Housing Bubble Bursting?

[Pamela Crowley (Florida)]

IMO, the party is over. Some just don't yet know that and their hangover hasn't sunk in yet.

 

[Brad Ellis]

Greg,

Yes, there will be opportunites. But, I am still trying to figure out how you by the million dollar condo at 2003 prices- possible- but then sell it at 2005 prices- assumng that 2006 prices get down to 2003 prices. Confusing.

Moh,

thanks for another anecdotal article.

Scott,

First we'd jave to figure out which downturn you are talking about. Apart from the localized ones- like CA back in the early 90's, I do not recall any overall long term declines since the mid 80's. FICOs were not around then.

But you are right- many/most of the analytical tools were unavailable, not yet developed, back then. We'll see if they are really good at predicting.

Dean,

Welcome. I do believe you will find that this specific data is from closed sales from assessor records or recorder records vs. MLS. I think it came from Dataquick.

But it does appear to be true that some of the numbers are not from those sources. New construction figures, for example, were from builder surveys. We simply do not know how many builders reported a sale that had not closed; we do know some were for homes under contract for which ground was not even broken.

What we do not know from that is whether the prior month included many of those situations. I suspect so but have no data to truly rely upon. If they reported all of gthese for Jan but then did not report them for Feb that wil skew the data.

Again, to all, I am watching the data just like you are but am focusing on the national picture. SoCal and Florida were among the hottest markets with Phoenix metro, Vegas and a few others. Both Phoenix and Vegas will be very telling- perhaps moreso than other markets because, while both have large portions of buyers who seek second homes, both also have typically normal components of the markets that will act in more traditional manners.

San Diego county is getting price reductions but LA county is not yet getting these too often.

So, we might see second purchases dry up- bad news for Florida for sure- but then we may be able to tell if investors are running as well and the overall effect upon markets that have large investor contigents.

Brad

 

[Couch Potato]

Greg,

Yes, there will be opportunites. But, I am still trying to figure out how you by the million dollar condo at 2003 prices- possible- but then sell it at 2005 prices- assumng that 2006 prices get down to 2003 prices. Confusing.

In real estate, what goes down must go up; falling markets are the time to buy and rising markets are the time to sell for real investors. I will sell or my daughter will inherit the properties at prices much higher than 2005, but it will probably require a holding period of more than 10 years. The IRS will never look at my transactions and decide I'm in the house selling business. subject to gains taxed as ordinary income.

One can use the proven strategy of buy low / sell high or the highly risky buy high / sell higher; I chose the former over the latter every time.

 

[Brad Ellis]

Greg,

Somehow I believe you will get it right; not sure if that proposed company will do so.

BTW, if you do plan to hold these for a while, you might want to consider having them in an irrevocable trust. That way, if an irate borrower decides to call in his hit man, your daughter will inherit at the then current market value vs. acquisition cost as the basis. Obviously consult a lawyer if you do so as I am not one.

Also, not sure where you are exactly, but my current info is indicating slipping prices along the gulf coast and the panhandle and inland areas (except Orlando) but increasing prices along the atlantic coast, albeit at much slower rates that we have seen.

Good luck.

Brad

 

[DeanHarris]

Actually, the reason I joined here was to see if there were multiple discussions on high asking prices and properties not appraising out...

I discovered something fairly interesting for the Mid Florida Regional folks around here...

In creating some spreadsheets, I was clicking around and as it turns out, the only reason ORRA was able to report "record sales" the last several months is due to the huge increase in Sold Data/Entry Only sold listings.

They were hardly on the map prior to 05.

In Dec of 2005 there were 504 Entry Only solds within the sold listings.

Even if you allow for the 93 there were Dec of 04 that still shows Dec 05 sales as less than Dec 04 closed sales.

Last January there were only 42 Entry only sales. Jan 05 there were 207.

Last MArch there were 82 Entry only sales. This March there have been 282 last I checked. There is up to 2 months for people to enter the data after the closing.

Anywhoo, even without the Entry Only adjustments I decided to plug in the sales numbers off the MLS.

Why? I'm just the sort who likes to know.

That, plus my friend told me the other charts I made makes it look like sales are going up. <shrug> So, I slapped in the current inventory to put the monthly sales in perspective:

Orlando Area Sales and Current Inventory Graph

My broker is a smart cookie and instituted a few new policies. Suffice it to state that a true full service brokerage cannot function if agents take discount broker fees.

When the #'s are released in a couple weeks there is no way the massive inventory can be ignored.

BTW, I'm very surprised there aren't many more Realtors on the forum.

 

[Pamela Crowley (Florida)]

Thank you Dean!!! That's pretty much what I'm seeing in Brevard County.

Most of us here are Realtors, we just appraise instead of list and sell. Any Realtor that prefers to tell it like it is is more than welcome here!!!

 

[DTB]

The true test for bubblologists. Have any of you sold your personal residence at the perceived top of the market and moved into one of the oodles of shiny, new beautiful rentals that are available in your market.

IF I felt the buble was coming my way, it would be prudent to sell at say 500K, lock it up at 5%+ and live for free. No repairs, no maintenance and still preserve my capital for the next buying opportunity.

Any bubblers doing this?

 

[Hal Mann]

Missed this gem earlier

The reason so many people are moving to Colorado Springs is because they do free comp checks. Edd and Mike have the market covered.
PS: Edd doesn't do comp checks, he does comp checks. There is a difference you know? Mike on the other hand will do a comp check, but never a comp check. Mike used to do comp checks until the latest thread on the subject but then he stopped doing comp checks and now just does comp checks the right way.

Right On!
.....................................

 

[Pamela Crowley (Florida)]

http://www.rismedia.com/index.php/article/articleview/14102/1/1/

Second-Home Sales Hit New Record in '05

RISMEDIA, April 6, 2006—Sales of vacation homes and investment homes set new records in 2005, with the combined total of second-home sales accounting for four out of 10 residential transactions, according to the National Association Of Realtors®.

The annual report, based on two surveys, shows that 27.7 percent of all homes purchased in 2005 were for investment and another 12.2 percent were vacation homes. All together, there were 3.34 million second-home sales in 2005, up 16 percent from an upwardly revised total of 2.88 million in 2004. The market share of second homes rose from 36.0 percent of transactions in 2004 to 39.9 percent in 2005.

Vacation-home sales increased 16.9 percent last year to a record 1.02 million from a downwardly revised 872,000 in 2004, while investment-home sales rose 15.7 percent to a record 2.32 million in 2005 from an upwardly revised 2.00 million in 2004.

 

[George Hatch]

It currently costs me a lot less on a monthly basis to own than I would pay in rent and I doubt the prices will roll all the way back so I could get back to this property tax bracket for my last recession-based purchase price. Why should I move to someplace where I can't surf - just to bank some cash? For me, a house is a place to live, not an wealth building system. I'll leave the Forbes 500 obsessions to guys like you, thanks very much.

BTW, I hope you're not pushing SD real estate - if you were your investors would probably be losing money right this moment.