Thought this may be an interesting set of numbers for those considering USA real estate investment
Change in House Prices since 1991
USA +88.40%
Texas +88.0%
North Carolina +86.5%
California +60.6%
Nevada +27.40%
Florida +78.5%
Arizona +72.5%
Georgia +53.6%Change in House Prices last 5 years
USA -11.5%
Texas +9.2%
North Carolina +2.3%
California -42.3%
Nevada -52.8%
Florida -39.7%
Arizona -42.5%
Georgia -19.4%Change in House Prices last year
USA -4.0%
Texas -1.8%
North Carolina -3.4%
California -4.7%
Nevada -6.5%
Florida -5.8%
Arizona -13.4%
Georgia -11.9%Source: FHFA.
The DFW metroplex medium house price has risen 7% in the last 12 months and is expecting a housing shortage in 12 months due to the population increase
Some economic experts here and abroad are calling for property in Australia to drop by 40% citing we will suffer the same fate of the USA.
What these experts don’t realise is Australia’s housing market is radically different to that of the US. Today the US property market still remains in ill health because of these indicators:
- National unemployment remains at 9.5% (compared to Australia’s 5.3%)
- Mortgages more than 90 days in arrears are estimated to be at almost 10% of all loans. The situation is even worse in states like Nevada, California and Florida where the 90 days arrears rate is estimated to be around 20% of all loans (the percentage of Australian home loans more than 90 days in arrears is estimated at 0.6% of all housing loans)
- Research indicates that more than 11.3 million or 24 percent of all residential properties with mortgages had negative equity at the end of the fourth quarter of 2009. The typical US home owner with negative equity won’t move into positive equity until around 2015/16. In worse hit markets a move back to positive equity isn’t likely until around 2020.
The US market has a long way to go before a recovery can be celebrated. While home prices appear to have stabilized, volumes remain extremely low and continue to show further falls. The housing market is arguably going to present the largest hurdle for a broad based US economic recovery and an improvement in conditions doesn’t seem to be on the drawing board any time soon.
Australia vs USA property prices
Australia currently has a housing shortfall, strong population growth, a robust financial system, low unemployment, improving economic conditions and a residential market that appears to be moderating in growth in a controlled fashion. Importantly, mortgage arrears have not moved upwards suggesting that Australian borrowers are coping with the increased level of interest rates quite reasonably
Thanks for this, very interesting reading.
I find the fact that Texas has had the highest growth since 1991 and hasn’t crashed to be very telling.
Texas has survived the GFC very well, with reasonable house prices that didn’t go through the boom-crash cycle that many other states went through.
I have read that Texas has a law that the minimum deposit for a house is 20%. This has stopped the huge credit growth that has occurred elsewhere, because people have had to save for a deposit before purchasing. The saved deposit also ensures that they can afford to pay off the house.
This should be a key learning for Australia and other countries to ensure that their housing market remains affordable and doesn’t crash in the future. The availability of 95%, 100% and even up to 110% lending is a common theme in the markets that have crashed, not only in USA but internationally.
Over the last year, I have had many Australian clients. I'd say 90% are adament that the AU housing market is "different", and that it won't suffer the way the U.S market did. I hope it won't! Geez, the U.S housing correction was terrible for anyone that owned a home, regardless of how much money you have.
Admittedly, I know nothing about the Australian housing market, but as I spoke to an analyst from a banking institution, he directed me to an online article: LINK
This analyst said to me that the Australian housing market is primed up for a massive correction which could be 20-40%. Again, I know nothing, but I read the article and the trends I see in the charts are the same (almost exact) the way the U.S data charts read, regarding income, rental rates, etc…
If I were a betting man….which I am
…..I bet that the AU housing market does not tank as bad as the U.S did. I don't think you guys were exposed to the Subprime stuff we were exposed to. That said, what are your thoughts on this article?? Grab a cup of coffee or a cocktail. It's a long read, but very interesting.CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeGreat article thanks Cheeves. I previously posted a very similar scenario to that outlined here https://www.propertyinvesting.com/forums/property-investing/general-property/4336193
The article also clearly backs my assertion that removing 20% deposits is a direct contributor to housing bubbles in this section
“As explained in the book, The Great Crash of 2008, it was the rise of the non-bank lender in the mid- 1990s – raising funds via securitisation activities on the wholesale debt markets – that initially caused an intensification of competition amongst mortgage lenders. It was these non-bank lenders, whom have no formal regulator and no rules outside of regular trade practices and corporations law, which led the decline in Australian credit standards from the mid 1990s by introducing ‘innovative’ loan products like low-doc loans in 1997, then ‘no-doc’ loans in 1999, and more recently they were beginning to issue ‘non-conforming’ (sub-prime) loans just before the global recession intervened.
Faced with this new competitive threat, Australia’s banks responded in kind by reducing their deposit requirements and tapping new sources of funding offshore. Gone were the days of requiring a minimum 20 per cent down payment and the banks funding their loan portfolios from domestically sourced funds (mostly deposits); instead, 5 per cent down payments became commonplace funded increasingly by the banks issuing bonds to foreigners.”
Great stats. Thanks for the post.
Very interesting to see that U.S. property has still increased by 88% since 1991 despite the GFC in 2008. While no one can predict the future, these stats indicate to me that if you invest long term and ride out the crashes, like the 2008 one, your investment still has a good chance of growth.
I wonder what the stats will be saying 20 years from now?
mattnz wrote:Thanks for this, very interesting reading. I find the fact that Texas has had the highest growth since 1991 and hasn't crashed to be very telling. Texas has survived the GFC very well, with reasonable house prices that didn't go through the boom-crash cycle that many other states went through. I have read that Texas has a law that the minimum deposit for a house is 20%. This has stopped the huge credit growth that has occurred elsewhere, because people have had to save for a deposit before purchasing. The saved deposit also ensures that they can afford to pay off the house. This should be a key learning for Australia and other countries to ensure that their housing market remains affordable and doesn't crash in the future. The availability of 95%, 100% and even up to 110% lending is a common theme in the markets that have crashed, not only in USA but internationally.<moderator: delete advertising>
Population Growth. Is it increasing or decreasing ? Today 1 in 12 Americans call Texas home. The current rate of migration to Texas from the rest of the US is larger then the migration to New York in the 30's. Dallas is increasing more then any other area in the US and this year expects 1, 069,000 new residents and an additional 6,500,000 in the next 10 years.
Cost of Living Index. Dallas sits at 28% of gross income which is the 2nd lowest in the US. Houston TX is the lowest in the US.
Jobs's Growth & New Jobs Creation. Is it increasing or decreasing ? Over 70% of jobs created in the last 5 years were in Texas. Dallas is again leading the way in jobs growth.
Property Values. Are prices appreciating or still depreciating ? The medium home price in Dallas increased 7% last year.
Market Motivators. What is driving the market. (i.e. low supply and high demand)
Inventory of existing homes on the market. Not new home sales…what is the average days on the market
Medium Income V Medium Home Price. Dallas went from an average income of $90,000-00 to $98,000-00 and homes prices went from an average $137,000 to $150,100 last year
So what does Texas have that makes it so different ?? At it's simplest….don't overtax, don't overspend (state budgets), keep regulations to a minimum, avoid letting unions and trial lawyers run riot and display a huge neon sign saying "Open for Business" Explains why DFW has more corporate and regional headquarters then any other US city including New York.
Texas Cash Cow Investments and Cash Flow Kings wrote:mattnz wrote:Thanks for this, very interesting reading. I find the fact that Texas has had the highest growth since 1991 and hasn't crashed to be very telling. Texas has survived the GFC very well, with reasonable house prices that didn't go through the boom-crash cycle that many other states went through. I have read that Texas has a law that the minimum deposit for a house is 20%. This has stopped the huge credit growth that has occurred elsewhere, because people have had to save for a deposit before purchasing. The saved deposit also ensures that they can afford to pay off the house. This should be a key learning for Australia and other countries to ensure that their housing market remains affordable and doesn't crash in the future. The availability of 95%, 100% and even up to 110% lending is a common theme in the markets that have crashed, not only in USA but internationally.<moderator: delete advertising>
Population Growth. Is it increasing or decreasing ? Today 1 in 12 Americans call Texas home. The current rate of migration to Texas from the rest of the US is larger then the migration to New York in the 30's. Dallas is increasing more then any other area in the US and this year expects 1, 069,000 new residents and an additional 6,500,000 in the next 10 years.
Cost of Living Index. Dallas sits at 28% of gross income which is the 2nd lowest in the US. Houston TX is the lowest in the US.
Jobs's Growth & New Jobs Creation. Is it increasing or decreasing ? Over 70% of jobs created in the last 5 years were in Texas. Dallas is again leading the way in jobs growth.
Property Values. Are prices appreciating or still depreciating ? The medium home price in Dallas increased 7% last year.
Market Motivators. What is driving the market. (i.e. low supply and high demand)
Inventory of existing homes on the market. Not new home sales…what is the average days on the market
Medium Income V Medium Home Price. Dallas went from an average income of $90,000-00 to $98,000-00 and homes prices went from an average $137,000 to $150,100 last year
So what does Texas have that makes it so different ?? At it's simplest….don't overtax, don't overspend (state budgets), keep regulations to a minimum, avoid letting unions and trial lawyers run riot and display a huge neon sign saying "Open for Business" Explains why DFW has more corporate and regional headquarters then any other US city including New York.
Texas Cash Cow, your information is very helpful. Where did you find this information from? I am looking at buying an investment property in Texas. Do you know where I can get information about the rental market i.e vacancy rate?
While it is good to know the state by state numbers, the worst is clearly over and if you are going to invest, you need to start looking into sub-market details. For those looking at Texas, Dallas and Houston are WAY different. If you are looking at Florida, Ft. Myers is WAY different than Miami area.
For instance, there is about 20% more shadow inventory in the backlogs in Ocala as opposed to Ft. Myers. Knowing shadow inventory is important and it is challenging to get that information. You won't find it on a google search. A fair approach to it is by looking at a specific timeframe, knowing the amount of foreclosure filings, knowing how many courthouse sales, short sales, REO sales there were in that specific timeframe. It is more complex than that. I am in Florida. There are great areas to invest and terrible areas to invest.
CHEEVES
http://www.MyRealtySource.comCheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone Medandyinvestor wrote:Texas Cash Cow Investments and Cash Flow Kings wrote:mattnz wrote:Thanks for this, very interesting reading. I find the fact that Texas has had the highest growth since 1991 and hasn't crashed to be very telling. Texas has survived the GFC very well, with reasonable house prices that didn't go through the boom-crash cycle that many other states went through. I have read that Texas has a law that the minimum deposit for a house is 20%. This has stopped the huge credit growth that has occurred elsewhere, because people have had to save for a deposit before purchasing. The saved deposit also ensures that they can afford to pay off the house. This should be a key learning for Australia and other countries to ensure that their housing market remains affordable and doesn't crash in the future. The availability of 95%, 100% and even up to 110% lending is a common theme in the markets that have crashed, not only in USA but internationally.<moderator: delete advertising>
Population Growth. Is it increasing or decreasing ? Today 1 in 12 Americans call Texas home. The current rate of migration to Texas from the rest of the US is larger then the migration to New York in the 30's. Dallas is increasing more then any other area in the US and this year expects 1, 069,000 new residents and an additional 6,500,000 in the next 10 years.
Cost of Living Index. Dallas sits at 28% of gross income which is the 2nd lowest in the US. Houston TX is the lowest in the US.
Jobs's Growth & New Jobs Creation. Is it increasing or decreasing ? Over 70% of jobs created in the last 5 years were in Texas. Dallas is again leading the way in jobs growth.
Property Values. Are prices appreciating or still depreciating ? The medium home price in Dallas increased 7% last year.
Market Motivators. What is driving the market. (i.e. low supply and high demand)
Inventory of existing homes on the market. Not new home sales…what is the average days on the market
Medium Income V Medium Home Price. Dallas went from an average income of $90,000-00 to $98,000-00 and homes prices went from an average $137,000 to $150,100 last year
So what does Texas have that makes it so different ?? At it's simplest….don't overtax, don't overspend (state budgets), keep regulations to a minimum, avoid letting unions and trial lawyers run riot and display a huge neon sign saying "Open for Business" Explains why DFW has more corporate and regional headquarters then any other US city including New York.
Texas Cash Cow, your information is very helpful. Where did you find this information from? I am looking at buying an investment property in Texas. Do you know where I can get information about the rental market i.e vacancy rate?
Hi dandyinvestor.
Those figures came from a Professor Jim Gaines from the Real Estate Centre @ Texas A&M. The figures for the Q1 2011 will be available this month. This is by far the best source of information available on all the Texas markets see http://www.recenter.tamu.edu
…..I bet that the AU housing market does not tank as bad as the U.S did. I don't think you guys were exposed to the Subprime stuff we were exposed to. That said, what are your thoughts on this article?? Grab a cup of coffee or a cocktail. It's a long read, but very interesting.
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