Doom, Gloom and Reality

[Pirate]

Hmmmm.... Reality?

This article presents a very interesting opinion. Here is another opinion that might interest the people wearing rose colored glasses. There are somewhere around 30,000 people in the entire country with a net worth in excess of $10m. These are 2004 numbers but you should check it for yourself. Where are this writers' imaginary buyers going to come from, another planet? How many people will hang around the $5m beachfront when the payment is 50k a month? How many have the staying power? Not many. The scariest part of this is how many beachfront houses there are around the entire coast of the United States? A hell of alot more than even 10 times this number. I keep hearing that 80 percent of the buyers of the homes over 1 million are cash buyers so these 30k must be the people we are talkng about, unless buyers are putting their entire portfolios into 1 beach house :funn: I wonder if the reason these sales might show up as cash is the magical "home equity line" on the primary residence, interest only ARM no doubt. I'm sure no one here knows anyone that has done that. :roll: There are only a small percentage of people who can REALLY afford the prices now, even double the 30k stat and say there are 60,000 people who are capable and it still looks mighty ugly to me. I own a house there (yes, it's off the beach) and love the run up, but the market is out of hand. Credit crunch is comin to town. This is the first time I have been a bear on the market since the early 90's, but these are the reasons houses are sitting on the market. I will have my checkbook out come fall or winter this year. 0-2% fed rate is not a free market, this is what happens when mortgage money is thrown at people. For our next excercise, lets see how many people have a net worth of $1m without their primary residence and crunch that a while........

 

[SHELLY]

...and Olly cannot be impartial regardless of his affiliations? He sees the cup half full and you see it...well, we know!

He could...but when it comes to their "product," all salesmen are hardwired to sell the sizzle. I'd be surprised if he didn't say those things.

 

[SlowMovin]

There are somewhere around 30,000 people in the entire country with a net worth in excess of $10m. These are 2004 numbers but you should check it for yourself.

Granted, I limited my "research" on this to Google queries, but I could find no truly reliable information (i.e. IRS or census data, for instance) on the number of households in the US with net worth in excess of $10 million. What information I did find, though, suggested higher numbers.

A new study by Edward N. Wolff, a New York University economist who tracks the distribution of wealth in the United States, found that 4.1 million of the nation's 102 million households had a net worth of $1 million or more last year...Make the wealth cutoff $10 million or more, and 275,000 households qualified in 1998, up from 190,000 in 1995, a 44.7 percent increase.

--From "More Wealth, More Stately Mansions," Louis Uchitelle, published in NY Times, 1999; http://web.nps.navy.mil/~relooney/3040_889.htm

While the above was from 1999, I also found the World Wealth Report of 2005 (Merrill Lynch/CapGemini) which stated that the number of millionaires with net worth between $5 million and $30 million worldwide was 774,800 with the US having the highest percentage thereof. They indicated the number has been steadily growing year over year.
http://www.us.capgemini.com/worldwealthreport/

Finally,

The number of superwealthy in the U.S. has surged, with 430,000 households now worth more than $10 million.

--Robert Frank, Wall Street Journal, 2005
http://www.realestatejournal.com/buysell/relocation/20050523-frank.html

Unfortunately the Journal did not cite their source for the figure.

 

[Rita]

Not all are purchased by single parties, therefore that needs to be considered - making the numbers more complicated.

 

[SlowMovin]

For our next excercise, lets see how many people have a net worth of $1m without their primary residence and crunch that a while........

I'm sorry, I forgot to mention this earlier. Net worth is typically defined as liquid assets minus liquid liabilities, including long-term retirement accounts but excluding home equity. Investment property equity, though, is usually included.

 

[Cork On the Ocean]

Hmmmm.... Reality?

This article presents a very interesting opinion. Here is another opinion that might interest the people wearing rose colored glasses. There are somewhere around 30,000 people in the entire country with a net worth in excess of $10m. These are 2004 numbers but you should check it for yourself. Where are this writers' imaginary buyers going to come from, another planet? How many people will hang around the $5m beachfront when the payment is 50k a month? ....

Great links SlowMovin, got to find the time to read them. Just one thing, Pirate. There is beachfront here for less than $5m. In fact there's a beachfront lot in west PC that we're looking at that's significant less than $2M (maybe $1.4 or $1.6). I also just got something on beachfront land in Cape san Blas less than $1M but I would want to do some checking on that with their erosion problem in some areas . Anyway, beachfront can be had for less than $5 million here so we're not to that point yet.

 

[Pirate]

Thanks for correcting me. I was using a figure that was for individuals with a net worth of 30m plus and I apologize. I will use your 400,000 figure and say this. Do you think there are only 400,000 multi million dollar vacation homes owned by individuals from the U.S.? No chance. Do a search on the amount of beach along the U.S. coastline and the amount of property is incredible. Add in mountain homes, river and sound places, the carribean, etc. Nothing I say will sway anyones opinion here, but the posted article seems biased with the backup being that the author thinks so.

I didn't say the beachfront was all 5 million, I feel someone with a multi-million dollar vacation home should have at least several million to invest. Additionally, Panama City isn't in Walton but there were multiple houses on that beach under 500k 3-4 years ago. Cape San Blas loses entire lots right into the ocean that cost over a million, then the owners put the sand back for a hundred thousand and a few weeks later it is gone again. A 30-40 percent discount off a 300-400 percent increase still doesn't look like a good deal to me.

The fact that the area costs less than Naples isn't a reason to buy. There should be some basis for an investment besides the fact that the current mortgage payment is affordable.

CCIM sure is a great training organization. Ever check the cap rate on a beach house?

 

[DuneDog]

Thanks for correcting me. I was using a figure that was for individuals with a net worth of 30m plus and I apologize. I will use your 400,000 figure and say this. Do you think there are only 400,000 multi million dollar vacation homes owned by individuals from the U.S.? No chance. Do a search on the amount of beach along the U.S. coastline and the amount of property is incredible. Add in mountain homes, river and sound places, the carribean, etc. Nothing I say will sway anyones opinion here, but the posted article seems biased with the backup being that the author thinks so.

I would believe that a lot of beachfront property as well as other high profile property in this country is owned by foreign interests.