Trends

[TooScared]

I post on the board sometime, but I've created a new name because I don't have Shelly's backbone and I don't want to be harrassed.

Most everything I here are real estate horror stories. Foreclosures, dropping housing prices, huge inventories, but by far most of the posts in the forum are positive - with the exception of Shelly who gets pounded by most everyone for being, in my opinion, too much of a realists.

My thing is that it seems to me most everyone who posts regularly in this section, most often, most positive, etc. have stake in the real estate game, either investors, realtors, developers, business owners all of which have strong personal interests in a strong real estate market or at least of the perception of an improving market.

I am leary these days of asking investing advice of anyone who makes a living in the real estate market. Car salesmen will always tell you its a great time to buy.

Hey. The market is AWFUL. It's the worst real estate market since the great depression, and how could anyone with straight face say it's a great time to invest in real estate unless you have the money and intention of holding on to it for many years.

So, my question is this, by a show of hands, and in the interest of full self disclosure, how many of the frequent posters on here, including the webmaster, have a personal interest, whether through themselves or there spouses, in real estate to include realtors, developers, homeowners with property currently on the market, marketers that advertise real estate through print or the web so that those of us who are have no interest can know who is being completely unbiased and who may have other motivations for constantly wearing their rose colored sunglasses at night.

[elgordoboy]

I post on the board sometime, but I've created a new name because I don't have Shelly's backbone and I don't want to be harrassed.

Most everything I here are real estate horror stories. Foreclosures, dropping housing prices, huge inventories, but by far most of the posts in the forum are positive - with the exception of Shelly who gets pounded by most everyone for being, in my opinion, too much of a realists.

My thing is that it seems to me most everyone who posts regularly in this section, most often, most positive, etc. have stake in the real estate game, either investors, realtors, developers, business owners all of which have strong personal interests in a strong real estate market or at least of the perception of an improving market.

I am leary these days of asking investing advice of anyone who makes a living in the real estate market. Car salesmen will always tell you its a great time to buy.

Hey. The market is AWFUL. It's the worst real estate market since the great depression, and how could anyone with straight face say it's a great time to invest in real estate unless you have the money and intention of holding on to it for many years.

So, my question is this, by a show of hands, and in the interest of full self disclosure, how many of the frequent posters on here, including the webmaster, have a personal interest, whether through themselves or there spouses, in real estate to include realtors, developers, homeowners with property currently on the market, marketers that advertise real estate through print or the web so that those of us who are have no interest can know who is being completely unbiased and who may have other motivations for constantly wearing their rose colored sunglasses at night.
Don't be a sissy..post it under your regular ID.

[Bob]

What's your point? Don't buy anything. Put your money in a cd, and rent when at the beach. Wear sunscreen and double deadbolt your doors while wearing latex gloves to protect you from germs.......pssst here's a secret.....everyone's biased whether they make their living from real estate or not. Right Shelly?

[SHELLY]

What's your point? Don't buy anything. Put your money in a cd, and rent when at the beach. Wear sunscreen and double deadbolt your doors while wearing latex gloves to protect you from germs.......pssst here's a secret.....everyone's biased whether they make their living from real estate or not. Right Shelly?

Biased? Why of course!....I own a few thousand shares in the Latex Glove and Tin Foil Hat Factory in China.

BTW TooScared...are you wanting to ask about Real Estate investing advice? I doubt you'll get a roll call of folks on the board stating their involvement with the RE biz, so don't hold your breath. You sound as if you've got the market pretty much sussed out--I'd leave it at that.

In defense of the folks in the RE biz. It's their job to present a positive spin on the market--real or implied--can't fault them for that. It's up to the viewers and buyers to agree or disagree--can't fault them for that. It is up to the investor/consumer to do the due diligence before making a commitment whether it is purchasing a stock, a used car or a condo. I always keep this saying in the back of my mind, "Never ask a barber if you need a haircut." (Oh! And never ask anyone on a message board for investing advice.) Think about it.


.

[Busta Hustle]

Shelly you may want to diversify from latex and tin hats...follow me here my broker just turned me on to trampoline futures. (tall buildings, places to land, etc.)

[Capricious]

[QUOTE=TooScared;346185]I post on the board sometime, but I've created a new name because I don't have Shelly's backbone and I don't want to be harrassed.



Geez.


What a downer post.


Maybe this will cheer you up:
http://www.whitehouse.gov/news/releases/2004/08/20040809-9.html


Ben & George are gonna take care of everything.


Cheers !

[Just_In_Thyme]

"Hey. The market is AWFUL. It's the worst real estate market since the great depression, and how could anyone with straight face say it's a great time to invest in real estate unless you have the money and intention of holding on to it for many years."

Maybe you answered your own question.

[Chickpea]

Regardless of the state of the market, most people (I believe) are affected by the current state of affairs, because their principal investments are with real estate - a house (or 2 or 3) will typically be the biggest purchase one makes.

Some people on this board know me and know that my work is tied to RE development but what I say below is truely personal.

Many others who post regularly understand much more than I about the signs in the economy, real estate current woes, sub-prime mortgage mess, etc, etc.. but this is the little I know.....

I LOVE living here, my family and I invested in property in 2005 at the peak of the market - many people may find that really stupid - but all we knew and what we still know is that we loved living here and saw the potential. We invested certainly hoping we would not lose our shirts, but we were/still are committed to this area, believe that like many other businesses, RE has its cycles, have absolutely no idea when things will start to turn around but believe with absolute certainty that this little paradise we live in will continue to grow and prosper in the long run.

I could be sitting with a calculator and depressing myself with the money we MAY have lost OR I could throw myself into my work and work on making this place a little bit more pleasant and beautiful and desirable! And in the meantime, I am going to really enjoy living here, enjoy the new services that seem to pop up with increased frequency and specifically, take advantage of our spectacular nature preserves and enviable beaches!

Thanks and happy weekend.

[beachmouse]

No primary interest- neither me nor Mr. Mouse.

But because the real estate machine takes up such a significant part of the local economy, if you live down here and have to work for a living, you'll feel secondary effects to some degree or another. Which isn't entirely bad if you're talking a market that's becomming affordable to middle income wage earners again.

[Smiling JOe]

Wow, a downer indeed. Are you trying to drive prices further down so that you can buy in? You state the market is the worse since the Not-So-Great Depression. Upon what evidence do you base that? I look at the sales numbers and see that prices in SoWal for Single family homes are around the prices of 2004-2005, which were two of the best years in history for real estate. This is fact based, not just some defensive stand to your post. So again, where do you get your information on this being such a Debbie Downer market? I'm not saying the market is all rosy, but you don't paint a balanced picture -- just a snapshot of one aspect of the market.

You need to remember that many people bought property in SoWal prior to 2003, and most of them will still profit from selling, even if they undercut the people in trouble. As for buyers, there are buyers who thought they were priced out of the market back in 2004-2005, and they are now seeing some cases of prices being lower, so they are tickled pink. These are end-users of property, not speculators. For buyers to be able to come in at major discounts in certain cases, it's a good thing. WaterColor and WaterSound are two areas where prices have decreased more than the broader area of SoWal, and there are some good buys to be had in there. Is it possible that prices could drop more, yes. However, people buying luxury items, like a second home at the beach, cannot time the market. If people could time the market, don't you think that everyone would have sold at the market's peak?

I suggest that you look at the broader picture, rather than the debbie downer segment, which does exist. Every day, I awaken to NPR on the radio, and at least one of the stories is the terrible state of our economy, the mortgage biz, and or the terrible real estate market. If people hear it enough, maybe they begin to believe it. That is what we have seen in the slow number of sales, but it relates only to one segment of the current market. Real Estate is local.

Almost forgot, for full disclosure, I am a Realtor, and people should know that all property is always for sale. Sometimes people like to pretend that a particular piece isn't for sale when a buyer is interested, but it's always for sale.

[Bobby J]

I raise my hand. I am a Real Estate agent! Please don't tell anyone. I try to keep my identity unknown.:cool:

[flyguy]

Since I have been reading this board a few people have been constantly saying this could finally be the bottom, activity is picking up, etc. For the most part their lively hood is tied to real estate and they are up front about that fact.

As for me I am a buyer. I am actively seeking beachfront property. And all of the signs I am seeing are that prices have not stopped falling. The only exception possibly being the very high end stuff.

Short sales are now being replaced by forclosures. And until those are worked through the system I don't see much chance of a bounce.

I will be on the beach for a week at the end of this month. I may be making some cash offers, but if I do they will be very very low.
:yikes:

As I have stated before, better to buy a little too late when prices are heading up rather than too soon when the bottom has not been reached.


JMHO,
Flyguy

[Smiling JOe]

As for me I am a buyer. I am actively seeking beachfront property. And all of the signs I am seeing are that prices have not stopped falling. The only exception possibly being the very high end stuff.


GulfFront properties, while included in my sales data for the area, is a different beast from interior property. There are many negative factors of owning Gulf Front, ranging from critical erosion, incorrectly placed seawalls (better read the FAR contracts regarding correct permitting), private vs public, additional maintenance required, etc. Prices of the Gulf Front properties don't reflect the trend of selling prices for the other single family homes in SoWal.

[Beachduck]

If your not a gambler then don't go to the casino. Trust your own instincts and research, research, research. Sometimes you make the right call and sometimes the wrong. I will say that I feel like now is not the time to step in unless you have deep pockets and can afford to ride the waves. You shouldn't buy on an adjustable rate now. I forgot that this is probably part of what got the market here in the first place. It is definately shifted more to a buyers market in housing. The only real estate sector nationwide gaining momentum is farm land. Remember that some day down the road beach property will make a come back. Too many people wanting to retire, visit, and the prestige of a home on the beach. It may be a few years but a good buy now will be worth something down the road in my opinion. I remember staying in a home at Seaside in late 80's and could not believe they were asking 240,00 for it. That would steal make some money now. I am not a real estate agent or investor in the Fl market yet. Maybe a home owner at some point in the future. Near future hopefully.

[beachwanabe]

I hardly ever post, but read and learn a lot from everybody on this board. In all of this I have never heard the word CORRECTION, isn't this part of the downfall. Houses everywhere rose after the stock market CORRECTION when people started investing in real estate. It had to catch up sooner or later. Sure there are other issues with the economy, major thing would be the stability of oil prices. Dreaming - what would the economy do if oil prices dropped and stayed down for a LONG period of time.

[2bohemians]

http://www.sowal.com/bb/gallery/files/1/2/0/3/wsmiliesCAEP6L3H.gif

[TooFarTampa]

I LOVE living here, my family and I invested in property in 2005 at the peak of the market - many people may find that really stupid - but all we knew and what we still know is that we loved living here and saw the potential. We invested certainly hoping we would not lose our shirts, but we were/still are committed to this area, believe that like many other businesses, RE has its cycles, have absolutely no idea when things will start to turn around but believe with absolute certainty that this little paradise we live in will continue to grow and prosper in the long run.



Excellent Chickpea. We do not live there but we are property owners and we feel the same way. We went in as investors but consider ourselves end users. As a native Floridian I have a strong belief that SoWal is very, very special (yes, even after all the development) and that there is a great deal of inherent value in the homes and land within walking distance to the beach. When you take a step back, consider the lack of developable land vs. conservation land, the elevations along almost all of 30-A, and of course the very special beaches and beautiful water, it is hard not to be impressed. Add in the height restrictions and the fact that most of the housing is newer and better suited to withstand storms -- all this makes SoWal extremely unique.

Because of this inherent value, my main concern with the prices in SoWal is not the large inventory, or the major pieces of property either going back to the bank or rumored to be. My concern, and maybe I am not seeing is correctly but I can't help but thinking this way, is more the national perspective -- ie, what is the going rate for homes in Hilton Head? Naples? Cape Cod? Catalina Island? If prices are declining in all these places because coastal real estate prices jumped too far way too fast, then it is hard to say where the bottom will be.

I keep going back to Shawn Tully's excellent 2002 piece in Fortune that declared the housing runup had to be over because any more growth was unsustainable. I also remember back in the mid 90s when 350K was the going rate for a very expensive executive home. My guess is we will level out nationally somewhere around 2001-2002 prices for desirable coastal areas. In SoWal, I don't think they will drop that far because the infrastructure and construction quality is much better than it was in 2001-2002. In other words prices at the time were cheap to begin with, and I don't see how they could get that cheap again.

Of course, it is just my opinion, and I don't have property for sale. :D

[TooFarTampa]

If you are interested, here is the article I read in 2002. At the time we thought we would probably be relocating, and when we did a couple of months later, Tully's warning influenced us to go for the best buy we could find with a fixed rate mortgage because we figured the gravy train was over.

http://money.cnn.com/magazines/fortune/fortune_archive/2002/10/28/330962/index.htm

Sound like someone we know? :scratch:

SHELLY = SHawn TuLLY?

[Capricious]

"...If you are interested, here is the article ..."


A quote from your article:

"..Of course, even if we don't get a housing bubble, we may still wind up with a double-dip recession. An oil shock or a financial implosion could also pulverize the economy and slam housing prices...."


Housing buble?

Oil shock?

"financial implosion" (SIV, subprime, hedge fund)?

Recession?




What's the secret of his crystal ball?

Clairvoyance or common sense?








"Sound like someone we know?...."






Shelly had the same crystal ball.

And a few of the rest of us were not far behind.

[livingiSoWal]

my hands up. Licensed at 18 GRI by 19. I do advertising as well though, you should buy some advertising for me.

[Smiling JOe]

Just so that we are on the same page, I'll share some numbers, from the Emerald Coast Assoc of Realtors, comparing the avg sales in SoWal, in the area between Bay County and Sandestin.

Detached Single Family
2005 compared to 2004
qty of sales, down 25%
price of sales, up 17%

2006 compared to 2005
qty of sales, down 57%
price of sales, up 15%

2007 compared to 2006
qty of sales, up 35%
price of sales, down 7%


The "peak of the market," according to qty of sales was June 05. That is when the Shelly's came out and said that the bubble had burst. However, looking at the statistical data, prices of homes sold, increased another 15%. Maybe Shelly was basing the bubble bursting on the quantity of sales, which decreased substantially, 57%. Avg Sales Prices did decrease in 2007, compared to 2006, but compare those of 2007, to 2005, when the "bubble burst," and you will see the avg sales price increase of 6%. Yes, the quantity of sales is down in 2007, compared to 2005. However, the quantity of sales in 2007, compared to 2006, has increased by 35%.

The avg selling price of homes (detached single family) in this area of SoWal, during 2007 is $937,532, and this is based on 361 sales.

Sure, there are foreclosures coming up, but looking at the recent history, it doesn't appear that has stopped homes from selling at prices which are historically significantly.

[Smiling JOe]

flyguy, here are some numbers for you, regarding sales for single family detached homes which are listed as Gulf Front, in the same area of SoWal, described in previous post.

2005
qty sold - 20
avg sales price - $3,570,167

2006
qty sold - 15
avg sales price - $4,796,296

2007
qty sold - 17
avg sales price - $3,252,738

Inventory in 2007 has remained fairly constant, but is up over the previous years.

[TooFarTampa]

"...If you are interested, here is the article ..."


A quote from your article:

"..Of course, even if we don't get a housing bubble, we may still wind up with a double-dip recession. An oil shock or a financial implosion could also pulverize the economy and slam housing prices...."


Housing buble?

Oil shock?

"financial implosion" (SIV, subprime, hedge fund)?

Recession?




What's the secret of his crystal ball?

Clairvoyance or common sense?








"Sound like someone we know?...."






Shelly had the same crystal ball.

And a few of the rest of us were not far behind.

All very true!

What does the crystal ball say about the economic stimulus package? :shock:

[Bobby J]

The Trend I see are the A quaility properties are selling. I think it is pretty obvious that the RE market is hurting. If an agent tells you any different run! I think my rose colored glasses are a way I approach life. Probably why I am in sales. I also think if you work with someone you can trust (remember trust works both ways), you will be fine. As earlier stated, research, research!

[Capricious]

All very true!

What does the crystal ball say about the economic stimulus package? :shock:







About as effective as the government stimulus plans for
the recovery from Hurricane Katrina, if it happens at all.

At this point, it's too late for the government to do anything so
it might as well do nothing.

Shelly might have a different take as I know he/she has
immense confidence in the abilities and intellect of our
polititions.

[Smiling JOe]

What does the crystal ball say about the economic stimulus package? :shock:
My Magic 8-Ball says that it may help stimulate the economy of China, since everything we buy today, seems to come from China. Don't think that China doesn't feel the hurt.

[SHELLY]

All very true!

What does the crystal ball say about the economic stimulus package? :shock:

Listed to Dubya & "Stuttering Hank" outline the economic stimulus package today :funn:.

Just where do the people of America think this "extra" money comes from to pay for this economic stimulus? (Hint: Rhymes with "Tinting Messes.")


.

[Busta Hustle]

printing dresses??? no that's not it

[SHELLY]

printing dresses??? no that's not it

Close, but no cigar --Bill Clinton

.

[TooFarTampa]

Minting presses?

[SHELLY]

Minting presses?

Charlie?? Charlie Crist is that you? Sounds like you need a clue.


.

[scooterbug44]

raising taxes? :idontno:

[Capricious]

"...(Hint: Rhymes with "Tinting Messes.")..."




But that would be inflationary.



As would the Fed cutting the discount rate.

[flyguy]

Joe,
Thanks for the numbers. I am shopping for a gulf front condo as I will be part time and want minimum upkeep. And I do realize it is a different market than single family. The single family beachfront lots have come off the bubble but I don't see any signs of a fire sale. The condo market on the other hand is where the foreclosures seem to be popping up. I suspect because that is where it was easiest to speculate in the market.

Flyguy

flyguy, here are some numbers for you, regarding sales for single family detached homes which are listed as Gulf Front, in the same area of SoWal, described in previous post.

2005
qty sold - 20
avg sales price - $3,570,167

2006
qty sold - 15
avg sales price - $4,796,296

2007
qty sold - 17
avg sales price - $3,252,738

Inventory in 2007 has remained fairly constant, but is up over the previous years.

[TooFarTampa]

"...(Hint: Rhymes with "Tinting Messes.")..."




But that would be inflationary.



As would the Fed cutting the discount rate.

So did I guess right then? :wave:

[beachnut1]

I'm not a regular poster but I'm going to give you my position anyway. I have been an owner, investor, investulator, speculator, developer and land swinger in the Destin Area for the last 10 years. I have bought to flip, bought to develop, and bought for my own personal use. I currently have no holdings in the Destin area other than a home I just bought a month ago. I bought because it is my belief that regardless of if its a shortsale, a firesale, or just a extremely motivated seller. I believe that prices will not go too far below the cost to rebuild the exact home, putting a reasonable value on the lot.

Property is valued one of three ways:
1) Income method
2) Replacement cost method
3) Comparable sales or market value method

Throw # 3 out, forget about what it sold for 18 months ago or last month even, comp sale price can and ARE manipulated on every sale so that number is worthless. The quicker we all forget about those unjustifiable prices which were mostly based on the comp sale method with no concern for income or replacement cost, the better off and more healthy the entire market will be.

There will be more foreclosures in the next 24 months than ever before but trust me, there will be investors buying these as well and they will be buying based on replacement cost valuation method and the income valuation method.

[Smiling JOe]

Listed to Dubya & "Stuttering Hank" outline the economic stimulus package today :funn:.

Just where do the people of America think this "extra" money comes from to pay for this economic stimulus? (Hint: Rhymes with "Tinting Messes.")


.
printing messes? :funn:

[fisher]

I'm not a regular poster but I'm going to give you my position anyway. I have been an owner, investor, investulator, speculator, developer and land swinger in the Destin Area for the last 10 years. I have bought to flip, bought to develop, and bought for my own personal use. I currently have no holdings in the Destin area other than a home I just bought a month ago. I bought because it is my belief that regardless of if its a shortsale, a firesale, or just a extremely motivated seller. I believe that prices will not go too far below the cost to rebuild the exact home, putting a reasonable value on the lot.

Property is valued one of three ways:
1) Income method
2) Replacement cost method
3) Comparable sales or market value method

Throw # 3 out, forget about what it sold for 18 months ago or last month even, comp sale price can and ARE manipulated on every sale so that number is worthless. The quicker we all forget about those unjustifiable prices which were mostly based on the comp sale method with no concern for income or replacement cost, the better off and more healthy the entire market will be.

There will be more foreclosures in the next 24 months than ever before but trust me, there will be investors buying these as well and they will be buying based on replacement cost valuation method and the income valuation method.

And, just how much do you think a 40 X 80 piece of sand 1/2 mile from the beach is worth. Many of the sales occurring now value this land at $100k to $900k depending on the location in SoWal. If raw land prices continue to fall, then the cost valuation method will certainly follow suit for existing homes.

[Smiling JOe]

flyguy, some condo numbers for you follow.
These sales numbers are for condos, listed as Gulf Front, which sold in the area of SoWal, between Bay County and Sandestin. The sales data is from Emerald Coast Assoc. of Realtors (ECAR), and doesn't include any units sold outside of ECAR. Also, the sales reflect new condos as well as resales.

2005
qty sold - 101
avg sold price - $1,563,680

2006
qty sold - 19
avg sold price - $1,076,499

2007
qty sold - 38
avg sold price - $1,109,986

prices and qty have increased in 2007 over 2006. You can see the dramatic drop in prices from 2004, for Gulf Front condos.

As I stated, the Gulf front units have been difficult to sell, especially after the storms of 2004, and the great number of storms predicted in 2005 and 2006. Add to that, the other reasons I mentioned in a previous post, and you will see that the Gulf Front units are not recovering as well as the other condos in the same area.

Below are sales for ALL CONDOS in that same stretch of SoWal, according to ECAR.
You will see that although the qty of sales is down in 2007, compared to 2006, but in that same time period, average prices of units sold have increased by 26%. Compare that to the Gulf Front Units increasing in price in that period, only 3%. (an increase of 3% isn't bad, considering we have been in a "bubble bursting" period, but the non-Gulf Front units have outperformed in that period.) That should be good news to you, since you are looking to buy a Gulf Front unit.

All condos, including Gulf front, located in the same area of SoWal (not including Sandestin):

2005
qty of sales - 358
Avg sales price - $929,362

2006
qty of sales - 151
Avg sales price - $635,055

2007
qty of sales - 136
Avg sales price - $804,636

Remember that part you mentioned about wanting to buy on the upswing? Looking at the annual averages for sale prices of Gulf Front Condos, we are currently 29% off the record highs of 2005, and for 2007, we are up 3% over 2006. Those sales numbers reflect a slight upswing in the Gulf Front Condo Market. I've shown examples of other more substantial upswings in the market for other properties. My question to you as a buyer is, how much of an upswing are you waiting to see, before you are ready to jump in? I hear many people who sound similar to you, in that they are waiting to see upswings, but I think they are really waiting to hear the bottom bell ring, telling them it's okay to buy now. I haven't hidden my thought that you will see more foreclosures in the next year, but that hasn't changed the fact that the average prices of properties selling has increased between 2006 to 2007. None of the buyers who say they are waiting to see the upswing, have identified a buy-in point, and I think they are buying more on gut instinct and emotions, so I'm curious to learn your perspective. Thanks for sharing.

[fisher]

Just so that we are on the same page, I'll share some numbers, from the Emerald Coast Assoc of Realtors, comparing the avg sales in SoWal, in the area between Bay County and Sandestin.

Detached Single Family
2005 compared to 2004
qty of sales, down 25%
price of sales, up 17%

2006 compared to 2005
qty of sales, down 57%
price of sales, up 15%

2007 compared to 2006
qty of sales, up 35%
price of sales, down 7%


The "peak of the market," according to qty of sales was June 05. That is when the Shelly's came out and said that the bubble had burst. However, looking at the statistical data, prices of homes sold, increased another 15%. Maybe Shelly was basing the bubble bursting on the quantity of sales, which decreased substantially, 57%. Avg Sales Prices did decrease in 2007, compared to 2006, but compare those of 2007, to 2005, when the "bubble burst," and you will see the avg sales price increase of 6%. Yes, the quantity of sales is down in 2007, compared to 2005. However, the quantity of sales in 2007, compared to 2006, has increased by 35%.

The avg selling price of homes (detached single family) in this area of SoWal, during 2007 is $937,532, and this is based on 361 sales.

Sure, there are foreclosures coming up, but looking at the recent history, it doesn't appear that has stopped homes from selling at prices which are historically significantly.

Raw land prices have CRASHED and construction costs are falling too. It is cheaper to build than to buy a resale in many cases today which will put further pressure on prices. Foreclosure prices today could very easily be average prices in the next year or so.

[Capricious]

",,,average prices of units sold have increased by 26%..."





Does this mean that the average price of any particular unit
has increased?

Or does it mean that the more expensive units are selling
and the cheaper ones are not, causing the average price to
increase while the price of any particular unit may not have?

[Smiling JOe]

Capricious, you raise a good question, and one which can be answered only anecdotally on a property by property basis.

[flyguy]

Joe,

Thanks for the numbers. Good stuff. As for the 2007 upswing. Could it be due to presells closing in a high end condo building?

I have seen the same argument made with condos in PCB. But you have people closing on units they pre purchased several years ago at what is now an above market price. These new purchases skew the numbers. Current resale listings are still decreasing and are now hitting $250/sq ft in buildings just a few years old. $200/sq ft in the old buildings. And these are full gulf front units.

Granted SoWal prices are still higher, but is the trend the same for resells? I know the MLS price changes in SoWal are still almost exclusively down. The few price increases in listing seem to be more of the high end SFH.

Then again, you may be right and the bottom has already come and gone with no bell ringing. But I also think that even after the official bottom of the market is found, prices will be rather flat (3-5% increase) until the inventory comes down.

My wife thinks it is time to start making offers. So as I stated before, we will start off with some lowballs and see what response we get. Because just as a buyer doesn't know when the market hits bottom, neither does the seller.

Thanks again,
and of course JMHO,
Flyguy

[Smiling JOe]

flyguy, looking more closely at the stats, while trying to determine your answer, out of the 38 condos listed as "Gulf Front," 7 of those look to be new sales, and 31 are resales. One other thing which I will point out is that some Realtors list condos as "Gulf Front," when there is question to that. Take Bella Vita for example, which has several buildings. There a few of those being listed as Gulf Front, because of the unobstructed view of the Gulf (should be listed as Gulf View in my opinion), but there are several other buildings between the units being sold and the Gulf. Those units included in these "gulf front" sales, alter the real avg price of gulf front units.

Four units in Park Place did close in 2007, bringing the avg sold price up, as each sold between $2 million - 2.5 million. Park Place is the condo building in Seagrove which was bought, gutted, and rebuilt into luxury condos. There were also three new sales in Andante, which helped to bring up the average. If we remove the 7 new sales units, the average sales price for the condos listed as Gulf Front, drops to $898,645.

Looking at 2006, I don't see any new sales for condos. All are resales.

For 2005, when we get into many of those, they are technically resales, because they were simultaneous closings, and in some cases, assignments of contract. However, they are really new, so I'll call those new sales, and for 2005, there were 46 resales of condos listed as Gulf Front, with the average price of $1,090,288.

Because all of the comparison figures are on the other page, I'll bring some of those forward to here:

the sales reflect new condos as well as resale for condos (listed as Gulf Front).

2005
Total Gulf Front Sales
qty sold - 101
avg sold price - $1,563,680

Resales only
qty sold - 46
avg sold price - $1,090,288

**************
2006
Total Gulf Front Sales
qty sold - 19
avg sold price - $1,076,499

Resales only
qty sold - 19
avg sold price - $1,076,499

(no new construction sales)

*****************

2007
Total Gulf Front Sales
qty sold - 38
avg sold price - $1,109,986

Resales only
qty sold - 31
avg sold price - $898,645

So, looking only at resales, we see a 16% drop in prices in 2007, compared to 2006. However, comparing 2007 to 2005, selling prices are down only 17.5%.

All that said, I'm not so sure that we can completely throw out the new sales as part of the equation. They are sales which occurred, and in many cases, the buyers would have been able to walk away from the table, leaving their deposit, coming out financially better than if they closed. The condos around here seem to be built in ten year cycles. We have the 1985 buildings, the 1995 buildings and the 2005 buildings. Buildings depreciate with time, especially the gulf front buildings. The salt air is tough on them. What we see in the data is a combination of lower land valuations as well as the depreciating buildings.

[beachnut1]

Fisher -

Again I would use the cost basis to value the dirt. Cost of infrastructure alone (roads, sewer, storm water retention, utilties, etc) in sowal runs about 30k per lot for your basic community, then add the cost for the dirt within 1/2 mile from the beach - thats probably worth 40k per raw lot in todays market in no specific premium location, maybe 30k at rock bottom wholesale price. So a baseline cost of around 60-70k cost with no Amenities. Add Watercolor equivalent amenities and your easily at a lot cost basis of around 250k per lot. A community like old florida village would run about 100k per lot total cost basis.

[TreeFrog]

Listed to Dubya & "Stuttering Hank" outline the economic stimulus package today :funn:.


So if we all get a check from the gov for $400, like we did when W took office, and it comes in June, how in the world could that possibly resolve the current mess?

In other words, this is just another empty promise that will be trotted out to say "look, we did something for you".

As SJ says, politricks...

[Smiling JOe]

Treefrog, its $800 per person, and it appears that you know exactly what is happening -- poliTRICKS. The same is happening with Amendment 1 on the ballot in FL, and many other programs our gov't creates. If the printing mess, excuse me, if the printing press is broken, I guess we can borrow the $800 per person from the Chinese, at an interest rate of 15%, so that we really stimulate China's economy, when we use that borrowed money to buy more cheap plastic crap from Walmart. Thank God I'm having a good day, otherwise, it would all be rather depressing.

[flyguy]

Joe,

I am a numbers guy and I appreciate you taking the time to post those figures.

Thanks very much,
Flyguy

[Smiling JOe]

You are welcome, flyguy. Good luck with your purchase/offers.

[SHELLY]

So if we all get a check from the gov for $400, like we did when W took office, and it comes in June, how in the world could that possibly resolve the current mess?

In other words, this is just another empty promise that will be trotted out to say "look, we did something for you".

As SJ says, politricks...

It's a desperate attempt to distract the clueless (voting-age) masses who are starting come to the realization that there is something seriously wrong with the economy.

It's like when you have that annoying puppy jumping up and down and being a nuisance, so you throw a "pretend" ball across the room so they'll take off and you can make a quick exit before they realize that you screwed them over. That's what the government is trying to do with the "free money."

The stimulus package is not going to resolve the current mess...it's just going to tack on more debt to the huge debt bubble we (or our children and grandchildren) are going to have to eventually deal with on down the line.


.


.

[Smiling JOe]

It's a desperate attempt to distract the clueless (voting-age) masses who are starting come to the realization that there is something seriously wrong with the economy.

It's like when you have that annoying puppy jumping up and down and being a nuisance, so you throw a "pretend" ball across the room so they'll take off and you can make a quick exit before they realize that you screwed them over. That's what the government is trying to do with the "free money."
...

Reminds me of another gimmick the Gov't does to distract the clueless -- give a tax "refund" check after overcharging people in the first place, while using that money to invest for the year. It's also called, withholding.

[SHELLY]

SJ,

Do you have inventory numbers to go with those stats?


.

[SHELLY]

Reminds me of another gimmick the Gov't does to distract the clueless -- give a tax "refund" check after overcharging people in the first place, while using that money to invest for the year. It's also called, withholding.

All some folks have got to do is change their W-4 to decrease the withholding and pay Uncle Sugar what you underpaid at the end of the year. :idontno:

I think it was on this board that someone said they like to overpay so they can "save up" and use the tax refund check to pay off their credit card balance. :blink:

You can't make this stuff up folks.



.

[Smiling JOe]

Shelly, Which in particular? It would be nearly impossible to track inventory of resales only, but I have the total inventory average per year. Are you requesting condos listed as Gulf front?

[SHELLY]

Shelly, Which in particular? It would be nearly impossible to track inventory of resales only, but I have the total inventory average per year. Are you requesting condos listed as Gulf front?

That will do. Hey, don't go to any trouble....just askin'


.

[Smiling JOe]

All some folks have got to do is change their W-4 to decrease the withholding and pay Uncle Sugar what you underpaid at the end of the year. :idontno:

I think it was on this board that someone said they like to overpay so they can "save up" and use the tax refund check to pay off their credit card balance. :blink:

You can't make this stuff up folks.



.Sounds easy enough doesn't it? When I used to employ people, I sat and watched probably 90% of them fill out their W4's with a big ? on their face. The gov't doesn't make it easy for people to understand, and then you have the people who like the "bonus" (aka- Refund) checks from the Gov't. "It's like money I didn't know I had." (Hear that one often.)

[Smiling JOe]

Shelly, remind me tomorrow and I will dig them up and post them. I'm about tired of looking at numbers all day.

[SHELLY]

Shelly, remind me tomorrow and I will dig them up and post them. I'm about tired of looking at numbers all day.

Forget it...just go walk the beach tomorrow and leave the numbers behind.


.

[SHELLY]

Sounds easy enough doesn't it? When I used to employ people, I sat and watched probably 90% of them fill out their W4's with a big ? on their face. The gov't doesn't make it easy for people to understand, and then you have the people who like the "bonus" (aka- Refund) checks from the Gov't. "It's like money I didn't know I had." (Hear that one often.)

That's the reason the "Stimulus Package" will work on the American public...they'll say "WHEEEEE! Free Money!!!"....then later it will be :blink::shock::eek::yikes:

Bought to you courtesy of the American Edumakatum and Banking Systems with the help and support of the debt-hungry family.


.

.

[Smiling JOe]

The more I think of it, the $800 will likely go to pay the existing bills, which more likely helps out the lenders, rather than actually increasing sales of goods.

[SHELLY]

The more I think of it, the $800 will likely go to pay the existing bills, which more likely helps out the lenders, rather than actually increasing sales of goods.

Bernanke was actually saying that during his hearing yesterday. He said that during the last "Free Money Giveaway" too much of it went to paying off debt or went into savings and didn't quite stimulate the economy as much as they wanted. That's why they're thinking how they can get it into the hands of people who will go out and plunk it down on an iPod, a 4-course family dinner at Red Lobster and new set of rims for their "ride."


.

[fisher]

Fisher -

Again I would use the cost basis to value the dirt. Cost of infrastructure alone (roads, sewer, storm water retention, utilties, etc) in sowal runs about 30k per lot for your basic community, then add the cost for the dirt within 1/2 mile from the beach - thats probably worth 40k per raw lot in todays market in no specific premium location, maybe 30k at rock bottom wholesale price. So a baseline cost of around 60-70k cost with no Amenities. Add Watercolor equivalent amenities and your easily at a lot cost basis of around 250k per lot. A community like old florida village would run about 100k per lot total cost basis.

Replacement cost is difficult to determine in a market where land prices are crashing and construction costs are falling. Replacement cost one year ago was much higher than replacement cost today and that trend could easily continue for a while. If there was no standing inventory of lots, your analysis would be reasonable. However, there is a glut of standing inventory which is likely to be sold at well below the cost of development (eg:Naturewalk).

[Bob]

Bernanke was actually saying that during his hearing yesterday. He said that during the last "Free Money Giveaway" too much of it went to paying off debt or went into savings and didn't quite stimulate the economy as much as they wanted. That's why they're thinking how they can get it into the hands of people who will go out and plunk it down on an iPod, a 4-course family dinner at Red Lobster and new set of rims for their "ride."


.That Ipod and dinner are fully 65-70 percent of our economy.

[SHELLY]

That Ipod and dinner are fully 65-70 percent of our economy.

:roll: Gee...do you think we can work that into our National Anthem?

.

[NotDeadYet]

That Ipod and dinner are fully 65-70 percent of our economy.

Exactly. Along with Chinese toasters. And that is the problem, IMHO. Or one of the problems, anyway.

[TreeFrog]

Forget it...just go walk the beach tomorrow and leave the numbers behind.


After looking at the Dow for the week, I did just that. It didn't help my bottom line, but my attitude and the dog's both improved.

[Yellow Hammer]

Tinting Messes?
uhh...Clinton Confesses
or.....benching presses
or.....blue stained dresses
or.....venting stresses

[Mango]

:roll: Gee...do you think we can work that into our National Anthem?.

And the IPODS do blare, the credit bursting in air,
Gave proof through the night that our flag was still there.
O say, does that star spangled banner yet wave
O’er the land of the spending spree, and the home of the brave?

[scooterbug44]

That's the reason the "Stimulus Package" will work on the American public...they'll say "WHEEEEE! Free Money!!!"....then later it will be :blink::shock::eek::yikes:

Bought to you courtesy of the American Edumakatum and Banking Systems with the help and support of the debt-hungry family.

It's really sad how little people know about the basics of money and financial planning.

The concept of "saving for a rainy day" and "if you can't afford it, don't buy it" are completely foreign to most people. That and only using credit cards for emergencies UNLESS you pay them off in full every month.

The WTF looks I get when I gently suggest that if you haven't paid off your student loans or house, maybe you don't need to be leasing a Mercedes or buying Louis Vuitton purses. :roll:

[Smiling JOe]

In some cases, paying off one's house may not be as financially sound as paying the mortgage. If you can borrow the money at let's say a rate of 5.5% (today's rate), and write off 25% of that, the actual cost to borrow the money is 3.75%. There are other investments which should yield a greater net than 3.75%. So, one would need to do the math to decide which is better, paying off the house, or investing the money into something else. While buying a purse or leasing a car is not an investment, those are lifestyle choices and some people have no problem being able to afford the luxuries even though their home is not paid off. Of course, in your example, you are probably referring to the people who cannot afford the luxuries, and are living beyond their means.

[scooterbug44]

Yes, the idea was that you should pay off your long term lingering debts (you know, the ones w/ the high interest rates) and your bills before you splurge and ADD more to your debts.

IMO investing should be done w/ your extra money, not the money you can get by playing a financial shell game.

Conservative yes, going to bite you in the arse on a rainy day, no. ;-)

I am sure there are people w/ the financial savvy and resources to pull off what you describe, but the average debt ridden American doesn't need more ways to play the system and avoid paying their bills.

[Smiling JOe]

I see, but student loans and 5.5% loans for homes are not high interest rates. They are about the cheapest thing going. Some people feel more comfortable having them paid off, but when you can make more money by investing in alternatives, there is nothing financially wrong with leaving them be.

I fully agree with your last paragraph, pertaining to the average American playing the system.

[scooterbug44]

Credit cards do not have low interest rates, and these people are not delaying the payment of their mortgages etc. to make money at a higher rate - they are spending the $ on items w/ no investment return and racking up MORE debt.

I understand what you're saying, but these are not paragons of financial savvy, but examples of what is wrong w/ how americans look at finances.

[TreeFrog]

That Ipod and dinner are fully 65-70 percent of our economy.

And don't forget that even though the iPod says Apple on the box, it is made in China, same as the cheap toaster.

[fisher]

In some cases, paying off one's house may not be as financially sound as paying the mortgage. If you can borrow the money at let's say a rate of 5.5% (today's rate), and write off 25% of that, the actual cost to borrow the money is 3.75%. There are other investments which should yield a greater net than 3.75%. So, one would need to do the math to decide which is better, paying off the house, or investing the money into something else. While buying a purse or leasing a car is not an investment, those are lifestyle choices and some people have no problem being able to afford the luxuries even though their home is not paid off. Of course, in your example, you are probably referring to the people who cannot afford the luxuries, and are living beyond their means.

Joe--Please point me toward a RISK FREE investment that will yield 5.5% and I will agree with you that it would be better to invest than to pay down your mortgage.

Paying off the mortgage gives you a risk free rate of return of exactly your mortgage rate. So, if you can't get a GUARANTEED rate of return on your investments that is higher than your mortgage rate, pay the mortgage off.

[beachmouse]

Though not everyone gets to effectively write down their mortgage rate come tax time. If you bought a median priced home in Florida prior in about 2003 or earlier, and were conservative in borrowing (fixed rate, no house as ATM) then a lot of people are better off claiming standard deduction for married-jointly than by itemizing.

Married-jointly standard deduction this year is something like $17K this year. We bought the average Okaloosa County house in 2001 and interest and taxes aren't half of that. (Granted we're on year 5 of a 15 year note, but even on a 30 year, the math will work out in favor of standard for a lot of people.

[Mango]

In some cases, paying off one's house may not be as financially sound as paying the mortgage. If you can borrow the money at let's say a rate of 5.5% (today's rate), and write off 25% of that, the actual cost to borrow the money is 3.75%. There are other investments which should yield a greater net than 3.75%. So, one would need to do the math to decide which is better, paying off the house, or investing the money into something else.

SJ, you're right on the money. Even my clients who had the ability to pay cash for a house got a mortgage. They were very conservative people and also financially savvy about investing for the long term. Consider that every 10 years or so the stock market averages 10% and you're not a day trader, having a mortgage makes sense with low rates. I do want to add they did not do 100% financing or any tricky or liar loans.
Full doc, good debt ratios, low loan to values and excellent credit.

[fisher]

SJ, you're right on the money. Even my clients who had the ability to pay cash for a house got a mortgage. They were very conservative people and also financially savvy about investing for the long term. Consider that every 10 years or so the stock market averages 10% and you're not a day trader, having a mortgage makes sense with low rates. I do want to add they did not do 100% financing or any tricky or liar loans.
Full doc, good debt ratios, low loan to values and excellent credit.

Not so conservative if they chose to invest versus payoff their mortgage. Nearly every conservative financial planner will advise clients to payoff the mortgage.

And, your statement about investing in the average stock market versus paying off the mortgage is dead wrong.

Here are some examples (mortgage rates are from Freddie Mac website)--

1972-- Market reaches 1000. Average return from 1972 through 2002 (length of a 30 year mortgage) when market was around 8400 is about 7.4%. In 1972, mortgage rates were running in the range of 8.5%. Paying off the mortgage would have been a much better deal.

1977 --Market at about 1000. Average return since then is about 9.4%. Average mortgage rate in 1977 was about 9.1%. A better deal to pay off the mortgage especially considering the return is risk free and the stock market is fairly risky.

End of 1982--Market around 1000. Return since 1982 to today at 12000 is about 10.5%. Mortgage rates were around 14% :yikes:at the end of 1987. Again, definitely payoff the mortgage.

End of 1987--Market around 2000. Return since 1987 to today at 12000 is about 9.5%. Mortgage rates were around 10.5% at the end of 1987. Again, a much better deal to payoff the mortgage.

End of 1997--Market around 7800. Return since 1997 is about 4.5%. Average 30 year mortgage was around 7.1%. Paying off the mortgage would have been a smoking deal.

Also, the market does not average 10% growth per year. I always hear that number quoted, but it just isn't true. In 1940, the market was around 100. If you had invested in the Dow in 1940 at 100, your average annual return would have been around 7.4% through yesterday. Go back to 1920, and the average return drops to under 6%.

The moral of the story--always, always payoff the mortgage. I'm not sure who started the myth regarding keeping a mortgage if you have the wherewithal to pay it off (probably a mortgage broker;-)just kidding), but it is an urban legend.

[Sandcastle]

I agree with Fisher. Pay off your mortgage and then invest in stocks. If you did the opposite and the economy tanks, you could lose both your house and your investment in the market. I love stocks and I still strongly feel this way.

[Mango]

Also, the market does not average 10% growth per year. I always hear that number quoted, but it just isn't true. In 1940, the market was around 100. If you had invested in the Dow in 1940 at 100, your average annual return would have been around 7.4% through yesterday. Go back to 1920, and the average return drops to under 6%.

The moral of the story--always, always payoff the mortgage. I'm not sure who started the myth regarding keeping a mortgage if you have the wherewithal to pay it off (probably a mortgage broker;-)just kidding), but it is an urban legend.

I guess you glanced over my post and missed words like "not being a day trader" or when "mortgage rates are low". My definition of conservative is they did not have any credit debt or car payments. They took fixed rate mortgages, usually 15 year terms.
In full disclosure, I am a mortgage broker by referral only with a large percentage of those referrals coming from Financial Planners.
I am not sure where you are getting your numbers from but also they do not appear to be taking into account the mortgage tax deduction.

Since 1927, the S&P 500 stock index has gained 10.4% a year on average. But in any given year it could be up 29.9% or down 9.0% or somewhere in between, says IFA.com. The trick is understanding that risk is a fact of investing. And it's also knowing you can manage risk intelligently by deciding how much risk you want to take and tailoring your portfolio to generate the top return for your level of acceptable risk.
To do that, it's important to understand the power of diversification and the benefits of owning many types of stocks, from large value-priced stocks to small value-priced stocks. Diversification lets you minimize the risk posed by a single stock or type of stock and lets you still get your share of the market's return. You must also understand that to claim your 10% return, you need to be invested for a number of years and ignore short-term stock movements.

The Borrowers I had take mortgages who didn't need to understood these principles, were not overweighted in anyone one investment and also had cash reserves. They also had low loan to values on their homes, so no risk of losing it if the economy tanks.

The decision to do such is obviously not for everyone. A good financial planner obviously would not recommend this to people reaching retirement where risk should be lessened or those who will do the freak out everytime the market blips. Some people also just like to know they have no mortgage, that's cool, but there are those who have proven themselves to be financially savvy and it has worked out well for them.

You wouldn't also have a screen name of Little Fish too would you Fisher?

[fisher]

I guess you glanced over my post and missed words like "not being a day trader" or when "mortgage rates are low". My definition of conservative is they did not have any credit debt or car payments. They took fixed rate mortgages, usually 15 year terms.
In full disclosure, I am a mortgage broker by referral only with a large percentage of those referrals coming from Financial Planners.
I am not sure where you are getting your numbers from but also they do not appear to be taking into account the mortgage tax deduction.

Since 1927, the S&P 500 stock index has gained 10.4% a year on average. But in any given year it could be up 29.9% or down 9.0% or somewhere in between, says IFA.com. The trick is understanding that risk is a fact of investing. And it's also knowing you can manage risk intelligently by deciding how much risk you want to take and tailoring your portfolio to generate the top return for your level of acceptable risk.
To do that, it's important to understand the power of diversification and the benefits of owning many types of stocks, from large value-priced stocks to small value-priced stocks. Diversification lets you minimize the risk posed by a single stock or type of stock and lets you still get your share of the market's return. You must also understand that to claim your 10% return, you need to be invested for a number of years and ignore short-term stock movements.

The Borrowers I had take mortgages who didn't need to understood these principles, were not overweighted in anyone one investment and also had cash reserves. They also had low loan to values on their homes, so no risk of losing it if the economy tanks.

The decision to do such is obviously not for everyone. A good financial planner obviously would not recommend this to people reaching retirement where risk should be lessened or those who will do the freak out everytime the market blips. Some people also just like to know they have no mortgage, that's cool, but there are those who have proven themselves to be financially savvy and it has worked out well for them.

You wouldn't also have a screen name of Little Fish too would you Fisher?

I answered your point directly. I was not assuming these folks were day traders. I assumed they were long term investors in my analysis. I didn't cut and paste an article that quotes a 10% average return. I actually went back and did the math. Niether the DJIA or the S&P 500 have gotten anywhere near 10% over the long term. In very short term bursts, maybe, but over the long, long term, no.

And, no, not little fish.

[Mango]

I answered your point directly. I was not assuming these folks were day traders. I assumed they were long term investors in my analysis. I didn't cut and paste an article that quotes a 10% average return. I actually went back and did the math. Niether the DJIA or the S&P 500 have gotten anywhere near 10% over the long term. In very short term bursts, maybe, but over the long, long term, no.

And, no, not little fish.

Fisher, I did view your numbers and I also googled the bejeesus out of the numbers as well. Here is a Yale Study done in 2001 (http://icf.som.yale.edu/pdf/Supply(v5).pdf)that examined 6 different methods of decomposing historical returns from 1926-2000. The historical return the study shows is 10.6% from Data obtained from Wilson and Jones.

But setting that aside, I will not debate S & P returns since it is not my topic of expertise, but lets examine if someone bought or refinanced in 2004, took a 15 year fixed rate mortgage, where rates ranged between 4.50-5% or so. I will use 5% for this scenario. Using a 33% tax bracket. The effective rate is then 3.35% with mortgage deduction. If I used your lowest rate of return since 1927 which was 6%, would you not argue that fiscally it made sense at that time to put money into an investment vehicle where those funds will be compounding?

I want to be pointed that not all need apply for the above.
The people who did this had a certain level of financial maturity, monitored their investments closely and may have also had other tax/estate pressing reasons for doing such.

[fisher]

Fisher, I did view your numbers and I also googled the bejeesus out of the numbers as well. Here is a Yale Study done in 2001 (http://icf.som.yale.edu/pdf/Supply(v5).pdf)that examined 6 different methods of decomposing historical returns from 1926-2000. The historical return the study shows is 10.6% from Data obtained from Wilson and Jones.

But setting that aside, I will not debate S & P returns since it is not my topic of expertise, but lets examine if someone bought or refinanced in 2004, took a 15 year fixed rate mortgage, where rates ranged between 4.50-5% or so. I will use 5% for this scenario. Using a 33% tax bracket. The effective rate is then 3.35% with mortgage deduction. If I used your lowest rate of return since 1927 which was 6%, would you not argue that fiscally it made sense at that time to put money into an investment vehicle where those funds will be compounding?

I want to be pointed that not all need apply for the above.
The people who did this had a certain level of financial maturity, monitored their investments closely and may have also had other tax/estate pressing reasons for doing such.

Mango, don't forget the taxes you must pay on the returns you get. You must compare pretax to pretax or after tax to after tax. I am keeping it simple by comparing pretax to pretax on both the mortgage and investment side. Also, remember that the mortgage rates quoted above are conventional loans. Many of the folks financing homes along 30A are taking out jumbos that have a higher rate making it an even better deal to payoff the mortgage. ;-)

As for your example above. If you had taken out a 30 year mortgage in January 2004, you would have paid roughly 5.7% plus .7 points making your APR closer to 6%. In January 2004, the DJIA stood at about 10600. The DJIA now stands at about 12100. Your return since 2004 on the DJIA would stand at a mere 4.5% with no day trading--we are talking long term investing here in a diversified portfolio. Paying cash still would have been a much better deal in your example. You would be saving yourself a guaranteed 5.7% annually versus making 4.5% annually on a risky investment. Hands down a better deal to pay cash for the house.

[Mango]

Mango, don't forget the taxes you must pay on the returns you get. You must compare pretax to pretax or after tax to after tax. I am keeping it simple by comparing pretax to pretax on both the mortgage and investment side. Also, remember that the mortgage rates quoted above are conventional loans. Many of the folks financing homes along 30A are taking out jumbos that have a higher rate making it an even better deal to payoff the mortgage. ;-)

As for your example above. If you had taken out a 30 year mortgage in January 2004, you would have paid roughly 5.7% plus .7 points making your APR closer to 6%. In January 2004, the DJIA stood at about 10600. The DJIA now stands at about 12100. Your return since 2004 on the DJIA would stand at a mere 4.5% with no day trading--we are talking long term investing here in a diversified portfolio. Paying cash still would have been a much better deal in your example. You would be saving yourself a guaranteed 5.7% annually versus making 4.5% annually on a risky investment. Hands down a better deal to pay cash for the house.

Explain your definition of long term to you because based on your example of 4 years, I am assuming this is what you mean by long term. It's not what I was comparing to. You also are making the assumption that people used funds in the market that generated taxable capital gains as opposed to maximizing their contributions to pension plans, ie; self employed persons, which are not subject to taxes. You're also using 4.5% in your above example, but 4.5% of what amount? The amount initially invested, or the compounded balance. We are also just using S&P figures as well. The people who were successful with our conversation invested in International stocks, bonds, tax free AAA muni bonds, in general have well rounded portfolios and pay close attention to them varying the mix based on market conditions.
Interesting topic, glad it was raised. Hopefully someone who has experience in financial planning will chime in with their opinions.

[fisher]

Explain your definition of long term to you because based on your example of 4 years, I am assuming this is what you mean by long term. It's not what I was comparing to. You also are making the assumption that people used funds in the market that generated taxable capital gains as opposed to maximizing their contributions to pension plans, ie; self employed persons, which are not subject to taxes. You're also using 4.5% in your above example, but 4.5% of what amount? The amount initially invested, or the compounded balance. We are also just using S&P figures as well. The people who were successful with our conversation invested in International stocks, bonds, tax free AAA muni bonds, in general have well rounded portfolios and pay close attention to them varying the mix based on market conditions.
Interesting topic, glad it was raised. Hopefully someone who has experience in financial planning will chime in with their opinions.

I was simply responding to your example of taking out a mortgage in 2004. In addition, you eventually pay taxes on virtually all investments including those made into retirement plans. In every example I gave, paying off the mortgage would have been the best long term or short term bet. AAA bonds and tax free munis will never beat the risk free rate of paying off your mortgage. International stocks may work in the short term snapshots, but not over the long term. Again, paying off your mortgage is risk free. There are no risk free rates that exceed mortgage rates at any given point in time that I am aware of.

Again, conservative financial planners (not those who are also selling investment vehicles or taking a cut of investable dollars from their clients) will almost always tell you to pay off the mortgage.

[Bob]

And don't forget that even though the iPod says Apple on the box, it is made in China, same as the cheap toaster.Consumer purchases, comprise roughly three quarters of our economy. Giving back a little of the income already earned by the taxpayer is not a free money giveaway. Those tax dollars spent in the short term will have some beneficial effect.

[Bob]

I was simply responding to your example of taking out a mortgage in 2004. In addition, you eventually pay taxes on virtually all investments including those made into retirement plans. In every example I gave, paying off the mortgage would have been the best long term or short term bet. AAA bonds and tax free munis will never beat the risk free rate of paying off your mortgage. International stocks may work in the short term snapshots, but not over the long term. Again, paying off your mortgage is risk free. There are no risk free rates that exceed mortgage rates at any given point in time that I am aware of.

Again, conservative financial planners (not those who are also selling investment vehicles or taking a cut of investable dollars from their clients) will almost always tell you to pay off the mortgage.Those conservative financial planners must have been hiding the last 20 years.

[beachmouse]

How's the disclaimer go? Past returns are not necessarily an indicator of future performance.

My concern over the next 20 years comes from the baby boomers- a lot of them are going to be selling off investments in order to have cash for retirement. Who's going to come along to increase the number of buyers for stock to keep it somewhat in equilibrium with the growing number of sellers?

I'm tending to see it as yet another way the Gen Xers are going to get the demographic squeeze put on them, and that we're looking at lower return rates in the medium-long term unless there's a significant increase from somewhere in the number of people buying American stocks, or the boomers start dying off in large numbers.

[Mango]

Again, conservative financial planners (not those who are also selling investment vehicles or taking a cut of investable dollars from their clients) will almost always tell you to pay off the mortgage.

Fisher, frankly I do not feel that there is any one right answer. It all depends on the level of risk aversion one has.
Here's an interesting article (http://www.getrichslowly.org/blog/2007/06/01/ask-the-readers-is-it-better-to-invest-or-to-prepay-a-mortgage/) that vocalizes multiple opinions.
.

[SHELLY]

Fisher, frankly I do not feel that there is any one right answer. It all depends on the level of risk aversion one has.
Here's an interesting article (http://www.getrichslowly.org/blog/2007/06/01/ask-the-readers-is-it-better-to-invest-or-to-prepay-a-mortgage/) that vocalizes multiple opinions.
.

Excellent article...there is no one-size-fits-all when it comes to investing. If someone writes in an article "this is the ONLY/BEST way/time to invest/buy" your BS alarm should be blinking red....or better yet, appear on a BIG BLUE SIGN.

.

[fisher]

Those conservative financial planners must have been hiding the last 20 years.

:confused:

You can do better than that.

[jimmyeagle]

To answer the original questions, I am a licensed Florida Realtor in this area. I don't post here very often. The posts that I have made don't really comment on the market as far as I remember, so I don't think I'm guilty of putting a positive spin on things.

Anyway, "judge" both properties and realtors on an individual basis, and you will be happiest with your results!

Good luck!

[raven]

don't be offended by people calling your post a "downer".

people on this site think if you live in denial and smile alot that somehow reality will dissipate. it's a tragic part of the culture here. keep pretending and somehow the facade will become real :) that's why businesses here are so frail and do so poorly and why they've destroyed what marketability the area has to offer. not too bright, but plenty arrogant...with a smile.

it's not that they're lying to you..knowingly..even if they told you it was the best investment ever..they'd totally believe it because sadly..not much is going on behind those passive aggressive grins.

as for changing your name to protect your honesty... frankly, if you have to lie to be friends with people...who cares?

as for bush's "stimulus" package..it's not an economic plan, it's a bribe. plus, it will all go to china in the end.

[Bobby J]

don't be offended by people calling your post a "downer".

people on this site think if you live in denial and smile alot that somehow reality will dissipate. it's a tragic part of the culture here. keep pretending and somehow the facade will become real :) that's why businesses here are so frail and do so poorly and why they've destroyed what marketability the area has to offer. not too bright, but plenty arrogant...with a smile.

it's not that they're lying to you..knowingly..even if they told you it was the best investment ever..they'd totally believe it because sadly..not much is going on behind those passive aggressive grins.

as for changing your name to protect your honesty... frankly, if you have to lie to be friends with people...who cares?

as for bush's "stimulus" package..it's not an economic plan, it's a bribe. plus, it will all go to china in the end.


Raven,

I stated in an earlier thread, I tend to be an overly optimistic person. It is how I live my life. My dad is a builder and one of the most negative people you will ever meet. Probably why he builds and I sell. I would probably be less optimistic if someone would point me in the direction of a beach community that had a better value. Can you show me this area? I may move there.

[JoshMclean]

don't be offended by people calling your post a "downer".

people on this site think if you live in denial and smile alot that somehow reality will dissipate. it's a tragic part of the culture here. keep pretending and somehow the facade will become real :) that's why businesses here are so frail and do so poorly and why they've destroyed what marketability the area has to offer. not too bright, but plenty arrogant...with a smile.

it's not that they're lying to you..knowingly..even if they told you it was the best investment ever..they'd totally believe it because sadly..not much is going on behind those passive aggressive grins.

as for changing your name to protect your honesty... frankly, if you have to lie to be friends with people...who cares?

as for bush's "stimulus" package..it's not an economic plan, it's a bribe. plus, it will all go to china in the end.


This is the best time to buy Real Estate right now.
:biggrin: <---- arrogant smile

Best Wishes,

Josh the Realtor

Sorry I can't post more, but too busy selling Real Estate to be a downer on Sowal all day.

[Babyblue]

My Magic 8-Ball says that it may help stimulate the economy of China, since everything we buy today, seems to come from China. Don't think that China doesn't feel the hurt.

Them China boys got their real first taste of capitalism Monday when their stock market lost a Trillion gazillion in value because of us. We finally got them back! :floor:

[SHELLY]

Them China boys got their real first taste of capitalism Monday when their stock market lost a Trillion gazillion in value because of us. We finally got them back! :floor:
From the Financial Times:

Beijing creates subprime taskforce

By Jamil Anderlini in Beijing
Published: January 22 2008 21:11 | Last updated: January 22 2008 21:11

China’s banking regulator has convened a task force to monitor US subprime exposure at Chinese banks as they prepare for larger-than-expected losses on those holdings, senior officials told the Financial Times on Tuesday.

The China Banking Regulatory Commission has established a special group to investigate the subprime holdings of China’s largest lenders and report on a monthly basis, according to officials who asked not to be named.

-------------------------------------------

You think they're going to be open to lending the US back our dollars to make loans in the future???.....Not!



.

[Mango]

people on this site think if you live in denial and smile alot that somehow reality will dissipate. it's a tragic part of the culture here. keep pretending and somehow the facade will become real :) that's why businesses here are so frail and do so poorly and why they've destroyed what marketability the area has to offer. not too bright, but plenty arrogant...with a smile.

What reality? Yours? destroyed marketability of the area? hello, but the entire country is in a recession. Maybe what you consider denial are those going about their business seeking ways to exact change or keep their heads above water in this fragile economy.

What have YOU done lately to exact any change? Probably nothing since it appears you have your head so far up your behind scraping past the cynicism to reach your flawed thinking.

[SHELLY]

Another development to keep your eyes on:

MGIC Investment Corp, the nation's largest insurer of mortgages, is in trouble. They've announced they'll have over $2B in losses as a result of mortgages they've insured going south--and a growing number of mortgages defaulting.

Problem is, Fanny & Freddie previously bought up these "insured" mortgages, so their portfolios are being kicked to the curb as well.

If MGIC goes bust, what will that say for all the mortgages they've "insured" and what will that do to the mortgage industry going forward.

Comments?

.

[Mango]

Another development to keep your eyes on:

MGIC Investment Corp, the nation's largest insurer of mortgages, is in trouble. They've announced they'll have over $2B in losses as a result of mortgages they've insured going south--and a growing number of mortgages defaulting.

Problem is, Fanny & Freddie previously bought up these "insured" mortgages, so their portfolios are being kicked to the curb as well.

If MGIC goes bust, what will that say for all the mortgages they've "insured" and what will that do to the mortgage industry going forward.

Comments?

.

I think MGIC is going to hold their own since I think they more than any other MI company are best prepared fiscally. They've always been relatively conservative. But in the event that this hole gets deeper than anticipated, what do y'all think of Jim Kramers plan (http://www.cnbc.com/id/22728371/)for the Feds to buyout mortgage insurers and help bailout Banks? He may not be that far out in left field with part of the idea. (although I think he is nutz personally, but every mad man has an epiphany every now and then) Fannie and Freddie are gov't agencies afterall so it's all one in the same. NAR's idea to raise the Fannie/freddie loan limit by 200K is absurd in my opinion and the economic stimulus plan is like handing out lollipops at the doctors office. Makes you feel good for a few minutes, but you still need to fill the prescription.

[SHELLY]

But in the event that this hole gets deeper than anticipated, what do y'all think of Jim Kramers plan (http://www.cnbc.com/id/22728371/)for the Feds to buyout mortgage insurers and help bailout Banks?

I'm against the government bailing out any businesses or individuals who risked it all. Too many of the mortgages are...shall we say...garbage at worst and "questionable" at best.

All this talk of "buyouts" and "handouts" and "rate increases" are only postponing the pain and unfairly dumping more debt on future generations.

.

[Bobby J]

I'm against the government bailing out any businesses or individuals who risked it all. Too many of the mortgages are...shall we say...garbage at worst and "questionable" at best.

All this talk of "buyouts" and "handouts" and "rate increases" are only postponing the pain and unfairly dumping more debt on future generations.

.

But you also know they are not going to let it happen this year.

[SHELLY]

But you also know they are not going to let it happen this year.

No, they'll just pass the bill along to that cute little tike in your avatar.


.

[full time]

Prices are down or are heading down towards 2001 levels. People that have to sell will sell, lenders will write off losses, property taxes and insurance costs get slashed in line with the decreased property values, some go belly up and some don't, the government does whatever the government is want to do, people buy because the holding costs are more in line with rental rates and personal income and the market will have resolved itself. As for China .... I believe it is preparing to host the Olympics. BTW, a study came out today saying global warming will diminish the number of U.S. landfalling hurricanes. I kid you not.

[Mango]

I'm against the government bailing out any businesses or individuals who risked it all. Too many of the mortgages are...shall we say...garbage at worst and "questionable" at best.

All this talk of "buyouts" and "handouts" and "rate increases" are only postponing the pain and unfairly dumping more debt on future generations.

.

I was speaking only of bailout of mortgage insurers. The insurers on the whole followed Fannie/Freddie guidelines. The Banks underwrite the loans, (sold on secondary to Fannie) subject to MI approval. Matter of fact, most Banks had MI companies underwrite the entire loans on their behalf.
If MI companies fold, it trickles right down to Fannie and Freddie, and it becomes the gov'ts problem anyway. Without mortgage insurance, you step back in time to the Depression era. IF, and I say IF with great hesitancy, MI companies folded, they would have to intervene anyway.
I don't agree with Kramers plan to sell shares to Warren Buffett, but it is entirely possible to sell MI back securities. Also, lower the LTV to 75% instead of 80% and increase rates in 5% increments as they are done now. Mortgage interest rates are at historic lows, housing prices are down. An increase in MI rates shouldn't impact someone's payment that significantly.

[beachmouse]

I don't see 2001 housing prices happening again because that would put them significantly under current rental rates. And the BRACiness is going to spill over to Freeport and west of Sandestin to some degree- there's a decrease in the amount of base housing at a time when they're increasing personnel, and not everyone is going to want to go to Midway or north Cresview to find a place to live.

So while prices may still have a little to drop, the under $350K segment stabilizes somewhere around early 2004 prices.

I can't see insurance costs going down. Replacement costs don't always have much to do with market prices, especially when market has so much to do with land costs.

[SHELLY]

I don't agree with Kramers plan to sell shares to Warren Buffett, but it is entirely possible to sell MI back securities.

The way I heard Cramer explain it yesterday Buffett would pick up the Muni's only--the U.S. taxpayers would be stuck with the toxic mortgage crap.


.

[full time]

After name and address, replacement cost is the first inquiry of every property insurance agent with whom I've done business. I've never been asked the cost of the dirt. During the height of the frenzy, building costs were probably 20 to 30% higher than today. Rates are determined by risk assessment ... the cheaper to replace the lower the risk. If you pay $800,000.00 for a 2400 sf house, you probably don't need a million bucks worth of insurance. Call your agent and see what your rates are if you lower your replacement costs by a third. You'll also have more carriers willing to underwrite more policies because of the reduced risk of loss, creating competition. It may take some time for people to reduce the amount of their coverage, but it will happen as housing prices and construction costs fall.

[JoshMclean]

The homes below $300,000 are already selling pretty well. I showed property today to a couple from Virginia and they were shocked at how much the prices had fallen. They said that homes where they were from in Virginia were pricier than many they saw today. They are wanting to get a place here and both of their sons are looking to buy also.

[SHELLY]

The homes below $300,000 are already selling pretty well. I showed property today to a couple from Virginia and they were shocked at how much the prices had fallen. They said that homes where they were from in Virginia were pricier than many they saw today. They are wanting to get a place here and both of their sons are looking to buy also.

Why do you think there's no interest in homes above $300K? And what were those presently-priced < $300K homes selling for in '05?



.

[JoshMclean]

I would have to check those prices in 2005 Shelly. Obviously people in that price range have been needing to be able to get into a home and now they can. The $500,000+ range is not moving too well. Obviously most people are trying to time the market and don't think it's bottomed yet. Gotta run. I will touch on it again when I get back.

[Smiling JOe]

I would have to check those prices in 2005 Shelly. Obviously people in that price range have been needing to be able to get into a home and now they can. The $500,000+ range is not moving too well. Obviously most people are trying to time the market and don't think it's bottomed yet. Gotta run. I will touch on it again when I get back.

Your posts suggests that those homes priced below $500K, are outperforming those price greater than $500K. However, during the last six months of sales of single family detached homes in SoWal, not including the area from Sandestin to Okaloosa County, 43% of the 77 sales were priced less than $500K. The remaining 57% of the homes sold in that area sold for more than $500. I do note that the $300K-350K range has been one of the hotter ranges for sales price, but to get a true feel, we need to look at the whole picture.

[Mango]

The way I heard Cramer explain it yesterday Buffett would pick up the Muni's only--the U.S. taxpayers would be stuck with the toxic mortgage crap.
.

I wasn't including the mortgage backed securities firms or Banks, just discussing a possible scenario if mortgage insurance companies like MGIC keeled over. The MBS and Banks need to take their licks. BTW, what a lot of people don't know is that Banks profited substantially off of mortgage insurers peeling off more than 40% off premiums without any recourse.

I was suggesting a Mango plan IF say MGIC folded, because if they did, you know the rest are all in line. Use part of the $145 billion or so from economic stimulus plan to buy mortgage insurers, then resell shares as a federally backed security like mortgage bonds. Of course, like I said, I don't suspect MGIC to fold, but we can't go back to the depression era ways of 50% down payment and 5 year loans if this did happen. There wouldn't be a home market at all.

Cramer likes Trump, no wonder I keep calling him Kramer. Must be thinking of Seinfeld because I don't take him seriously. At least he entertains me with his loony pro Wall Street rants. :biggrin:

[Bobby J]

No, they'll just pass the bill along to that cute little tike in your avatar.


.

That is too bad but seems to be the way life goes. Our government has been passing the buck since I was his age. We are eventually all going to have to pay but it will not happen this year. Election too close.

[SHELLY]

Use part of the $145 billion or so from economic stimulus plan to buy mortgage insurers, then resell shares as a federally backed security like mortgage bonds. :biggrin:

I don't agree with US Taxpayers buying out shareholders of these homeowers mortgage insurance companies.

I don't get it, the US taxpayers would essentially be buying a big bunch of RISK....what "shares" are they going to sell? The revenue stream from the homeowers insurance premium? And if the homeower defaults, that means that the taxpayer not only (1) paid out for the company; but also must (2) pay out to the holders of the defaulted mortgage insurance bond; (3) pay the lender for the missed payments. :blink: Fannie & Freddie have their own shareholders...let them deal with it themselves.

Let the company go bankrupt, let the shareholders take it in the shorts; and sell off any assets to Abu Dhabi for 2 fils on the dollar.



.

[Smiling JOe]

Insurance... that brings up another good subject. When someone defaults on their payments, they are likely to also cancel their insurance for that property. Does the lender then buy insurance for the home until they can get if off their books? That could be dangerous if they don't, and hurricane season is harsh.

[Mango]

I don't agree with US Taxpayers buying out shareholders of these homeowers mortgage insurance companies.

I don't get it, the US taxpayers would essentially be buying a big bunch of RISK....what "shares" are they going to sell? The revenue stream from the homeowers insurance premium? And if the homeower defaults, that means that the taxpayer not only (1) paid out for the company; but also must (2) pay out to the holders of the defaulted mortgage insurance bond; (3) pay the lender for the missed payments. :blink: Fannie & Freddie have their own shareholders...let them deal with it themselves.

Let the company go bankrupt, let the shareholders take it in the shorts; and sell off any assets to Abu Dhabi for 2 fils on the dollar.
.

OK, but then who would insure mortgages? Were not investors who bought shares of the enterprises taking risks? or when you buy a bond, there is a risk of losing yield due to inflation etc. Fannie and freddie would in essence then have to set up their own self insured programs if mortgage insurers failed.
Yes, they have their own shareholders, but remember, they are also government sponsored. They're neither fish nor fowl. You buy risk when you buy one of the enterprises, however people feel since the agencies have special priviledges, that that risk is limited figuring the govt. would intervene. Serious consequences domestically and globally could arise if these agencies start taking it in the pants too deeply. They account for a majority of the loans purchased. They were designed to encourage home ownership and it is part of their charter.

If the Office of Federal Housing Enterprise Oversight (OFHEO) established 14 years ago to ensure taxpayers would never have to pick up the tab in the event of failure at Fannie Mae or Freddie Mac, did their jobs, they would have intervened prior to this fiasco and restricted some of the risk Fannie was taking, ie, buying subprime mortgages, doing these risky ALT-A loans. Freddie is poised to handle a 10 yr. meltdown, but Fannie isn't.

The housing sector could be crushed without these agencies and add to an already economic mess. Agencies or mortgage insurers go south, believe me the government is going to have to intervene someway, somehow and who is going to pay? taxpayers one way or another.

You asked for comments above regarding MGIC. My ascertations may be wrong, but you got it. Be careful what you ask for. :lol:

[Mango]

Insurance... that brings up another good subject. When someone defaults on their payments, they are likely to also cancel their insurance for that property. Does the lender then buy insurance for the home until they can get if off their books? That could be dangerous if they don't, and hurricane season is harsh.

Yes they do at a hefty premium too I might add. :shock:
That's for a private home. Condos and townhomes that buy commercial policies have their HOA get stuck with covering defaulted dues.

[SHELLY]

The housing sector could be crushed without these agencies and add to an already economic mess. Agencies or mortgage insurers go south, believe me the government is going to have to intervene someway, somehow and who is going to pay? taxpayers one way or another.


The mortgage industry plunged the knife in with their "magic" 80/20 piggybacks, which abolished the need (and resulting revenues) for traditional mortgage insurance companies.......and the non-existent underwriting standards of the lenders twisted the knife--and now they're both surprised and concerned that the agency is bleeding out??
:confused:


But all these problems with credit and mortgage and insurance will be fixed by this Spring's RE Blowout....right?


.

[Mango]

[quote=SHELLY;349167]The mortgage industry plunged the knife in with their "magic" 80/20 piggybacks, which abolished the need (and resulting revenues) for traditional mortgage insurance companies.......and the non-existent underwriting standards of the lenders twisted the knife--and now they're both surprised and concerned that the agency is bleeding out??
:confused:
But all these problems with credit and mortgage and insurance will be fixed by this Spring's RE Blowout....right?. [quote]

YES! :lie:

Fannie and Freddie got greedy. I remember when they did not charge a premium for a 1st mortgage that had a piggyback up to 90%. Eventually they wanted these revenues to offset risk, and charged premiums for combos, ie: 75% first/ 15 seconds etc.; Statistics show that if someone starts to deteriorate financially, they may stop payments on the equity line first vs. the first mortgage.

Then with low HELOC rates in place, people wanted piggys in lieu of MI because 1) MI WAS not tax deductible, 2) getting MI removed at a later point could prove to be difficult. Banks could ask that the LTV be 75% for removal vs. not being required to purchase it if you put 20% down. Further, quite a few LO's didn't utilize some of the MI programs that were available like refundable policies because they didn't grasp it. Instead they did straight monthly premiums with no initial outlay of cash.
People were betting their houses would appreciate significantly enough, and MI companies have caveats that you can not remove it for a certain time period regardless of LTV.

***Now more than ever MI is making a comeback and finally going to be tax deductible up to 100K in earnings with it lessoning gradually to 0 deduction up to 110K income (insert it's about dang time smilie)
Homeowners will not be subject to payment swings vs. a HELOC.
http://www.privatemi.com/news/media/20070417.cfm