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Strategies & Market Trends : 50% Gains Investing

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To: Carl Worth who wrote (46572)	6/3/2006 1:05:56 AM
From: tdl4138	Read Replies (3) of 118717

Carl, After reading some of your posts concerning the HB's and the thought that they may be bottoming, I'm afraid you may not quite understand just how bad the outlook is. As Dale knows, I've been dealing and developing properties in Fla for the last 5 years. I became a net seller about a year ago. All good things come to an end...lol. During the last 5 years I've made enough to be able to sit back and watch the coming storm...and be quite comfortable. The amount of excess and sheer stupidity that we saw in the FL RE market will take YEARS to wash out. The pain has just begun. Ironically I still talk to people that don't see a problem...after all...this is a healthy lull that the market needs before it moves higher. Heard the same idiocy with the dot.coms. Spoke with a RE broker this week that is caught with 3 houses he placed deposits on about 10 mths ago that are now ready to close. He doesn't know what to do because the homes are now worth about $50K LESS than what he was priced a year ago. People can't grasp the concept that RE doesn't ALWAYS go up. My broker friend, who's in the business, can't deal with the fact he's far better off to write off $60K than to close on the homes. My point is by not closing, guess who gets stuck...the builder. And its going on everywhere...and getting uglier by the week. I was in Vero Beach last month and had time to drive around. Went into a new subdivision called Eagle Trace. About 60 homes are finished. We noticed 2 were occupied. Just about every home had a realtors sign in the yard. Some were FSBO...some were for rent. The homes are priced in the mid $400's and there literally are no buyers. None. People are not even out looking. Another subdivision we looked at was Amelia Plantation. About 15-16 homes...2 or 3 occupied with the rest being builder specs. One had a brochure on the counter with the original price of $599K. That was crossed out and reduced to $579...then $529...and was now at $479. I bet they'd look seriously at $375 just to get rid of it. The condo market is even worse. When the RE got "hot" speculators and investors jumped in foolishly and drove up the prices far ahead of the market needs. As much as 50% of all Fl construction for the last 2 years was investor driven. There is far more inventory available than there is demand for a normal market. Remember, NAR "statistics" on "new homes" are literally bogus. Most new homes are not MLS listed by the builders. They have their own sales staffs and marketing. NAR's numbers for existing home sales are just as goofy. They get their data from conducting surveys...not real MLS actual closings. NAR represents REALTORS, they have a great reason to be just a little biased...lol . The other joke is that the "average" home price is still appreciating. That is pure BS. The low end of the market for starter homes is absolutely dead with higher home prices and mtg rates having priced a lot of buyers out of the market completely. Without the low end sales of course the average price looks to be heading higher. If you bought a home in Fl during the last RE "boom" '89-90, it took 8-10 yrs to get even. RE does go down... Don't be fooled by the HB book values and pe's..etc. Look at where they were priced before this last cycle started. Consider the carrying costs for unsold inventory. Look carefully at how they valued their land and how much they've sunk into infrastructure development. Sooner or later these numbers are going to get written down and revalued. Consider the amount of investor inventory of their own product they now have to compete with...and that doesn't include the foreclosures and existing owners that just want to sell... It's going to get very ugly....and take a lot longer than a year or two to clean up. My guess is 3-4 years at best. If you want to see what I believe is a horror story in the making, take a very close look at JOE. Even money bet that they lose money starting this qtr...so much for book value....

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