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

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.

wrote in message
ups.com...

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

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.

Isn't that what the guy said in the first sentence of his article.

Up in the Northeast they are seeing record setting housing prices. Housing
starts are way down. Housing sales are off. Taxes are going up. Little is
being done to improve the inferstructure. They have a democratic
legislature, and puritainistic town governments. The technology highway is
crumbling. Because of all of this, there is a negative population growth in
at least one New England state. Oh! I forgot to mention the weather.
Hopefully it hasn't yet gotten that bad up where you live. Cut your losses
and come on down while you can. The timing isn't going to get any better.
Oh, by the way bring lots of money with you. You can't make a living on
wages down here.
JIMinFL

JIMinFL wrote:
wrote in message
ups.com...

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

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.

Isn't that what the guy said in the first sentence of his article.



Not exactly. The author supposes that rents will soon begin increasing
dramatically to support the skyrocketing price of houses and
apartments. IMO, as a guy with over 30-years of landlording experience,
that ain't gonna happen, and here's why:


Buyers are attracted to skyrocketing prices like moths to an overly
bright deck light.
Buyers, weirdly enough, want to buy the most overpriced house they
think they can almost afford,
with the expectation that when the house they just paid $1mm for goes
up 40% in a year they will be much better off than if they bought a
$400,000 house. In the current market, you can almost increase the
amount of interest in a property by raising the price.

Renters, on the other hand, consider housing an expense rather than an
"investment." Renters are not the least impressed with what the
building they are living in is worth this year vs. last, they are
simply hopting to get by with the lowest monthly payment for a
habitable rental house or apartment that meets their needs.

For example: I can speak with unquestionable accuracy about an
embarrasing and tottering little eyesore of a run down slum in a mixed
residential/commercial neighborhood just a couple of blocks from one of
Seattle's major tourist attractions. They just mowed down the old
teacher's union building on the lot immediately next door, and they're
putting up 17 (!) new townhomes. I'm going to speculate that the very
tiny little two-shoebox-bedroom townhomes will probably sell for
something north of $200,000 apiece- and based on what the developer
paid for the TU building and the demolition they are probably going to
have to bring at least that much for the project to pencil. Rents for
one of those little crackerboxes would need to be at least $1500-1800 a
month to make any sense at all. Some people will surely move in and pay
that, but it isn't going to raise the rents on any of the 2 bedroom
units in the little eyesore of a run down slum next door. (The 1964
vintage bulding gets $895-925 for a typical 2 bedroom).

Point is: The new buildings need some super rents to pencil, but the
market consists of new buildings that must get record breaking rents as
well as older buldings that can afford to
rent out a similar amount of space, in exactly the same neighborhood,
for about half the price.
Renters seek the lowest available rent for an apartment that meets
their standards, a totally different philosophy from most buyers who
believe it's a wise move to buy the most overpriced property they can
find and speculate on further appreciation.



Up in the Northeast they are seeing record setting housing prices. Housing
starts are way down. Housing sales are off. Taxes are going up. Little is
being done to improve the inferstructure. They have a democratic
legislature, and puritainistic town governments. The technology highway is
crumbling. Because of all of this, there is a negative population growth in
at least one New England state. Oh! I forgot to mention the weather.
Hopefully it hasn't yet gotten that bad up where you live. Cut your losses
and come on down while you can. The timing isn't going to get any better.
Oh, by the way bring lots of money with you. You can't make a living on
wages down here.


And precisely because you "can't make a living on wages", the FLA
bubble is going to burst.
Those wage earners who "can't make aliving" will be unable to pay the
rents required to support the mega-expensive new condos and apartments-
even if they wanted to do so.



JIMinFL

Harry Krause wrote:
wrote:
JIMinFL wrote:
wrote in message
ups.com...
JIMinFL wrote:
http://www.orlandosentinel.com/busin...ness-headlines
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.
Isn't that what the guy said in the first sentence of his article.



Not exactly. The author supposes that rents will soon begin increasing
dramatically to support the skyrocketing price of houses and
apartments. IMO, as a guy with over 30-years of landlording experience,
that ain't gonna happen, and here's why:


Buyers are attracted to skyrocketing prices like moths to an overly
bright deck light.
Buyers, weirdly enough, want to buy the most overpriced house they
think they can almost afford,
with the expectation that when the house they just paid $1mm for goes
up 40% in a year they will be much better off than if they bought a
$400,000 house. In the current market, you can almost increase the
amount of interest in a property by raising the price.

Renters, on the other hand, consider housing an expense rather than an
"investment." Renters are not the least impressed with what the
building they are living in is worth this year vs. last, they are
simply hopting to get by with the lowest monthly payment for a
habitable rental house or apartment that meets their needs.

For example: I can speak with unquestionable accuracy about an
embarrasing and tottering little eyesore of a run down slum in a mixed
residential/commercial neighborhood just a couple of blocks from one of
Seattle's major tourist attractions. They just mowed down the old
teacher's union building on the lot immediately next door, and they're
putting up 17 (!) new townhomes. I'm going to speculate that the very
tiny little two-shoebox-bedroom townhomes will probably sell for
something north of $200,000 apiece- and based on what the developer
paid for the TU building and the demolition they are probably going to
have to bring at least that much for the project to pencil. Rents for
one of those little crackerboxes would need to be at least $1500-1800 a
month to make any sense at all. Some people will surely move in and pay
that, but it isn't going to raise the rents on any of the 2 bedroom
units in the little eyesore of a run down slum next door. (The 1964
vintage bulding gets $895-925 for a typical 2 bedroom).

Point is: The new buildings need some super rents to pencil, but the
market consists of new buildings that must get record breaking rents as
well as older buldings that can afford to
rent out a similar amount of space, in exactly the same neighborhood,
for about half the price.
Renters seek the lowest available rent for an apartment that meets
their standards, a totally different philosophy from most buyers who
believe it's a wise move to buy the most overpriced property they can
find and speculate on further appreciation.


Up in the Northeast they are seeing record setting housing prices. Housing
starts are way down. Housing sales are off. Taxes are going up. Little is
being done to improve the inferstructure. They have a democratic
legislature, and puritainistic town governments. The technology highway is
crumbling. Because of all of this, there is a negative population growth in
at least one New England state. Oh! I forgot to mention the weather.
Hopefully it hasn't yet gotten that bad up where you live. Cut your losses
and come on down while you can. The timing isn't going to get any better.
Oh, by the way bring lots of money with you. You can't make a living on
wages down here.


And precisely because you "can't make a living on wages", the FLA
bubble is going to burst.
Those wage earners who "can't make aliving" will be unable to pay the
rents required to support the mega-expensive new condos and apartments-
even if they wanted to do so.



JIMinFL



Fortunately, one can still buy a very nice brand new house on a decent
lot in NE Florida for $125,000 to $150,000. This would be a four bedroom
builder's house, with 2-1/2 baths, and a decent lot NOT in a flood
plain. I don't disagree about wages in Florida, though. They really
suck. That's why the state usually loses so many teachers, firemen,
policemen, et cetera, every year.


Whenever we have travelled to the south, (has been a couple of years
now), we are always amazed at some of the relative "deals" we see on
the RE down that way. IIRC, we saw ads for 3-4 bedroom houses on 20
acre parcels for about $100k in some of the more rural areas last time
we were down there. It's too bad that the costs for most things work on
a national, rather than regional basis because if the cost for housing
were indicative of the overall relative cost of living in the sunny
"souf" there would be a stampede of folks headed that way who couldn't
afford to retire anywhere else.

And that's another disconnect; Why do the SOFLA folks think that
exponentially increasing numbers of fixed-income retirees are going to
be attracted to the most expensive housing in the country?

I'd like to have 20 acres and a 4-bedroom house for $100k......but on
the shore of Puget Sound, if you please. :-)




I'd only consider renting a place for a week or two in SW Florida. The
weather stinks, and you are likely to lose everything in a hurricane.







--
Debate Issue:
Resolved, that the voters of the United States need a mechanism
to remove an incompetent President from office.

An alternative: write a letter to George W. Bush at the White House
and ask him to resign immediately for the good of the country and its
people.

wrote in message
ups.com...

JIMinFL wrote:
wrote in message
ups.com...

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

Buyers are attracted to skyrocketing prices like moths to an overly
bright deck light.
Buyers, weirdly enough, want to buy the most overpriced house they
think they can almost afford,
with the expectation that when the house they just paid $1mm for goes
up 40% in a year they will be much better off than if they bought a
$400,000 house. In the current market, you can almost increase the
amount of interest in a property by raising the price.

There might be some truth to that but many buyers in the Florida markets
have been thru that mindset in their younger years when their incomes were
likely growing as exponentially as housing prices. Today, baby boomers are
learning to live within their means and buying houses they can afford. A lot
of times with cash.

Renters, on the other hand, consider housing an expense rather than an
"investment." Renters are not the least impressed with what the
building they are living in is worth this year vs. last, they are
simply hopting to get by with the lowest monthly payment for a
habitable rental house or apartment that meets their needs.

I have to admire you for not being greedy and selling these poor people out.

And precisely because you "can't make a living on wages", the FLA
bubble is going to burst.
Those wage earners who "can't make aliving" will be unable to pay the
rents required to support the mega-expensive new condos and apartments-
even if they wanted to do so.

Nope.
Most people don't come here for employment opportunities. Construction
workers and a few others excepted. It's a different market than up there in
Seattle. I think that's why you are having a difficult time understanding
what's going on here.

Take care,
JIMinFL

"Shortwave Sportfishing" wrote in message
...
On Thu, 22 Sep 2005 17:19:55 GMT, "JIMinFL"
wrote:


wrote in message
roups.com...

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

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.

Isn't that what the guy said in the first sentence of his article.

Up in the Northeast they are seeing record setting housing prices.

Not really. The market has changed considerably from the premium
prices they were getting - like 5% over asking price, but with respect
to actual value, there hasn't been a significant change.

Housing starts are way down.

Not in my town. We are 7% up from this same time last year.

Housing sales are off.

That's true for existing single family houses, but not in crippling
sense - houses in my town used to sell in one to two weeks closing in
30 to 45 days. Currently, it takes about 30 days for the first offer,
closing in 45 to 90 days.

Curiously we're seeing a change in the multi-family market and a lot
of property swapping going on. For instance, we might swap a property
with another comparable property owner to get out from under the
rental agreement to provide heating - new owners, new contract.

Taxes are going up.

That certainly is true. Unfortunately, comparable increase in
services isn't occurring at the same time.

Little is being done to improve the inferstructure.

Not in Connecticut - we've got more highway improvements going on than
you can shake a stick at. Locally, we've just finished a project to
chip seal all the roads in town - took three years and we're back on a
regular maintenance schedule, rebuilt two roads and there is one to
go.

They have a democratic legislature, and puritainistic town governments.

The first is true, but I'm not sure what you mean by the second.

The technology highway is crumbling.

How so?

Because of all of this, there is a negative population growth in at least
one New England state.

It's probably Connecticut, but that may be for different reasons
including relocations due to mid-level management changes and changes
in the business sector. I'm curious as to which one it is.

Oh! I forgot to mention the weather.

Nothing wrong with the weather - just wait five minutes and it will
change.

Hopefully it hasn't yet gotten that bad up where you live. Cut your losses
and come on down while you can. The timing isn't going to get any better.
Oh, by the way bring lots of money with you. You can't make a living on
wages down here.

Too hot.

Tom,
Puritanical- By that I mean a lot of towns are run by people that are afraid
to mess with tradition. They want things to stay the way they are. Blue laws
for example. How hard was it to get them changed?
Technology highway- This was the east coast version of Silicon Valley. There
isn't much left there any more.
Take care of the shoulder.
JIMinFL

On Thu, 22 Sep 2005 20:15:39 +0000, JIMinFL wrote:


Today, baby boomers are
learning to live within their means and buying houses they can afford. A
lot of times with cash.

I'm not sure I agree with that. Personal debt is at an all time high. I
haven't seen an age break-down, but would expect boomers are doing their
share.