Pricing in WaterColor

[AAbsolute]

just as we were told bac was a steal at $25 or wachovia was a can't miss at $20. prices are simply supply and demand. nothing more nothing less. the nation is in turmoil and unfortunately 2nd homes are the first thing to go. and 30-a was a massive bubble no different than vegas or california. there's a personal attachment for many on here with 30a just as people were attached to wachovia or bank of america. but no matter what anyone says there's a breaking pt were the lose is too great and you dump it. lets use the watercolor example. obviously price per square foot prices are crashing all over 30-a. already we've seen sub $300 in watercolor and before this is over we could see a lot of $300 per square foot on the upper end homes in there that are still trying to get $500 and above.my pt is there's 100's of homes in watercolor that were bought for $500-$1000 per square foot. what happens to the fat cat that bought his watercolor 4k square home for $3.4 mil in 2005 and its worth $1.8 mil now? his business at home has collapsed and his cost per month to pay for and maintain his watercolor home is $10k per month. he's down $1.6 mil so the answer is obvious. It's gone. thats what makes this collapse so hard to end. there's literally 1000's of people on 30-a in that same situation so when those homes are dumped and sold in foreclosure they are the new per square foot price to measure new sales against.ITS A VICIOUS CIRCLE OF DECLINES ON TOP OF DECLINES JUST AS THE UPSIDE WAS VICIOUS ON GAINS ON TOP OF GAINS. its painful and could last many more years. i think by the end of 2009 there will be tons of homes and condo's in the $250 range per square ft.

Do you think that sale prices will drop below a point where a mortgage payment can be paid by the value of the rental income?

 

[traderx]

This situation is a perfect example of our market. The seller of this house is making a late attempt to avoid a foreclosure that is very close to being reality. If you are selling real estate in this market, this is the competition. Selling in the current enviroment unless you are in a must sell situation is simply crazy in my opinion. I think people that are selling today are making the same mistake those made in purchasing real estate in 05" or even 04'. There is more demand for WaterColor than most people realize, quite a few buyers on the edge of the fence...this is not going down forever...the opportunities to purchase real estate on 30-A at these prices will not last.

Try as you may, you cannot talk this market up, just as you could not talk it down a few years ago. The psychology of this market has been broken and nobody knows where it will end. The notion that my-home-is-worth-more-because-I-am-not-desperate-to-sell is nonsense. The market is the market regardless of motivation or lack thereof.

 

[fisher]

Do you think that sale prices will drop below a point where a mortgage payment can be paid by the value of the rental income?

Rental rates are falling too and will continue to do so until the we come out of this deep trough in the economy. So, I'm not sure when that break even point will arrive.

 

[traderx]

Rental rates are falling too and will continue to do so until the we come out of this deep trough in the economy. So, I'm not sure when that break even point will arrive.

Do you mean vacation rates, long-term rates or both?

 

[chanster]

i expect some homes in watercolor to go to the $200 a square foot in the next year. that short sale for 599k in watercolor is probably one of the ugliest homes in all of watercolor. i looked at it and walked right out

 

[awig]

Try as you may, you cannot talk this market up, just as you could not talk it down a few years ago. The psychology of this market has been broken and nobody knows where it will end. The notion that my-home-is-worth-more-because-I-am-not-desperate-to-sell is nonsense. The market is the market regardless of motivation or lack thereof.

I completely agree with your comment that a home is not worth more because the seller is not desperate to sell, with all of the desperate sellers out there it makes no sense to sell today unless you have no choice. There are quite a few homes in WaterColor that are bad design/floorplan, inferior finishes, not quality construction, etc that people are not going to buy unless they are rediculously low. 1 year ago... 2 houses sold within 3 months of each other right next door to each other. 1 sold for $462/foot and one sold for $318/foot. On paper it would appear the $318/foot got the better deal, which is simply not the case in my opinion. There is a reason that house sold for $318/foot.
http://ecarmls.com/EmeraldReports/listings.asp?ID=1116379732
I understand the market is lower today than it was a year ago. I am not trying to talk the market up, but it is a fact there are substantially more serious buyers looking at WaterColor than there have been in 4 years. The perception is this market will continue to go down because 90% of the inventory in our market is overpriced for todays market. But, there are some incredible deals that are closing in this market. I believe the people that are buying now (at the right prices) are making the right decision just as those who sold in 2004 or early 2005. We shall see...

 

[beachmouse]

Do you think that sale prices will drop below a point where a mortgage payment can be paid by the value of the rental income?

Maybe not that far for short term rentals because you get slammed on management fees and shrinkage, but I'm seeing ads for condos with a 10 or better gross rent multiplier, which has generally been the point at which the numbers are said to make sense for rental property.

 

[traderx]

Just curious, how do you know how many serious buyers are currently looking at WC?

 

[egrp]

I think AAbsolute hit the nail on the head...i continue to beleive that residential real estate will sink to a value where the cost of the home + hoa + re tax etc will cash flow in the rental mkt...i still think there is a huge disconnect between the rental mkt and the for sale mkt in the US. now obv sowal is a bit different and prices may never get that low...but if people are going to start looking at 2nd homes as investments etc...then this is the math they need to run and res real estate has a long way to go down still and i expect it to continue...price are still way out of whack compared to a comparable property u could rent.

 

[Smiling JOe]

egrp,
So you are saying that the cash flow break even point will be the place to where we will see real estate sale prices, on average, sink? I know you are probably talking about short term rentals, but if that is true, the same should hold true for long term, and long term is easier because no mgt company is needed in many cases, and there is no housekeeping or rental website to keep updated. Let's do some math, using a real example in Pt Washington.

Currently, you can rent a nice house (not on the beach) which would sell at $200,000 in South Walton, for $900/month. A buyer, putting down 20% is left with $160,000 mortgage, plus tax and insurance. At 6% interest, on a 30yr fixed rate loan, principle and interest is $960. Taxes for said home are $100 per month, and insurance is $200 per month, a total expense of $1260 per month, not including maintenance and vacancy, a net loss of $360 ($1260-$900=$360) per month, if you have 100% occupancy, and no required maintenance.

What sell price would be needed in order to make those numbers break even, again using 100% occupancy and no maintenance expense?
(Let's keep taxes and insurance the same amount, as this is probably likely, totaling $300 per month.)
If our rent is $900 per month, and taxes and insurance is $300 per month, that leaves only $600 per month to apply toward principle and interest. Using that same 20% downpayment, and 6% fixed rate for 30years, the note would be for $100,000. Add the 20% dwn pymt, and the sell price would be $125,000. Currently, that price of $200,000 would be the bottom for the area.

So if what you are saying is correct, we will see home sales in Pt Washington sink to $125,000 for a cute, 1600 sq ft Florida Beach style home, with medium grade finishes. This would be $78 per sq foot and you would get the lot for free. Wow!

Using this particular example, I would say that we will not see that happen.

If you want to give some real examples of other properties, I'll gladly look through your numbers.