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Are we in another balloon?

App601

App601

Junior Member
Joined
Sep 7, 2014
Professional Status
Certified General Appraiser
State
Puerto Rico
I have been appraising properties in Puerto Rico since 1998. In 2008 we had a "balloon" as property values reached its higher level. This "\balloon" burst and property values declined between 25% to 35% particularly the Walk ups
I appraised a property i 2023 in a development that has several amenities like tennis courts, swimming pool and recreation areas. Property values, proven by many sales, have increased 72% in 3 years as I appraised it again. In 2023 $900ks and now $1.4MM
I would never pay that price, but I have to appraise it by how the market behaves and not based on what I like

But the question is Are we in another "balloon" that will burst sooner or later ?
Is this happening in the states where you work?

I will also like to add that the land to value ratio is yielding 55% land 45% improvements
What implication can this have in a possible sale loan?

I will appreciate your comments
 
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We learned this week that one person's party balloon is another person's security risk and reason to shut down an airport. Also because of Bad Bunny we've learned that there are more Puerto Ricans in 'America' than in Puerto Rico. My guess is they are doing well and like all ethnic groups buying a piece of their homeland. I have a builder friend who plans to retire to his homeland, Spain. I only have one real estate property left on my wish list and it is to recreate the family farm from 80-years ago, acreage and house, thinking with climate change it will someday be a wine growing region. The TV show Will Trent has a strong story line of going back to his PR roots.

But I'm just spit balling. Maybe they are a good VRBOs. : )
 
I think that up to a certain price point people buy the payment, not the price. I also think the floor of the pricing for SFRs is supported via substitution by the rental market. If rental vacancies are low then the rents will increase, and vice versa. I expect SFR pricing to parallel rental pricing. Rents might enter a trend sooner or later than an SFR pricing trend but I don't think the two can move in opposite directions for very long, if at all.
 
App601 said:
I

1. But the question is Are we in another "balloon" that will burst sooner or later ?
2. Is this happening in the states where you work?

I will also like to add that the land to value ratio is yielding 55% land 45% improvements
3. What implication can this have in a possible sale loan?

I will appreciate your comments
Click to expand...
1. Can't speak for your area but I suspect that PR is like a lot of tropical areas. One really good (bad) hurricane can set prices back pretty quickly, like parts of FL. It's all sunshine and wonderful weather to brag about, wonderful, until you have to rebuild your house and pay dearly for the insurance or the increased condo fees.

2. No. Prices have levelled off here after rising about 100% in the past 5-10 years.

3. I think that you'll find land/improvement ratios like that or even higher land values in quite a few of the higher priced areas of the mainland. Doesn't seem to hinder lending.
 
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I don't think so. The market is doing a pretty good job overall of digesting the pandemic price gains.
 
Mark K said:
1. Can't speak for your area but I suspect that PR is like a lot of tropical areas. One really good (bad) hurricane can set prices back pretty quickly, like parts of FL. It's all sunshine and wonderful weather to brag about, wonderful, until you have to rebuild your house and pay dearly for the insurance or the increased condo fees.

2. No. Prices have levelled off here after rising about 100% in the past 5-10 years.

3. I think that you'll find land/improvement ratios like that or even higher land values in quite a few of the higher priced areas of the mainland. Doesn't seem to hinder lending.
Click to expand...
My house is made of concrete It took a Cat 5 hurricane Maria and nothing happened tio the structure I was without powwer for months but that is another story
But thanks for the information
 
I wouldn't worry about prices falling because pent-up demand is huge. The Fed will likely cut short-term rates 3 to 4 times this year, which will help reduce mortgage rates.
 
App601 said:
That chart denotes perfectly what happened There was a peak in 2008 the property values declined 20 to 30% and started to rebound in 2018
But could it happen again?
Click to expand...

I mean, it could one day.

The people buying second homes in Puerto Rico are feeling pretty good right now. A person who had $2 million in 2007 before the financial crisis might have $10 million today. The second-home market and the high-end are mostly driven by the stock market, not rates or W-2 income.
 
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