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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (74895)	3/14/2007 3:47:11 AM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 94695

I think just because some areas didn't reach the lofty levels of Fla and Ca, it doesn't mean they aren't bubbles also. I have been mulling retirement and living in the cheaper midwest for the last few years. Prices there are at a substantial discount to the coastal bubble areas even today. HOWEVER, the jobs there are scarce, the pay at the jobs that are there pay substantially less and yet home prices there have also risen 300-400% in many of these "cheap" areas. I have watched a focused list of markets for the last couple years and watched the prices climb and climb and now stagnate. A couple towns I was looking at had homes priced at 3 times the average annual wage for that area a couple years ago but now are easily 5 to 6 times the per capita salary average for the region. I have changed my retirement area multiple times as I have watched the mini bubbles form in these areas. When talking with realtors in the towns, they are in shock. Californians and others from the main coastal bubble markets sold their million dollar McMansions and had cash burning holes in their pockets. Most I talked to said they would walk into these midwest markets expecting it to be hot like what they left and thus if a home on an acre was selling for $80K, they would pounce on it and offer $100K afraid someone would steal it. The next guy calling to see if the home was still for sale would see this and despite these two being the only ones to call for the last 6 months, would panic and then see another home for sale that had been on the market for almost a year for $90K and offer $120. In 6 months, home prices in some of these small towns that had no jobs went from selling for $50-70 sq ft to $110 sq ft. Funny thing though. Now that the bubble markets have slowed and no one there can sell their homes, there is a ton of inventory in these midwest areas and things are going back to normal. Prices haven't dropped much but the inventory is building fast. The two towns I have been watching have gone from 6 pages when I do my search in Realtor.com to 18 pages for one and 17 for the other. Old construction is around $70 sq ft and the newer stuff is going for about $86. It used to be about $55 and $70 but also climbed, just not as much as some of the other areas I had been watching. I figure I will buy here, wait it out and then buy in those other towns when they bomb out in a couple years once the coastal boomers get tired of the area and realize these places aren't what they thought they would be. ( I like the taxes in the other areas more than where I have decided to settle for for now) As a matter of fact, I talked to a realtor today about a house I saw that I thought I might be interested in. It was being sold by a transplant that changed his mind after living there for a year. It was listed for 105K, they had paid 95K, realtor said it isn't worth 80K but if he were the realtor selling it would list it around that. He thinks it will not sell for more than mid 70s when all is said and done. He said too many homes are hitting the market now and the yard is like a cliff in the back. That is OK on the coast of California but in the midwest, no one wants or will accept a yard like that. The house is 1700 sq ft but also has a full basement, was built in '95 with little to no upgrades. That works out to a final expected price of around $45 a sq ft and the owner probably overpaid and thinks he will get enough to move back to the coast. He is going to take a bath or it will be a rental soon!!! The midwest is a bubble also, just not as big as the coasts and a cheaper version of a bubble but all bubbles pop. It is just a matter of how loud a bang they make. I am already seeing a lot of coastal migrants in the midwest trying to unload and getting shocked they cant find any buyers. They seem to forget that in many of these cities and especially smaller towns, the per capita income is only around $28K a year. How much do they think these people can afford to pay for a house? Good Luck, Lee