:roll: I'm living out my lifelong dream of relocating my family here from Tx June 1st and am working through the pros and cons of the current market conditions. I'd love to hear from some of you regarding an objective view of pricing. I'll admit my mindset has become very jaded due to a number of factors. Side note: If you live in Rosemary Beach, don't even bother reading further, you are either retired, independently wealthy, or mortgaged out the wazoo and this lengthy post will bore you.
I'll preface this by saying I don't think I've ever seen so many real estate agents in one particular locale than I've seen here. And with all due respect, I don't expect any one of them to voice anything but optimism about how pricing and demand is right on the verge of taking off. (I'm very skeptical due to the fact that I read that there are over 11,000 listings right now along the Emerald Coast - supply is considerably higher than demand.)
I want someone to tell me what they would tell their son, friend, or business aquaintance they would do, if they were in my shoes. Not try to sell me on the area, just talk honestly about how to get the best value for my housing dollar.
That being said, I think that I am a great prospect for a home purchase. My income is above average, my credit excellent, and my job allows me to live anywhere along the Panhandle. My preference is to live as close to water as possible (and know that waterfront is out of the question). I don't want to have to drive across the causeway or Mid-bay bridge to get to the beach. Bluewater Bay is nice, but not my cup of tea.
However, it now seems that every mudhole with a trailer in this area has been listed at $300K. And I've been coming down here for 40+ years and I've never seen that kind of seller optimism. The number of homes in the $300K to $400K range is disappointing. And my view is that if I'm going to spend $500K for a 3 bedroom 2+ bath home here, I'll definitely build what I want, not buy a 70's home that somebody is trying to flip for a big profit because their agent has convinced them they can get it.
Am I the only guy in the grit eating world that thinks that a price correction is still yet to come? I understand that there is a lot of money coming into this area, but with homeowner's coverage and property taxes rising, I've got to believe that there are a number of folks in Atlanta, Bham, Memphis, etc, who have overextended themselves. If your taxes and insurance are $700/month, that can seriously impact your monthly mortgage note (escrow).
Am I nuts in my thinking? Is this California? I hope this area has not become unaffordable for the average family fortunate enough to live in this incredibly beautiful area. I'm seriously considering renting for a year to watch and wait. I'd love to hear what you would do if you were in my shoes. Thanks for allowing me to type this novel.
Replies
66
Beach Fanatic
I think if I had to make my decision today, I would rent for a year as close to the beach or Pt. Washington as possible, and think seriously about building in your area. However, I am meeting tomorrow with a good friend who is a realtor in the area that I trust and respect. The intention of my post was to make myself think about all angles before outlining my search goals.
Funny thing, my brother in law is an architect here (McWhorter Architects... got to give him a cheap plug). We used a plan he designed for the HGTV Dream Home in Rosemary Beach and built in New Braunfels, TX in the hill country. My home sits on an acre of land and I have it listed for $335K, hoping it will sell. What a difference in markets huh?
Well, coming from Texas, at least you are used to high real estate taxes! Your home in Texas sounds dreamy.....is it on the market yet? Any links you can post? Maybe someone will want to trade!
Beach Fanatic
I think this is it: MLS 451173 on emeraldcoasthomesonline.
http://www.emeraldcoasthomesonline.com/(xfkxtm45hnzn5a2ykcfg1p55)/propertyDetails.aspx?mls=451173
Seems to me that would list for more like $850k to $900k when comparing to the second link.
http://www.emeraldcoasthomesonline.com/(xfkxtm45hnzn5a2ykcfg1p55)/propertyDetails.aspx?mls=451173
Seems to me that would list for more like $850k to $900k when comparing to the second link.
Beach Lover
I think this is it: MLS 451173 on emeraldcoasthomesonline.
http://www.emeraldcoasthomesonline.com/(xfkxtm45hnzn5a2ykcfg1p55)/propertyDetails.aspx?mls=451173
Seems to me that would list for more like $850k to $900k when comparing to the second link.
I was just looking for a quick neighborhood comparison for rental and home purchase... It can be done for almost every neighborhood in Okaloosa, and Walton county and the same results would be found...
I apologize for not getting an exact match, but I thought same neighborhood, all new construction and roughly same size would have been enough to make my point...
Christini Zambini
Beach Dad, I think building is a great idea, especially since you are related to a great architect. Lot prices in certain areas are very competitive and construction costs have gone down considerably from the last 2 years. Materials costs are way, way down and you will be able to find a local builder who will give you a fair deal because they have to be competitive now that the market has slowed.
IMO, Point Washington is the place for you to look because it is centrally located in SoWal. You kids can walk to Bay Elementary (great, small school) and it is near Seaside Middle and the South Walton High School. Also, Point Washington is near Helen McCall Park where the football and baseball fields are located.
IMO, Point Washington is the place for you to look because it is centrally located in SoWal. You kids can walk to Bay Elementary (great, small school) and it is near Seaside Middle and the South Walton High School. Also, Point Washington is near Helen McCall Park where the football and baseball fields are located.
Beach Fanatic
Here is a link to my home in New Braunfels....
http://realtor.com/FindHome/HomeLis...20&y=12&sid=07B515BD199BC&snumxlid=1072323449
If you look closely, you can see my big screen TV calling out my name during tonight's football game. I miss it terribly. Almost as much as my wife and kids.
Looks like another break for you - you are not used to having a garage. :funn:
Every shack in the county has granite countertops, but garages are hard to find!
Beach ComberAuthor
Well, coming from Texas, at least you are used to high real estate taxes! Your home in Texas sounds dreamy.....is it on the market yet? Any links you can post? Maybe someone will want to trade!
I tried to post a link to my home in New Braunfels but I didn't succeed. Let me try again... (this site must be childproof and kept me out)
http://realtor.com/FindHome/HomeLis...20&y=12&sid=07B515BD199BC&snumxlid=1072323449
Click on the virtual tour and you will see why we are really going to miss this home. And not only do I have a beautiful wife and two kids, I am also married to a 60" big screen TV that no doubt misses me terribly.
Side note: Check out the built in bunk beds upstairs - the boys sleep there when we have guests. It frees up their rooms and I don't have to have a forth bedroom sitting idle. I give my Brother in law an A+ for that creativity.
You are right about the taxes. My property taxes are right at $4K per year. My homeowner's coverage with Nationwide is only about $1100 per year - no hurricanes in the hill country thankfully.
Beach Fanatic
I am really tired of hearing this line of crap...
If you buy, you are building equity...
If you rent, you are throwing money away...
Lets actually look at this simplistic mainstream idea a bit deeper...
Lets assume as you have stated that the market will stagnate for a few years and I am looking to buy or rent next week...
Well if I looked to buy a home in South Walton and say as example I picked Village of Blue Mountain I would be looking to pay anywhere from $700k to $1.5M depending on the size....
Well if I meander on over to the rental department I can magically rent a home over 2,000 sq ft for $2,000/month in the same neighborhood... And this comparable size home in this neighborhood would be going for about $1.25 million...
So say I bought it at $1.25 million and I even put down 20%(doubtful to have $250,000 cash on hand for a down payment... but I am giving the benefit of doubt in this argument toward the buying side... I also won't even use this downpayment against you as far as the opportunity you have wasted by putting $250k into the house rather than letting it grow in a mutual fund or even a high yield savings) my mortgage with insurance taxes and interest would be no cheaper than $7000/month... This is assuming annual taxes at $7500/year and Annual Insurance at $2500/year... pretty low assumptions...
So knowing that very little of your PITI payment each month for your mortgage actually goes to Principal for the first 5 years of the loan... why would I want to spend $5000/month more to live in the same type of home...
Assuming you even had $7,000/month to spend on a mortgage would you not rather pay $2,000 per month to rent and save the difference ($5,000/month in even a high yield savings account???)
In this scenario with house prices stagnate and the difference from price to rent in five years that person could have saved and grown his savings to close to $350k in a simple high yield savings account with absolutely no risk... or he could fork over $7,000 per month and hope and pray everynight that his house appreciates like it was 2005 all over again...
I also left out maintenance costs, HOA dues, and maybe some other small things to again give the benefit of my math to the buyer.... But in the end, in my opinion you would be crazy not to rent for a few years and see how this thing shakes out...
You are absolutely correct, but you will have a hard time getting many people that ignore logic, reason and facts to understand your post.
Beach Fanatic
I don't agree ... I don't think all areas in SoWal are the same and there is a bottom in sight to the price reductions.Second, if you buy a house and the price falls after you buy, you are not building equity, you are losing equity [/quote]
True - but if you buy wisely, you won't be buying a house that falls in price. And if you do, and you've bought for the long term, history has told us things swing up again. Just like stocks - up and down, up and down.[/QUOTE]
Again, please be specific. I'm sure there are lots of people on this board that are looking for one of these sure fire investment opportunities that you refer to.
Hyperbole and tired old sayings won't get you very far in a market like the one we are currently experiencing.
Beach Fanatic
Second, if you buy a house and the price falls after you buy, you are not building equity, you are losing equity
True - but if you buy wisely, you won't be buying a house that falls in price. And if you do, and you've bought for the long term, history has told us things swing up again. Just like stocks - up and down, up and down.
Again, please be specific. I'm sure there are lots of people on this board that are looking for one of these sure fire investment opportunities that you refer to.
Hyperbole and tired old sayings won't get you very far in a market like the one we are currently experiencing
Specific examples?? It depends on what you are looking for, what your price range is, your investment goals, etc. etc. etc. Ready to buy? Do your homework, find a good Realtor and proceed.
Hyperbole and tired old sayings
Funny, I could say the same thing to you, fisher! We just aren't on the same page.Edited
Beach Fanatic
"... you will have a hard time getting many people that ignore logic, reason and facts to understand your post."
Apparently not. You seem to have "understood" it just fine. Using the Village of Blue Mountain Beach makes the exercise pointless and patently stupid from the outset.
Apparently not. You seem to have "understood" it just fine. Using the Village of Blue Mountain Beach makes the exercise pointless and patently stupid from the outset.
Beach Lover
"... you will have a hard time getting many people that ignore logic, reason and facts to understand your post."
Apparently not. You seem to have "understood" it just fine. Using the Village of Blue Mountain Beach makes the exercise pointless and patently stupid from the outset.
Like I had said in an early post, pick any neighborhood you would like.... 99% of the time you will come up with the same outcome I have shown..
The ONLY reason I used Village of Blue Mountain is because it was the first rental I saw when searching in the SoWal area for an example to be used to make my point...
Same can be shown in Camp Creek, Rosemary, on and on... just name your neighborhood...
Beach Lover
Destinsm,
You gave one hypethetical example. There are a lot of values out there. It just takes time, effort, and hard work to turn lemons into lemonade. Oh yes and a good realestate broker, which I am not.
How about a real life example. A gulf view house (much larger than your example) was purchased 3 months ago in Santa Rosa Beach for less than $900K. It will generate $70k to $75k a year in rents. Humm that works.
Renting as opposed to buying is definitely easier, but necessarily a correct decision.
You gave one hypethetical example. There are a lot of values out there. It just takes time, effort, and hard work to turn lemons into lemonade. Oh yes and a good realestate broker, which I am not.
How about a real life example. A gulf view house (much larger than your example) was purchased 3 months ago in Santa Rosa Beach for less than $900K. It will generate $70k to $75k a year in rents. Humm that works.
Renting as opposed to buying is definitely easier, but necessarily a correct decision.
Beach Fanatic
Destinsm,
You gave one hypethetical example. There are a lot of values out there. It just takes time, effort, and hard work to turn lemons into lemonade. Oh yes and a good realestate broker, which I am not.
How about a real life example. A gulf view house (much larger than your example) was purchased 3 months ago in Santa Rosa Beach for less than $900K. It will generate $70k to $75k a year in rents. Humm that works.
Renting as opposed to buying is definitely easier, but necessarily a correct decision.
I assume you are quoting gross rent. After deducting 33% or so percent for the rental agent. You are netting out $50k or so. Next deduct property taxes, utilities, maintenance, insurance, etc. You might be left with somewhere in the neighborhood of $20k to 30k. A return of 3% or less. CD's are running around 5% right now. So, you need appreciation of 2% per year to breakeven. That kind of appreciation ain't happening--in fact properties are depreciating right now. Bottom line--renting is a better option from a financial perspective right now.
Beach Lover
Yes, gross rent. NO Rental Agency = 0%. You do not need a rental agency. It much easier and more painless without a rental agency. Sorry to the advertisers. Also, most rental agencies charge much less than 33%, more like 20%-25%. Lastly, you have to take in the effect of the paper depreciation losses on your taxable income. I believe you could gain a taxable benefit of up to $25k per year.
Talk to a good realestate broker and enlist a good CPA, before you decide buying is not feasible for your situation. Good luck with your decision.
Talk to a good realestate broker and enlist a good CPA, before you decide buying is not feasible for your situation. Good luck with your decision.
Beach Fanatic
Yes, gross rent. NO Rental Agency = 0%. You do not need a rental agency. It much easier and more painless without a rental agency. Sorry to the advertisers. Also, most rental agencies charge much less than 33%, more like 20%-25%. Lastly, you have to take in the effect of the paper depreciation losses on your taxable income. I believe you could gain a taxable benefit of up to $25k per year.
Talk to a good realestate broker and enlist a good CPA, before you decide buying is not feasible for your situation. Good luck with your decision.
You can only deduct the depreciation and other expenses up to the amount of your rental income. So, you get no tax "benefits" other than the fact that you pay no tax on the $25k which I factored into my equation.
And, I disagree, using a rental agency makes things much easier for a landlord. A good agency takes most of the hassle out of renting--especially if you own multiple properties.
Beach Fanatic
As I said, I'm not a Realtor anymore so don't have access to the MLS to quickly pull some data - and I'm not going to sift through public records ... Beach Dad can do that.
That said, I've heard of homes in WaterColor selling around $600-$700K and people getting incredible deals at auctions. And there is a lot on my block here in Point Washington that was just recently listed for $99K (or around there). That to me is a steal. Maybe some Realtors could quickly share some data with us?
Are you talking about one of the lots on East Point Washington or the one on Oak Street or the one on Georgie Street? Looks like some lots nearby several of these lots have sold for less than $99k over the last 6 months or so. So, is $99k really a steal?
Also, given the current state of the market, you would likely be better off putting your money in a 15 year CD at around 5% than buying a $99k lot from an investment perspective (does not take into account intangibles of simply wanting to own a nice piece of property). Hypothetically, you would be better off at the end of 15 years in the CD netting 3% after taxes than buying the $99k property with prices stagnant for 3 years then increasing by 6% per year thereafter. At the end of 15 years, after paying property taxes each year, then selling the property, paying broker fees and cap gains, you will have less money at the end of the period than you would by simply putting the money in the CD.
I don't believe an interior lot in Point Washington is worth $99k. Maybe the $25 to $30k the lots were going for just a couple of years ago is a better measure of the value. Lots in many areas of South Walton are retreating to levels from 2003 and 2004. That means your Pt Washington lot could have a huge way to go on the downside making the analysis above look all the better for the CD.
Beach Lover
?????????
You are able to deduct up to $25k of rental losses against normal taxable income with a Schedule E. Your are not limited to deducting $25k of expenses against your total rental revenue. Please see your CPA to verify.
Rental Agencies - Personal experience. I have used 3 different rental agencies. Marketing, renting, and maintaining multiple rental properties on your own is much easier and lot less expensive. Please talk to other rental home owners about there experiences.
You are able to deduct up to $25k of rental losses against normal taxable income with a Schedule E. Your are not limited to deducting $25k of expenses against your total rental revenue. Please see your CPA to verify.
Rental Agencies - Personal experience. I have used 3 different rental agencies. Marketing, renting, and maintaining multiple rental properties on your own is much easier and lot less expensive. Please talk to other rental home owners about there experiences.
Beach Fanatic
Even if you bought wisely today and prices stagnate for the next few years, if you have purchased as a long term investment, according to history, things will swing up again.
More importantly though, if you rent for 2-3 years, you have lost that time to build equity - and helped the owner of your rental build theirs! There are many "what if's" in life ... this is an AMAZING place to live and we all have to be thankful we can afford to be here because many who would like to move here can't. Do your homework and you will see there is a perfect place for you RIGHT NOW to buy and call "home".
In a flat market, the rate at which you build equity in a home in the first five years isn't very good unless you're one of those freaks with a 15 or 20 year mortgage. Go look at the amoritization tables for a 30 year fixed, and look at how much interest you're paying in the first few years, and how little principal.
SoWal Expert
I am really tired of hearing this line of crap...The fault in this argument is your assumption of a flat market for the next several years. If it was a fact that the market will rely flat, your argument holds truth. The truth is that it is unkown what the market will do. Who knows, buying that property at the $600K mark, may prove to earn you an extra $300K. To say that you know what will happen doesn't hold water.
If you buy, you are building equity...
If you rent, you are throwing money away...
Lets actually look at this simplistic mainstream idea a bit deeper...
Lets assume as you have stated that the market will stagnate for a few years and I am looking to buy or rent next week...
Well if I looked to buy a home in South Walton and say as example I picked Village of Blue Mountain I would be looking to pay anywhere from $700k to $1.5M depending on the size....
Well if I meander on over to the rental department I can magically rent a home over 2,000 sq ft for $2,000/month in the same neighborhood... And this comparable size home in this neighborhood would be going for about $1.25 million...
So say I bought it at $1.25 million and I even put down 20%(doubtful to have $250,000 cash on hand for a down payment... but I am giving the benefit of doubt in this argument toward the buying side... I also won't even use this downpayment against you as far as the opportunity you have wasted by putting $250k into the house rather than letting it grow in a mutual fund or even a high yield savings) my mortgage with insurance taxes and interest would be no cheaper than $7000/month... This is assuming annual taxes at $7500/year and Annual Insurance at $2500/year... pretty low assumptions...
So knowing that very little of your PITI payment each month for your mortgage actually goes to Principal for the first 5 years of the loan... why would I want to spend $5000/month more to live in the same type of home...
Assuming you even had $7,000/month to spend on a mortgage would you not rather pay $2,000 per month to rent and save the difference ($5,000/month in even a high yield savings account???)
In this scenario with house prices stagnate and the difference from price to rent in five years that person could have saved and grown his savings to close to $350k in a simple high yield savings account with absolutely no risk... or he could fork over $7,000 per month and hope and pray everynight that his house appreciates like it was 2005 all over again...
I also left out maintenance costs, HOA dues, and maybe some other small things to again give the benefit of my math to the buyer.... But in the end, in my opinion you would be crazy not to rent for a few years and see how this thing shakes out...
Also, one additional minor note: In your opportunity costs example, you mention mutual funds as one choice of investments where you say that money can "grow." Again, you make the assumption that all mutual funds will grow over the same period. I can give you many people's real life examples where their mutual fund investments were not growing.
SoWal Expert
I assume you are quoting gross rent. After deducting 33% or so percent for the rental agent. You are netting out $50k or so. Next deduct property taxes, utilities, maintenance, insurance, etc. You might be left with somewhere in the neighborhood of $20k to 30k. A return of 3% or less. CD's are running around 5% right now. So, you need appreciation of 2% per year to breakeven. That kind of appreciation ain't happening--in fact properties are depreciating right now. Bottom line--renting is a better option from a financial perspective right now.It isn't?
Tell that to the sellers who profitted around $1 million dollars on a $4.1M investment, of which I am sure wasn't paid for with 100% cash, on the sale of the property at 260 Blue Mtn Rd. It was purchased in April 05 while the market was still high in price. It recently sold in Aug 06, in this "down market" to which you guys keep referring. Let's say for our example that they put 10% down on $4 Million ($400,000). They paid interest on the balance of $3.6 million for 1.5 years at 6% per year, equalling $324,000. Add that to their costs of downpayment and you have a total cash out of pocket of $724,000. Oops, better throw in taxes and insurance. Assessed value being at $1.56 million would bring the taxes to around $15,000. Insurance? I have not idea the costs. Lets say its a crazy number of $50,000. So when we add those numbers to that total cash out of pocket in the investment, we get a total of $789,000. To receive the $1,000,000 return on the investment of $789,000, you get a before tax return on investment of 126%. Divide that by 1.5 years and you receive an avg annualized rate of return of 84%. Show me that CD that pays that. ...and this sale is in a "down market" for a property which was originally purchased in the peak.
There are plenty of example on both sides. My point is that if you shop, you can find a property which may work for you today.
Edited
Beach Fanatic
In a flat market, the rate at which you build equity in a home in the first five years isn't very good unless you're one of those freaks with a 15 or 20 year mortgage. Go look at the amoritization tables for a 30 year fixed, and look at how much interest you're paying in the first few years, and how little principal.
Alas, but once again this is based on an assumption to support your point of view and you aren't "thinking outside the box" . Your are assuming that the buyer would be taking out a 30 year mortgage. If, after researching and doing one's homework, the buyer feels confidant that the property will stagnate for a few years (and remember, not one person here knows what is going to happen), there are options to accomodate for that out there (differnet types of financing, more cash invested (again, I'm not judging to say this is good or bad - if the buyer thinks it is a good idea, it's a good idea), etc.).
That is what is frustrating, a lot of pessimists here have no peripheral perspective. No one sitaution is the same - there are ALWAYS ways to make things work in every market, up and down and why some win and some lose in this game.
Again, just my opinion.
Beach Lover
S.J.
Great point. The rate of return needs to calculated against the cash out of pocket to purchase property not the total sale price.
It is true that overall properties have seen values decrease. But if you buy right, you will experience an instant 10%-20% equity gain that will neglect a slight decrease in the market.
Buying investment realestate that will have a great return is not easy, but it is very feasible with some work. If it was easy everyone would do it.
Great point. The rate of return needs to calculated against the cash out of pocket to purchase property not the total sale price.
It is true that overall properties have seen values decrease. But if you buy right, you will experience an instant 10%-20% equity gain that will neglect a slight decrease in the market.
Buying investment realestate that will have a great return is not easy, but it is very feasible with some work. If it was easy everyone would do it.
Beach Fanatic
It isn't?
...and this sale is in a "down market" for a property which was originally purchased in the peak.
There are plenty of example on both sides. My point is that if you shop, you can find a property which may work for you today.
:clap_1: Thank you SJ for the "real life" example.
SoWal Insider
Beach Dad, Full time is right about buying, because the consensus says rent. There are raw land deals out there. Builders need work now and are dismounting their Clydesdales. Make your homestead Florida and build a stout home exactly as you wish. The west end of 30A north of the road and Point Washington will provide you with a quiet location, without the hassles of short-term renters generally speaking. And, of course, mortgage rates are very low. If only we could have a permanent El Nino. Buy this spring after a full scouting foray, or wait and treat this whole process like a stock trade.
SoWal Insider
Beach Dad, Full time is right about buying, because the consensus says rent. There are raw land deals out there. Builders need work now and are dismounting their Clydesdales. Make your homestead Florida and build a stout home exactly as you wish. The west end of 30A north of the road and Point Washington will provide you with a quiet location, without the hassles of short-term renters generally speaking. And, of course, mortgage rates are very low. If only we could have a permanent El Nino. Buy this spring after a full scouting foray, or wait and treat this whole process like a stock trade.
I would say renting is a good idea just because it is smart for any relocating family to rent for a while to figure out what neighborhood is best for them (that said, we have never done that, and never regretted not doing it). Bob is right about the raw land deals. And remember, while you are holding onto the raw land, you do not have to insure it. Maybe consider buying a lot in a great location, and renting for two years or so while you refine building plans and search for a contractor. Hopefully in the meantime, the state will be able to deal with some of these insurance issues.
Good luck with the move!
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