Melody, FYI, here are some comments from a builder I know of in gulf coast of FL that is actively building homes right now, on why he thinks prices are staying elevated. This guy has been in real estate 50 yrs, and building and investing for 40+ years. He also correctly and vociferously went on record in 2005 calling the peak and 2008 bust back then.
-thinks prices are only down 3% from peak right now
-35-40% of buyers in Florida pay cash
-Florida is the number one state in the nation for wealth migration (taxes, retirees, politics, etc...)
-Many of the buyers are migrating from more expensive states and have lots of equity from home sales
-people want new and he builds new - no competition from existing sales b/c homeowners won't sell if have <4% fixed rates
-tons of REO's hitting the MLS in 2008 are what really caused the prices to crater - when REO's and short sales dominate the MLS listings - this builder doesn't think this happens this time b/c existing homeowners PITI is less than what rent would be, huge equity positions for buyers who have even only been in house 2-3 yrs, FL is judicial foreclosure state meaning would take years for properties to go back to banks and hit MLS even if there was a rash of foreclosures - he says no danger of glut of homes showing up next 12 mos
Thank you for the intel! I too also agree that the mortgages will not likely foreclose and the ones that do will take a long time (a year from now- but not a major inventory source). Where I diverge with him is I'm seeing a lot of stress in the all-cash buyers. That was leveraged cash in many cases. And, just like this builder a lot of people started to think that we were all richer than we really were. For those, foreclosures will happen, but will often be a legal battle as they do not pay taxes and walk away from the properties. But, of course, we will see how it all plays out. The other thing I'm seeing is the amount of fraud is bigger than list time. You've got people re-selling properties in the family for much higher prices to grab cash and cover other obligations. I think if he saw what I've seen on all these tours he might have a different take because the speculation is just so rampant. But, of course, my two cents :). Thank you!
Thanks Melody for your response. I think he did a lot of research and is building what features people want too. 3 car garages, pool, hurricane windows, etc.... But yeah, I think he has been surprised himself how well prices have held up. Apparently in terms of FL being #1 place for wealth migration in America, its higher than the sum of the next 9 states after it.
I personally do not know where prices & inventory go. I tend to side with the bearish case on the economy, RE, stocks. But I self admittingly am perma-bear trying to get into recovery :). After being wrong about the economy, stock market, and real estate market for about 13 years now, I'm pretty beat up! :) I think I personally had a lot of recency bias after the GFC that did not serve me well the last 14 years. And I've been conservative with my investments and didn't participate much in this massvive 14 year boom in real estate and stocks. But the downturn has to FINALLY come soon doesn't it?!! :)
Haha. Yes - I was the last person in this camp to think we will see something similar to the GFC. We all promised it would never happen again. But when I went to cities like Tampa, Jacksonville, Orlando and now Charlotte County and Fort Myer, I realized most people didn't learn a thing. Sounds like your builder friend is one of the good ones. But, I believe we may finally have to pay the piper. But who's to say I'm right? :)
Condominiums in Florida turned 60 this year. The first condominium act was passed in 1963. There are 45,000+ units in Pinellas County (Clearwater, St. Pete) alone that are older than 30 years with more than 80 units. salt water and air have been attacking all these beachfront condos for 30, 40, 50 plus years, and many don't keep reserves. Due to the entirely forseeable Champlain Towers disaster, the legislature has mandated inspections of condos older than as little as 25 years. I have seen analysis that statewide condo owner will spend $150-$300 billion on repairs. many will terminate and be repurposed as apartments, imploded and built on, or just so they will be tenants in common because they can't afford to be condos. Fun times coming/here!
In your honor, I'm staying in a ghost condo right now :). As I look around me at night I see maybe 3 or 4 apartments lit up in the condos. My sense is that the foreign owners will probably walk away not wanting to deal with it and then the fixed income won't be able to afford it.
That article on Int'l buying being way down that Squawk Box did was a signal in my opinion.
But, hoping to explore this weekend and talk to some locals on the issue.
I lived through hurricanes and the aftermath in FL and know what a mess the insurance situation is. You are correct that this won't be limited to FL. I think a lot of people that moved to "low cost" states like FL and TX are finding out that the all in costs aren't that low. Probably still cheaper than CA, but low cost states with better weather will be seeing the migration move their way. As more cities regulate or ban STR that will be another push towards the exits for many owners. FL, TX, AZ will be challenging markets.
I really appreciate your well written and well researched posts. Keep up the great work.
Thank you so much! I agree still cheaper than CA, but besides that it's quickly becoming one of the most expensive areas.....even car insurance is the most expensive in the nation. Thank you so much for reading and the kind words.
Melody, FYI, here are some comments from a builder I know of in gulf coast of FL that is actively building homes right now, on why he thinks prices are staying elevated. This guy has been in real estate 50 yrs, and building and investing for 40+ years. He also correctly and vociferously went on record in 2005 calling the peak and 2008 bust back then.
-thinks prices are only down 3% from peak right now
-35-40% of buyers in Florida pay cash
-Florida is the number one state in the nation for wealth migration (taxes, retirees, politics, etc...)
-Many of the buyers are migrating from more expensive states and have lots of equity from home sales
-people want new and he builds new - no competition from existing sales b/c homeowners won't sell if have <4% fixed rates
-tons of REO's hitting the MLS in 2008 are what really caused the prices to crater - when REO's and short sales dominate the MLS listings - this builder doesn't think this happens this time b/c existing homeowners PITI is less than what rent would be, huge equity positions for buyers who have even only been in house 2-3 yrs, FL is judicial foreclosure state meaning would take years for properties to go back to banks and hit MLS even if there was a rash of foreclosures - he says no danger of glut of homes showing up next 12 mos
Thank you for the intel! I too also agree that the mortgages will not likely foreclose and the ones that do will take a long time (a year from now- but not a major inventory source). Where I diverge with him is I'm seeing a lot of stress in the all-cash buyers. That was leveraged cash in many cases. And, just like this builder a lot of people started to think that we were all richer than we really were. For those, foreclosures will happen, but will often be a legal battle as they do not pay taxes and walk away from the properties. But, of course, we will see how it all plays out. The other thing I'm seeing is the amount of fraud is bigger than list time. You've got people re-selling properties in the family for much higher prices to grab cash and cover other obligations. I think if he saw what I've seen on all these tours he might have a different take because the speculation is just so rampant. But, of course, my two cents :). Thank you!
Thanks Melody for your response. I think he did a lot of research and is building what features people want too. 3 car garages, pool, hurricane windows, etc.... But yeah, I think he has been surprised himself how well prices have held up. Apparently in terms of FL being #1 place for wealth migration in America, its higher than the sum of the next 9 states after it.
I personally do not know where prices & inventory go. I tend to side with the bearish case on the economy, RE, stocks. But I self admittingly am perma-bear trying to get into recovery :). After being wrong about the economy, stock market, and real estate market for about 13 years now, I'm pretty beat up! :) I think I personally had a lot of recency bias after the GFC that did not serve me well the last 14 years. And I've been conservative with my investments and didn't participate much in this massvive 14 year boom in real estate and stocks. But the downturn has to FINALLY come soon doesn't it?!! :)
Haha. Yes - I was the last person in this camp to think we will see something similar to the GFC. We all promised it would never happen again. But when I went to cities like Tampa, Jacksonville, Orlando and now Charlotte County and Fort Myer, I realized most people didn't learn a thing. Sounds like your builder friend is one of the good ones. But, I believe we may finally have to pay the piper. But who's to say I'm right? :)
Condominiums in Florida turned 60 this year. The first condominium act was passed in 1963. There are 45,000+ units in Pinellas County (Clearwater, St. Pete) alone that are older than 30 years with more than 80 units. salt water and air have been attacking all these beachfront condos for 30, 40, 50 plus years, and many don't keep reserves. Due to the entirely forseeable Champlain Towers disaster, the legislature has mandated inspections of condos older than as little as 25 years. I have seen analysis that statewide condo owner will spend $150-$300 billion on repairs. many will terminate and be repurposed as apartments, imploded and built on, or just so they will be tenants in common because they can't afford to be condos. Fun times coming/here!
In your honor, I'm staying in a ghost condo right now :). As I look around me at night I see maybe 3 or 4 apartments lit up in the condos. My sense is that the foreign owners will probably walk away not wanting to deal with it and then the fixed income won't be able to afford it.
That article on Int'l buying being way down that Squawk Box did was a signal in my opinion.
But, hoping to explore this weekend and talk to some locals on the issue.
Don't forget that our legislature, in its infinite wisdom, passed laws that prohibit nationals from the PRC to buy property in Florida. A violation of Federal law? Who cares! Let's make America Florida! https://apnews.com/article/florida-china-government-politics-real-estate-34a5589d7a8453c891dff27449eda58a
Oh yes and house poor people can't pay $150k assessments on condos 50 years old that were bought for $60k in nominal dollars....
THANK YOU SO MUCH. I did not know this at all.
I lived through hurricanes and the aftermath in FL and know what a mess the insurance situation is. You are correct that this won't be limited to FL. I think a lot of people that moved to "low cost" states like FL and TX are finding out that the all in costs aren't that low. Probably still cheaper than CA, but low cost states with better weather will be seeing the migration move their way. As more cities regulate or ban STR that will be another push towards the exits for many owners. FL, TX, AZ will be challenging markets.
I really appreciate your well written and well researched posts. Keep up the great work.
Thank you so much! I agree still cheaper than CA, but besides that it's quickly becoming one of the most expensive areas.....even car insurance is the most expensive in the nation. Thank you so much for reading and the kind words.
If homeowners can barely find and afford insurance in Florida, how do rental owners do it?
Even if a rental has steady occupancy, it may still have trouble getting insurance.
Completely agree.
Costa Mesa? Hmmm.
Bigish week-over-week jump (less than 150 properties so swings can be bigger), but # compared to average was only a .94% increase.
Miami is a freak show. I won't go there. I can't imagine why people are buying million+ dollar homes there unless it's fraud money.