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Beginning in April 2005 -
There were many indicators that the
market was due to correct.
The information below was written by The Top Team and shared will all
our real estate investors.
Please take a few minutes to read this before
consulting with us about any Real Estate Investment.
We all hope that this booming real estate market will continue for years to come and never
experience a slowdown.
But as honest real estate professionals, we must be prudent and advise our buyers that the
facts indicate a slump.
April 2005- We predict
that you may be soon reading or hearing about "a real estate bubble"
similar to the internet dot com bubble. The Tampa Bay market is not immune from any
national downturns...but past, present and future analysis predicts that we
will fair much better than the rest of the nation due to the fact that we
are a vacation, retirement and economically
solid area. We think positive and prudently in hot markets, flat markets and even down
markets. It's positive thinking combined with sound decision making that will produce the
results we want to achieve for our buyers. We will not exaggerate about the
"Potential for the Future" on any Investment. We rely on facts and not
predictions.
STOCKS OF MAJOR REAL
ESTATE COMPANIES - AN INDICATOR TO WATCH
Note the real estate type stocks and the charts below for
NATIONAL real estate related price movement
Click Here for current prices
on each one> The St Joe
Company Pulte Homes
CHARTS AND PRICES - MAY 2005
The St. Joe Company (JOE) is a real estate operating company and a
private landowner in the State of Florida.
The majority of its land is located in Northwest Florida. The Company owns approximately
820,000 acres,
approximately 352,000 acres of which are within 10 miles of the coast. The Company is
engaged in town
and resort development, commercial and industrial development, land sales and commercial
real estate
services. For the three months ended 3/31/05, revenues rose 17% to $212.5 million. Net
income from
continuing operations rose 21% to $15.4 million. Revenues reflect robust real estate
activity across
all segments both in terms of price appreciation and sales velocity. CHART MAY 13, 2005
Click Here for TODAYS Price
Updated Daily > The St Joe Company
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Pulte Homes, Inc. (PHM) is a holding company whose subsidiaries engage in
the homebuilding and financial
services businesses. For the three months ended 3/31/05, revenues rose 26% to $2.55
billion. Net income
from continuing operations rose 65% to $218.3M. Revenues reflect an increase in the number
of homes
closed, product mix shifts and higher average selling prices. CHART MAY 13, 2005
Click Here for TODAYS Price
Updated Daily > Pulte Homes
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Everyone has a "ball park
estimate" about the future profits of their potential real estate purchase. For
Investment Condos - What return do you anticipate or must have on the rental income
and the price appreciation to consider making a purchase?
Past performance is no guarantee of Future Results. We advise our buyers to avoid buying
any properties that rely on ongoing appreciation similar to the past in
order for the deal to still make sense. We try to locate properties based on sound
fundamentals that will weather potential readjustments in the economy.
The real estate market has always been flexible. The Sale Price has always been what a
seller and buyer agree to accept to close a deal. In the last three to four years in many
florida areas ...a percentage of sellers and buyers have agreed to close deals at ...and
above ...the asking price. Gulf Front...Waterfront and Investment Properties are best
examples of this trend.
In the middle of 2005 we have noticed that the trend has abated somewhat and asking prices
are trending downward.
OVERPRICING -
Early 2005 Example - MLS# 7097049 Asking Price $275,000 Address: 530 Mandalay Ave Clearwater
Beach
560SqFt - 2 Bed - 1 Bath - Previously in 2005 was asking $170k then $190k then $210k
and now $275k....the seller increased the price every time there was an offer at the lower
price. We contacted the listing agent thinking there was a legitimate reason and
asked for rental income - Annual Rental income in 2004 was $5,444.00 - (withdrawn from the
market May 10, 2005)
Example #MLS 7083580 - 7 Day Rental - Reduced from $439K January 2005 then $398K March
2005 then to 365,000 then withdrawn from the market on May 11, 2005
Overpricing and Negotiating in the best interests of a Buyer
Example- MLS # 7076244- Overpriced
Asking Price: $420,000 30 Day Waterfront Investment Condo -
Sold Price: $325,000
June 23, 2005 Planet Realtor- Among the state’s larger markets, the Tampa-St.
Petersburg-Clearwater metropolitan statistical area (MSA) had the largest number of
resales last month The market’s median sales price rose 25 percent.
"It's a strong market, and the reason for it is that the Tampa area is a great place
to live with a good job base, a convenient location and a world-class airport," says
George Bodmer, president of the Greater Tampa Association of Realtors
June 24, 2005 - OTHER OPINIONS - Mortgage Bankers
Association Chief Economist Doug Duncan says he expects dramatic home-price gains to
continue next year. He also anticipates a jump in the homeownership rate over the next two
years, with 2005 marking the fifth straight year of record home sales. According to
Duncan, baby boomers will account for a majority of the buyers, as only 70 percent of them
own homes at the present time. Additionally, he believes that interest rates will rise
only slightly during the next two years, enabling many homebuyers to fit a mortgage into
their budgets.
"The housing market still has a good head of steam," said Frank Nothaft, chief
economist at Freddie Mac. "Given that mortgage rates aren't expected to move too much
in either direction any time soon, we fully expect the housing market will continue to
thrive well into the foreseeable future," Nothaft said.
Despite the fact that the Federal Reserve has been raising short-term interest rates for a
year, long-term rates, including mortgage rates, have been falling for much of this year,
providing support for housing construction and sales.
David Lereah, NAR’s chief economist, said low interest rates, population factors and
job growth are driving home sales. “Most of the stars continue to be correctly
aligned for the housing market,” he said. “An ongoing problem is the tight
supply of homes available for sale, which is pushing gains in home prices.”
NAR President Al Mansell, cautions buyers to avoid shortcuts and to take time to fully
understand all aspects of the purchase. “In a market where it’s common to see
multiple bids on homes, buyers should avoid the temptation to skip appropriate inspections
or documentation that would protect their interests.
Existing condominium and cooperative housing sales hit a record in May, rising 2.2 percent
to a seasonally adjusted annual rate of 922,000 units from a level of 902,000 in April.
Last month’s sales activity was 10.6 percent above the 834,000-unit pace in May 2004.
The median condo price was $221,000, up 15.2 percent from a year earlier. Condo sales
accounted for 12.9 percent of market activity in May.
My partners and I have sold Multi-Million Dollars worth of Investment Condos/Townhomes,
Waterfront Homes and Pre-Construction Real Estate in the last 5 years. The vast majority
of our buyers reaped substantial price appreciation and the rentals had very satisfactory
incomes. During 2004 and 2005 some have sold their property for a 100% or more profit
(35% per year appreciation).
Our Team does comprehensive
research for VIP Buyers, before negotiating against Listing Agents/Sellers Asking Prices -
Many owners in general are
putting their property on the market in 2005, to mostly take advantage of the price
appreciation. Lately, we are finding more and more properties that are overpriced. Remember, their asking price is only the top amount they would love
to sell it for. To us the asking price is only a figure that we analyze against fair
market value. We do extensive research before consulting with you on any listing you
express a serious interest in.
A majority know that the real estate market in
general and especially the Tampa Bay Florida area has appreciated substantially for the
past 4 or more years. Currently, we are spending countless hours on the phone with a huge
amount of buyers who have said "I don't want to miss this great run"....
or...."A lot of my friends made a lot of money and I do too".. We're answering
numerous questions about the general investment potential for the Tampa Bay marketplace
from prudent investors and many irrational ill informed potential investors. That's why
I'm writing this for my Team. It's important that we communicate our team's observations
and thinking about the marketplace. This applies to all real estate and not just
investment condos
We all hope that this booming real estate market will continue for years to come and never
experience a slowdown. But as honest real estate professionals, we must be prudent and
advise our buyers with the facts. (Check the charts below)
No one can honestly
predict the future. We never did and never will, even in this very hot market. We only use
past performance as an indicator of future projections. On occasion, there may be an
annual renter using a unit on the market. We can then run those annual projection figures
more accurately. Sometimes the unit was never rented and only bought for price
appreciation. We then look at comparable units that have a rental history and make
comparisons. Remember, no one can guarantee the amount of renters and the rental
income for any particular unit or it's price appreciation in the next two or three years.
This has been a very satisfying ride for investors. You've probably experienced a solid
improvement in your real estate market for the past 2 to 5 years. Many ask us, "How
long will this rise continue?" When it comes to answering that question honestly, I
remember Alan Greenspan calling the stock market "Irrational Exhuberance" It
took over a year for his prediction to fulfill itself. I can't say with certainty
that I have all the answers for you. But I can tell you that I see some things happening
in the marketplace that propel me and my partners to pay close attention to.
I've been Realtor for over 20 years, combining my partners - we have over 100 years
experience. In market upswings, people sometimes get a little dizzy counting their future
profits. No one can say for sure where the real estate market is headed, but when the
market is inundated with so many people thinking that all they have to do is purchase any
property and they'll make easy money on the appreciation, this could be a warning sign. It
even more important now for investors to exercise caution and work with experienced buyers
agents.
Despite the fact that home prices in the United States have achieved record levels, the
percentage of people's equity in their homes has never been lower. While people have been
experiencing record levels of appreciation in their homes, they've also been taking the
equity out through lines of credit and second trust deeds for both living and other
expenses, too. While people have been stretching to afford the home they want at these
current prices, many of them have also been financing their loans with variable interest
rates. If and when interest rates go up, these people will be caught making much higher
mortgage payments than they are right now. And some of these homeowners got into their
loans at artificially low "teaser" rates, too, meaning that their interest rate
will be increasing in the months and years ahead even if market interest rates remain the
same. But if interest rates go up, these people will get hit with both the increase they
knew was coming, plus another increase in their variable rate because of the changing
market conditions.
Some real estate appraisers have been publically stating that they're under pressure to
justify continued higher prices in their appraisals, and the government is now demanding
answers from some. If they put pressure on appraisers to be more conservative it could
begin to curb a hot real estate market.
Here is what we do for our
VIP
Buyers* for each property they
initially express an interest in.
We look up the prices that it changed hands from the beginning. We compare it to current
market conditions. We look for how many days it has been on the market (DOM). We use our
proprietary software to see if the listing agent removed and replaced the listing to give
the impression it is "new on the market". We ask for rental income histories. We
do a group analysis for negotiating tactics. We then sharpen our pencils and come up with
a price range that we feel is a fair market value for that property and relay it to our
buyer for consideration. A VIP Buyer* is one who is not
working with any other real estate agents, has spoken to us about their expectations, has
listened and understood what we tell them concerning the current market conditions and
agrees to our Single Agency Representation
As experienced agents immersed in the
marketplace, you have the advantage of being among the first to be told when we recognize
any change in the market before the rest of the public even sees it.
9-30-05 Updated - According to a comprehensive analysis recently conducted by NAR of the
Tampa-St. Petersburg-Clearwater metro market, there is very little danger of a housing
bust. In fact, the local housing market is in excellent condition with potential for
significant housing equity gains. Realtors® are advised not to sit idly by while the
media, Wall Street and others create an illusion of a housing bubble getting ready to
burst in our area. Sales of single-family existing homes in Florida rose 4 percent
in August. The statewide median sales price rose 31 percent last month to $246,500; a year
ago, it was $188,700. In 2000, the statewide median sales price for single-family existing
homes was $117,100, which translates to an increase of about 97.8 percent over the
five-year period, according to FAR records.
Many say the Nations Real Estate Market is holding up our overall economy.
Some Wall Street investment experts are predicting that gasoline prices in the US will
reach $4 to -$5 a gallon within the next several years. What these experts are saying may
be speculation, and it may never fully materialize. Three years ago did you predict or
even imagine that the price of gasoline would be what it is today? With this in mind, it
doesn't take a genius to project where the price of gas could rise to over the next 2-5
years either. Especially when some experts are already telling us where they think it will
go. And if these projections are accurate, what kind of an impact do you think this could
have on both the economy, and on the real estate market as well?
FLORIDA POPULATION GROWTH AND REAL ESTATE APPRECIATION
Between mid 2003 and mid 2004, Florida's population hit 17.4 million
making it the Nation's third fastest growing state. The population increased by
nearly 400,000 people with an average of 1,090 per day. Florida's growth is being driven
primarily by winter weary Northerners and others who are attracted by the warmer weather
and tropical lifestyle. Some were planning for retirement and decided to invest in the
Tampa Bay market now. Many bought before the boom and have seen their initial buy price
increase 25 to 35% per year. Others during that time frame were attracted by cheaper
housing and they too have seen substantial price appreciation on their purchase. Some
younger people and families relocated for better job opportunities and rented units while
they prepared for purchase. This added to the rental income on those that purchased
investments to rent.
INVESTMENTS COMMENTS KNOWLEDGE
IS YOUR POWER
We are all familiar with the "Dot.com" Internet Stocks Bubble. It reached a
plateau and came falling down....then settled and after years...a few have slowly begun to
rise....but not near the astronomical heights previously.
FLORIDA BUSINESS CLIMATE
STATISTICS
Florida is one of the Nation's Top 10 Business States in 2005 according to a recent
national study. The ranking considered 26 factors. It means that Florida is among the best
places in the nation for conducting and succeeding in business because of it's progressive
pro business policies, a quality workforce and a positive economic environment. The
Nation's five best performing central business districts over the next two years will be Tampa
Florida, Miami Florida, Orlando Florida, Oakland California and Orange County
California. Florida is also projected
to turn in a good showing among suburban business markets in such regions as Pinellas
County Florida and Palm Beach County mainly because of while collar job growth.
(sources included our Team's experience and
knowledge of the Florida Market plus -Florida Association of Realtors, USF Bureau of
Economic and Business Research, Pollina Corporate Real Estate Study ) |