Thursday, May 12, 2005

Vulture Capital Circles Miami

Warren Buffett isn't the only one looking to make a buck in the RE bust. "The vultures are circling the construction cranes and unfinished concrete-and-glass towers of Miami's white-hot condo craze. A handful of real estate entrepreneurs are forming 'vulture capital' funds to pounce on what they call an inevitable downturn in an exploding south Florida real estate market."

"Jack McCabe said he has formed an 'opportunity fund' that is nearly 'eight figures' to take advantage of a swoon he sees coming next year as a result of a bulge in the south Florida condo pipeline."

"'I believe many of them won't get built,' said David Dabby, a longtime observer of the Miami market. 'If all those projects go forward it seems pretty clear that there will be an oversupply.'"

"He believes a market downturn beginning next year will leave some speculators unable to close, buyers in bankruptcy or foreclosure and developers out of business. That's when the vulture capitalists will swoop. 'Some of the greatest fortunes were made in down markets,' he said."

15 Comments:

At 4:59 PM, Anonymous Anonymous said...

This is the sort of thing that will keep this bubble from popping--every time there is the slightest dip, the so-called vultures swoop in and bid the prices back up. A real market bottom will occur when people have the same attitude towards housing as they do towards, for example, a roto-tiller. Cheaper to buy than rent, assuming the price is reasonable and you'll be using it frequently, but you don't fall in the love with the damn thing and you certainly don't think of buying one as an investment, even though it will probably have some resale value. I predict 30 years for this change in mentality to take place with regards to real-estate.

 
At 5:06 PM, Anonymous Anonymous said...

These VC are probably a lot more intelligent. Otherwise, they would not be anticipating the downturn anyway. They are likely to buy only if prices and fundamentals are in check.

 
At 5:12 PM, Anonymous Anonymous said...

yup this guy is too early and the last thing a true vulture does is attract PR like this...the guy is basically saying look at me i missed the run but i m real smart to catch the falling dagger. idiot yes true vulture no.

ps. the fallout will produce a massive cascading effect through out the economy unlike anyhting we've seen in the past thus producing margin calls left and right through out rich or poor.

only the true 100% cash kings will come in and p/u the value...the abv mentioned vulture will just be a 2nd bagholder from the 1st bagholder who top ticked.

 
At 5:45 PM, Anonymous Anonymous said...

5:12 -

Good point. The time to buy will be more like when Business Week runs a cover story (picturing a dilapidated McMansion) titled "The Death of Real Estate".

 
At 7:58 PM, Blogger Nayrab said...

I agree with someone's reply earlier. Even if they buy at the bottom, it may be another 10-20 years before we see another bubble like this one.

This is the biggest yet, and it may take awhile to bounce back from the bottom.

 
At 9:27 PM, Blogger David said...

The smart vultures don't get in until things get really bad: i.e., neighborhoods go south, everyone gets down on real estate, etc. In a weak market, there are always good properties that can be had cheaply. They milk the property for a small profit comfortably, and then sell in the next upturn. Repeat.

 
At 1:01 AM, Anonymous Anonymous said...

I have a great strategy for the RE Bubble. It's an inflation hedge, no property taxes and its totally liquid if I want to get out of it. Two Words: RENT CONTROL. A lot of people in San Francisco are paying $500/month for units that now rent for 3-4 times that because of the glories of rent control :). Sure you have to live somewhere for maybe 10 years to really get a good deal but in a declining market it's nice.

 
At 4:23 AM, Anonymous Anonymous said...

Anon 101 (was that an accident, or a lovely piece of timing?)

I have to disagree with you here. Rent control almost always brings its own distortionary problems.

AJH

 
At 6:38 AM, Anonymous BoyInTheBubble said...

How'd all those people who waited for the Nasdaq to go from 5000 to 4000 before buying do? Could someone update me?

And where are all the vulture capitalists buying office space in San Jose now that the vacancy rate is 25%? That's real estate too, and God isn't making any more land, right?

Could it possibly be that these Miami highrises will lie empty/get unbuilt because there is NO DEMAND in the first place?

 
At 7:02 AM, Blogger deb said...

"The housing market remains unusually strong, but speculators and lenient lending practices do pose a risk for the real estate industry, said David Lereah, chief economist for the National Association of Realtors.

Lereah, during a presentation Thursday at the National Association of Realtors' midyear meetings, said he expects that some hyper-extended local real estate markets will sour within the next couple of years, while the overall housing market should remain robust for at least the next couple of years.

"Loose lending and speculative buying – that, in my opinion, is the greatest risk that our industry faces right now," Lereah said."

Oh my Goodness. I just don't know what to make of the above!!! Did he have some kind of awakening yesterday? Will this hurt his book sales?

http://inman.com/inmannews.aspx?ID=46177

 
At 9:14 AM, Anonymous Anonymous said...

Bear markets always have bounces by folks who call the bottom too early.

The best way to make money in real estate is to buy good property at a good price and rent it out for years on end. It's not easy and you have to fix it up every time a jerk moves out. If you're lucky you get a nice widow to live there for a couple of decades.

There are houses you could have bought in Detroit for $5000 cash in the early 90's. If you didn't get to know the neighbors quickly you wouldn't have lived long enough to turn a profit. Even if the neighbors did accept you a drive by may have gotten you anyhow. You can lose more than money in real estate.

 
At 6:18 AM, Anonymous Anonymous said...

You can already see the decline starting here in South Miami. Homes built 6 months ago with the hurricane shutters still on. Drive by a new subdivision late at night. And theres a light on at every third home. Two or three years worth of association fees paid for. If you move in this month. Prices in the paper saying the condos are for sale at the same opening day presale prices. This doesnt even count in the new condos coming on line this year.

 
At 7:48 PM, Anonymous Anonymous said...

There is no housing bubble in Miami when you look at the recently published US Census bureau's statistics. 400,000 ppl moved to Florida in the past year! The demographics are there, as a result we see this tremendous amount of building. More specifically, Miami saw a net migration of over 30,000 ppl. Therefore, the 60,000 condos coming to the miami market in the next 2 years will surely be absorbed.

 
At 9:30 AM, Anonymous Anonymous said...

I agree, no housing bubble in Miami or SW Florida. The Boomers are flocking here for their second home or retirement. The inventory is lowest ever and demand is highest ever - due primarily to the increase in permanent population. Things will level out a bit but Look for healthy growth to continue for the next decade or so.

 
At 10:06 PM, Anonymous Anonymous said...

To anonymous 7:48AM post: you must have your head stuck in the sand underneath a palm tree. Another naive pseudo-expert, like so many have recently become (in their own minds).
Watch for downward pricing movement on Miami condos in 2nd quarter 06. Watch for panic selling in some buildings. Prices falling like the stock market. Potential to pull the entire S. Florida market into a recession
Get it!! This is far more serious than what you can contemplate.

 

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