United States on Sale?

Monday, February 25, 2013 | 0 Comments

Foreign investor demand of U.S. real estate is on fire for many reasons. One of the first is the weakness of the U.S. dollar. Foreign buyers are able to invest in US real estate that will produce high yields as well as make money on the currency trade. These two factors can produce a double whammy effect of great returns. Since 2006 property values in America have declined in many markets around 70%. Because of the manipulation tactics of the Federal Reserve, Bernanke’s QE to infinity, to big banks suppressing inventory, real estate prices are starting to rebound. These are some of the reasons foreign capital is making its way to America.

International buyers accounted for $82.5 billion, or 8.9%, of the $928 billion spent on residential real estate in the 12-month period that ended in March 2012 according to a survey released by the National Association of Realtors last year. That was up 24% from $66.4 billion in the previous-year period.

The survey showed that about 55% of all international buyers came from five countries: Canada, China, Mexico, India and the United Kingdom. Additionally, five states accounted for around 55% of all sales to international buyers: Florida, California, Texas, Arizona, and New York. The survey found that 62% of international buyers paid in cash. In fact, in some markets cash buyers account for up to 50% of all sales and in some Florida markets over 70% of sales are cash investors. Real first time home buyers are having a tough time competing with these cash investors and many times lose out when their contract contains a financing contingency.

In addition to the buyers from the countries mentioned above, if we see problems begin to flare up again in Europe, which we will, many wealthy Europeans will start moving their money to America in an attempt to protect their wealth. Unfortunately for them they will likely soon find out that the politicians in America are just as crazy and stupid as the ones in Europe.

Another force driving the market and buying everything from oil fields to hotels are Chinese investors. Chinese investors accounted for $7.4 billion of sales in the 12 months ending in March 2012, up 24% from the previous 12 months, according to the National Association of Realtors. Buyers from China and Hong Kong also spent $1.71 billion on commercial property in the U.S. in 2011, more than quadruple their investment in 2008, says Real Capital Analytics.

All this foreign money presents a HUGE opportunity for investors. My company The Note House has made it a priority to make sure we are the point of contact for as many of these foreign buyers as possible. Many of them are looking for value, and the majority has educated themselves about the markets they seek to invest in. If you become that point of contact that can present deals to these investors you will be highly coveted among this group.

One caution I would stress to all foreign buyers and really all current investors. I am forecasting that prices will continue to increase over the next 24 to 48 months perhaps even longer. Market manipulation can create a joy and exuberance that leads to bad investment decisions like we had during the last boom years. Here is what the big money investors don’t want you to know about. Wall Street investors and hedge funds are buying billions of dollars worth of properties right now and waiting for inflation to increase prices. They also know that the U.S. government is starting “no money down” loans again for many buyers and will likely increase these programs which will fuel high purchases prices. Once all these factors take hold, the big money investors will sell into this market and the shoe shine boy who is buying his first rental property or home will likely get stuck holding the bag. The bottom line is that you should always know what drives a market. Look for changes in those driving factors and plan accordingly. There is tremendous opportunity and money to be in made real estate right now, you just have to know what you are doing.

The Note House LLC is a premiere nationally recognized purchaser of commercial and residential mortgage notes and REOs. Dedicated to simplifying the process of complex real estate transactions, The Note House team relies on in-depth market research and its combined experiences to ensure that each transaction is streamlined resulting in a win-win for all parties involved. For more information, visit: www.thenotehouse.us