Agents I talk with in Key West keep saying things like the national real estate trends don't apply down here and that the market is heating up. They're very bullish. I argue prices need to come down more. What's your stance?
I don't listen to Realtors in this town any longer. During the Bubble, it was the local NAR leader who came out saying, "You'll never see a Key West House sell for less than $600,000 again.
That famous prediction pretty much notched the market top.
Other things which Realtors used to love telling Key West buying prospects during the Bubble: "Get into a Key West property while the getting is good. Key West is an island. They are not making any more land."
To which I respond, "Japan is an island. At one time the land below the Imperial Palace was priced to fantasy more than the entire island of Manhattan."
Look at Japan's cratered housing prices for the past 20 years. Look at the cratered Nikkei stock market for the past 20 years. And think about this: in the 1928 Florida Housing Crash, certain mansions on both coasts have still yet to get back to their 1928 price highs (adjusted for inflation).
The Bubble blew for more than 10 years in this country. We've only been deflating for 3 to 4. Unfortunately, the government and Wall Street are trying to reflate the same insanity, yet fewer Americans have jobs, and very imporatant: $7 Trillion in wealth has evaporated (and more losses are coming still in commercial real estate and Housing), yet Americans have only paid back $330 Billion of the DEBT owed on that wealth.
To top this off, the local NAR has been pounding the local paper with the infamous ad: "There's never been a better time to buy a home." Those same words were printed at the market top. And they have been printed for the past 3-4 years since the market top.
If you listened to Realtors from 2003-2008, your Keys home is now underwater, meaning you are upside down on your mortgage.
And here we are with rock bottom mortgage prices, and the country is still selling fewer existing homes than last year, and, we have the fewest number of new homes sold since records have been kept since 1963.
Hence, the pressure is downward on home prices because inventory, foreclosures, short sales, et al, are wreaking havoc.
You can prove this to yourself by surfing Monroe County records. Look at the majority of homes which were bought in 2004 and look at what they sold for in 2008, 2009, and this year. People lost money.
One last warning: check out this visual mls: www.keywestmls.com.
Click on the left most tab at the top of the page which says "Hot $Sheet". After you open it, click on reductions. A list of houses and condos will appear which have recently had a reduction in price. Notice anything else under the "Hot Sheet" button which is missing? Answer: there is no button to click for "Additions In Prices" or "Raised In Price".
On a macro view: Keep an eye on the Case/Shiller median home prices in the USA come this October: watch them fall. Case Schiller is a backwards looking median of the last 3 months averaged in. Two of the last three months were helped by the just ended government subsidies (tax credit) for first time homeowners.
You know what happened to car sales when cash for clunkers ended, right? Watch what happens to median prices on the Case/Schiller scale in October when those three months are averaged in with no government help selling homes.
Lastly, delinquent loans are on the upswing again now that the government programs to help homeowners has proven to be a failure.
(as my response is so long, I'll add more to this in my next comment)
Okay, I'll add one more: almost 900 banks are on the "danger list" in the USA right now. The FDIC bailed out so many banks this year that it ran out of its reserves. It luckily has an "Open Credit Line" with the US Fed to borrow money to back up depositors money in failed banks.
Why are so many banks failing? The reason is banks are hiding bad loans off book, plus a recent accounting change (FASB 17) allows banks to mark to fantasy their toxic loans. Meaning, your bank might have given you a loan on a house for $500,000. Let's say you walked away from that home (strategic default) because its value was now only $250,000. Instead of marking that REO (bank owned) asset at it's real mark to market value of $250,000, the bank is still showing that house on its balance sheet as worth $500,000.
Consequently banks are carrying tons of "Shadown Inventory" (REOs, failed developments such as CRE towers and condos, etc.)which they are reluctant to release into this market as they know if all of it was released at one time, housing prices would crash another 20-50% in one year's time.
Hence, it is my position that anyone trying to time a market "bottom" at this time is going to end up regretting their decision to buy today. There is no rush to buy. Not when sellers continue to drop their prices on their offerings.
This is why I enjoy your blog - you tell it like it is. Also, I generally agree with you and think the best deals to be had are going to be in 2011 and 2012.
Oh, and I've been tracking recent sales and comparing them to past sales (same houses). Very, very few sellers in 2010 have made money and most have lost a great deal, unless they bought in the mid 90s or earlier.
I can't imagine how giddy and gleeful agents were during the swell.Same island breezes today, but a lot more hard work ahead of them to sell this paradise.
4 comments:
Rock -
Agents I talk with in Key West keep saying things like the national real estate trends don't apply down here and that the market is heating up. They're very bullish. I argue prices need to come down more. What's your stance?
I don't listen to Realtors in this town any longer. During the Bubble, it was the local NAR leader who came out saying, "You'll never see a Key West House sell for less than $600,000 again.
That famous prediction pretty much notched the market top.
Other things which Realtors used to love telling Key West buying prospects during the Bubble: "Get into a Key West property while the getting is good. Key West is an island. They are not making any more land."
To which I respond, "Japan is an island. At one time the land below the Imperial Palace was priced to fantasy more than the entire island of Manhattan."
Look at Japan's cratered housing prices for the past 20 years. Look at the cratered Nikkei stock market for the past 20 years. And think about this: in the 1928 Florida Housing Crash, certain mansions on both coasts have still yet to get back to their 1928 price highs (adjusted for inflation).
The Bubble blew for more than 10 years in this country. We've only been deflating for 3 to 4. Unfortunately, the government and Wall Street are trying to reflate the same insanity, yet fewer Americans have jobs, and very imporatant: $7 Trillion in wealth has evaporated (and more losses are coming still in commercial real estate and Housing), yet Americans have only paid back $330 Billion of the DEBT owed on that wealth.
To top this off, the local NAR has been pounding the local paper with the infamous ad: "There's never been a better time to buy a home." Those same words were printed at the market top. And they have been printed for the past 3-4 years since the market top.
If you listened to Realtors from 2003-2008, your Keys home is now underwater, meaning you are upside down on your mortgage.
And here we are with rock bottom mortgage prices, and the country is still selling fewer existing homes than last year, and, we have the fewest number of new homes sold since records have been kept since 1963.
Hence, the pressure is downward on home prices because inventory, foreclosures, short sales, et al, are wreaking havoc.
You can prove this to yourself by surfing Monroe County records. Look at the majority of homes which were bought in 2004 and look at what they sold for in 2008, 2009, and this year. People lost money.
One last warning: check out this visual mls: www.keywestmls.com.
Click on the left most tab at the top of the page which says "Hot $Sheet". After you open it, click on reductions. A list of houses and condos will appear which have recently had a reduction in price. Notice anything else under the "Hot Sheet" button which is missing? Answer: there is no button to click for "Additions In Prices" or "Raised In Price".
On a macro view: Keep an eye on the Case/Shiller median home prices in the USA come this October: watch them fall. Case Schiller is a backwards looking median of the last 3 months averaged in. Two of the last three months were helped by the just ended government subsidies (tax credit) for first time homeowners.
You know what happened to car sales when cash for clunkers ended, right? Watch what happens to median prices on the Case/Schiller scale in October when those three months are averaged in with no government help selling homes.
Lastly, delinquent loans are on the upswing again now that the government programs to help homeowners has proven to be a failure.
(as my response is so long, I'll add more to this in my next comment)
(completion of my response to anonymous)
Okay, I'll add one more: almost 900 banks are on the "danger list" in the USA right now. The FDIC bailed out so many banks this year that it ran out of its reserves. It luckily has an "Open Credit Line" with the US Fed to borrow money to back up depositors money in failed banks.
Why are so many banks failing? The reason is banks are hiding bad loans off book, plus a recent accounting change (FASB 17) allows banks to mark to fantasy their toxic loans. Meaning, your bank might have given you a loan on a house for $500,000. Let's say you walked away from that home (strategic default) because its value was now only $250,000. Instead of marking that REO (bank owned) asset at it's real mark to market value of $250,000, the bank is still showing that house on its balance sheet as worth $500,000.
Consequently banks are carrying tons of "Shadown Inventory" (REOs, failed developments such as CRE towers and condos, etc.)which they are reluctant to release into this market as they know if all of it was released at one time, housing prices would crash another 20-50% in one year's time.
Hence, it is my position that anyone trying to time a market "bottom" at this time is going to end up regretting their decision to buy today. There is no rush to buy. Not when sellers continue to drop their prices on their offerings.
This is why I enjoy your blog - you tell it like it is. Also, I generally agree with you and think the best deals to be had are going to be in 2011 and 2012.
Oh, and I've been tracking recent sales and comparing them to past sales (same houses). Very, very few sellers in 2010 have made money and most have lost a great deal, unless they bought in the mid 90s or earlier.
I can't imagine how giddy and gleeful agents were during the swell.Same island breezes today, but a lot more hard work ahead of them to sell this paradise.
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