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American real estate: The upside

Last week’s stock market crash caused by a dramatic rise in sub-prime mortgage delinquency rates in the US may not be good for American real estate but things look brighter for Brits

Throughout the American real estate mortgage industry, the percentage of prime home-equity loans at least 60 days delinquent has more than doubled to 1.14 per cent in May 2007, according to new data from First American Loan Performance. America's top mortgage lender, Countrywide Financial, last month announced that its second quarter net income fell by 33 per cent. Additionally, American Home Mortgage Investment Corp shares dropped 90 per cent after the lender said it didn't have cash to fund new loans.

In response to current economic conditions, Countrywide has cut its sub-prime lending (with a higher rate of default) in half: it now accounts for 4 per cent of new loans. However, this "decline in high-risk lending failed to outweigh a surge in late payments on its prime loans," The Times recently reported. Countrywide chief executive Angelo Mozilo warned that in the second half "we expect difficult real estate and mortgage markets conditions to persist."

Whilst real estate prices remain depressed throughout America, due to a slowdown in the American real estate market caused by oversupply and 17 interest rate increases in a row, now could be a good time for British buyers to snap up their dream real estate in Florida before prices begin to rise again.

"Real estate prices in Florida are expected to recover in early 2008 or sooner as sales of resale American real estate rises and scarcity becomes the norm," says Gordon Robinson from Florida Gold International Real Estate.

"Because buyers in this buyer's market have had an oversupply of homes they have been able to negotiate lower prices with American real estate owners and builders. However, as the new build inventory diminishes and building companies profits are squeezed home builders will limit new construction in 2008 and this will bring higher prices."

This slump in Florida's real estate market therefore continues to bring good news for Brits looking to purchase American real estate in the state. With the pound trading with the dollar at a 20-year high, real estate prices in Florida are proving to be a better deal for overseas buyers than in recent years. And with prices not set to drop any further, now may be the optimum time for British buyers to snap up a bargain.

"Here in south-west Florida, we feel that real estate prices have bottomed out and won't fall any further," says Elaine Osbond, a buyer's broker specialising in the Naples and Marco Island areas. "Basically, prices have returned to the levels of two years ago. There is a six-month supply of American real estate on the market, which once confidence returns to the market and the buyers start to buy again, will take some time to clear."

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14 August 2007