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Chuck FYI
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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 |
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. |
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