US property prices continue to rise

Warren Lewis
7th August 2013

The recovery of the US property market is supporting further gains with home prices in 10 major US cities increasing by 11.8% in the year ended in May, according to the S&P/Case-Shiller home price index.

Home values in 20 cities were up 12.2% on the year, with two cities - Dallas and Denver seeing home prices hit new highs in May. Prices in these two cities surpassed their pre-financial crisis peaks set in June 2007 and August 2006, respectively.  In addition, five cities - Atlanta, Chicago, San Diego, San Francisco and Seattle - posted monthly gains of more than 3% for the first time.

Home prices have been rising for more than a year. Low mortgage rates and stronger job growth lifted demand at a time when supplies of homes were relatively tight.  The recent increase in mortgage rates could slow the uptrend in home prices. Some potential buyers may no longer qualify for a mortgage at the higher rates, and they may have to lower their price bids on a home in order to keep the monthly mortgage payments down to an affordable level.

Luke Smith, Managing Director of Crystal Investment and Real Estate comments:

“US real estate is showing a sustained recovery with prices returning to levels last seen in the spring of 2004.  However, they remain 24%-25% below the June-July 2006 peaks.  
“As a result of the rising prices, there has been a flurry of positive investor sentiment.  We have been busy looking in some detail at various alternative investment models to assist investors to diversify their asset class.

It becomes increasingly more difficult to identify and select quality residential real estate properties in good locations, due to the huge absorption rates driven by institutional funds from Wall Street.  Our efforts have turned to identifying some significantly undervalued land plots from key markets in which we have previously offered properties.

We have built upon our acquired local knowledge and experience to bring exclusive access to serviced land plots in the affluent Atlanta suburb of Fairburn, offered for sale at around 25% less than current comparable pricing in the area.  Oakleaf Manor is located in East Fairburn and consists of 98 lots in a quiet residential cul-de-sac, ideal for creating a safe family environment.

Given the increasing demand for new homes, developed land offers the perfect solution for house builders. Without the need to wait for planning and the associated costs of installing infrastructure, they can start building almost immediately, providing you get a profitable return on your investment. Let’s say you buy your lot for $15,000 today and sell it five years later for a very realistic $33,000. This would give you a 120% gross return on your investment, or 20% annualised.”

Crystal Investment and Real Estate has put together some key facts on Atlanta:

•    Forbes Magazine ranked Atlanta as the number 1 rental market
•    1st in US as least costly large city for business
•    2nd as America’s best cities to relocate
•    3rd in job growth by US Economic Rankings
•    CNNMoney.com says Atlanta is the 4th best US city to invest in
•    Forbes Magazine ranks Atlanta the 4th most affordable city
•    4th for having most Fortune 500 companies’ headquarters
Related articles
More from Overseas
Latest from Financial Reporter
Latest from Commercial Reporter