I have a questions for all the experienced investors on this forum. I love in Miami and sold my home right before the market turned. I decided to rent until the market stabilized somewhat. It has been almost two years now and I know the condo market in miami keeps declining because of all the inventory and the future inventory to come but the SFH’s seem to be fairly stable. I am not sure if I should wait or buy something soon. My question is that if I see appraisals or comps they don’t mean much to me. I see it as unreliable information because everything was so inflated I am not really sure if anyone knows what the true value is?
Would you trust an appraisal or comps in this market? How would you approach it?
Comps only tell you what your market did within the last six months. Active listings will give you a clue to what your market is doing now.
If comparable property sold for $300K within the past six months, but current active listings are advertising comparable properties for sale at $285K, then you have a clue that the current market value is lower than the comps.
Ok, if comps were say 300K 6 months ago and listings are currently 285K and you think the market is still declining what percentage below the asking price would you offer. I would like to get something from someone who need to get rid of it but I also don’t want to completely kill a deal by offering too low. Or is there such a thing?
Also, not sure if any of you have experience with this but there are some very low asking prices on condos in very nice areas which are attractive at least to live in but my concern is the HOA. If a large number of the building is in foreclosure is there a chance the HOA can basically go out of business. I assume that someone has to keep paying the banks, etc. I fear this cost will be shifted to the few people who actually live in the building or are not in foreclosure.
What is your outlook for the condo market down here?
Do you think the Florida economy is going into recession???
If YES…WAIT!!
What you have to remind yourself about the current cycle is… We are just NOW starting to see this mess ripple through the economy. As people start losing JOBS the prices of homes WILL drop further. Here’s an interesting fact from my neck of the woods (the North East) 2 years ago you couldn’t get a contractor to even return your phone calls. They had so much work they would give people astronomical prices for estimates. If the homeowner accepted at THAT price, they took the job. If they didn’t, they never even tried to negotiate. There was SO much work out there.
It seems things are a little different in 2008 up here. My friend is building a new home for his family. He pulled his permits last week. In the WEEK since he got his permits, he has received 32 LETTERS FROM EVERY SUB imaginable looking to price his project. He NEVER contacted any of them. THEY went to City Hall and made lists of new building permits LOOKING FOR WORK!!! THESE GUYS ARE DIEING UP HERE.
ANYONE (in my opinion) who doesn’t think a housing bust of THIS magnatude won’t plunge this country into a prolonged and DEEP recession is kidding themselves. It’s coming.
My question to you is…How will YOU FEEL if housing prices in Florida CONTINUE to fall another 30-40% from these levels??? Florida has about 15 years worth of housing inventory according to many of the articles I’ve read over the last year. JUST WAIT. Your in the drivers seat. I would sit on the sidelines and make low ball offer after low ball offer on anything I liked down there. If your not coming in at 50 cents on the dollar your too high. It’s a numbers game. SOMEONE will take that offer. Don’t be in a rush, and you could save yourself hundreds of thousands of dollars.
Another quick Florida story… I have a friend who purchased a home (pre-construction) down there thinking he was going to flip it and make ton’s of money. Well, like most people, he now has a NEGATIVE CASH FLOWING RENTAL HOME. He can’t sell this thing for ANYWHERE near what he paid for it. So…he rents it to a college kid for $1500/month (this is a $300K home :banghead) He decides (my friend) that the college kid is getting TOO good of a deal so he tells him he going to UP his rent. The kid goes outside and takes a picture with his phone of the street and sends it to my buddy…That street has FOR SALE/FOR RENT signs on every house. EVERY HOUSE!!! The kid tells him he doesn’t want to house anymore unless he can rent it for $1200/ month. My buddy calls his realtor and the realtor confirms EVERYTHING the kid has said!!!
I live South Fl and do not recommend buying unless you really feel your tired of renting. If you plan to buy, look at only REO’s … Get a realtor that deals in REOs only and put all offers in at 40-50% of the appraisal value. There are so many down here now and some banks are willing to give them away.
But you need to remember, taxes and insurance will cost so much renting becomes cheaper. In most parts of broward and palm bch, taxes are now 1.5% of purchase price which is a nice drop, but ins still sucks and with state farm pulling out of the state, that meand Citzen will be picking up more policies and flipping them to the 2 very private companies that charge even more than Citizens. There is no more Poe INs in Miami to cover some policies so your screwed.
Say you find a home for $200K, your looking at about $1500 for a fixed 30yr mortgage with good credit, 3500 for taxes and 3500 for insurance.
So that is about $2200. The same home can be rented for $1300 a month probably. Tahe the $900 a month and place it in a high yeild investment at 8-12%. Take the 5% downpayment you will need along with the $900 a month and in 3yrs when market is better (we think) you will haveover $50K in the bank.
Thanks, you are confirming what I was thinking. I have never rented until now and just got killed in my income tax but if I consider all factors the payment I had to send uncle sam is better than losing 30-40K. Also, we really only plan to be in Florida for another 2-3 years while my husband finishes his MBA. I drive myself crazy because I think “what if” we don’t leave" (I only want to leave because of the cost of living, ins, taxes, etc… even though I really enjoy the weather and the fun things to do in the area) and then I will be renting forever. But you all confirmed what I was thinking. I know we don’t have a crystal ball but things are definately not looking good down here. I will take everyone’s advice and will wait and if I see something I will lowball, lowball.
I’m going to drag an old dishwasher into the street an beat on it with a 2X4 while screaming at the top of my lungs to “scare off” the recession. That should ensure my commercial properties stay fully rented. :biggrin
Look at it this way, if you buy it for half of what it’s worth (.50 cents on the dollar), and the value still continues to plummet; it is likely that it will not plummet another 50%. And I would say in 2-3 years you will have some equity when you sell.