WSJ article (07 Dec 2005)

Yes I would agree that our "investor" market has slowed, but our market did just fine before the big investment boom because people still want to own a piece of paradise.

WSJ article on slowdown in investment property purchases.

The folks who regularly read the WSJ, pretty much knew this was the case for a couple of months. Now it will take a tad longer to trickle down to the masses who think annual 15-20% appreciation is the norm for RE. Smart "investment" money was exiting real estate pre-Katrina (some going into gold & precious metals maybe?). Too much real estate is an anchor and can drain a portfolio.

The main problem is that many of the novice "real estate investors" were under the impression that 'ALL THE BABY BOOMERS' were going to flood into the Florida real estate market in the few months after they purchased...and never crunched the "delay" and the booming competition into their carrying costs.

This is old news-like trying to drive by looking in the rear view mirror. Most smart real estate investors started pulling back over a year ago and most bailed by last Spring.

The question is what is ahead. When the pop media starts celebrating or criticising one investment you should be wary.

This is old news-like trying to drive by looking in the rear view mirror. Most smart real estate investors started pulling back over a year ago and most bailed by last Spring.

The question is what is ahead. When the pop media starts celebrating or criticising one investment you should be wary.

What is ahead is that RE will revert back to the "norm" (resulting in shock :shock: and awe for the novice RE "investors" who just don't know how low the "norm" really is). The collapse of the "condo craze" is, however, going to be ugly--really, really ugly .

I agree-especially overbuilt places like Panama City and Destin with all their new preconstruction condos. As you said, the cost of just holding those money pits will be a significant drain on anyones budget and portfolio.

Are most poeple in the SoWal area, (not PCB or Destin), buying for specualtion or a long term investment/enjoyment? I'd say for the most part the latter. That's the reason I believe this area is a bit more immune to the downturn/glut that will occur in PCB, Daytona Beach markets etc.

I agree-especially overbuilt places like Panama City and Destin with all their new preconstruction condos. As you said, the cost of just holding those money pits will be a significant drain on anyones budget and portfolio.

The cost of owning those condos is a money pit only to the degree that one is leveraged to own them, at least according to my definition of a money pit. Personally, if I owned a dozen condos free and clear and the income offset carrying costs, I would feel just as comfortable having a portion of my money in the condos as I would the stock market - which, after taking two years (DOW 30) to recover within about 10% of its 2000 high, has been in a trading range for the last three and is expected, by many, to remain in a trading range for at least a few years forward.

10 years out, I don't believe that there will be enough beachfront property for everybody that wants it. Actually, there isn't enough now. Its just getting ahead of what most buyers can afford. Time has a way of evening all that out. It wasn't that long ago that I couldn't imagine myself living in a $100,000 home. Now I wouldn't expect to be comfortable living in one that cost as little as a $100,000. Coastal property is limited. Yes, we're entering a new paradigm with the hurricanes, but yes, people will adjust and build what it takes to "survive" them. I can forsee a time in the not to distant future where most everything here in Orange Beach, on both sides of the beach highway will still be standing after an Ivan-size+ hurricane. Its not that big of a deal to dig 6 ft of sand from a parking deck, underneath the condos and replace the ground amenities on a $200,000,000 complex, especially when almost everybody who owns there has another home.

I wouldn't recommend anybody totally abandon the financial markets, but that doesn't mean that I'd count out coastal real estate either. Personally, I feel comfortable owning appreciating real estate for the future - and owning stocks and bonds for living expenses. Its worked for me since 1994.

I've seen real estate go "all over the place" in the last 11 years. 5 years ago, developers were auctioning off condos here on Terry Cove at a loss, less than they presold. Now those condos are going for 3 times the auction prices. Certainly, the past is no indication of the future - just pointing out that this is not the first time that property has gotten ahead of its pricing - and it won't be the last time.

Regarding the WSJ article, I respect the WSJ, but it seems that even they think of an angle and create a story that backs up what they want to get over. Just a month or so ago, I was reading a WSJ article, about how well Florida real estate was doing in the wake of Wilma. The other day, as I left my computer, my wife asked me what I'd learned. I replied, "Whatever you want to believe, just keep looking, you'll find an authority to back it up pretty soon."

Another thing I find interesting: The "over built, overpriced" lists always include Panama City. Do they mean PCB or both PCB and PC? And why do they list Panama City and sometimes South Walton, but not Perdido Key, FL - Baldwin County, Alabama. We've got 13,381 rental units here on the Alabama coast. By 2009, 17,100 new ones will be added. Looks like PCB to me. Why aren't we on the list? Also, the lists are supposed to indicate how far housing is outpacing wages. The beach condo market doesn't correlate to that. Buyers earn there money somewhere else and bring it in. I question all of these lists for reasons like these.

Are most poeple in the SoWal area, (not PCB or Destin), buying for specualtion or a long term investment/enjoyment? I'd say for the most part the latter. That's the reason I believe this area is a bit more immune to the downturn/glut that will occur in PCB, Daytona Beach markets etc.

I read today in "Smart Money" that 17% of the market in PC is investor money. That figure by itself doesn't mean much. You'd have to separate the condos from the SFH and figure out how much area they were calling PC.

I read today in "Smart Money" that 17% of the market in PC is investor money. That figure by itself doesn't mean much. You'd have to separate the condos from the SFH and figure out how much area they were calling PC.

That's not nearly as high as I expected.

Are most poeple in the SoWal area, (not PCB or Destin), buying for specualtion or a long term investment/enjoyment? I'd say for the most part the latter. That's the reason I believe this area is a bit more immune to the downturn/glut that will occur in PCB, Daytona Beach markets etc.

During this frenzy in the last 12 to 24 months, when a new development of lots hit the market, I would guess that a large majority were sold to investors. You don't put 100 lots on the market and reserve all in 48 hours and have very many end users in the mix. The same could probably be said for condos.

During this frenzy in the last 12 to 24 months, when a new development of lots hit the market, I would guess that a large majority were sold to investors. You don't put 100 lots on the market and reserve all in 48 hours and have very many end users in the mix. The same could probably be said for condos.

Agreed. I think a huge chunk of the buyers over the last 2 years have been investors. We have been looking to buy property in one of the upscale developments like Rosemary, Watersound or Watercolor (Alys is just too different, too white and too dense) but will not buy until prices fall dramatically. We thought we had missed the boat last summer (2004), but with hindsight we are thrilled that we didn't plunk any money down during the last 12 months.

There are lots of opinions on these boards, but my money is riding on the folks that believe there is a big bubble that is already in the process of bursting. We have been watching the sales activity and prices in the big developments. My agent says that sales in these developments are off by 50 to 75% for the period July-Nov 2005 versus the same period in 2004. Prices on lots are falling fast and the few lots that have sold recently have sold at prices well below prices paid last summer. Recent house sales have also been at prices below prices last summer (2004). I am going to wait for supply and demand to begin looking normal again before putting cash into a new beach home. Until this equilibrium is reached, prices will be headed down.

The area is beautiful and has tons of appeal. But, those attributes will not stop falling prices. The market will dictate the value of these properties, not the beautiful surroundings.

Front page, NY Times travel section 12-10-05 on Seaside (with 3/4 page picture of a walkover), gist: the major problem with Seaside is "not enough parking". That's like having too many people in your retail store.

to monty:
If you are ready to build within about 18 months you can pick up incredible deals. The big price drops on vacant property appear to be primarily for lots with a build out time. The closer the build out dead line the faster the price drop. I have seen this in Cyprus Dune, Watersound, Watercolor, and The Preserve at Grayton just to mention a few. The "investor flippers" that bought these build out time lots get more motivated every day. One seller was so desperate they actually tried to market it on ebay.

Are most poeple in the SoWal area, (not PCB or Destin), buying for specualtion or a long term investment/enjoyment? I'd say for the most part the latter.

I'd say a lot of people in SoWal still are in on the speculation of these condos/land grabs. Over the last couple years, the pied pipers (developers/realtors) skipped merrily through the hamlets of SoWal drawing crowds of villagers to their condo/land grab roadshows with a siren song of quick, easy money. Certainly no one reading this board has more than they should tied up in these gems (yeah, right)--but those out there who do are now starting to realize the folly of their "investment."

to monty:
If you are ready to build within about 18 months you can pick up incredible deals. The big price drops on vacant property appear to be primarily for lots with a build out time. The closer the build out dead line the faster the price drop. I have seen this in Cyprus Dune, Watersound, Watercolor, and The Preserve at Grayton just to mention a few. The "investor flippers" that bought these build out time lots get more motivated every day. One seller was so desperate they actually tried to market it on ebay.

You forgot to mention the Watercolor lots that went up for auction last weekend. But, remember that these mega developments are what caused the huge runup in prices over the last few years. As prices fall in these communities, it will drag down the rest of market. And, as lot prices fall so will the prices for the homes. The so called incredible deals won't look very incredible 12 months from now. Prices will be even lower then.

to monty:

So you would not buy anything now?
How much lower do you predict prices will be in a year?
Have you heard how those auctions worked out-did anyone show up ?

You forgot to mention the Watercolor lots that went up for auction last weekend. But, remember that these mega developments are what caused the huge runup in prices over the last few years. As prices fall in these communities, it will drag down the rest of market. And, as lot prices fall so will the prices for the homes. The so called incredible deals won't look very incredible 12 months from now. Prices will be even lower then.

So, does anyone know what the watercolor lots went for in the auction? And were they were located. I know that they have been having some problems selling the new phase over by the publics. I would love to find out. As far as build out dates are concerned how much of a house has to be completed prior to the build out date. The entire house? Or can you get blue prints and start laying fondation?

i also want to remind people that markets tend to move in cycles. The go up and then they go down. The people sitting around waiting for the market to bottom out will be stuck with a ton of cash in the hands when the markets starts climbing again. No doubt deals will contiue to take place in the future but you may miss out on something really great that is happening right now. People will contiue to want to live here, there is a supply problem with BEAUTIFUL white beach font properity in areas where it has not been comletely eaten up by people. Areas like Napels, Boca Raton, Miami, also went through situations where prior to becomming huge and amazingly expensive, they titter toddered. The major investers that are putting millions of dollars into development, are not going to just let it die here. I think we are one summer away from major maketing explosion. Remember the glass can be half empty or half full.

The properties that were to be auctioned last Sat.

• St. Barth #904 at Silver Shells
• Century Park West #407
• 705 Forest St
• Destin Pointe Lot 31
• Watercolors Lot 16
• Watercolors Lot 19
• Cypress Dunes Lot 74

Ben Anderson was to hold the auction. His site does not have the selling info.. Contact him to find out if they sold.

Anderson Real Estate Auctions
Ben Anderson 850-654-5300, Cell 850-865-5300
12273 Emerald Coast Pkwy, Suite 117, Destin, FL 32550

I'll find out some more information and then I will post it for you.

The fact that folks are auctioning off properties and condos (or using E-bay) is proof-positive that property owners have lost faith in the real estate profession's ability to get what they "think" or were "led to believe" their investments are worth. These investors are now forced to cast out a larger net to catch the dwindling supply of "greater fools."

to monty:

So you would not buy anything now?
How much lower do you predict prices will be in a year?
Have you heard how those auctions worked out-did anyone show up ?

No, I would not buy now.

I predict prices will be 50% lower than the peak in 2004/early 2005 within the next two years. That will take price in the big developments back to $400 to $500 per square foot for near ocean properties. Oceanfront will fall even further due to the hurricane risk to levels similar to 2000/2001.

No clue on how the auctions went, but if the lots sold, I bet it wasn't a pretty picture. There are already lots in many of those areas for prices well below market highs. So, the auction lots, if sold, will be way, way below the high water mark. You have a couple of lots in Watercolor listed under $500k and they aren't selling, several in Watersound under or just over $500k, Alys Beach lots aren't selling by the developer, developer lots still available in Watercolor and Watersound that didn't sell in lotteries, and prices falling in Rosemary too. A real problem development is Cypress Dunes. Without beach access, the prices in this development will fall drastically.

No, I would not buy now.

I predict prices will be 50% lower than the peak in 2004/early 2005 within the next two years. That will take price in the big developments back to $400 to $500 per square foot for near ocean properties. Oceanfront will fall even further due to the hurricane risk to levels similar to 2000/2001.

No clue on how the auctions went, but if the lots sold, I bet it wasn't a pretty picture. There are already lots in many of those areas for prices well below market highs. So, the auction lots, if sold, will be way, way below the high water mark. You have a couple of lots in Watercolor listed under $500k and they aren't selling, several in Watersound under or just over $500k, Alys Beach lots aren't selling by the developer, developer lots still available in Watercolor and Watersound that didn't sell in lotteries, and prices falling in Rosemary too. A real problem development is Cypress Dunes. Without beach access, the prices in this development will fall drastically.

We sold our place on Hilton Head, because we found that at the time, the price per s/f was much cheaper here in SoWal. We bought a fantastic brand new house w/ocean views. You couldn't find anything like that back on HHI for the price. On top of that we fell in love with the beaches and the area in general. Now the prices here are comparable to what you find back on Hilton Head, or Kiawah Island. The friends I have there aren't freaking out about prices, or predicting a crash in real estate. So why is it such an obsession here?

I believe that prices here in SoWal were lagging because it was still relativley unknown. As it became more popular, prices started to skyrocket to catch up with everyone else. Now that it has caught up, prices are steadying and settling down to more reasonable levels. But falling 50% lower? I don't see it.

Talk about traffic on 30-A? Try getting on or off HHI during rush hour, it makes driving through Seaside in July a picnic.

We sold our place on Hilton Head, because we found that at the time, the price per s/f was much cheaper here in SoWal. We bought a fantastic brand new house w/ocean views. You couldn't find anything like that back on HHI for the price. On top of that we fell in love with the beaches and the area in general. Now the prices here are comparable to what you find back on Hilton Head, or Kiawah Island. The friends I have there aren't freaking out about prices, or predicting a crash in real estate. So why is it such an obsession here?

I believe that prices here in SoWal were lagging because it was still relativley unknown. As it became more popular, prices started to skyrocket to catch up with everyone else. Now that it has caught up, prices are steadying and settling down to more reasonable levels. But falling 50% lower? I don't see it.

Talk about traffic on 30-A? Try getting on or off HHI during rush hour, it makes driving through Seaside in July a picnic.

Here's my take--we had a REALLY bad summer starting with Allison, Cindy, Dennis, Katrina, Rita. Mix in a shark bite fatality, red tide, and a terrible year for yellow flies, well, SoWal just couldn't recover. This is in contrast to summer 2004 where prices and sales were way up even with Ivan. There wasn't a slow deceleration of the RE market over a few years--it came to a screaching halt within a few months. Everybody is a little freaked out.

No, I would not buy now.

I predict prices will be 50% lower than the peak in 2004/early 2005 within the next two years. That will take price in the big developments back to $400 to $500 per square foot for near ocean properties. Oceanfront will fall even further due to the hurricane risk to levels similar to 2000/2001.

50% price decrease????? Now that's craaaaaaazy talk man!