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Just can't figure it out: Roy Caples; Minneapolis, MN
I sold my vacation home in Fort Lauderdale, FL last year (at a peak price) while anticipating relocating vacation time to Palm Springs, CA. We started looking about 18 months ago. I see this average price slide of 1 or 2 or 3% on the mainstream media, and just can’t figure it out. We have looked in a couple of price ranges, and the price decrease I have seen is 20%+.
Example:
Single Family Property (New House):
Ask May 2005: $389,000
New Price May 2006: $349,000
New, New Price December 2006: $299,000
Single Family Property (Existing Home):
Ask May 2005: $699,000
New Price June 2006: $599,000
Current Status: Make us an offer.
This builder of the new home sold a ton of these properties at about $389. There are 6 finished to choose from at $299. Isn’t that 23%? There are many more specific examples. The inventory continues to climb in the Palm Springs area, and we continue to hold off knowing that there is no where near enough demand to buy the number of units on the market. I would guess that in just new homes, there is a 2 year back log. Used homes could be 3 years.
Another point, most of the new and used properties are empty. Meaning someone has already moved or the speculator can’t rent them.
I think the best buys may be made in late 2007 or 2008 directly from the bank. We will see. In the meantime we will rent when vacationing which is cheaper than owning anyhow.
I have owned about 20 houses in 30 years, vacation and primary. I have owned rentals (about 100) over that same time. I started selling in 2001, and completed in early 2005. Since many purchases were in the 70’s and early 80’s during other price pressures on property (high interest rates, recessions, slow markets) my investment in prices was quite low.
All that said, rents are under pressure, investors got in too late and will need out in 2007 and 2008, and people are sitting on the side lines. The optional buyer (of which I am one) can afford to wait putting more pressure on the markets. The single family home will return to its place of a good investment if you plan to live in it. When it does and reflects its true price/value ratio, people will again buy. I just don’t think it will be any time soon.
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