I’m calling a bottom in the Florida housing market!

What am I crazy? What do I base this on? But wait a minute; economist Gary Schiller is predicting another 20% drop in housing prices for 2011. What am I nuts?

Well the jury is still out on the nuts part, but I’m only looking at the Florida housing market, for that is the market I know. Of course I’m not trying to insinuate that I know more about the economics of home prices than Gary Schiller, but I do know a deal when I see one, or a pig for that matter.

The housing market is not much different than the stock market. The same principles of fear and greed apply equally to both. I am biased toward real estate for the fact that if you own stock and the company goes out of business you have nothing, as to real estate even when prices drop, you still own a physical piece of property.

Though as we’ve all seen over the past 4 years, just because you own real estate, doesn’t mean you can’t get hurt financially.

I have learned a lot about the economics of homes since I bought my first house at the age of 19, over thirty years ago. In fact I’ve made money on every house that I’ve owned except two. One was in my early twenties in which I learned my lesson about dealing with very low income housing. The funny part was my Dad unloaded the house on me and walked away with a profitJ.

The second time was in this latest housing market melt down. Here is what happened.

During the later part of 2006 when everyone was buying houses for investment purposes and prices were going through the roof, I was hearing a lot of the investors that I worked with saying things like “There won’t be a housing bubble here in Florida.” “All the baby boomers will be retiring here.” We’re alright.”

Having been schooled the hard way on the last dot com stock bubble, I knew the housing market had topped when I heard this talk. I proceeded to sell all of my rental properties (about four at the time) and was able to sell them quickly at top dollar.

Pretty smart I thought. The problem was buying and selling homes is very addictive and I really enjoy it and I had a bank account full of money. So what’s an addict to do? You guessed it, I got greedy.

I found one more house that at the time looked like a great deal. Twenty thousand in rehab make a quick $10,000 and still be priced twenty thousand below the comparables. Why not? I usually hold and rent for one year to take advantage of the long term capital gains tax rate but I figured one last flip.

Well as you know the rest is history. I was completely blindsided and surprised at how fast the housing market stopped and then went into reverse, even with my knowing we were at the top of the market.

By the time I finished the rehab the market had came to a screeching halt.

Then I learned another life lesson, the one about selling and walking away with a small loss and my tail between my legs and not selling and taking a total loss.

The point I’m trying to make is, it’s really hard to make good decisions when you are in the grips of fear and greed.

First, ..... I’m calling a bottom here, because I see a lot of fear out there. There are a lot of people who are afraid to pull the trigger on buying a home for either their primary residence or investment property.

Those people are going to look back five years from now and say “I could have bought that house for….”. I talked to an investor today who is in the housing market and he mentioned the words “panic mode”.

Second, ...... I recently read where large home builders are now buying newer homes and renting them instead of building new homes. Why, because they can’t build them cheaper than they can buy them right now!

Third, ..... is the price per square foot. When I’m looking at homes in today’s market, I look at the price per square foot. If you were to have a home built for you today it would cost about $125 a sq ft (for a nicer house). I’m looking at homes under $70 a sq ft and start getting excited at below $50 a sq ft. I bought a house last year that I’m living in for $38 a sq ft.

Here is an example of a home a client of mine is buying. This is a town home that was new in 2005 and sold for $155.50 a sq ft. She is now buying this town home for $50.74 sq ft. (The house is in excellent condition - awesome).

Here is a random listing I pulled today on A HUD property for sale a 3/2/ 2car garage sold in 2005 for $165.67 per sq ft. It’s on sale right now for $56.85 per sq ft. You can’t replace the home for even close to that!

No one can really predict what can happen in this wonderful word we live in, but one thing I do know is that interest rates are about .50% higher than a year ago and that is because the market thinks the economy is getting better or at least not getting worse.

When the economy does start improving and employment gets better and all your kids that are graduating from college start working and looking for a home you will think back and realize that this time, right here, right now, was when housing was at its most affordable in your lifetime. (See chart below)

I Love Helping People,

ToddDawkins                                                                                                           561-714-5541
Testimonials        <<<--Check out 1st time home buyers-<<