There’s power in a simple idea.
In fact, some of the best business ideas have that, ‘why didn’t I think of that?” factor.
Take BBQ’s for example.
In the mid-70s, Hilton Mason welded a hot plate and a grill onto a mobile trolley with a gas inlet and called it a BBQ.
But didn’t aussies go mad for it?
Now, his company, Barbeques Galore has 78 franchises across Australia. A simple idea, powerfully executed, and bang, you make yourself a very rich man. And thousands of people are left scratching their heads, ‘now why didn’t I think of that?’
A lot of times in life you’ve just got to grab the beef by the horns and go with it. If you see an opportunity, it’s likely that a lot of other people do to, or are about to. If you wait around to see how it plays out, it will be too late. The beef has bolted.
Here’s an interesting fact. The word barbeque comes from the French phrase “barbe à queue”, which translates as “from head to tail” – a method of cooking a pig whole.
But in Texas they say they came up with the common acronym ‘BBQ’. Only in Texan folk lore it apparently stands for ‘Beer, Beef and (pool) cues’ – a sign that used to hang out the front of old road houses.
But a love of beef and barbeques isn’t the only thing Australia and Texas have in common (though is there any culture on earth that doesn’t like cooking meat over a fire and eating it?)
They’ve both got desert landscapes, starry skies and a love of cowboys and now, both places are on the verge of a major housing boom.
(See how I wove that in there? I’ve been doing a creative writing course.)
In my piece a few days ago, I picked up on the solid housing recovery in the US. But while the country as a whole is doing well, some states are booming.
The other day I saw a story about a 5-bed room house in Las Vegas selling in mid-July for $499,000 – double the price it sold for three months ago!
Maybe that lucky investor was one of my readers.
Way back in February I was highlighting the coming boom in Las Vegas – driven by institutional investors like Warren Buffett:
“If you follow the big money in America right now, it will show you that the serious investors believe that the property market has bottomed, and we’re launching into an upswing dynamic.
“And if you follow the scale of funds being directed into property, it tells you that these guys believe that a lot of property markets over-corrected in a big way in the downturn. That is, prices fell too far and a lot of high-performing properties are massively undervalued. Las Vegas is a case in point.”
Well, turns out I was right on that one. With the national property market finding a floor, Texas, and nearby Ariozona, have swung into boom land.
In Vegas, house prices grew 23 percent over the year to May. In Phoenix, Arizona they grew 21 percent – heading up the national leader-board.
In part, these gains have been made possible by the severity of the downturn. Homes in Vegas lost 62 percent of their value in the GFC. In Arizona, they fell 56 percent.
But all that’s done is create more upside for potential for those who bought at the bottom. As Buffett’s been betting all year, the market went too far, and a sudden bounce back was the most likely scenario. And that’s exactly what we’ve seen.
Private equity firms, hedge funds and REIT’s have had a voracious appetite for housing, especially foreclosed or distressed sales. They’ve raised at least $18 billion, and bought more than 100,000 properties since 2011.
But they’re not the only ones buying up big.
The surprise factor has come from south of border. South American investors, with pockets full of cash as a commodity boom drives wealth at home, are increasingly looking for somewhere safe and secure to park their money. US property has become a popular destination.
This has interesting parallels with the Australian situation, with Chinese and Asian buyers making significant plays for Aussie property. And for much the same reason – Australia is a safe and secure, mature economy, and property is always solid performer.
But the American demand base is broader still. The government’s mortgage finance policies (such as the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP)) have provided a further boost to refinancing and home-owner demand, helping our mums and dads mix it with investors.
And so demand is bouncing back, especially as buyers realise that prices are on the march again. The window for nabbing a bargain is closing quickly.
On the supply side, the recovery in the US is actually pulling homes off the market, as there are less distressed sales coming to market these days.
In part this has been driven by stricter foreclosure practices, enforced by states like Nevada, which found that it wasn’t clear which banks actually had a right to the houses they were foreclosing on! Banks will be banks.
But at any rate, the “shadow inventory” of homes seems to be clearing. There are 7.6 percent less homes on the market than there were a year ago nationally.
So what we’ve got is expanding demand and tightening supply.
And I’ve got a jelly bean for any one who can tell me what that means…
Yep. Rising prices.
The boom in US property I flagged 6 months ago is up, up and away. It’s gathering steam but there are still some super bargains if you know where to look.
It’s time to grab the beef by the horns. Watch this space.