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The US Housing Market Rebound

Global markets have retreated slightly over recent weeks, following a minor fall in new jobs for the month and unemployment in Europe reaching new highs. A big-picture view however, shows major US economy bellwethers -housing and stock markets, experiencing a rather robust recovery. As an equities analyst, my eye is trained toward chart analysis and leading market indices to show underlying value in the economy. Right now, America's leading index, the Dow Jones Industrial Average, appears well positioned for future growth and economic recovery.

The housing market and leading indices remain explicitly intertwined. Housing affordability is at unparalleled levels. Atlanta, (one of America's fastest growing cities), has an affordability ratio of 2.8, meaning that the average home purchase is approximately 2.8 times the average annual income. Sydney, for example, is at an affordability ratio of 9.2, a rather stark contrast. Housing in America is unbelievably cheap, and smart US Property Investors continue to see the rewards. Historically, housing, and the economy have moved very much in unison. Regardless of swings in momentum and overall market conditions, equilibrium is eventually maintained.

The housing market, like many things, moves through oscillations. A big picture analysis tells us that that often, when all appears to be doom and gloom in any market, this is in fact the point of maximum financial opportunity.

So where does the US real estate market appear to be positioned right now? Sure, we may have passed the absolute point of maximum financial opportunity, but the expansion phase, which will likely span for a decade, is only just beginning.

The US real estate recovery all starts with the mortgage market. Major banks are now vying for a piece of the decrepit US mortgage market and Wells Fargo, one of America's only continually profitable banks continues to dominate the ailing mortgage arena.

As of this week, Wells Fargo owns 33.9% of the US mortgage market for the three months ending March 2012. In perspective, this is THREE TIMES the amount of mortgages of its nearest competitor! Whilst many may view this as a high risk financial approach to the US economic recovery, many will also note that Wells Fargo is also one of the only banks positioned to emerge from this recovery in an excellent financial position. Its flailing competitors, such as Bank of America, have paved the way for Wells Fargo's dominance, as they are in no financial position to be increasing their position in the US mortgage business.

What does this mean for Australian's investing in US property? Gaining access to finance will only get more difficult. Ultimately, interest rates will rise and US domestic borrowers will again, find their feet, but mortgages for foreign investors will come at a much higher price. Gaining access to secure, bank approved finance is no easy task However, there are companies that provide better finance options. For example, the company US Invest, can get access to rates of just 5.75%, fixed for 20 years in some of America's best markets, by being qualified through their finance criteria

Australians can access finance to buy US property. What they do need, is to be qualified by an official US partner.

So where do we go from here? It's clear that US markets present value from a range of different scenarios. Business confidence remains high, as does affordability. Competition in the US mortgage market would be fiercer, should any of its traditional players be in a position to compete for new mortgage business. The strategy for many US institutions is to clear their books of existing loans, not add to the list. This delayed reaction to improved economic conditions may lead to many US lenders missing an outstanding opportunity in the US economic recovery.

Those investors who have bought property in America in 2012 are in an enviable position. It's likely their US investment properties have increased significantly in value. Now may just be that point of maximum financial opportunity and there is no better time to add to your portfolio.

The US economy and housing market is poised for a continued recovery. The future is bright, get involved!

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