Just Got An Email From A Realtor

Not sure if you bought during the height of the craze, but I would bet that people that bought a home at the height of the craze probably don't feel quite as cozy about their investment/home as you do. Prices have fallen a lot since the peak and many people are under water on paper.

You guys really keep us working with some of the remarks about the doom of the market up here :bang: but it helps me keep up with what's going on so here goes:

I ran sold sales of gulf front condos less than 1 year old between corresponding dates for 2005 and 2006 in Tampa Bay (Sarasota to Hudson), South Florida (Jupiter to Ft Lauderdale) and Panama City Beach. There are 3 different systems that produce data differently so the Cma's look different but all produce the ave sq ft price for the subject searches. You'll see that:

Tampa Bay had an increase in value and in the number of sales this year.

South Florida had a decrease in both value and the number of sales this year but have to say that with only 2 sales this year, the tremendous drop in value is highly suspect. It could be indicative of a decrease in high-end buyers down there over last year and/or the production of more affordable housing. Or it could just be not enough data because of the 2 month time frame. It's really late and if anybody cares I'd be happy to look into it more closely.

I restricted Emerald Coast Search to Panama City Beach as a result of some comments about the flooding of condos over there but you will see that this year so far, we've had a flattening of prices from 1st quarter 2005 (which was before the drop so prices were at peak) but they have not fallen a lot as Monty stated. Also the number of sales have nearly tripled since Jan 2005 which is the first significant increase I've seen since 1st quarter last year. Number of sales have been up and down every other year since 2002 and if that trend were to continue, they would rise again this year since last year was down but as we all know, in the short term anything can happen and as everyone knows there is a lot of inventory on the market.


Tampa Bay - 01/01/05 - 02/26/06 - Ave sq ft Price = $478.26 (3 sales)
Tampa Bay - 01/01/06 - 02/26/06 - Ave sq ft Price = $507.04 (8 sales)

SE Florida - 01/01/05 - 02/26/06 - Ave sq ft Price = $717.69 (4 sales)
SE Florida - 01/01/06 - 02/26/06 - Ave sq ft Price = $396.47 (2 sales)

Panama City Bch - 01/01/05 - 02/26/06 - Ave sq ft Price =$452.85 (3 sales)
Panama City Bch - 01/01/06 - 02/26/06 - Ave sq ft Price = $450.03 (8 sales)

To those making predictions based on heresay or isolated cases, I can only say that everybody has an opinion, some people may have rushed to judgement and "dumped" their property too quickly . Some people may have acted foolishly and gotten in over their heads as Paula mentioned. The information that we have a lot of inventory right now is correct, as is the fact that some investors are running but they really have no one to blame but themselves for getting greedy and overextending themselves to make that quick buck. I see no current foundation for this whole hullabaloo about the crashing real estate market. And for those making predictions based on mortgage rates, they probably will go up but as of yesterday, I believe interest rates were right about the same as 4/2004 which was right in the middle of the "craze".

If you are or want to be active in this real estate market, work with somebody that can give you numbers not premonitions and if you're not active in the market, why do you care?

Paula's a wise investor and has the spirit to enjoy and appreciate this beautiful place that's been put here for us, as do many of the people on this board.

Thank you cork...I enjoyed reading this and even learned some things!

"And for those making predictions based on mortgage rates, they probably will go up but as of yesterday, I believe interest rates were right about the same as 4/2004 which was right in the middle of the "craze"."

Mortgages and loans are a big piece of the puzzle.

The 4 things that fueled the hot real estate market (cheap land, cheap loans, fast appreciation and speculation) are pretty much gone.

Many "investulators" bought pre-construction with money they most likely pulled out of home equity. They were planning on a quick flip before or on-the-day the mortgage was due. When the developer comes knocking for the rest of his money, many of these folks will find it difficult to get a mortgage let alone have enough money to pay out carry costs (assn fees, taxes, property mgt, insurance). And the "boomers" that they hoped to sell them to are having an equally hard time unloading their 5-Bedroom homes into a slow market in Bayonne, NJ.

Many other "investulators" bought actual condos, houses and property using a variety of short-term ARMs or other exotic financing whose rates have shot up substantially over the last 2 years thanks to the Fed. (investulators don't use 30-year fixed mortgages). These folks never intended to hold them beyond the initial ARM period, but needed to hold them long enough to qualify for long-term capital gains. They might have been able to afford the payments at first, but the new mortgage and increased carrying costs will be a burden the longer they sit on the market.

"Investulators" are the fly in the ointment of the real estate market and will level and cause some decreases in property "values." ("Values" meaning what some folks think their property is worth based on what the 'guy down the street' got for his lot/house/condo in July 2005.)

Not all these people are rolling in dough like those of us here on the boards. 😀

I had lunch with a business associate Friday who was stressing over just that. Had his lot on market, approaching build out date, never intended to build, 3 year option ARM adjusting soon...etc. Said if he does not sell by July payment will double. His problem is not "crashing values", it's the carrying costs/transaction costs/mortgage cash flow dynamic vis a vis what he can sell it for. For buy and hold/build/keep the market is not an issue. For those who lived on the edge, problems for sure.

I am hoping for some great deals this year so I can buy in...I'm long term.

Isn't that the way the cookie cumbles sometimes?

Jellyfish, your acquaintance is indirectly educating you as well here. If he is sweating his first option ARM adjustment, then he was totally unqualified to buy the land in the first place. The lender just enabled him to financially corner himself.

I am hoping for some great deals this year so I can buy in...I'm long term.

These lots with "build-out dates" are getting interesting to watch...they add a whole new layer of risk to real estate investing where none existed before. For someone who is ready to build at any time, I'd say the chances of picking up one of these lots at or below original cost will get better and better.

What is an "investulator"? How does one differ from an investor and why do you put the term in quotes?

Isn't that the way the cookie cumbles sometimes?

My sentiments exactly, Sueshore. People have to think before they act.

What is an "investulator"? How does one differ from an investor and why do you put the term in quotes?

Investor + speculator. Right Shelly?

Is this a term you are trying to coin in your thesis? It's pretty clever actually.

If he is sweating his first option ARM adjustment, then he was totally unqualified to buy the land in the first place. The lender just enabled him to financially corner himself.

If you have decent credit or home equity, the banks and other lenders are almost like drug dealers...they have been, and still are, pushing these crazy mortgage products that enable people to do stupid things. The "option" ARM is my favorite :floor: the option part is you can go bankrupt if you wish since your loan amount goes UP, not down.
I know these produts can be used to leverage great returns, but I like sleeping at night.

Everyone looks like a genius when values are going up- the latecomers will be the ones who get hurt if they are in it just for the flip.

Investor + speculator. Right Shelly?

Is this a term you are trying to coin in your thesis? It's pretty clever actually.

That's correct. An "Investulator" is a hybrid--a cross between an investor and a speculator. They claim to be an 'investor' to be PC in social circles or to secure a property where flipping is discouraged--but they are really in the game for the short-term money grab as a speculator or flipper.

(I can't take credit for coining the phrase--it's being used in investment circles.)

You've hit the nail on the head with your analysis of the investulators (cute), Shelly. Thanks for asking Kurt, I was wondering myself.

Jelly, you make a good point about the lenders and their creative loan programs. I remember a term coined "lender liability" several years back where there could be liability on the lenders part for lending money to people that couldn't afford it. Any attorneys here that could comment on the concept of lender liability related to all these non-traditional loans that they've made that could financially bankrupt the borrower?

I like to think of this speculative real estate buying (like pre-construction, flipping, etc.) by the novice investor and your normal Joe Citizen to what I call the Money-Magazine-phenomenon. By the time the hot stock tips make it to print, they are rarely hot tips anymore. Same concept in this real estate game. Those that made great money were #1 here before the rest of the world found out what was happening and/or #2 are/were seasoned investors and/or #3 had/have either cash or enough cash to weather the storm. I have also heard a lot about "mortgage fraud" from ECAR over the last week. Hold on for the ride!