No longer an owner!!!!!!!!

Oh what a relief it is!!

Long time lurker wanting to add a few comments as I exit the market.

Got lucky and just sold my second home in SoWal. After watching the market sour for a couple of years now, I finally decided it was time to sell. I priced the home right and sold it within 90 days. I bought new construction in 2003 before the boom caused by speculation and sold in 2008 at a very slight profit excluding carrying costs. Given the current trends in the market, I think I would have been underwater within another year and way under water within a couple of years. However, I did not sell because I could not afford to own. Like many people new to the second home market in the early 2000's, I decided owning a second home wasn't all it was cracked up to be. The primary reasons for selling were--

1. Bad and worsening economy that made me think I would be in a loss position soon with no time in sight where the tide would turn.

2. Renting is much, much cheaper than owning. I can rent the best of the best several times a year along 30A or anywhere else in the world for that matter and still come out ahead of owning (especially when the second home is depreciating). I could rent a really nice place for one full week just for the cost of my annual HOA dues. Not to mention insurance, maintenance, taxes, utilities, interest, etc, etc.

3. Tied down by second home. I never felt I could justify going other places while I owned the second home. Now I feel free to travel the world.

4. South Walton is nice, but I realized there are lots and lots of times when being in another vacation spot would be much nicer. For instance, winter months are much too cold (air and especially water temperature) to enjoy the beach. May/June I never could sit on my porch without getting eaten alive by the deer flies. Sept/Oct I never could be on the beach without being eaten by dog flies. June/July/August more times than not, the June grass and jellies kept me out of the water. I will still visit, but will choose my times wisely like late April to mid May and October. I'll make sure the June grass isn't choking out the water and the jellies are in retreat.

5. If I miss the area and my second home, I believe that I will be able to buy much, much cheaper in a couple of years.


Good luck to all those trying to sell their second homes.

Good for you!! How did your market it? Did you sell it yourself or through an agent? Realize most important point you made was it was "priced right". In what area is the house?

I am very leery of internet forums and think posting personal info can get me in trouble. But, I did use a real estate agent. I thought this would be much easier than for sale by owner.

You did take a chance, happyrenter, posting among a bunch of rabid beach-lovers (the SoWal kind are the worse ) saying that you're happy you sold! But you presented the facts very openly and fairly, and even left the door open with item # 5. So how can anyone not be glad for you?

I will admit that there's much that I agree with. We've found out over the three years we've owned our condo that it's not a money-making proposition. We're fortunate that we're in the position to wait out the bad economy but I will never speak ill of someone who is able to cut their losses, or even better, make a profit. Owning in SoWal is not for everybody. Whenever we sell, I can't say for sure that we will buy again and it's for a very greedy reason. We will never make enough profit to buy the luxury I'd like--yet, if we don't own, we can rent someone else's luxury. Not a bad proposition in my eyes.

It's a pity, though, that you felt tied down by your property. I thought similarly in the first year of ownership--that I couldn't vacation anywhere else when I already owned a vacation (like it was wasteful or something), but I've long since tossed that idea out. The world is too big and wonderful not to explore! Loving other places doesn't mean that you love SoWal less. In fact it's kind of comforting to come home to your own piece of the beach after having been elsewhere. There's nothing like appreciating what you have, and when you've reached that conclusion, you'll be ready to buy once more.

Much, much cheaper than prices in 2003? Wasn't the run up in prices during 2004, 2005 and 2006?

"5. If I miss the area and my second home, I believe that I will be able to buy much, much cheaper in a couple of years. "

You did take a chance, happyrenter, posting among a bunch of rabid beach-lovers (the SoWal kind are the worse ) saying that you're happy you sold! But you presented the facts very openly and fairly, and even left the door open with item # 5. So how can anyone not be glad for you?

I will admit that there's much that I agree with. We've found out over the three years we've owned our condo that it's not a money-making proposition. We're fortunate that we're in the position to wait out the bad economy but I will never speak ill of someone who is able to cut their losses, or even better, make a profit. Owning in SoWal is not for everybody. Whenever we sell, I can't say for sure that we will buy again and it's for a very greedy reason. We will never make enough profit to buy the luxury I'd like--yet, if we don't own, we can rent someone else's luxury. Not a bad proposition in my eyes.

It's a pity, though, that you felt tied down by your property. I thought similarly in the first year of ownership--that I couldn't vacation anywhere else when I already owned a vacation (like it was wasteful or something), but I've long since tossed that idea out. The world is too big and wonderful not to explore! Loving other places doesn't mean that you love SoWal less. In fact it's kind of comforting to come home to your own piece of the beach after having been elsewhere. There's nothing like appreciating what you have, and when you've reached that conclusion, you'll be ready to buy once more.

Congrats!! The pride of ownership, security from rent increases, and the forced savings aspects of home ownership need to be the rewards you seek. The fear of loss of your home in legal/divorce settlements may even alter behavior in a positive way. But believe me, the numbers just don't work out for ownership versus renting in the long run. I know that sounds like heresy in sowal and the real estate agents may disagree, but a careful analysis will show this to be true.
The continued price decreases, holding costs increases, and prospects for tax changes after our elections, will continue to put pressure on the ownership equation from strictly a numbers perspective.

Thanks Miss Kitty!!! Heck no, I can't speak for everyone's situation. I strongly agree with most people that ownership is preferrable. But that is from a perspective of the benefits to a family unit and the development of stability in the family that the mortgage obligation creates.

Congrats!! The pride of ownership, security from rent increases, and the forced savings aspects of home ownership need to be the rewards you seek. The fear of loss of your home in legal/divorce settlements may even alter behavior in a positive way. But believe me, the numbers just don't work out for ownership versus renting in the long run. I know that sounds like heresy in sowal and the real estate agents may disagree, but a careful analysis will show this to be true.
The continued price decreases, holding costs increases, and prospects for tax changes after our elections, will continue to put pressure on the ownership equation from strictly a numbers perspective.

I have to respectfully disagree with you Skeet. What you say will be true for some, but not for all.

I agree that if you are talking about the annual cash inflow/outflow only, then a second home, even if rented, will most likely suck money out of your wallet every year.

But other factors like your mortgage interest rate, initial purchase price, property appreciatiation rate, and tax bracket/savings, can work together to give you a nice investment return and a great Sowal home to stay in on occasion.

For example, say you found a post-bubble pre-foreclosure property, bought with mortgage at a low interest rate, rents well through VRBO, property appreciates at the average rate of the last 20 years, and you are in a high tax bracket and need a tax shelter. Under these circumstances, rare as they may be, a second home can be a decent investment, returning over 10% (IRR) per year at resale.

My point is that a "careful analysis" depends on the situation and the assumptions built in to the analysis. For some people the numbers work, for others they won't.

I've yet to find a vacation rental property like that in SoWal post the current bubble. Prices still seem too high, and may never come down far enough to make a positive rental investment financed through typical methods feasable. I think SoWal is going through a substantial change right now, the old business model which relied on appreciation is largely obsolete.

I agree with you 100% that buying a property that is a huge cash drain because you expect it to appreciate rapidly is a huge risk. This is gambling, not investing.

But I'm really curious. Are you saying that you don't think that within 5 years the appreciation rate will revert to the 20-year mean for beachfront property in the region. I'm thinking that mean is around 6% per year (values doubling every 12 years or so)? Is my 6% too high in your opinion? What would you suggest as an alternative?

Obviously we are currently seeing negative appreciation, playing catchup for all the silliness that took place from 2002-2005. Please correct me if I'm wrong, but I see a valuation drop of 30% from the highs, and this takes property values back to pre-bubble days. At some point intrinsic value kicks in and property values rise at a reasonable, historically-valid rate. The demand for beachfront properties, though dampened in the short-run by credit issues and economic problems, will continue to be strong over the long run, no?

You own a vacation home instead of renting one for a variety of reasons, but IMO financial gain isn't one of them.

If you can make the $ work, more power to you, but I think most of the benefits are intangible. It's certainly much nicer to arrive to your bed, pj's, furniture, and decor, but you have to spend quite a bit of time there before it is "cheaper" than a rental a couple weeks a year.

Well, you have to get 6% or more when you sell and you have to generate good rental income every year for the life time of the investment. Also the house can not experience any major damage from a storm. That's a lot of 'ifs'.

I guess it comes down to what you like to invest in and what ancillary gains you might get from your investment. For example, like a lot of folks down here, maybe you plan on retiring in the house at some point. This is the type of market I think we are back to now - you buy for reasons other than appreciation and income.

Myself I'm looking for steady, reliable income flow - I don't think vacation rentals are well qualified to provide that. You might be looking for something else.

Well, you have to get 6% or more when you sell and you have to generate good rental income every year for the life time of the investment. Also the house can not experience any major damage from a storm. That's a lot of 'ifs'.

I guess it comes down to what you like to invest in and what ancillary gains you might get from your investment. For example, like a lot of folks down here, maybe you plan on retiring in the house at some point. This is the type of market I think we are back to now - you buy for reasons other than appreciation and income.

Myself I'm looking for steady, reliable income flow - I don't think vacation rentals are well qualified to provide that. You might be looking for something else.

Yup. That was the point of my first comment. I'm looking for something else. I need a place to put excess cash outside of my company and the stock market--a place that will not increase my taxes but provide long term capital appreciation (I'm under 40) and allow my family to enjoy visits to the best beach in the world.

A generalization was made above that buying Sowal property as a financial investment would not make sense for anyone. I disagreed and suggested that maybe that is true for many but not for all, namely me .

Sorry to take things off on such a tangent. It just bothered me a bit that the generalization was made and I feel strongly that it does not apply in all cases. Maybe there are some others considering purchasing here with circumstances similar to mine. Just wanted to encourage them to think through all of these factors and take the plunge.