What do you think will happen to Sarasota realestate? (insurance, attorneys)

[LeMemeFemme]

Originally Posted by craigiri

Anyone who thinks that short term deserves what they get.

I don't think this will create more or less land or properties close to the water nor stop the baby boomers who are already a bit late to retirement.

As an investor myself, my portfolio has leaned heavily toward income producing stocks and ETFs for years - so I look at what gets put into my bank account each month, not at the total value of the portfolio.

If one cannot take 10 or even 20% swings in stocks they should pile their money under the mattress.

As a Wall Streeter and capital markets professional, I find this laughable, primitive and wrong....like counting on stocks continuing to pay high "dividends". The equity market at this point (and has been) is completely overvalued and rich in practically every sector. The real estate sector in this area is also rich. One would have to be blind or a novice not to recognize that reality. Everything in the equity market by professionals is "short term", only the retail small investor believes in buy and hold for the "long haul". That world changed about 27-35 years ago.

[jsup]

Originally Posted by craigiri

Anyone who thinks that short term deserves what they get.

I don't think this will create more or less land or properties close to the water nor stop the baby boomers who are already a bit late to retirement.

As an investor myself, my portfolio has leaned heavily toward income producing stocks and ETFs for years - so I look at what gets put into my bank account each month, not at the total value of the portfolio.

If one cannot take 10 or even 20% swings in stocks they should pile their money under the mattress.

I don’t disagree that as an investor you should be able to sustain a 20% or more drop in value. But, I believe such an environment will have a chilling effect on the market for luxury vacation homes. Lets say you are in the market for a $500k vacation home. You have a stock portfolio of $3M and will sell a portion to make the purchase. Now, the market drops 10% and the expectation is for more uncertainty and volatility. You have just sustained a $300k (unrealized) hit and expect more to come. I would think most would not be inclined to sell into that market to buy a less liquid and discretionary asset. Wouldn’t the inclination be postpone any such purchase and see how the equity market plays out? And, if this is the consensus then you now have less demand and values will suffer.

[bbronston]

Originally Posted by jsup

I don’t disagree that as an investor you should be able to sustain a 20% or more drop in value. But, I believe such an environment will have a chilling effect on the market for luxury vacation homes. Lets say you are in the market for a $500k vacation home. You have a stock portfolio of $3M and will sell a portion to make the purchase. Now, the market drops 10% and the expectation is for more uncertainty and volatility. You have just sustained a $300k (unrealized) hit and expect more to come. I would think most would not be inclined to sell into that market to buy a less liquid and discretionary asset. Wouldn’t the inclination be postpone any such purchase and see how the equity market plays out? And, if this is the consensus then you now have less demand and values will suffer.

Makes sense to me but let's say prices do drop on those types of properties by a significant amount. Wouldn't that open the door to more buyers who might be able to afford the new lower price and who might not be as heavily affected? Or, same situation, if prices drop by large amounts, might that not attract the same people who would normally wait and see because they now see those properties as "bargains" and "right time" buying opportunities?

I'm not saying this is what will happen...just thinking one more step forward, so to speak. I don't predict markets because I can't.

[jsup]

Yes, I can see that, particularly for those financing their purchase.

[LeMemeFemme]

Originally Posted by jsup

Yes, I can see that, particularly for those financing their purchase.

Correct. It's also simplistic to think that these two constituencies are the same and behave the same. There is simply no rational assessment that would suggest that other buyers would "rush in" to fill the "void" ,aka new buyers. In this market, the herd mentality has always been facilitated by "boosters" with an agenda, and with less knowledge. This market is fairly easy to predict at this point in time. Longer term this market is contingent on a myriad of factors too fuzzy to isolate as accurate predictive indicators. That said, if any objective and sober person can't see wage stagnation, globalization, outrageous debt, subprime comeback, huge trade deficits, and extremely high unemployment rates (especially among millennials-with crippling debt), that are staring the average US citizen in the face, that person must be the dumbest person on the planet. These factors have real impact on housing. The market will not continue to be "bailed out" by "baby boomers". Some of these "boomers" will be dead shortly, or incapacitated, inactive, immobile or ill. The following generation (and the next) will not have the resources, income or savings that their parents had through the last of the TRUE pension plans and social security, because they have been duped into some utterly lousy, criminal, and bogus 401k plans. Most will be shocked upon their own "retirement". They are unlikely to flock to Florida, SC, or AZ to purchase 400k second homes. The writing is on the wall for any intelligent person to see, read and understand. This market is very ripe for a bit of change.The spigot of next generational money (discretionary) will be turned down if not completely shut off.

[craigiri]

Originally Posted by LeMemeFemme

only the retail small investor believes in buy and hold for the "long haul". That world changed about 27-35 years ago.

Well, my 11% record over the last 20-30 years would disagree with that.
To a hammer everything looks like a nail.

My friends who were scared of the market for one reason or another are still working hard - despite often making 50-100% more per year than I did.

I weathered the storm back in the mid-80's, the S&L crisis, the dot-com bust and the great recession. I watched up to 30% of my portfolio vanish...but never sold, just kept at it and put small amounts in each month.

I guess I am old fashioned.

Over the years stocks such as Apple (owned since the 1980's) have been my mainstays...but truth be told, Mr. Bogles stuff did just as well as my hand picked stuff when looked at over the decades.

Of course, that stuff doesn't put as much money into the pockets of brokers, etc.

You may be correct in the fact that we can only expect 5-7% per year going forward...however, with reduced costs of many goods (relatively) due to automation, etc. - I can make it on 5-6% from this point onward.

There is a tiny chance of something worse than the Great Recession - but, IMHO, that's in the realm of an asteroid strike.

[craigiri]

Originally Posted by jsup

I don’t disagree that as an investor you should be able to sustain a 20% or more drop in value. But, I believe such an environment will have a chilling effect on the market for luxury vacation homes. Lets say you are in the market for a $500k vacation home. You have a stock portfolio of $3M and will sell a portion to make the purchase. Now, the market drops 10% and the expectation is for more uncertainty and volatility. You have just sustained a $300k (unrealized) hit and expect more to come. I would think most would not be inclined to sell into that market to buy a less liquid and discretionary asset. Wouldn’t the inclination be postpone any such purchase and see how the equity market plays out? And, if this is the consensus then you now have less demand and values will suffer.

Well, there is a pessimistic outlook and the "I only have so many days left" one!

A little story.

We took a liking to the coastal RI area back in about 2005. So we started looking and renting and just about everything was too expensive. 2006 passed and then 2007 and it was obvious the stock market was headed south, although it was not yet at its worst.

One of the properties we were looking at fell 10%, then 20% - still expensive, but now somewhere within our means.

We 100% knew it would fall further. We also 100% knew our money in the markets would fall further and that the Days of our Lives were going by.

So we sprung for an amazing property which we still own and use about 100 days per year. It is paradise on earth.

Sure, the other end of this is a bubble when the market goes up big and everyone had money to buy vacation properties.

Our unit probably went down 15% or more in the years after we purchased it. At this point it's almost back to what we paid for it....and we have gotten immeasurable pleasure from it.

I guess the point becomes what money is for - just gambling...or enjoying? If everything always went up in price...well, inflation would be crazy!

FYI, view from our place is enclosed....

[jsup]

My guess is that you bought this property prior to September 2008 when we had the Lehman failure and the market crashed. You could easily rationalize your purchase prior to that point. The market had been positive in prior years, some double digit, and only recently had the market turned volatile and showing single digit losses. Your sitting on substantial stock gains. In the meantime your dream house drops 10% then 20%. You know with 100% certainty the stock market is going to drop but, to date, much less than the drop in the property you sought.
My initial point was that there is a correlation between stock market performance and real estate values, particularly vacation homes, which I think your story, demonstrates. Yes, you bought after the market had turned but only after you watched and waited and benefited from the effects on the real estate market.

[craigiri]

Originally Posted by jsup

My initial point was that there is a correlation between stock market performance and real estate values, particularly vacation homes, which I think your story, demonstrates. Yes, you bought after the market had turned but only after you watched and waited and benefited from the effects on the real estate market.

Yeah - I'm in agreement...

There is a middle ground somewhere - when things are all going up (stock market AND vacation house prices), it's somewhat relative so although we feel flush we still can't spend a million for that 1/2 decent beach condo!

I noticed that in Rhode Island the buyers are mostly like we are - that is, they are buying more due to age and dreams than because they made a killing in the market or in some way or another.

The most expensive item seems to be time and that is where the baby boomers are probably weighing in on the scale.

Back to SRQ, I think it's a complicated formula which involves:

Stock Market and general state of the economy.
Foreign money and expats
Baby Boomers retiring and pursuing a golden years lifestyle.
Actual supply - supply is relatively tight in the really good locations close to water.

So we probably have a number of "mini-markets" which operate semi-independently of each other. A bunch of Amish coming down and buying isn't much related to condo sales next to the mall, etc.

Or, as the old sales guys liked to say "there is an arse for every seat" (probably is when there are too many seats you sometimes can't find an arse).
:-)

[photoman_6]

hey, thanks for the words of wisdom there. The time will come for you too. In the meantime, try to lighten up and not make everyone around you miserable.