I love this thread, especially how Covertibility posts all kinds of facts and figures showing the RE market very strong and OWP posting all kinds of facts and figures showing just how weak its getting. Classic, with statistics I guess you can spin a story anyway you like. I'd like to note that where I live in NJ the PE yeild on RE rental income is about 5%, which is also the PE yeild on the S&P 500 index and on bond yeilds too. So I'm guessing its all dependant on risk appetite and interest rates right now.
Here's some interesting anecdotal statistical stuff. I advertised a 1 BR/1 BA by putting a sign along side the road out in front of the development. Not really a busy street, but not a residential street either. Anyway, I got 5 inquiries in one day to rent it. And we're in the slow season. My rents are exactly 12% higher than the previous owner put them and every caller wanted it. The market for rentals is kicking butt! I think its going to start pulling prices of investment properties (the little houses) upward soon in my neck of the woods.
Oops...forgot to say our "P/E" is 11% before expenses but also sans leverage. I did get a good deal though. Even at market price the P/E is around 8% and the guy who bought the rest of the complex is flipping them at that price. I'm loving this real estate stuff. SM
I looked at a number of investment properties from 2002-2005. I would have needed a property value increase of roughly 10% a year just to come close to break even after I rented it out. There is no such thing as a cash flow positive rental where I live...unless you have owned it since 2001 (before the real estate craze).
Pasted from a real estate blog...could that be the smell of smoke in the theater? Perhaps a hint of things to come as A.R.M.S. come home to roost...OWP "Anyway, one of my better brokers is in Sacramento. So yesterday I asked him how the residential market is up there in Sac town (of course I knew it was a disaster but I did not know if he owned or not - did not want to offend a customer of mine)." "He confirms what most people on this blog already know - yes, Sac town residential mkt is in utter disarray. He said he received 3 phone calls this week from friends looking to refinance their homes. One of his buddies purchased his home from a builder (not sure which one) 12 mos ago. Of course he financed 100% of the loan but it gets better. He also financed $50k in upgrades like granite CTs, etc." "Apparently, he wanted to impress the chicks he brought back to his pad, so he said. Well, his loan was in the $500k range w/ payments of $2000/mo. That was fine for a while butâ¦he only had a 1 year ARM. His payment is going up to over $4000/mo and he canât afford it. But hold on the news gets worse for this guy. The appraised value just came in at $ 460k. Making matters worse my contact said he could maybe get $ 450k if he put the home up for sale. So what about 125% financing he asks my contact. Believe it or not itâs possible but at 13%â¦ouch. Not an option." "So he has 2 options: sell while coming to the table w/ $50k or hand the keys back to the bank. He is cash strapped and makes $70k/yr so paying $4000 in PITI is not an option. So he is selling his collectors car, value $45k, and selling the property. I hoped he pulled a lot of chicks back to his pad during the last 12 mosâ¦no bueno."
Same in DC. The spread between buying and renting including 3% per year for maintenance, etc is around 1/2. When I moved here last year, I didn't buy.
Monday, June 12, 2006 · Last updated 2:14 p.m. PT Housing prices drooping, buyers waiting By ELLEN SIMON AP BUSINESS WRITER http://seattlepi.nwsource.com/business/1310AP_Market_Spotlight_Housing_Prices.html
I find this funny. I live in the Seattle area. We bought a house a year and a half ago for about 450k and similar houses are now going for 630-650k, and they are still going FAST as there aren't many of them for sale in that price range where I am. My wife's best friend is a real estate agent here. She says that some areas have slowed down SOME, but the high demand areas are still, ummm, high demand. More people want to move here than there are people who want to leave. Also, there are very few new houses built near me, besides the people who live on the water subdividing their lots even smaller so another person can build a 2 million dollar house right next to them. I guess it really goes back to the old mantra of location, location, location.
The article was from AP, just published by SeattlePI. True, Seattle does not see any weakness in housing prices yet. In some aspects (style/music/housing prices?) it is always a couple steps behind other metropolitan areas.