This article talks about how commercial real estate is falling in value. The article gives a few reasons to be pessimistic about the economy. One of them:
“We expect construction activity to continue to pull back over the next 18 months,” as “property values still face significant further declines.”
According to this article, Detroit, NYC, Phoenix, Portland, Minneapolis are expected to see continuing housing declines for a while. Detroit is no surprise except maybe some people though things could not possibly get much cheaper. I guess I’ve always thought of New York as crazy expensive so I’m not sure I expected it to decline much. But I suppose things had to come down a little.
This article talks about how vacation home sales are on the decline and how prices are coming down. But the conclusion is that retiring baby boomers will start buying vacation homes and retiring in them.
I know a few retiring baby boomers, and some bought a place near Disney that could be considered a vacation home by some but most of the ones I know prefer to stay near their friends / kids. So I’m not convinced that baby boomers will be driving the market in places like Costa Rica.
There’s also a personal finaince lesson here. One that I’ve mentioned about saving for unforseen medical expenses (because you can’t trust the insurance companies) and one that I shouldn’t have to mention about interest only mortgages:
But so far, no buyers. While she has dropped her price on the property, with its rambling five bedrooms and nearby rain forest, from $2.35 million to $1.5 million, she is experiencing firsthand just how dismal the market has become for vacation homes. She has enough money to pay her interest-only mortgage of $3,800 through July, but after that, there are no funds left.
She decided to sell the property because of unforeseen financial problems, such as medical expenses. “We’re about to lose it to the bank.”
Here’s a good article on NYC real estate.
The Stuy Town project certainly has potential, but given the market and the need for their fellow investors to receive immediate gains, they are really hurting right now.
Compared to the rest of the economy however, real estate prices in nyc have only gone down 3% since the last quarter. However, the two main things that pose risk now are:
1) Lack of wall street bonuses and new jobs, creating vacancies in luxury apartments
2) Lack of lending for developers
Interesting article here on investing in Malysian real estate. I like the idea that about 50 grand can buy a nice proprty 15 minutes from KL.
This article talks about some of the issues you face finding a home inspector in Pennsylvania, but everyone needs to be careful finding a home inspector. More generally, before you buy a house you really have to make sure you’re not getting screwed.
I know of one case in New Jersey where the sellers cheated on a radon test. The buyers moved in thinking everything was fine but when they went to sell they realized two things:
1. They and their children had been living in a very high radon environment.
2. They would now either have to cheat the new buyers like they had been cheated or they would have to spend thousands of dollars trying to reduce radon levels in the home.
Radon tests are extremely easy to cheat on (too bad they didn’t know that before buying the house) but they chose option #2 and lost a lot of money.
The same people then bought a house on the Jersey shore. Home inspection was no problem when they bought the house but when they went to sell…
Their dock violated some laws and had to be ripped up and rebuilt. $50,000. The electric had to be redone, etc. The previous owner and the inspector had screwed them. It took them about 12 months longer to sell the house than it should have so in addition to that $50,000 they had 12 months worth of taxes and lawyers and stuff.
Plus the stress was unbelievable. These poor people could hardly talk about anything else during that time. It screwed up their retirement plans pretty good.
So anyway, when you’re buying a home you need to be extremely careful. You can get majorly screwed.
Bank of America Chief Economist Mickey Levy told Bloomberg Television that he expects housing prices to continue to decline. “The decline in home prices, while necessary to clear the inventories, is building in expectations of more house-price declines, which is keeping potential buyers on the sidelines.”
I don’t think anyone is arguing with levy but everyone questions when the declines will reach bottom. Most estimates I’ve heard range from 12-18 months. What do you think? When do you expect the housing market to hit bottom? Is real estate better than stocks right now?
Here’s an article on Steve Hoyt, a successful investor in commercial real estate. On the one hand they say you can make good money hitting singles (as opposed to homers) but on the other hand they call the guy an artist:
What I realized quickly was that Steve had the entire discipline related to real estate that I someday wanted to have,” Lund said. “I do think the art of the deal is something unique. You can’t learn that in college. I think most of Steve’s peers would call him an artist when it comes to real estate.
I don’t think an individual investor needs to be an artist to do OK in real estate. As long as you can hit a few singles before your first strike out….
This article discusses some of the riskier real estate markets, arguing that Denver is in better shape than Detroit and Cleveland because Denver is adding jobs at a good rate. The idea is that in some markets people aren’t buying because they can’t while in other markets (like Denver) they are just waiting for a better price.
Here’s an interesting article about lease-to-own plans, which are becoming more popular in the currently down US real estate market. The article is fairly well-rounded with both advantages and disadvantages listed.