Condo Speculators Wait For The Bubble To “Come Back”
The Orlando Sentinel reports from Florida. “Experts say they don’t know how many of the Orlando area’s newly converted condominium units now have tenants living in them again, because condo complexes aren’t included in the industry’s apartment surveys. But faced with a slump in sales, individual investors and professional converters alike have added enough condo units to the local rental pool since March to cause the apartment market’s occupancy rate to drop for the first time in more than three years.”
“Jim Lewis, president of a Maitland research company, said the sharp drop in apartment occupancy, from a record-high 96.4 percent in March to 94.1 percent in September, came as a surprise. ‘We scratched our heads and concluded the biggest factor was the several thousand conversions out there that are rented’ but not included in local apartment surveys, the researcher said. ‘No one knows just how many. It’s a shadow market.’”
“Angela Paradiso is a small real-estate investor who owns three condominium units: two in downtown Orlando and one in Altamonte Springs. She has tenants in all three and charges ‘very competitive rents,’ she says, ‘because I want to keep them occupied.’”
“Developers have backed off dramatically from last year’s record-setting pace of conversions, but thousands of apartment units are still being snapped up for makeovers into condos. Just since March, Lewis said, more than 5,500 rental units have been converted to condos in Metro Orlando.”
“‘Conversions are still coming on line, even though many [converters] are renting while they wait for the market to come back,’ Lewis said.”
“Broker Luis Casanas, opened an office in Orlando to focus on condo sales and rentals in MetroWest, where thousands of rentals have been converted during the past couple of years. Casanas estimates that anywhere from a third to a half of those converted condos are now for rent. ‘There are plenty of rentals available in MetroWest,’ he said.”
“Condo conversions were a national phenomenon in 2004-05 in the country’s growth markets, but the question of how many remain rentals isn’t known, said Mark Obrinski, chief economist for a Washington-based apartment-industry trade group.”
“‘That’s the big question when apartment researchers get together,’ Obrinski said. Some rental-property investors, he said, are assuming for planning purposes that one-third of all conversions in any given market are staying in the rental pool, while the rest have been occupied by the people who bought them.”
“‘But that’s not backed by any real data,’ Obrinski said.”
“Tony Martin, VP of Tarragon South Development Corp., said that in some rental communities, as many as 50 percent of the units have been bought by investors who didn’t move into them after taking ownership. Many of those investors were hoping to profit from quick resales, but because for now they can’t find a buyer at a price they’ll accept, they have begun renting to tenants while waiting out the market slump, Martin said.”
“But with rising property taxes and insurance in Florida, investors are finding it tough to break even, said Patrick Skinner, an apartment broker in Orlando.”
“Paradiso, the investor, was aware of that problem when she bought her three units. The rent money from her three condo units falls about 20 percent short each month of covering her expenses, she said. But at some point, she insisted, the rental income will exceed her expenses, and the properties will appreciate in value.”
“‘I’m looking at things long-term,’ she said.”
The Naples News. “The furniture business in Southwest Florida is getting a new look. Street walkers hold up signs advertising the closing of Spectrum Home Furnishings on Davis Boulevard and on U.S. 41 North. The stores from East Naples to Cape Coral are draped in brightly colored ‘Going out of Business’ signs.”
“Blame it on the real estate market that has sagged like an old easy chair. Naples resident John Munzenrieder, who has run Spectrum Home Furnishings for more than 20 years, does.”
“When condo sales dropped by 50 percent after the market turned last year, business dropped by almost that much at Spectrum, Munzenrieder said. ‘It’s kind of funny. Two years ago was the best year we ever had in sales and profitability and when things slowed down, they slowed down very drastically,’ he said.”
“Spectrum isn’t alone. Brown’s Interiors has closed after more than 35 years in business. A going-out-of-business sale ended Thursday. Though the owner isn’t talking about the reasons for closing, some in the business say they think it has something to do with the sluggish market they’ve experienced themselves.”
“‘There are some people really hurting,’ said David Dann, who has been the manager of Badcock Home Furnishings in Golden Gate for 21 years. ‘I brought this store up from scratch. And I’ve seen nothing like this at all.’”
“Two weeks ago, he attended a companywide meeting for Badcock in Lakeland and for the first time that he can remember stores in Florida were at the bottom of the graph for sales. Florida stores are usually at or near the top, Dann said. It may be a really hard Christmas, he said.”
“Dave Annand, sales manager at Haverty’s Furniture in North Naples, said business at his store began to slow at the beginning of the year. He understands the reluctance to purchase furniture. He has two homes that he bought as investments and hasn’t been able to sell. Until he does, he’s not buying new furniture for his new house, he said.”
‘After making about $3 million on the sale of two Sarasota apartment complexes earlier this year, Colin Hebson and Thomas Eggers have unloaded a third complex at a slight loss. The Illinois-based real estate investors paid $1.148 million for the 14-unit complex at 2050 Hillview St. in October 2004 and recently sold it for $1 million.’
‘The buyer, well-known Sarasota businessman Harvey Vengroff, said the price shows the local apartment market is not as good as it was a year ago. ‘It’s pretty flat,’ Vengroff said.’
Jim Lewis, president of a Maitland research company, said the sharp drop in apartment occupancy, from a record-high 96.4 percent in March to 94.1 percent in September, came as a surprise
So much for rising rents scaring more renters into buying, right? With prices decoupled from rents already, how does falling rents support the prices again? Please, Jim we’d like to know.
John Doe
And now you will have falling rents making the math of buying even more looney.
Not to mention a declining job market and that impact on demand. We’ve never had as many bedrooms per person available. As embarassing as it is, many will move back in with mom and dad after their escapades as a real estate tycoon.
If you’re a potential buyer, write off 2007. Don’t even think about it. I’m not saying 2008 is a good time to buy either… (it might be… but that’s a long discussion), just please don’t even consider 2007.
Neil
I’ve been watching a house in RPV. Its valuation is up round 1.2 million. I think the “owners” ran up a lot of debt with a fancy new pool, guest house and renovation. If that pops on to the market and I can brag it for 600K (still inflated) I’d do it.
Its just a really nice property.
Nooo!!! Bad area… go down to Redondo… RPV is bad… There is an evil new gang up there dressed in Hugo Boss… repeat, Don’t watch RPV…
Then again, that’s where I’m going to buy! Let the market die… die… die…
Ok, I found a great home in RHE last weekend… prices well (1.3M on a .6 acre lot… sweet! That would have been 1.7M 6 months ago…)
Realtors were such scum. “We don’t expect a price decline but we do expect rates to go up.” I just went, “ok, I’m still not buying now” but then went on and argued about how jobs will leave if prices don’t drop… (My fiancee got anoyed with me… oops. She’s of the opinion, don’t waste your breath on the obvious with someone who can’t understand.)
I agree that RPV would be very attractive at 600k… But first, a recession from our sponsors…
Neil
“If you’re a potential buyer, write off 2007. Don’t even think about it. I’m not saying 2008 is a good time to buy either… (it might be… but that’s a long discussion), just please don’t even consider 2007.”
Good idea. That will allow the savvy investors to find the best bargains beginning next summer without the possibility of too many others bidding against them.
You gotta jump in when things seem the worst. Reporting (whether it’s a top or a bottom) always lags the actual event, sometimes by several quarters.
Bill,
I’m very much in agreement about buying when the market is at the bottom. However, this bust in housing could be a major exception. It may not appreciate or anything for a number of years (7 or 8?). We may never really “soak up” the excess supply. Housing is not really an investment as much as a place to live.
Me? What would I look into when it comes to investing? I’m going to invest in businesses that actually do something or make something. Houses sort of sit there.
Roidy
Good luck with that. Much like any market in a crash, there will be at least one, and probably more, false bottoms. And an army of knife catchers will be there for it. Sounds like you’re one of ‘em.
Buy when the “investment” can be cashflow positive. If you don’t know what that means, you’re a speculator, not an investor.
I’ve been thinking a lot about the apartment market lately, and writing about it as well, most recently at …
http://www.moneyandmarkets.com/press.asp?rls_id=486&cat_id=6&
And…
http://tinyurl.com/ya8prh
I agree with some in the multifamily industry that we haven’t seen a boom in the construction of traditional apartment complexes. But we have seen a huge increase in the amount of condo construction and SFH construction. Since a big chunk of those condos and SFH were sold to “investors” … investors who now can’t sell and are trying to rent instead … we do indeed have a pretty big shadow market of rentals out there. Throw in a slumping economy, and you’ve got a recipe for smaller rent increases down the road. Just my two cents, of course.
“‘That’s the big question when apartment researchers get together,’ Obrinski said. Some rental-property investors, he said, are assuming for planning purposes that one-third of all conversions in any given market are staying in the rental pool, while the rest have been occupied by the people who bought them.”
“‘But that’s not backed by any real data,’ Obrinski said.”
I’m betting it is the other way around.
“We scratched our heads and concluded the biggest factor was the several thousand conversions out there that are rented’ but not included in local apartment surveys, the researcher said.”
What kind of infomation age researchers do we have when he tells me there are 2000 underground units being rented, but he doesn’t know how to find them? Is any numbers reported by anybody “real” that you would depend on to make investment decisions. And this clown is willing to scratch his head before digging around to get the accurate info. The David Lehear school of disimilation.
It would seem to me that you could get pretty close to the truth by keeping a running track on the number of apt for rent ads. At least it might cut down on the head scratching.
Or, you could track a set of a few different buildings, check tax records as to where the “owners address” is, and extrapolate. (They have seperate “owner mailing address” info in the searchable public databases here, in Alexandria, Va. — it’s a great way to see how owner-occupied are newly built condos around here)
Eh, I’ll cut him a little slack on that one. Short of sending someone door to door to ask if it’s the owner or a renter (assuming anyone’s even living in all those conversions), there’s not a good way to know the accurate number.
Of course, I’m thinking he’s significantly underestimated the amount of rented units. Oopsies!
I remember reading an article years ago about common sense estimating. The author would give speeches and be tested by his audience. The one example I remember was him getting within spiting distance of the population of Chicago just by being told the number of piano tuners in the phone book.
His point being that a little common sense will get you in the ballpark. These guys seem to be sitting at their desk waiting for answers to hand delivered.
I’m 1000 miles away and I could have told them to expect a drop in the vacancy rate.
True. A reasonable estimate should be possible even if he could never get an exact count. Why won’t the numbers fall from the sky when he needs them!?
Wonder how many room rentals are in that area? Seen a few on the local Craigslist with (presumably) post-adjustment ARM owners offering master bedrooms for ~ $500/month with full house privileges. Now that’s a stealth market.
Does that include the wife?
Waiting for the bubble to come back? Good luck with that. I’m waiting for the JDSU bubble to come back with $2 shares. It’s been 7 years now.
Did jdsu merge w/ alcatel here lately?
Lucent
Did jdsu reverse split recently? It’s at $18. I haven’t paid attention to dreck like that in years; forgive me.
Indeed, txchick. I just do not understand all these people who are counting on the magical spring bounce, including some of my relations. My thoughts as to why this will not happen are threefold: regardless of whether the Fed lowers rates, it appears we have exhausted the supply of buyers by borrowing from the future, giving anyone with a pulse a loan. Second, builders have lots of empty units and units still under construction, and as their inventory grows the prices must drop. Finally, regardless of where interest rates go many regions have hit price ceilings. By that I mean area incomes simply cannot support further appreciation. Of course we could always see a couple of dead cat bounces as many here have opined, but these should be short and beneficial to very few of the FBs trying to escape.
Yeah, I don’t understand the belief by many that somehow lowering interest rates will save house prices. If mortgage rates declined to those prevalent in summer of 2003, would house prices decline to their 2003 prices? This by itself would put many upsidedown on their mortgages.
Saw this on Amazon “Flipping Houses For Dummies (For Dummies (Business & Personal Finance)) (Paperback) ” http://www.amazon.com/Flipping-Dummies-Business-Personal-Finance/dp/0470043458
it is ghost written in conjunction with Ralph Roberts..
What is interesting it the reviewer that posted 17th Nov.
“This is by far, the best book I’ve read on flipping houses. It provides information on how to develop a strategy, identify target neighborhoods, how to screen prospective homes, estimate potential profit, negotiate pricing, arrange financing, identify necessary and high-profit repairs and renovations, and how to sell quickly at the highest price. I’ve been an arm-chair flipper for the past 24 months, just waiting for the market to soften in order to have more inventory from which to choose and more motivated sellers with which to negotiate. This book couldn’t have arrived at my doorstep at a better time. Highly recommended. Over all rating? AAA+”
Just goes to show why the market will go down slowly. A dead cat bounce may be coming early next year.
Amazing. There are always sheep that need shearing. I wonder how many thought the same way when they purchased “Trading Tech Stocks on Margin for Dummies”. I wonder how many glowing reports were written late 1999 and early 2000. The end result will be the same.
Given market and credit conditions remain the same, I would say this would be in keeping with previous bubble cycles. I am not sure lenders will be able to keep pushing money into the hands of borrowers who clearly cannot afford to repay… That said, these loan products will likely continue to be available until mid year or perhaps towayrd the end of the year, but once defaults get to a high level, pressure will be on to stop them, so any dead cat bounce will likley be soon and short…
GH,
I agree with you. If we are to have a dead cat bounce, it must occur while credit is still easy. Once credit tightens… Look out below.
Realtors look far too hungry for me to believe in a bounce though… I think we’ll go straight down. But… a bounce could happen. Yawn. I’m looking for my next place to rent for April 2007 through April 2008 at a minimum.
No employer in this area is considering raising wages more than 2% above inflation that I know of… But quite a few are opening “branches” in other states or transfering work to existing distant non-bubble market branches… Welcom to the information age and globalization. Its a good thing in the long run (assuming its not too screwed up), but its going to cause quite a bit of pain…
Neil
Oh, I have a theory on this market. The equity upgrade gravy train that has artificially proped up Cali home prices… is about to end. Too many people HELOC’d/refinanced out that equity.
Good luck upgrading to RPV without that equity and with the current mortgage cash burn rates.
Neil
Exactly the point I made this weekend. A huge part of the potential move-up pool will have little, no or negative equity; they might as well be first-timers since they’ll have to bring cash to the table. Cash short buyers in a “normal” credit environment (20% DP, 700+ FICO, 32DTI, five years taxes) will have to buy based on income. 1997 prices? Try 1977, since prices will revert to 3-4x income.
I disagree with your assessment of globalization. The problem arises in the high tech sectors where we continue to lose our dominance. In 1980, our universities turned out more engineers and scientists than any other nation. Today we are still above some third world countries, but well below India and China. So by the time it all “equalizes”, we will no longer have our technological dominance and in effect will have completed the cycle and transition to full third world status. I suppose after that, Asian countries (if they are as shortsighted as we are may look over here for cheap labor, but I would not count on it. Of course, even in the Asian countires where the west is the primary consumer, there will be much pain, but at this point, I believe the horses are all out of the stable…
” In 1980, our universities turned out more engineers and scientists than any other nation. Today we are still above some third world countries, but well below India and China. So by the time it all “equalizes”, we will no longer have our technological dominance and in effect will have completed the cycle and transition to full third world status.”
This is not necessarily the blog for this discussion, however… While India is a threat, China is not. I review papers in computer science for journals and major conferences. China is a dirty word. No one wants to review papers out of there. Massive plagiarism and rediscovery of existing work. When something is newly discovered, it is some minor tweak that was so obvious a previous author did not think it worth mentioning. China has real cultural issues in their educational system that will hold them back for a while.
India, however, is a completely different story.
amen walker. papers from china are usually barely comphrehsible. The work out of IITs from India is usually first rate.
hey, I think I may know you.
The truth is, this is an argument usually put out to justify increasing the cap in H1-B visas to keep wages low .
The Chronicle of Higher Education:
Is There A Science Crisis? Maybe Not
Leaders warn of a labor shortage in the U.S., but indicators point to an oversupply
By Richard Monastersky
…
But such a lamentation has an all-too familiar ring to some experts, and it strikes them as off-key. In the mid-1980s, the National Science Foundation warned that the nation would soon lack enough scientists and engineers to fill the necessary posts in academe — a forecast that turned out to be wildly inaccurate. Instead, over the past decade, thousands of frustrated researchers have labored in postdoctoral positions at low wages because they could not find jobs in academe or industry. Current data suggest that the new predictions may fare no better than earlier ones. In fact, contrary to prevailing wisdom, which fixes blame on poor training in science and mathematics from kindergarten through the 12th grade, record numbers of Americans are earning bachelor’s degrees in science and engineering. And unemployment rates in at least some sectors of science and engineering have topped the charts.
“Despite recurring concerns about potential shortages of STEM scientific, technical, engineering, and mathematics personnel in the U.S. work force, particularly in engineering and information technology, we did not find evidence that such shortages have existed at least since 1990, nor that they are on the horizon,” concluded the RAND Corporation in a report this year. “Projections about shortages are a dangerous business,” says Paula E. Stephan, a professor of economics at Georgia State University who has tracked employment in science. The inaccuracy of past pronouncements, she says, “creates a woof-woof problem. How many times can you say this and the public will believe it?”
http://chronicle.com/free/v50/i44/44a01001.htm
Ditto in life sciences here - the amount of decent original research which comes out of China is negligible. They’re an economic colossus, but their role as a leading scientific power is probably generations away at this point.
Walker,
Writing off China on the basis of one field doesn’t make sense. Wait until all the top Chinese researchers currently in the US start to emigrate back. I’m always surprised at how many top discoveries in US Universities have Chinese researchers associated with them.
With the exception of the last 100 years, China has a long history of trading and innovation. It’s hard to fathom until you have lived there and spent time of some of the 50+ cities with more that 1 million people.
I suspect that most of them would rather stay, conditions being what they are. And that’s part of how we win people. We’ll be competing against them either way, but if they stay here they’ll be paying US income taxes.
I know and work with some great guys that are here on H1Bs, but IMHO the program is nothing but a scam to cap wages in high technology fields.
I have mentored a few Chinese post docs and they are usually very bright and able. I think China may well dominate science in the future. The big problem in China now holding back science is the almost complete lack of respect for intellectual property. Anything of commercial value that is discovered is just copied by all your competitiors so why bother to do research. Also, there is still a lot of favoritism with promotions based on family and or party rank.
I agree we will get a bear market rally next year. There are still a lot of prospective buyers waiting to “buy the dip.” They watched the market go up, they are convinced it will continue to do so, and they are waiting their turn to pounce. These late buyers will be the last support this market will find.
Look at a chart of the NASDAQ for 2000. You will see the initial collapse in April 2000 followed by a brief period of support, then the multi-year selloff began in earnest in September 2000. The housing market is beginning the initial collapse, 2007 will be the period of support, and 2008 will see the real selloff.
And, last I checked, NASDAQ is still more than 50% off the high it reached in early 2000.
And did you ever see the chart and the return to the mean. The bubble was an upside down dip, with several dead cat bounces, and once it returned to where it should have been prior to the bubble, it normalized. Google the chart. It’s a beaut!
Yes, the final high on a lot of the bubble stocks was in August of 2000. A lot of people I know lost everything thinking that was the bottom.
I agree with the comparison to the Nasdaq (INTC made its high in August 2000 IIRC), but I think it’ll be a bit more compressed with housing. We’ll start dropping off the cliff in late summer ‘07.
Define what you mean by rally? If you’re implying an increase in sales versus previous months it’s possible, but an increase in prices probably not. The analogy to the stock market is not a perfect one. Although there are similarities, there are many differences as well. From my way of thinking I just don’t see the massive reduction in inventories occuring to push prices higher.
I’d say that all we’ll see is an increase in sales for a month or so. Maybe some NAR reports will find a way to say that the median went up in some areas - but either way, it’ll be short-lived and only serve to lure the last of the GFs into the market.
I think that there are more potential sellers sitting on their flips than potential buyers waiting on the sidelines.
I doubt the list of unencumbered potential buyers “on the sidelines” would even register as a statistical blip.
‘Bear’ in mind that this will be a lot slower in developing/unfolding than the NASDAQ. Stocks are liquid, RE isn’t. So it is difficult to see how long this may take. Personally I currently think its going to be more than a year or two in collapsing.
http://youtube.com/watch?v=f7sXTLkBmic
Flipper Nation: The First Flip (video)
“A dead cat bounce may be coming early next year”
That is actually a good thing…it will help push the negative sentiment even further south when the cat stops bouncing. Psychology is key.
However, a contrary view on a DCB: What happens when the band of false bottom feeders collides with the stampede of “hold off until next spring to list your house” sellers? Concrete cat.
Help speed up the dead cat bounce…
http://www.addictinggames.com/kittencannon.html
Caution: Addicting and not for kitten lovers.
Alot of suckers get pulled into speculative rally’s towards the end. There were numerous “get rich day trading” books out in 2001 and 2002 with plenty of “contrarians” taking the plunge.
From “Tucson Citizen” 12/02:
SaddleBrooke - North Tucson:
Price Discount Close Out
————————————–
441,000 $70,000 371,000
….
….
532,000 60,000 472,000
12 listings with discount = 70,000
2 = 60,000
I looked at those just over a month ago. Fairly good quality and not a bad price for the market at this time.(I am not talking about next year) It’s interesting that none of them have sold.
pdf link
http://www.robson.com/templates/robson/pdf/incentive/sdbkcloseout.pdf
Comment by Chrisinpnw
” …It’s interesting that none of them have sold.”
1. It’s still ~ twice of 2002′ prices.
2. This area is far away from Tucson.
The big question I have is how many of these condo conversions (or new condos) are being rented out for the monthly payment. It’s hard to find a renter(s) that will fork over $2000 + a month for a place. However, most of these condos were priced above $180K so the payment is pretty steep. More than likely, the people renting these places are loosing money month after month.
In Palm Beach that is an easy answer. None.
I know of no condo conversion in the past 3 years where you could rent out a purchased unit for carrying costs. Homes are the same situation, sometimes worse (because the monthly rent is higher; pushing out of the range for most renters).
My first hand experience; I am renting a 600K home (last sale) for 2K a month. The taxes on that home are almost 1K a month.
I’m new in Orlando; renting a decent townhouse for 1300. Thanks to online records, I was able to find out my landlord bought the place for 230k two years ago. Funny thing is, he’s convinced appreciation will make up for it. Rarely have two parties to a financial transaction each been so convinced the other is getting screwed.
“Rarely have two parties to a financial transaction each been so convinced the other is getting screwed.”
That is the greatest “conundrum” of the bubble, IMO. But one side has already blinked — the folks who thought that cashing out and renting was stupid, because prices never go down, are no longer snickering. In fact, a lot of them are lookin’ sorta’ pissed.
“Paradiso, the investor, was aware of that problem when she bought her three units. The rent money from her three condo units falls about 20 percent short each month of covering her expenses, she said. But at some point, she insisted, the rental income will exceed her expenses, and the properties will appreciate in value.”
Hey Ms. Paradiso…what’s an investment that loses money every month/year (property taxes?!) called?
A BAD INVESTMENT!!!
Amazingly, I know so many people who are in this same situation, including my own landlord (he breaks even on monthly because he put $200K down but loses overall due to repairs and property taxes.) Oh well…just have to wait until all these people are shaken out of their dreams of “great appreciation.”
And I’ll wager she used a less than full principle loan to arrive at the 20% loss. Imagine what the inventory will be if resets send ‘investors’ like her to market?
200k at 5.5 percent = 23,199.51 earned after 2 years. (100k is insured)
Is a 11.5k+ per year guaranteed and insured return better than the owner is getting now? Is the property gaining or losing value?
Heck — if, as she claims, she were pulling in 80% of her cost, assuming little or nothing down, she would be doing very well, relative to prices and rents in the area. I will bet that she isn’t getting that much.
Amazingly, I know so many people who are in this same situation, including my own landlord (he breaks even on monthly because he put $200K down but loses overall due to repairs and property taxes.)
Not to mention the opportunity cost of investing that $200K elsewhere, which works out to a grand a month, give or take a couple hundred depending on assumptions and time horizon.
“Paradiso, the investor, was aware of that problem when she bought her three units. The rent money from her three condo units falls about 20 percent short each month of covering her expenses, she said. But at some point, she insisted, the rental income will exceed her expenses, and the properties will appreciate in value.”
“‘I’m looking at things long-term,’ she said.”
_____________________
What an idiot this girl is.
Hmmm, Let’s see, I wanta invest money to get rich. I could open this account that automatically withdraws 20% of my fixed monthly deposit in fees (that MIGHT decline over time, but no guarantees), and has the potential of MAYBE someday giving 10% APR on the fund (flippers dream), AND I am going to take out a loan to make this investment!
If this were stocks, bonds, money market fund, futures, or anything else other real estate, this idea would be just laughed at by everyone as being stupid and too risky without the premium, but being RE the mainstream considers this shrew investing.
Losing 20% per month isn’t too bad, relatively speaking. You might get to breakeven in four or five years. What about all the people who are losing 50-60% per month?
and it may not be a “true” 20% given losses like this are partially deductable against income on federal taxes.
She does not have enough money that losses are worth the tax breaks (otherwise, she wouldn’t be mortgaged beyond the cash flow point), and that 20% is probably still on the interest only period of her loans, since the majority of loans in CFL within the past year or two are I/O. Once they reset, she will probably be 50-60%+. An IRA/401k could provide the same tax break with more return and less risk.
“But faced with a slump in sales, individual investors and professional converters alike have added enough condo units to the local rental pool since March to cause the apartment market’s occupancy rate to drop for the first time in more than three years.”
Repartments for rent with granite countertops — what a concept…
Indeed ! If you were renting now would you go to the typical worn out corporate run apartment beehive with beat up appliences and counter tops or rent a nicely redone condo for the same price ?
I am renting now and I’ll take the SFH w/ 2 car garage for $50/month more. Course, our landlord bought in ‘98, so he probably is making a profit at this rate, but he helps set the price bar nice and low for the floppers. I like him!
‘No one knows just how many. It’s a shadow market.’
Shadow inventory is and will continue to be a huge factor in the unraveling of the bubble.
OT - Bubble Nation The Story Of Five Bubbles
http://www.youtube.com/watch?v=S_i7yWizHhg
Amazing how much air time they give this guy on a MSM outlet. Oh yeah, it is a Canadian MSM outlet. Not a “all is rosy” US outlet.
I guess the people that post on this site were right about rental
prices going down or keeping steady because of supply . With the exception of a few areas landlords are not gettig these higher prices they needed to hold these spec. properties long term .
Wait until these new landlords find out what you have to do when a renter moves out to re-rent or sell .
I saw a sign today at the front of a house that had been on the market saying “Lease for 6 months “.Wonder what the RE agent has been saying to this seller/short term landlord ?I know for a fact that this seller could of sold this place had they just came down another 10k because of know of the same model that did sell for 10k less .
This seller isn’t going to get the 10k more and most likely will get a bigger haircut by waiting until the famous spring bounce period in 2007. On top of everything else, how many renters just want to rent for 6 months ?
The RE industry is not being honest about the market and many of these people should sell now because of the carrying costs .
IMHO the NAR/RE agents have more of a influence than they should . People are desperate to get advice on what to do .Where is the main stream media articles that should burst or dispute the 2007 appreciation market fairytale by the cheerleaders .I mean they need a major headline like “MARKET WILL BE DOWN FOR YEARS THE REAL ESTATE EXPERTS PREDICT “.
“I guess the people that post on this site were right about rental
prices going down or keeping steady because of supply”
It still depends on the area…for example, in the Victor Valley area of SoCal, overbuilding and rempant “investor” activity has caused a glut of SFH rentals, putting downward pressure on rents. However, in the Pasadena area, I’ve seen rents continue to climb. Out here on the central coast, rents for SFHs are pretty much stable.
another big between now and the 80’s bubble- you could rent condos at at possitive cash, day one
In NYC at least, rents are skyrocketing. It’s frustrating as hell for us bubble-sitters. It goes to show that while NYC has many of the bubble features of other places (e.g. high projected appreciation built into asking prices, inflation due to easy credit availability, etc.) it does not seem to have a crowd of stranded “floppers” who are flooding the rental market.
My view is that while flippers invaded other places over the last few years, they were too intimidated to get anywhere near Manhattan, preferring to work the dreary exurbs of California, Florida, Nevada, etc. where they assumed they could prey upon a dumber demographic. Well, folks in those places turned out to be smarter than the floppers thought - they’re not buying and they’re driving a hard bargain as tenants.
While I wish I had floppers around here to torment, all I can do is hope that the flood of new inventory being built now will eventually force a “repartment” trend in NYC, causing rents to moderate.
NYC probably won’t see much effects of the bubble unless there is drastic unemployment (IMHO). Which I don’t see happening due to boomer retirement a weakening dollar (strenghtening manufacturing), etc.
I guess what I’m saying is that I think NY is just too big and there is too much money there that RE investors there by and large have enough cash reserves to ride out the bubble collapse. Did you see how big the bonuses were on Wall St this year? Insane!
My guess, only pockets of deflation, but overall NY will probably flatline.
Fortunately, I’ll be getting one of those Wall St. bonuses, but you’d be surprised how little even a nice 6-figure bonus gets you around here (begin by taking 50% off the top for taxes…).
Oh, right… it’s different there.
More kudos for the housing bubble. I read a report on how so much farmland is being bought up by the RE speculators that there is now fewer farmland. They said to expect the price of produce and meat to increase. So now besides making housing unaffordable, food will be unaffordable with a recession coming our way. Instead of farms, we have tracts full of empty houses in the middle of Hooterville. Isn’t this housing bubble wonderful?
There’s still plenty of land and plenty of farmland. The tract homes are just an eyesore, nothing more.
Whoever is saying that food prices are going to go up because of this is just trying to start another non-existent bubble. Yeah, the food-bubble is next! Invest in food stocks now everyone!
“I read a report on how so much farmland is being bought up by the RE speculators that there is now fewer farmland. They said to expect the price of produce and meat to increase. So now besides making housing unaffordable, food will be unaffordable.”
Don’t believe it. Price rises WON’T be caused by a farmland shortage. In the ’60s, some well-known idiot wrote a book about how global famine was less than 10 years away. It received great acclaim and generated much serious hand-wringing, the same way “An Inconvienent Truth” is doing today. A few days ago I read that obesity is even becoming a problem in Africa! So much for famine.
Never fall into the “static analysis” trap. Humans adapt, improvise, and overcome.
Inconvenient. Sorry.
Street walkers hold up signs advertising the closing of Spectrum Home Furnishings
OMG! Did they really say that? Or has the sign twirling biz gotten so competitive that the pay beats hooking?
LOL.
If you look at the Census Bureau stats on rental vacancy rates, you’lle see they bottomed out in the first quarter of this year …
http://www.census.gov/hhes/www/housing/hvs/historic/histtab1.html
9.5% was the recent low … followed by 9.6% in Q2 2006 and 9.9% in Q3. The Q3 reading is the highest since a year ago. Admittedly we haven’t jumped all that much, and we’re still below the recent peak of 10.4% in Q1 2004. But I think the great apartment rent surge is probably poised to ebb.
http://interestrateroundup.blogspot.com