JIMinFL wrote:
http://www.orlandosentinel.com/busin...ness-headlines

Much ado about nothing.

See paragraph 4:

"Asking rents are projected to increase by 3% this year." Surrounded by
paragraph after paragraph of hype, celebration, angst, and alarm- the
bottom line is that the author of the article has quantified pressure
on rents to be about the rate of inflation.

Wowie. Rent keeping up with inflation. Anything less than a 3% increase
would indicate an overbuilt market.

Question for the "prices will go up at 30-50% per year forever, unless
there's a bubble burst and then they will simply go up a little less"
crowd: Why is there no "disconnect" between prices
going up 30-50% and rents going up 3%?

It's like any other business. Let's say I bought a gas station for
$1mm, and did so because it was generating combined net profits and
owner's salary of $300,000 a year. By careful management and by keeping
pace with inflation, after my first year of ownership the gas station
is then generating $309,000 a year. If the buy made sense at $1mm for
$300k a year ago, it certainly wouldn't make the same sense to another
prospective buyer if I wanted to sell the gas station and held out for
$1.3mm or $1.5mm. AFter two years, when the net might be up to
$320,000, nobody in a right mind would even consider the second 30-50%
comnpounded number of about $1.8mm to $2.75mm.

After a couple of years of boom town price hikes and 3% rent increases,
buyers can no longer afford to service the debt or would be reluctant
to tie up that sort of cash for such a paltry return.