Is Real Estate a "Buy" in your neck of the woods yet?

[ShokWaveRider]

Here on the "First Coast" of Florida (Jax to Daytona) prices have come down about 20 - 25% on what they were 1 year to 18 months ago and appear to be still coming down. I think there is still about another 20 - 25% to go personally. But what do I know.

As usual you talk to the local Realtors (They are supposed to have a code of ethics) and they say things are great and one should buy now as prices are on the rise. I am sure Lying in in that code some place. Maybe in the code of Unethics .

SWR

 

[tryan]

Certianly not a "buy" here (north of Boston).

But I am kicking myself for letting an REO slip thru my fingers. My neighbors house was foreclosed 6 or 7 months ago. Didn't attend the auction, but my tenants did; said the top bid was rejected. Sooo it sat as an REO for 3 or 4 months.

In prior years I would have at LEAST called the bank to see what they were asking. Just assumed it was over leveraged .... "why bother". Weeelll, fast forward a couple months, an investor is fliping the place after 20-30k work. The price is 40k BELOW the last comparible sale. Tells me they got into it CHEAP ... i.e. it was not heavily leveraged.

Oh well ... next time!

 

[Nords]

Hawaii? No. And mortgage rates have been dropping, too, which seems odd considering the hysteria about the subprime mortgage infrastructure.

 

[Empty Pockets]

Upper Mid-West, the housing market has cooled somewhat. Farmland is at an all time high. Lakeshore & waterfront property seems to be bringing as much as ever before.

 

[lazygood4nothinbum]

as i posted elsewhere, a recent university of florida study indicates that most of florida has hit bottom. overbuilt high rise condos still have a way to go down.

The stabilization of the single-family housing market came earlier than anticipated and is not expected to affect all parts of the state equally, Archer said. The quieter markets likely will take longer to rebound than those in Central and South Florida, where growth has been explosive, he said.

i suspect we'll get about 20% less on our waterfront palm beach county home than we would have gotten at peak madness. but i don't see any rush to flood the market with new inventory (of that product) and i also don't see people continuing to drop asking prices. i also don't see a lot of homes moving but i'm basing that observation on how quickly things moved before so who knows.

as our property tax bill is going to be insane this year, we are considering renting the house while we sell just so we don't lose that much more.

 

[Lusitan]

No, here in the NYC-metro area prices still have a lot of bubble-growth that I think will be worked off in the next year or so.

 

[ziggy29]

Hawaii? No. And mortgage rates have been dropping, too, which seems odd considering the hysteria about the subprime mortgage infrastructure.

Is it odd? If the market fears that something like this could be recessionary, that tends to push bonds higher and interest rates lower.

 

[wabmester]

Here on the "First Coast" of Florida (Jax to Daytona) prices have come down about 20 - 25% on what they were 1 year to 18 months ago and appear to be still coming down. I think there is still about another 20 - 25% to go personally. But what do I know.

I found a fairly simple way to predict when prices have corrected to their fundamental value, assuming the bubble started in the year 2000.

1) Download the OFHEO data in excel format from this site: link

2) Calculate the average real appreciation from 1970-something to 2000.

3) Apply that growth rate to an early median price up to the present to determine where prices should be today.

For example, the long-term historic real growth for the Orlando Metro Area is 0.08% -- home values essentially grew at the rate of inflation for 20+ years.

The real (inflation-adjusted) home price in Orlando in 1978 was $128,850. At 0.08% growth for 29 years, the median price should be $131,900 today. So, prices still need to fall about 50% to get back on the historic track.

The average historic real growth for all the US is about 1%. But for some places in CA, it has been as high as 5%.

Here's Orlando:

 

[hellbender]

Just as with equities, there are buys in any market. Last year I picked up two identical riverfront lots for about $67.5K each. In my opinion, they were undervalued. I did my due diligence and realized that with only a little prettying up (grading and turf establishment) that the lots could easily be worth $100K (or more) each. I awarded a contract last week to a local builder to construct a vacation cottage on one of the lots. The lender's preconstruction appraisal came in today at $50K above my investment. Not a big surprise, (as the appraisal only verified what I already suspected was true) but it's fun to see it in writing. Of course the increase is in equity, not cash, but it's better than a poke in the eye with a sharp stick.

 

[honobob]

I found a fairly simple way to predict

Only in Wabville

 

[wabmester]

Only in Wabville

I knew you'd like that one.

But this stuff is really too funny for me to make up by myself. You can get material for your own housing jokes here:

http://www.ofheo.gov/

 

[tryan]

I found a fairly simple way to predict when prices have corrected to their fundamental value

I've tried lots of inflation adjusted tracking methods for RE ... none ever materialized into reality. Future RE supply and demand have little to do with anybody's spreadsheet.

Just keep running the $$ numbers based on real life experience. Buy when the profit properly compensates you for your sweat, blood and tear.

The young and naive - who ran this market up - have no real life experience and no understanding of the forthcoming sweat, blood and tear.

 

[wabmester]

I've tried lots of inflation adjusted tracking methods for RE ... none ever materialized into reality. Future RE supply and demand have little to do with anybody's spreadsheet.

The OFHEO tracks every region of the country. Some areas do appreciate faster than inflation. Most of them don't. There are a few things that are obvious to me:

1) Nothing in the last few years happened to increase the demand of housing on a national (or international) scale.

2) Wages didn't grow much faster than inflation in the last few years.

3) Prices can't grow to the sky. They are rooted in supply, demand, and wage growth.

4) Supply is up, demand is down, credit is tight. The top is in.

 

[tryan]

1) Nothing in the last few years happened to increase the demand of housing on a national (or international) scale.

Some would say imigration. I think this is bunk ... minimum wage jobs won't pay a mortgage. Soooo more to my point ... the run-up is "off the chart"

2) Wages didn't grow much faster than inflation in the last few years.

3) Prices can't grow to the sky. They are rooted in supply, demand, and wage growth.

4) Supply is up, demand is down, credit is tight. The top is in.

We agree. We've topped. I just don't think analysis-paralysis will find a top or bottom.

 

[wabmester]

I just don't think analysis-paralysis will find a top or bottom.

No guarantees, of course. I'm just going by the historical data. This isn't the first bubble, and so far they've all ended the same way. I see no reason not to expect us to once more correct back to the historic appreciation line (or slightly below). There have been no structural changes to suggest that this time is different.

 

[brewer12345]

The OFHEO tracks every region of the country. Some areas do appreciate faster than inflation. Most of them don't. There are a few things that are obvious to me:

1) Nothing in the last few years happened to increase the demand of housing on a national (or international) scale.

The hell there wasn't! We had the greatest flood of the loosest mortgage money in the history of the capital markets. Heck, if you have a 720+ credit score you can still buy a house with no money down and skate (for a while) by making ~1% a year payments on the first lien note.

 

[wabmester]

The hell there wasn't! We had the greatest flood of the loosest mortgage money in the history of the capital markets. Heck, if you have a 720+ credit score you can still buy a house with no money down and skate (for a while) by making ~1% a year payments on the first lien note.

Yeah, what I meant was that there hasn't been a huge increase in population growth or any fundamental change in demand.

No question that there was demand generated by both speculation and easy credit. Those factors are out of the picture now. Watch out below.

 

[cute fuzzy bunny]

We're off about 20-25% in some areas around here. My buy is going to make a lot of people in the neighborhood that bought in the last 18 months pretty angry when they see the comp. But I dont feel like I need to wear a mask and carry a gun to the closing like I usually do.

 

[wabmester]

We're off about 20-25% in some areas around here. My buy is going to make a lot of people in the neighborhood that bought in the last 18 months pretty angry when they see the comp. But I dont feel like I need to wear a mask and carry a gun to the closing like I usually do.

One more graph for my fuzzy friend:

 

[brewer12345]

I haven't seen a decline near me, things have just stopped rising thus far.

 

[justin]

But I dont feel like I need to wear a mask and carry a gun to the closing like I usually do.

Why do you usually wear a mask and carry a gun to the closings?


I thought cheap money is still out there. sub-6% loans are still plentiful for good credit borrowers. If mortgage rates go up a few more points to 8-9% and lenders continue increasing their risk-adversity, things could get real ugly.

 

[wabmester]

I thought cheap money is still out there. sub-6% loans are still plentiful for good credit borrowers. If mortgage rates go up a few more points to 8-9% and lenders continue increasing their risk-adversity, things could get real ugly.

Forget the rates. Just the lack of 100% financing and higher required credit scores knocked over 1 million potential buyers out of the market. Ugly is coming.

 

[brewer12345]

Forget the rates. Just the lack of 100% financing and higher required credit scores knocked over 1 million potential buyers out of the market. Ugly is coming.

I largely agree. The question now is when and how much the Fed cuts rates. Enough of a rate cut will offset the impending mess, although it is likely to be a bit bumpy.

 

[wabmester]

I largely agree. The question now is when and how much the Fed cuts rates. Enough of a rate cut will offset the impending mess, although it is likely to be a bit bumpy.

A lower fed funds rate may save some of the ARM'd folks who would otherwise see foreclosure, but I don't think it'll help much on the demand side as long as underwriting guidelines are kept "sane."

 

[al_bundy]

there is a book i'm reading with a nice chart that says that the historic average of mortgage payments is 30% of income with a big spike to 50% in 1981. I live in NYC and the wife and I make over $100,000 gross income. how many houses in a good suburb do you find here for $300,000? what about when you take property taxes into account?

what about in other areas where the average income is less?