WSJ article on slowdown in investment property purchases.
WSJ article (07 Dec 2005)
- Thread starter drsvelte
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Yes I would agree that our "investor" market has slowed, but our market did just fine before the big investment boom because people still want to own a piece of paradise.
drsvelte said:
The folks who regularly read the WSJ, pretty much knew this was the case for a couple of months. Now it will take a tad longer to trickle down to the masses who think annual 15-20% appreciation is the norm for RE. Smart "investment" money was exiting real estate pre-Katrina (some going into gold & precious metals maybe?). Too much real estate is an anchor and can drain a portfolio.
The main problem is that many of the novice "real estate investors" were under the impression that 'ALL THE BABY BOOMERS' were going to flood into the Florida real estate market in the few months after they purchased...and never crunched the "delay" and the booming competition into their carrying costs.
This is old news-like trying to drive by looking in the rear view mirror. Most smart real estate investors started pulling back over a year ago and most bailed by last Spring.
The question is what is ahead. When the pop media starts celebrating or criticising one investment you should be wary.
The question is what is ahead. When the pop media starts celebrating or criticising one investment you should be wary.
ecopal said:
What is ahead is that RE will revert back to the "norm" (resulting in shock :shock: and awe for the novice RE "investors" who just don't know how low the "norm" really is). The collapse of the "condo craze" is, however, going to be ugly--really, really ugly
.
Are most poeple in the SoWal area, (not PCB or Destin), buying for specualtion or a long term investment/enjoyment? I'd say for the most part the latter. That's the reason I believe this area is a bit more immune to the downturn/glut that will occur in PCB, Daytona Beach markets etc.
ecopal said:
The cost of owning those condos is a money pit only to the degree that one is leveraged to own them, at least according to my definition of a money pit. Personally, if I owned a dozen condos free and clear and the income offset carrying costs, I would feel just as comfortable having a portion of my money in the condos as I would the stock market - which, after taking two years (DOW 30) to recover within about 10% of its 2000 high, has been in a trading range for the last three and is expected, by many, to remain in a trading range for at least a few years forward.
10 years out, I don't believe that there will be enough beachfront property for everybody that wants it. Actually, there isn't enough now. Its just getting ahead of what most buyers can afford. Time has a way of evening all that out. It wasn't that long ago that I couldn't imagine myself living in a $100,000 home. Now I wouldn't expect to be comfortable living in one that cost as little as a $100,000. Coastal property is limited. Yes, we're entering a new paradigm with the hurricanes, but yes, people will adjust and build what it takes to "survive" them. I can forsee a time in the not to distant future where most everything here in Orange Beach, on both sides of the beach highway will still be standing after an Ivan-size+ hurricane. Its not that big of a deal to dig 6 ft of sand from a parking deck, underneath the condos and replace the ground amenities on a $200,000,000 complex, especially when almost everybody who owns there has another home.
I wouldn't recommend anybody totally abandon the financial markets, but that doesn't mean that I'd count out coastal real estate either. Personally, I feel comfortable owning appreciating real estate for the future - and owning stocks and bonds for living expenses. Its worked for me since 1994.
I've seen real estate go "all over the place" in the last 11 years. 5 years ago, developers were auctioning off condos here on Terry Cove at a loss, less than they presold. Now those condos are going for 3 times the auction prices. Certainly, the past is no indication of the future - just pointing out that this is not the first time that property has gotten ahead of its pricing - and it won't be the last time.
Regarding the WSJ article, I respect the WSJ, but it seems that even they think of an angle and create a story that backs up what they want to get over. Just a month or so ago, I was reading a WSJ article, about how well Florida real estate was doing in the wake of Wilma. The other day, as I left my computer, my wife asked me what I'd learned. I replied, "Whatever you want to believe, just keep looking, you'll find an authority to back it up pretty soon."
Another thing I find interesting: The "over built, overpriced" lists always include Panama City. Do they mean PCB or both PCB and PC? And why do they list Panama City and sometimes South Walton, but not Perdido Key, FL - Baldwin County, Alabama. We've got 13,381 rental units here on the Alabama coast. By 2009, 17,100 new ones will be added. Looks like PCB to me. Why aren't we on the list? Also, the lists are supposed to indicate how far housing is outpacing wages. The beach condo market doesn't correlate to that. Buyers earn there money somewhere else and bring it in. I question all of these lists for reasons like these.
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WiLe said:
That's not nearly as high as I expected.