Housing Bubble

[Joe Complete]

I am curious to get some opinions on whether or not we are in a housing bubble and how long you think the crazy real estate market is sustainable.



Some interesting points...



--A NAR report found that investors accounted for 23 percent of the nation's 2004 home sale transactions, with second-home buyers taking an additional 13 percent of all sales transactions.



--Home prices have become far out of line with wages.



--The current buy/flip rage in the housing market is all too reminiscent of the run-up in the NASDAQ before it burst. If the NAR report is correct then almost ? of all buying is speculative investments.



Personally I have no idea what is going to happen especially in areas like South Walton. Vacation home markets are much different than primary resident markets. It just seems to me that things are becoming borderline unrealistic.

 

[Just_In_Thyme]

I used to own property on Hilton Head Island, SC. I thought the same thing about a bubble over there when ocean front homes starting selling for $3M. They are now going for up to $7M. We sold and came over to Seagrove and are seeing the same run up. I have never seen home prices in resort areas decrease. Sometimes they stop increasing but in the 10 years we have owned beach property we have never seen a decrease. Of course I can't speak for the condo market that I believe is much more specultive. There is a limit to homesites and homes, but condos can be built up.

 

[Rather B Paddlin]

There are several factors to consider about the increasing price of vacation homes in South Walton county that will prevent a bubble for at least the near future.

1. Eventhough the prices of beach homes are high, they are still less than many other beach resort areas.

2. People have shown a tolerance for large negative cash flow situations (>$25,000) on vacation investments in high rise condos for years at Sandestin.

3. The people from the midwest are just beginning to discover and enjoy the white sand beaches. The drive is just a tad bit longer than the drive to Myrtle Beach or Hilton Head. Beaches are no comparison. There is a large population base with the financial resources to fuel the demand for vacation property here .

4. People want to control their financial future. Past loses in the stock market will have lingering effects on future investments. The economy is coming back. People are going to have investment cash.

5. Here come the baby boomers.

6. Less overseas travel, means more domestic travel.

7. Only bad news is everything goes in cycles.

 

[beachmouse]

Also:

We're going to see strong population growth coupled with a shrinking amount of developable land close to the coast- Walton's been one of the 100 fastest growing counties in the country since 2000. Redevelopment options are limited compared to places like PCB- no high rises, generally lower density. And there are huge chunks of land that are more or less permanently off the table because of the state forest, Eglin Reservation up by Freeport, and NW Florida Greenway conservation easements. (with more conservation easements apparently in the works)

I think Eglin is going to come through the latest round of BRAC with additional mission responsibilities that will also play a role in curbing further development on the FL 20 corridor. There's been talk of a new urban combat training area east of Villa Tasso. More land will be restricted from development by the Greenway.

Yeah, buyers could go elsewhere in the region, but PCB is probably a good ten years out in terms of getting the kinds of upscale amenities you get on 30-A, the Big Bend has some negatives to it, and Mississippi's beaches just aren't as nice.

So I can see a plateau, but not a serious contraction in prices any time soon.

 

[Buckhead Rick]

A client/friend who has been investing in R/E for 30 years (St. George area) and talked me into investing in the panhandle had the same thing to say about beach property as those above, it moves up, goes sideways, then goes up again, seldom goes down because it is a tangible asset and most buyers realise time will bail them out. The OTC market had companies with no sales going up in value. Now condos are another matter since sooo many more can be build quickly in a small area, they do go down when over speculation takes hold. P/C smells like that now.

 

[FoX]

The market in general you have to wonder about. The stock crash and scare, low interest rates, liberal lending, and no interest loans have fueled a boom. If rates hit double digits it could pose a problem.

I believe SoWal is unique for some of the reasons we all know well. It will become more and more exlusive, similar to, but prettier than other southern resorts like Marco, Amelia, Sea Island, etc. But SoWal is so unique and beautiful that it may surpass all those and become an international destination like the Riviera, the Caribbean, etc.

Do you think the new airport might change the whole panhandle?

 

[Sally]

I think we're going to have a bigger frenzy this Summer than last.

 

[Buckhead Rick]

Fridays NY times had a balanced article about a housing bubble, what stricks me is as long as the popular press "talks" about a bubble, it has not arrived yet. The articles are keeping some potential buyers out of the market and tops occur when all the buyers have arrived and bought. At some time the specutive part of the market will get soft, i.e. the prices of the PC condo's will not only not go up but will come down as the multi unit owners lighten up, but as far as the blue chip side , you and I will continue to wait for the call that will never come for your chance to buy in Ayls beach.

 

[fisher]

Interesting posts from about 3 years ago.

 

[30A Skunkape]

Nostradami they were not! Up...sideways...never down...right