Keith
How is the market for fix and flips in New Orleans? I see that you are from the Louisiana area. It would be nice to go down south for a winter?
NDI
<<How is the market for fix and flips in New Orleans? I see that you are from the Louisiana area. It would be nice to go down south for a winter? >>
I have no idea…I’m in NW Louisiana, about as far away from New Orelans as I can be and still be in the state. It’s about almost 6 hours to NOLA from here!
Come on down, the weather’s great and REI ain’t so bad either!
Keith
“Average time on market out there is 3 months or less,”
Competitively priced homes are selling in a matter of days w/multiple offers here in the Pacific Northwest.
Double digit appreciation is pretty much a foregone conclusion for the next couple years.
-Infowell
Long Island NY Is tricky. If your price is off by a few grand your home is sitting unshown.
There seems to be a disconnect between buyers and sellers.
Sellers are reluctant to come down and buyers are sitting around waiting for 1999 stock market like corrections in Real Estate. Not going to happen IMHO. There may be a slight pullback but this is certainly not our parents RE market.
Demographics and a Hands on approach to markets by the Fed have changed the game to some extent.
Me… I am under contract to buy my second Rental Home in a south shore community on Long Island. The drive from the Home to the Marina which launches into The Great South Bay and atlantic Ocean is exactly 2 minutes and 15 seconds…stop signs included!! PP is $210,000 with a 5k pump for CC.
Bets of Luck To All
They taught you how to predict all that stuff in stockbroker school? Cool.
The only place(s) it matters whether the bubble has bursted are the places where you either own or plan to buy real estate!
I believe there is money to be made in real estate at every stage of the cycle. It is your approach or strategy that must change with the times. I don’t like to think of Real Estate as a bubble which has bursted. - The image implies that Real Estate has fallen to pieces and might be irretrievably broken. Instead, I like to think of a cycle that takes 10-12 years to get back to the same station. Accordingly,
I would suggest that you take a look at two resources for some excellent information.
First of all, participate in a teleseminar or in-person seminar with Dave Lindahl - the guru of apartment house ownership. He provides an excellent description of the characteristics of the 4 stages of the real estate cycle. If you need something more visual, a document you can print off the internet, PriceWaterhouseCoopers prepared a Strategic Real Estate Analysis that illustrates the cycle. Here is a link to the report:
www.pwcreval.com/value_cycles/cycle_methodology.pdf
You may also find the following link interesting. It is also by PWC and shows various cities and what stage of the cycle the are in: www.pwcreval.com/survey/cyclesspecial.pdf
Finally, I want to affirm that I am in no way associated with PriceWaterhouse. - I merely found their reports to support this concept.
Vicky, yes I agree with your statement. This is why I was wondering what is going on outside my backyard.
I am a different type of investor who has chosen to invest in states outside of my own. I live in PA and have properties are far away as Hawaii, to Florida. I like the “hands off” style of investing the best so far out of what I have tried to date.
I have one beach house in Atlantic Beach NC, (Older fixer that I fixed up that is a 3/2/1 on 1/4 acre, 10 house from ocean and 10 from the sound) that 6 months ago a local realtor did a CMA on it and said she wanted to list in for $399K and should get close to the asking price in 30 - 60 days.
At that time I did not want to sell it, but about 2 weeks ago I decided to put in on the market so I could do a 1031 exchange for a Clearwater Beach Florida property. She did a CMA again and listed it for only $325K and almost a month later no serious offers on it? Other properties much nicer for under $500K are not selling either in 28512 zip code area?
She says she feels that “Maybe we have overpriced the beach”. I know this is only one small example (a needle in a haystack) so this is why I was asking whats going on in your neck of the woods.
I actually sold a property I owned in Kona Hawaii, and wanted to invest the profits into some other areas?
With the 'Market correction" looming, I am trying to locate a few good investment areas, and perhaps my strategy should change?
What are you doing to change your stategy today?
Thank you are for your valuable insight. 
Thought I would chime in here from S FL (Palm Beach County).
We are definitely in a correction period here. The market is saturated where only a year ago, most homes were gone within days, if not hours. Still…the median home price is around $400,000.
Even though prices are “correcting,” the prices here are still out of reach for most buyers.
On the upside, though, for some investors, a buyers market is perfect for picking up preforeclosures due to those that took on more than they could handle when they took out interest only or planned to flip. Probably starting to be a decent market for investing in these kinds of problems.
Response removed by Infowell - posts are being altered by Moderator
The real wealth is made in buying and holding real estate for cashflow and long term appreciation.
I mean, isn’t financial freedom what we’re really after? Real estate is merely the vehicle. If your idea of investing is buy, wait for it to “go up”, and sell-- you’re basically f***ed anyway. You have a loser’s lottery mentality and are not, and may never be an investor.
Find me a property that has fallen below it’s retail value of five years ago, and will stay that way for the next decade. It’s not going to happen.
When you see that prices have retreated, what do you mean by “prices”? Are you talking about land, single family homes, commercial, condos, or what? Has the price been dragged down by a particular development, or region? For instance, prices in “Michigan” have retreated-- but what that really mean is that Detroit is in freefall. Yet, statewide-- and even some places in Detroit- you’re still seeing appreciation. Do you mean price per square foot of living space? In Chicago, I’ve seen neighborhood where the average price per total unit has come back, but the price per square foot actually rose. Why? Because with construction costs rising, smaller units, but more of them has been the strategy.
Then there are the more convoluted reports of “housing prices retreating 20%” where what it really means is they haven’t risen as fast as in previous years, or as fast as some prediction or other-- but they still rose. There were two reports like this recently on the Phoenix area.
Don’t discount strong economic indicators (You wouldn’t know it reading political gossip rags like the New York Times, but we’re actually in the middle of the strongest economy in human history-- literally), and supply and demand. Take Florida for example where ABC just ran a panic piece on 20/20-- not counting second homes, and vacation rentals-- 1,092 people a DAY move to Florida (make it their residence). They gotta live somewhere, folks.
I could go on, but I think my strongest point would be that it’s been four years now since I first heard the “bubble” theory-- and aside from a few investors who made stupid decisions and now want to blame it on a “bubble” and some newspaper articles marinated in ignorace-- all in all-- there’s not the slightest sign of anything resembling a “bubble”, and there’s absolutely NO sign of anything on the order of a “crash” in real estate on the horizon. That being said, there are isolated examples in the US of real estate markets that are falling or flat. As investors, it’s our job to be more than a one trick pony.
If you’re investing in Detroit and still trying to make the sandwich lease option strategy work-- and you can’t figure out why you can’t L/O them in the first place, and those you manage to will never excercise because the properties simply will not appraise out for 10% more than you contracted for…may I suggest you learn to acquire them for cash and/or “subject to” and or get seller financing put seller financing on them yourself? Might I suggest section 8 and/or multifamily properties? Even diversification to other markets. Learn to do SOMETHING in every market.
That way instead of hitting the panic button, or even getting overly exhuberant-- you can remain level headed and profitable in every situation.
Response removed - posts are been altered by Moderator
infowell,
“The real wealth is made in buying and holding real estate” is a statement of fact, not an opening argument. Nobody has created great wealth flipping properties. Though there are many who have earned a lot of money that way, unless that money is invested-- it’s just a job. Pay for performance. It’s still just earned income.
By definition you can’t have a real estate fortune unless you have real estate.
An investor knows how to get cashflow in ANY market. Understand that you have made a choice to place that limitation on yourself. If I acquire a property at full market value for $485K in Naperville, IL-- can I make it cashflow? Can you state categorically whether or not I “bought it right”? Not if you can’t see your way through a deal in more than one dimension.
Depends on HOW. If the property is owned free and clear and I give the owner $100K, put the rest on a note for $385K at 4% interest-only with payments starting in 120 days-- can I not sell that same property for $500K to $520K by offering TERMS myself? For example, I could get $50K down and $470K on a note at 8% (or higher in this climate).
There. My full market value $485K, single family home purchase now cashflows just fine.
Where’d I get the $100K down? Maybe I have a private equity partner; maybe I raised it in a Limited Partnership; or perhaps I got cashed out of another note.
If the Naperville market tanks-- do I care? Hell no. I don’t have institutional financing (I am the maker of the note, so I don’t give myself a “due on sale” clause-- though, I may give my buyer one…)
Paul, you threw out a line and got some response. Your bold, and sometimes contradictory statements, are laughable. I won’t bother to go point by point.
What’s annoying is this notion of a real estate bubble that has been thrown out by former day traders who never saw the NASDAQ bubble coming, still don’t really know what happened or what a real bubble is, and who for the last five years have wanted to sound like geniuses by “predicting” a real estate crash-- and then every time some market or other hiccups, they start shreiking about “this is it”.
There are isolated bubble markets. There are still opportunities in those markets, and there always will be. Just because someone had an exit strategy that amounted to flip it in three days for $30K more than they paid-- doesn’t mean there’s a bubble. It means there’s an idiot. Probably several.
Here’s a “bubble” article from 2003–
http://www.today.ucla.edu/2003/030624my_mind.html
Here’s another one from 2003–
http://www.ksg.harvard.edu/news/opeds/2003/healey_investment_barrons_111703.htm
Bubble nearing the end…(from 2003)
http://blog.mises.org/archives/000769.asp
2004-- http://www.sfgate.com/cgi-bin/article.cgi?file=/gate/archive/2004/07/13/carollloyd.DTL
2005-- http://www.forbes.com/investmentnewsletters/2005/11/22/reits-slatin-in_ps_1122soapbox_inl.html
I could go on and on-- and I can go back to 2001 / 2002.
The problem with debating the “real estate bubble” is that there is no definition of exactly what it is. People try to debate an undefined term, so the debate is meaningless.
If some 25 year old journalist who works for a newspaper or magazine wants to write an article on the impending 50% crash in real estate values, he can find an expert to support that scenario. If, instead, he wants to write an article about the impending 100% runup in real estate prices over the next 5 years, I’m sure he can find that guy too.
But, back to the subject of the thread, “bubble” is nothing but a buzz word. It’s a boogieman for people who need to be afraid of something. If there is to be any intelligent discussion, then Real Estate Bubble must be defined.
Response removed by Infowell - posts are being altered by Moderator
I feel like we should hug or something. That’s exactly right on. The biggest problem is that there’s no definition. A little background-- on me, I’ve got a background in financial services (mutual fund industry), and economics-- still a passion for me.
The rules DO apply to real estate, but in different ways. The main issue (REITs, and publicly traded industry stocks notwithstanding) is liquidity (or a lack thereof).
A piece of property isn’t an easy thing to liquidate in a hurry. If ten thousand homeowners in my market suddenly decide to sell-- literally NOTHING will have happened. If, on the other hand a few million people decide to dump 1,000 shares of Google each-- that’s it for the value of Google stock.
Back in my neighborhood 10,000 phones are ringing-- and maybe for sale signs have started to go up.
Two weeks later, Google could be fighting for its financial life-- but my property value hasn’t changed on iota until one very important thing happens: The first several houses sell. This could happen in weeks (at the soonest).
Sooner or later, the supply will drive price down-- but a funny thing happens when the prices start to fall…property owners start taking their for sale signs down and settle in for awhile.
With the exception of imminent domain pathways, and Love Canal-- they’re going to be just fine.
Now, the economic theory of the bubble is that lower interest rates have drawn in speculators with easy and cheap money (very often via adjustable rate, interest-only, and even negative amortization exotic loan products) and that the demand has caused the values to rise and that sooner or later, interest rates will rise and put the squeeze on these folks at the same time that it makes the properties less attractive to the “greater fools” these speculators hoped to “flip” to.
Property values will drop precipitously and that’s when a new issue will be created for all concerned.
Lenders will take a look at the falling values of the property they’ve got on the books as security-- properties that they’ve perhaps loaned $500K on that might now be worth $400K. Add to that the fact that they’re getting 5% to 6% on their money when, in a rising interest rate environment they might be able to get 8% to 9% on-- two big incentives to foreclose.
In the “sky is falling” bubble theory-- values drop, credit tightens, and mass-foreclosures ensue.
I see NONE of that happening. Not even in some of the most overheated (and there are some) markets in the country.
Hello all,
This is a good link that gives "A"definition of “Real Estate Bubble” ???
Thanks for the link, Wallace. Even that definition is so ill-defined to be meaningless from a real estate investor’s point of view. Paraphrasing: “RE prices may decrease or may stay flat for several years. Some areas may see large price decreases.” Well which is it?
Flattening or slightly decreasing prices don’t worry me at all. If that is the bubble, then…yawn. I am conservative enough in evaluating properties that this possibility is built-in. I am not insensitive to the effects that this could have on our economy and the people who make it up, but it doesn’t hurt me.
A freefall of say 50% in prices, and that’s is more like what the term “bubble” means to me…well that will be a bit tougher.