Tuesday, October 23, 2007

52 Months Supply of Housing in Palm Beach County

September 2007: 52 Months Supply of Housing in Palm Beach County (suburban Miami). Or 4 year and a 1/3 year supply of housing units. (as a reader pointed out). ~52 = (25882 / 472) Yikes! Graph from Illustrated Properties

38 comments:

  1. Ah, it's probably just easier to say four and a third years of inventory.

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  2. When has supply NOT been above 40+ months in the Miami metro area?

    Come on...there will always be a glut of condos down there.

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  3. What about the glut of condos in DC? How many months? The delta group in Va says it is 3 1/2 years and rising. Smart developers I would say.

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  4. That is true! But prices are still too high. I think reality will hit as a ton of bricks. Ouch!

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  5. my buddy bought a condo on the Hill back in 1999, near the Senate bldgs, but no parking...$65k.

    There is no way a condo here should be more than $150k....they certainly shouldn't be as expensive as a nice suburban rancher inside the beltway (which you can get for under $399k)

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  6. "There is no way a condo here should be more than $150k....they certainly shouldn't be as expensive as a nice suburban rancher inside the beltway (which you can get for under $399k)"


    lol, more seedy suburb talk!

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  7. Ouch! To put this 52 months into perspective: The average American moves every 60 months.

    Once upon a time I lived in WPB and loved the area. Back then there was never more than three months of homes on the market and price appreciation was a normal slow and steady (pre-bubble).

    Its tough to get my mind around even one year worth of inventory... 9 months is considered horrible.

    I realize 30 months ago most of the bubble areas were at 1 or 2 months inventory are now at or above 1 year's worth of inventory. Yes, I do realize just home many markets could "have not a single home come onto the market in 2008"; Any market with a year plus of inventory cannot drop the inventory enough to have any price appreciation in 2008 sans new sellers!

    I feel for my friends who own in WPB. They are now "geographically locked" like surfs to the land. I hope those that caused this real estate mania suffer for their sins.

    But hey, when the bears warned back when this could have been prevented, we were just nuts! We were freaks who created charts "to show anything we wanted."


    Got popcorn?
    Neil

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  8. "I feel for my friends who own in WPB. They are now "geographically locked" like surfs to the land. I hope those that caused this real estate mania suffer for their sins.

    But hey, when the bears warned back when this could have been prevented, we were just nuts! We were freaks who created charts "to show anything we wanted.""


    I'm glad you're not my friend. You're a total prick.

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  9. Popcorn popcorn popcorn. I love popcorn!

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  10. I first bought in Florida in 1993 and now I have 2 places paid off and the third has a 40K mortgage.

    I feel sad for my tenants who have paid off these places for me. Even in the midst of a "crash", I have over 2 million dollars worth of property down there. I suppose it could drop some and take some time to come back.

    Jeez, I am soooo sorry I ever bought! How stupid. Everyone knows RE only goes down. Why can't I think in 2 yr time-frames like the smart people?


    Got popcorn?

    Va_Investor

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  11. I've had family in So. FL since the fifties. The market down there has always been susceptible to extreme swings, mainly due to the natives' ability to sucker Yankees. Not for nothing did the first modern U.S. real estate bubble start in FL. The great-grandparents of the current generation of hucksters learned well that northerners would buy anything for a dollar, which they would then buy back for a dime, much like Uncle Slaton in the James McMurty song "Choctaw Bingo". From what I've heard lately, the recent arrivals from Cuba & SA have figured the system out perfectly.

    BTW, Miami is not in Palm Beach County.

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  12. I love how the bulls twist my posts. I commented that "I feel for my friends." Then there was a description of there situation. Its not good. Or do certain people not understand the situation their friends are in? I suspect some posters here are either just out of high school or haven't kept in touch with any friends from that long ago. ;) But hey, it amuses me when you sell my side of the story to the lurkers.

    I'm happy for those that made money in real estate. Good for you. But think how much you could have sold those properties for 18 months ago. I notice the bullish arguments never include ROI. Yesterday's wish prices are not today's sales prices. The unraveling of this mania hasn't even started.

    As to property dropping some? There is no debate it will drop a lot. If not, please explain why its dropping when we aren't even in a recession yet?!?

    Oh... there has never been a leading property downturn that didn't lead to a recession.

    Got popcorn?
    Neil

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  13. "I commented that "I feel for my friends.""

    Yeah, you must have missed the part of your own post that began "But hey!"

    You're a fucking prick and your friends should beat the fuck out of you.

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  14. Aw, how cute!

    The real estate pumpers are pretending to be concerned about other people.

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  15. wannabuy said:

    "but think how much you could have sold those properties for 18 months ago."

    That is the point of this entire debate. If you want to trade in and out of the housing market, you may as well stick with stocks (builders, lenders, whirlpool, carrier, etc). Due to tranaction costs, housing is not for day-traders or short-timer's.

    Tell me when inventory was at less than 3 months for any significant length of time? The problem with people who never experienced or examined RE markets prior to 2005 is that they don't know what they are talking about. Where I own, prices were stagnant throughout the 80's and early 90's. We were due for some catch-up.

    As to ROI, I never really think too much about it. I have had a "plan" since my early 20's and don't jump in and out of RE based on cycles. As long as I am b/e or positive with tenants buying me houses, I am happy.

    Funny how you suggest that one should have sold 18 months ago. That is an odd statement given the BH mantra : "I don't have a time machine". Why didn't you buy in 2000? Frankly, I'd rather sit tight and continue to collect rents and pay-off properties. There are substantial tax ramifications to exiting the market (recapture of depreciation, capital gains, AMT, transaction costs, loss of tax benefits, loss of rental income, etc.) Then one must take their net proceeds (60%?) and invest that money elsewhere. Where?

    Good properties may go down periodically, but in the the long term....well you know. Should I be all-in the stock market instead? I have substantial assets there too. I'll be fifty next year and I can't see any reason why I would sell in the next 20 yrs. I may trade some stuff via 1031, but it's not reasonable to think returns would have, in hindsight, been better in other asset classes. In what other investment, do other people buy it for you?

    You really showed your true colors with that "surf" (Did you mean "serf"?) stuff. Your "friends" must really miss you.

    Va.

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  16. "Where I own, prices were stagnant throughout the 80's and early 90's. We were due for some catch-up."

    In most cases RE tracks inflation. The long stagnant period in the 90s was a result of the run-up in the 80s.

    I have no idea what you must have bought that was stagnant "throughout the 80s" because RE was hot in the late 80s.


    As usual va_investor you are having trouble keeping your story straight. The only thing you are consistent about is insisting that you are a great success to a bunch of strangers...

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  17. "The only thing you are consistent about is insisting that you are a great success to a bunch of strangers..."

    Both VA and lance....you hit that one on the head. This is blog therapy for them.

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  18. Bulls, trolling here won't save you any money. I mean, lash out as much as you want at the people who are here and just telling it like it is. Just makes us feel bad for you.

    Anyone this upset about the "correction" must really be losing their shirt.

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  19. "Both VA and lance....you hit that one on the head. This is blog therapy for them."

    Seconded!

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  20. anon 6:50,

    Reading is fundamental. I'm not talking about the DC area, which did see a tremendous run-up in the 80's. I am addressing Niel's claims about inventory in Florida and also giving my memory of SW Florida in the 80's and 90's. I know exactly what my place was going for in the 80's and early 90's. THERE WAS NO RUN-UP. Jeesh.

    Neil, et al, posts a bunch of bs about 3 month inventories. Anon's come in with appreciation rates in Florida in the 80's and 90's (with no clue what they are talking about). Then, I am accused of lying and bragging. So, it's totally turned away from Neil's ridiculous assertions and revealing statements. Perfect Strawman! I'm impressed.

    Got popcorn?

    Va.

    p.s. Nice to see you trolling around skinny. Try to get your story straight. How is the fireman doing?

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  21. VA Investor said...
    "I first bought in Florida in 1993 and now I have 2 places paid off..."

    Umm, if you've got the places paid off, over the long haul you'd get a higher return with less effort by investing your equity in index funds. The only way real estate can compete with the stock market is by using financial leverage (i.e. a mortgage).

    By the way, I checked the OFHEO HPI data. Average annual price increases in Florida during the 1980s were: 4.6% in Tampa, 3.5% in Miami, 4.9% in Orlando, 2.2% in Pensacola. For the U.S. as a whole, prices increased at 5.5%. The average annual inflation rate was 4.7%. So, in general, real housing prices fell in Florida during the 1980s, while they grew in the U.S. as a whole.

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  22. Thanks for the "appreciation" data James. I was correct and ole Neil was wrong, as usual. Florida was flat in the 80's and up to the mid 90's.

    As far as returns, James, you fail to account for rental income and principal paydown. What other investment is there were someone else buys it for you and you get substantial paper losses (depreciation).

    Many investors choose to refi to extract equity to invest in other properties or assets (thus re-building their leverage). I may do this at some point, but the rental returns are very safe and quite adequate for me. When I was younger (20's and 30's) I was very highly levered

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  23. VA Investor said...
    "As far as returns, James, you fail to account for rental income and principal paydown. What other investment is there were someone else buys it for you and you get substantial paper losses (depreciation)."

    No, I did not fail to account for them. I did, however, fail to account for risk-adjusted returns. Volatility doesn't bother me, so I usually focus only on total return.

    Depreciation is not a gain. Depreciation reflects a real loss in the value of your property that needs to be roughly matched by capital expenses... unless you are cheating on your taxes.

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  24. VA Investor,
    I think perhaps you misunderstood my earlier comparison of stocks vs. real estate. My comment was only about unlevered real estate. (Of course you know that there is no principal paydown when there is no mortgage.) I did not mean to imply that real estate doesn't beat stocks when financial leverage is employed. If leveraged real estate couldn't beat an index fund, there would be no point of doing the extra work involved in real estate investing.

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  25. James,

    There are substantial tax advantages to owning rental real estate. Those that qualify for IRS treatment as "Real Estate Professionals" can benefit greatly from the "paper" losses. And no, taking depreciation losses does not require cheating on one's taxes.

    There are also tremendous benefits available to expand and re-lever on a tax-deferred basis by utilizing the 1031 provisions.

    You correctly state that RE beats the stock market hands down when leverage, rent, appreciation and principal paydown are accounted for. Nevermind the tax preferences.

    va

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  26. VA Investor said...
    "And no, taking depreciation losses does not require cheating on one's taxes."

    That is not what I said. I said depreciation represents a real loss in the value of your property. The timing of depreciation charges may be a bit artificial. You may depreciate a washing machine over 5 years when it really lasts for 15. However, you can only depreciate items which ACTUALLY LOSE VALUE. Taking depreciation charges on something that doesn't actually lose value is cheating on your taxes. Therefore, taking depreciation charges is not some sort of actual financial gain.

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  27. james,

    I take depreciation on my brick houses. Do you truly believe that they last only 27.5 yrs? How about plaster walls and hardwood floors? Radiators? Heck, in my last house (built 1920), the boiler was 50yrs old. I think you take a too restricted view of depreciation. I don't see too many 27.5 yr old houses collapsing.

    Depreciation is a "fiction". Too bad it's not still 15yr straightline. Oh...the good old days! I'm glad you don't know about one-time write offs for computers and cars, etc....

    va

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  29. "Taking depreciation charges on something that doesn't actually lose value is cheating on your taxes."

    James...Bullshit. Pure Bullshit. Classic case of tax avoidance which (if the US Supreme Court means anything) is 100% legal. See Gregory v. Helvering, 293 U.S. 465 (1935) if you want to actually learn something.

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  30. Anonymous said...
    "James...Bullshit. Pure Bullshit. Classic case of tax avoidance which (if the US Supreme Court means anything) is 100% legal. See Gregory v. Helvering, 293 U.S. 465 (1935) if you want to actually learn something."

    The word "depreciation" doesn't appear anywhere in Gregory v. Helvering, and the Supreme Court ruled AGAINST the taxpayer, so I'm not sure what you want me to learn.

    However, let me refer you to IRS publication 527, page 9:

    "What Property Can be Depreciated
    You can depreciate your property if it meets all the following requirements.

    • You own the property.
    • You use the property in your business or income-producing activity (such as rental property).
    • The property has a determinable useful life.
    • The property is expected to last more than 1 year.
    • The property is not excepted property (such as property placed in service and disposed of in the same year and section 197 intangibles).

    Property having a determinable useful life.
    To be depreciable, your property must have a determinable useful life. This mean that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes."


    My statement was referring to bullet number three. Now I may not have used the precise phrasing when I said you can only depreciate something that loses value, however almost all things lose value as they gradually approach the end of their useful life. I cannot think of any object that people would be willing to pay as much for at the end of its useful life as they would when it was new.

    Let me also point out that the "gain" from depreciation charges during the time you own property is mostly lost when you sell due to the decrease in your cost basis.

    If you're a practicing lawyer, I feel sorry for your clients.

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  31. Is there any place in the nation that was not part of the crazy speculation that has the critical mass of people to support selling homes for a reputable builder?

    I have 5 successful years in the business working for a builder. But I am mired in the Tampa market and it is horrendous. It has been obliterated by investors and thousands of homes are for sale that have never been lived in. Of course, I was selling homes in the Dallas market at the time and was not the benefactor of the Florida run-up (my luck).

    Anyway, I am 37 years old with no ties. I can relocate on the drop of a dime for the right builder in the right state. Any suggestions?

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  32. James,

    You are no CPA, please quit while you are behind. I am embarrassed for you.

    va

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  33. James,

    You also ignore (or fail to comprehend) the present value of the loss (not gain) created by depreciation deductions. Recapture years down the road is at a great savings. Think about it before you respond.

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  34. that was me again!

    va

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  35. James,

    You are no CPA, please quit while you are behind. I am embarrassed for you.

    va


    That's funny. I quote the IRS directly and you tell me to quit, without providing any evidence to the contrary.

    You also ignore (or fail to comprehend) the present value of the loss (not gain) created by depreciation deductions. Recapture years down the road is at a great savings. Think about it before you respond.

    I am well aware of that and you are correct that I left it out. I was trying to keep things simple. I'm not here to write a dissertation.

    Depreciation charges reflect a loss on the value of your assets. That's what I have been saying. You are the one who originally claimed that depreciation leads to a financial gain. While I will admit that taking depreciation charges adds a financial benefit, you greatly overstate their power.

    However, my original point has been lost in this whole discussion. With your properties paid off, there's no way your investment returns on those properties can compete with a simple index fund. In fact, with today's historically low cap rates and negative real estate appreciation in Florida, I doubt you are even keeping pace with Treasury Bills. You claim to be a sophisticated real estate investor, but I've never seen you write anything that suggests that you have a clue as to how to calculate discounted cash flows.

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  36. Is there any place in the nation that was not part of the crazy speculation that has the critical mass of people to support selling homes for a reputable builder?

    Texas and Atlanta, Georgia. Much of middle America has not experienced a housing bubble the way the east and west coasts of the U.S. have. However, Texas and Atlanta, Georgia are probably your best bets. They both have strong, growing economies without overvalued housing markets.

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  37. James, James, James,

    If my properties are paid off I am not getting the return that leverage would provide. Who cares? I'm collecting rent which is invested in other asset classes. I see a great future in Florida, particularly the places I own.

    Assuming I started buying 15 yrs ago and the properties have tripled and quadrupled and more; and someone else has bought them for me - what do I care whether it may or may not now be the best deployment of some of my assets?

    My mother lives in one place and my inlaws in another. The third is leased out seasonally. I've already made enough on these places to more than compensate for some dead equity.

    These are only 3 of my properties and if they never made another cent I wouldn't care. The future income stream from rents is fine for me, even assuming that they NEVER appreciate further (which I think is a ridiculous assumption).

    Think of what the return has been. It would take years and years for the stock market to get close. Remember, other than coming up with the down payment, tenants have bought these places for me.

    I never claimed to be the best investor. I don't jump in and out of things. In a few years we might bundle those three together and 1031 into something really terrific and then convert it to our winter home. Lot's of options exist.

    I don't need to swing for the fences, a double or triple is fine.

    va

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  38. "Now I may not have used the precise phrasing when I said you can only depreciate something that loses value."

    Therein lies the answer - thank you for admitting that. My problem was you calling it "cheating on your taxes". The point of Gregory V. Helvering in simplistic terms is you dont have to pay more in taxes if the tax code allows other methods for you to pay less. Call it stupid, call it foolish, whatever, but using words like "cheating" implies you have some knowledge of the law.

    Thanks for the departing shot - real civil.

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