A realtor called me today about selling my house in Florida. My neighbor sold his in a short sale for less than half of what he paid four years ago. The realtor told me that new owners of the development will be starting construction at much lower prices, so now may be the time to sell, before the supply increases. The new owners of my development bought the property (with the big name designer golf course, club house, fitness center, tennis courts, pool—you get the picture) out of bankruptcy about 18 months ago.
I spoke with the Property Appraisers of two Florida counties in the past few weeks and they see continuing declines in property values across the board—commercial, residential, industrial, raw land, etc. They have advised their Boards of County Commissioners to prepare for continuing declines in real estate taxes.
Last year we sold an office and warehouse building to an end user. I asked the banker who financed the deal if his big bank was now making real estate loans (I was looking for some good news). He laughed and said this particular deal got done only with SBA guarantees and the personal wealth and guarantee of the buyer’s owner.
I talked with an accountant who tells me his wife is now working for a big auctioneer. “They had their best year ever last year—over 250 auctions,” he said. They have so many properties to auction, many are held on line.
I have also talked with real estate brokers and appraisers who report the same thing: Real estate in Florida continues to decline in value and they don’t see any recovery on the horizon.
I spoke with a client last week who told me he is selling his 65 foot two story motor yacht (with an elevator, no less).
“I thought you loved that boat,” I said.
He responded, “I do, but I want to buy some 100 acres of land nearby to play with on the weekend. This land will appreciate in value, my boat won’t. And, besides, I want the cash.”
This is from an entrepreneur whose business generates over a million dollars of cash every year and who has bankers making appointments to try to lend him money.
Another accountant friend sold his house three months ago and moved to a rental house on the water. He reduced the rent 20% by paying a year in advance. He is using the capital from his home to purchase and flip foreclosures.
Wednesday is real estate day in the The Wall Street Journal. It used to be fun to see all the fancy resorts, big condo buildings, ranches, etc. with full page ads. Now the ads are one sixteenth of a page with headlines such as Bankruptcy Court Ordered, Absolute Auction, FDIC Owned Property, etc. Sometimes these are the same properties I saw six years ago.
Land is close to free in my part of Florida and elsewhere, and construction costs are the lowest in decades. I am not shilling for Florida real estate (I can, however, offer you a great deal in a wonderful golf course community outside Tampa), but I want to draw your attention to some hard facts.
1. Land in many places has reached values unseen in decades.
2. There is no recovery in sight.
3. There are bargains to be had for long-term cash buyers.
4. Owners are reaching their limits of endurance; they are becoming motivated sellers.
5. And Cash is King, now and forever.
What does your real estate situation look like? Does it confirm or counter this picture?