Is it time to buy real estate?

[Nanita8140]

Hi everyone! I'm thinking of buying a small house for one of my brother's who is handicaped. He currently lives with my mother as she drives him to the train station at 5 in the morning so he can get to his job. I started looking at homes near the train station and I find them still overpriced(I'm in south Florida). I have read a lot of the other threads on the forum regarding home prices and many of you seem to believe that, "YES" home prices are overpriced. Monday I have an appointment to view three homes in the area. So my question to you is.....what percentage decrease in price should I offer? By the way, I am a 100% cash buyer so this may help my cause. I'm definately not willing to get into a home now if they don't give me a significant lower price....so my second question is......Do you think that by 2009, prices will have gone done or do you think prices will stay flat? Okay, so get out your crystal balls and give me your opinions.

 

[brewer12345]

I think you will see modest further declines through 2009, then probably sideways prices for a couple of years. I looked at some RE a couple months ago and found the prices to be unrealistic.

If I were in your shoes, I would go look, but only start thinking about buying if you found a real desparate seller or a REO in decent shape.

How about a condo? Given the glut in FL, I suspect you would be abe to cut a ferocious deal, especially if you are dealing with a builder.

 

[Orchidflower]

Agree with brewer12345 about getting an REO, but, from all the homework I have done in the past weeks on Florida, the bottom is supposed to not hit until 2nd quarter of 2009; so, you have some time to look.
However, from looking myself at Florida, it seems there are a number of panic sellers out there. Personally, if it were me, I would look ONLY--unless I ran into a paniced seller who would take 20% less than current...or else just wait until around summer of 2009. Just another opinion.

 

[Walt34]

Would you consider a park model RV? These are RVs that are intended to be put in place and stay there, moving only occasionally.

Depends on zoning, it is definitely a depreciating asset, but accomplishes the goal w/o investing the amount that a house does. For one person it may be a solution.

An example is at Superior Park Model Homes

 

[lazygood4nothinbum]

might depend on where in south florida you are looking. considering the three counties which make up south florida and assuming a bottom can ever be called: palm beach county is either at or close enough to touch bottom; broward is either at or at least can see bottom; miami-dade might not be close enough to even see bottom yet.

i'm making the broward bottom crystal ball call living in an area where there are very few single family houses available for sale. my friend, just miles away, living in an area with many for sale signs does not see bottom through my rose colored crystal ball and he is stunned by the asking prices which are lower than my area though during the upswing they were much higher. he thinks his house will be worth 10% less next year whereas i think my area will simply lose to inflation over the next few years. living in a gay ghetto has insulated me just a little from the downturn.

but any of that dependents not only on individual area within each county, but also on individual street & house. my feeling is a lot of us who were serious to sell & at least somewhat realistic priced down quickly. i took 30% off the top on the inherited house, effectively wiping out bubble gains. i figure a 32% paper loss on my personal house, both of which i hope to sell within the next year or three (however long it takes).

according to deutsche bank in Housing weakness is spreading, will be prolonged: Deutsche Bank - MarketWatch

After examining the February data, Deutsche Bank said home-price declines accelerated to 9% year-over-year, the highest figure recorded to date, with formerly hot markets in Florida and California the hardest hit. The analysts reiterated their belief that home prices will fall in the 20% to 25% range, peak to trough, before there is light at the end of the tunnel.

foreclosures seem to be priced anywhere from 30 to 50% off the high water line. so of course until they are gone non-foreclosed houses are going to be tough to get a much better price. buyers keep waiting in for a foreclosure to come up in the area where i've the inherited house but it is such a monied area that such a sale is unlikely. so i'm told there are a lot of buyers waiting on the sidelines. once i sell here and take a breath from real estate for a while, i might come back to northern florida if there are foreclosures left to buy in a few years.

to get an idea if the area you are looking at is at least decelerating downward, you might want to check out DQNews - DataQuick Real Estate Headlines and Statistics which reports quarterly based on zip code. though if you are looking for something near a tri-rail station, i would imagine steeper declines due to greater foreclosures in those areas within those zip codes.

edit: concerning condo in florida. if your brother lives in miami and you want to spend that kind of money, there are some new condos built adjacent to the metromover (which hooks up to metrorail & tri-rail) in the downtown area. in fact i believe there is one building built around the track with a station right inside. a word of caution on buying condo now is that many are being bought in bulk by vulture venture groups which then take over the association and convert the building to rentals. and even if that is not the case, i imagine maintenance fees could go a little crazy if many units remain unsold. anyway, will search for building i'm thinking of and post if i find same. would be perfect for your borther.

got it. nice prices too. damn, might consider it myself.

the internet: making life too easy...

Loft Downtown II Condos

just noticed, cohen freedman encinosa architects. used to deal with them in my past life. very talented firm & nice guys ta'boot.

 

[W2R]

OK... now, bear in mind I know absolutely nothing about Florida real estate...(rubbing my crystal ball vigorously with a nice chamois)... Look deep into my crystal ball with me:

... I see in the misty crystal that prices are pretty low and some owners, builders, and speculators are going into "desperation mode".

... I see through the clouds in the crystal that this is not the bottom and prices will decrease for another year or two. However, the rate of decrease will be moderate.

.... I see the vague shimmering shapes within the crystal ball of a bottom in 2009-2010 that will be followed by a 5-10 year sideways market.

So sayeth my crystal ball, which is in some ways consistent with Brewer's analysis.

 

[Moemg]

I think you may be in the Wild Guess category !

 

[tryan]

So my question to you is.....what percentage decrease in price should I offer?

I wouldn't buy until owning is better then renting (i.e. investors can buy and rent for a profit).

 

[Ronstar]

It really depends on how popular/stable the local real estate market is. Its tough to get much of a discount in hot market areas. But I've seen ordinary suburban Chicago middle class homes go for 30% less than appraised value.

I expect the prices to stop falling because demand is on the rise. But I dont think prices will begin rising within the next year.

 

[danm]

I wouldn't look until 2009 or really 2010. Even my real estate agent is saying this! In the last newsletter he's pointing out the problems (inventory overhang, bulk of the ARM resets still to come) that still have to be worked through. There's a little blip of people buying, just because of the already steep discounts. Catching a falling knife IMHO.

Locally, median price has dropped from $640k to $400k, according to the local newspaper. It has to go to around $250k to align with rents. We're waiting.

 

[kcowan]

If you run across an empty place that is suitable and the owner will not negotiate, why not offer to rent it?

 

[tryan]

yeah, why buy? When you can rent a place for half the costs of ownership.

 

[Orchidflower]

Agree totally with Brewer and Want2Retire. Thats my vote and I'm stickin' to it.

 

[Moemg]

I think it is hard to know what's happening in real estate in Florida unless you are living there or have some personal connection with the area . Otherwise it is just a guess . The person on this board who has the most knowledge about Florida real estate is LGFNB or Rich since his wife is in real estate in Florida .

 

[lazygood4nothinbum]

thanx moemg but far from expertise here. just try to keep my ear, & feet, to the ground. one of the things i learned from this board is that there are fundamentals to what i otherwise would have considered to be not much more than a crapshoot. so when i look at how far the market might go down, i remember how far it went up. and if fundamentals kept it from going higher or staying so high, than fundamentals should keep if from going much lower or staying so low. that, of course, unless you guys failed to teach me well enough.

certainly there are plenty of houses still overpriced and they will still be for sale in ten years, but plenty more bargains are already to be had. though florida still sends shivers down the backs of many, i wouldn't be surprised to see some of the country continue to drop even after florida has leveled, if only because we fell so far so fast. of course i am not expecting prices to rise much any time soon. i read somewhere (sorry, don't recall the source) that the next bubble here might be expected in 20 years. hopefully i'll be done playing in thailand in 15 years, just in time to buy back in.

here are some interesting forecasts by a florida economist who specializes in real estate Fishkind & Associates - Econocast 2008 - Florida's MSA & Counties Forecast.

seems this guy is now calling for a 2008 bottom in many areas of florida while other areas extend beyond that. (though to qualify that, he also called a bottom in 2006 & in 2007.) ok, so maybe he's not the kind of bottomfish who sees too clearly. but to see how florida is not a singular market, check out, for instance, the difference in population growth/employment he projects for cape coral and then for fort lauderdale (which i assume is based on something more scientific than his bottoming predictions.)

while i am not an expert, i know enough to say that anyone who makes a blanket statement about florida might be slighting, a bit, their subject at hand. this isn't nevada where there seems to be just one city, las vegas. this is a big and varied state. the miami condo market is not the sarasota single family market. this state is huge. it is the fourth most populated and on the way to being the third most populated state in the country. oh, and by the way, the rules are different here.

 

[Buckeye]

Can you get homeowner's insurance at a less than outrageous price? I guess if you are a cash buyer, technically you don't have to have buy homeowner's insurance and can self-insure.

 

[danm]

I wouldn't. Likely the rent wouldn't cover the carrying cost (especially if they bought in the last five years), and obviously the owners want to sell not rent it out. So they'll likely still sell at the first opportune moment. Or, an increasingly common situation, they get foreclosed on and you're stuck in the middle.

Plus I'm not sure I want a landlord, who didn't plan/doesn't want to be a landlord.

If you run across an empty place that is suitable and the owner will not negotiate, why not offer to rent it?

 

[lazygood4nothinbum]

Can you get homeowner's insurance at a less than outrageous price? I guess if you are a cash buyer, technically you don't have to have buy homeowner's insurance and can self-insure.

yes but you have to shop it. on my personal house my insurance costs are (wind) $1,326 (flood) $390 (liability-fire-etc) $1,255. i insure only for rebuilding at $100/sq ft as i know many bldg industry folk and most of the value here is in the land anyway.

the inherited house was just about to lose its insurance because it is empty so needs a new policy. quotes ranged from a little over $5k/year (including all three policies) to over $7k for just six months.

 

[lazygood4nothinbum]

as to forecasting, found another crystal balled economist who seems to think that miami is more stable (aside from its condo market) than either fort lauderdale, west palm, orlando or tampa. he's calling for up to 30% price depreciations which happens to be where i've already priced my houses.

www.pmi-us.com/media/pdf/products_services/eret/pmi_eret08v2s.pdf

 

[inquisitive]

I do not have any real estate experience other than books I have been reading, newspaper articles, the Internet, and my independent thinking, but it seems to me that it is impossible to determine where "the bottom" of the market will be. It is like the stock market. There will always be financial experts who predict when a bear market will reach its lowest point and each person has their own different opinion, but it is nothing more than speculation that is probably based on dubious grounds. What is certain is that right now in certain parts of the country we have the biggest decline in prices in several decades. Why not buy now? If prices start to trend upward you've lost your opportunity, and if they continue to go down, you've still gotten a bargain.

Several people here advocate renting over buying, stating that it's cheaper. I'm really not convinced, if you take into account appreciation (over the long-term, the housing market always trends upward) it may be far better financially to purchase over renting, plus consider the prices of homes now and the fact that you will be building equity instead of spending the money toward rent.

Why pay all cash instead of financing it? That amount of money, if put into any number of investments, will accrue more than what you will lose in interest on mortgage payments.

Real estate, I imagine, is how a number of retired individuals here have made their fortunes. What real estate forums do people frequent?

About pricing, 20% off the actual market values seems reasonable. Clark, in his book on real estate, says that he never buys a house unless it is 20% below the market value, not the sticker price of the house.

 

[Pete]

No one will know the bottom until it's behind us. There are thousands of opinions out there so someone will be right and proud of it.

Do the math. Every 100 dollar loss a month over 30 years at 8% is 150,000.

Every 100,000 you have tied up in a house and not earning 8% on that money over ten years is 122,000 dollars in lost profit.

A 400,000 dollar investment in a house would become 488,000 dollars in profit at 8% over ten years.

 

[HFWR]

Seems to me that, by definition, whatever you pay for real estate is "market value"...

 

[slazenger]

My 2 cents Natina is to not get in the business of market timing. If you have need to purchase a house, purchase a house. Most people should view homes as places to live and leave it at that. If i knew for certain houses were about to climb high, heck I'D buy a home just for an investment. But I don't know that, and I don't think anyone else does either.

 

[Brat]

For me the reasons to buy a home include: pets, kids, need to nest or control one's environment. The economic factors are not to difficult to compute.

If you think you are interested in buying only a fool would wait for a deal to fall in their lap. Earn the 'lookie lou' button, start by attending open houses. Only by knowing your own market, needs and tastes, can you find a good buy. Because transaction and moving costs are high any purchase should meet your housing needs for at least 10 years.

Sellers have different levels of 'willingness', or desperation one could say, and different levels of ability to negotiate. It is a very individual transaction

 

[BunsGettingFirm]

I think you will see modest further declines through 2009, then probably sideways prices for a couple of years. I looked at some RE a couple months ago and found the prices to be unrealistic.

If I were in your shoes, I would go look, but only start thinking about buying if you found a real desparate seller or a REO in decent shape.

How about a condo? Given the glut in FL, I suspect you would be abe to cut a ferocious deal, especially if you are dealing with a builder.

Don't mention FL condo to me. I'm already out of napkins from all the drooling. Ah, 1000+ sq. ft., water views, new kitchen, designated parking, a pool, a workout room, and all for a lot less than a Boston condo. I saw one Boston condo in the same price range as a FL condo. The only problem besides the fact that there is no view, no parking space, no pool, and no gym is the fact your bed is stuck 1/2 in the den and 1/2 out in the living room, and there is no room to walk into the den, so you'd have to dive on to the bed from the living room. I'd better have hot Harvard undergrads visiting me daily to make that condo worthwhile.

At these prices for so few amenities, I wouldn't buy anything in the Northeast. In Florida, I'd consider buying something toward the end of the 2008. Read Scott Burn's Sliderland article to get a feel.