THE BUBBLE HAS BURSTED!

General Real Estate Investing
41

Did anyone else notice that the Price Waterhouse Coopers reports are 6 years old!! (from 1st Quarter 2000, see links below) Phoenix, San Jose, Tampa and several other cities are displayed on the downhill stretch. Since 2000, Phoenix area housing has gone up some 70-80%, including our 45%+ spike in 2005. San Jose & Tampa have also done well in the 2000-2005 time too. Not shabby for being on the downhill slide…

The Phoenix market has since slowed down and has transitioned to where Buyers & Sellers are on a fairly level playing field, which is good for everyone.

These reports just emphasizes to me to always cross check info from a variety of sources and backgrounds and to understand where & when they are coming from. You need to also know the basic economics of your area; job growth, population growth, retirements, tax laws, etc. With this tool box, you will be way ahead of most people & investors.

I am a licensed real estate agent in Arizona, and yes, I am bullish on this market. I own my own home and invest here as well.

Have a wonderful day!
Eric Johnson

[i]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. [/i]

42

There’s another article I wish I could find entitled “The September 11th Effect” which basically had data to back up the hypothesis that all of Europe basically feels that their governments lack the will to confront global islamofascsism and are thus looking to the United States as a place to retire vs. traditional hot spots like the south of France (already jokingly referred to as “Francelamabad” by Parisians who were there for the riots this year), Spain, Greece, and Italy.

Florida is already the number ONE retirement destination AND the number ONE vacation destination on planet earth-- and leads the pack in the UK, and US. 1,091 people move to Florida every day. That’s geniune demand. There might be speculators in the mix, but if you’re going to speculate-- betting on the peninsula where 1,091 people move every single day is not quite “betting it all on red”.

43

In Colorado there are a lot of foreclosures. That has driven down the retail prices. Our high appreciation was from 1995-2001. Flat since then…Becoming a buyers market.

44

Out of curiousity- where have you seen retail prices actually fall? That is-- a property that has current sold comps lower than the previous sold comps for that same property? I’ve seen new asking prices-- especially for new construction come down-- but I have yet to see a property actually sell for less than it had previously sold for in my market at least.

45

Not to be a simple-minded, knee-jerk contrarian-- but part of the reason I’m not sold on a major RE crash is that it’s in the paper. When is news ever accurate? :wink:

46

If it’s in the paper, than it popped six months ago, seems about right.

47

Yes, well the sticky part of that is there’s no data to back it up. So, yeah- I guess that is right for the news.

48

Every article I read in the Baltimore sun after the new data comes out for each month shows increasing inventory, slowing sales, and price plateauing…

… that seems like backup data to me?
that is also one of the things holding me back from purchasing property in particular areas…

49

In Michigan, in Oakland and Macomb County condos are selling for about 8-11% less than what people paid just 3 years ago.

50

Just got off the phone with Eric Nurni, a top realtor in Hawaii I have worked with and he said the prices are steady on some, and falling on others, but days on the market are MUCH longer accross the board.

Also all the New Construction is comming with a lot of builder incentives to help move the product.

What are you hearing from around the country about this?

51

This sounds oddly familiar. My estate planner (a registered broker/dealer) also told me the same thing last year. He does not make a commission on my real estate deals, but does make a commission on any stock market investments he sells me.

Now, he was also trying to tell me that my asset allocation was too heavily weighted in real estate. While it is true, I don’t see it as a bad thing. After all, I have only seen a total return of 25% in the stock market over the last ten years (does this work out to 2.5% per year?). My real estate holdings have quintupled in value during the same time.

This broker was trying to warn me that a market correction could steal as much as 20% of the current value of my real estate. I say, so what? A market correction will not affect my cash flow – cash flow that has been steadily increasing over the past ten years. Even a 20% correction after a 400% increase still leaves me well ahead, so why should I be so concerned.

52

MY LOGIC IS SIMPLE and two fold! don’t put a dime anywhere a rapid increase has recently occured for 1, and 2 go for long term strategy, keep your money some where U understand and U control… Its true commodities are definatley rising (especially oil) bUT if you need a broker your not an expert, so you put your money in someone elses hands, also who will “rent out” your stock almost if not entirely paying for ur investment???

Feed on those who are panicing in areas that did burst and pick up a discount! @ least 15% cuz a lot of places are headed for a 10 % correction and even then with inflation ur level…

SO i would say look where the bubble never hit, find out why and you’ll not only find cash positive rentals (eventually) but u may find a mini bubble as the equity money trickles in from the coasts!!![ simply follow the money from California. TO Nevada. TO Arizona. TO Utah. TO Colorado to Idaho… THEN my guess is texas next, san antone to be specific based on numerous factors…
including good weather (not natural disasters at leat :slight_smile: and a stable economy, decent rent and low house prices as much as 50% less than tucson!.. the only downside is that taxes are high, which I heard may change…

ANY ONE ELSE BELIEVE IN THE REVERSE GOLD RUSH??

53

Real Estate Bubble theory is largely a creation of Wall Street. Interest rates are at a four year high, but still at historic lows. Economic fundamentals are very strong and as long as the economy is growing there’s really nothing to fear.

In places where “there is no bubble” real estate is in trouble. You can’t overcome the migratory fact that people are fleeing the frozen north for places sunny. The caveat is places like CA where prices are unsustained by economic fundamentals, and where taxes are high, regulations are onerous-- you’re going to see those places drop as people head out to Texas, Arizona, Nevada, etc.

You just have to follow the data. You can’t fight the tide, or a trend.

54

Some of you don’t remember “Reganomics” in the 80’s, in fact most people today can’t even fathom 18.5% interest rates on a 30 yr mortgage.

55

I actually give the Fed, and Reagan CREDIT for doing what needed to be done and taking the heat.

They were after all dealing with the legacy of the disasterous policies mainly of Nixon who imposed wage and price freezes because inflation had reached the “unacceptable level of 4.5%”

To say nothing of the “maylaise” of the Carter administration and the 8th wonder of the world-- Carter’s economic miracle: “Stagflation”.

It was not 1981, but 1979 when the CPI rose 13% and the inflation rate skyrocketed to 18%. The prime interest rate peaked in Reagan’s inaguaral year, 1981 at 19%-- which is hardly attributable to “Reaganomics”, or its centerpiece of tax and spending cuts which did not take effect until 1982. By the end of Reagan’s Presidency in 1987:

Interest rates fell from 19% to 8%

18 million new jobs had been created

GNP grew $2.5 Trillion

But overall, you’re right. I have to laugh at the recent panic over “inflation” and “rising interest rates”. What short memories we all have.

56

I will add, too-- Good for the new Fed Chairman. Rate hikes are welcome now. If it causes short-term pain-- so be it. I credit Paul Volker and Jimmy Carter for two things-- Volker for having the vision to crank interest rates to tame inflation. People that don’t understand inflation don’t get that it’s worse-- much worse-- than high interest rates. It errodes everything you’ve worked for. It’s no different than if you build a financial empire and thieves come in and zero the whole thing out. Inflation is intolerable.

I credit Carter for much of the deregulation that Reagan gets credit for. Especially getting rid of fuel rationing. It was bad policy (of course, it was his policy until he was up for re-election, but still…)

57

WHOA!

I never meant to turn this into a political debate…And frankly I am terrified by your ability to throw out SOOO many statistics. It was not my intention to bash Reagan. I was actually making reference to the high interest rates. You should know that my understanding of the economics of the time were limited, I was young. My mother happened to be a Real estate agent at the time and ALL I heard was 18.5%. I have been in the Real Estate business ALL my life in one form or another. By virtue of the endeavors of my parents I have literally been raised in the business.

Biff

PS. I happen to think Reagan was a great man.

58

Sorry. Economics geek-- and definitely a free-market guy, too. Reagan had plenty of flaws. I’m not an apologist for Reagan, just a stickler for data. I do a TON of research in my investing career-- which is precisely why earlier in this thread I said the whole discussion about a “bubble” is silly to start with.

In fact, your post also brings to the forefront another fact most people aren’t thinking about-- why is it that people were making money in real estate in the 1970’s and early 1980’s. 1987 - 1992 wasn’t such a great period-- and interest rates had fallen from historic highs.

So the immediate assumptions that a) Interest rates are “high” and b) that high interest rates automatically mean a “buyer’s market” are flawed-- nevermind the local, local, local nature of real estate markets, and the relative inefficiencies of “trading” real estate (the long, expensive, and complex sales cycle)

I didn’t mean to start a political debate, either.

59

I have read the information in this thread and all I have to say, is that the so-called bubble has burst already.

Some areas that are hot, are still doing fine. Good areas are exempt from this phenomenon.

My metro area is strange. Some parts are good, but some are completely flooded with property for sale and not a buyer in sight.

Developers around the country have started canceling projects. Plans were scrapped last week for a 4, 400-unit Las Vegas condo resort complex that had been backed by actor George Clooney and nightclub owner Rande Gerber.

With land prices falling in some areas, Hovnanian has walked away from about $5.6 million of deposits on land parcels it had options to buy. Unsold new homes are at the highest level in history.

What anyone “feels” about whats going on is irrelevent.

The bottom line is the basic economic concept of supply and demand applies whether you feel it or not. As for the NAR, they are a lobbyist group. This means that the reports they issue are spun to make everyone believe that real estate is where its at, and getting more people to become agents so they can collect more membership dues, regardless of whats really going on.

I never bought into that whole doom-n-gloom hype about how we’ll all be screwed when the big bubble bursts. Things are going just as I suspected they would. If you are in an exempt area, good for you.

If not, you know what I am talking about.

The old motto “buy low, sell high” ought encourage people to start thinking about outside the US.

IT ISN’T WISE TO MAKE A HABIT OUT OF “BUYING HIGH AND SELLING HIGHTER”

After all the bandwagon speculators go back to what they were doing before, or find another bandwagon, the market will pick up again - but it won’t be what it was.

Want to debate? Lets hear it! :wink:

60

…in addition to being inflation hawks (though I do think they might be a tad too worried at present), it’s also good if interest rate hikes shake the speculators out of the market, and spook the get rich quick crowd.