By .

December 5, 2006 07:55 PM | Link to this

This is what many people do not seem to grasp. If you can hang on to real estate year after year, it simply does not matter if house prices are down from one year to the next. Ultimately, you will be wealthier for having property, no matter how bad the news was, no matter how many times you got scared, no matter how many times you got behind in the mortgage.

Bear in mind most of those houses were bought at 80% LTV. In other words, return on investment is 5 times that 626%, 555%, etc.

By Mike FInk

December 5, 2006 08:59 PM | Link to this

Quadrupled in 26 years? Well, guess what, that’s just about the rate of inflation. Here is a good explanation of how money doubles every 10 years:

http://www.financialservicesguide.net/seller.html

As I have said over and over, typical home appreciation is just above the rate of inflation. Take into account the carrying costs (taxes, insurance, etc), and you will realize that you housing is typically not a great investment. Yes, many people have gotten rich in RE. And, if we continue on this path, many people are going to go bankrupt in the RE market.

However, what . said above is correct, the leverage used when buying homes can greatly increase the ROI for home purchases. However, just as it compounds the increases, it also compounds the fall! That’s what people do not seem to grasp. If home price fall 10%, and you put 20% down, you just lost 100% of your investment! (carrying costs and RE commisions on purchase and sale) That’s one of the many reasons why buying into a falling market is always a financial disaster.

By student

December 5, 2006 09:33 PM | Link to this

Mike — the people who bought $5,000 houses after World War II, and made 4,000 per cent on their investment in their lifetime, didn’t know about supply and demand. They didn’t know about rising and falling markets. They didn’t know about PC’s, web sites or FICO scores. They didn’t have all the crap in their heads that keeps you from thinking straight.

They had common sense.

They bought a house and stuck with it.

Grow up, Mike. You can not time the housing market or the stock market or the coming/return of the Messiah. Start acting with a little common sense - all the time.

By Mike Fink

December 5, 2006 09:56 PM | Link to this

I fail to see how “growing up” means overpaying for a depreciating asset. Maybe you can explain that to me; and how that makes me a grown up.

No, you can’t time the market, you’re absolutely right about that. I am just waiting until the fundamentals return, and then I will buy. If it falls further, so be it; I know it will be back. But buying in now? Again, I fail to see how that would “grow me up”.

Your right, they probably did not have that crap in their heads. They also did not have a crazy lending environment; had to put 20% down on their homes, and had very little in the way of resources to help them quickly value their homes. Again, I don’t see the point.

If you could explain to me how “ignoring” the pricing disparity and the data that we have at our fingertips is “common sense” I would be very interested to hear it. No, they did not have those kinds of resources; I don’t see how it matters though. They did have common sense, as do I. I just have more data at my fingertips to help me analyze the situation.

Please let me know how I can increase my “common sense” by buying a home right now. I can’t even fathom an argument one can make to buy a home in Palm Beach county right now, but I am always interested to hear what others think.

By dutch

December 5, 2006 10:00 PM | Link to this

Letter from Mike Fink to the Dutch West India Company

Dear Sirs: I am acting in the stead of Peter Minuit, who has taken ill with a fit of vapors. In the matter of the purchase of Manhatten Island from native peoples, I am convinced that this would be an act of folly.

Given the state of the economy in Holland this year of 1626, the infinite availability of land in the New World, rising interest rates in the Netherlands and the tax liability such a purchase would incur, it is clear that the purchase of Manhatten Island for 60 guilders is an unnecessary risk. After all, we can rent the island for half a guilder a year, and reap enormous savings in the short and long term.

I see no reason why outright ownership of the island would be of significant value to any future generation of our posterity.

Sincerely,

Mike Fink

By FL Rennaissance

December 5, 2006 10:10 PM | Link to this

Thanks you for the above comment student! You are indeed correct and earn A++! Dimwitted people such as the ilk of Mike Fink et al think they are very wise and but end up outsmarting only themselves and living in a Rent-to-Own trailer park down by the river demanding a welfare state while the patient and prudent prosper.

By Mike Fink

December 5, 2006 10:20 PM | Link to this

You guys really crack me up. :)

Anyway, go back through my posts for the past year or so. I have been called names, told I was an idiot, prices are only going to rise, I will be priced out forever… And so on. This started right around a year ago. I don’t know if the PB Post keeps blogs for that long; if so, you will see that this is exactly the same things that people were saying as the market was climbing like crazy, and I was saying exactly the same things.

I have been right for the last 12 months. You think I am wrong for the next 12? I put my money where my mouth is. Are you? If we are in a slump, and about to climb like crazy again, go buy! There are tons of properties out there, many in distressed situations. Buy away! Credit is still very, very loose. I can get a loan for 9X my income right now (negative am, the flippers wet dream). So, all you who are convinced we are going nowhere but up… Now is the time to pounce! Credit IS going to tighten, you will probably never be able to get credit terms like you can now again in your lifetime.

So go for it folks, buy away! Don’t let me dissuade you from your dreams. As long as you are willing to rent me your piece of paraidse at 1/3 the carrying costs, we are all happy!

By cw1900

December 5, 2006 10:33 PM | Link to this

dutch,

Brilliant. perfect. very well done.

Does anyone remember the 1993 tourist shootings up on I-10 in north Florida? Remember the national exposure it rec’d? Remember your relatives living out of state calling you, thinking you were crazy to live down here in this crazy place?

Remember how the media at the time opined how Florida tourism was going to be hurt for years to come and it was affecting property values and it was dangerous here and yak yak yak?

The point is, did it really matter? No.

Was it overhyped? Yes.

13 years later and did the Florida median home price increase substantially in spite of all the bad press and naysayers and anything else bad that happened?

Did all of that news fade into oblivion? Yes.

Will our short term RE blip do the same? Yes.

Will the people still come here in droves? Of course.

cw

By Get in the Game

December 6, 2006 08:18 AM | Link to this

Funny…

Remember the “irrational exuberance” that Alan Greenspan of the Federal Reserve described in reference to the stock market in the late 1990’s. However, many “investors” continued on ignoring fundamentals and/or companies with no profits. No, the Federal Reserve, ah what do they know anyway about technology? They just setting monetary and fiscal policy. And even after the technology let down, if you will. Ah, it’s the Fed’s fault. They printed these stories and people listened. No, they just stated the numbers, which is their job, and how these financials work with the additional moving parts within our economy.

Fast forward to 2002/2003 in South Florida, if you will. Not many people cared [only the Buyers] about the absurd appreciation within the residential housing market. The media or Wall Street [only cared about homebuilders] did not mention any disparaging information, nor did any Sellers or local “investors”.

Everyone was flying high at cocktail parties speaking of riches and how “easy” it was in the residential market. Then the wave of pandemonium took off. HGTV to local “ponzi” schemes described how you could “flip” your house with minimal work in months.

So, the Fed goes out, this time in 2006, and states that the housing market and its underlying fundamentals are overvalued much more than initially thought. Again, what do these guys truly know about my neighborhood? Again, they are suits busy writing policies. A bunch of economists and finance geeks, that’s all. Florida is a brand, everyone will come here no matter what and no matter what price. So, again what do our policy makers truly about the world’s number one economy?

SUCCESS = PATIENCE, RESEARCH, AND TIME

It has been stated several times throughout the course of any country’s financial timeline. Success takes patience, research, and time.

Patience, research, and time. Not luck [lottery], or timing the market, or reading your favorite, local columnist, or staging your home, or flipping a contract.

In the case of real estate, you also need to include added value. Not perceived, but actually added. The value or component that actually appreciates in residential real estate? The land. Most “investors” do not know this fact. The structure is a depreciating asset over a given periodicity unless…you add value. So, in a short period of time the land is only appreciating at 6%-8% a year tops, go ask your bank [since this is their increase]. This leaves a whopping 25% - 30% in the existing structure. That means you need to add value, not shifting furniture or adding crown molding, but…adding a bedroom and a bath, adding a second story, increasing the square footage. Maybe changing the zoning, if you live in on a commercial/industrial node or corridor.

Value takes time. You understand the rest.

FORTUNE 500 VS. THE HOUSING MARKET

Again, financial fundamentals. Does Coke or General Electric increase at a rate of 35% a year for 3 years in a row. Do they not want to? Is their management doing a poor job or are they lazy? Or is the housing market a small, unheralded stock in its infant stages, e.g. Microsoft?

Or think of it this way. If Pfizer wanted to acquire Merck for…let’s say for ease of math…$100 B in 2007. Merck said no the company IS not available. Pfizer attempts to purchase again in 2010, is the price now $246 B??? And we are even assuming Merck has added significant value to the corporation, not “window treatments”. Is this truly rational?

HOOKING A SUCKER

In the end, the residential market is based on emotion while the commercial sector is based on added value, yield earnings, and other financial data. The residential side, yes one MUST live in a home for job transfers, change of scenery, or some other aspect that forces one to a certain geographic region.

Because this is true, is an individual going to pay more for a house or anything if the price does not “make sense”, unless the Buyer is a sucker. The Buyer is swept in a wave of emotion of HAVING to purchase an exact home regardless of price. That is the battle, the equilibrium of price. As a Seller, everyone wants an overpriced home to sell and as a Buyer, everyone wants a deal.

Right now in 2006/2007/2008 the pendulum has swung in the Buyer’s favor, you should know this by now. Forget what you read and view on TV. Just think basic financials, supply and demand. Look at how many For Sale signs are in your neighborhood or how many RE offices are being acquired or shutting down. Do the math and place yourself on the opposite side of the pendulum and honestly ask yourself does this number truly make sense?

Next time you Sell or Buy a house, just realize which side you are truly on and this shall help you recognize and appreciate both points of view.

Good Luck to All

By Seller in Control

December 6, 2006 09:22 AM | Link to this

The Buyer controls the market? Can the buyer sign his name on both lines on a contract? It is has and always will be the Seller who controls of how much he wants to sell his property for. The Seller is the “only” one who can say “yes” or “no” on a contract offering. If the Buyer receives a “no”, he can offer more money to the Seller or move on to look at other houses within his price range. It is the Lender who can say to the Buyer either “yes” or “no” on a loan. It is the Realtor who has to convince his client on offering more money or lose a sales commission. If the Seller does not sell, the Seller still has his property, the Buyer still has their money, and the Realtor is out of a commission.

In the long term, real estate is a better investment than stocks. It always has, and always will be.

easyasabc

By cw1900

December 6, 2006 09:24 AM | Link to this

Actually, the irrational exuberance speech was made on 12/5/96, technically a little before the “late 90s”. Anyone who took Greenspan’s advice did miss out on three years of good profits, even if by accident and dart board throwing. However, I see your point and you make a good one, but using the Greenspan speech would be like NARS coming out in late 2002 and saying irrational exuberance on so fla real estate.

If one would have listened to that and sold in early 2003, they would have missed out on 2004 and 2005 profits to sell to the bandwagon, interest only crowd who generally buys after the news is already out and buys at the top.

However, to use my own philosophy, if you make your money on the buy and not try to day trade real estate, irrational exuberance speeches would be meanigless to guys like me who have no plans on selling their re holdings for years to come anyway and make their money on the buy.

Your good formula SUCCESS = PATIENCE, RESEARCH, AND TIME will never be used by the cocktail party crowd you speak of. They are the “get rich quick” crowd in their leased cars and 300 dollar shorts who are at that cocktail party strictly to look good for the Jones’ and tell all of their newfound big lot they just overpayed for in Ocala. They have the time, but do research via infomercial, and have zero patience.

That’s why there are people who actually think a luxury condo they bandwagoned on in 2005, with crown molding next to the railroad tracks in Delray Beach, is a good investment because it has nice kitchen countertops. It may look nice inside, but you have to step over the passed out crack whores to get inside of it. “Interest only, Window treatments, and Location Stupid” is not how to get through your real estate life.

It just makes it easier for the rest of us.

cw

By To: Easy

December 6, 2006 09:52 AM | Link to this

Hey Easy: The seller can’t sign both sides of the deal either. WIth volume at its current levels, the buyer can make 10 lowball offers and one desperate seller will bite.

Those desperate sellers are all those poor souls who bought with neg. amt. mortgages who can’t afford payments on them once they reset. Unfortunately there were way too many of them here, and since they HAVE to sell, they are the ones driving down the prices.

By what did easy say

December 6, 2006 10:14 AM | Link to this

easy, what did you say to make jeff mad? we didnt see it. clarify.

cw, i agree about those condos in delray in the marginal areas, no way were people using sound judgment in buying those. the suckers were hooked.

easy, the client of the realtor is the seller, not the buyer. Unless it is a buyer’s broker, the broker works for the seller, never forget that.

By Mike Fink

December 6, 2006 10:18 AM | Link to this

RE vs. Stocks:

http://www.forbes.com/realestate/2005/05/27/cxsc0527home.html

Historically, over a long period of time, stocks have pretty much stomped RE. Yes, if you pick certain periods (like the past few years) you will definately beat the stock market. However, in the long run, stock prices are not as pegged to inflation (they can increase at a rate much higher then inflation without causing a “priced out forever” situation).

Anyway, I am sure this will start a link-fight, but, no, historically stocks are a better place to park money for a long period of time.

By Michael Fink

December 6, 2006 10:24 AM | Link to this

Here is an even longer term analysis of RE vs Stocks:

Again, looking at national averages rather than specific hot or cold markets, median home values (a statistical measure, which, unlike an average, provides that price in the middle of a range) from 1940-2000 has increased from $7,500.00 to $125,000.00, a sixteen-fold increase.

However, during that same time period, the Dow Jones rose from 150 to 10,000, four times better than that of housing.

http://findarticles.com/p/articles/mim3601/is2651/ain10301253

By mike stop the BS.

December 6, 2006 10:56 AM | Link to this

Mikey dear, stop the baloney. You yourself know that leveraging makes real estate perform at least twice as well as stocks in terms of ROI. You stated as much plainly in this column.

You can leverage stocks 2 to 1. The typical homeowner trying to avoid PMI leverages 5 to 1. With nothing down deals you have infinite leverage.

Someone (EX-NY?) mentioned brownstones in Brooklyn that are up 1000 times since the 1960’s — and don’t forget they could have been leveraged. How many stocks do that, Mike?

Finally, if you like stocks so much, why don’t you make money on real estate stocks, like that young man (student?) is doing? As you say, Mike, put your money where your mouth is.

By A.P.

December 6, 2006 10:56 AM | Link to this

CnnMoney.com wrote an article a month or so titled Top 10 Cities: Where To Buy Now. Out of the top 10, 3 were Florida cities that were in the top 5.

Sorry Rich R, Wilmington,N.C. came in at #7. The PIE can only take you so far!

Can we CHEERLEADERS and DOOMSAYERS agree that Panama City and Vero Beach is NO Palm Beach? AGREE! If the projected median home price in those 2 cities are going to be in that price range within a few years, Where do you think the Palm Beach median home price will be? Do you really think Palm Beach will be at or less than those values? NOT! While the market is down, It’s NOT out.

Florida for many years was UNDERVALUED! It finally caught up and it did get carried away. A correction is taking place,but it’s not going to be as dramatic or catastrophic as some have predicted.

While I agree with Mike Fink holding out for the past year or so not buying a home, The window of opportunity might soon be upon us. TIMING is everything! The 2000 price levels you hope for are UNREALISTIC! Good Luck on your journey.

By crazydem

December 6, 2006 11:09 AM | Link to this

Mike the sideliner- Surely you have to be putting all that money you’re saving in mortgage payments somewhere? Can I assume it’s in the stock market? Then please let us in on your stock picks!!! (You can name sectors or your favorite index if you don’t want to get into specifics and blow your cover.) Your patience, research, and time is surely being put to good use studying the market right? Come on then, give it up! We want some tips!

BTW-The other renters can chime in also. Hmm, I wonder how much time these people waste computing the rate of price decreases in the local RE market, along with cuts in asking prices of local homes in the subdivision they lust after…? That’s alot to digest.

By cw1900

December 6, 2006 11:25 AM | Link to this

Mike,

Bottom line, if you want to be wealthy, and everyone does, do what wealthy people do. Wealthy people never put their eggs in one basket. The wealthy acquire over long periods of time both real estate and stock portfolios, among other things.

Both have their place, but on real estate, you did not take into account leverage. I will never use leverage in purchasing stocks, but I will in real estate, and even then, rationally.

The one big thing that the wealthy do not do as a practice, is what many here do. The wealthy do not load up on unsecured credit, they do not live above their means (The old saying “Never touch the principle” also applies here), and they don’t put sizeable ratios of their money into things that go down in value such as leased cars.

Some will say here, well, they can do that because they are rich. Not true. How do you think they got that way? Not by the way the wannabes are doing it.

The wealthy I know never ever told me the way they acquired wealth was by renting, or upgrading their floors to marble, or taking out a heloc to buy a hummer.

So Mike, it’s a little bit of both in stocks and RE, keeping debt to an absolute minimum, and a little bit of common sense thrown in.

By Investor

December 6, 2006 12:14 PM | Link to this

Easy,

Please fill me on Belle Glade/Clewiston plan. I need a place to invest my profits I made from Webvan and Enron.

By Signed

December 6, 2006 12:18 PM | Link to this

“I wonder if he’ll stop by today or if he just had a coronary reading easyasabc. I only have two cans left.”

Signed,

the lady at the general store where Rich R buys his pie filling…

By Signed

December 6, 2006 12:40 PM | Link to this

“Ok Rich R, yes, thank you for that information. I will take care of it right away and let Mr. O know. I’m sure it will be gone very, very soon.”

Signed,

Jeff’s secretary on the phone to Mayberry just minutes before Easy’s bombshell was deleted once again…

By Notes to Mike Fink

December 6, 2006 12:52 PM | Link to this

1) Did you really write the letter above to the Dutch West India Company? Certainly sounds like your logic.

2) I could use some of those stock tips that your insightful analysis yields.

3) I have learned from you, Mike, that renting is the way to get rich. However, I am impatient, so extending your logic, I am goint to rent 2 or 3 houses at a time, maybe 4 or 5. I should be wealthy in no time.

4) As someone else observed, Mike, learn to do arithmetic, esp. compound interest.

By Signed

December 6, 2006 12:54 PM | Link to this

“My goodness. He is a vixen, now isn’t he? Why? … Because to the other kids, he is one “righteous dude”.”

Signed,

the guy talking to jeff who sits in the bigger office than jeff that jeff needs to get permission from before he can delete easy’s next post…

By Jeff Ostrowski

December 6, 2006 01:10 PM | Link to this

A few easy rules for playing nice in the comments section:

No profanities.

No racial slurs.

No misogynist fantasizing.

No personal attacks.

No misstatements of easily verifiable facts.

By easyasabc

December 6, 2006 01:28 PM | Link to this

Gee, Isn’t that what we read in the Palm Beach Post everyday?

We read about what Michael Richards or Mel Gibson types said.

The Post has stories of what is up Britney Sperars skirt or we are trying to figure out who Jennifer Aniston will be in bed with next.

Everyone attacks President Bush, VP Cheney, Bill & Hillary Clinton, local police, and any other politician who the paper says are crooked or otherwise.

And about 90% of what we read from news stories are lies or facts turned around to benefit the paper in their means of promoting circulation.

Why should this blog be any different?

easyasabc

By crazydem

December 6, 2006 01:41 PM | Link to this

Fink-U there? I’m logged into IShares-waiting for your guidance-ready to buy…

By note for crazydem

December 6, 2006 02:17 PM | Link to this

I know what Mike Fink is doing with his investment money. In six days, you will learn that Mike Fink has purchase the 488 mobile home park of Briny Breezes for $500 million. Look for shares that are selling off now to see what he was into.

easyasabc

By .

December 6, 2006 06:18 PM | Link to this

$500 million?

My goodness, Mike really DID save a lot of money renting.

By Mike Fink

December 6, 2006 07:46 PM | Link to this

Where do I keep my money?

I keep most of it in an index fund, which tracks with the S&P 500. The rest I have in an aggressive small cap fund. I am young, I can afford some periods of downturn, and small caps generally perform better when you have lots of time to wait for recovery after a possible (and probable) fall.

What some of you fail to realize is that what your advocating; speculating on RE, is even riskier then “playing” the stock market. I don’t play the stock market, I put money in that I don’t intend to need for many, many years. Over the long run, I know I will win.

Yes, you can leverage the hell out of RE. That’s great on the way up. And devestating on the way down. Anyone who bought last year with 20% down has lost 100% of their investment at this time. And, if they don’t sell, or the market change direction, will lose more then 100% in the very, very near future.

Also, RE has carrying costs; which, espcially in S. FL, are VERY expensive. Stocks have NO carrying costs (or almost none, I try to invest only in no load funds).

Look into the stock market crash of 1929. The reason that happened is (somewhat) because of buying on extreme margin. That’s exactly what has happened in RE. You can buy RE on 100% margin! Even during the 1929 crash you could not do that!

For anyone who is interested, you will find this sounds very similar to our RE market right now. The only reason we don’t see a crash like this is because of the period of time necessary to buy/sell RE. But when the smoke clears, the effect will be the same.

http://en.wikipedia.org/wiki/WallStreetCrashof1929

Here is the section detailing what I was saying:

The crash followed a speculative boom that had taken hold in the late 1920s, which had led millions of Americans to invest heavily in the stock market, even borrowing money to buy more stock. Banks lent heavily to fund this share-buying spree.[citation needed]

The rising share prices encouraged more people to invest, as they hoped the shares would rise further, thus fueling further rises, and creating an economic bubble.

Sound familiar?

Renting is not a way to get rich; its a way to prevent becoming poor from owning a grossly overpriced, rapidly depreciating asset. You get rich through hard work and careful planning. Not through reckless speculation and overspending.

And finally, to AP. I don’t think we are going to see bottom in this market for at least 2-3 years. RE just does not unwind that quickly; and we are still WAY out of whack from the fundamentals. However, on this point, I totally concede I could be wrong; again, its speculation. The market could just be flat for 7 years, while rents and incomes catch up. Or we could see a massive sell off tommorow and the correction could be over, in which case I will be renting for a number that is close to the price to own the same home. It’s just impossible to tell. However, I am just playing the numbers. We have years of inventory; I don’t see it going anywhere for a long time, especially with our unique problems down here (SOH and insurance).

Look at the positive, at least we are discussing RE again. The past 2 weeks on this blog have been almost worthless for learning/discussing anything meaningful. :)

By Mike Fink is a Fake

December 6, 2006 08:41 PM | Link to this

Where do I keep my money?

WHO CARES? You are so full of BS. If you were so great at investing, you would not be spending your time on this blog BS- ing since you would only use your talents for that much more investing instead of more BS- ing.

You don’t see Warren Buffett, Ted Turner, or Donald Trump talk like you on this blog. And they DO HAVE MONEY and REAL ESTATE. I don’t see them brag about how great it is to rent and how well they are investing in stocks. Boy, and you are a boy and not a man, GROW UP.

You don’t have any brains, let alone any money. I just laughs at you because you sound so incredibly stupid.

The market could just be flat for 7 years,

The only thing I see flat is your head.

The past 2 weeks on this blog have been almost worthless for learning/discussing anything meaningful.

That is exactly what I think of any of your comments too - worthless.

You are no financial whiz kid and I hope no one reading this takes any of your advice or they too will be in the hole with you where you are now.

Don’t you agree A.P., CW1900, and Florida Renaissance?

By John

December 6, 2006 08:49 PM | Link to this

If prices are going up then why are’nt people buying with 30K+ homes sitting? Where are these rich boomers that people keep talking about saving the market? Judging from data from a website (melissa data corp) November 2006 sales are going to be pretty sad as well over last year.

By Joe

December 6, 2006 08:58 PM | Link to this

Sounds like a few disgruntled realtors on this blog!!

By Realtors Turn 2007

December 6, 2006 09:27 PM | Link to this

Yes Joe, many disgruntled and angry realtors out there these days. This year the realtors watched all their buyers from 2004 and 2005 go in foreclosures for all the exotic and no money down mortgages they encouraged for people who did not have money or enough money. Next year, 2007, it is the realtors turn to go into foreclosures and loose their homes. Maybe we can give some low-ball offers to realtors who need to sell next year. You know those same low-ball offers that they are pushing on sellers this year, can be even lower for realtors next year. Save your money Joe so we can buy some of those properties from desperate realtors in 2007 and flip them too like they did in 2004 and 2005. What do you say Joe, are you in?

By Statsin question

December 6, 2006 09:34 PM | Link to this

Interesting article on auctions in Naples and RE in general :

Auctioned houses went for less than bought for earlier sale.

http://www.nytimes.com/2006/12/06/business/06leonhardt.html?_r=1&ref=business&oref=slogin

By habib

December 6, 2006 10:49 PM | Link to this

This is hilarious. Why would anyone buy a house now in PBC? 4 years supply of inventory and every realtor known to man proclaiming now “IS” the time to buy? No thanks, I’ll wait for the wage/rent/home price ratios to normalize. We still have about a 30% downward adjustment to go.

By Mike Fink

December 6, 2006 11:01 PM | Link to this

Who said I was great at investing? :) I just hope to follow the historic market trend. Again, I am not speculating in stocks, I am using them as a retirement/tax shelter, not as a get rich quick vehicle. Also, I am not a financial whiz kid, nor did I ever claim to be. I do, however, know how to divide, add, multiply and subtract; which is really all you need to do your own analysis of our housing situation.

And the rest of the ranting deserves no response. Come back with some arguments/reasoning next time, instead of just mouthing off.

2007 is probably too early. Look to 2008-2009 as the bottom, unless we get there much quicker then we ever have in the past (which is definately possible because of the exotic loans/lax lending standards). However, flipping is going to be a thing of the past. Remember day trading; and how everyone was doing it/getting into it? Who daytrades now? Stock brokers. :) I don’t know one person who personally day trades anymore. And so it will be with flipping houses. People will still do it, but probably only 1/100th the number of the people doing it now. The experts will return; spot underpriced/undervalued properties/areas and flip them for a profit. However, the days of Sally Soccermom, and Joe HowMuchAMonth flipping houses are over.

Oh, and one more thing. Warren Buffet is not the best person to use in defense of our housing prices. He has acknowledged the housing bubble several times; in effect laughing at the price people have paid him for land.

http://www.ic.stonybrook.edu/Stu/jcolombo/

By wow habib man

December 6, 2006 11:04 PM | Link to this

very intelligent post. you are a rocket scientist of real estate.

cool how you can pull numnbers out of thin air that mean zilch, but in your world, who knows what it means?

How about this? I think the Carolina Panthers are going to win the Super Bowl this year. Yep, you can take that to the bank. I just know because I said it.

On this blog, please come with data and facts to support your thoughts.

You are welcome, but please have something intelligent to say.

By .

December 7, 2006 05:25 AM | Link to this

I do, however, know how to divide, add, multiply and subtract; which is really all you need to do your own analysis of our housing situation. quoted from Mike Fink

Actually Dear, You DON’T know how to divide, add, multiply and subtract. You were the one who wrote it takes 9% interest a year for a 500K property to appreciate 180K in 5 years.

You still refuse to address this issue.

The main reason you lack credibility is you can’t do simple math.

By Signed

December 7, 2006 09:36 AM | Link to this

“Margaret, who the hell is Mike Fink and why does he keep sending me a Christmas card every year in my newspaper?”

Signed,

the old guy on Mike Fink’s early morning paper route delivering the Palm Beach Post to supplement his income and hopes people will give him an extra big tip because the full time gig as an Asst Mgr at Kmart in that cheezey short sleeve short and the clip on tie doesnt cut it and now the old guy calls the Post delivery dept to complain that his newspaper was thrown into the grass and not on the driveway and the sprinklers got it wet and now he can’t do the jumble while he has his morning coffee and that dam@#d paperboy can’t get anything right….

By Mike Fink

December 7, 2006 10:29 AM | Link to this

Man, someone is still hot about that 9% thing, huh… Well, if it will restore my credability in your eyes, get me the quote of what I said, and I will be happy to either retract the statement, or try and clarify what I was saying. Obviously 9% appreciation on a 500K property is about 50K appreciation per year. So, no, its not going to take 5 year to get 180K out of it. More like 3 and a few months, and maybe just 3 because of the compounding effect.

But please post the quote back to what I said, I would like to see it and try to determine what I was trying to say. I have a feeling I was figuring in cost of ownership vs cost of rental (shocker), and was probably taking the carrying (fixed) costs into account to determine a break even point. You don’t get straight apprecation on a home like you do a stock, you have costs every month (on top of the intrest for the loan) that need to be serviced.

Either way, I would be happy to try to explain what my point was, I just don’t remember the article/post in question, so I don’t want to speculate.

By Mike Fink

December 7, 2006 10:41 AM | Link to this

A few articles for your reading pleasure:

http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20061204/BUSINESS/612040615/1438

“‘People had to realize that the bubble had burst,’ said Anson. ‘If they wanted to sell, they needed to lower their prices.’”

“And not just by a little bit. ‘Prices have to come down to where they were five years ago,’ Anson said. ‘Five-acre parcels that were selling for $250,000 to $300,000 should now be priced at $130,000 to $150,000. Ten-acre parcels that were selling to $300,000 should now be $195,000 to $180,000.’”

“Anson ‘is one of a handful of very sharp Realtors who has been forward thinking,’ consultant Jack McCabe said. ‘No matter how many Realtors say that this is a great time to buy, buyers are more savvy now. They understand that it doesn’t make sense to buy into a falling market.’”

Only when the fundamentals are strong does it make sense to buy into a falling market. Our fundamentals are…Well, not strong, to put it nicely.

‘Visitation to the theme park capitol that underpins Florida’s multibillion-dollar industry seems to be sputtering. The area has seen double-digit declines in September and October hotel occupancy, according to Smith Travel Research. It ranked worst in year-to-date occupancy decline among the company’s top 25 U.S. destinations (excluding Las Vegas), with a 4.6 percent drop so far.’

‘Visitors to all areas of Florida are down so far in 2006, which could give the state its first year-to-year drop since the Sept. 11 terrorist attacks. Orlando occupancy has been down each month in 2006 over the same periods in 2005 except April, when it was up 10 percent. But no declines were as dramatic as the 10 point September drop and 13 percent October dip.’

Another one, again, not a suprise. This really has little to do with FL, and everything to do with very loose lending and rapid home appreciation on a national level. People’s homes were providing a 2nd/3rd income stream in the household, leaving lots and lots of money to buy stuff and travel. That merry-go-round is over, and now the hangover sets in.

http://www.naplesnews.com/news/2006/dec/06/orlandohotelsunusuallyemptyfuelingfloridatou/?business

By Signed

December 7, 2006 11:37 AM | Link to this

“I’m not going to tell you again, the answer is no! Please stop bothering me, please.”

Signed,

The Finance Dept Chair of the School of Business Administration at FAU in answering yet another phone call from Mike Fink where Mike put in his application 18 months ago to apply for a teaching position for the night class entitled, “The Financial Analytical Theory in Real Estate”…..

By Signed

December 7, 2006 11:43 AM | Link to this

“Well, Mike, at least they still talk about you….”

Signed,

oscar de low renta

http://www.blogger.com/profile/11722253

By FL Renaissance

December 7, 2006 05:14 PM | Link to this

Let us analyze this excerpt from “genius” M. Fink’s above posting: “Renting is not a way to get rich; its a way to prevent becoming poor from owning a grossly overpriced, rapidly depreciating asset. You get rich through hard work and careful planning. Not through reckless speculation and overspending” OK, first he correctly states that renting is not a way to get rich! Hooray for that insight.Next, he states that he avoids being poor by not owning a grossly,”overpriced” rapidly depreciating asset. OK, obviously he either does not possess the skills to sniff out a deal and/or does not have enough ready cash available to negotiate an “undervalued” prime location property from a “humbled” builder or from an overextended “distressed” seller who’s most likely a “creative financing” victim nor probably does he understand how to use prudent leveraging (not akin to margin) No one is urging him to indulge in reckless speculation pay an unrealistic asking price…in fact, we don’t really care what he does. God bless him though, because We NEED people like him who rationalize that they are smarter than we “bag-holders” because they enable us to continue to enhance our long-term holdings. Lastly, he lacks vision, patience and foresight as “dutch” so aptly captured in Peter Minuit’s letter scripted by Mike’s fictionalforefathers

By n8tive

December 8, 2006 10:02 AM | Link to this

My God folks! I look at this blog periodically to see if anyone can engage in serious debate about the state of RE in SoFla, and all I ever see is emotional, irrational, personally directed potshots being taken. The only sane post in this whole trail is that of A.P. SoFla prices caught up to the rest of the country because it was WAY undervalued due to years of continuous overbuilding, then went beyond where it should have based on momentum. Now is the inevitable pullback, but after being in Florida for close to 40 years, I’ve seen this cycle repeat over and over. Every time RE has had a downturn the negative press inundated us. In 1980, Time magazine ran a cover titled South Florida, Paradise Lost. The whole article pointed out every negative piece of info the authors could find, and predicted the South Florida was finished. NOT!

The current negative drag on RE is temporary and will be soon forgotten. Trust me, I’ve seen it happen 10 times at least since 1970. But all it takes is one cold winter in the North, and people forget about that, they will keep coming, land will grow more scarce, and prices will ultimately continue to go up. Just have a little patience, rent your homes out for a year or two unless you absolutely HAVE to sell, and watch the market rise again. This is pure free market supply and demand at work. Right now, the negative press has scared the buyers, so demand is down, which scares the sellers into dumping properties, inflating supply. Yet interest rates are at the lowest level in years, job creation is high (especially in high paying fields like Biotech), in migration continues at a rapid rate, and the boomers are retiring, with the active, wealthy ones looking for a sophisticated, urbanized retirement spot like SoFla. The beauty of a free market economy is that whatever the situation today, it will be the exact opposite in a few year - supply and demand. Of course there will be disgruntled people who will say that SOFla stinks, that no one is coming here anymore, etc, but it is not true -people are just waiting to see when the bottom is reached, then the logjam will break.

Maybe we should give online courses on Economics to stop this childish banter?

By 32yrowner

December 8, 2006 11:33 AM | Link to this

Enjoyed owning over 30yrs in SoFl, not selling.

Also watched RE prices rollercoaster over the years.

Don’t you think there are some new wrinkles here though ?

Biggest I see is Insurance costs and taxes based on % of purchase price.

Also, many more areas (Vegas, Arizona, Carolinas, etc) now attract seasonals or retirees than past years.

Most long time owners are doing fine, but I really wonder if the aformentioned Ins and tax situation and competing areas hasn’t become a big drag for potential buyers in SoFl.

Something is causing largest inventory and longest average time on market that I have seen over the years.

By cw1900

December 8, 2006 12:01 PM | Link to this

to n8tive,

very well stated.

cw

By n8tive

December 8, 2006 12:41 PM | Link to this

Yes, there is merit to your points, and there are some new wrinkles, some of them are a real problem that have to be dealt with.

Insurance is the main issue, but I think the state government will step in to stop this gouging at some point. Taxes are high, but comparable to other highly urbanized cities.

While there is some competition from the other areas you mention, most of the migration to AZ and NV is coming from CA and the midwest. The Carolinas are somewhat attractive, but the weather is nowhere near as good as here, and most Northeasterners do not want to vacation or be snowbirds in a place where the bible-belt mentality is still going strong.

The active, wealthy retirees from the Northeast will always place SoFla on the top of their list. Like speaks to like, and they want to be around people of similar backgrounds.

Give it a couple of moe quarters, and if the fundamentals still hold, prices will rise, inventories will decrease. Times of change create uncertainty, and that is when all the fatalists come rattling out of the closet proclaining the end is near. Most of it is wishful thinking on their part, either they missed the opportunity to buy before the boom, so they see an opportunity for an “I told you so” moment, or they hope to take advantage of people’s worst fears. It’s never as bad or as good as the so-called experts claim.

By FL Renaissance

December 8, 2006 02:24 PM | Link to this

To N8tive: Agree with your posts wholeheartedly. Nobody really knows it ALL, but those that know the MOST take a view longer than the tip of their nose! 12 months or even 36 months does not prove one right! Thanks for your wisdom. To quote GBShaw, “it’s too bad youth is wasted on the young”.

By n8tive

December 8, 2006 02:36 PM | Link to this

Renaissance … Ain’t that the truth! Stocks are meant for flipping, RE is not.

By Finkfan

December 8, 2006 04:06 PM | Link to this

As N8tive pointed out south FL real estate is a rollercoaster, and I bet Rich R and Mike Fink would agree with easyasabc and FL Renaissance that the prices will rise in the long term. The only difference between them is determining when to buy.

If it’s such a great time to buy a house, then why is it that the average person working an average job is stretched to the limit to buy a house? This isn’t very logical, and throwing in taxes and insurance only adds to the insanity, but then again, who cares about the average person?

It’s interesting that dutch posted a Holland story because it reminds me of another tale from the same country. It’s the one in which Mike stops buy Easy and FL Renaissance’s tulip stand, but decides the asking price is too high.

You’re never a sucker until you realize you’re the one holding the bag.

By FL Renaissance

December 8, 2006 06:41 PM | Link to this

Huh? How’s that? I thought Turkey day was over! I rest my case concerning the ignorant. My bag is full of polished gems which are each set in beautiful settings; and does not include the pretty but very perishable flowers and dirt of an indentured serf’s harvest.

By Finkfan

December 8, 2006 10:09 PM | Link to this

Yes, FL Renaissance, I’m sure your bag is full of polished gems which are each set in beautiful settings. Are the settings platinum, palladium, or rhodium? Gold and silver are much too common.

The tulip stand refers to the mania which engulfed Holland in the 1630s.

You say it’s a great time to buy, which might be true if you’re investment time frame is 15 or 20 years, but Mike thinks it makes more financial sense to wait because he believes prices will drop in the next year or so. Hey, if you bought stock in the Roaring 20s, you’d be doing great today.

From what you’ve typed, we all know you’re not a sucker. The last sentence was a general statemtent and should be in quotes. I’ll translate it for you, “You’re never a sucker until you realize you’ve overpaid for something.” Certainly, you can agree with that statement. Refer to the second paragraph under the “HOOKING A SUCKER” portion of the post by “Get in the Game”.

The teachers, policemen, nurses, firefighters, and pool cleaners that make society work may be the distant offspring of the serfs to which you refer.

By FL Renaissance

December 9, 2006 12:13 AM | Link to this

I never said, “this is a great time to buy”; I said seize the opportunity to search and sniff out and negotiate a real deal on an “undervalued” (underpriced) prime location property from a “humbled” builder’s inventory or from an overextended seller who’s most likely a “creative financing” victim”. Use the current market dip to your advantage. Make your money on the “buy” and then much more in the longer term. Now is the time to zig when others zag. If you can’t uncover a deal DON’T BUY! What are you going to do? Sideline it out until the herd returns? Well OK, if you can live for free sponging off mom&dad…otherwise grow up. The best time to buy RE has ALWAYS been “5 years ago”! So, talk to me in 5 future years from now…Oh, never mind… most whiners will be long gone out of So. FL. anyway, because RE will consistently remain way too expensive. Better yet, since folks like Mike must be saving a ton of money by renting instead of owning, all we have to do is follow Mike Finks lead and make a fortune in high rate bank CD’s and index funds and growth stocks..then anyone will be able to afford anything, anywhere regardless of RE market swings. Sound like a plan for success? Good Luck!

By Mike Fink

December 9, 2006 09:48 AM | Link to this

FL,

Yes, you can use the current market dip to your advantage, that’s exactly what I intend to do. But do you see the dip slowing down anytime soon? All I see is acceleration as the mtg resets really start to kick in, as well as the increased insurance/taxes take their toll on affordability. I don’t see any signs of the market getting stronger, and don’t expect to see any for the next 2-4 years. We have that much inventory on the market right now; today.. That’s assuming another house does not go up for sale tommorow! S. FL is just a very unique animal right now, we have the same problems everyone else has with RE (insane lending; crazy appreciation) plus our own special brand of pain (SOH, Insurance). Couple that with a lack of higher paying jobs, and I just don’t see this market going anywhere but down for the foreseeable future.

In a normal environment, your rule of “5 years ago” is right on. But we are in uncharted territory here; we have never seen home price appreciation (on a country wide scale) like this before. We have never seen lending standards, or loan instruments (Negative Am, IO, etc) like these in the past. Up until about the year 1999 I would agree with you (buy it 5 years ago). Today, that’s not the case. I am wholly convinced that if I bought a year ago, 5 years from then I still going to be way under the home. If I bought today, I might be able to break even in 5 years… Maybe…. And that would be assuming my best possible case situation for S. FL, and buying at a bit below market cost right now. Do you think that the people who bought in 1929 in S. FL were looking back in 1934 and saying “Man, I am so glad I caught that right at the peak!”. Those who bought at the top of the 1926 bust were underwater for XXXX years (I can’t find a reference).. I would guess about 15-25, depending on where they caught it on the way up. Again, typically, “5 years ago” is the right answer. I would argue that is not the case in this market environment.

One final thing. We can’t all follow my lead (even if I was a sucessful day trader) because if we did, then none of us would be rich! That’s the point, if we all make a killing off one asset that over 60% of the population owns… Guess what, none of us made a killing! That’s inflation folks, everything will, by definition, just have to get more expensive.

By FL Renaissance

December 9, 2006 04:12 PM | Link to this

To Mike F: Glad to read your sensable reply. Your last line, “That’s inflation folks, everything will, by definition, just have to get more expensive.” perhaps is the wisest thing you have ever blogged! But keep in mind beyond inflation,normal living costs will continue to rise. That applies to residential RE as well! LABOR (wages and benefits) BUILDING MATERIALS(lumber, hardware,steel &cement), LAND COST Development costs for NEW and for EXISTING(Prime only) RE pricing and appraisals are based on then higher replacement costs per square ft. not to mention the premium paid to already be in a proven desirable location. While waiting to “get into the game” though, how much opportunity cost are you wasting in non-deductible rent and lost income tax deductions to people like me because you are getting such a great rental deal? Seems to me that your are winning the current battle but losing the war. Capish?

By good news for Rich R.

December 9, 2006 05:49 PM | Link to this

The world’s largest retail chain is teaming up with Ernest & Julio Gallo Winery to produce the wines at an affordable price, in the $1-$3 range.Wine connoisseurs may not be inclined to throw a bottle of Wal-Mart brand into their shopping carts, but “there is a market for inexpensive wine,” said Kathy Micken, professor of marketing at University of North Carolina She said: “But the right name is important.” Customer surveys were conducted to determine the most attractive name for the Wal-Mart wine brand. The top surveyed names in order of popularity were: 10. Chateau Traileur Parc 9. White Trashfindel 8. Big Red Gulp 7. World Championship Riesling 6. NASCARbernet 5. Chef Boyardeaux 4. Peanut Noir 3. I Can’t Believe It’s Not Vinegar! 2. Grape Expectations 1. Nasti Spumante The beauty of Wal-Mart wine is that it can be served with either white meat (Possum) or red meat (Squirrel) Enjoy, Rich R.

By Desperate Realtor

December 15, 2006 08:21 PM | Link to this

SUSAN CARLISLE of VILLAGE REALTY GROUP, stop stealing For Sale By Owner Signs. Does your broker, Michael Berry, know about your antics and that you are back at it again stealing For Sale By Owner signs? Are you that desperate of a realtor?

What does it take to get it through your head that YOU LOST?

DO YOU WANT TO LOOSE EVEN MORE?

     Homeowner