7 Good Reasons to Invest in U.S. Real Estate

From CEO of Pacific Holdings, Youval Ziv

The past year in the U.S. real estate market has been a very successful one - the market woke up, prices rose and real estate investing has become attractive and appealing to locals, foreigners, investors and entrepreneurs alike.

According to all the data and estimates, this trend will continue in the coming year - home prices are expected to continue rising, yields on investments are growing (specifically with regards to capital gains from the appreciation of assets), and new areas become centers of attractive real estate. Why?

The first reason: The general atmosphere in the U.S. after the election. The positive American atmosphere helps lower unemployment figures and boost the economy, and that means a strengthening and stabilizing of its real estate market.

The second reason: The index of real estate prices in the U.S.; the most common is the Case-Shiller index national average which rose by 11% during the past 12 months and is the highest increase since 2006! You have to remember that the national average is misleading because demand areas in California, Arizona, Florida, Nevada, and Georgia increased by 30%, yet the quieter areas (like central states or New York ) had a much more moderate rate and thus affect the index of house prices. The National Association of Realtors released figures showing that real estate prices are expected to rise by another 10% in 2013. (Old news)

The third reason: The decrease in new housing, and the high level of demand for housing. In 2012, there were approximately 620,000 units built in the U.S. compared to the 2,000,000 units that were under construction in 2005! To keep pace with population growth, the U.S. economy needs a little more than a million housing starts per year. Speculation suggests that about 700,000 housing units will be built this year, indicating that the increase in demand will continue. Decreasing housing builds below the required level has helped many markets recover, even if not as fast as expected; the recession has forced families in general and young people in particular to return to live with relatives, but now that the U.S. recession is over and unemployment is down, demand for homes is strong and significant!

The fourth reason: Stability and an increase in rental prices. People who lost their homes to the bank were forced to rent. Coupled with the sharp decline in new housing construction during the crisis of 2007-2012, the stock of homes for sale took a dive, and therefore those who wanted to buy would not necessarily find a suitable home and chose to rent in the meantime. We're left with low prices for real estate on the one hand and higher sales on the other; that's good news for real estate investors.

The fifth reason: Lack of alternatives: Low interest rate environments in the developed world and the ongoing crisis in Europe cause a condition where there is no safe alternative investment. One of the safest alternatives was first precious metals and gold, but gold has been running very relaxed the last six months and the price dropped accordingly by about 20%. Bonds offer very low yields and of course for Israeli investors, current yields on real estate rentals in Israel declined in recent years, and with it the chance to increase asset value in the future.

The sixth reason: The U.S. dollar is lower. U.S. real estate investment is also a currency investment. The U.S. government's policy during the crisis was to keep a low dollar to increase exports and thereby create jobs and prevent diplomatic pressure. With recovery from the recession and inflating pressures for the Central Bank Governor to change policy, interest rates will start to rise; thus, the policy of printing money diminishes greatly and as a result the dollar in general, and in Israel in particular, will rise. In addition to the government, it is in Israel's interest to raise the dollar to increase exports and prevent a recession. U.S. real estate investors enjoy currency appreciation and enjoy capital gains resulting in profits over and above the increase in value of the real estate itself and the current yield of the lease.

The seventh reason: Timing. The window of opportunity is closing, the bottom is behind us, the train left the station and is forging ahead. Due to the gradual increase of prices and decreasing returns, by the end of 2012 we offered investors a fixed return of 10% maximum yield model, which is now the CLA 9%; whoever waits on the sidelines may find it in a year or less with a yield of 8% or less. It is important to note that whoever buys property was not damaged by the decline in yields since the yield is derived from the cheap price that the investor paid for the property during the investment. Rising prices not only affect the current yield but also increase the return on capital.

Pacific Holdings
Real Estate Investments
(800) 403-3407
8484 Wilshire Blvd #870
Beverly Hills, CA 90211
Direct: (800) 403-3407
Fax: (877) 607-7556