A lot of people in America are eating their hats right now.
Big fat juicy cowboy hats.
And this is good news for you, let me tell you. How? I’ll get to that.
But first, why are these guys having a side of hat with their steak?
Because the housing market there has just gone and proved all the fire and brimstone preachers of property apocalypse wrong.
National House prices in the Case-Shiller index saw a thumping rise in March. They’re now 10.9 percent higher than a year ago – the biggest annual increase in almost 7 years.
This graph here tells you the story they didn’t want you to know about.
There’s a very clear trend emerging there, right?
And importantly, it’s the third month in a row that all 20 cities in the index recorded increases. This means the upward trend in American house prices is broad-based. It’s not just one or two healthy cities, but the whole country that’s in upswing.
There is a very, very clear momentum behind U.S house prices right now.
And many cities are posting 20-plus percent growth rates. Phoenix was up 22.5 percent. San Fran was up 22.2 percent. Vegas was up 20.6 percent.
Thank you. Thank you very much.
It’s true that these were the cities that were hardest hit by the downturn. But I’ve written before that it seems pretty clear that the US market over-corrected on the downside. This is the bet that Warren Buffett is making, and the latest data seem to be proving him right.
And even the laggard cities are doing pretty well. New York, New York was up 2.6 percent, Cleveland up 4.8 percent, and Boston up 6.7 percent. These are still very decent results.
And at the end of the day, 12 of the 20 cities in this measure posted double digit growth rates.
Like some sauce with that, cowboy?
And a number of housing indicators are in the expansion zone. Housing starts and permits are up, and sales of new and existing homes have been trending higher too. Home-builder confidence is at a six-year high.
People are getting excited.
And this is all good news for the US, and it’s good news for lil ‘ol Aussies over here too.
First, rising house prices will give US consumer balance sheets a good shot in the arm. As consumers feel wealthier, and as less of them remain stuck underwater with their mortgage, this will lead to more consumption and more borrowing.
Indeed, consumer confidence jumped to the highest level since February 2008 in May, and it’s likely that rising house prices were a big factor.
The improvement in consumer balance sheets will also help repair the banks’ balance sheets and reduce the over-hang of bad debt. This will allow banks to start lending more, and ease up on lending conditions.
So it’s a big plus for the US.
And it’s no surprise that the US stock markets reacted accordingly on the news, busting through to new all-time highs.
But why is it good news for us?
Well the first, most obvious point, is that a strong US makes for a strong Australia – at least economically speaking.
Australia has been slogging it out alone on the global stage, with only China playing a supporting role. The US, European and Japanese consumers have all been AWOL, and if it wasn’t for Asia then we almost certainly would have joined the rest of the world in recession.
So the US will be a very welcome return from the bench.
And I think a resurgent US will inspire the rest of the world too, and help the globe finally put the monster of the GFC to bed.
But the other key factor is the impact I think this will have on property market confidence here.
Over recent years, a lot of the fear-mongering around Australian property was nothing more than “quick, look over there!”
People showed us an American market going to pieces, and said, “Australia will be next”, as if there was some red-ink peril domino’ing it’s way down through Asia towards us.
Leading the chorus was Steve ‘keep your hands off it’ Keen, with lots of pretty graphs comparing Australia to the US. Sure, they were pretty. But it turns out they didn’t explain a darn thing.
They ignored the fact that Australia and the US were fundamentally different markets, set in fundamentally different economies.
But it was all too easy just to point to American mums and dads drowning in mortgage debt, and make scary monster noises. Wooo-ooh. The facts never came into it.
There was a correction here, but nothing like what we saw in the US. The only similarity I reckon, is that like the US, we also over-shot on the down-side, relative to the fundamentals.
And confidence became the key pressure keeping a lid on prices. Nothing else.
So what I reckon will happen is that as Australians see US house prices go into launch mode, as they see that the worst of it is well and truly over, they’ll garner more confidence about prospects for the property market here.
And prices, already a year into recovery, will flick the launch switch too.
And so now is the time to buy in cheap and buy at the bottom.
Imagine you had bought in Phoenix a year ago. You’d have made over 20 percent this year already. Not bad for doing nothing but having balls.
I’ve been one of the first independent commentators to jump on this opportunity four years ago. And for that period of time, whilst the Australian dollar has moved up and down from $0.80 to $1.10, Aussie investors have all done well.
By the way, the door is still open in the States as we speak. With the dollar at $0.96, there is still plenty of upside there as well.
This is where the market’s going. Don’t listen to those cowboys, still desperately trying to spook the herd.
They’ll eat their hats, mark my words. Whilst they’re going South, go North. There’s a lot more money there.
Belinda Smith says
I totally agree. As a lover of all things property, I’ve been going to most open house inspections in my area since 2007. In the last few weeks there have been more excited people at the opens, with properties are selling much faster and closer the the vendors asking price (and in some cases more). It’s back on in Sydney big time!!
dean says
Interest rates at almost 0% in the US…. the US Fed printing pressed running amok, and house prices gouged right out from the GFC sure make a potent argument for some bargains/ profit making/taking to be had…but are they sustainable is the question.
Are the mums and Dads buying or is it an institutionalisation of the property market as the Buffets gorge at the table and alter the market dynamics, creating a new belt of renters.
I dont think anyone can deny property prices have slipped back, or at least neutralised here in Australia in the last 5 years, and consumer confidence is at an all time low.
The Aussi feds continual manipulation of the interest rates perhaps may stimulate fiscal movements towards property, but there is a growing number of people wary of how these manipulators can ruin dreams, and this confidence, or lack thereof, is something that will be hard to reengineer.
Australians i know are still highly suspect of the economy at large, and this will have ramifications for years to come.
gus says
totally agree with the above. Everything to do with money, interest rates, and all finance is being manipulated to keep us thinking that all is fine. Well it’s not. Take a look at Europe, UK,USA, just to name a few, mass unemployment, Austerity and it’s all coming here. It’s here right now, just open your eyes and ears to what is happening to our country.
JV Perth WA. says
Just have to contradict the comment made taht Consumer confidence is at an all time low, that’s just not true.. History has proven humanity can endure far worse than the GFC, this generation has not had to live through war but now in an age where Global information is available to us faster than ever before, we take the worst news from the globe & leave our focus on the bad news, with no perspective on how great we have it in Australia on the fundamental standards of living. MEDIA LOVES BAD NEWS, they propogate fear in the masses, after all IT MUST BE TRUE IF I READ IT IN THE PAPER/WATCHED IT ON THE NEWS… I worked in media for 15 years; radio, television & press and I know first hand how they manipulate the facts to send consumers onto the edge of their seats waiting for news of the latest catastrophe.. Don’t fall victim to their scare mongering propoganda! Think for yourself, don’t be a sheep and one of masses who believes everything they are fed from the media. Australia is not the US or Europe, we have mining that is respobsible for 46% of Australia’s exports. We have one of the highest standard’s of living in the world, rated No 4 in the top 10 nations in the world by the United Nations on the most livable countries in the entire world! Our unemployment is low, we have free national Health care that the US and most other Nations do not. We look after our poor and our sick with socially responsible unemployment and sickness benefits, again, the US are not the model humatarians, Australia has signed the Kyoto Protocol, the United nations Framework convention on climate change. The US are responsible for over 50% of the worlds polution yet they refuse to be a part of reducing carbon emmissions, they (the US) do not have free health care for their sick or a national social security safety net for their poor, nor does a long list of other nations. the Aus $ was recently the highest it has ever been. Australian technology innovation and Australian medical innovations are also leading the world. So stop falling prey to the propoganda, pull your nose out of the bad news media and have a look around. Might I suggest that perhaps our National consumption of anti-depressants would be dramatically lower if the masses didn’t believe everything they read or watched in the media. Reality is perception, so stop taking the media’s perception of the facts as your own. See how well we compare on a humanity level, the fact is we live in one of the best Countries in the world, we don’t live with war or political unrest. For all you gloom & doom junkies, go travelling, see how well we live by comparison. Go to Fiji or India or Asia, see the fear the US citizens live with and God forbid you actually need medical treatment while Overseas. Se for yourself and think for yourself. Don’t be just another one of the spoonfed masses!
Mike says
We are gearing up for another property price rise I believe, well on the Gold Coast anyway, believe it or not I don’t care.
I see the poster above is worried about Europe, USA bla bla bla, you read to much garbage that the media feeds you mate, think about it like this, has your own life changed in the last 5 years because of what is happening overseas, my life is still basically the same as the previous 5 years and the 5 before that because i dont listen to all the garbage that a person like me or you is writing in the paper, if there was no such thing as media then no one would worry, you would just live your life as normal.
Remember the person that writes an article is just one person and then other people reproduce the crap.
A mate of mine said to me the other day, gee I was on RE and the average sale price for our area is $x, I said to him, what does that mean for us, he’s like mmmm I don’t no, I said it means jackal, Realestate.com just pluck numbers out of a computer, I can do this as well by using different properties and I will give you a different average, but once again it’s just what I or them work out, it really doesn’t mean much unless you want to believe it.
People need to focus on there own life and who gives a shit if USA Europe or Australia fail, it just means you need to find another way to make money.
I believe Europe and USAare fine from the people I speak too that live there, china is the place we need to keep an eye on but once again who cares. Go buy a property you only live once or buy 100
Andrew S Thomas says
Agree with the US investing. I’ve been there buying heavily undervalued properties and doing very well cash flow and now growth. A lot of the upswing I believe is from the hedge funds buying redundant foreclosed stock off the banks which has pushed the market up and given confidence to some areas. However I believe there is still a long way to go and there is a second wave of foreclosures about to hit. Banks I’ve spoken with still have considerable stocks of delinquent mortgages on their books and have stalled off on foreclosing on them to relive pressure on their own balance sheets. There are still bargains to be had but they are getting harder to find. Get yourself a good agent and go for it.
Happy to assist anyone thinking of making a move to buying in the US
Andrew
jessica says
I have attended many auctions. I realize 2 facts: many people come but a few really put their hands up and there are some groups of Chinese who come together and push the price so high that only them can continue to make the price often much higher than the price estimated by agents.
Chris Pasas says
Message to Andrew S Thomas please send me an email as i am also an active US investor interested in your thoughts. Thanks [email protected]
Mark Crane says
Ditto to Andrew S Thomas – I am interested in sussing out the US show also, but have limited knowledge and definitely need help. Cheers [email protected]
Tom says
Always great reading from Jon’s and reader’s . Keep up the good work. What are your thoughts on the depreciated dollar?
Andrew S Thomas says
Hi Tom
I think the depreciating dollar is inevitable. From a us investors point of view I love it as it represents Capitol growth through exchange rate adjustment so the lower the US dollar the more growth I get. From future investing it kills me as the costs increase but thankfully I bought forward exchange and took a punt that the dollar was going to drop so for now I have funds locked in at 1.05 but this only gets me a couple more deals.
I think the aus banks have a lot to answer for and surprise surprise manipulating the market and feel this has a bit to do with exchange rates. My predictions R that the rates will hover around 94- 97 cents for a while yet. Once the us stops printing money which I think the austerity measures stop in sept then I think we’ll see the foreclosure market round two kick in next year.
Con says
Andrew S Thomas – I would also appreciate some info on US properties. Regards, Con. Email: [email protected]
rena says
Hi Andrew,
I am US investor as well but I need some info about taxes and diffirent states. Would you reply to me please [email protected] In what state did you invest ? regards, rena
Grace says
Hi all,
For those interested in the US market, my coach Dymphna Boholt the real estate milionaire runs a thorough real estate program that covers the pros and cons. All her students on the US program are part of a buying group that buys direct from the banks – no middle men. The properties are carefully selected so that they are in the right areas that will give you ROI. Payment for the properties is made after they are renovated and you are happy with them. She lost a lot of money in the US, learnt from her mistakes and she now makes a lot by using the right strategies. Call Knowledge Source for details on (03) 9490 8888
Richard_E says
There is always a middle man … or woman. Dymphna charges her devoted students up to $10,000 for membership and then there are more middle men/women down the line. To suggest there is an army of do gooders offering their services for nothing, to help Aussie investors make $’000 out of US property is, to put it politely, naive in the EXTREME.
Andrew S Thomas says
Wow Richard what a post. I don’t know how you read all that into Graces’s comments..you have obviously had a very negative experience.
As a graduated student of the Dymphna program and now an educator in property I haven’t found what you state to be the case. I haven’t even paid $10k for ALL the program’s over 4yrs. I don’t know what courses you went to. I haven’t met any middle men and have had the option to choose the professionals that Dymphna recommends or go it alone with my own.
The money I paid for the education (under $6k) I’ve made back ten fold in returns.The commissions I’ve paid along the way we’re worth every cent because the deals brought to the table warranted It.
I deal direct with the US agents that I’ve been introduced to and have a very professional relationship with many other students from the program’s.
You have to put things in perspective.
It’s just the cost of doing business or its a rip off. I know which mindset I’d rather choose.