"Puzzling Real Estate Market? Not Really."

It all makes perfect sense. It may be making you talk to yourself... yet logical it is. Think about it for a minute. Here in Flagler County, Florida, properties in Palm Coast and Flagler Beach were appreciating at a rate which often went beyond 20% per year. Waterfront property went through the roof. New construction was other-worldly. That was cool - IF - you caught it just right. But what were the odds that your personal crystal ball allowed you to maximize the old "Buy low - Sell high?" Numbers don't lie... (well, sometimes they do, but you know what I mean here). If you took a house at the median of $225,000... you wanna' know what the value would have been in ten years, if things stayed as they were? Hold your breath - $1.4M - that's million. I know lots of Marondas that sold for under $100K in 2000 and 2001... that went for $249,900 in 2005. Personally, I had property that was purchased for $385K in 2001 and appraised for $910K in 2006. That's Pure Crazy... Using that median purchase price of $225K, the ten year increase would have been 622%. Let's compare that to income. If a guy was a $20/hour wage earner and made about $40,000/year, do you think his income would have gone up 622% - to $258,752 - in the same time period? We both know the answer:-( So, as hard as it is for me to say this... This market "correction" is actually a good thing. If the "status had remained quo" for ten years or so, the results would have led us to an economic implosion of historic proportions. Talk about an "affordable housing crunch." Ouch. The transfer of wealth to the rich would have been unprecedented and impossible to accept (unless, of course, you were one of the rich ones:-) Recent economic studies have shown that the top 20% (those with roughly over $100,000 per year income) have now come to control over 50% of America's wealth. That top quintile's wealth is still growing in 2007, while the other four quintiles are losing theirs. Last time I checked the history books, that's the kind of stuff that leads to revolutions and civil wars. Anyway, I'm not too happy on a local, micro scale, yet I see the need on the global, macro level. We sure took it for granted, didn't we? We preened and postured and pretended we were quite something. So here's how you can dazzle your friends... Speak with authority when you say: "This is why we are in the current mess:"

• The up trending market was much longer than the average cycle since WWII. Ten years is a long time for fairly steady growth.
• From 2003-2005, approximately 40% of all real estate sales in the US were to "investors." (I'm more fond of the term "speculators." They weren't buying blue chip real estate to hold. Lots of "flippers"... akin to day traders). They, in turn, have flooded the re-sale market with distress sales.
• Thanks for the easy money, dear, dear lenders. Now all those sub-prime loans are coming due... and the sellers are upside down... which leads to...
• Foreclosures and short sales are like Harleys in Daytona during Bike Week. They are everywhere.
• Builders, in order to stay in business, must continue to build. Also, they tend to have deeper pockets than Joe and Alice Homeowner. They can slash prices and go into survival mode to keep the doors open.
• Speaking of Joe and Alice - they are panicking. So are many real estate agents. It's like being shot at. In my first live firefight in Viet Nam, I started to hyper-ventilate. So much for feigned bravery. This market is like that. It takes a little exposure to reality to become seasoned. With the largest housing inventory in the past twenty-five years, we'll have plenty of chances to succeed.

(This blog post is a compilation of data from multiple sources. Some of the better ideas are reworked and came from Mike Ferry, a respected national real estate trainer)