Is there a real estate bubble in the US?: What experts say about the sector that attracts Argentine investors

Housing construction continues to progress in Florida, the United States, a refuge that Argentines choose with savings that they spend on homes in search of income

in the United States of America There is some concern about the decline in home sales, as the increase in mortgage interest rates, which averaged 5.1%, has made many potential buyers begin to doubt when taking resolution. But from the real estate sector in that country they pointed out that prices reached an all-time high last April, with record-breaking unit prices – starting on average at $391,200An annual increase of 14.8%, according to the National Association of Realtors.

The possibility of a “bubble” worries Argentine investors who are putting their dollar savings into real estate in Miami, Detroit or New York. Experts advise them Infobae Agree that there will be no new place housing bubble. This is happening They occur when prices rise rapidly for no reason to explain, as happened in 2008 with the “subprime” crisis. The schemes used to purchase homes by customers with low net worth and the level of default risk were higher than the average for loans in the sector. These credits had a higher interest than personal loans (although in the early years they offered a promotional rate), and bank commissions were more burdensome. And they ended badly.

John Paul PistorioCEO of Time Buyers, said Infobae This “in my view, We can’t talk about a bubble, because the fundamentals in the price hike are quite solid. With the arrival of the pandemic, the government lowered interest rates and this allowed a section of society to obtain loans that were not previously payable. This caused demand to grow almost immediately, which supply could not logically follow. Once supply matches demand, when new construction ends up as well as prices rising again, prices will stop rising, but they will hardly go down, so I think the bubble concept will not be correct.”

“Once the supply matches the demand, when the new construction ends as well as the prices going up, the prices will stop going up, but they will hardly go down, so I think the bubble concept will not be right” (Pistorio)

Where The US market confirms that it is now an adjustment in prices, not in all properties, but in some. Where the impact has been felt most in homes for US citizens themselves, as mortgage credit has risen, many people are left without access to a home, or it becomes more expensive to do so.

“In March 2020, the interest rate offered by US Treasuries reached an all-time low, 0.54%; thanks to this, mortgage rates reached their historic lows in December of that year, at an average of 2.68%. This strengthened Mortgage lending and this was one of the main factors that drove home prices to record levels.Today, with the highest rate, the most historically normal, the market is under control, it is calming down a bit. But in the face of the record value of homes, there are various reasons to believe that we are not in bubble mode, but rather a slowdown in price growth and some adjustment in areas where prices have grown well above their value.‘, explained to Infobae Virgilio RaidenCEO of GlobUp-One.

Miami continues to attract investment despite strong home price increases
Miami continues to attract investment despite strong home price increases

And they warn this sector that there are strong structural problems that prevent the collapse of house prices despite the high prices. Mainly demographic factors and the housing deficit, i.e., the demand for homes is greater than the supply.

In the case of Florida, the imbalance between supply and demand for homes is deeper because it is a strong immigration destination, which has increased with the pandemic.

Are Argentine investors safe?

Meanwhile, Argentine investors’ preference for Miami remains consistent, with a minimum investment ticket of $400,000, Orlando ranks second; can invest from $300,000, and more recently the Fort Myers-Cape Coral area, on Florida’s Gulf Coast, has emerged as a new alternative, especially for building homes for sale or rent.

Miami remains consistent in the preference of Argentine investors, with a minimum investment ticket of $400,000 USD. Orlando ranks second with investments of $300,000. Recently, the Fort Myers-Cape Coral area, on Florida Bay, has emerged as a new building alternative for sale or rent

Rayden explained: “My advice to investors is to consider the cap rate (capitalization rate) of a property, i.e. how much net annual return a property gives or expects, after all, real estate is an asset that is worth what they are worth. If they generate little, they must be Their value is little, and if they give too much, they are valuable real estate.”

Detroit is another city where Argentines have recently purchased homes worth over $80,000 in search of income from rentals of around 8% annually.
Detroit is another city where Argentines have recently purchased homes worth over $80,000 in search of income from rentals of around 8% annually.

The purchase process is very simple and can be made online with a digital signature. Many investors do it this way, although after the worst of the pandemic, many prefer to travel and see their investments in person, even though they sometimes end up – already back in Argentina – digitally signing documents. Argentine investors tend to buy quickly, anxious to protect themselves from inflation and get dollars out of the country. In this context complex errors can incur. My advice is to be calm and analyze well before investing,” Pistorio explained..

As an added fact, in 2021, Argentines represented 13% of foreign buyers in that area, according to the Miami Association of Realtors.

George Coverman Miami Life Realty moderator commented on Infobae That “Argentinean buyers have to be calm, nothing can happen to them. They continue to have the dollar money in real estate and generate income. What an Argentine investor is looking for is different from what a local buyer is looking for, or different from a person from New York. What the Argentine wants is money in dollars and bricks, and this is what he achieves by buying in Miami. He’ll get a return of 2%, 3%, 4%, 5%, 7%, it depends on what you buy, but you know you have the money safe, in the bricks, and that’s fine.”

Miami has an element that is not found elsewhere. Because of the home office, a lot of people have moved to this state to live, because of the climate and tax benefits, adding pressure on the already high prices.

Detroit, another destination chosen by Argentines, differs because access to credit is still limited, so real estate in the premium segment has seen decent increases, but the mid- and low-end segments, despite trying to capitalize on part of the increases, today everything is stabilizing again .

“However, given the low entry ticket, it can be a good investment if you know where to buy,” Pistorio added.

Read on:

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