Real Estate: Fundamentals

Quote from jem:

First off California is skewed.

Because of the tax propostion that says that your taxes do not go up while you own the home.


No one wants to sell because their taxes have been locked in at old rates. So you have a shortage of turnover, people wanting to move in for weather and jobs. And some houses being rented because people figure if they sell they can never get back in.
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The turnover may be less because of Prop 13. But they would be competing for the same supply, anyway.

Among other things, Prop 13 makes home ownership in California attractive because, quite frankly, taxation on property is a terrible reality. Taxation based on the market value of property is even worse.
 
Quote from vhehn:

can you find houses in florida in a good location for 100k? my sister lives in winter springs. she just sold a plain 1200sq ft ranch built in 1970 that she paid 85k for in 98 for 199k. she banked the money and moved into a nice newer apartment for 700 a month.
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Sure, off the top of my head. Jax, Fl. I'll have a more extensive post later.
 
Quote from Sparohok:

Not where I live.

I doubt if there is a single house for sale in the entire San Francisco Bay Area which could be purchased and rented profitably in today's market.

Martin
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California is in a bubble Period

But there are other places in America outside of California that many people seem to be ignoring. They all look to California and say "Look, America has a real estate bubble."
 
Quote from The Kin:

But there are other places in America outside of California that many people seem to be ignoring. They all look to California and say "Look, America has a real estate bubble."
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America does have a real estate bubble. It can be found in Florida, California, Nevada, Arizona, New York, etc.

Nobody is saying that every house in America is overpriced.

Martin
 
If people are reacting properly is that a bubble.

lets review -- prices rise over time
Prices of well located property go up even faster
California skews market because of Prop 13
Feds skew because of tax breaks
Cal skews more because you do not have to repay loans on less than 4 units if you property goes under water.
San Diego and other areas have an economy that attracts jobs
Cal has weather and location that attract retirment
We have a bubble of people in their biggest property buying years.

Prices go up.

Prices howevever have not gone up as much as they did say in Greeenwich from 76 -87.

The boom ends when the baby boomers stop buying property for retirement. Until they are all bought up it will continue in Florida as well.

Perhaps
 
Quote from silk:

Bottom line is prices could fall a lot. Will they and when is almost impossible to know. But can they fall a lot? YES. Will they? Don't know. Will it be a disaster for economy if they fall a lot? Yes. That is the important thing to understand.

Risk and stakes are higher than ever before.

My house could fall 25% and i would still have a profit on my purchase from just 3 years ago. But What about the guys buying houses all this year. What happens to average family if their latest purchase fell 25%. Bankruptcy and Foreclosure likely result for many.
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You are talking about an investment house, right, otherwise, if you buy a house to live in, if the price drops 25% you still pay what you paid before, so I don't see why would you go bankrupt.
 
Quote from jem:

If people are reacting properly is that a bubble.
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If people were reacting properly, how would that explain the divergence between rent and asset prices.

Martin
 
them housing numbers look like they will be strong tomm....look at $hgx and the rest of them stocks.....wow...my short went from great to oh boy.....8:30 am is going to be huge... you have PPI, housing starts and building permits.....stay tuned
 
Quote from Sparohok:

If people were reacting properly, how would that explain the divergence between rent and asset prices.

Martin
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Most people don't evaluate houses as an "investment". Instead, they evaluate them as places to live. As a place to live a house has numerous things to offer that a rental does not have. You can decorate as you choose. You can add-on, you can rehab. Etc etc. There is a value to these types of intangibles.

Then there is the idea that when you own a home you can pay it off over time. You can never pay rent off. In fact, I don't personally know of an area in the country where rents have gone down over time. They always go up.

So what you can count on is this: over time, you can own the house you buy. Over time, a rental can never be paid for, and in fact, rent will rise considerably over your life time.

No one sits down with pencil and paper to figure out what it is worth to them to not deal with a landlord, to be able to redorate when and in the manner that they choose. But it has value that no one on Wall Street or on this site ever pays any attention to. There is a gut level desire to own your own home.

But assuming no appreciation at all, over a period of time the buyer will be way ahead of the renter because of loan pay down versus inexorably rising rents.

OldTrader
 
I live in Miami beach...so i am very familiar with the condo market here......1st of all there are people whose job title is property flipper...locals who for the last 5 years have just put their name on paper and flipped property to some euro or NE'erner
(i have to admit i also have partaken in this easy money and it was probably easier then pickin internet stocks)

but now it has gotten ridiculous here..totall obscene

I beg ANYONE to send me a link of a CONDO in miami that you can rent tht will cover the payments (including Maintance, Taxes and mortgage)...just one link please


Even if you pay for an apartment in FULL you ar looking at 6% cap (MAYBE) and that does not cover maintance(about 1-2%) and taxes (2%)



Now the best part is Commercial is being priced at Residential multiples...so you have nice corners with NEGATIVE Cash FLOW with a lease on it for 15years...and when you tell the owner..but sir..there is a lease on here..how is it worth 1.2 million if you paid 100k for it 5 years ago.they will tellyou...you will be able to sell it for 2.4 million in 5 years (its obscene)....obviously people are paying it...but the lease is LOCKED IN...negative cash flow..i dont get it!!!!!!!!

if you find a AA rated tenant and get a 6.5% cap rate CASH ON CASH...you STOLE IT!!!!!!

I konw many MANY MANY people who own 7, 9 , 10 pre construction units in miami...there aer 70,000 units comin on line in the next 2 years......do me a favor...go on Monster.com or HotJobs ..and see what the salaries and the jobs that people look for here...and then look at prices of these things.....

Unless the state of NY is moving here in the next 2 years,,, the suppply along with higher rates and a weaker Euro (the latest reason for higher prices) will lead to a disaster for specs and a field day for bottom pickers ..but they should be able to have stayin power for about 7 years as the LARGEST ABSORBTION OF CONDOS in miami HISTORY is 12,000 units....remeber 70,000 online in 2-3 years

OH...also...call any real estae broker here and ask him how much 1br apts rent for in MIami ...then ask him how much they sell for......

I have friends in Cali and NY and they are saying the same thing at TODAYS prices it is almost impossilbe to get positive cash flow renting in TODAYS market...and in the real estate biz....either 2 things gotta happen

1) higher rent (doubt it cause all renters are buying and the amount of new supply is at decades highs)

2) prices gotta come down

throw in the rates, the fact that MOST people bought in last 3 yrs, and you know what happens when everyones long and there is no buyers.......

old saying..."sell when u can, not when you have to"

just my 2 c
(im not angry..i just saw real estate brokers on CNBC today in miami saying...just buy..its only goin up...and i dont like to see innocent people losing thier life savings...a la 2000)

also...very good post on CNBC about Japan in 90's and similiarity to USA today...check it out

d
 
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