What you need to know when buying a property in the USA in 2021
Following the global financial crash, caused by the implosion of America’s subprime mortgage market, an average property in the USA tumbled in value to levels that had not been seen for many years, and buying a property in the USA had become much cheaper. Since the turn of the decade, however, the country’s economy has steadily recovered from the darkest days of the credit crunch and slowly improving from the coronavirus crisis pandemic, American property prices throughout the county have started to climb consistently.
US house prices are peaking
According to the December 2020 CoreLogic Home Price Index (HPI), house prices nationwide rose by 9.2% from the previous year. This appreciation in house values was strongest in Idaho (21%), Montana (17.4%), Indiana (15.3%), and Maine (15.3%). The CoreLogic HPI Forecast suggests that US property prices will increase by 3.3% YoY from January 2021 to January 2022.
Which US states have the highest property prices?
Rising property prices and the improved US economic outlook managed to attract buyers back into the property market in 2020, teamed with record-low mortgage rates. However, President and CEO of CoreLogic, Frank Martell, stated “heavy competition for the few houses on the market drove home prices to historic highs, and mortgage rates are no longer enough to sway the affordability challenges for consumers. While new construction may help balance home prices towards the end of 2021, we may expect to see demand slow in the medium-term”.
On the subject of mortgages, the US lending market has changed significantly over the years and although financing the purchase of a property there is not as easy as it used to be, it’s certainly not impossible, especially if you have a healthy deposit to put down. Mortgages are generally available for purchases up to 70 per cent of the property’s value, depending on the state in which the property is located.
Most mortgages are agreed on a repayment basis, the maximum term is 30 years, and interest rates and loan terms tend to vary depending on the property type and exact location. Hawaii, Mississippi and Idaho have the highest monthly mortgage repayments in relation to average household income. Within these three states, mortgages cover around 18.9% of the average household’s income each month, which is 2.5% higher than the national average at 16.4%.
The states with the highest monthly mortgage repayments are Hawaii, California and New York. In Hawaii, the average monthly mortgage repayments are USD 1,780, USD 1,696 in California and USD 1,575 in New York.
Buying Property in the USA
When it comes to buying a property in the USA, it’s important to note that the purchasing process will almost certainly differ depending on the state in which you are intending to buy a home. For example, most states in the USA require that the Agent you use to help you buy or sell real estate (should you wish to use one; there is no requirement) holds a Real Estate License, but this is not true in every state. Perhaps the biggest difference between buying a property in the USA compared to the UK is that, generally, once a buyer’s offer to purchase a property is accepted, the contract and timing is fixed and binding.
The process when buying a property in the USA
The closing date of the sale is defined and agreed right from the start of the process, and the buyer is fully committed to completing the purchase by paying an ‘earnest money’ deposit as part of the contract agreement. This amount is likely to be around 1 to 3% of the final purchase price, and the money will be kept by the sellers if the purchaser is unable to complete the sale contract on time. Should you wish to rent instead of buy your property in the USA, then you’ll also need to be wary of some minor state-by-state differences to the process.
In most cases, you should expect to fill out a comprehensive rental application, pay an application fee, and have your credit checked. Once approved, you’ll probably need to pay a security deposit and part with a month’s rent upfront. Most property managers require a one-year lease, although this is down to the landlord’s discretion. Apartment communities that offer corporate housing often offer short-term rents for as little as one month, but you should expect the rental rates to be much higher.
Property in the USA rental costs
Due to an increase in the number of people renting property in America – a consequence of the economic crisis which left many Americans unable to afford to buy their own property – rental costs have risen sharply in recent years. According to October 2020 figures from managecasa.com, rental prices across the United States have increased significantly from March 2020.
For example, median monthly rent for a two-bedroom apartment in Boise, Idaho has risen by 9.7% from March 2020 at USD 1,021, 8.9% in Toledo, Ohio to USD 814 and 7.6% in Greensboro, North Carolina to USD 1,000.
Property in the USA: Sizes and features
While it is nigh-on impossible to provide a clear picture of what a typical ‘American’ property looks like, given that the country encompasses so many different climates and landscapes, one thing you can be pretty confident about is that it will be much bigger than the property you have been used to living in in the UK.
The average size of an American property offers over 200 m2 of living space; more than double that of the typical British property. Given that the majority of Brits heading for a new life across the Pond tend to settle in one of the country’s warmer States – California and Florida are by far the most popular, while Texas is also popular – it’s fairly likely that your property will have a fairly large outdoor space in which to enjoy all the extra sun that you’ll be benefiting from, while outdoor swimming pools are also far from an uncommon feature. You can find out more about other aspects of life in the United States, by exploring the US section of our website.
If you’re thinking of moving abroad, take a look at our useful emigration guides.