Too Many Condos In Myrtle Beach?
Sometimes one wonders if the writer of a story is paying attention to their own words. This Myrtle Beach story on condo construction lays the numbers out and then quotes the optimist line. "Buddy Hucks' research shows oceanfront closings numbered 1,100 last year, with more than $300 million in total sales volume."
So far so good. Then this is the next line. "His research shows there are another 4,000 units either planned or pre-selling." And they are increasing, "There were 123 multifamily permits issued in February compared with 33 the same month last year."
How many units in these permits? "You're trading maybe a 30 to 50 unit motel or hotel to a 200-unit condo complex."
Tom Maeser, president of Fortune Academy of Real Estate says, "Everyone I'm talking to says it will continue. Of course, that's predicated on the buyers being there."
19 Comments:
We must be out of land. Alas, there's always Mexico:
http://money.cnn.com/2005/04/11/retirement/mexicanretirement/index.htmhttp://money.cnn.com/2005/04/11/retirement/mexicanretirement/index.htm
It's a toss up between FL and California. More building in Florida but it seems the prices compared to incomes in CA are even more out of proportion. At least Florida can import retirees in the long run to fill what will inevitably be cheap houses/condos.
Here's another good one, 10 year interest only loan:
http://www.washingtonpost.com/wp-dyn/articles/A59515-2005Apr16.html
My real estate agent in Brevard County sent this email to me a few days ago: "There are a lot of condos being built currently, and for that reason prices are somewhat stagnant. They will return to the investment side but it may take a couple of years until the glut is gone. But townhouses and single family homes are still a good investment." Huh? (I'd change agents, but I think it's pretty fruitless by now)
It was good to see Sunny's post, and realize that I'm not crazy. I could have bought there a few short years ago without bringing an arm/leg to closing.
Where I live (Boston) condos are sprouting like mushrooms. A lot of units can be shoehorned into a tiny lot.
I'm wondering who will buy all the units when they are done ...
check out this chart of san francisco bay area home prices versus the rest of the country. does that chart look familiar to anyone?
btw- according to the chart the rate of price appreciation in the bay has now reached $36,000 per month, or over $400k per year.
i dunno, i seem to recall some other financial instrument going up 80 points a day over and over a while back and then collapsing to zero, but i cant quite put my finger on it.. anyone remember? i think i saw it on a channel called CNBC or something..
http://sfgate.com/cgi-bin/object/article?m=/c/pictures/2005/04/15/mn_numbers_says_itall.jpg&f=/c/a/2005/04/15/MNG29C9D8D1.DTL
And here in the Great White North:
http://www.startribune.com/stories/535/5351102.html May need to register but the hightligts:
--6200 new condo units in downtown Minneapolis in the next few years and that's not counting conversions. I know at least 500 apts are converting in downtown.
--31 year old medical sales rep trading up to 200-400K unit says:
"It was like ... 'I've had money in stocks for almost 10 years and they've barely moved $1,000.'
"It'll never go away," she said of the condo's value. Ha Ha silly girl
--developer of new mega tower expresses confidence that other condos developments may not succeed but not his project: it's a "unique location with superior design"
--all realty types see demographic trends driving condo boom won't end. Of course since more condos are being built than there are newcomers to the Twin Cities, doesn't that mean that there's going to be a glut of single family homes on the market if all these people are leaving their neighbors and moving downtown? Who are they going to sell to?
--Only one developer interviewed sees the light: "In our mind the market can't absorb the [condos] that are being talked about."
Three years from now, they'll be giving these places away.
Here is great article on RE investing from San Diego
http://www.signonsandiego.com/uniontrib/20050417/news_1b17specula.html
To the person who mentioned Mexico, why this obsession with buying as opposed to renting? The article mentioned the issues of clear title and maintenance headaches, but what about the hassles your heirs will have going through probate with a house in Mexico after you die? I've heard some comments on this board about how renting is like living in a prison camp. That utter BS. Perhaps a housing inspector can barge into an apartment (I've never experienced any such thing), but then the government can also condemn a house you own (like that example in Oregon). Contrary to popular belief, most big professional landlords DON'T treat their customers like shi*t, for the simple reason that they are customers. I'm speaking from experience, as a renter for most of my life and an unwilling landlord for a small period of time when I inherited a duplex from my father. Owning anything is SUCH a pain in the ass! I suspect the housing bust is going to be aggravated when the 3% or so of the population, which has switched from renting to owning in the past few years, comes back around to my point of view that renting, espcially for people like me who move around a lot and hate maintenance, is usually the better option. I'm retired, I travel a lot, but have a home base studio in Reno, for which I pay $370/month, utilities paid (other than phone and cable).
$370 a month will pay for my property taxes, garbage, water and sewer. Sounds like a good deal to me!
Just a little factoid for the mad buyers in a panic out there:
According to Robert Shiller, real house prices in the US rose by an average of just 0.66 per cent per year in the 114 years between 1890 and 2004---much of it thanks to the last eight-year boom. That's less than 1% over inflation FOR 114 YEARS.
Over the past six years, inflation (according to the CPI) has been a cumulative 13.7%. Yet median home values in California have tripled since 1998. They have outperformed inflation 300% vs. 13.7% while the 114-year average is 0.66% a year.
Just stunning numbers. Gonna get uglee.
Interesting WaPo article today on housing. Apparently in DC area, very few homes avail for sale creating buying frenzy.
What could be happening is that most current homeowners, even though their homes have inflated, are tapping the equity via HELOC. So they don't have to sell to access gains (even though of course it means they accumulate more debt.) They don't want to sell because: 1) they like their home; 2) they don't want the hassle; 3) they don't want to pay today's high prices.
So the home frenzy ends up having the odd effect of locking folks into their homes because they can't afford or don't want to pay the new high prices. Ergo, low supply forcing non-homeowners into a frenzy overbidding for the few homes available.
The solution: 1) build tons more homes or 2) home prices flatten or fall.
I think in most markets the #2 scenario is more likely. Why? Because building tons more homes assumes there is some sort of housing shortage causing prices to skyrocket. Except in very fast growing areas, there is no housing shortage. The rental markets are at multi-decade lows in vacancies. There IS a shortage of home for sale, precisely for the reasons stated above. So continued asset inflation becomes a vicious circle: owners don't want to sell because they can't see themselves paying crazy prices forcing buyers into panic-mode.
Most buyers don't see what's happening. They think the high prices are some sign that there is a housing shortage, and the low avail of homes to buy confirms it for them. But there is nothing of the sort. The buyers themselves are the ones fueling the asset inflation. If crazed buyers simply stepped away and rented for a year or three, the pyramid scheme would collapse of its own weight.
I read an article the other day that a hotel in the Mammoth Lakes area of California (a resort area where only employment is ski resort and small related service base)was converted into 141 condo units, priced from $400,000 to $1,300,000. It sold out in 4 hours.
Thanks Deb!
There's an old stock market saying that goes, "When does a bull market end? When there's no one left to buy."
I think that is a good way to look at housing right now. A couple of posters mention resort areas doing well. That's because there are a lot of vacation/retirement homes being purchased right now. Most of the money for these purchases is coming from HELOC on inflated first homes. At some point, these second homes will become FIRST homes.
Also, the homeownership rate in the US is now almost 70%. When you look at a long-term chart (50 years), you will see that the US homeownership rate fluctuated in a pretty narrow band b/w 63-66%. Since the mid-90s, it has gone parabolic (at least for this chart) from 63% to 70%.
What does that mean? To me, it means that we are near (and perhaps beyond) the point where there are no more buyers left. Part of this "parabola" is no doubt due to folks buying 2nd and 3rd homes.
The problem gaining ground from here is twofold:
1) much of this gain in homeownership rates is due to marginal buyers (low- or no-income) coming in and folks using HELOC to buy 2nd/3rd homes. When the booms subsides or we even see a decline, there will be no HELOC money to fuel these 2nd/3rd home purchases. And a tighter housing market will squeeze out the marginal purchasers.
2) Over the next 10-20 years, as baby boomers retire, many of these 2nd homes will become 1st homes, causing a steady stream of homes to come on the market.
It wouldn't surprise me, once this boom ends, to see housing spend a decade or two in deep slumber in terms of real appreciation.
(It wouldn't surprise me, once this boom ends, to see housing spend a decade or two in deep slumber in terms of real appreciation)
I think that is probable, and one reason folks like Dan, that are considering rolling a home into another property for tax reasons may want to just pay the tax. When prices stay down for years, psychology changes.
I visited Myrtle Beach recently.
It is considered in the top 3 2nd home market in the country now.
Also there is about 62% investors there,compare that to the 24% approx. nationally!
When the sentiment changes look out!
I visited Myrtle Beach recently.
It is considered in the top 3 2nd home market in the country now.
Also there is about 62% investors there,compare that to the 24% approx. nationally!
And the funny thing about that is that Myrtle is strictly middle class/white trash. There's a reason Hooters Air flies there. Anyone with real money or class goes to the Outer Banks or Charleston. But there's a reason why the rich are rich; the middle class is where all the suckers are.
"And the funny thing about that is that Myrtle is strictly middle class/white trash. There's a reason Hooters Air flies there. Anyone with real money or class goes to the Outer Banks or Charleston. But there's a reason why the rich are rich; the middle class is where all the suckers are.'
Same thing going on in Florida. Lots of suckers in all these trashy third rate beach towns in a state with a 1000 miles of oceanfront think they are going to be the next Palm Beach or Naples. The bankrupcy law change that minimizes protection for homestead property should have been the bell for anyone with any intelligence that the party is about over.
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