13 Riskiest housing markets

[ginasands]

Hello Everyone, I just pulled this article from the Kiplinger News Letter and wanted to give you some food for thought.
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Kiplinger’s Personal Finance list:


“Soaring prices and the emergence of a generation of wet-behind-the-ears real estate investors stoke fears that the boom is turning into a bubble that will burst,” says the report, released this afternoon. “Another reason for concern: the growing number of houses bought as investments: nearly one-fourth of purchases over the past year were investments, and they’re concentrated in a few markets.”

Here’s the list, with the probability of a decline in prices over the next two years rated as a percentage:

1. Boston, 53 percent (the area has lost 200,000 jobs since 2000 and home prices remain high);
2. Los Angeles, 40 percent;
3. San Francisco, 40 percent;
4. Sacramento, Calif., 40 percent;  (that's me)
5. Providence, R.I., 39 percent (no population or job growth);
6. Detroit, 38 percent (auto sales are awful);
7. New York City, 31 percent;
8. Minneapolis-St. Paul, 25 percent;
9. Fort Lauderdale, 23 percent;
10. Denver, 21 percent;
11. Washington, D.C., 19 percent;
12. Miami, 18 percent;
13. Tampa-St. Petersburg, 14 percent.

The problem in the Florida markets, says Kiplinger’s, is that investors are jacking up prices to the point retirees can’t afford them.

July15, Kiplinger NewsLetter

[Valgolas]

"The problem in the Florida markets, says Kiplinger’s, is that investors are jacking up prices to the point retirees can’t afford them."


It's always those evil, greedy investors.  

They should pass a law against them, you know.

[reoconsultants]

I think it was still put best when they said IF YOU WERE TO PUT EVERY FINANCIAL ANALYST TOE TO TOE YOU STILL WOULD NOT REACH A CONCLUSION!

[Dan732]

"The problem in the Florida markets, says Kiplinger’s, is that investors are jacking up prices to the point retirees can’t afford them."


It's always those evil, greedy investors.  

They should pass a law against them, you know.

ATTENTION Home shoppers, if the prices are too high, DON'T BUY! It's that simple. If you can rent a nice condo for 1500 a month why buy it for 400K? It makes no sense! Let the flippers flip to each other and sit on the side line and watch.

[Moneytalks]

Why do you think it would be better to pay $1500 a month toward rent
than it would be to pay $2500 toward owning a fast appreciating property ($2200 if interest only).

The renter saves $1000 per month ($12,000) and the owner would have the interest deduction and over $100,000 in appreciation.

The math goes on and on but the result is the renter loses everytime.

You must be a landload.

Moneytalks

[Dan732]

Why do you think it would be better to pay $1500 a month toward rent
than it would be to pay $2500 toward owning a fast appreciating property ($2200 if interest only).

The renter saves $1000 per month ($12,000) and the owner would have the interest deduction and over $100,000 in appreciation.

The math goes on and on but the result is the renter loses everytime.

You must be a landload.

Moneytalks

Only problem with that is you are assuming it would be a "fast appreciating" property. You also have taxes, HOA fees, insurance you have to facter in. What happens when that 400K condo is now worth 200K, you now owe more than what it is worth! So you are stuck paying 2500 a month plus taxes hoa and insurance, when you could have been paying 1500 a month and not even have to worry about the taxes, hoa or insurance.

[Valgolas]

Hey, guys,

How about renting, but also get an option to buy, too!

Get the best of both worlds...  low rent (relative to a mortgage payment), and capture the upside.

If it goes down; don't buy it.


Now, if you can just find someone who will agree to this in an appreciating market...

[evergreen]

What if you can't afford $2500 a month lol. Then renting is the way to go.

Forgive my ignorance, but I am still trying to figure out how investors control the market. I am sure investors add some to the demand but they act like that is the sole and largest reason why costs go up.

How about the fact that loans are so easy to get now? How about the fact that more people are learning out Real Estate and the benefits of owning verses just renting? How about the fact that many like to live above their means and that regular people are buying just to get into something? How do you explain sharp price increases in a city where sales numbers remained about the same as they have been for months or years before said increase?

It must be nice to look through tunnel vision glasses.

I don't think I have ever seen such poor reporting in all my life and it is not just in the RE world either. News agencies and report givers usually have little in the way of credibility and experience and fail to verify sources and data. RE, war, left, right, et al.

Real news has exited stage left and the era of sensationalism is upon us.

[cma_master_1]

11. Washington, D.C., 19 percent; - wrong.

I'm an agent in Maryland and we do 50% of transactions in DC.  There are a lot of areas which still need to be turned around so the prices will most likley not go down.  I've worked with an Investor friend of mine who purchased a house in DC and fixed it and ended up makin 100000 profit in 2 years.

 He has a house in Farifax, Va (it is one of those Florida hurican metal house).  His house is part of a community of 12 similar homes.  He purchased this for $200,000 2.5 years ago.

They are building more and more 700k to 1mil homes around his house and the builder went to him offering 400K+ for his home so they can tear it down and build a mansion (he has a nice chunk of land).  They made the same offer to the 11 other home owners.
 

[Dan732]

What if you can't afford $2500 a month lol. Then renting is the way to go.

Forgive my ignorance, but I am still trying to figure out how investors control the market. I am sure investors add some to the demand but they act like that is the sole and largest reason why costs go up.

How about the fact that loans are so easy to get now? How about the fact that more people are learning out Real Estate and the benefits of owning verses just renting? How about the fact that many like to live above their means and that regular people are buying just to get into something? How do you explain sharp price increases in a city where sales numbers remained about the same as they have been for months or years before said increase?

It must be nice to look through tunnel vision glasses.

I don't think I have ever seen such poor reporting in all my life and it is not just in the RE world either. News agencies and report givers usually have little in the way of credibility and experience and fail to verify sources and data. RE, war, left, right, et al.

Real news has exited stage left and the era of sensationalism is upon us.

Buyers control the market, you should know that. If all the buyers decided to not buy Real Estate, it would go down until they decide to buy. That is just like anything else. Do investors solely control the market? Nope. But they are part of it.

News is bunch of hogwash, it is more about celeberties and their stupid antics. Do I really care what Paris Hilton is doing? No, but they are going to broadcast it anyways. News jumped the shark in the late 90's.

[chatterweb]

What a relief! My two cities and states were not on the list!!!
Like it matters! If you can invest, it can work for you!

[evergreen]

So-called "Reports" are like butts, everyone's got one and it usually has a hole in it.

Remember, these are the same people who told you to buy stock in Internet-based companies that were being run by CEO's who used AOL now and again.

The same people who will tell you that rates are at their lowest point in 12 months and it is a good time to buy and then turn around and say not too because a magical bubble will burst and your home will lose value.

Think I am going to open up a Lemonade stand now. :D

[TamiSpartan]

Another great thread  8)

Ever been caught in a "bubble"? I have -- and it wasn't pretty. Eighteen years ago we ended up with four townhomes not worth the mortgages on them and three nightmare tenants. Taxes, insurance, HOA, and mortgages don't go away -- they need to be paid regardless of the value of the property. We were ROOKIES and thought we'd found a good deal. We lost our shirts and almost our primary residence. Our approach has changed significantly. To this day, I still wish there was a way we could have rode out that mess, those townhomes are worth a fortune now

No one has a crystal ball, therefore, no one can predict what exactly will happened. Past performance is not an indicator of future returns, it should be taken into account with all of your research. Buying high and suffering through negative cash flow because you are banking on future performance is a no win situation IMHO. This seemingly national trend, has put me in a watch-and-wait game for my areas of property investment. I still know a great deal when I see one, and believe me, I'll be in there attempting to get it. I'm positive there are people who disagree with me because there is money to be made -- I've been burned badly, so I just don't go that route any longer.

I'm convinced people have decided the RE market is the place to put their money now and are doing so with wild abandon (can you stay dot.com?), assuming it's a slam dunk based on past performance. TV shows (that do not account properly for the costs) and, infomercials telling everyone how "easy it is," while the formerly homeless woman sits infront of the rented mansion telling her story of vast gains continues to drive the inexperienced investor.

I'll be here to pick up their mess.

[Dan732]

So-called "Reports" are like butts, everyone's got one and it usually has a hole in it.

Remember, these are the same people who told you to buy stock in Internet-based companies that were being run by CEO's who used AOL now and again.

The same people who will tell you that rates are at their lowest point in 12 months and it is a good time to buy and then turn around and say not too because a magical bubble will burst and your home will lose value.

Think I am going to open up a Lemonade stand now. :D

When I heard Jim Kramer (sp Cramer?) I forgot how to spell his name, was touting Real Estate a week ago as a great investment. I figure RE has jumped the shark. He did the same thing with Tech Stocks, he pumps it and pumps it until it went downhill fast. It's not the question of if, it is a question of when. I can not tell you when it will pop, it might be popping right now. And most people will who own will just wait it out, no big deal, as long as you can afford too. Would you sell your home because a nieghboring property was selling for 50K less than what others sold for? No, because as long as you can afford, why would you sell?

[karlsd]

Another great thread  8)

Ever been caught in a "bubble"? I have -- and it wasn't pretty.

Thinking as a long term investor who is seeking a positive cash flow via rental properties; does it really matter if the bubble bursts, no matter where you purchase?

If I buy a 2 story rental for 400K in NY and my montly nut is 2850 (Mortgage, Home Owners and Taxes) and I am collecting 1800 & 1400/month rent.  I will have a positive cash flow of 350/month.  If the bubble bursts here in NY and my house is now worth 250K, who cares!!!!!  I still have 350/month coming into my pocket.  Sure if something unexpected happens which forces me to sell, I'd be in big trouble.  

I decided to move forward with this deal, regardless of all the bubble talk, sure I could have gotten into this house 2 years ago at 275 and it could end up right back there 2 years from now, but in my mind I have built a positive cash flow that will take me through the ups and downs.

I think now is the time to look for deals on properties that can give you a positive cash flow right now and over the next 5 years.  That should be the focus, NOT HOW MUCH THE PROPERTY MIGHT BE WORTH IN THE NEXT YEAR OR TWO.  Just my 2 cents