[discontented lot owner]

Originally Posted by ntfeldman

I love this thread and the contributions are wonderful.

NYChiefs, I haven't contributed to the poll yet. You know how I feel about the market!

The thing about the bottom is - by the time you know you're there, it's gone and on the up-take. My thoughts on it are (there may be a false start too) that the bottom will be when:

1. Inventory stops going up or drops for 3 consecutive months AND
2. Monthly closed sales for 3 consecutive months equal an average of property units sold from 1999-2003 (pre-boom but reasonable interest rates).

Inventory came very close to leveling off in June numbers. But closed sales are still down (not there yet by a long shot).

I hate to predict this but price levels will not go down to the pre-boom rates. There are lots of reasons why but it's largely because at any given time there's just not enough property for sale to drive prices to that point. WHAT??? IS SHE CRAZY THERE'S TONS OF HOMES FOR SALE?! Yes, but not necessarily by the people who over paid. Some yes, but really it's a small percent of the people who over paid in 04 and 05. The rest have a lower basis and will lower their prices if they have to... they just don't want to yet. Don't get me wrong, the flippers are hurting and those who bought at the peak. Those are the people you're hearing about but they are just 10% of the total homes for sale... 90% can still take the hit and be ok. They are ticked that they didn't get the peak price but they aren't dying... just mad because they aren't getting what their neighbors got because they missed the timing...

It's a circumstance issue - the % of people who sold (and moved into their homes) in 2005 that HAVE to move at the moment isn't that large. Prices certainly will/are already going down from the 2005 high but they are not going to completely adjust. The 100% gain in 3 years will adjust to about a 15% year over year in the "pop-up" years (45% increase over 2001 prices.)

To answer a couple of posts regarding where people get the money to pay for these homes, you should know in Florida, 1 in 4 homes is purchased in cash. So only 75% of those homes for sale are "qualification" sensitive. There are still plenty of people with decent paying jobs that qualify to buy. Go figure. I do think the jobless rate is under reported. If this is the case, then we could be in worse shape but as long as there are jobs, there's income and there's housing demand.

My favorite line in this - at least we're not in Detroit! Talk about a housing problem. They're bleeding all over there and jobs are not going to save them.

Also, as staggering as it may see with the inventory on the market, in the ordinary (balanced) market only 4% roughly (if varies from area to area) of "homes" (condos and mobiles are included, heck, someone's living there right?) are moving (buying/selling). This market is unusual but (I'll run the math and respost the ratios) I doubt more than 12% of all homes are for sale. - Granted that's 3x the normal market and it really does spike the graph but really 12% isn't devastating, it's just humbling.

Ok, 12% instead of 4% - bad but recoverable.

Let's put supply and demand into perspective - there's only aprox. 63% home ownership in the US and oddly enough that percentage is pretty true in FL too. So that's 37% of households that don't own. Some of them couldn't own, some of them aren't going to be here long enough for it to make sense to them but in any case, at some price those non-owners might consider a move to the ownership side. Low interest rates still make that possible and every day some percentage of the population is getting married, getting a pay raise and look at the graphs for the number of people in the 21-35 range. There they are - potential buyers.

Also, the Florida market is one of the most popular places to own a second home for that small segment of aggregated wealth in the US that has the ability to do so (to some people a second home is a $120K condo in New Port Richey but it's still a second home).

So as most markets go, the Tampa area (that's where I am) market has good jobs for buyers or seller's who's homes have lost their value and just need to sit tight through this trough in the graph.... and plenty of potential purchasers that may just be afraid of jumping into a "bad" market.

But at the end of the day - this is not a post-1986-tax-reform-act level problem. Why? It's housing. Everyone needs housing. Not everyone needs another office building or shopping center - that's evaluated on totally different merits. I worked at a dissolved S&L in Texas - then I went with the portfolio of real estate to the RTC contractor that consolidated about 40 S&L's - I was there from 1990 through 1994. That was brutal and interest rates certainly weren't then what they are now. The real estate (commercial) market didn't recover from the Tax Reform Act of 1986 until 1996 - 10 years. But we're talking about a housing market. Everyone needs housing. It's just not going to have the same level of devistation.

Also, keep in mind, every seller is a potential buyer. So once a single buyer from outside the pool of sellers comes into this market and makes a purchase, they free up a seller to become a buyer. The knot the market is in, once the bottom hits will predictably begin to loosen shortly over a period of about 4-6 months.

Don't just count in the baby boomer's moving to Florida, there's a gen x and gen Y group coming into the pool and we're all living longer. Look at the growing population and you'll see the increased need/demand for housing.

There are definitely aspects of the demand graph in play to absorb the supply... it's just going to take time.

As for the foreclosures - the people getting the boot still have to live somewhere. Sure they probably can't buy a home for the next 2-5 years but guess who now moves in and rents from the investor who bought the property... it's housing.

What won't happen after the recovery is a large price appreciation.

I bought a wonderful old ad for a gulf front home in Clearwater run in 1918 - the home was being marketed for $4,000. I know if you put that same money to work for 91 years at a 7% steady compounding return (tax free - but that's another calculation and you get to deduct the taxes on your home and the interest paid so for simplicity's sake we'll consider it an equal calculation) that $4,000 would be worth $2.31Million. I know this house and let me tell you, if it were for sale today you could not buy it for $2.31 Million (waterfront land alone runs $4M an acre on the Gulf in Clearwater). I'm going to say it would move quickly even in this market at that price. Fair market value would run closer to $3.5M possibly a lot more (there's a home a block away for sale for $10M but it's a land issue and I'm not going to do a BPO on it at the moment).

Historically real estate appreciates. The up tick in the curve has past, the dip is now, the plateau is coming - but it will rise again. I suspect the rise part of the graph is 5 years out. I'll vote 9-18 months for the plateau to hit and it will LAST for another 18-24 months before the graph will begin to climb and that will happen more slowly.

Housing will stabilize in spite of the lending debacle - good incomes, interest rates will stay low for the next 17 months (they have to - it's the only prayer the Republican's have of not totally losing the elections to the Dems) plenty of willing buyers waiting to get in, growing pool of renters for investors, and people don't die off as fast on the back end of the population count.

There is no other "investment" (and I don't counsel home buyers on their place to live as an investment but you can't argue the facts on a home purchase as historically floating with inflation and offering leverage.) that can be made with 75% to 97% leverage that floats with inflation(or better). Real estate competes with all other types of investments for dollars in the investment pool and we're in a buyers market at the moment.

Where's the bottom? You'll know it when it's gone. More importantly if you can find a seller with a low basis and an immediate need to sell due to some family/financial circumstance your going to get a great buy RIGHT NOW on YOUR terms right now. If you can make a property cash flow, buy it. Plan for a minimum 5 year hold and don't look back, just collect the rent and pay the debt. You can still get a fantastic fixed interest rate if you have good credit and as low as 25% down (on investment property).

When the market has "hit bottom" the terms benefit will quickly dry up, there will be less property to choose from and you'll be back to bidding against other buyers.

There's no question, you're in the moment now and we all know it. You can't time the bottom. Personally I've started looking for buys and I'm ready to put my cash back in the market for the right deal. I don't buy forclosures, those aren't going to be the "deals" people think they are going to be. For what it's worth,

I also have a client with $200M and they buy land that's sold to home builders. They bank it with a 5-18 year hold. They are shoppping agressively. They are only buying the steals, but they are buying.

Thanks NYChiefs for all the great links and I love the Dr. Bloggers site too! Good stuff. I hope you're not disappointed that my forcast isn't completely gloomy. I just love a sale and everything is on sale!

Thank you ntfeldman, its refreshing to hear some good sense positive new news to try and counterbalance all of the negativity. Like I explained in my previous post, The Californian situation in the mid 60s and 80s was real doom and gloom, especially when my uncle had a real hard time finding a realtor to even list his west covina house during the tragic layoffs of the 60s. ((it was a nice home in a nice area) Despite all of the layoffs, glut in housing inventory, high unemployment, poeple moving out of Calif, pollution, THE PRICES STILL PREVAILED. TO THIS VERY DAY, I CANT FIGURE OUT HOW THIS REALLY HAPPENED, BUT IT HAPPENED!!!!!! The house I purchased for 40k in WPB back in 1994, sold in 2004 for 148k I STILL CANT BELIEVE IT HAPPENED, BUT IT HAPPENED!!!!!!! I am soo glad the I invested 50% of my real estate profits in gov bonds, so now I just sit in my already paid for doublewide on a secuded forest lot and just kick back and wait for the right time to sell more lots (Ive done sold 5 lots this year so now I can play a pretty damn long waiting game just like a buyer does

[Mike Peterson]

Originally Posted by SKB

Mike, I can not get the number to fit are you calculating that on a 50 year mortgage?

A forty year mortgage the mortgage payment would be 749.00, what are you calculating for taxes and insurance?

If you borrow 132,000 over 30 years with an interest rate of 6.25%
You are looking at a mortgage only payment of 812.75

Taxes of 2800 which is 233.00 monthly and insurance ?? lets say 1200 yearly 100.00 monthly.

812.75
233.00
100.00
________

1145.75

Ok, find me a home in WPB area that is brand new and well built for 165,000.

Sure, you may be able to find me properties in OTHER areas of Florida, but I am talking about Wellington, Port St Lucie, or Jupiter.

We are moving to WPB so homes in other areas are of no use to me.

The median income for those towns: PSL, 49K, Wellington 75K, Jupiter 55K.

Median home price in PSL: 227,000, Wellington: 328,000, Jupiter: 230,000

Should be PSL (at three times income) 147,000 Wellington 225,000 and Jupiter 165,000.

Herein lies the problem with everything you have been saying.

You keep talking about high prices and lack of affordability as if every area is the same. I show where some areas are relatively affordable and then you only want to talk about certain other areas.

I understand that the areas you want to be in are what concerns you but the generalized statements you have put forth do not just focus on those areas.

Did you ever think that you may be looking in an area that is above your budget? There are many people that would like to live in a high end gulf front or golf course community but their budget will not allow it. That does not mean that home prices are out of their reach it means they need to look at different areas that are within their budget.

The numbers you used were close but a little bit high.

The taxes would be about $560 less and the insurance about $200 less so it would put it at $1083 a month just above my $1000 estimate. This was based on a house listed at $165,000 though and most homes sold right now are not going for 100% list, There are also some in the $150,000 brand new which would bring it down more.

There is affordable housing out there, just not in every area.

[floridamove2]

Real Estate Agents in this area are slow and most have part time jobs to help pay the bills. I feel sorry for them.

[lostbuyer]

[Don't get me wrong, the flippers are hurting and those who bought at the peak. Those are the people you're hearing about but they are just 10% of the total homes for sale... 90% can still take the hit and be ok. I think its way more than 10% in my neighborhood looking at homes listed about 70% were bought during the boom..
To answer a couple of posts regarding where people get the money to pay for these homes, you should know in Florida, 1 in 4 homes is purchased in cash. So only 75% of those homes for sale are "qualification" sensitive. when are these stats from?before 2000 it sounds believable but after that I doubt its that high..Also, as staggering as it may see with the inventory on the market, in the ordinary (balanced) market only 4% roughly (if varies from area to area) of "homes" (condos and mobiles are included, heck, someone's living there right?) are moving (buying/selling). This market is unusual but (I'll run the math and respost the ratios) I doubt more than 12% of all homes are for sale. - Granted that's 3x the normal market and it really does spike the graph but really 12% isn't devastating, it's just humbling.

Ok, 12% instead of 4% - bad but recoverable. percentage of homes for sale doesnt matter if only 8% of homes are for sale but a big number of them have risky loans then that means problems..

[lostbuyer]

The Denver Post from Colorado. “Despite predictions that foreclosures would level off this year, new filings rose 26 percent in the metro area through the first half of 2007 compared with the same period in 2006. For every two existing homes sold in the metro area during the first half of the year, another went into foreclosure.”

“The 12,085 filings represent nearly half the 25,513 existing homes sold during that period. With the peak home buying season only six weeks from wrapping up, another dismal record in foreclosures seems unavoidable.”

thats denver,florida and cali are said to be the two worse markets...

[kort677]

Originally Posted by lostbuyer

The Denver Post from Colorado. “Despite predictions that foreclosures would level off this year, new filings rose 26 percent in the metro area through the first half of 2007 compared with the same period in 2006. For every two existing homes sold in the metro area during the first half of the year, another went into foreclosure.”

“The 12,085 filings represent nearly half the 25,513 existing homes sold during that period. With the peak home buying season only six weeks from wrapping up, another dismal record in foreclosures seems unavoidable.”

thats denver,florida and cali are said to be the two worse markets...

please tell us what would force you to step up to the plate and buy a house

[SKB]

Originally Posted by Mike Peterson

Herein lies the problem with everything you have been saying.

You keep talking about high prices and lack of affordability as if every area is the same. I show where some areas are relatively affordable and then you only want to talk about certain other areas.

I understand that the areas you want to be in are what concerns you but the generalized statements you have put forth do not just focus on those areas.

Did you ever think that you may be looking in an area that is above your budget? There are many people that would like to live in a high end gulf front or golf course community but their budget will not allow it. That does not mean that home prices are out of their reach it means they need to look at different areas that are within their budget.

Did you ever think that maybe there are some people that wish to NOT go into debt to purchase a home?
We have saved enough to pay cash for a home and we do not want to spend any more than 200K on that purchase.

BTW, we qualify for a 400K mortgage based on our income and if we wanted we could purchase a 600K home with 200K down.

For 600K we can live in pretty much most areas in WBP. Do we wish to have that 400K nut to crack each month?? No thanks, we enjoy life, we travel, husband wants a nice 25 foot boat, I am into horses, we have kids that live all over the place and we like to be able to fly them down for visits.
You should try to not have such generalized thinking that everyone buys using the banks money.

[Mike Peterson]

Originally Posted by SKB

Did you ever think that maybe there are some people that wish to NOT go into debt to purchase a home?
We have saved enough to pay cash for a home and we do not want to spend any more than 200K on that purchase.

BTW, we qualify for a 400K mortgage based on our income and if we wanted we could purchase a 600K home with 200K down.

For 600K we can live in pretty much most areas in WBP. Do we wish to have that 400K nut to crack each month?? No thanks, we enjoy life, we travel, husband wants a nice 25 foot boat, I am into horses, we have kids that live all over the place and we like to be able to fly them down for visits.
You should try to not have such generalized thinking that everyone buys using the banks money.

You completely missed my point.

You have an amount that you want to spend.
Homes in the area you want are more than you want to spend.
There are homes in other areas in the price range you want to be.

I thought I was pretty specific there was nothing generalized about it.

I don't see where I said anything about banks or loans.

[firemed]

Originally Posted by SKB

Did you ever think that maybe there are some people that wish to NOT go into debt to purchase a home?
We have saved enough to pay cash for a home and we do not want to spend any more than 200K on that purchase.

BTW, we qualify for a 400K mortgage based on our income and if we wanted we could purchase a 600K home with 200K down.

For 600K we can live in pretty much most areas in WBP. Do we wish to have that 400K nut to crack each month?? No thanks, we enjoy life, we travel, husband wants a nice 25 foot boat, I am into horses, we have kids that live all over the place and we like to be able to fly them down for visits.
You should try to not have such generalized thinking that everyone buys using the banks money.

This is common sense. Do you have to give up on everything to own a home. Thats might be why prozac sales are so high. No, live your life and have fun ! The urgency to buy is gone. Let the people that are trying to sell you this crap buy it if its such a great deal.

[SKB]

Originally Posted by firemed

This is common sense. Do you have to give up on everything to own a home. Thats might be why prozac sales are so high. No, live your life and have fun !

Right on, thank you very much. you seemed to have gotten my point in all of this.