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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (10291)	8/6/2004 7:03:39 PM
From: redfish	Read Replies (1) \| Respond to of 116555

Interesting article. I think single-family homes are getting out of hand too. In the neighborhood I grew up in, some idiot just paid $250k for a modest house adjoining Georgia Ave. (industrial section) and less than 100 yards from the railroad tracks. "As much as 70 percent of all condo buyers in South Florida are speculators — people hoping either to "flip" the contract to another buyer at a profit, or people looking for a quick and profitable sale after they close, he said. In West Palm Beach alone, some 3,500 new condominium units are being built or are planned, and the county's coastal areas are sprouting scores of new condo developments. Many rental apartments are converting to condominiums, as well, contributing more units to the condo craze. "There will be a day of reckoning two years down the road, when all these units are ready to close," said Jack Winston, a real estate adviser for Goodkin Consulting. "You're going to have a tremendous amount of standing inventory." Goodkin agreed. "When you have this much demand that's not generated by users, the prices are artificial. That's scary," he said. Speculators will be competing with the builder to sell their units, putting more pressure on the condominium market, he said. The single-family home market is much safer, both consultants said, because most of those buyers are "real users" — people who intend to live in the homes they're buying. But the B word could be a danger in the condo market, Goodkin said. "A bubble occurs when you don't get what you expected to get, irrespective of what you paid," he said. "These people bought at high prices. The best scenario is that they won't close." The worst scenario, Goodkin said, would occur when carrying costs — monthly mortgage payments and maintenance fees, for instance — become unbearable and a speculator can't afford to hold the condominium any longer. "So you start to forgo big profit," he said. "If you still can't sell, then you get to the point of just wanting to break even. If you can't do that, then you sell at a loss." Aside from the speculative condominium mania, Goodkin said, South Florida's real estate market will remain strong, thanks to Baby Boomers hitting retirement age. "Twenty-four percent of the retirement market is Baby Boomers," he said, "and that's going to feed Florida real estate markets in a big way." More than 12,000 home-building professionals are meeting at the Orange County Convention Center for the conference, which ends Saturday night." palmbeachpost.com