Most investors are buying the undeveloped land to developed and flip. They are not looking for long term investments so they will not own a very large portion of the market. There are large areas in Florida where investors are buying up all the land to develop.
Careful whom you blast with blanket statements. A poster takes you to the mat regarding your position and you go off on a tirade about renters being stupid, wasteful, whatever... Here's one for you. Sold a place for almost the max allowable exemption. With that exemption money, making ~12-15K per month before any interest on the cash balance. Now renting a home in an area that has hyperinflated. I know some people pretty high up in the RE building industry. The local area has seen price reductions moving in on 50K to move remaining properrties in new subdivisions. House next door is listed at 499K, you can buy the same house from the builder for a little over 400K with same upgrades. 160 homes in subdivision... 33 for sale. If you believe the bomb going off in CA, NY, FL, won't have a negative effect on other parts of the country, you may be surprised. Who exactly do you think is driving up prices in the other areas of the country, AZ, OR, WA, NM, NV for the CA people. I expect a retracement of values in the hot areas, where I live, in the 40-60% range. I'm more than comfortable waiting it out as a renter, even if that makes me foolish in your eyes, with my cash in the bank!!!
Problem is...the flippers cannot hold on to the properties. To rent them they face neg cash flow that chews their rear end month after month, not to mention the disturbing option ARM reset looming ahead for them. They will have to sell, indeed dump them below market to move them. Sales in my area are off 50% and growing, while the inventory is up 300%. Last year at this time there was 20 buyers for each home, this spring it will be 20 homes for each buyer. When the flippers sell, that becomes the new "comp" for the 90% of the remaining homes. It destroys the whole market. And I disagree, I think in LV there is more than 10% flipper spec. going on, certainly not 51% though...OWP
Credit card rates is what may what start the problem. Bloodsucking banks are charging 20% for those that have missed a payment. Missed payments are becoming more common now since a lot of people have maxed out their home equity lines. Also financial problems will cause a lot of divorces. A lot of couple have one spouse pissed at the other for buying in the first place. Also a lot of the high income people were making their money off the real estate business, mortgage brokers, sales agents, apprasial companies, on and on. It's like travel 80 on the interstate and it stops because of one car that puts on brakes which causes a mile of cars to put on brakes too. John
Yet another intelligent response. I hate confusing you with facts.... Hope you don't end up like Robert Allen...
Good points. There are many mortgage holders out there that likely have very close to zero extra money available to them at the end of each month. All it takes is a semi-serious illness or job loss, and it will be enough to put them over the edge. I think that some of the higher net worth individuals on this forum might sometimes forget that living from paycheque to paycheque is the norm in Canada and the US, not the exception. I certainly hope that I'm never in that position once I work full-time (I'm a uni student), I intend to live my life in such a manner that I have short-term savings, an investment account, retirement funds etc.; even if it means that I won't have a 50" plasma TV sitting in my living room or a BMW in my driveway.
What will happen if bird flu breaks out and non-essential workers get sent home for 2-4 weeks to try to reduce infection rates? I don't know the assumed death rate for the US but would guess it to be a million or so.
I basically agree with you ... although I am not a renter. I have transacted large protions of my portfolio properties in areas where I believe speculative momentum has taken the market to unrealistic and unsustainable levels - unsustainable over the next several years. As others have said there are always properties that are reasonable investments and there are raw land deals for development or re-development that make sense. However, the short term flip and become a millionaire days are over in the hyper-inflated markets and anyone living there would be well-advised to follow your path .... the penalty for being wrong is simply a locked in gain.
Funny cause the Rent Index vs Home buying index shows that you are full of crap. With the RE market so overbought, it is not possible to cover your debt service PLUS maintenance PLUS utilities PLUS taxes PLUS insurance with the rent income. If it was that easily done with the money supply so loose then the market simply pushes up the price of the property to where it is not possible. It's when ppl start dumping their homes and are resorted to renting with no cheap money around that renting out becomes a huge cash cow since property can be acquired so cheap. LOL I am a millionaire also, let me go mortgage out a couple NYC condos and then rent them out to some suckers that cover all my expenses and then some. Too bad that hasnt worked in years.