Investment Outlook for 2014
In our last newsletter we looked back on a 2013 dominated by explosive home price increases, over 68 billion in foreign investor purchases, and wide acknowledgement that the US housing market has “turned the corner”. In this newsletter we look at the rest of 2014, which is shaping up to be another year of sustained growth. It remains to be seen if home prices can grow as explosively as 2013, but analysts certainly agree that the overall market outlook is positive.
Here are 7 key pieces of information about 2014 as reported by major industry sources:
- The direction of the national price trend is overwhelmingly clear as we transition from 2013 to 2014. The National Association of Realtors reports that prices were rising in 73% of metropolitan statistical areas (MSAs) in Q4 2013 when compared with Q4 2012.
- Zillow predicts that homeownership rates will drop to their lowest level ever in 2014. For investors this means an increase in the pool of tenants and an increase in the demand for rental properties.
- Forbes reports that foreclosures are working their way out of the system; “The once booming foreclosure market has slowed, with September 2013 the 36th straight month of year-over-year decreases in foreclosure activity”. While foreclosures can represent a good discount buying opportunity, their decline signals a sustained recovery in the market which, in the long term, is beneficial to investors.
- As MSN reports, nationally prices are still 31.5% below their 2006 peak. There is still ample room for capital growth and attractive positive cashflow properties are still available for investors to snap up.
- Redfin, Kiplinger, and Zillow are predicting that home prices will rise between 3% and 5% in 2014. This is modest compared to 2013. However, like 2013, certain targeted markets will see growth much higher than this.
- According to a survey of 40 top economists conducted by USA Today on Feb 5-6th, the consensus is that “the US will see better growth in 2014”. A stronger economy and a stronger housing market are historically synonymous with investor profits.
- Wall Street and other “big money investors” continue to pile into US single family properties. New investment products are being created from these assets and these financial products are receiving a lot of attention. According to the New York Times “The private equity giant Blackstone Group sold the first single-family rental securitization of its kind last fall, a $479 million bond, attracting six times as many investors as the private equity firm could accept”
Overall 2014 represents an excellent opportunity for Australian investors to purchase investment property in the USA. However, great investment properties are becoming harder to find as rising prices are pushing net yields lower. For those who haven’t invested yet – you haven’t missed the boat. But at American Properties we are realistic with our timelines, this opportunity won’t be here forever.