I wouldn't say it's a bad or good time to invest in American real estate. The American government is trying very hard to make house prices appreciate. Moreover they are printing(or quantitative easing if you object the term printing) a lot of money, so properties might go up in value just because the dollar is being depreciated.

Moreover, if you are a gambling type, I heard that there are tons of properties in Detroit selling for peanuts(1 USD to 1000 USD). If you bet on a Detroit recovery, and say buy 10 houses for 1000 USD each, at worst you lose 10000 USD. At best there is this amazing recovery from a very crappy position and you make at least 10x your money.

I'd say if you plan to live in the US and stay in there to supervise the properties, it wouldn't be a bad idea to rent these apartments for an attractive yield.

On the other hand, property appreciated a lot from the mid 90s. A lot of things have contributed to this rise in property prices and you should ask yourself whether these factors will play a negative or positive role in the future:

-Lower downpayments/looser lending standards. Obviously, these allowed people to bid up prices for houses back in the late 90s. Moving forward, can you go any lower than a 0-3% downpayment and a looser lending standard thatn 'just being able to breathe?'

-Less overall leverage in the system. So obviously, if you have leverage of 30% of your total net worth you can lever up a lot more. But what is you have leverage 100%(I pulled this figure out of my ass but the American consumer is way more leveraged now than it was 20 years ago) of your total net worth? Moving forward, will consumer be willing to borrow more money, and will the banks allow it?

-Interest rates have down a lot from the 20%~ peak sometime back in the 80s. Lower interest rates lead to lower repayments and an increased ability to bid more for property. Moving forward, can interest rates go much lower than 4.5%?

-Wage increases obviously lead to an increased ability to pay up for property. But considering you can hire cheap and able workers overseas, can we expect American wages to increase by that much moving forward? I believe the average America wage has been falling in real terms for quite a number of years already.

-There is this massive amount of houses in the US just waiting to be sold.

In a fair marketplace these factors would strongly argue for more declines in the US housing market. Against this, the government is throwing everything plus the kitchen sink to try to revive the housing market. In my personal opinion, the only way you can reasonably expect another massive drop in house prices(say another 30%) is if really believe that the US will be totally incapable to surmount these negatives. Even if the government is successful, I doubt very much you're going to get a high rate of return by holding houses as a passive investment.

If you plan to live in a house, I wouldn't say it's a bad time to buy now, especially if government policies work. If you plan to invest, I'm uncertain. But sure enough betting on American housing sounds to me like a much better alternative than investing in Australian or Chinese property.

Doroto wrote:Andy Xie has been warning the property market for a number of years. No one knows whether the year of 2012 will see what he is predicting.

My feeling is that there are still strong demand for commercial properties. I have been inquired quite a few times recently by companies that are going to buy office rooms or buildings in Shanghai.

Institutional investors like Blackstone are still pouring money into the property market to buy property and renovate, upgrade and then rent them out.

After reading a lot, I think there are two ways to look at the Chinese property market:

1)China is a special country in Earth in this special moment in time. Chinese leaders are the smartest this planet has ever seen in history, and this time is in fact different. In this case it's ok to put money in Chinese property.
2)China is not special, just like the US wasn't, Japan wasn't and Ireland wasn't. The numbers look bubbly and it will pop, despite what the Chinese government attempts to do. In this case don't buy, but I wouldn't say short property stocks neither(Because even if you are right, you can lose your shirt if you don't have experience/resolve). We're basically in a waiting game to see when it pops.

I've heard that should the property market is that the Chinese government will step in with heavy artillery should it collapse. Funny thing, I could swear the US moved the sky and the earth to try to prop up the American real estate market.

A final note, people interested in Chinese property should have a look at a lecture Jim Chanos gave a few months ago. It's in youtube and lasts for 1 hour.

Stpepper wrote:I wouldn't say it's a bad or good time to invest in American real estate. The American government is trying very hard to make house prices appreciate. Moreover they are printing(or quantitative easing if you object the term printing) a lot of money, so properties might go up in value just because the dollar is being depreciated.

Moreover, if you are a gambling type, I heard that there are tons of properties in Detroit selling for peanuts(1 USD to 1000 USD). If you bet on a Detroit recovery, and say buy 10 houses for 1000 USD each, at worst you lose 10000 USD. At best there is this amazing recovery from a very crappy position and you make at least 10x your money.

Regarding your comment bout govt trying to make house prices appreciate, all i can say is you are getting it wrong, the less they want right now is a new bubble.

Now, as for the cheap houses, if you look carefully, they are mostly located in some bad places in usa, like, you will have mexis and crack whores in your neighborhood, lots of economy based in drug dealing and prostitution, uncountable people living in shopping carts, hey that doesnt look good? not worth 10k.

In miami there were some good offers (from 200k+) but land taxes? and some others didnt make it attractive at all, but you can always bet on properties, somewhere else thats it

Could have fooled me. I mean, the are pumping tons of money into the economy, the funds rate is something like 0%, they are trying to help people stay in their overpriced houses instead of letting them walk away, the government now insures 95% of the mortgage market in the US. Ok, let's say I mispoke, they don't want the housing market to keep free falling, which is what it will do should everything return to 'normal'. But the result is not only they stop the freefall, they run the real risk of inflating another bubble.

It's a no brainer. You as a first time home buyer can get insurance from the FHA, put a downpayment of 3.5% and pay interest of say, 4-5% per month. You work out that you can get a rent of say 7% of the value of the house and maybe wait until things get better. Even if you assume that the house won't go in value you are cash flow positive. If things don't get better you walk away(Unlike many countries, a lot of US states have non recourse home loans. If you default on your home loan, the only thing the bank can do is sell your house. They can't chase you for the difference).

A lot of people will figure out that 'hey my account is earning almost nothing' and they will feel forced to put their money to work somehow. Then a lot of people start doing it. And we repeat the 2004-2007 period again.

About Detroit, there is a reason why I said it was a gamble rather than an investment. I know these properties are dirt cheap because Detroit has it very bad and these houses are no good anyways. But Detroit has it so bad right now that how much worse can it possibly get? If things do get worse, how much money are you losing? 10,000 USD, maybe less, if you somehow get hold of cheaper properties. State government coming later to collect tax? Default on the house.

Should a recovery come along, that also happens to lift Detroit along with it, reducing drugs and crime along the way, these properties will be worth much more. But again, I'm not going to mince words: It's a gamble. If you lose, you lose all your money, and the investor can only blame oneself for taking that gamble.

If you are gambling 10k on a recovery which is not coming (actually a 2nd wave of failures is) then you are losing money.
You are gambling, like it or not, in a bear market, dont forget that, and by principle, the job of the bear is to make you think its all good

^ This kind of thinking helps people make mistakes. There's no bear trying to do anything. It's a market pushed and pulled by a confusing combination of economic and psychological forces. Nobody knows what's going to happen. Many can guess, but that's all it is - a guess.

rickettyrabbit wrote:^ This kind of thinking helps people make mistakes. There's no bear trying to do anything. It's a market pushed and pulled by a confusing combination of economic and psychological forces. Nobody knows what's going to happen. Many can guess, but that's all it is - a guess.

Wrong, current market has been fueled by the gob, low vol trading, no money entering the market, and better than expected but not good news At all.
You aré right When you say nobody can guess but its pretty clear dji will test 8k lows sooner than later, you know, current market conditions aré just unsustainable.

Time will tell, cash is King

brokenfishing wrote:Chinese buyers flooded not only USA, but (at least as i know) : Japan, Singapore, UK..

Can you imagine if they also have another purpose...like find safer place for own rich arses ?

Imho.

I think you Perfect !

traveler2 wrote:

rickettyrabbit wrote:^ This kind of thinking helps people make mistakes. There's no bear trying to do anything. It's a market pushed and pulled by a confusing combination of economic and psychological forces. Nobody knows what's going to happen. Many can guess, but that's all it is - a guess.

Wrong, current market has been fueled by the gob, low vol trading, no money entering the market, and better than expected but not good news At all.
You aré right When you say nobody can guess but its pretty clear dji will test 8k lows sooner than later, you know, current market conditions aré just unsustainable.

Time will tell, cash is King

Oh, so you're not worried about a currency crisis in that case, right?

Traveler2: I *do* think that the US is headed towards a double dip recession. I *do* think that there are significant headwinds in property, debt, stocks, USD dollars and so on. I *do* think that you can get property cheaper if you wait instead of buying now.

However, if I were 100% right(Or even say, 75% right) I'd be filthy rich by now. I'm not saying you are wrong, rather, to think about what happens if despite all these significant headwinds th US recovers just fine(I know, a stretch).

I doubt very much, a lot of people would have been able to forsee the massive rally in the Nasdaq from 1995-2000. What is more, tons of bears got killed in between. Sure enough, by 2000 it crashed, but by then tons of bears got crushed and were not in business anymore. Same thing with Japan 1985-1990, Chinese property 2000-2010, Australian property 2005-2010 and so on. Heck if you had asked in 2006, I'd have told you Chinese and Australian property had to come down.

Rabbit: Well, if we are in a deflationary environment cash isn't to shabby. I'd say, having cash sitting in the bank for the last 10 years hasn't been a bad investment. Also, even when we understand that the end game is massive inflation and a lower USD, we do not know the timing of it. Just look at Japan: Printing money for 2 decades and they are *still* battling deflation. If you are looking for an accident waiting to happen, Japan fits the bill, because the numbers are so scary over the long run. But hey, tons of guys bet on Japanese bond yields rising, using very sound reasoning and they got killed anyways.

Moreover, if you are waiting for a currency crisis in the US I wouldn't worry about property or stocks: I'd buy guns and supplies for the end of the world and looking at means to protect my property against a break down in law enforcement.

Doroto wrote:how do you think of investing in real estate in USA?

like this:

The market is still unwinding. Its really quite a mess. I wouldn't touch it. Even people who buys homes with cash or those who make their mortgage payments on time and up to date are being affected. The problem is, for a lot of these extremely cheap properties( and probably more than just the cheap ones) - they don't actually know who has the title. Massive record keeping fraud and issues, and blind signoff and "robo-signing". One guy was fighting the bank foreclosure after he bought a place for 100% cash, because the paperwork the bank had from the previous owner said something different.

http://www.huffingtonpost.com/news/foreclosures

Today I read a piece of news on major web portals that a Chinese buyer (actually this guy has US nationality but his money comes from within China) spent 480 million USD to buy 8000 apartments in USA.

Previously, he has bulk investment in Chinese real estate market.

Still people have different ideas about the future. Even in China, though after Shanghai stepped up its own rules a few days ago, I still see (via my realtor friend and phone inquiries about legal question regarding real estate purchase) a lot of people buying in properties in Shanghai.

The Chinese and the U.S. real estate markets are at completely different stages. High prices and talk of a bubble China is balanced by statistics to support that prices in some parts of USA have bottomed and are up to 60% lower than they were at the height of the market.
Investors in Chinese property are looking for quick profits, investments in USA market right now are more long term wealth building opportunities.
When buying a US property there are 2 things an investor should look at - cash flow from rental income, and the opportunity to make money on capital appreciation. Places like Detroit can potentially give great cash flow when you buy a really cheap house and put a tenant in there, but don't expect to sell the house any time soon and realize a profit. Detroit does not fit the bill of a good investment market, where you should look for a growing population, healthy economy and job growth, diversity of potential buyers etc. Better to look for markets with more modest cash flow, better quality tenants for ease of management, and good indicators for future growth.

In the U.S. housing market was the most dramatic change in a complete reversal of the preferred types of U.S. real estate investors, with all categories of ownership and transfer, the most spectacular is the fifth office and commercial properties to the first.

United states is very famous and popular country in all over the world. I like so much your post. You give such nice information bout real estate investing. It is very useful.

you invest in us if you live in us or go there very often, the same apllies to any other market, therefore if you arent just stick where is your region of expertise and make a deep research everymarket has a potential, location is the most comon atribute of a good investment.

I moved to china and i had to sell my properties in USA as it was a pain to collect the rents actually the opp was given to the vendors, like property managment agent, county taxes, banking institutions and the last in the line wa me. Since im in china i think i have to stick to what it brought me here save and keep strudying opportunities, China doesnt convince me as a good long run, not for an expat but for a chinese for residential, but if its for comercial thats something else. I better prefer to wait and see what and where i will spend my next 10 years. then focus on the prop mangmnt which is the no1 thing to think before having a property.