Bubble bursting???

St. Joe will sell for what the market will bear. If a buyer is paying cash, so be it. If financed, appraislas are required, which reflect comparable sales. Do you think taht someone paying $1.5 million for a house a mile from the beach is counting on rentals to pay their mortgage?

Classic and timeless beach homes, while prices may seem outrageous to many of us, are much more than numbers on the sheet for those that will end up owning them for many years. And many of them will end up being owned by people who will value them for generations, with wonderful memories that are difficult to put a dollar value on.

There are a lot of folks here that are out of my league, and many more I've yet to see.

Such has been the case with Ono Island, Star Island, Marco Island, Sea Island, Malibu, Hilton Head, The Hamptons, Seaside, Rosemary Beach, and is soon to be the case at WaterColor, WaterSound, Alys Beach, etc . . .

They come, they stay, they buy. They care little whether a couple of folks have flipped their beach home. They care little what the developer or builder made. They want their beach home.

If you are simplifying the real estate market here all the way to the point of comparing it to the stock market, then you just don't get it.

What is your real issue? You lost money in stocks and now you want to watch others suffer?

Very well put.

When successful experts talk about the stock market, they talk about the fundementals.

The fundementals of SoWal are extraordinary. We are blessed with a location between a beautiful bay and a beautiful beach. That will not change until the next Ice Age, or until global warming takes the beach to Freeport.

We all know that anyone selling anything, will sell what the market will bear. My opinions are based on the unrealistic value of remote beach property. Not the poreperty in the first few rows, but the high prices further away. It just becomes unrealistic.

This isn't to remove the family value of having a wondferful vacation getaway, where memories are made. It's the realistic opinion of a market that has gotten to fat to quick, Which has many comparisons to the stock market or any investment vehicle that has had a run up. My view is simple, what goes up, will come down. It's only a matter of how far and quick.

I believe a lot of good people try to build their dreams in places like Watercolor. However at these prices dreams may become nightmares.I feel you will find whether someone has more money or not, they care about the value of what their hard earned money was spent on. And if you are someone who keeps the property, lower values have their advantage. A tax bill alone can go from a projection of 10K when purchasing a property to 20K at closing.


So finding this informative board, I thought I'd throw in an opinion.

As for my "issue", I feel blessed. I jumped out of the market before the crash and bought realestate. I am now holding my realestate and now buying stocks again. I'm not a flipper or day trader, just someone who reads the paper. And when I see what everyone is doing, I assume it's to risky for me. Sort of flying under the radar.

Long term investing is very relaxing.

Skier, Remember please that I said long term is up. Long term,long term longtermlongtermlongterm...as said by DeCaprio in "The Aviator". Sure, there may be a correction, as in California,but last I checked, you can't purchase resort property anywhere at 70's,80's,90's prices. And stop comparing SoWal w/ tech stocks and the Japanese. As I told Buckhead Rick, that's like apples and oranges/sushi.

Most real estate busts are caused by excessive lending practices. My sense is that significant equity is being invested in most of the SoWal single family transactions. Wealthy individuals have been unable to earn adequate yields in either stocks or the bond market, so many have turned to real estate. If you can't make a decent return in the stock market, why not invest in a second home? At least the investment can be enjoyed. If the stock market takes off again, capital will be pulled away from additional real estate investment, but I would not expect a wholesale selloff. I think demographic trends are good for the area and continued improvements in the transportation infrastructure such as the new airport will be positive for values. That being said, PCB condos may be a different story.

Bob--

We are not talking apples and oranges here. What makes all these markets that crashed similar is the SPECULATION that created the boom and then the bust. The real estate market runup on the panhandle has been created by a huge amount of speculation. When the speculators eventually have to sell to pay down debt (ie:margin loans of the 90's) or because they can't afford to build a house on the lot they bought solely to flip, the market will tank just like the stock market.

Rampant overspeculation in the real estate market is what will cause the price decreases. I know too many folks that bought 2, 3 and as many as 10 properties. Yes, some of these folks are very wealthy and won't get hurt desperately by a fall. However, many of them financed these purchases through interest only loans and never intend to build or hold the homes/condos long term. They are leveraging themselves to the hilt and with short term rates going up, their interest payments (many are tied to LIBOR and adjustment monthly) are going up, up and away. They are trying to sell or will be soon.

Pete and I agree--if you got in two or three years ago. Your investment is probably safe. But, if you got in recently and you can't afford to take a hit, look out.

Skier,

Did you know interest only, which are connected to LIBOR offer a 3 and 5 year fixed rate?

Actually, some lenders will design all kinds of loans including 3, 5, 7, 10 and 15 year interest only loans. However, a large chunk of the interest only market (especially the high end) is taken up by the shorter term loans with adjustment periods of 1, 6 and 12 months. Also, some are tied to LIBOR, some are tied to treasuries and others are tied creatively to other market indices.

Boy, these Watercolor folk really begin to unravel when their overinflated prices go down and their friends discover "hey, maybe this wasn't such a smart idea to buy 10 lots to flip with adjustable interest only loans in a rising interest rate environment". Next time I am at the Watercolor market, I am telling them to offer only decaf.

Boy, these Watercolor folk really begin to unravel when their overinflated prices go down and their friends discover "hey, maybe this wasn't such a smart idea to buy 10 lots to flip with adjustable interest only loans in a rising interest rate environment". Next time I am at the Watercolor market, I am telling them to offer only decaf.

Not arguing for the Watercolor crowd. I don't and won't own anything in there but the interest rates just went down again.

Hmmm, time to refinance my nerdy boring 30 year fixed rate mortgage, maybe.

I will confess to considering buying in Watercolor, although I doubt if I could afford it now (what with doubling prices every six months or so) and to this day have mixed views about my choice. Lots good about the place for my needs, lots bad for my needs. When the salesperson told me I could "get in" to use skier's term, for a modest amount, less than the credit limit on my visa card, together with an interest only loan I was probably the only one ever in their office to say "that's crazy" (two years in the late 1980s where part of my job was helping to pick up the pieces from the S&L debacle makes me gunshy). Plus, I didn't want to get in, I wanted a second house.

Skier's possible doomsday scenario has some reality to it, and I considered it myself when evaluating Watercolor, but unlike tech stocks there is inherent value in built out 30A properties and developments that are attractive to real families. Always has been, always will be. My view has always been that St. Joe has way way too much riding on that property to let skier's endgame scenario happen. But, who knows?

Realtors raise prices so they can then drop them at advertise the property as "Price Reduced!" I'm seeing lots more of that lately.

Realtors raise prices so they can then drop them at advertise the property as "Price Reduced!" I'm seeing lots more of that lately.

Is this to make people "feel" like they got a good deal?

Realtors raise prices so they can then drop them at advertise the property as "Price Reduced!" I'm seeing lots more of that lately.

I haven't seen that. I've seen some real price drops and some token ones. A $5k price drop on a $1.25m dollar property is probably a gimmick.

Bob--

We are not talking apples and oranges here. What makes all these markets that crashed similar is the SPECULATION that created the boom and then the bust. The real estate market runup on the panhandle has been created by a huge amount of speculation. When the speculators eventually have to sell to pay down debt (ie:margin loans of the 90's) or because they can't afford to build a house on the lot they bought solely to flip, the market will tank just like the stock market.

Rampant overspeculation in the real estate market is what will cause the price decreases. I know too many folks that bought 2, 3 and as many as 10 properties. Yes, some of these folks are very wealthy and won't get hurt desperately by a fall. However, many of them financed these purchases through interest only loans and never intend to build or hold the homes/condos long term. They are leveraging themselves to the hilt and with short term rates going up, their interest payments (many are tied to LIBOR and adjustment monthly) are going up, up and away. They are trying to sell or will be soon.

Pete and I agree--if you got in two or three years ago. Your investment is probably safe. But, if you got in recently and you can't afford to take a hit, look out.

Skier, You are hyper-ventilating. Inflation is under control, the economy is anything but overheated and 10 year Treasury yields are in the 4.0-4.2 range. This scenario keeps long-term rates low. Well qualified buyers can refi and grab a second teaser rate easily because of recent appreciation. The up, up and away you are refering to is the rise between the teaser rate and current LIBOR Treasury rates, which, by the way, are still LOW..Not everyone is on one month adjustables, many went 3-5 years.

Florida Real Estate Bubble

The 1920?s, in America, were a time of great prosperity. Skilled and educated working Americans had jobs providing numerous fringe benefits, paid vacations and pensions. In addition, automobiles were becoming commonplace for the wealthy and middle class allowing cross country travel. This good fortune set the stage for the Florida real estate bubble.

Starting in 1920, many Americans became enamored by the materialistic and prosperous lifestyle of the time. During this time, the stock market was moving forward at an extremely fast pace. Many investors were becoming quite wealthy. Florida became a hot spot for these newly rich people, who didn?t enjoy the cold. Many whole families took vacations to Florida. It was at this point that tourism started booming and land prices were skyrocketing. Many astute investors took notice and started buying Florida real estate. The population in Florida was growing exponentially and housing couldn?t meet the demand. Florida became the ?playground of the rich and famous?. Illegal casinos and drinking parlors became widespread in Miami.

At this point, almost anybody could invest in Florida, even without much money. Credit was plentiful and soon everybody in Florida was either a real estate investor or a real estate agent. In 1922, the Miami Herald became the heaviest newspaper in the world as a result of its humongous real estate advertisements. People in the North heard about the real estate prices ?doubling and tripling?, causing a snowball effect. Capital was rapidly pumped into the real estate market. Whole golf communities were developed, such as Temple Terrace. Resorts and retirement communities were developed almost overnight. Mansions were sprawling in every area, as were swimming pools. As always, waterfront property was the most desirable. Florida was seen as a veritable Utopia.

Real estate prices quadrupled in less than one year. An elderly man invested $1,700 in property and by 1925 the property was worth over $300,000! It seemed you could do no wrong by just buying any property in Florida and become a millionaire. By 1925, real estate prices had become so exorbitant that buying land wasn?t affordable any longer. New investors failed to arrive and old investors started to sell. Panic arrived, as it always does, and the real estate market crashed. Prices kept moving downwards as heavily indebted investors tried to sell to avoid bankruptcy. In most cases, no buyers arrived, and the investors were bankrupt from the enormous mortgages.

To make matters even worse, a highly destructive hurricane ravaged South Florida in September 1926. The 125 mile an hour winds eventually turned Palm Beach County into swamp lands. After the storm, a huge tidal wave crashed upon the towns of Belle Glade and Moore Haven. Due to these horrible turn of events, over 13,000 homes were destroyed and 415 people died. Additionally, the arrival of the Mediterranean fruit fly obliterated the large citrus industry. It took years for Florida to fully recover, even through the highly prosperous time from 1925 to 1929. Florida was barely affected in the stock market crash of 1929 and the Great Depression, because of its poor financial state from the start.

Market crashes always occur in the same manner. Regardless of the market, the same simple psychological underpinnings are always at work. People who are caught up in a bubble never look back for historical examples. For this folly, they become paupers.

?Those who cannot remember the past are condemned to repeat it.?

STILL NOT CONVINCED THERE'S A REAL ESTATE BUBBLE, READ THIS!
by Peter Schiff
Euro Pacific Capital
April 20, 2005


As the debate over the existence of a real estate bubble rages, the most persuasive case in favor continues to be made by those firmly committed to the opposite point of view. Such was the case with several recent articles that should give even the most ardent real estate bulls cause for concern.

A New York Times article of April 17, 2005 entitled "Seeking Nest Eggs Investors Buy Nests," chronicles the recent deals of several New York actual, and wannabe, real estate moguls. Although the figures profiled varied largely in terms of wealth and experience, two threads that united them are their a) confidence that real estate prices have no where to go but up, and b) willingness to accept low rental returns, or even negative cash flows, as trade offs for expected appreciation.

Several individuals admitted to being attracted to real estate because they had either lost money in the stock market, or knew of others who had. What these "investors" fail to realize is that they are making the same foolish mistakes with real estate that they or others made with stocks. Stocks per say are not bad investments. Neither is real estate. Its over paying for either that makes for a bad investment. In the 1990s investors over-paid for stocks by ignoring the fundamental measurement of a stocks value, its dividend yield, simply because they expected its price to rise. By ignoring rents, todays real estate "investors" are making exactly the same mistake.

The following quotes taken directly from the Times article provide more evidence than any academic study could in support of the existence of a real estate bubble:

One investor seeks simply to "cover her monthly costs, even if rents are low" and admits that "if there is a little money left over after mortgage payments, taxes, and other expenses, so much the better, but enhancing cash flow is not the goal." How can cash flow not be the goal of an investor in rental property? The fact that she describes minimal positive cash flow as "so much the better" implies that even negative cash flow is acceptable

A second aspiring tycoon who turned to real estate because "he watched his friends lose money on stocks" and feels "real estate is safer," is happy to buy rental property if he can break even. "Im not looking for positive cash flow because we both work and have good incomes." His goal is "to get as many apartments as I can, even with a mortgage, and break even-I do not want any negative cash flow-and when my retirement comes, sell everything." Sell to whom? Apparently a greater fool for whom negative cash flow will not be an obstacle.

A third individual boasts about having paid $70,000 for a rental condo last year that is worth $115,000 today. Though she admits to "not making much money in rents," she looks forward to making up the difference in appreciation. She claims to have no interest in selling now but When Im ready to liquidate I will have the money there, its better than the stock market." How does she know the condo is worth $115,000? Is it because a greater fool purchased a similar one at that price? How does that affect her if she is not the one who sold? Remember all those "paper profits" in the stock market? What good are they now to those who did not sell?

The fact that so many novice real estate investors are confidently buying property with nominal or negative cash flow is not completely lost on the New York Times reporter, but even in pointing this out, he provides still more fodder for my argument. One "expert" consulted commented that in the past real estate investors expected annual rental returns of 8% to 10%, and that such a "historical perspective" is actual a negative in todays market, as it results in experienced investors passing on properties that investors with "fresh prospective" routinely buy. "Theyre not being foolish; theyre looking at it differently than people who have been in the market for a long time." In other words, this time its different, a new era. Ive seen this movie before, and I know how it ends. Remember all the novice stock market day-traders ridiculing Warren Buffet for his failure to grasp the new reality.

A second "expert" remarked that "A break even investment is O.K.," but cautioned others to "never buy a negative return." So even todays supposed experts see nothing wrong with buying rental property that produces no net rental income.

Similarly, a local magazine in Connecticut recently featured a cover-story titled "Annual Real Estate Market Survey -- How High Can It Go?" in which an expert commented "The only problem with real-estate investing in this area is when you approach it strictly as an investor." In other words, consider the fundamental investment value of the property. "Yes a house in Darien or New Canaan will appreciate, and turn a handsome profit when sold, but the greatest interim benefit comes from actually making your home there rather than renting it out and waiting for the optimal selling point." (Not for my wife and me, who are enjoying the area along with the benefits of cheap rent while waiting for prices to collapse.) Notice how appreciation is seen as given, despite the low rental retunes available at todays already high prices.

Another agent commented that "Homes have been very difficult to rent. Ive seen rental listings sit for numerous months." A third added "Even transferees who are coming her for a year or two are buying and then selling after they leave. Its great to buy a house for investing because the value will increase, but dont expect to get an enormous amount of rent."

In another article in the same magazine ironically titled "The Realities of Real Estate" a Q and A with a local realtor included the following: Question, "Are condominiums good investments," Answer, "Theyre an OK investment, but not as good as a single-family home where you can double or triple every dime you put into it." By that she means that if you spend 25K remodeling your kitchen, expect to get an extra 50K to 75K at resale. Remember the olden days, like 5 years ago, when at best, a remolded kitchen could recoup only about 50% of its cost.

Finally, an article which appeared in the April 10 New York Times, entitled "The Hunt, Becoming a Mogul Slowly," which should have been entitled "A Bankruptcy in the Making," chronicles the real estate deals of a 25 year old New Yorker, who began his investment career at the ripe age of 22, using money borrowed form his proud parents for the down-payment. This young man's advice to those potential investors who might be worried about real estate is "What are you worried about? Take a risk with real estate, its less risky than the stock market." It is! Well hes 25 years old, so I guess he should know.

The young mogul also advises against shying away from bidding wars. "An apartment is more attractive to me when other people want it. While the price might seem expensive now, it might not be expensive six months to a year form now. We overbid to capture the opportunity." Basically, his real estate wisdom boils down to the following: Dont worry about the price you pay, just buy, because the price will be higher in six to twelve months.

Meanwhile his success has inspired six of his young, former-renter friends, to follow in his experienced footsteps. Initially, some were put off because "they thought buying was scary or complicated, especially if they werent sure they would settle in New York, but that when they saw that I wasnt completely frazzled and was doing it fairly easily and came out with a profit, they saw it was fairly simple. I made it seem like a very cool thing to do."

I don't think there has ever been a greater "can't lose" consensus than the one which exists among today's real estate "investors." Combine this "irrational exuberance" with unprecedented access to cheep credit, and its no wonder that the Fed has succeeded in creating the "mother of all bubbles." In fact, it's the sheer size of this mega-bubble which makes it so hard to detect, as so many observers are themselves trapped within it. But the simple fact that a 25 year old kid, with three years of experience, is the subject of a series article about real estate investing in The New York Times, itself is perhaps the best anecdotal evidence that today's real estate market is a bubble. When a self-described computer geek, proclaims real estate investing to be cool, you can bet the trend is nearing its end.

Y'all like my new profile pic??? :laughing1

Y'all like my new profile pic??? :laughing1

What is it?

Skier, when will the bubble burst? What will happen? How much of a discount will I be able to buy along 30A? Partly joking, partly not. It's easy to say there won't or will be a RE bust. What are the ramifications if there is?

So much for the lighter subjects you were going to tackle. Skier says SoWal will lose 1/2 its value in . . . what was it? 12 months?

I'm beginning to think you are on this board so that you can come back and say "I told you so". And you're the type of poster that if you turn out to be wrong, we'll never hear from you again. :roll:

At the risk of over stepping my bounds as a new forum member, I'm going to call this one as I see it:

When Skier was asked some intelligent rebuttal questions in recents threads, asking him to elaborate, he responded with sarcasm and avoided the questions completely. Until then he was helping drive an interesting debate, but he dropped the ball once he was challenged directly. I stopped reading his posts with interest after that, I'm afraid. Started to sound like someone who is baiting for pointless debate.

Skier, we get your point. Yes, there are definitely some over inflated properties out there. Some. Humans are greedy, it's guaranteed to happen in a market like this. I'm glad you are providing food for thought, but please, if you want to retain credibility, have the courtesy to respond to those who have different opinions without resorting to sarcasm.

Respect, Thumper

I keep looking for a real estate expert to discuss the bubble. Everything I've read is from economists or a financial expert. Real Estate is unlike the stock market, it doesn't implode. During a slow down it let's air out slowly and typically stabilizes. I've bought and sold scores of property and scores of stocks. I've lost money in stocks, some more than others. I've never lost a nickel in real estate.

About a month ago - I saw something on CNN about real estate bubble bursting. I wish I could remember more of the figures - but they brought up cases such as California and Boston - where in the past real estate had risen like 300% over a few years - when the bubble burst - values fell 10-15%. Not that I want to lose 10-15% - but if I have increased 300% - then 10-15 doesn't sound so bad. Did anyone else see this that remembers more about it than I do?

Current Barron's mag. has three interesting articles. One by a Yale prof who says the R/E bubble is nationwide and we could see a drop of 50%, latter he says it could be only 2.6%-that's why he is at Yale and I'm not, he covers all bases.
Two, Alan Albelson writes that he feels all the popular mags are right this time in calling for a bubble burst, though he admits they have never been before.
Last, Ryan Beck & co. stock analyst boosts her target price on JOE to $92, because of the projected 80% population increase in the next 10 years. Maybe they'll all be right, I sure do not know.