Posted by: davidgarnerconsulting | September 11, 2009

Have U.S. House Prices Hit Bottom?

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To put things as bluntly as I possibly can, unless it is an “out of this world” type of deal, and I’m talking 50% to 70% below current valuation, then I will not be buying in the UK property market right now.

But what about elsewhere, in the US for example? Well for me that’s not quite so straight forward. There are always lots of reasons to be negative – lots of supply, high and rising unemployment figures, and an underlying economy that isn’t very healthy. But when compared to the UK property market, US home prices don’t look overvalued. In fact I’ve always believed, and have been proven right, that the UK housing market in terms of trend is about 12 months behind the US.

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That’s when prices start looking more and more interesting. Over the long-term, property values tend to revert to average levels. So as long as you have patience as a virtue, if you buy something when it’s historically cheap, you’re likely to make money. This is very much the basis of my distressed asset purchase strategy that I have talked about in other Blog posts. If you buy something when it’s historically expensive, you have to exit before the market tops out. If you can that is.

I have recently been offered portfolios of US property of around ten properties per portfolio, and after having each unit independently valued, (with a remit that the agent gives me a fire-sale value to move the property on within 3 months), I found that the current market value of the portfolio (avg.) was around $400,000 and the purchase price was around $150,000, meaning that I would be buying real estate 62.5% Below Current Market Value.

In conclusion, the US offers far better value for straight forward asset acquisition than the UK, for now.

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