Linz’s Musings – What the U.S. market looks like for 2024

G’day all

One tenth of the year gone already, and I hope you are all off to a fantastic start!  If not, don’t panic, plenty of time yet, but how quickly is this year moving already?

I was listening to a great podcast last week from a very experienced Economist in the U.S. – Rick Sharga.  If you have not heard of him, Rick is the Founder & CEO of CJ Patrick Company, a market intelligence and business advisory firm that operates in the real estate, financial services, and technology space.

Rick is of the country’s most frequently quoted sources on real estate, mortgage and foreclosure trends, and has appeared regularly over the past 20 years on CNBC, the CBS Evening News, NBC Nightly News, CNN, ABC World News, FOX, Bloomberg and many others.

He is regularly my ‘go-to’ for all things U.S. economy and I follow him where I can to help cut through the media smoke screen.

I wanted to give a quick recap of his market predictions for 2024, a quick synopsis if you will, but if you want to listen to the full episode, email us and we can provide links.

So, firstly some market stats…

For the Q4 drivers announced early Feb, the GDP for the U.S. came in at 3.3% which was up 1% on forecast.  For reference for the same period, our GDP here in Australia came in at 0.2% (interesting from a population perspective, with immigration accounting for 0.6% this shows a negative GDP per capita for the past 3 quarters)

U.S. unemployment rate was steady at 3.8%, another interesting stat, given that in the States, full employment is deemed to be around 5%.  There are currently 8.8 million jobs available with 6 million workers looking for work, so very tight job market.

Wage growth is also strong at 5% and average hourly rate up to $29 now, as a national average.

These are the main drivers we look for, and particularly with the U.S. being such a highly capitalist society, GDP, unemployment and wages growth are key indications to show economic strength and unemployment numbers can often directly impact the housing market (more so that interest rates in the U.S.)

Predictions for 2024 is it seems to be quite a resilient economy with the doom and gloom of recession that has been forecast in media still not in sight.  Lots of fear, uncertainty and doubt (FUD) being forecast via media outlets though, with no hard data to back up any of that.

Still very low inventory on market for residential, with numbers approximately 1.3 million homes on market, still way down from 2019 numbers of almost 2.5 million (healthy market can be as high as 1% or approximately 3 million).  This low inventory market is predicted to hold until interest rates come down to sub 5% levels.

Home foreclosure activity is still over 30% down on 2019 numbers.  Predicted to possibly rise a little (between 5-10%) but still way down on pre pandemic numbers.  This may though, lead to great opportunities for buyers at a pre-foreclosure level.

 

So all in all, we are looking at a steady, if not, quite resilient market for this coming year, with interest rates still predicted to see some cuts towards the 2nd or 3rd quarters.  Some excellent opportunities though for investors, and particularly for us as foreign investors, I think it will still be a good year for diversifying with our AU economy here looking quite sluggish.

For those that follow the RBA, it was interesting this month (Feb 2024) to see the RBA board still quite hawkish on rates, and while the decision was made to hold, the press conference and minutes showed that another rise was on the table…

This is quite the opposite of what economists thought, with quite a dovish sentiment, with expected rate cuts to come in the next medium term.

The RBA is now aligning its meetings to more imitate what the U.S. Fed does, with meetings now each 7-8 weeks instead of previously monthly.  The meetings will be longer (around 2 days) with press conference and minutes release afterwards.

For us, this means only around 7 meetings per year for the RBA now, rather than the previous 10-11 per year.

 

If our full market analysis is something that might be of interest, and you are not already subscribed to us for these updates, click on the link below to subscribe and have these updates sent to you directly via email!  We also have a Facebook group where we share a lot of this as well and do video updates etc

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The Best Way To Diversify Your Portfolio with Overseas Investments

Diversification is an essential strategy for any investor looking to reduce risk and maximize returns. One way to diversify a property portfolio is by investing in international property. However, investing in property overseas can be a complex process that requires careful consideration and planning.

 

There are a few things that we always recommend doing before looking into a new market. These are just light touchpoints, but we go into a lot of detail over this and more in our exclusive Cashflow Catalyst Program.

 

Now, it’s important to also state, there are many other complexities that you need to consider such as language barriers, currency and legal frameworks. Something we chat about in another blog.

 

Conduct Thorough Research

The first step in diversifying a portfolio with overseas property investments is to conduct thorough research. This includes researching different countries and regions, property markets, and potential risks and rewards. Investors should also research local laws, regulations, and tax implications to ensure compliance and avoid potential legal issues.

 

Choose the Right Location

Choosing the right location is crucial when investing in overseas property. Investors should consider factors such as political stability, economic conditions, and local property market trends. They should also consider factors such as language barriers, cultural differences, and the ease of doing business in the country.

 

Consider Different Types of Property

Investors should also consider different types of property when diversifying their portfolio with overseas property investments. This includes residential, commercial, and industrial properties. Each type of property comes with its own set of risks and rewards, so investors should consider their investment goals and risk tolerance when selecting a property type.

 

Hire a Local Property Manager or Realtor

Investing in overseas property requires a significant amount of time and effort, especially when it comes to property management. Hiring a local property expert can help investors overcome language barriers, cultural differences, and legal issues. A local property manager or real estate agent can also provide valuable insights into the local property market and help investors make informed investment decisions.

 

Consider Exchange Rates

Exchange rates can significantly impact the return on investment when investing in overseas property. Investors should consider the potential impact of currency fluctuations and the cost of transferring funds when investing in foreign currency.  There are ways to help mitigate this risk though too!

 

Seek Professional Advice

Investing in overseas property is a complex process that requires careful planning and execution. Seeking professional advice from a financial advisor, lawyer, or real estate agent can help investors make informed investment decisions and avoid potential pitfalls.

 

Get a Mentor

The easiest way to learn how to invest in an international market is to talk to someone who has done it successfully.   So many traps and pitfalls can be avoided by learning from those that have already got through those hurdles.  We specialize in the U.S. residential market, so learning from our mistakes can help you avoid making them yourself.

 

Diversifying a portfolio with overseas property investments requires careful consideration and planning. If you want to discuss this further and see how we can help you – set up a free chat with the team today.

 

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Linz’s Musings – Sydney Property Investment Expo Wrap up

It was great to meet everyone that came down to the Sydney property Investment Expo last weekend, and there was lots of interest in the U.S. market as an option for strong, balanced portfolios.
While we were not the only international option at the Expo (anyone want a Dubai property? Entry costs only $850K USD but does give option to live there!) we were certainly popular with many investors not realising the U.S. market is an option or did not know its strengths.
One of the key focus areas right now, from talking to many investors at the Expo, seems to be cashflow.
Many investors are really hurting now with the meteoric rise in interest rates in Australia. While 3.85% is certainly not a ‘high’ rate, to have gone from virtually zero, to almost 4% in the space of 12 months is almost unheard of in pace.
AND, it appears the RBA will likely look to rise again next Tuesday…
Coupled with the false promise from the RBA back, not 2 years ago, that interest rates would not rise until at least 2024, here we are with round 11 rises in 12 months, and there still seems to be no respite for homeowners or investors alike.
Some investors took the RBA at its word and have purchased investments a little out of reach, or over leveraged, with the incredibly low rates at the time, which has now come back to bite.
Even the savvy investors, who may have had positive yield properties are now finding these properties moving into negative territory. Combined with possibly other negatively geared properties in the portfolios, many investors are finding they are also out of serviceability due to the cashflow impact, and therefore unable to refinance to a better rate, or interest only payments right now.
This is hurting.
While the past 3-5 years in Australia has all been about equity (how much is my portfolio worth; how much growth have I seen in my properties) the current economic investment climate is now all about CASHFLOW.
While I cannot see that properties here will not continue to rise, most economists are also suggesting the RBA isn’t done yet with rate rises either, so this may yet get worse before it gets better.
So, the answer?
Cashflow.
It has become more and more imperative to ensure your portfolio is balanced with cashflowing properties as well as growth properties. The cashflow then allows for support to help fund the additional costs now seen on the growth properties, and/or possibly allows for higher serviceability to enable refinance of the growth properties to interest only payments for the short term to help offset the rising costs.
The U.S. market is one of the best options I have found for high cashflow rentals. Yields of over 10% net after costs, is common and multifamily properties can often even perform better.
With low entry costs, and high yields, to balance out an equity portfolio, the U.S. residential market is perfect.
Interested in looking at high yield, positive cashflow? Hit me up!

Common risks for Aussies investing in international property market

Diversification is a key to reducing your investment portfolio risk in the hopes of increasing your overall profits. It’s common for Australians to invest in the domestic market but the idea of international can often be daunting.

 

Investing in international property markets comes with unique risks that can affect the performance of an investment. Let’s explore some common risks that Australians should be aware of when investing in the international property market.

Currency Fluctuations

One of the most significant risks of investing in international property is currency fluctuations. When investing in foreign property, Australians must convert their money into the local currency of the country they are investing in. If the value of the Australian dollar decreases against the local currency, this can negatively affect the return on investment.

 

Legal and Regulatory Risks

Every country has its own legal and regulatory framework, which can differ significantly from those in Australia. This can make it challenging for Australians to understand and navigate the legal and regulatory requirements of investing in foreign property. Failure to comply with local regulations can result in fines or legal disputes that can negatively impact the investment.

 

Political Risk

Investing in foreign property also comes with political risks. Political instability or changes in government policies can impact property values, rental yields, and the overall performance of an investment. Australians investing in international property must keep a close eye on political developments in the countries they are investing in.

 

Market Volatility

Like any investment, international property values can fluctuate based on market conditions. Changes in supply and demand, interest rates, and economic conditions can all impact property values and rental yields. Australians must conduct thorough research and due diligence before investing in foreign property to understand market trends and potential risks.

 

Property Management Risks

Investing in international property also comes with property management risks. If the investor is not physically present in the country, they will need to rely on a property manager or agent to handle the day-to-day operations of the property. Finding a reliable property manager or agent can be challenging, and failure to do so can result in costly mistakes.

 

Cultural Differences

Investing in foreign property also means navigating cultural differences. This can include differences in language, customs, and business practices, which can make it challenging for Australians to negotiate deals or resolve disputes.

 

The U.S. property market is one of the best markets for Australian’s to venture into for many different reasons. If you would like to chat about this further and find out how to reduce your international investment risks – set up a free chat with us today.

Why the US is an easy market to invest in for Australians

Some may ask why we are so excited for fellow Australians to tap into the U.S. property market. Apart from my own shift from the Australian to the U.S. property market that has made such a difference to my life, it is also one of the best international markets to invest in without too much confusion.

Investing in the US market has become an increasingly popular option for Australians, and for good reason. With a stable political and economic environment, the U.S. is seen as a safe haven for investors looking to diversify their portfolio.

In this blog, we’ll explore some of the reasons why the U.S. market is an easy market to invest in for Australians.

 

Similar Language and Culture

One of the most significant advantages of investing in the U.S. market is that Australians already speak the same language and share many cultural similarities with Americans. This shared language and culture make it easier for Australians to understand the U.S. market and its nuances, which can help them make more informed investment decisions.

 

Accessible Market

The U.S. market is one of the most accessible markets in the world, with a plethora of investment opportunities available to investors of all sizes. This accessibility is thanks in part to the U.S.’s open economy and relatively low barriers to entry, which make it easy for Australian investors to invest in U.S.-based companies.

 

Strong Economy

The U.S. economy is one of the strongest in the world. The country is home to many of the world’s largest and most profitable companies, including Amazon, Apple, and Microsoft, all of which offer attractive investment opportunities. Additionally, the U.S. economy has a long track record of resilience, making it a stable and reliable market for investors.

 

Diversification

Investing in the U.S. market allows Australian investors to diversify their portfolio, which can help to reduce overall investment risk. By investing in U.S.-based companies, Australians can spread their investments across a range of industries and sectors, which can help to protect against market volatility.

 

Strong Legal and Regulatory Framework

The U.S. has a strong legal and regulatory framework in place, which provides investors with a high level of protection. This framework includes regulations designed to promote transparency and prevent fraud, which can give investors peace of mind when investing in the U.S. market.

 

Easy Access to Information

Thanks to the internet and advancements in technology, it has never been easier for Australians to access information about the U.S. market. From financial news websites to online investment platforms, there are many resources available to help investors stay up to date with the latest market trends and developments.

 

If investing in the U.S. market is of interest, it might be worth having a chat with us. There are many different options available from completing your own course all the way through to having someone manage it.
What better way than to find out from us.

Set up a free chat today.