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GVM

Beach Lover
Dec 25, 2004
109
0
Here's an interesting column I came across on-line. The author is a business journalist in the mid-west, I think.

The Real Estate Bubble Pops Here
Posted by Dana Blankenhorn
A post card came in the mail, from a Keller-Williams agent. (Is it just my imagination or have they taken over the market lately?) It was about the Gary house, down the street from me.

The asking price is $334,900.

I remember the Garys, from back in the day. Nice people. Salt of the earth. He was a deacon at the church. She loved him desperately. The mantle was already filled with pictures of grandchildren when I met them, in the early 1980s. I went there regularly for block meetings. They said we were crazy to pay $49,000 for our house.

Mr. Gary passed away in the late 1990s. (God rest his soul.) She finally moved out with some of those grandchildren, a few years later.

They had gotten an unbelievable offer.


The seller this time gave her that offer, which doubled property taxes all over the block. Now they?re looking for an unbelievable profit. They might get it.

It?s ironic that FNMA (Fannie Mae) and FHMC (Freddie Mac), which were created to make housing affordable, have in the last years done just the opposite. But food is energy, and too much obesity, I guess.

The problem is that Fannie and Freddie buy anything. As a result there?s no longer any risk in mortgage lending. The banker moves the paper to the government, which turns it into a security. Everyone takes a fee. All the incentives are one-way.

So you get 40 year mortgages, you get adjustable rate mortgages, you get interest-only mortgages, you get adjustable rate interest only mortgages. These were fine for investors, who could pay off called loans, but for ordinary people it leaves you one pink slip or one rate hike away from bankruptcy.

And you?ve gotta do it. The price of housing is tied to the price of money, and the availability of loans. With the spigots turned on high, a conservative buyer has as much chance of closing as a value investor chasing Google.

We?ve had bubbles before. Some are old enough to remember 1974, the last time Atlanta housing crashed. It stayed crashed for many years. But most aren?t old enough to remember that.

So the bubble gets bigger and bigger and bigger. Prices go only one way. It ends when everyone?s in the game, when there are no more buyers, or when the price of money shoots up, as it might with this $2.50/gallon gasoline.

Until then, $335,000 for a three bedroom, two bath in Kirkwood is just the price.
 

Bob

SoWal Insider
Nov 16, 2004
10,463
1,344
O'Wal
GVM said:
Here's an interesting column I came across on-line. The author is a business journalist in the mid-west, I think.

The Real Estate Bubble Pops Here
Posted by Dana Blankenhorn
A post card came in the mail, from a Keller-Williams agent. (Is it just my imagination or have they taken over the market lately?) It was about the Gary house, down the street from me.

The asking price is $334,900.

I remember the Garys, from back in the day. Nice people. Salt of the earth. He was a deacon at the church. She loved him desperately. The mantle was already filled with pictures of grandchildren when I met them, in the early 1980s. I went there regularly for block meetings. They said we were crazy to pay $49,000 for our house.

Mr. Gary passed away in the late 1990s. (God rest his soul.) She finally moved out with some of those grandchildren, a few years later.

They had gotten an unbelievable offer.


The seller this time gave her that offer, which doubled property taxes all over the block. Now they?re looking for an unbelievable profit. They might get it.

It?s ironic that FNMA (Fannie Mae) and FHMC (Freddie Mac), which were created to make housing affordable, have in the last years done just the opposite. But food is energy, and too much obesity, I guess.

The problem is that Fannie and Freddie buy anything. As a result there?s no longer any risk in mortgage lending. The banker moves the paper to the government, which turns it into a security. Everyone takes a fee. All the incentives are one-way.

So you get 40 year mortgages, you get adjustable rate mortgages, you get interest-only mortgages, you get adjustable rate interest only mortgages. These were fine for investors, who could pay off called loans, but for ordinary people it leaves you one pink slip or one rate hike away from bankruptcy.

And you?ve gotta do it. The price of housing is tied to the price of money, and the availability of loans. With the spigots turned on high, a conservative buyer has as much chance of closing as a value investor chasing Google.

We?ve had bubbles before. Some are old enough to remember 1974, the last time Atlanta housing crashed. It stayed crashed for many years. But most aren?t old enough to remember that.

So the bubble gets bigger and bigger and bigger. Prices go only one way. It ends when everyone?s in the game, when there are no more buyers, or when the price of money shoots up, as it might with this $2.50/gallon gasoline.

Until then, $335,000 for a three bedroom, two bath in Kirkwood is just the price.
Prices in Indianapolis actually fell last year. "Real Estate" is a very local issue.
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
Speaking of Bubbles, while I am not blind to the recent trends, I can see reasons why Stock Brokers would have much to gain by pushing the Real Estate Bubble into the news. They have much to gain by getting people to reinvest in stocks. Americans pulled billions out of the stock market and parked their money in real estate. Stock Brokers want your money back in their hands.

I am suprised that a television channel has not been dedicated to Real Estate valuations and speculations. I bet the ads would be costly due to the watchers. Should I sell my house today, or hope for a run up tomorrow? Maybe I will buy another home or two if prices drop next week.

I can see it now.
 

skier

Beach Lover
Mar 7, 2005
116
0
There are some very interesting articles in the Wall Street journal today regarding the bubble. And, oil prices, interest rate trends, etc. all point to a bubble bursting in overheated markets.

But, unlike stock market bubble bursts, the articles say it will be much more subtle and take time to see the effects of the decrease in prices.

It is clear that prices have fallen in areas of SoWal recently. Good examples are the 3 lots on Salt Box Lane in Watersound that apparently went under contract for under $700k after some sold last year for almost $900k. That equates to about a 20% decrease in market value. I have seen some other lots for sale where folks are listing for barely 5% more than they paid last summer. But, they aren't moving because similar lots close by are priced much lower (those aren't moving either) because the owners bought a couple of years ago and have much lower basis in the property.
 

OnMackBayou

Beach Lover
May 15, 2005
227
0
Mack Bayou, Sandestin
I recently read a bubble article by an "expert". He said that prices were really out of whack in California because it would cost the same to buy 7 houses in Buffalo vs. 1 in Santa Barbara. Only 7??????????????????????? Sounds like a bubble in Buffalo to me. That's comparing oranges and snowballs.

I lived in Houston until the late 80's, and went thru a big housing downturn. People often owed more on their homes than they were worth. Many people just walked away from them. Foreclosures were rampant. But Houston was a one trick pony related to the bust in the oil market. I always liked Houston because it was home.

But I can't really imagine too many people really wanting to go there on vacation, to have a second home there, to retire there or to spend the winters there, such as they do in South Walton.

Most other areas that have had bubbles had them because of a downturn in the local economy. The individual deals out here in South Walton seem to be getting snapped up pretty quick, at a price still elevated from a year ago. If buyers are waiting for prices to fall to 2004 levels, they will probably be waiting for the rest of their lives.

Kinda like the deal I'm still waiting on in Naples. From 1997. That bayfront lot for which I wouldn't pay $300,000.00 is now probably worth $2,000,000.00.

Can you imagine what this area will be like in 5-10 years? More diverse, more crowded and certainly much, much more expensive than now. If you see a deal now, you better grab it.
 

Bob

SoWal Insider
Nov 16, 2004
10,463
1,344
O'Wal
Long term for SoWal is likely to be very good, those who have built and homesteaded have a rather unobtainable status. Nice club to be in now.
 

Miss Kitty

Meow
Jun 10, 2005
27,015
1,123
67
Bob said:
Long term for SoWal is likely to be very good, those who have built and homesteaded have a rather unobtainable status. Nice club to be in now.

Could this be the newest..."haves vs. have-nots"???? Is the Save Our Homes campaign closed to new buyers moving to FL? Will we see bumper stickers that say...HOMESTEADED replace SoWal.com as the latest must have
accessory? I say NEVER!...SoWal Rules...We're no Fools!!!
 

skier

Beach Lover
Mar 7, 2005
116
0
OnMackBayou said:
I recently read a bubble article by an "expert". He said that prices were really out of whack in California because it would cost the same to buy 7 houses in Buffalo vs. 1 in Santa Barbara. Only 7??????????????????????? Sounds like a bubble in Buffalo to me. That's comparing oranges and snowballs.

I lived in Houston until the late 80's, and went thru a big housing downturn. People often owed more on their homes than they were worth. Many people just walked away from them. Foreclosures were rampant. But Houston was a one trick pony related to the bust in the oil market. I always liked Houston because it was home.

But I can't really imagine too many people really wanting to go there on vacation, to have a second home there, to retire there or to spend the winters there, such as they do in South Walton.

Most other areas that have had bubbles had them because of a downturn in the local economy. The individual deals out here in South Walton seem to be getting snapped up pretty quick, at a price still elevated from a year ago. If buyers are waiting for prices to fall to 2004 levels, they will probably be waiting for the rest of their lives.

Kinda like the deal I'm still waiting on in Naples. From 1997. That bayfront lot for which I wouldn't pay $300,000.00 is now probably worth $2,000,000.00.

Can you imagine what this area will be like in 5-10 years? More diverse, more crowded and certainly much, much more expensive than now. If you see a deal now, you better grab it.

Mack,

Not sure what deals you are talking about, because the only stuff I see selling along on the eastern end of 30A are at prices that are below the prices paid for very similar properties last year. In fact, several lots in watersound sold recently at prices 20% less that lots next door sold for in 2004. There are also numerous properties on the market in Seaside, Watercolor, Watersound and Rosemary that are for sale at prices close to or lower than last summer that are not moving. The inventory on the market is overwhelming and folks continue to drop prices with no takers. In Watersound, Watercolor, Seaside and Rosemary, the inventory continues to increase each week (ie:new houses appearing on the market exceed the sales each week). And, at Alys Beach, the agents are actually calling prospects to try to "drum up business". When was the last time any of the big developments had to contact people to drum up business. Not sure how long the slow down and trend of decreasing prices will last, but in the short term, you are dead wrong. The FACTS speak for themselves.
 
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