Saw the bursting real estate bubble first hand visiting West Palm Beach this week...

[Dueller]

Perhaps I'm too isolated at times, but I visited some of wife's family in West Palm Beach, FL this past week. We went to visit her oldest brother and his wife. They recently purchased a rural retiremnet home out in Palm Beach county so we really didn't look at much of the upscale beach front type of properties.

They spend their summers in Greece where they own a nice home overlooking the Mediterranean Sea (she is from there). This is to be their winter home. They purchase a nice, fairly new 3BR 2 bath, 2 car garage etc on an acre and half lot. Probably 1700 sf. Nothing fancy and certainly not beach property but it had but it was quite comfortable and surronded by homes that were much larger...such as 3-4000+ sf with pools 3/4 car garages, etc.

They paid $106K for it. Records show that it last sold for $290K 3 years ago. Granted...they put another $15K or so to repair and landscape but, still. Prior owners just walked away from it and let it go into foreclosure 18 months ago.

The thing that shocked me was how many other much larger homes in the area that were obviously abandoned. One nearby was probably $450-550K and was about to come on market from banks at low $200K range.

In my area, prices are down a bit but nothing like what I saw down there.

[Crowbob]

I don't think we've even bottomed out yet. The higher end market drop is truly breathtaking but the really big numbers are yet to come. The initial RE bubble was viewed as a shock (and opportunity) but the next go 'round is going to play out as a true catastrophe. It does not appear unemployment will ever go much below 9-10% for an entire decade. The tsunami of evictions and repos haven't even begun. I hope I'm wrong.

[motion]

30 cents on the dollar sounds about right. That's where Phoenix is sitting right now. I have no first hand knowledge, but I'm guessing LV is probably about the same. Crazy.

[Dueller]

Originally Posted by motion

30 cents on the dollar sounds about right. That's where Phoenix is sitting right now. I have no first hand knowledge, but I'm guessing LV is probably about the same. Crazy.

I'm not smart enough to be an economist, but what shocks me is how low our housing costs were pre-bubble burst relative to european industrialized areas. My bil/sil paid cash out of wife's money since the euro is so strong. They were tickled.

[motion]

Yes, we do have very cheap housing here. I hear stories about northern Europe and Australia. Crazy prices. I don't know how they buy houses AND pay 60 cents on the dollar taxes. And how the heck to they buy Ferraris? Our 200K Ferraris cost them 500K. Poor blokes.

[Christien]

That's just spectacular, and not in a good way. I couldn't imagine the feeling I'd have if our house were devalued to 30 c on the $. Our values around here are quite a ways up from a few years ago, and as such, we've found almost 100k "equity" in our house. If the market holds that's great for us, but if it retreats, we should still be ok, as we bought before values really started increasing. But the thought of selling now at a high market and buying a place like that in Florida for a half or even a third of what our house is worth right now is definitely tempting. Probably a good thing this thread didn't come up during a snowstorm a few weeks ago

[Dottore]

And then there's Vancouver.

We've been waiting to buy into an apartment that we really like for some time. Our realtor rang us yesterday to say a unit had just come on the market. He sent us all the details. We know the building well. We love the unit, and we told him to buy it for us. Full asking price. Clean offer. etc etc.

Today he rang us back to say that the owners got 10 offers on the day it was listed. Five of these, like ours, were for the full asking price. Five others were over the asking, with the highest $100K over the asking price. Needless to say they took the high offer.

Crazy sellers market here. Higher than its ever been.

Driving around the US (as we are) we keep seeing ridiculous buying opportunities. Seems to me a man with a bit of capital in your fine country could set himself up for life in these times.

[motion]

Still takes balls... guys thought they had them, but wait, maybe they don't now. Not much to work with.

[Dueller]

Originally Posted by Dottore

And then there's Vancouver.

We've been waiting to buy into an apartment that we really like for some time. Our realtor rang us yesterday to say a unit had just come on the market. He sent us all the details. We know the building well. We love the unit, and we told him to buy it for us. Full asking price. Clean offer. etc etc.

Today he rang us back to say that the owners got 10 offers on the day it was listed. Five of these, like ours, were for the full asking price. Five others were over the asking, with the highest $100K over the asking price. Needless to say they took the high offer.

Crazy sellers market here. Higher than its ever been.

Driving around the US (as we are) we keep seeing ridiculous buying opportunities. Seems to me a man with a bit of capital in your fine country could set himself up for life in these times.

It sorta reminds me of how we looked at opportunities in central and south america just a decade or two ago. My wife and I are looking at modestly priced second homes near coastal areas as a result with the thoughts of having a weekend getaway that will be a place to retire.. Just don't know what to do at this point.

BTW...where are you in the US?

[Super_Dave_D]

Welcome to Florida - I would say that every 10 houses in my neighborhood is vacant or foreclosed. We are talking a normal neighborhood of 2k sf houses.

[Dottore]

Originally Posted by Dueller

BTW...where are you in the US?

California. Some amazing deals (we thought) in Palm Springs and on the SoCal coast. Also some friends showed us a couple of ranch properties around Ojai that were brilliant, and way down from their peak. With the location just behind Santa Barbara—we thought these were great value.

The Carmel Valley even. Some great properties there at prices that must be at least 50% off their peak.

[Rick Lee]

We're finally closing on a short sale in a few weeks. Records show the nextdoor neighbor's house sold in 2005 for almost twice what we're getting ours for and this house is turnkey perfect. Another one we had been trying to buy as a short sale foro about six months finally got taken back by the bank. On the first day of showings I think we saw about 10 other people waiting in line to see the place. We offered about 15% over asking and didn't come close to getting it.

[Normy]

Last August I took the big step...and bought a rental condo in downtown Fort Lauderdale.

I paid $94,000. It is a 2/2, about 1100 square feet in a 5 story building with two inside courtyards. One has a pool, the other a fountain; my unit is on the fountain courtyard and does not look out on any street. The building has a fitness center that is COOL, and a secure parking garage. There are cameras everywhere, and there is a security guard at night.

The unit was a foreclosure, I bought it from the bank. It was in good shape, but had no kitchen appliances or washer/dryer. I found a near-perfect matched set of stainless steel appliances at a local thrift store for $1000 [range, refrigerator, microwave, and dishwasher], and at another thrift store I found a washer and dryer that I was able to pick up for $300 for the pair. And I paid $200 to have the AC evaporator cleaned and serviced.

I rented it to a woman who is a physician working on her residency. I rented it to her for $1600 per month, which is the going rate for a place like this in downtown Fort Lauderdale. My total cost each month? $1100. That means that $500 goes into my pocket each month! Folks, did I mention what the previous owners paid for this condo?

In 2006 it sold for $340,000~

mm HMM! But the icing on the cake is this: Three of the exact same units in the same building have sold recently, none of which was in as good a shape as mine [I know- I looked at all of them and bid on one], and they are all now going for about $130k! At that price in this building, they are typically on the market for one week~

Ah....NO. The real estate market in south Florida is NOT dead. If you do the research and pay careful attention, there is money to be made right now. Houses under $300k are hot items right now, and they turn over quick because investors like me are buying them. Anything more than $300k? Don't even think of trying- it isn't going to sell any time soon!

The long and short: "The only thing we have to fear...is fear itself!" Franklin Roosevelt

N!

[McLovin]

Originally Posted by Dottore

California. Some amazing deals (we thought) in Palm Springs and on the SoCal coast. Also some friends showed us a couple of ranch properties around Ojai that were brilliant, and way down from their peak. With the location just behind Santa Barbara—we thought these were great value.

The Carmel Valley even. Some great properties there at prices that must be at least 50% off their peak.

I bet none of them would come close to cash flowing, even with 30% down.

If a property doesn't cash flow, it isn't an investment, it's gambling.

[McLovin]

on the other hand, if you can find people to pay $1600 rent on a $94K property, that's a good investment.

[onewhippedpuppy]

Just an adjustment back to reality. The target market for an average 3 bedroom house is probably someone that can afford to pay in the low to mid $100k range. Prices make sense when house meets both the buyer's needs and income. When an average starter home is $1,000,000, then you have problems (as we've seen over the last few years).

[targa911S]

I worked in the RE division of a major newspaper in FL. I can say I saw it coming. That is just one of the reasons I got out. I bought my house there for 117K lived in it for 17 years and sold it for 389K just as the bubble was breaking. I could buy my house back now for 170K if I wanted to. Came back north to an area that had not seen the wild prices in those days and was relatively stable.I retired, paid cash for my current house and have not looked back. Plus the fact that taxes and insurance here are nothing compared to FL. I was paying 7K a year in home owners insurance in FL. Here I pay about $500. Housing may be cheap there but ownership is still expensive.

[Dottore]

Originally Posted by McLovin

If a property doesn't cash flow, it isn't an investment, it's gambling.

That of course depends on the market. In Vancouver for example the main game has always been (and still is) capital appreciation rather than cash flow.

Also high-end residential in top locations is subject to a whole other layer of global market forces. There's a lot of offshore money chasing bargains in these markets—and again cash-flow is often not the main game in these acquisitions.

[McLovin]

Originally Posted by Dottore

That of course depends on the market. In Vancouver for example the main game has always been (and still is) capital appreciation rather than cash flow.

Also high-end residential in top locations is subject to a whole other layer of global market forces. There's a lot of offshore money chasing bargains in these markets—and again cash-flow is often not the main game in these acquisitions.

AKA, "real estate never goes down?"

AKA, "Vancouver is DIFFERENT."

AKA, "Vancouver is special.'"

Maybe that works in Vancouver. I can assure you, it works nowhere in the U.S. Read the "More Bad RE News" thread for conclusive proof. Your post is exactly what was being posted in 2005, 2006, 2007 to justify the great bargain prices and in California, Nevada, Florida, etc. RE.

Fundamentals didn't matter, because there is always capital appreciation, RE always goes up, those foreigners will keep paying anything for houses, etc.

[creaturecat]

A starter home in Vancouver is $700,000 - 800,000.
A tear down? 600,000, absolute minimum.
Canadian dollar, essentially at par.