Tales from Florida
Lehigh Acres, Florida is a far cry from New York City but the apocalyptic scenerio described in The Times this weekend was enough to send shivers down the spine of even the most optimistic gotham dweller: Trinkets for $1 were an early sign of trouble. Early last year, garage sales and estate auctions became more…
Lehigh Acres, Florida is a far cry from New York City but the apocalyptic scenerio described in The Times this weekend was enough to send shivers down the spine of even the most optimistic gotham dweller:
Trinkets for $1 were an early sign of trouble. Early last year, garage sales and estate auctions became more common in Lehigh Acres as families sold what they could to survive. No one seemed interested in buying whole houses, and foreclosures soon gave way to empty homes that became magnets for crime. Thieves stole air conditioner parts for scrap. And on distant roads with only a few new homes and faded blue street signs from the ’50s — on Narcissus Boulevard, on Prospect Avenue — drug dealers moved in. In 2007 and 2008, the Lee County Sheriff’s Department shut down more than 100 houses in Lehigh Acres where marijuana was being grown. In 2008, the police confiscated nearly 3,000 plants valued at nearly $7 million.
Gulp.
“I hope you have given your wife this exact same advice BHO. I am sure she will appreciate you guys putting your lives on hold while you wait for the PERFECT time to buy.”
Actually, the advice comes from her. But we’re fortunate enough to be in a very cheap rental situation. It’s hard to give that up. Well, it WAS hard to give that up. Now rents are falling and looking more and more attractive.
***Bid half off peak comps***
“I distinctly recall after the 80’s housing bubble people said – ‘you’ll never get another bubble like that again in your lifetime’ That prediction didnt even last a decade”
Ha! Nice try. That was the first I heard of such a comment. The 80’s was froth compared to this recent bubble-of-all-bubbles. Loose lending back then didn’t even come close to what we just experienced (illegal aliens and homeless/jobless people approved for mortgages, stated income, liar loans, fugeeetttaboutit!). Take a look…
http://tinyurl.com/g9vf4
***Bid half off peak comps***
“You speak as though homes are stocks.”
Peep the category, 11217. This is a market thread.
“The people you are speaking to bought their homes primarily to live in and don’t need to worry about how much they are worth for many MANY years.”
How do you know? Do you have everbody’s balance sheet in front of you? I sense a lot of distress out there. Leverage was a way of life. It gets real nasty, real quick, when the market turns.
“Do you not understand that concept?”
I understand the concept but I disagree with it as an argument. It is my sense that an overwhelming majority of owners bought in markets/hoods they could barely afford, not where they would have 6 months to a year of solvency left over in the case of job losses. Despite repeated warnings, as recent as two years ago, few saw October’s crash coming (or even a housing crash at all).
***Bid half off peak comps***
Ok, let’s hear the explanation of that one.
1. In Econ 101 as I learned it, rising interest rates mean that the price of income producing assets goes down. Real estate is a income producing asset. Why invest in real estate, which is risky and hard work, if you can make more money holding a less risky and less work-intensive bond? Higher interest rates don’t seem very likely in the near term, but when they come, they’ll make real estate prices go DOWN, not up.
2. Rising interest rates mean that the cost of owning goes up. That makes owning more expensive relative to renting. For both reasons demand goes down. In Econ 101 as I learned it, when effective demand drops, prices go down not up.
4. More fundamentally, the basic point on Econ 101 is that markets tend to converge to the point where price equals cost, because if prices are higher than that, excess profit can be made by creating more supply. And — surprise — high prices in Brownstone Brooklyn have led to an explosion in conversions, in-fill, expansion of boundaries, etc. In Econ 101, more supply and reduced demand means prices go down, to no more than costs.
5. Macro econ is usually Econ 102, but here too DIBS needs to explain a bit. From here it looks like we are in a period of DEflation, not INflation. Credit is contracting, jobs are contracting, demand is contracting, real estate prices are dropping, rents are dropping, interest rates are at historic lows, and the government stimulus efforts are expected to replace less than 1/3 the lost demand in the private sector. Most important for upper class NY housing, Wall St pay is shrinking. Why is this a period of “rising inflation and rising interest rates”?
6. Even with inflation (which isn’t happening), rent increases (which aren’t happening), loose credit (which isn’t happening despite the government’s best efforts), further improvements in quality of life in NYC (not likely if the City’s fiscal crisis doesn’t magically self-correct) no increases in supply (i.e., no development, no expansion of acceptable borders for middle-class buyers), and no drop in demand (yeah, right) — prices still have a long way to go down.
Unless upper middle class/professional/jr banker pay suddenly jumps, BHO is an optimist. Half off peak would barely get us back to trend; markets usually overshoot.
“Get the hell out of Brownstone Brooklyn until things cool off. If I needed to, I would. Sacrifice lifestyle. Delay your gratification. The options are endless if you’re creative.”
I hope you have given your wife this exact same advice BHO. I am sure she will appreciate you guys putting your lives on hold while you wait for the PERFECT time to buy.
11217 – “The people you are speaking to bought their homes primarily to live in and don’t need to worry about how much they are worth for many MANY years.”
Maybe they do not need to worry – but they will worry and that effects the economy and housing prices overall.
The truth is no one knows…..btw I distinctly recall after the 80’s housing bubble people said – “you’ll never get another bubble like that again in your lifetime” That prediction didnt even last a decade.
Another Lively Discussion today!!!
I think BHO and DIBS should arm wrestle this one…could be a very successful performance piece…
BHO,
You speak as though homes are stocks.
The people you are speaking to bought their homes primarily to live in and don’t need to worry about how much they are worth for many MANY years.
Do you not understand that concept?
“BHO…you think that during a period of rising inflation and risinfginterest rates that real estate prices aren’t going to rise as well???”
Nope. Lending standards.
“If you’re keeping your downpayment in a savings account you aren’t earning anything on it right now.”
But “it” is still there. Neither Madoff nor you could touch it.
***Bid half off peak comps***