as big as what the US residential market presents.

Despite the economic downturn, real estate in the US is booming. And no, we’re not exaggerating at all. 

Prices for houses across the US demonstrated the fifth-largest gain in nearly 25 years, and is the strongest in 15 years, which is greatly advantageous to sellers.

A September report showed that US home prices rose by 7.8% in the past year, which is the fastest climb in over a decade. Furthermore, the typical U.S. home appreciated by 1% in October alone, to USD $262,604, which was the best monthly gain since 2005. 

Economist Jeff Tucker says that the market is seeing some of the fastest price appreciation in the modern era. “I don’t think this pace of appreciation can go on forever. It’s just too hot,” Tucker says.

By November, the total active listings were down 39% for the fourth consecutive week, keeping the prices up.

And this ‘head of steam’ is being seen in the New Year now as well.

This is a massive opportunity for investors for Australia and New Zealand, considering how our property prices are becoming way too expensive for people to even step into the market.

 

2. Record-low interest rates

An interest rate is the percentage of the amount of money loaned which is charged by the lender for the use of its money.

The bank applies this interest rate to the total unpaid portion of your loan, which you should pay in each compounding period. Otherwise, your outstanding debt will increase despite making payments.

In a nutshell, the lower the interest rates are, the better. 

And right now, US interest rates are at a record low, incentivising buyers to find homes faster, keeping the demand high, and therefore keeping the prices high too.

As someone looking to invest, this means that you don’t have to worry much about paying high interest rates. And as a property seller, this means that there will be more people looking to buy homes (i.e. more potential buyers of your property).

According to the Federal Reserve, this near-zero interest rate will remain until the economy starts to recover from the virus, giving investors all the more reasons to act now.

 

3. Best exchange rate for the Australian and New Zealand dollar compared to the US dollar in more than two years 

The low interest rates, the booming real estate market, and the significantly lower prices of property in the US compared to Australia and New Zealand – you’d think these are all the perks you need to invest, but it turns out, there’s more.

Due to the recession, the exchange rate between the three countries is now very strong. The value of the US dollar has plunged in 2020, and according to forecasts, there will be a bigger decline in the coming year.

This means that you can exchange and spend less of your Australian/New Zealand dollars to buy in the US, which saves you a lot of money, especially for huge purchases like property.

 

4.Stimulus packages in the US and Australia 

According to Investopedia, a stimulus package is “a coordinated effort to increase government spending—and lower taxes and interest rates—in order to stimulate an economy out of a recession or depression.”

The government does this by boosting employment, consumer spending, and investment.

Currently, the Australian government is using AUD $17.6 billion to support up to 6.5 million individuals to keep their jobs and 3.5 million businesses to keep running during the pandemic-triggered recession.

Meanwhile, the US government has approved a new proposal of stimulus packages for their economy as well that numbers in the Trillions of dollars…

 

5. COVID vaccines being rolled out 

Scientists have been working tirelessly on a vaccine since the start of the pandemic which fortunately led to a success.

The Pfizer/BioNtech vaccine is reported to be 95% effective, and 43,000 people have had the vaccine with no safety concerns. Australia is expected to roll out vaccines by March 2021, while the US has started to rollout vaccinations.

This means that we are getting closer and closer to returning our world to as close to normal as we can get.

Having these vaccinations rolled out will boost the confidence of Australians and Americans alike, reducing the fear and stress brought about by the pandemic.

For the US residential market, this means that more people will start buying property again, so you need to be ready to sell by then.

The world’s circumstances have given all of us a reason to fear taking risks and making big decisions. But this doesn’t mean that we should do nothing and simply let time pass us by.

Despite the pandemic and the recession it has led to, there are still many growth opportunities out there – we just need to look in the right places.

The US property market has barely been affected by the COVID-19 situation. In fact, the market is booming and things are looking more positive in the next few years. 

So when the ‘fog of war’ lifts, there will be an abundance of opportunities investors can capitalise on. 

Will you be ready to take advantage of them? 

 

2 replies

Trackbacks & Pingbacks

  1. […] Last year, the US housing market’s combined value hit $43.4 trillion AUD, which is almost as much as the combined GDP of the two largest global economies: the US and China. And, unaffected by the current economic conditions caused by the global pandemic, the U.S. residential property market is seeing some of the fastest price appreciation in recent years. […]

  2. […] are wise enough are putting that money into purchasing properties. For foreign investors, this shows why now is the right time to capitalise on the U.S housing market, as higher spending will allow it to recover faster, and property value will then […]

Comments are closed.