At least you didn't remind me that New Trier wasn't good enough for you! Your mention of the tremendous P/E's in a place like Reno is why I see Nevada/Arizona as the most vulnerable regions. In Florida P/E's are stretched but not as dramatically. A decent pool home in a good neighborhood (SoFla is FILLED with scary/shitty areas) is at least 3k. That would be a 700-800k home. Plus property taxes can be 8-10k. (one loses their homestead exemption in FL on rentals). But in reality Beck, if a guy can borrow in the low 6's and can take full advantage of the mortgage interest deduction, in the scenario I mentioned he's not under a hell of a lot of a water. And of course MOST of these homes weren't purchased last year on the highs. So the guys who got long in the sweet spot of 1996-2001 have seen a. rents rise b. rates move lower c. 100-200% appreciation on their properties. Just because the equation looks less advantageous at these levels doesn't mean landlords in mass will be sellers. Certainly however the "flipper" type who's stuck long will succumb to a year or two of negative carry. I guess it's sort of like being stuck long on a futures trade that started as a scalp and then trying to sell calls against it. No matter how ya slice it you're still long delta's in a breaking market........
San Diego's climate was just as good 5 years ago as it is now. 5 years ago houses cost half as much. International money bought land more then houses. The lot cost on the house I bought in Olivahain was $330k. This was in 1998. In 2004 a similar lot sold for $1.1 million in the same subdivision. I don't know what's going to happen but when only 10% can afford the median priced house in San Diego then something has to give. If houses ever get back to what they were in 1998 then I am buying one. John
Oh, who'd pay up to live in chi-chi Coconut Grove. That half a rock profit's burning a hole in your pocket..... BTW: Did you ever sell your investment property up near Ocala? Viva Sanchez!! And GO DOLPHINS!!!!
The supply of new homes is increasing, look at the permits. IOs are as common as a Paris Hilton STD. Rates are pushing on a string. One good labor puke and there go the foreclosures. ALL homestead buyers ARE spec buyers in this market. They buy a $1mm home on an IO when they couldn't qualify for $500k on a conventional note. Why? Appreesh! They assume they will bank $300k before the loan needs to be rolled in 5 years. The entire Country has been trading up. IOs are not a recent invention -- do some research and you'll find out how the last IO boom ended. [spoiler: it wasn't good] Those that bought in 1996-2001 haven't stopped buying. There is a townhouse development at route 395 and 431 in Reno... my RE agent told me that 65% of the purchasers were spec buyers. The dev is only 40% occupied. They're offering $15,000 coupons on a $300k unit. The recorded closing prices are bullsh*t as people are throwing Hummers and BMWs into the deals to inflate closings. Wages didn't suddenly double in the past 5 years. Yes, it can continue as long as MBS buyers are willing. Watch the mortgages. We will see record foreclosures if we drop into recession.
im in the roads.....near the brickell area...but im a grove hood rat from the days of virick gym, lived there many years and also in the gables near miracle mile not yet still own land not an actual house.... And me dolphins are looking good.... Mike and mike in the morning have them at 9/7 but most have them at 10/6..coach Saban is doing a very good job as per cote and le batard..we shall soon see.... and any mo-fuck that starves himself for his peeps and isnt just another let me screw them good jesse jackson wanna be...is good by me...Viva Sanchez...
Housing has been part of the income (think of a ATM machine) until recently, so the out of balance is not too strange.
For a trade maybe. Just remember that people said the same after the nasdaq had dropped 50% from the highs in the tech bubble. There were one or two pretty sweet rallies, but ultimately the market collapsed to multi-year lows. Homebuilders have just given back the advances over the last year or two, so I'd expect there is further downside in the long-term.
There's no correlation if you look at prices over the last 50 years or so, nor should there be, as supply/demand factors for both are based on quite different things.
Median Household income in 1975 was $11,787. The $50,000 price you quoted was just over 4x median household income in 1975. The price it sold for, $400,000, is over 9x the current $43,000 median household income. And this is for a used home (saying "existing" home is like saying "pre-owned" car - it's just awkward). My feeling is that property prices could collapse by 50% and still not hit bottom. Japan's property market went down every year for 14 years. I remember reading last year about how Japan's property market had registered its smallest drop in 14 years - a mere 5% decline. I don't know how severe the stateside decline will be, but I expect a lot of buyers in the 2002-2005 time frame to be upside down to the tune of hundreds of thousands of dollars each by the time this is over.