Contrarian investing

The definition of a Contrarian: An investor who buys a category when most others are selling and sells when others are buying. A contrarian doesn’t chase what is hot, but is often buying a category that has recently underperformed.

Sam Zell is a self made billionaire and is considered a contrarian investor. He is largest owner of apartments in the U.S. and among the largest converters of apartments to condos. Here is a May 19th, 2005 interview with him talking about real estate.

Highlights from the Sam Zell article:

I'm 63. I've been in the business 40 years. I've heard about all kinds of "housing bubbles," and I ain't seen one yet.

There've been short periods when single-family-housing prices fell, but the number of examples of that are really small.

Housing prices, though, are always connected to fundamentals, like the amount of buildable land. A house has intrinsic value.

Over the next 10 years we're going to add a million new households; much of that's due to immigration. There are lifestyle influences on demand too.

Over the past 25 years, for example, marriage has been delayed eight to 10 years. It used to be Harry and Sally would graduate college and get married. Now everybody gets married late. Instead of Harry and Sally owning one house in exurbia, you now have two people buying. And think about the longevity of the boomers; they continue to buy.

Americans don't understand that we have the cheapest housing in the world. London and Tokyo are more expensive than New York. Why do you think everyone is going to South Florida from Europe? It's because prices here are cheap compared with there.

Something to think about.

Should you try to pick a bottom in the real estate market?

I have heard statements like this lately, "We are going to wait to see if we can get a better price in a few months." Buyers are a little apprehensive right now and rightfully so. 2004 and 2005 were boom years for real estate. We are currently going through a correction phase and home prices in Sarasota and across the nation have dropped. I have not verified it but some segments of the market jave gone back to 2004 prices.

Should you try to time the real estate market by predicting when the bottom will occur? It depends. Are you trying to buy a property to speculate and flip? Then you need pick the bottom fairly accurately or buy a home at wholesale and add value to the home. Do you need a home to live in and plan to be there for a number of years? Then it is not as important to pick the bottom of the market. You probably aren't going to do it anyways.

If you plan to get a mortgage you should take into consideration the current rates. The mortgage rates dropped again this week. 30 year fixed rates are at a 6 month low and hovering around 6.4%. Numerous financial institutions are forecasting higher interest by the end of the year and into next year. It is possibility that you will get a lower sales price down the road but have a higher monthly payment because you are paying a higher interest rate.

If you are looking for a home don't be afraid to make low ball offers. You buyers have the leverage right now. Most sellers will entertain an offer. You might have to make a few of them to find that motivated seller. Give me a call if you need some help. 308-6766

Housing prices are cooling off

Sales of existing homes have also dropped from last year.

Here is an article from the Sarasota Herald Tribune about Sarasota home prices cooling off.

Here are a couple of highlights:

For the second month in a row, the Sarasota-Bradenton market posted a double-digit drop in median sales price.

A single-family home sold for $309,700 during August, down 11 percent from a median of $347,400 during the same month in 2005. That is on the heels of an 11 percent drop during July.

"The biggest mistake today is they price their home off their neighbor's home down the street," said Dan Forbes, co-owner of Bradenton's Premier Team Inc. "Their neighbor's home has been on the market for five months and it still hasn't sold.

Southwest Florida was by no means alone in either the drastic slowdown in sales or the drop in prices. Plummeting sales have been weighing on home prices in most of the country, with the median price of an existing home sold during August dropping to $225,000, 1.7 percent below August 2005.

Felix Power, president of the Sarasota Association of Realtors, notes that the current rate of sales is comparable to 2002, before the big boom of 2003-05.

Some have taken their homes off the market after "coming to the realization they're not going to make a fortune," the way a neighbor who sold 18 months ago might have.

This is not a surprise to me. Of course prices had to drop if the supply of homes and condos for sale exceeds the demand for them. The good news is that the buyers are getting more active. They know that there are plenty of options to choose from and that they are in the drivers seat.

If you are looking to buy or sell give me a call at 308-6766. I would be happy to help you.

Cooling market a good thing, experts say

This is a good article from The Sarasota Herald Tribune. Go here to read the article.

It talks about the recent slow down in the Sarasota real estate market and why it was necessary. I agree we needed to slow down at some point. A market cannot sustain price appreciation like that every year. Once we get through this bump in the road the market will become normal again.

This is from the article above:
"Sarasota's high per-capita income and strong in-migration will continue to sustain growth and the economy will continue to outperform the national average over the forecast horizon," Moody'sEconomy.com's Slesers wrote.

In addition to their sheer numbers, baby boomers will also buoy Southwest Florida real estate with the size of their bank accounts through inheritances.

Some $200 billion annually now is passed down from one generation to another, and by 2050, an estimated $25 trillion will be inherited, Boston College's Center for Wealth and Philanthropy reports.

September 24th Inventory of Sarasota Homes & Condos

Here is another snapshot of inventory levels in Sarasota. Again, we seem to be in a holding pattern. Inventory for homes are hovering around 4,400 and about 3,000 for condominiums.

September 24th
4,458 single family homes for sale
3,078 condominiums for sale

September 9th
4,433 single family homes for sale
3,002 condominiums for sale

August 17th
4,450 single family homes for sale
3,051 condominiums for sale

July 22nd
4,486 single family homes for sale
3,062 condominiums for sale

I searched Sarasota, Lakewood Ranch, Lido Key, Longboat Key, Siesta Key, Bird Key, Casey Key, Nokomis and Osprey for these numbers. MLS data is believed to be accurate but not guaranteed.

Good news for buyers

Mortgage rates are at their lowest level in 6 months. The average for a 30 year fixed rate mortgage is 6.40%. This is good for home buyers. Not only do they have plenty to choose from but they can also get a low interest rate on their mortgage.

Rates on 30-year mortgages hit a four-year high of 6.80 percent on July 20, but since that time have been trending downward as financial markets have become more convinced that a slowing economy and recent declines in energy costs will help keep inflation contained.

Such a slowdown would allow the Federal Reserve to keep interest rates on hold. Fed officials announced on Wednesday that they were leaving a key interest rate unchanged for the second straight month, raising expectations that the Fed’s two-year campaign to raise interest rates to fight inflation pressures may be coming to an end.

MSN article

Housing not facing bust, just normalcy: experts

By Patrick Rucker
Reuters
Wednesday, September 13, 2006; 2:57 PM

WASHINGTON (Reuters) - While the U.S. housing market is drifting down from stratospheric levels, the sector is just returning to normal and is not poised to crash, several economists and industry leaders told lawmakers on Wednesday.

"True housing busts are a relatively rare event," Federal Deposit Insurance Corp chief economist Richard Brown said at a congressional hearing on the housing market.

In a recent study of past housing trends, the bank regulator concluded sharp drops in housing markets are most often linked to "episodes of severe local economic distress."

The rest of the article

You may find this article interesting. It looks like the Sarasota real estate market is heading towards a more normal market. However, we are not there yet. It is possible we will see more price drops. If you want that 2nd home for this winter or need a place to live then don't try to time the market by trying to pick a bottom.

What condos are selling in downtown Sarasota?

Are you interested in seeing what condos have sold in downtown Sarasota? Take a look at my Downtown Sarasota Condos sold in 2006 page that I just put together. It is a good way to keep an eye on what is selling in downtown Sarasota. I will periodically update the page with new sales information. If you would like sales information on any building in downtown or any other part of Sarasota let me know. 308-6766.

Fractional Ownership

Here is an article from the Sarasota Herald Tribune about fractional ownership. It is not really a new idea. You won't find too many of them in Southwest Florida. However, that will probably change in the future. Fractional ownership is used often in Colorado due to the high real estate prices. I get a call every now and then from someone looking for fractional ownership. I think it is a pretty good idea. It allows someone to enjoy a beachfront getaway without having to spend as much. Article

September 9th Inventory of Sarasota Homes & Condos

Again, inventories have not moved much since I last looked in the middle of August. Again, I think it is a positive sign that they are not increasing. Athough some properties are moving many of the buyer and sellers appear to be in a stalemate.

September 9th
4,433 single family homes for sale
3,002 condominiums for sale

August 17th
4,450 single family homes for sale
3,051 condominiums for sale

July 22nd
4,486 single family homes for sale
3,062 condominiums for sale

I searched Sarasota, Lakewood Ranch, Lido Key, Longboat Key, Siesta Key, Bird Key, Casey Key, Nokomis and Osprey for these numbers. MLS data is believed to be accurate but not guaranteed.

Wicker Inn on Longboat Key Sold

U. S. Assets Group, the Sarasota-based developer of waterfront projects such as Orchid Beach Club and Beau Ciel, bought the 11 unit Wicker Inn on Longboat Key. The property was listed for $5,900,000. According to the Sarasota Herald Tribune Jay Tallman said the Wicker Inn will continue booking business until he develops plans for a maximum of six condos.

"Losing" on Real Estate Price a Matter of Perspective

Here is a good article by M. Anthony Carr of RealtyTimes.com. He talks about the psychology of todays sellers. Here are a couple of excerpts:

"When it comes to pricing your house when you’re ready to sell it, keep in mind you must sell in the market you’re in today. It doesn’t matter what your former neighbor got six months ago, or what properties are listed for now. All that matters is this -- whatever the last sale price in your neighborhood of your model -- that’s probably your sale price now. "

"What’s even scarier are the agents who are defending their prices in a correcting market. I have to keep in mind that nearly half the agents in the country (as well as here in the Capital region) were not in business five years ago. They’ve just now entered a market where prices have to be corrected, dropped -- improved, as it were."

"Keep in mind, the market is the market. When it’s time to buy, buy. When it’s time to move, then sell. Work with the market you’re in, not in the market you wish it would be. "

Go here to read the article: http://realtytimes.com/rtcpages/20060616_perspective.htm

Parkstone

I just listed a 3 bedroom/2.5 bath/1 car garage townhouse in Parkstone. This lovely gated community was developed in 2002/2003. It is just off Bee Ridge road so it is convenient to downtown Sarasota, Siesta Key and Lido Key beach, I-75, shopping, entertainment and restaurants. Enjoy the open floor plan with high ceilings in this 2002 built townhouse. View the photos here: Sarasota Townhouse. Sit out back on the private screened lanai for relaxation. Take a stroll across the street to enjoy a dip in the swimming pool or socialize with neighbors. The townhouse has 16 inch tile laid diagonally, berber carpet in the den and bedrooms, 42 inch kitchen cabinets, was freshly painted and cleaned. Parkstone also has low maintenace fees of $146 a month and allows 3 large pets. $279,900. Give me a call if you would like to see it 308-6766.