True, because their next paycheck comes from the next draw on their next construction project. It will come to an end, however. Not all resort markets are in the tank...the ones driven by the old fashion notion of someone purchasing a second home for their personal use are doing very well. Lakes Rabun and Burton in North Georgia and Lake Keowee in South Carolina are just a couple of examples of very steady, sure growth in value...driven by end users, not investors.
June 2006 Real Estate Sales
- Thread starter Smiling JOe
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GVM said:
"Investulators" or "Equity Locusts (Those who cash out of high-priced areas and buy up a bunch of "investment" real estate in lower cost areas)" are fanning out across the nation--if they believe there is money to be made in Georgia, SC or Oklahoma they will be there driving up prices to unsustainable levels and selling to fools who believe the prices can go up indefinitely. This frenzy will continue as long as people believe real estate is a "riskless" investment. Eventually, the game will be up and the frenzy will crash in on itself, the truth will be known, and eventually real estate will go back to "normal" (appreciation just over inflation).
What we've experienced in the real estate market was an anomaly--not a "normal cycle."
If you are buying a property to use and enjoy, just do your homework. The same rules apply as if you were making a rent or buy decision on your primary residence. How long are you going to be in the property, how much can you afford, how realistic is rental income if you are using that to offset your expenses.
If you are buying 10 preconstruction condos, you better know what you are doing and you better not make a bad decision on an entry point.
There are areas where values are going up as mentioned in another post. I have mentioned here before about Park City, Utah. In Feb 2004, I bought a unit at a developer auction, sitting right on the ski run, next to the main gondola - that was the trough. Some of these areas are now peaking and there does seem to be some speculation in preconstruction, although not nearly as much as the emerald coast. There is building going on there, but the biggest difference is the number of units. There are no 30 story condo towers. I bought into a preconstruction project about 18 months ago - 4 stories, 2 buildings, about 80 units total. Space is severely limited. There are no mom and pop motels to tear down and replace with monstrosities. They do continue to add some new projects but in each case, the number of units is around 40.
If you are buying 10 preconstruction condos, you better know what you are doing and you better not make a bad decision on an entry point.
There are areas where values are going up as mentioned in another post. I have mentioned here before about Park City, Utah. In Feb 2004, I bought a unit at a developer auction, sitting right on the ski run, next to the main gondola - that was the trough. Some of these areas are now peaking and there does seem to be some speculation in preconstruction, although not nearly as much as the emerald coast. There is building going on there, but the biggest difference is the number of units. There are no 30 story condo towers. I bought into a preconstruction project about 18 months ago - 4 stories, 2 buildings, about 80 units total. Space is severely limited. There are no mom and pop motels to tear down and replace with monstrosities. They do continue to add some new projects but in each case, the number of units is around 40.
I am so thankful I didn't get caught up in the frenzy of 2004 and early 2005. I did sell a High Pointe beachfront condo and a Seacrest lot in early 2005. Bought a nearby home very close to the beach in May of 2005 but that was just because it increased my enjoyment of the area. I am fortunate that the rentals from this property cover my taxes, insurance and a relatively small mortgage. However, I was VERY tempted to jump into the pre-construction boom and take on a lot of debt. I even put down several deposits. Thankfully, I got nervous and pulled out before going to hard contracts.
Unfortunately, the home I bought has probably declined in value about 35% since my purchase. Still, this has always been a long term investment and source of vacation pleasure so I think I'll do OK. While I believe the worst is yet to come I think we will go through an adjustment where beach front or close beach access properties will eventually recover and appreciate strongly. However, I believe it may be many, many years (think 10-15) before some of the properties without beachfront access appreciate to the levels we saw in 2004 and 2005. I just don't think there will be much demand for $500,000 postage stamp size lots without easy beach access (think Prominence, Aquatera and Cypress Dunes) for a long time. On the other hand, larger beachfront, beachview and beach access lots (think Paradise by the Sea and the smaller lots in Alys beach south of 30A) are scarce and should recover faster, maybe 3-5 years. Ultimately, I think we'll see a larger differential in future pricing as lots become further from the beach or beach access. For instance, if a 40 front foot beach front lot sells for $2,500,000 a 40x80 lot in Aquatera may sell for only $250,000 not $500,000. Just my $.02.
Unfortunately, the home I bought has probably declined in value about 35% since my purchase. Still, this has always been a long term investment and source of vacation pleasure so I think I'll do OK. While I believe the worst is yet to come I think we will go through an adjustment where beach front or close beach access properties will eventually recover and appreciate strongly. However, I believe it may be many, many years (think 10-15) before some of the properties without beachfront access appreciate to the levels we saw in 2004 and 2005. I just don't think there will be much demand for $500,000 postage stamp size lots without easy beach access (think Prominence, Aquatera and Cypress Dunes) for a long time. On the other hand, larger beachfront, beachview and beach access lots (think Paradise by the Sea and the smaller lots in Alys beach south of 30A) are scarce and should recover faster, maybe 3-5 years. Ultimately, I think we'll see a larger differential in future pricing as lots become further from the beach or beach access. For instance, if a 40 front foot beach front lot sells for $2,500,000 a 40x80 lot in Aquatera may sell for only $250,000 not $500,000. Just my $.02.
Paradise Sea said:
What he said ... I too am accumulating cash and waiting patiently for the bottom, though I suspect that is still several years away.
My theory is that prices will eventually settle back to 2002/03 levels. It seems that since '03 the vast majority of buyers have been the speculators ... speculators buying preconstruction and selling to another speculator who has it built with granit counters in the kitchen and sells it to another speculator who decorates and furnishes it and sells it to another speculator. You have to go back 3 or 4 years to find REAL buyers (ie. non-speculators) in any quantity and market dynamics that make sense.
Speculator driven price appreciation is never sustainable ... I could bore you at this point with my personal dotcom-millionair-on-paper experience, but I'll spare you.
(thanks Smiling JOe for posting the info ... much appreciated)
shelly-moto said:
..........and you think WE need to stay in the lounge!!!!!
bdc63 said:
It's going to take at least that long for an industry shake-out. First folks gotta realize that "the boom" is really over and isn't coming back (we're still not there yet). Next comes the criminal shakeout of fraud and collusion that went on behind the scenes (that's just starting to come to light). After that is the flood of owners' lawsuits due to shoddy workmanship and broken promises from developers. (I wouldn't rush out too quickly to buy these quickly assembled "bubble" houses/condos--I'd wait a good couple of years for the problems to show up).....
....but if there is a major hurricane, or the property insurance mess isn't fixed soon, or the economy experiences a recession, or worse, stagflation--then the entire timeline will be shifted further into the future.
Shelly, I always enjoy reading your posts. My friends always accuse me of seeing the glass half empty ... I suspect that you see it bone dry.SHELLY said:
I am curious why you think a dissaster (natural, economic, or other) would shift the timeline out? Seems to me this would speed things up.
(SOWAL folks, you're not the only ones experiencing price depreciation ... my suburban Baltimore/DC home has lost about $75K in value over the past 6 months
, and the buying frenzy that was happening last year has come to an abrupt stop. All of us "bubble" cities are in this together).
bdc63 said:
I can see your point.....
The shifting of the timeline OUT that I was referring to was the time when Florida Real Estate would be an attractive purchase again.
The insurance problems and hurricane damage would give pause to folks who are looking for a "real place to live" (not investors).
For investors, hurricane-damaged housing isn't as attractive as it once was due to the ever-increasing cost of reconstruction, increasing carry costs AND the fact that there is so little equity in many, many houses and condos, they wouldn't be able to get the "bargains" they would have gotten in the olden days--before folks started using their home as ATM machines and "liberating its equity."
Additionally, if developments and homes are tangled up in a bunch of legal who-ha over crappy craftsmanship and broken promises, folks would be reluctant to purchase for fear of liens or taking over someone's lemon-house.
......Regarding your first comment: as matter of fact--I do like my martinis " very dry"--shaken...not stirred
Monty, you are wrong about the SoWal market being higher than other resort areas like CA and HA. The home we have at Grayton would cost us at least four times what the conservative value of it is in today's market. And the beach wouldn't be nearly as nice or rental demand what it is at SoWal. And I can tell you from firsthand experience in HA, you won't touch a well located resort condo for less than $1.25M...and that's a one-bedroom/one bath, guy. SoWal may be comparatively priced with communities such as Hilton Head and some in South Florida or the Naples/Tampa areas. But it is still a bargain when compared to anything on the West Coast or in HA.