Is it the right time to buy in Florida???? (Cape Coral: short sales, real estate)

[twobums]

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So it's been a week since I've posted on this forum. This interview I found online.... I will send to all my friends & family who email me after seeing a 3/2/2 for $60k in Cape Coral (or for $40k in LeHigh) and think it is a great investment. Maybe you will find it helpful in making a decision about buying in our great state. Mr. Norris has been on CNBC many times and is considered knowledgeable. This is just another view of Florida real estate.


interview with Bruce Norris ~ real estate analyst http://www.mccaberesearch.com/homepage.html

Florida is the epicenter of the housing depression and national/global recession. The overconstruction of condominiums and single-family homes, the ridiculous amount of apartment-to-condominium conversions, rampant and runaway speculative buying (which artificially doubled real demand during the boom), and the high percentage of toxic ARMs peaked first in Florida. While many of the toxic-loan lenders were headquartered in California, the mortgages and resultant foreclosures have destroyed Florida markets.
Florida has a long way to go before the pipeline of foreclosures begins to decline. Foreclosures will fuel the inventory pools in this state for the next 18-24 months, and the biggest wave of foreclosures still lies ahead. Three years ago, Florida unemployment was 4.3%; today, it’s 10.6%. I expect to see it rise to over 12% sometime in 2010. On top of that, the state actually lost population between June 2008 and June 2009, the first recorded population loss for Florida since WWII. All this does not bode well for local real estate through at least the end of 2010.
That said, there are some deals, although one must do excellent homework and be very sophisticated to take advantage of them. I don’t think you absolutely have to know someone at the bank to get a good deal. Of course it helps if you know someone who works at a bank’s strategic-assets group, but if you go to the courthouse steps in many Florida counties, you will find thousands and thousands of foreclosure sales every month.

Do you use a different decision-making process when considering a multifamily property than when considering a single-family property?

Yes. Single-family houses don’t get as much overconstruction during boom cycles because, when competition for land is fierce, it’s much easier to build a 40-story tower on ½ acre than it is to build an entire subdivision. Hence, single-family houses will rebound more quickly than multifamily. If an investor can buy a house and rent it to cover expenses, then that investor is in a good position. When purchasing a condo as an investment, however, one must anticipate more dramatic changes in value during boom/bust cycles.

Do you think that now is a good time for investors to start buying properties? Why or why not?

I think now is a good time for everyone to start doing homework. Study your target market(s), the submarkets, neighborhood, project or dwelling, and all potential data sources. If you have your eye on a particular multifamily building, find out how many units are vacant, how many are in foreclosure, what percentage of owners are not paying their HOA dues, etc. There are plenty of landmines out there, but there are some deals that make sense. I warn investors never to buy an investment property, condo or otherwise, unless it will immediately and consistently generate positive cash flow.
If you see what looks like an excellent opportunity to purchase a lot, several, or a chunk of land, again, do your homework or consult with an expert before moving forward.
You don’t need to pull the trigger within the next few months. This downturn and depressed prices will continue in many markets for at least the next 18 months. Real estate is a long-term investment, so don’t plan on buying and flipping in a year or two. The days are over when properties rose in value by double-digit percentages for years to come, unless you buy smart. Today, you must use extreme caution and be very sophisticated. You could buy a loser just as easily as a winner.

Do you think that now is a good time for owner-occupants to start buying properties? Why or why not?

If you are a potential owner-occupier with a plan to stay in the house at least 5 years, then, in the lower price ranges, now can be a good time to buy in some areas and markets. For first-time homeowners, this is made possible through the $8,000 tax credit (which I expect will be increased and extended), and additional tax advantages. However, there is still the potential for decline in values (10% over the next year, flat for a couple years after that). I advise prudence, a minimum down payment of 10-20%, and a conservative fixed-rate mortgage with PITI payments less than 28% of your household gross monthly income. In 5 years, it might be worth more than what you paid. Then again, maybe not. It will depend on the area and the deal you negotiate. Your priority should not be investment value, but rather how the house suits your needs.
As far as Florida goes, the light at the end of the long, dark tunnel is visible, but still a pinhole. Florida will always have sunshine, warm weather, beautiful beaches, and turquoise ocean waters. When population growth increases again in future years, real estate in the Sunshine State will again become a worthwhile investment. The long-term prospects for the market are still excellent, once this historic, decade-long rocket ride/crash to earth debacle is finally over and sanity again returns to real estate and financing.

[Chicken Wing]

Depends on your personal situation, but I'd say "Yes" for the market as a whole.

[samjune2009]

Originally Posted by twobums

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Florida will always have sunshine, warm weather, beautiful beaches, and turquoise ocean waters.

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This is such an interesting post. Thank you.
Florida has problem of profligate mismanagement.

[twobums]

What I found insightful about the interview was the notion that buying a single family home in Florida is not out of the question.... as long as it is owner-occupied for at least 5 years, there is a large down payment and sufficient debt ratio to carry the mortgage. And, the prospective buyer must do lots of homework first!

If this criteria had been used for the last 5 years, would there have been a housing bubble here at all?

[justNancy]

I just got an email with a foreclosure listed for $15,000. It's a 2/1 in Naples. So I figured "what could go wrong?" The HOA is $1,260 a quarter. In case anyone is interested, it's in Treetops.

Originally Posted by twobums

(which I expect will be increased and extended)

I like your optimism regarding the tax credit. I broke my toe in July and it still hasn't healed, so I'm having a heck of a time getting around, not working, and an extension past Nov 30 would really help. It's a gamble at this point.

I also agree that, if there are more foreclosures, the values might drop slightly. Depends on the area & inventory of course.

Originally Posted by twobums

If this criteria had been used for the last 5 years, would there have been a housing bubble here at all?

Not sure what you mean - the housing bubble or the slump we are in now after it burst? (maybe both) True, if homebuyers had to meet stricter requirements, then there probably wouldn't be so many foreclosures. However, that's the case everywhere. When I first shopped for a home back in 1980 when mortgage rates were double digits, the DTI ratio was 25%. In other words, if I made $500 a week, my mortgage couldn't be more than $500. You also had to have a pretty good credit score. If this is what you mean, I agree.

In any case, if someone loses his/her job it doesn't matter how much money was put down or what the payments are. Many people who bought homes were relying on 2 incomes.

[hiknapster]

Originally Posted by justNancy

I like your optimism regarding the tax credit.

Actually, it is not the forum poster that wrote that. It is a quote from Bruce Norris, the real estate analyst. I just couldn't remember where I read that, today, Nancy. It was here! (private joke!)

Thanks two bums for the great article.

I will be one very, very, very happy woman if they extend that credit. If they raised it I may just faint from joy.

For those not in the know, I am in the middle of getting my real estate license. I passed my class exam on Friday! I still have the TN state exam and a bunch of money to throw and bunch of hurdles to leap. And I am broke and old.

Anyway, great article. I poked around on that website and he says that swFlorida was the first to implode, which I have always believed. He also said to watch the area carefully, because when it recovers so will the country. I believe that, too. I watch swFlorida like a hawk.

[justNancy]

Originally Posted by hiknapster

And I am broke and old.

What does that make me? Mummified?http://bestsmileys.com/mummy/1.gif (broken link)


The extension of the $8,000 credit is anyone's guess. It's a gamble. The last thing the Republicans want Congress to do is add more debt, but the National Assoc of Home Builders is putting pressure on them to not only extend the bill, but to make it available to everyone buying a principal residence.

[hiknapster]

Originally Posted by justNancy

What does that make me? Mummified?


The extension of the $8,000 credit is anyone's guess. It's a gamble. The last thing the Republicans want Congress to do is add more debt, but the National Assoc of Home Builders is putting pressure on them to not only extend the bill, but to make it available to everyone buying a principal residence.

You are so funny!

I'm only 47. I know. But I feel like I'm 95. Gosh, my 85-year-old neighbor can run circles around me. No kidding!

Giving everyone the credit might just make me drop dead from happiness. I don't think I could handle it.

SwFlorida could use it, too. Go SoFlGal! She'd probably drop dead from exhaustion!

[TANaples]

I have seen foreclosures going for $5,000 in the Naples condo we own. Even the ones going for $70,000 are the price when it is was brand new in the 80s.

If I won the lottery, I would sell it for $50 to just get rid of it. BTW, since there are so many foreclosures, short sales, with people not paying their HOA fees, they just keep raising the HOA fees to make up the difference. They are now up to $4,000 a year for absolutely nothing but a community pool and hot tub. Aww, the price for warm weather and sunshine.

[justNancy]

Originally Posted by hiknapster

Giving everyone the credit might just make me drop dead from happiness. I don't think I could handle it.

I wish I could go back in time. I never would have let my license expire. I sold timeshare many years ago. In Florida (at least back then) you had to be a licensed real estate salesperson to sell timeshare. The school was easy, but the state exam was very long & confusing. I passed with flying colors, but I studied very hard and took a pre-exam cram course.