Bubble bursting???

[Seasider]

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.

 

[skier]

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.

 

[Kim Smith]

Skier,

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

 

[skier]

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.

 

[Travel2Much]

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.

 

[RiverOtter]

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.

 

[Travel2Much]

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?

 

[SHELLY]

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

 

[RiverOtter]

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?

 

[FoX]

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.