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Last Updated: Jul 26, 2016




Nothing seems to stop the U.S. housing market. House prices continue to rise; demand is strengthening, and residential construction activity is also rising.

During the year to April 2016, S&P/Case-Shiller seasonally-adjusted national home price index increased 5% (3.3% in real terms), slightly up from a y-o-y rise of 4.3% a year earlier, according to Standard and Poor’s. The seasonally-adjusted purchase-only U.S. house price index from THE Federal Housing Finance Agency (FHFA) rose 5.9% (4.6% in real terms) y-o-y in April 2016.

All 20 major U.S. cities experienced relatively strong house price hikes, with Portland posting the highest increase of 12.32% during the year to April 2016, according to Standard and Poor’s. It was followed by Seattle (10.67%), Denver (9.45%), Dallas (8.65%), San Francisco (7.77%), Tampa (7.77%), Atlanta (6.51%), Miami (6.44%), and San Diego (6.34%).

The Pacific region had the highest house price increases (8.6%) during the year to April 2016, followed by the Mountain region (7.7%) and the South Atlantic region (7.1%), according to the FHFA.

The median sales price of new homes sold in the U.S. rose by 1% during the year to May 2016, to US$290,400, according to the U.S. Census Bureau.

Demand has been shooting up. New home sales rose by 17.9% y-o-y to Q1 2016, to 132,000 units, according to the U.S. Census Bureau, rising in all regions. Likewise, existing home sales increased 5.1% in March 2016, to an annualized 5.33 million units, according to the National Association of Realtors (NAR).

U.S. homebuilder sentiment in June 2016 was at 60, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) – the highest reading this year.  A reading of 50 is the midpoint between positive and negative sentiment.

Construction activity is also rising. New privately-owned housing unit starts were up by 10.1% y-o-y during the first four months of 2016, while housing completions increased by 8.9%, according to the U.S. Census Bureau.

United States house pricesCoreLogic projects a 4% to 5% increase in its national home price index this year. NAR expects existing home sales to rise by 3% to 5.45 million in 2016, with the formation of 1.25 million new households.

The U.S. economy grew by an annualized 1.1% in the first quarter of 2016, after growth of 1.4% in Q4 2015, 2% in Q3 2015, 3.9% in Q2 2015 and 0.6% in Q1 2015, amidst weakening exports and investment caused by strong dollar and lower oil prices, according to the U.S. Bureau of Economic Analysis. The world's largest economy is expected to grow by another 2.4% this year, at par with the growth rates seen in the past two years, according to the IMF.

Analysis of United States Residential Property Market »


RENTAL YIELDS
Last Updated: Jun 29, 2016



Manhattan property has held up well through the crisis and beyond.

How much will you earn?  Studio apartments will earn relatively more than one-bedroom apartments (in terms of return-on-investment), and those in turn will earn relatively more than two-bedroom houses, etcetera. To earn higher returns, buy smaller units.
  • a studio apartment can rent for around $2,700 per month, earning a rental yield of around 7%
  • a 1-bedroom apartment  can rent for around $3,500 per month, earning a rental yield of around 4.4%
  • Larger units earn proportionately lower returns.  A 3-bedroom apartment is likely to earn a rental yield of around 2.4%

Round-trip transaction costs are moderate for buyers of U.S. residential property. See our U.S. residential property transaction costs analysis.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Sep 12, 2016



united states houses for saleRental Income: Rental income is categorized as either Effectively Connected Income, wherein it is taxed at progressive federal tax rates, or Fixed Determinable Annual Periodical income, wherein it is taxed at 30% withheld by the tenant.

States also levy income taxes at varying rates.

Capital Gains: Capital gains tax for properties held for more than a year is 5%; otherwise the tax is 15%.

Inheritance: Federal estate tax is progressive with rates at 18% to 45% and an exemption of up to US$2,000,000. A Generation-Skipping Transfer Tax is also being levied on transfers to beneficiaries who are more than one generation younger than the transferor.

Residents: Resident foreigners, like U.S. citizens, are taxed on their worldwide income.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Sep 13, 2016



Roundtrip transaction cost is around 9% to 11%. Significant costs include the 6% real estate broker's fee and real property transfer tax, at around 1.425% in New York City. Total costs for legal fees, title search and insurance, and registration fees range from 1.70% to 3.50%.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Feb 06, 2008



Strong anti-discrimination laws make the US slightly pro-tenant.

Rent Control: There are subtle rent control laws in 5 states; however their laws also have provisions to give landlords a fair return of investment.

Tenant Security: It is advisable for landlords to write a report citing all the allowable reasons when declining a prospective tenant. Tenants can also charge landlords with intentional infliction of emotional distress to fend off eviction.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Jul 26, 2016


Modest economic growth, low unemployment

United States GDP inflationThe U.S. economy grew by an annualized rate of 1.1% in the first quarter of 2016, after growth rates of 1.4% in Q4 2015, 2% in Q3 2015, 3.9% in Q2 2015 and 0.6% in Q1 2015, amidst weakening exports and investment caused by the strong dollar and lower oil prices, according to the U.S. Bureau of Economic Analysis.

Despite this, the U.S. economy grew by 2.4% last year, matching its pace in 2014.

The world's largest economy is expected to grow by 2.4% this year, and by 2.5% in 2017, according to the IMF.

However, the U.S. is vulnerable to global economic turmoil. “Greater uncertainty about the prospects for global growth and increased financial market volatility could make U.S. businesses more cautious in hiring and investing, and could make consumers less willing to spend,” said Gus Faucher, deputy chief economist at PNC.

Last year’s budget deficit was the lowest deficit in eight years, at an estimated 2.5% of GDP, down from 2.8% of GDP in 2014, according to the Congressional Budget Office (CBO) - and down from 10.1% of GDP in 2009.  But for the full fiscal year, the federal government’s budget deficit is expected to increase to 2.9% of GDP, according to the CBO.

United States unemploymentInflation stood at 1% in May 2016, according to the US Bureau of Labor Statistics. Overall inflation is expected to be 0.8% this year, almost unchanged from a year earlier, according to the IMF.

Unemployment in the U.S. was 4.9% in June 2016, down from 5.5% in the previous year, according to the Bureau of Labor Statistics (BLS). It is the lowest level since 2007.

There were a total of 287,000 jobs added in June, up from a meagre increase of 11,000 jobs the previous month. The additions came mostly from the healthcare and social assistance services (58,000 jobs), professional and business services (38,000 jobs), and the information sector (44,000 jobs).

The country’s unemployment rate averaged 5% from 1998 to 2008. Its recent peak year was 2010 with 9.6% unemployment.

In June 2016, average weekly earnings increased by 2.3% from the same period last year, to US$880.98.







  • Strong and stable economy
  • Low to moderate transaction costs
  • Yields now moderate to poor
  • Complicated tax system
  • Pro-tenant rental market
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $17,847 For a 120 sq. m. property, usually an apartment.
Rental Yield: 2.75% For a 120 sq. m. property, usually an apartment.
Rent/month: $5,078 For a 120 sq. m. property.
Income Tax: 30.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 9.82% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 5.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

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