Saturday, 26 May 2012

US Real Estate Turnaround Takes Hold

For those following the US Real estate Market the news has taken a dramatic turnaround as of late: This week markets surged as April sales released by the National Association of Realtors showed a dramatic 10% increase in year over year prices, the strongest gains since pre-crisis. Shares of US Homebuilders have seen dramatic gains over recent months on reports showing increased orders. Most call for a moderate price increase in 2012 followed by strong price increases in 2013.
In Tampa the statistics are even more encouraging as the median condo sales price was up 13% over April, 2011. Median single family homes price is up 8% and inventories are 41% lower than April last year both in condos and singles. Tampa has posted solid year / year price gains in the last 4 months with the charts showing a bottom to the market in January 2011.
With the market heavily influenced by foreclosures, how and where you buy the units is critical. Trading distressed sales in select complexes it is possible to easily outperform the broader market: Some downtown complexes are selling for 140% of what we paid last year. In one case we sold a unit for 140% of what we had paid for it within 2 months.  While the downtown market continues to post impressive gains the lack of inventory has become an issue.
Meanwhile in newer complexes outside the core the supply of foreclosures remains strong and the prices continue to be adversely affected. Relatively new properties can be bought far below replacement (construction) cost. When the inventory of distressed properties is absorbed the prices should rise in the same manner as it has done downtown. Longer term, prices will have to exceed construction cost before it becomes economical to build again.

ABC News May 22nd, 2012 : U.S. April resale housing numbers released by NAR show 10% jump in median price over April 2011. Markets surge on optimistic outlook for US housing.
Washington Post May 15th: Homebuilder confidence at 5 year high. Building permit applications highest in 3 ½ years.
Time Business, May 15th, 2012: Housing recovery has officially begun. Investors play crucial role in first stage of recovery.