Us Housing Is A Bargain Now?

[frugalboy]

OK I'll put in my 2c worth.

1. Taxes are high in most metro areas. Mish (for example) pays $12000/yr in smaller Illinois metro, I saw a property profiled on the Business Insider that had dropped 50% in value, but the tax was $60,000/yr. Not unusual to pay $15,000/yr or more most metro locations for an average property.

2. House prices are simply not as sticky in the US as they are in the rest of the world. The reason is that mortgages in the US are written against the property, not the buyer (thank you Franklin Roosevelt). In the rest of the world, like the UK, the bank writes the mortgage against the buyer and against the property. So you can expect the property market to clear faster in the US than most other places will.

3. Even though the properties will reach bottom within the near future, I just don't think there is a lot of upside (generally) for a long time yet. That's because the property taxes+maintenance fees (in some cases) will have to be gutted. These monthly service costs are more than monthly cost of finance in many locations. This means that many metro areas are going to have to completely restructure. I think this could take more than 10 years to work through.

4. Many properties built during the last 5 to 10 years are not of a high standard. I designed an extension for a property in North Carolina 10 years ago and was appalled at the material that was used to construct it. Off cuts of lumber, patched together. The floor had to be underpinned to stop it bouncing.

All these factors make the US property market quite treacherous for the time being. This is not to say that there wont be individual instances where good investments can be made, I'm only describing the more general case. Beware and take care.

Not so sure about your #1 - $60,000pa??? The OP was looking to buy a cheap flat in Florida not a mansion in California circa 2005. A recently built condo in Miami valued at say $200k would require roughly $4k pa in property tax. A significant running cost yes, but an order of magnitude away from 60k.

Totally agree with your #3 though - maintenance fees are totally unsustainable and something will have to give eventually. When taxes+fees barely cover the market rent (so how does a landlord with a mortgage on top of this possibly make any money?) then you know it's totally out of whack.