Search
 Request Information  |  Find me a Home  |  Register  |  Login 
View Article 

Current Articles | Categories | Search | Syndication

South Padre 2010 Residential Home Sales Surpass 2009
1143 Views :: 21 Comments :: :: South Padre Island
Both Texas and South Padre Island - 2010 Residential Home Sales Surpass 2009

According to the latest Texas Quarterly Housing Report covering second quarter 2010, the volume of real estate sales in Texas increased for the third quarter in a row, possibly spurred by renewed job growth in the state and the expiration of federal homebuyer tax credits. Whether the dysfunctional US Government will restore the credits is subject to debate.

The Texas Quarterly Housing Report is issued four times a year by the Texas Association of REALTORS® with multiple listing service (MLS) data compiled and analyzed by the Real Estate Center at Texas A&M University.

For the period of April through June 2010, sales of existing single-family homes increased 14% to 66,079 compared to the same quarter of the prior year. Over the same time period, the median price of homes in Texas remained virtually unchanged at $149,200. The months of inventory of Texas homes – a statistic that indicates the balance between supply and demand for homes – increased slightly from 7.3 months in 2009-Q2 to 7.4 in 2010-Q2.

Bill Jones, chairman of the Texas Association of REALTORS®, commented on the positive results. ”We’re encouraged to see continued strength in Texas’ real estate market as 2010 marches forward,” says Jones. “We’re now focused on maintaining that strength and expanding access to affordable, sustainable homeownership in Texas.”

To do so, the Texas Association of REALTORS® launched TxHomePrograms.org, a searchable online database of homebuyer assistance programs. In addition, Texas REALTORS®are partnering with local lenders, housing counselors, and others throughout the state to host educational events for consumers about affordable housing.

Jim Gaines, Ph.D., an economist with the Real Estate Center at Texas A&M University, says the robust second-quarter numbers were “spurred by particularly heavy volume in April and May. However, the federal tax credits for homebuyers expired on April 30 and sales volume decreased between May and June. It’s possible the tax credit deadline inspired buyers to move up purchasing decisions, so we may have seen our usual ‘summer peak’ in sales volume a little early this year.”

South Padre Island Residential Home Sales

According to the South Padre MLS, when you exclude Condominiums which were boosted in 2009 by the New Sapphire Tower, covering second quarter 2010, the volume of real estate sales for residential home sales increased.



Gaines adds, “This is a very unique time in the housing market because of the extent of federal government involvement and there is no precedent to look at to predict what will happen in the next few quarters. We will have to watch the economy and the market closely to determine where it is heading.”



By Bob Peltier
Texas Gulf Coast Online Editor
Rating
Comments
Rate watcher @ Friday, August 13, 2010 9:30 AM
30 year jumbo rates are now at an ALL TIME LOW average of 5.07%, and 30 year refinance jumbo rates are about 5.3%. (15 year jumbo is 4.68%.) That could help stabilize high end property prices. To put that in perspective about a year ago the 30 year jumbo was more than 6%

Nobody can predict the future, but it's hard to imagine financing deals getting much better than this.

flipper man @ Saturday, August 14, 2010 11:54 AM
"Thoughts of real estate double dip deter investors"

www.usatoday.com/money/economy/housing/2010-08-14-cnbc-real-estate-investing_N.htm

Is a "buy, hold, and rent" strategy the best way for investors to deal with the current market on South Padre? A lot of condo complexes don't allow rentals, and a lot of the ones that do haven't been renting very well lately. It's also very rare to find a condo on south padre that rents for enough to pay a full mortgage & other homeowner expenses, or even come close. That situation has been aggravated by the fact that most island rentals are for relatively short term vacationers and "Winter Texans", a market which is especially susceptible to economic conditions.

Regardless, this article causes me to wonder if condos in which the home owner's association allows short term rentals will be more valuable in foreseeable future, as more investors embrace the "buy, hold, and rent" strategy.

Bob Peltier @ Tuesday, August 17, 2010 5:43 AM
One has to look at South Padre closer. One thing for sure is it is not Florida nor California. Prices on South Padre have not plummeted like in other states. Double dip projections are just that. Opportunity lost is just as likely. Investors profit by assuming and managing risk. Some are good at it and some are not. Most who succeed use the advice of a real estate professional. There are many of these professionals on South Padre. They know what a good buy is and what is renting and what is not. An Investor client is a whole different animal that a second home buyer who intends on using and renting the property. Investors will want hard facts and are normally not intending on using the property themselves. It's a true investment.
Flipper Man @ Wednesday, August 18, 2010 6:48 PM
Nobody can argue with the value of having a good real estate agent working for you! Alice's gang knows this island upside down and backwards, no doubt about it. I bet they can smell a good bargain a mile away.

The rental market on this island fascinates me, as it constantly changes from season to season. Closely monitoring it can also help you determine the underlying property values, and better gauge your bargaining power. Here are a couple of trends I have noticed this year:

- Rental demand seems to be down this year, but I don't have any exact statistics. (Anybody have those numbers?) I don't know what the problems are this year, but let me guess - bad economy, Mexican violence, oil spill scare, etc.

- Without mentioning any names, at least one major rental agency has "tweeked" the definition of what specific calendar dates constitute low season, high season, and peak season. By their new definition, peak season now constitutes only 20% of the calendar year, high season 14%, and low season the remaining 66%. What has caused this new assessment? Lower occupancy rates and/or a larger pool of rental properties? Any way you look at it, the shorter "premium" seasons are not good for property owners.

- It looks like the holiday "shoulder season", has now fallen into the "low season" bucket. Like it completely vanished. Oops.

- Regardless of where you define the seasons, it's enlightening to look at the premium (over the low season rate) that is charged during the peak seasons, as compared to the low season. These premiums can vary all over the map, from less than 40% to more than 100%. Obviously this premium is based on demand.

- Most interesting is that the properties that seem to rent best are at the higher end of the market.

Now ain't that interesting? If your rental property caters to bargain hunters, you're probably not going to get as juicy of a premium during the peak summer months. However, if you've got a beautiful 3 bedroom beachfront condo, you might be able to increase your asking price by 50 -100% during Spring Break and the summer months, and actually get away with it. For an investor, that suggests you would be best buying a few select premium beachfront condos, instead of a larger number of lower cost condos.

A lot of realtors on this island hate the Sapphire developers, and (from what I hear) for good reason. However, Sapphire's decision to allow renters in this premium complex may have been a good one, helping to maintain resale values. (On the other hand it costs more in the form of higher maintenance fees to maintain a "hotel like" atmosphere, just look at what they pay at Saida.)

Another thing I've learned is that there is a significant difference between the various rental agencies on this island, with respect to how much they earn for their property owners. So when looking at rental rates it's not a clear apples-to-apples comparison. It's the bottom line that counts. Marketing is important, and some rental agencies play that game better than others.

So now I'm scratching my head wondering if the best way to approach this market is to buy high end island properties, and rent them until the market recovers.

http://info.trulia.com/index.php?s=43&item=97

The recent article above suggests renters may not buy homes for at least another couple years. That may not apply directly to the South Padre market, but consider the bigger picture. Most island property owners start out as condo renters (or at the very least hotel patrons. ) So if it's going to take a couple more years for our typical island condo renters to start turning into island property owners, it could be YEARS before our depressed island property market fully recovers.

The truth is that nobody really knows when the island property market will significantly improve, but buying high end properties and renting them out until the market does recover might not be a bad strategy. The biggest question is WHEN IS THE RIGHT TIME TO BUY? If you wait forever you could miss the boat, but I personally don't believe that boat is leaving anytime soon. Perhaps a good strategy is to wait for the first boat to leave port, and then hop on the second boat. That might cost you some profit, but at least you wouldn't risk having all your capital tied up for years in rental properties until the market really does recover. Just my opinion.
Bob Peltier @ Wednesday, August 18, 2010 7:29 PM
You can pull up the motel and sales tax receipts of the rental agencies and get a good idea what is going on. You can even compare year to year I believe or quarter to quarter.
flipper man @ Wednesday, August 18, 2010 11:03 PM
The occupancy tax statistics on the town's web site are somewhat less than current.

http://www.townspi.com/images/stories/Business_Forms/EDC_Indicators/EDC__occupancy_tax_revenue.pdf

If you've got good current rental statistics for the whole island, please share them with all of us. (I would tell you who I am so you cold discretely send them to me, but then you would surely take me off your Xmas card list for messing up your web site today)

I don't know how much use these occupancy tax statistics are even really worth, given that the Winter Texans that stay more than 30 days don't pay the occupancy tax. It's really hard to track those long-stay visitors.

One other thing to consider is they raised the hotel occupancy tax a while back, but I don't remember exactly when, or by how much. That also screws up the year-over-year comparisons. Perhaps current sales tax statistics could help us get a better handle on the situation.

Making generalizations about the island's property market is easy, but getting good statistical data to back it up is hard! It's like trying to solve a 20 variable equation, and I'm definitely not an actuary.

I am very confident that eventually we'll get out of this rut. It's just a question of when. Will the market slowly improve over the coming years at a snail's pace, or will it take off fast with no warning? At least one very experienced realtor I talked to seems to think that at some point in the future it will take off like a rocket, but he can't rationalize exactly what will trigger such an event. To me it sounds more like wishful thinking from a desperate man, but ALWAYS respect a person with gray hair.

On the bright side it has been a relatively mild tropical weather season, and none of that gulf oil reached our beautiful beaches. The island's guardian angel is doing a good job this year.

The beach was beautiful today, and many of the season tourists have departed for home, relaxed and refreshed. The tide was out, making the beautiful beach much wider than normal. I love to see those cute little sandpipers pecking away at the water line, looking for breakfast. For me, nothing makes a morning beach walks more enjoyable. The winds were also calm, allowing the water to settle and present a beautiful blue color, as if we were part of the Bahamas. There simply is no more beautiful place in all of Texas.

Bob Peltier @ Thursday, August 19, 2010 2:38 AM
Now Now. The winter Texans? That is somewhat nit picking. Any indicator is of value to the investor. I doubt if you can find an exact figure that includes every variable. In any event the state site has the figures and you can research either monthly quarterly or yearly. We do not ban people from the forums or web page. We simply have them eliminated from the gene pool. So if you see a few seagulls looking at you funny like in Alfred Hitchcock's "The Birds"; you will know you have gone to far.

http://www.window.state.tx.us/taxinfo/hotel/
flipper man @ Thursday, August 19, 2010 2:29 PM
That is a great web site, far better than the data published by the city. It clearly shows that hurricane Dolly did some serious damage to the local economy in 2008, and also took a lot of beds out of the system. If however you look just at the 2nd quarter data over the past few years, which are pretty much immune to tropical weather, while still including the busy month of June:

Total occupancy revenue has been relatively stable for the last couple years, though down about 20% from 2006/2007.

Contrary to my previous remark, this new data strongly suggests there has actually been some stability in the island lodging/rental market during the past couple years. The market is still very weak compared to previous years, but at least it has stabilized, and is not getting any worse. Personally I don't see how the real estate market can fall much further if the rental market has apparently stabilized.

So does this REALLY mark the bottom of the property market? It's hard to imagine the situation getting much worse from here. Maybe it is a good time to buy, or maybe we'll drift sideways like this for a while longer. Hard to say. So at this point I believe the most appropriate strategy for investors is:

"Carefully shop for high end properties now. Then rent them out until the market recovers".



Bob Peltier @ Thursday, August 19, 2010 2:50 PM
What I find strange is you can get the sales tax/motel tax information for every one collecting it in the state but to my knowledge you can't get the information about a particular store. If you want to do the calculations the Winter Texans are designated as non-taxable receipts.

The city and other groups may want to spin the numbers for whatever reason. The state site does not. One could still spin the results by picking and choosing the years/quarters to compare. During the sapphire sales all I heard was you shouldn't include the Sapphire in the numbers. I am somewhat surprised that someone hasn't posted that this article now should include the condo sales. South Padre will continue to out perform everything else on the Texas coast as it always has. Creme my friend, always rises to the top. The days of easy flipping may be over or severely hampered, but that doesn't change the fact that South Padre property is an excellent long term investment. Day trading or short term real estate investing has always been a large gamble and in today's market even more so.
flipper man @ Thursday, August 19, 2010 7:47 PM
Flipping in this market ain't easy, that's for sure! But the alternatives aren't good either. The rate on a two year treasury this week is 0.56%. Or, you could invest in the stock market. Year to date, the S&P 500 has lost 7%. The concept of "Carefully shop for high end properties now, then rent them out until the market recovers" does NOT appeal to me. I just don't see a better alternative right now, and I still gotta put the kids through college.

I also don't like shopping for high end properties. The more money they cost, the weirder they tend to get. I just love how these owners explain that they used some prestigious French speaking decorator to justify ruining the interior of their multimillion dollar home. Or how some custom builder ended up "convincing" them that it was best to make the game room ten times larger than the master bedroom. Or asking a plumber if he can get rid of the squat (hole in the ground) toilets and bidets that some owner from Europe or Asia put in. And the list of unique problems trying to flip high end properties goes on and on....

I won't mention any names, but there are actually some developers on this island (who ain't doing too well at the moment) trying to sell multi-million dollar homes with break-away walls on the bottom floors to allow hurricane surges to pass right on through. Really, I'm telling you the truth. With a building design like that I think it would be easier just to install motorized garage doors all around the ground floor so you could enjoy the breeze on pleasant evenings!

Again, the more money they cost, the weirder they get, and the poorer the selection/availability. It's much easier to stick to basic commodity condos, but right now I believe there is more money in the higher end stuff, because the middle class doesn't have as much money as they used to for vacation properties. But the rich always have money, even if they lost half of it during the last few years.

With regards to Sapphire, I don't see how you can ignore the sales statistics. Just prior to those closings a lot of realtors were jumping up and down in anticipation, because they KNEW the Sapphire sales would increase island ASPs. But after the sales closed, and the buying panic never materialized, there was a terrible "ASP hangover" that also couldn't be easily buried under the rug. The way I see it, building the whole Sapphire development was a positive event for the island. It's nice to see a new supply of premium condos that have conventional floor plans.

Bridgepoint is BEAUTIFUL from the outside, perhaps the best looking building on the island, but did you ever tour the inside of those penthouse suites? The views are spectacular, but many of the walls and closets have weird angles, making it a serious challenge to furnish, and unappealing to many. I suspect that's why they never went ahead with the planned cloned buildings, but I'm really not sure. Even some of the more rectangular luxury condos on this island have weird angled interior walls, as if some architect thought he was going to win the AIA Gold Medal.
Bob Peltier @ Friday, August 20, 2010 3:42 PM
Three Reasons to Buy a Home Now
Stocks are up 50 percent from the March 2009 bottom. Some commodities have risen dramatically. The only asset class left in the cellar is real estate, says Michael Murphy, editor of the New World Investor stock newsletter.

As a result, Murphy is advising investors to buy now for these three reasons:

• Desperate sellers: Both home owners and lenders are eager to unload a flood of foreclosed and underwater properties. Buyers with the patience to push through these complex deals can save a bundle.

• Little competition. Because most people don’t have what it takes to negotiate their way through short sales and REOs, patient investors are winners.

• Low rates. Mortgage rates are at their lowest level in 40 years. If you believe inflation is inevitable, lock in now.
flipper man @ Friday, August 20, 2010 9:48 PM
You forgot to mention that most people do some significant remodeling during the first year after they move into a new home. Right now there are a lot of hungry contractors out there, and you'll probably never get a better deal on remodeling services.

It's really hard to figure out how to make money in this especially challenging market. I'm really disturbed that the best I option I could come up with thus far was to buy high end properties and try to rent them out until the market recovers. But now I'm wondering if undeveloped land is a better investment in the current environment. There are few if any maintenance fees associated with empty lots, aside from normal property taxes, (and maybe some standby utility fees?) In other words, there would be a much less risk involved in buying empty lots, especially if it took the market several more years to fully recover. Perhaps pick out some cute lots in town, which already have access to utilities, ready for somebody to build on when the market recovers. With that strategy you also don't have to worry about renters. From what I can see the undeveloped property market on this island is virtually dead, although I have seen prices slashed by motivated sellers on a few properties. It's an idea I shall ponder more, especially if I could get enough adjoining lots somewhere in town to eventually tempt a major developer....

It would be nice if there was a serious "investment opportunities" page on this web site. Something with content especially selected for smaller investors/developers. Fresh, new ideas.
Bob Peltier @ Saturday, August 21, 2010 4:09 PM
Just call Alice's Team and I am sure they will be glad to help locate foreclosures, REO opportunities and distressed sellers in the area. Your ready for a good deal on a high end condo but the thought of remodeling all those obtuse walls is holding you back. The Team has all sorts of tools at their disposal for locating these properties.
flipper man @ Sunday, August 22, 2010 10:01 PM
I like realtors, really I do. They are some of the most friendly, personable people I have every met. (unless a deal goes sour, and then some of them will really show their true colors!) If you find an agent with lots of experience, and knows the local territory very well, they can be worth their weight in gold. I mean that sincerely.

But...

MANY times after I make an offer on a property, sooner or later the listing agent is twisting my arm into upping the offer. And when I go to sell the property, if I stick with the same agent, they're twisting my arm into lowering the price. That really drives me nuts, because they know darn well how much it cost me to buy it, fix it up, and pay the property taxes/homeowners fees while I'm waiting to sell. No respect for a guy just trying to make an honest buck, I hate that! It's funny how many investors will criticize the commissions that agents make, and then the agents turn around and criticize how much the investors are making.

A good real estate agent is a MASTER at the bargaining process, and can take care of last minute problems at the closing table with the skill of a fox. Over the years I've come to the conclusion that most realtors are totally focused on getting the deal to that closing table, no matter what it takes. After you close the deal you might get a Christmas card from them, and then you'll never hear from them again. They got their commission, and they're long gone, because that's just the way it works with most clients. The whole farewell process seems to have been institutionalized.

This is NOT to suggest that many good realtors are not worth the money. On the contrary, their insight into the local market can be invaluable. They know where the potential problems are, and they probably have a good idea of whether or not I'm gong to make money on a flip before I even tour the property. But I really get tired of the two-faced "make a better offer" advice when it's time to buy, and then "lower the price" advice when it's time to sell. On the other hand I'm a reasonable guy, and I know darn well that without a good real estate agent in the middle, a lot of good deals simply wouldn't happen.

Another thing I like about realtors is they have a good instinct for the bare minimum it takes to get a property ready to market. A lot of investors will want to use premium materials in a remodeling job, and a good realtor will tell you it's often a waste of good money. For example, most buyers can't tell the difference between a cheap ceramic floor, and a more expensive porcelain tile floor. Or ten year shingles on a roof compared to 30 year shingles. But realtors have a good feel for what buyers are willing to pay for, and what they're not. "Don't waste any money on a premium garbage grinder - get the cheapest one possible!", they'll tell you. On the other hand they can suggest cheap things that make the place look better, like fresh flower beds. Really, agents have a good instinct for this kind of thing, because they're constantly showing a variety of different properties.

If you think about it, that agent wants to get the listing quickly, so they're naturally motivated to minimize any remodeling so they can get their sign out in the front yard ASAP. "Don't worry, I'll sell it as is", they'll tell you. Again, they've got their eye on that closing table, and they can't get their without the listing contract.

So what I need is some kid of a "hybrid" agent. That is, one that works WITH me, not just for himself. The typical buyer-broker contract is supposed to fix that problem by legally switching the loyalty of the agent, but in reality I haven't found it to work as designed. Those agents are still focused on getting the deals to close, no matter who the buyer and seller are, and they still use the same appraisers, contractors, closing agents, and dang inspectors (who sometimes don't find significant problems that don't pop up until after closing, and I'm stuck with it.) To me the whole situation is quite understandable, because the appraisers, contractors, closing agents, and inspectors get much of their business from the real estate agents, so that's where they naturally put their loyalty. I'm not saying it's a crooked business, but I do believe it is slightly tilted in favor of the real estate agent. If you go through the process enough times from an investor's standpoint, you'll better appreciate what I mean. Most of these agents clearly work for themselves, regardless of what the contract says.

I'll never forget the time that an inspector looked at one of my properties, and said that even though he didn't find any termites, I still had to have pest treatment, including drilling holes in the foundation to inject bug killer. I asked him how much that cost, and he knew EXACTLY, because he coincidentally also had his own pest control business. (Like the optometrist who wants to sell you glasses from his front office store after he exams your eyes.) The next day that inspector was out there drilling holes, making good money. The unnecessary service certainly wasn't a deal breaker, but it did reduce my ultimate profit on the deal. I can sure see why some of these inspectors are so chummy with real estate agents, because that is where they get a lot of their business from.

Side note: Want to hire a good inspector? Look for a WOMAN. They're aren't too many of them out there in this traditionally male-dominated field, so the ones that are out there are often a cut above all the men.

Strangely enough, what I do like is a listing agent that will allow me to take them out for a fine dinner, and get them a nice bottle (or two) of wine, and get a little tipsy in the process. That will often get them to open up about the problems with the property that they're not willing to discuss when they're sober. Also, I've found out that as soon as they fully understand that I'm an investor trying to get the best price from THEIR little old lady client, with whom they have started to develop a personal relationship - the less likely they are to spill the beans with regards to what is REALLY wrong with the property. In other words, they'll be much more likely to tell a "normal" buyer what is wrong with a property, but they figure an investor like me isn't worth the same consideration. As soon as they find out I'm investor, they clam right up. A simple bottle of wine and nice lobster dinner can really help that situation.

So what I need is not a traditional real estate agent, but more of a PARTNER. That is, somebody who only gets paid AFTER the property is successfully flipped. Somebody who is willing to take their cut after the full round trip, after ALL the expenses are paid. In other words, somebody who accepts the fact that if I don't make any money on a flip because their buddy screwed me on the title policy, THEY don't make any money either. But I'm also a reasonable guy, and I see nothing wrong with giving a good partner a generous share of any profit WE make.

I've heard all kinds of arguments from agents against entering into such agreements. They'll go back to their favorite real estate lawyer, who I believe feels threatened by this concept, and Mr. Attorney will give them a zillion stupid half baked reasons why they shouldn't deal with me on a strict net-profit basis.

My wife tells me my hairbrain "partner" idea will never work, because sales agents are only wired in one direction: that need for immediate $$$ gratification at both the closing of the initial purchase, and closing of the final sale. You gotta keep those agents motivated all the way through the entire process, one step at a time, she argues. Not much different than you typical stockbroker, I suppose, who picks your pocket when you buy a stock and then again when you sell it, with little regard for how much profit you actually make after completing the round trip. And then there are products like mutual funds, who charge annual fees regardless of whether or not the shareholder actually makes any money. (In all fairness there are hedge funds who decrease their fees when returns are low, and raise them when returns are good.)

I knew one investor who did the bare amount of work necessary to get an actual real estate license, and then went around making low-ball offers everywhere, so he didn't have to worry about an extra agent's commission. No ethics whatsoever. I'm not that kind of guy. I believe in a good relationship with the realtors I work with, and pay the full commission, because there IS some mutual interest in completing a deal, even if there are also some conflicts, as I outlined above. Never give an agent the shaft, because if you do, word travels fast, and you'll quickly be black listed. (I've never been in that situation, but I have hard of others.)

Really though, I can't complain about agents. It's like that line from Jack Nicholson, in the movie "The Shining", when discussing the topic of women with the bartender: "Women, can't live with them, can't live without them".

So I say, "Real estate agents - they often drive me nuts, but I also wouldn't make many deals without them."

Really though, I'm not complaining. Over the years I've done pretty good for myself, and I'm sure I would have done much worse without the services of some good realtors.

One final thought. At some point property values on this wonderful little island are going to start to increase, along with sales. I believe the catalyst for that will be bottom fishing independent investors, who will inject important liquidity into the overall market. Successful real estate agents will begin to modify their business practices to better partner with such investors, because right now there simply aren't many alternatives out there for either the investor or real estate agent. (It's like Russia and the USA teaming up to build the world's largest H-bomb to destroy the space alien invaders.)

OK, now I'll get off my soapbox.
Bob Peltier @ Tuesday, August 24, 2010 1:19 PM
Sales of previously built single-family homes plunged in July to their lowest level since May 1995 as job fears trumped low mortgage interest rates and relatively affordable home prices.

Sales of existing single-family homes, condominiums and townhouses fell to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors reported Tuesday.

That's a 27.2 percent drop from June, about twice as much as analysts surveyed by Bloomberg expected. That's also a 25.5 percent drop from the same time a year ago. The sales of all these housing types combined was the lowest since the group started tracking the numbers in 1999.

The results, which measure only completed purchase transactions, are well below what experts who track the market projected. They capture the unease about the housing market's recovery and the economy overall as unemployment remains stubbornly high.

Steven Ricchiuto, chief economist for Mizuho Securities in New York, said the drop was "so outside the statistically norm" that it took even the most pessimistic economists by surprise.

Scott Brown, chief economist at Raymond James & Associates, said the news shows "this is a pretty dicey time" for the U.S. economy.

And Paul Dales, an economist for Capital Economics, called the numbers "eye-wateringly weak."

"It suggests that without the housing tax credit, housing market activity is very, very weak," Dales said. "That would eventually lead to a double dip in house prices."

Existing home sales surged in the early spring largely because of a lucrative tax credit program that targeted some first-time buyers and repeat buyers. Many economists predicted that home sales would drop briefly when the program expired April 30 and would then recover. But now, many are questioning how soon the rebound will occur, and July's results add to those fears.

Sales fell in every region of the country, led by a 35 percent drop in the Midwest. In the Northeast, sales were down 30 percent; in the West, 25 percent; and in the South, 23 percent.
flipper man @ Tuesday, August 24, 2010 5:19 PM
OK, enough doom and gloom! Let's be a little more objective here. Look closer at the latest numbers, and you'll see there are still pockets of opportunity for investors to make a buck:

http://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__CHARTS_SPECIAL/REALTY_CHECK/RC_sales_single_family4_72010.gif

Notice that when you get to homes selling for $1 million+, the sales numbers are actually UP. In other words, don't invest in cheap inner island condos that are typically bought by first time vacation home buyers, who seem to have left the market. Go for the expensive beachfront areas.

Another thing to note is that despite a catastrophic collapse in overall home sales nationwide, AVERAGE HOME PRICES REMAINED STABLE AND ACTUALLY INCREASED 0.7 percent year over year.

Island sales may have slowed to a trickle, and inventories may be near all-time highs, but it is quite possible that we may have already seen the market bottom - at least as far as prices are concerned. I seriously doubt if prices are going to rise quickly anytime soon, but that doesn't preclude the possibility that prices may have already bottomed out.
Sierra @ Friday, September 10, 2010 10:23 PM
It's very disturbing that the president of the South Padre Island Board of Realtors would tell a reporter: "It doesn’t matter how good your credit is, you’d be lucky to get a loan."

http://www.spislandbreeze.com/articles/spots-11239-isn-among.html

Even though loans are becoming increasing hard to obtain, I would expect a little more optimism from somebody in this important position. Instead of spreading fear, give us some useful advice regarding which financial institutions ARE lending, as I am sure there are some out there. I mean really, if you're seriously thinking about buying island property, and you read something like this from the president of the South Padre Island Board of Realtors in the local paper, wouldn't you be tempted to head for the hills? What is she trying to do - scare away buyers, trying to get sellers to lower their prices, or getting ready to quit her job altogether?

We need to start talking about solutions to the current real estate slowdown, such as the owner financing option being discussed here - not listening to somebody in authority who seems to be giving people the impression that the current slowdown is a hopeless situation. It's NOT a hopeless situation, it just requires a little new creativity, patience, and flexibility.

I'm only one person, but what I want to start hearing is some realistic ideas for how we can accelerate island property sales. Talking about owner finance solutions is a GREAT START. If you look at the current MLS statistics, there are 637 listings on the island, and 19 sold last month. That's almost a 3 year inventory. So if you're a seller, a 2 year rent-to-buy deal shouldn't look so bad. And if you're a buyer, with a reasonable expectation that the economy is slowly starting to recover, a 2 year rent-to-buy deal starts looking like opportunity.

If anybody can think of any useful variations of this basic rent-to-buy concept that can get buyers and sellers together, let's talk about it! Sellers need some fresh new ideas, and buyers need lower risk opportunities.

Here is one variation I can think of, that needs to be scrubbed. The article above mentions that there is a huge demand for long term rentals, due to the violence in Mexico. That opens up the opportunity for rent-to-buy deals that allow the buyer to sublease the condo/house to Mexican refugees until the end of the two year contract. That would really minimize the buyer's risk, given that most of the monthly payments to the seller would be paid for by steady rental income. I doubt if too many mortgage companies would go for a deal like that (without a very distressed seller), but for those sellers who own their property outright, it could be a good way out.

Good Night.
flipper man @ Friday, September 17, 2010 9:46 PM
I would LOVE to see a freshly updated chart showing the number of bank short sales on the island over the last year. Does anybody have that data to share with the rest of us?

Generally, it costs banks about $20 - $40K to foreclose a property. So if they think SPI prices are going to further decline, that will be evidenced by more short sales. Conversely, if the banks think SPI prices are headed up, the number of short sales will be trending down. I wouldn't read too much into the short sale data though, as I don't think banks have much more idea where prices are going than the rest of us.

On the other hand Fannie and Freddie are wild cards, and the banks may have some inside information regarding what the future holds for these two quasi-government entities. From what I hear Fannie and Freddy loan modification efforts haven't been very successful lately. If they largely abandon those efforts, it could push more foreclosed properties onto the market faster, increase inventory levels, & further lower prices.

With a 2 - 3 year inventory of island property already on the market, a big wave of bank short sales could really drive down SPI prices even further. Weak sales could further amplify this effect. Any way you look at it, we're all skating on very thin ice right now.

Some of the deals I've seen during the past week are absolutely incredible - the kind of deals that only come along once in a lifetime. The big question I have now is: "Are the deals going to get any better?" Right now I bet there are a lot of HOAs that are suffering serious cash flow problems as owners walk away from their mortgages. I'll also bet that we'll ALL be faced with higher property tax rates eventually as property values fall and the various government money spenders run into some practical budget cutting limits.

Personally I would like to see some more short sales on the island, to "unplug the toilet" ASAP and get this market moving again. A long drawn out recovery is Chinese Water Torture for everybody.

Here is something else I have been pondering. The lower property values go, the more important those blood leaching HOA fees and property taxes become. Property owners who walk away from their properties can cause serious short term fiscal problems for the corresponding HOA, and place additional burden on existing property owners in the same HOA. Lower property values often manifest themselves into higher property tax rates, adding insult to injury for existing property owners that "ride out the whole storm." In other words, after the market collapse is over and our property values return to their previous highs, we'll probably all be paying higher property tax rates! Rising property tax rates can only further stall the recovery.

Don't wait for the phone to ring, hoping that things will soon get back to normal. If you're a realtor, touch base with your sellers every month and make sure they have the facts they need to lower their asking prices and/or offer owner financing. Believe it or not there are plenty of investors out there lurking in the bushes, just waiting for those prices to come down just a tad more before coming out of hiding. (You needn't be too aggressive in convincing sellers to lower their price; just keep bombarding them every month with carefully selected newspaper clippings detailing the current state of the market, and they'll independently come up with the idea to lower their price pronto.)

It's hard to connect with potential buyers that you haven't even met yet, but your sellers have definite faces and phone numbers that you can reach today. I wish I could get all you realtors to form some kind of union and start refusing to accept/renew overpriced listings. I've heard the old saying that "you can't get a home run if you don't swing at the ball", but accepting overpriced listings in today's market is more like waiting in a desert for a rainbow.

Another strategy for dealing with stubborn sellers is to get them to sign up for regular price reductions until their property is sold. Get them to agree to a 2% price reduction every month, on a one year listing contract, and you're almost guaranteed to eventually close the sale. That also helps the seller feel confident that he got the best possible price in the current market.

"Reality is too much to take in heapfuls, but sprinkle it sparingly upon life's path and most can tread it lightly." ~Astrid Alauda


local Pete @ Thursday, September 30, 2010 9:57 AM
Here is a good reason to sell ASAP: Don't get too fixated on your asking price. With Obama printing so many dollars, the value of the dollar is going to go WAY down in coming years. If you're a seller holding out for $500K on that beachfront condo, you may actually get it in a few years. BUT, in another five years, that $500K is going to buy a lot less than it does today. Our politicians don't have the guts to cut government spending, so serious inflation is inevitable. Bottom Line: sell now, for whatever you can get.
Bob Peltier @ Sunday, October 03, 2010 12:09 AM
Obama had to print it it to pay for bills run up by previous idiot. Things are getting better. Everyday old Shrub Bush is gone.
Ready to Retire @ Thursday, November 11, 2010 9:09 PM
The latest buzz from Washington is that they're talking about getting rid of the mortgage interest deduction for homes over $500K, and getting rid of it altogether for second homes and home equity loans. If anything even close to that ever makes through congress, it would really hurt property values on the island.

http://www.mortgageorb.com/e107_plugins/content/content.php?content.7102
Click here to post a comment