It’s official! Most press reports now indicate that the U.S. housing market is in recovery. Across the country, the numbers of transactions are growing, inventory levels are shrinking and prices are rising. Of course the United States is a huge country and it is difficult to generalize, especially when location is such a key element in a property purchase. However, Dr. Lawrence Yun, chief economist for the National Association of Realtors® (NAR) has stated that the recovery is strengthening and to expect limited housing supplies for the balance of the year in much of the country.
In a statement dated June 20, 2013 Dr. Yun went on to say that” housing numbers are overwhelmingly positive. However, the number of available homes is unlikely to grow, unless new home construction ramps up quickly. Only additional supply from new homebuilding can moderate future price growth”. The speed at which homebuilders can ramp up production remains to be seen. Many scaled back their activities during the market’s slowest years, and a shortage of skilled labour is being experienced in many areas.
Latest research by NAR offers this perspective on the market:
- Existing-home sales are at the highest level since November 2009 when the market jumped to 5.44 million as local buyers took advantage of a tax stimulus package. Sales have stayed above year-ago levels for 23 months, while the national median price shows 15 consecutive months of year-over-year increases.
- Total housing inventory rose 3.3 percent to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace. Listed inventory is 10.1 percent below a year ago, when there was a 6.5-month supply.
- The national median existing-home price for all housing types was $208,000, up 15.4 percent from the previous year. This marks six straight months of double-digit increases and is the strongest price gain since October 2005, which jumped a record 16.6 percent from a year earlier. The last time there were 15 consecutive months of year-over-year price increases was from March 2005 to May 2006.
So what does this mean to foreign investors who have not yet invested in the U.S.A. market? Have they “missed the boat?” Not necessarily. Homes in many areas are still being offered for sale at prices up to 40% below where they were at the height of the property boom in 2005 – indicating a good opportunity for capital gains. Rents have continued to rise as rental demand has increased, giving landlords a good return on $$$s invested.
As I travel around the world educating would-be investors, the question I hear most often is “How do I get started?” The good news is that it is not hard to buy real estate in U.S.A. Foreign investors have the same ownership rights as Americans, and the market is highly regulated which affords the consumer some level of protection.
One of the keys to investing successfully is to accept that one size does not fit all. You should establish your own investment criteria and then find properties that meet those criteria. Your budget, availability of financing, timing, attitude to risk, and exit strategy is something unique to you. Having established what these criteria are, you should then strive to identify a market(s) and properties that meet your needs. This can be difficult to do from another country, so your next task should be to identify an agent to work with. The agent may be in your home country, or someone who resides in U.S.A. who is experienced in working with overseas investors. Much can be learned from the right professionals.
I offer this guidance on selecting an agent. Interview several agents, either by email, phone or face-to-face. You should not be embarrassed or feel awkward about telling the prospective agent about your selection process, and the need to ask a few questions. The agent will respect you for being open about it.
Six questions you should ask a prospective agent. One or two of these pertain specifically to American agents, but can be modified for your local market.
- Are you just a real estate agent or a Realtor®?
- How long have you been in the business, and is this your full time job?
- Which NAR designations do you hold?
- Do you work alone, or as part of a team?
- How many overseas clients like me have you worked with in the past?
- What are some of the common pitfalls I may encounter?
Only members of the National Association of Realtors® may use the term Realtor®. NAR do offer membership to real estate agents outside of U.S.A. This is an important differentiation, as Realtors® are bound by a Code of Ethics over and above the minimum requirements of their local real estate licensing law. Generally the Code of Ethics requires a Realtor® to:
- Be loyal to clients
- Have a legal duty to clients
- Cooperate with competitors
- Be truthful in statements and advertising
- Not interfere in exclusive relationships that other REALTORS® have with their clients
This is a good indication of the agent’s experience and dedication to their profession. Generally, agents who have made real estate their full time career are more likely to be knowledgeable about the latest laws, standards of practice, trends in the market and how they may affect you as a buyer.
The answer to this question is an indication of how seriously the agent takes their personal education and responsibility to be aware of the best ways to serve their clients. Designations indicate that the agent has undergone structured training courses, run by the National Association of Realtors® aimed at providing tools, knowledge and skills needed to work successfully with clients. The most important designation for an overseas buyer to look for is the CIPS – Certified International Property Specialist, a designation is held by a relatively small number of agents, but one that is entirely focused on working a global environment. You will find a directory of CIPS at NAR’s website www.realtor.org
An agent operating alone may do an excellent job, but if you need assistance at a particularly busy time you may get frustrated by their lack of availability or responsiveness – especially as you will be working across different time zones. Try to work with an agent who is part of an immediate “team” that includes other Realtors® and administration staff. Beyond that, they should also have an extensive support team provided by the company they work for – effectively giving you multiple levels of assistance should you need it.
Don’t be afraid to ask for customer testimonials or references, and the ability to speak to previous clients if that is what you need to feel comfortable in making a decision about the agent.
The agent should be able to articulate a number of areas where they will exercise particular care in working with you as a foreign buyer. Some of these may include: taking title, qualifying for a mortgage, home inspection, insurance considerations, currency exchange, money transfer and money laundering regulations, taxes, immigration, logistical problems associated with document signatures and notarization, and so on. Where these areas require the service of another professional, such as a real estate lawyer or accountant, the agent should be able to make the appropriate introduction.
Here are two examples of properties which may meet your investment criteria.
Atlantic Ocean Views Close to Miami
High quality construction and finishes in these high rise condomoniums that sit on the intracoastal waterway with views across to the Atlantic Ocean. 805 sq ft 1 bedroom units from US$195,000
Florida Gulf Coast - Waterfront with Boat Dock
Hard-to-find brand new construction directly on the water. Each town home has its very own boat dock. Waterfront locations will always have limited supply and command a premium. These homes represent excellent value from just US$250,000 and 50% financing available. Valu