Us mortgage rates at all-time lows

American real estate has turned the corner with prices continuing to rise, the S&P Case-Shiller March index shows. House prices rose by over 10 per cent in the last four quarters and all 20 cities in the index posted positive year on year growth, but low mortgage rates mean that even with rising prices, investing in US real estate is affordable.

Phoenix had the largest annual increase at 22.5 per cent, according to Case-Shiller, followed by San Francisco with 22.2 per cent and Las Vegas with 20.6 per cent. Miami and Tampa, the Eastern end of the Sunbelt, had  smaller increases of 10.7 per cent and 11.8 per cent. The weakest annual price gains were seen in New York (+2.6 per cent), Cleveland (+4.8 per cent) and Boston (+6.7 per cent), but even these numbers are quite substantial.

All 20 cities showed increases on an annual basis for at least three consecutive months. Atlanta, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, Phoenix, Portland, San Diego, San Francisco, Seattle and Tampa all posted double-digit annual returns. Las Vegas, Phoenix and San Francisco were the three cities to increase over 20 per cent in March 2013 over March 2012.

Charlotte, Los Angeles, Portland, Seattle and Tampa were the five cities to record their largest month-over-month gains in over seven years.

As of the first quarter of 2013, average home prices across the US are back at their mid-2003 levels. At the end of the first quarter of 2013, the National Index was up 1.2 per cent over the fourth quarter of 2012 and 10.2 per cent above the first quarter of 2012.

But rates are working in buyers’ favours, explains Rod Thomas, Director of Axis Property Investment: “US mortgage rates are now near their lowest levels since long-term mortgages were first offered in the 1950s. A 30-year fixed mortgage currently costs as little as 3.6 per cent in interest to service each year. This has made houses more affordable and driven a big rise both in mortgage applications and in refinancing to cheaper deals.

“America’s demographics also support the market. Younger people still find houses relatively expensive, so they’ve switched en masse to renting. As a result, America’s rental market has boomed in recent years, helping to support prices.

“Rental vacancies are now at their lowest levels in over a decade, while the homeowner vacancy rate is at its lowest point since March 2006.  Selected regions in the US can easily give a rental yield of well above 5 per cent.

“For those considering property investment in the US, the climate is favourable and hotting up. Low, but rising prices and increasing average rental rates make it possible to achieve much better yields than in the UK.”