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Real Estate A Vital Investment Sector & Real Estate A global view
Armstrong Economics ^ | January 23, 2012 | By: Martin Armstrong & Petra Gajdosikova

Posted on 01/24/2012 10:27:04 PM PST by Razzz42

United States

The US now presents some of the best real estate opportunities not only of all developed countries but also compared to most developing markets. Prices in a number of states have declined so much that there is deep value to be found. In fact, there are many locations around the country where properties now sell below replacement cost.

As is always the case, nobody wants to even think about buying real estate now that prices in many areas have dropped by 50-60% and yields are higher than seen for decades. Yet just a few years ago at the top of the bubble everyone had to be a home owner and/or investor. So much for buying low and selling high.

In such a vast country, real estate is very geographically dependent. While some areas and cities came through the housing crash relatively intact with quite modest falls, declines for the 10-City and 20-City Composite from the summer 2006 peak through October 2011 came to 32% (S&P/Case-Shiller Home Price Indices). Then there were the

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true disaster zones like Arizona, Las Vegas, Florida and parts of Southern California that saw prices crash by up to 60%.

The conditions are very favorable for an investment in inexpensive US real estate - in particular well located income producing properties in Arizona, Florida, Nevada and (parts of) California. Prices in many locations are now back to the levels of the early 2000’s (and in fact below early 2000 prices in the case of Las Vegas). Most homes are priced well below replacement cost, in many cases as much as 40-50% lower than the cost of rebuilding the property. Sales prices in these locations average $750-1,100/m2, but prices as low as $500/m2 are not so rare...

(Excerpt) Read more at ...

TOPICS: Business/Economy; Education
KEYWORDS: global; realestate
This time Armstrong has a guest writer on real estate. Armstrong does his historical rendition of early American real estate adventures during the founding of the US and his guest writer offers her observation on global real estate investing beginning on page 21.

I only excerpted part of her US RE opinion as the .pdf is 36 pages, so you can pick and choose what interests you the most in these writings.

BTW, I couldn't find any spell check errors in these well written pieces this time around.

1 posted on 01/24/2012 10:27:09 PM PST by Razzz42
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To: Razzz42

Problem is we do not know how big is the inventory of homes held by the banks. Estimates vary from 4.8 million to 9 million homes held, in the process of foreclosure and behind in payments eligible for foreclosure. The legal snafus in the foreclosure process has created an artificial drop in foreclosures, but the inventory and pipeline of homes is hidden like an iceberg. Sooner or later these homes will be liquidated and placed on the market. Rumors is the Fed Reserve recommend the gov buy them in huge lots and sell them to large investors pennies on the dollar. Sold or rented out by the new owners it will depress the prices of any home being brought today or near future by atleast 20 percent. So if one plans to buy a house, figure a drop in value by 20 percent before it hits real bottom within 10 years.

2 posted on 01/24/2012 11:08:53 PM PST by Fee
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To: Fee

That’s all true but you have to consider also any possible rise in tax rates and interest rates. Either one would stifle any economic recovery affecting not only a buyer but a potential renter.

At current interest rates, if you were looking to buy to live in the home and not looking for return on investment, might not be a bad time to shop for a decent house deal. Seems cheaper than renting.

Notice how depressed the RE market is now, people still don’t want to part with their money even at these prices and interest rates, more than likely due to the uncertainty of what the future holds.

If RE is just going to bounce along the bottom here, no sense trying to pick the exact bottom.

3 posted on 01/25/2012 12:17:44 AM PST by Razzz42
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To: Razzz42; Fee

I agree with fee and razzz42 .. I am looking at real estate now and interest rates are a possible problem going forward ... but any rise in the next few years will lead to more collapse in prices ... If I could I’d leverage all I could into rental properties and expect inflation to make my payments (in real money) become miniscule ... I am in Florida and single family is down 60-65% and condo’s are down as much as 90% (priced so that with condo association fees included they’re at the same -60 to -65%) ...

In FL 15-25% of all mortgaged housing is 90 days+ delinquent so there will be no recovery here for at least a decade.

4 posted on 01/25/2012 3:51:44 AM PST by Neidermeyer
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To: Neidermeyer

If you can buy property and have it immediately cash positive (not lose money and wait for tax rebate for profit) I would buy some. Remember, the biggest threat to this approach is the tenant must have jobs or else you are forced to evict. How the US economy will fare in the next couple years and what employment looks like is an important factor when investing in rental property. No jobs, no tenants that can pay rent. Make sure the rental property is within 30 minutes of drive and be handy in small repairs.
IMHO if you must buy a home, find a location that is highly desire. Example near waterfront with water view, near golf courses etc etc for resale purposes. Or buy a home that is just enough for your living needs and very close to your place of work.

5 posted on 01/25/2012 4:36:20 AM PST by Fee
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