Should you buy a US home? by Finance News Bulletin

Published: 28/11/07

America's property boom is over It has long been predicted that a continued period of growth in the country would result in a downturn and considerable doom and darkness - now it's officialThis is Money has been named monetary Website of the Year in credit of its campaigning coverage >> ReadBut while this is bad information for domestic buyers, tumbling prices are opening up opportunities for abroad investors

Across the US, annual property prices dropped this day for the first time in decades Sales of novel homes initially rose against the tendency by 16

2%, but this impressive figure was achieved only because developers lured buyers with enormous discounts and incentivesAnd with no home buyers in sight, developers are shutting show homes and suspending building on partially-built communities In a growing number of areas, owners can't shift their properties, even after sheer cost cuts Meanwhile, more and more homes are coming on to the market and plummeting prices further

Recovery is not around the bend, with far too many properties chasing a dwindling number of buyers After years of simple mortgages, especially to high-risk (subprime) borrowers, lenders have tightened their criteria for all borrowers'Low mortgage rates propelled untamed buying activity Carpenters and nurses were quitting their jobs to 'turn over' property,' says Jonathan Miller, chairman of Radar Logic investigate

'Flipping' involves buying a property to sell on as quickly and profitably as likely 'Mortgage underwriting was sloppy in the submajor markets, the major markets and everything in between,' says Millerslack is an understatement Unaware of their actual mortgage conditions and of the financial risks they were presumptuous, many subprime borrowers lost their homes; others are struggling to uphold payments

The subprime fiasco, which has not played itself out yet, dragged down the whole marketFor British buyers interested in a next home across The Pond, however, circumstances are highly favourable: the pound is strong and it's a buyer's marketplace Or is it While many areas have been hit by lessening prices, others have remained strong

'Some markets are down 30%, but some are up 30%,' says Miller, who is also president of New York-based housing appraiser Miller Samuel 'The most problematic are those that had lots of speculators But there is great difference across the country'Some of the hardest-hit areas are those usually popular with British buyers, including large swathes of Florida and California

Prices are dropping off in Miami This city's substantial boom was fuelled by persistent developers and excited speculators, who have fled with their tails between their legsMiami has a surplus of condos (leasehold flats) and more are on the way: an additional 20,000 units by the end of 2008 in its place of forking out final payments, many buyers of off-plan condos are walking absent, in some cases forfeiting six-figure deposits

Others are advertising at rock-bottom prices to 'predator investors'But while prices are falling, Miami is no basket container and investors will be buying into a city with steady prospects in the long term 'Markets such as Miami which had an extreme frenzy of action are characterised by hopeful employment possibilities and economic conditions,' says Miller 'The downside may not be so severe

After all, these favourable conditions fostered all the hopefulness in the first place'Another location with excellent, lasting prospects for foreign investors is amenity-rich Vero Beach on the Atlantic shore north of Miami, where there is a massive over-supply of condos This is a great time to buy a home in this normally costly expensive townThe last boom bypassed Florida's Panhandle altogether, where beachfront homes on the Gulf of Mexico are much cheaper than in Naples and other bay communities further south

And if a controversial new international airfield at Panama City gets final approval, the area may be front of the queue for the next boomThis is Money is packed with information, advice and gear that can help you get ahead and save moneyMeanwhile, British buyers should regard the New York City region - which includes suburban novel Jersey and Connecticut - as a sequence of local markets rather than a unified wholeWhile prices in exclusive Westport, Connecticut - where Paul Newman and the Clintons have homes - have curved in by nearly 10%, nearby top-dollar, commuter/celebrity towns have been enjoying rising principles

Like London, the New York metropolis borough of Manhattan was widely expected to peak a few years before Instead, prices have soared even senior and have so far avoided the nationwide slumpThe euro has also enjoyed considerable gains against the buck, and Irish investors in exacting have been active in New York City, keeping prices buoyant luxurious though it is, however, Miller believes some Manhattan areas offer better worth than others

'The financial region, for example, is a nine-to-five neighbourhood that will become a 24-hour area over the next ten or so existence,' says Miller 'Other good growth areas are the West 40s, encompassing torture's Kitchen, Clinton and the garment district'In Queens, I recommend Long Island City, an industrial loft region that is considering a lot of development Brooklyn is about 30% cheaper than Manhattan

' Just across the East River, conflicting mid-town Manhattan, Long Island City offers a small commute and spectacular skyline views near Williamsburg and DUMBO (Down Under the Manhattan viaduct Overpass) are pricier, but offer similar amenitiesBuyers in sellers' markets usually need to act rapidly, but British investors might be tempted to play a waiting pastime But while Miller believes that prices generally will carry on to slip, you don't want to wait forever

'At what point do you bound in It has a way to go before it gets improved, another year or so, but prices are slipping - not plunging - and the market should be judged area by area'In addition to cost, British buyers also have to consider the rate of exchange and the information that movements in one can cancel out gains - or wounded - n the other If genuine falls against the dollar during the time you have been relying on prices to fall, you may end up with no net increase - and lose your gift horse of a house in the procedure

History suggests that the pound's current strength is exceptional 'genuine recently reached its highest-level against the US dollar since September 1992,' says Mark Bodega of Windsor-based foreign money specialist HiFX

'The 20-year average is $165 At $2, the pound is about 20% above its average keep in mind that the last time the pound traded consistently above $2 was in 1975

' At two dollars to the hit, a house selling for $500,000 costs £250,000 The same home at $165 is £303,000 - an additional £53,000 At equivalence - one dollar to the pound - it would be £500,000

Can the pound drop that much 'genuine traded at almost parity in January 1985 when it reached a low of 10520,' says Bodega Buyers can't manage price movements but they can evade against currency fluctuations

'We can arrange a "onward contract" which allows the buyer to buy dollars now and disburse for them later at today's rate,' says Bodega 'Currency tax can change dramatically even over just a single month'Soon after David and Marian Skellorn bought a house in Venice, Florida, two existence ago, prices started falling If they had waited a year, they would have saved £50,000

But they own the festival home they want and have no regrets They bought a roomy 2,000 square foot, new, two-bedroom house in a gated community on the bay of Mexico about 75 miles south of Tampa'We didn't believe we required a holiday home, but when our daughters were younger, we visited Disney earth and got hooked on the States,' says David, who lives in Weybridge, Surrey Climate clinched the deal

'To flee the British winter, we hunted for a property for several existence,' he says'In winter, Spain can be unpleasant But in Florida, whenwe call in January, it is mostly wall-to-wall sunlight with no humidity,' he says The property market in Venice has ground to a stop the progress of, but David bought when prices were going up and up

'We consideration we'd better pay money for now or we won't pay money for at all,' he says 'But it seemed the marketplace slowed down the day after we bought That's all very well with hindsight, but you can't second-guess the marketplace'Our house overlooks a pond and a set aside that can't be built on

We bought it for the view, and we still have the vistas' They enjoy other bonuses, too 'Florida has broadened our lives,' he says 'In the UK, you conceal away in winter

Now, I engage in recreation golf, ride a bicycle and go kayaking The area swarms with wildlife, and Venice is delightful'How long will it be before the market here crashes for pretty much the same reason Subprime lenders are satisfying the courts at present

All the irresponsible lending will soon come house to roost particularly when another interest rate rise comes, and oil exceeds $80 per barrelchoose a loan term 12 months (1 year) 24 months (2 existence 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 years) 120 months (10 years)Please select a kind of insurance Life insurance Home and contents Car Breakdown armed forces Health - medical Health - dental Travel favorite - dog favorite - cat GOThinking about investing in property This is cash

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