when i bought our home, the payment was about $950-$1,000/month PI. we had two houses on the property and one rented for $450, which was low, so our PI was below gross potential income. if you look at mortgage IR at 6.5% and real inflation, one could argue that real rates are still negative. so if you bag a little 3br/2bth say 1,700 SF stucco box on a tiny lot in inland north s.d. county for say $525,000, the payment (no down) is $3,300. i think you can rent those for $1,400 or so, maybe $1,500 - but you get the idea.... very interesting times, particularly if the FED pauses or indicates that they may pause at the next meeting.
The irony is thick, a guy called "Smart Money" who is bullish on Florida real estate at the peak of a major cycle.
Tallahassee, Florida for one. I count "for rent" signs in the neighborhoods where I have rentals and in areas adjacent that my properties compete with to get a feel for demand before I try to fill a vacancy. There are consistently less signs up now than last year at this time, and way less than 2 years ago. The fact is that there are less for rent signs now than I've ever seen and the college students aren't even back yet. Consider, that when a 100-unit apartment goes through a condo conversion, 70 of those units will be purchased by small time landlords like me, and maybe 30 will be purchased by new owners. The net result is 30 units off the market that were previously periodically available. Consider that for the last 2 years, it was not profitable for the small time landlords to buy a new property and rent it out. So many of my peers, with multiple properties elected to sell, putting former rental properties in the hands of owner occupiers, thereby removing them from the rental market. Likewise, although I wanted to add to my position, I could not. The net result is that the pool of small-time landlords like me collectively own less properties that before...because ownership of rental properties was like the exit door at the movie theater...you can get out, but you can't get back in. There are other factors too...an improving economy giving new workers enough money for a place of their own, and Hurricane Katrina victims, 100,000 of them, displaced with most of them renting. If you agree with me on these points, then you can see how there is definitely a difference in demand for the smaller houses vs. the larger houses when it comes to purchases. As rents rise, it becomes profitable to purchase small places and rent them, which increases sales. How long to the cross over point? Have we reached it already? Besides...if you believe the doom and gloomers that say that so many people will lose their houses....where will they live? SM
Hey, look at a map of Florida and see where Tallahassee is located. Some folks joke that it is Tallahassee, Georgia. The market here is *NOT* like Daytona, Miami, West Palm, etc. It is more like the "flyover" states. I can say I'm definitely bullish on the purchase of rental property, financed with fixed notes, where the properties will (almost) support themselves. I think the slow-down in sales in this area is ending and I'm wondering if there are others out there seeing the same thing. By the law of large numbers, there would have to be places in the U.S. that have had a major reversal in the price of real estate. Sure, there are places like Miami, or western states where people bought condos or other properties without consideration of the replacement cost or the price you could rent it out for. Heck, I'm not even arguing that prices have dropped, or that there aren't people there in pain. But in light of multiple factors which can limit the downside of negative price swing, I am asking, "How can you be so sure we haven't already hit bottom?" My question assumes that prices have dropped. It assumes there are desparate people out there. Every time a STOCK takes a crap before rebounding, it is foolish to look at a downward sloping graph and say "that will go on forever"...especially if sales of goods or services provided by that company start to pick up. The best bargains are always picked up by those who are the first to recognize in new data that the correction is over, rather than dwelling on past data. SM
Of the stateâs smaller markets, the Tallahassee MSA reported a 5 percent gain in existing home sales in April, with a total of 436 homes changing hands compared to 415 homes sold last year. The areaâs median existing home sales price rose 11 percent to $172,000; a year ago, it was $154,800. Thirty-six existing condos sold in Tallahassee last month for an increase of 112 percent over the 17 condos sold a year ago. The market's median existing condo price rose 11 percent to $152,900; a year ago, it was $137,500. Tallahassee Board of Realtors President Kenny Ayers says the area offers a range of housing options at attractive prices, which helps to drive demand. "People are still coming to North Florida and employment is strong -- they like the Florida atmosphere and the convenience of only being about 30 minutes away from beaches," says Ayers, a new-home specialist with Heritage Homes Realty, representing Turner Heritage Homes of Tallahassee. "The Tallahassee area also offers a variety of housing opportunities, from downtown living to more rural development." http://media.living.net/index.htm
Wareco, you da man! Thanks for the great data and great link. I didn't think I was imagining an improvement. I've been seeing the signs (or rather, a lack of for sale signs) We may be the exception to the rule nationally, or maybe we are on the leading edge of something. Will this start happening elsewhere? Again, thanks for the data and link. SM
Looking at the existing home sales data on the site, Tallahassee does seem to be the current exception to the rule in Florida. Whether it is the leader or the laggard remains to be seen.
What is bubbleproofing your home in Shiller's example? The Shiller interview "Q. You came up with a pilot insurance program for people in Syracuse to bubbleproof their homes. Did it work? A. The Syracuse project was a success but on a small scale. Not that many people signed up. We have to come up with a better marketing strategy, and I think we need to get private insurance companies involved. I don't think it will be long until we have hedging vehicles for houses. "
$172,000 - those were the days. tallahasse has : 1) a major university and 2) State capitol "university towns" tend to be vibrant with strong underpinning for housing demand. State lesiglators may cut spending, but they always allocate dough for programs in the state capitol. Austin, Tx has similar characteristic.
I am from Montgomery Alabama, and Montgomery is same way. Real Estate is doing fine there and will as long as rates are this low. John