Land of the free? and Home of the Brave Investor

First and foremost – let me say I have nothing against the USA.  It’s a great place.

I have friends and family there, whom I love to visit, and there are also some very cool things to do and neat places to visit in the USA.  What I don’t think the USA is – is a great place to invest.  Please - Let me explain.

Yes there are some really great sounding deals….Seemingly irresistible even.  We have all seen and heard the ad ‘Foreclosed home that was once valued at 800k now being sold for 100k’.  Tempting?  Sound too good to be true?   Its is

Let’s think logically about the above scenario.  Why is there such a deep discount on the property in the first place?  Its like the Boxing Day sale of housing prices – It’s all the stuff no one wanted.  Its surplus!  The surplus inventory just keeps getting passed along and passed along with price reductions at every step and yet still no one wants it.  Why do you think it’s valued at 100k today? ‘Something is only worth what someone is willing to pay for it’ and to date no one has wanted that property! No one is going to pay 800k for that house for a long time – and if it is foreclosed on - no one wanted to buy that house as it sat on the market for a very very long time with a sign on the lawn saying ‘Will take anything – please just buy our house from us’  Sad but true.  I don’t think they put in the literature that the house sat on the market vacant for at least 2 years.

Keeping this scenario in mind –  people invest to make money - not to purchase a bargain property.   It pains me when time and time again I hear people mulling over the idea of investing their hard earned money in the US.  I don’t get it.   Buying up surplus housing in a market that is failing is not a sound investment.  The markets are not going to rebound over night or even in the next 10 years.  Also managing this property I can assure is going to be a full time job, unless of course you hire a management company – who in turn take a nice big chunk of any possible profits right off the bat.  Still tempted?  Deep down you know there are much better options to earn residual income.

Prices have been falling in the USA since 2006, and will continue to decline well into 2012. According to reports some areas have fallen well over 55% since 2008 and are expected to fall another 3.6% in the next 6 months alone.  Not good news.

Many experts thought that 2012 would see the end of the falling and failing housing market in the USA, but according to the most recent reports out this week it seems we have not even seen the tip of the iceberg as the massive ‘shadow inventory’ of foreclosed homes has not even been released to the market yet.

It is the areas most popular with Canadians that are being hardest hit as well. Naples, Fla., for example, will see prices drop another 18.9% by next June – that’s in the next 6 months! (according to Fiserv. ) That’s the largest decrease in price of any metro area covered.

Las Vegas is not far behind either; prices are set to fall 15.9%, Riverside, Calif., predicted to fall another 14.8%, and Miami - 14.8% drop.  All this according to reports out by CNN.  None of this is good news.

So the next time you hear someone telling you about the ‘great housing deal’ they have just been offered in the USA – tell them to think long and hard about where they put their money cause the USA is not getting better anytime soon.   Invest smart people!