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Tail-end my ass. The SA market is thriving.
If you've been waiting like I told ya too, your ship is gonna come in...
CNNNEW YORK (CNNMoney.com)-- Homebuilder Toll Brothers said the current slump in residential construction is unlike any it has seen in 40 years as it became the latest to warn of a glut in new homes for sale and a slowdown in the closely watched real estate market.
The builder of luxury homes also reported weaker than expected preliminary results for the just completed quarter and cut its outlook for the homes it will sell in the current period. Toll Brothers (Charts) shares fell 4 percent in premarket trading.
The housing and homebuilding markets have helped drive the national economy during the past few years. Any downturns in these critical sectors could add to the problems of an already unsteady situation.
In a statement, company chairman Robert Toll warned there is a glut of supply of homes for sale in the market, as the building boom of recent years seems to be turning into a bust.
San Antonio is on the tail-end of a sellers-market. The economy continues to be strong, but investors are shying away from the quick turn-over deals in real estate from just 2 years ago figuring the market is stagnant. Now there are many empty homes on the market, with even more neighborhoods still under construction in the burbs. Homebuilders, like American automakers, are always the last to get the memo, but the real winners this time will be those who waited.
Tail-end my ass. The SA market is thriving.
Believe me..I have and making a hansome return doing so. Thanks.
San Antonio is one of the few markets were you can still make a buck in real estate because homes are still moderately affordable and it's a developer's city, very few barriers to entry, low building regulations and lots of affordable land. A similiar size home in Austin could cost 2 or 3 times as what it would cost in San Antonio. The high costs of building or remodeling a home in Austin has led to housing booms in surrounding small towns, mostly affordable family homes, but not so for SA, you can still find moderately priced homes for the square footage in the city and that lends to a good investment opportunity, trouble is appreciations have been going up so fast in SA that it makes some people feel artifically rich and it gives people like Snake a feeling of invulnerabilty, while those on fixed incomes or with salaries that aren't keeping up with inflation (a majority) are left to struggle with the higher taxes and insurance costs. Everything else being equal, a housing boom can become self-sustaining, but only as long as the next sucker will come along and over-pay. Still, there are worse things than being stuck with a home in SA.
Bingo.
Real estate is one of those real "get-rich-quick" things that people pile into when the economy favors it, then cry in their beer and blame others for when it doesn't.
The high rates of return are garnered to compenstate for losses in economic downturns. A simple tenet of finance.
WEB EXCLUSIVE
By Jennifer Barrett
Updated: 6:35 p.m. ET Aug 8, 2006
Aug. 8, 2006MSNBC- When Shawn Howell saw the house in the summer of 2004, he thought he couldn’t lose. The location-close to family and in an upscale subdivision in Louisville, Ky.,—was perfect; the three-bedroom plus loft was just right. The price was a little high at $217,000—especially as Howell's wife, Niki, had just given birth to their second child. But the couple learned they could purchase it with no money down by taking out two adjustable-rate mortgages. The monthly payments would start at a manageable $1,100. And Howell figured the value of their home could only go up in the five years they planned to live there. Instead, two years later, the family have put their home on the market for less than they paid for it—desperate to find a buyer before the bank forecloses on the property. "Looking back, I wouldn't advise anyone to do what we did," says Howell, an Iraq war vet who worked two jobs but still fell short on the monthly payments after they jumped by more than $300. "We just couldn't afford the house anymore."
Across the country, millions of homeowners are finding themselves in a similar situation. Real estate purchases that once seemed like such moneymakers have become financial burdens instead. U.S. homeowners now owe about $9 trillion in mortgage debt. Of that, about $425 billion in adjustable-rate mortgages-initially pegged at historically low rates, but designed to shift with market trends after periods ranging from one to 10 years—will reset sometime this year, according to Freddie Mac, a government-sponsored housing financing company. Another $600 billion in home equity lines of credit (or HELOCs) and second-lien mortgage loans, which became popular when rates were low as a means of paying off credit card debt or financing home improvements, are also being readjusted. Those with fixed-rate mortgages payable over 15 or 30-year periods may be seeing little change, but those who banked on rates remaining near the 4.6 percent lows of 2003, are getting some unpleasant shocks when their mortgage bills arrive in the mail. As their payments rise, many are struggling to keep up. Foreclosures and delinquency rates are rising. And with the markets cooling in many regions—existing home sales across the country have slipped for three months straight and new home sales nationwide have declining as well—there are growing fears of a looming crisis. Howard Dvorkin, president and founder of Consolidated Credit Counseling Services, a nonprofit debt management organization, says up to 10 percent of those now seeking counseling are being squeezed by adjustable-rate mortgages or home equity loans. "And this is just the tip of the iceberg."
Its people like this who overextend themselves on credit that help create the very bubble which crushed him.
This guy thought he would take a free ride on the housing bubble, he thought he would get it all, no money down, ride the appreciation wave and then cash out in a few years. He lost, its 100% his own fault. All the signs were there interest was only going to go up and he should have planned appropriately.
sorry but the poor dumb SOBs that get ADJUSTABLE RATE mortgages deserve it.
Your assuming that fixed rate mortgages are available for everyone, but your right, if you have to buy a home with an ARM to meet the payment, don't buy the house.
Bingo! SA (and a few other cities) are seeing the exact opposite of the rest of the country.
Yup.
Better to live in an apartment, sock away money for a couple of extra years to get a larger down payment.
People always say that renting is "throwing away money". To a small extent that is true, but then again, so is making house payments that are 90%+ interest for the first few years of a 30 year loan.
The best thing to do instead of an ARM, is to rent and live beneath your means for a few years, and sock away a good chunk of money every month for the express purpose of getting a house.
I DO feel that a house is a good investment, and one of the first I will make.
Invest in your house.
Make your normal payment each month.
Write a separate check at the same time for the amount you want to "invest", and be sure to write "principal only" in
the memo portion of the check.
Make sure that your mortgage company allows you do to this first. Most do, but read your mortgage first.
Example of this in action.
Your 30-year mortgage amount: $150,000
Your interest rate: 7%
Your normal payment $997.95
Amount of that.........You will pay your
second check...........mortgage off this much earlier
$100 ---------------7 years
$200 ------------- 11 years
$300 ------------- 14 years
$400 --------------16 years
$500 ------------- 18 years
Once your house is paid off, you can then start investing that $997.95 (plus your extra) per month, and be able to afford good advice on how to do it!
You will lose a slight tax deduction for the interest paid, but having the extra to save will make a big difference in the amount you end up with at retirement.
People worry a lot about how to invest, but an investment in one's own debt is a good place to start, even if you don't know much about investing.
Last edited by RandomGuy; 08-10-2006 at 04:53 PM.
They are indeed, due to local fluctuations in economic growth. Do you know when the SA market will cool off?
When people stop moving here... I don't see it happening.
Dude, where are these tenets you always refer to?
that's like "if you can't pay the insurance on the car, you can't afford the car."
Genius.
The S&L collape of the late 80's along with the real estate collape in SA happened after the rest of the country had already cratered. It will happen here, just delayed.
i've talked to a load of realtors and homesellers recently... our housing market is is slowing down just a bit... houses that were selling in weeks are now takings months... i don't think we'll see some sort of crash that will happen in other areas though... our homes have always stayed reasonably priced...
FYI: no financial planner will tell you to make extra mortgage payments on your home. not a good investment
Michigan saw a HUGE housing market couple years back (maybe 4-5). Subdivisions went up over night, old farms were being bought for millions to build million dollar homes.
Im not kidding when I say that (total guess, but close) 20-40% of those houses are completely empty.
Some of the smart contractors didnt build houses until the lot sold....you see alot of subdivisions with 4 houses out of 30 lots.
Unbelieveably bad here. Im no economist/real estate agent either...just a guy that drives by these abandoned subs every day to work.
U.S. housing boom appears over
Web Posted: 08/09/2006 08:13 PM CDT
Martin Crutsinger
Associated Press
WASHINGTON — The "For Sale" signs are staying out longer. House prices are easing as sellers try to lure in buyers.
The big question now: Will the nation's five-year housing boom turn into a bust that could derail the overall economy?
"We recognize the risk ... and we are watching it very carefully," Federal Reserve Chairman Ben Bernanke told Congress recently.
The Fed's interest rate increases, which have helped push mortgage rates to the highest levels in more than four years, have put a damper on housing.
The central bank acknowledged that fact Tuesday when it decided against raising a key short-term rate for an 18th time.
Richard Dekaser, chief economist at National City Corp., has done a study with Global Insight that identified 71 metropolitan areas, representing 39 percent of the single-family home market, as extremely overvalued. Of the top 25 cities, 14 are in California and seven in Florida.
San Antonio is bucking the national, trend, however, and making its mark as one of the country's hot real estate markets. The median sales price for the year's first six months reached $139,400, an 8.6 percent increase over last year, the San Antonio Board of Realtors said.
The median sales price for June alone was $149,000.
Construction of new homes is soaring. The city saw more new homes started in the past 12 months than in any period in its history. Builders started 18,598 houses between July 2005 and June 2006, a 26 percent increase from the previous year, according to a report from Metrostudy, a housing research firm.
David Lereah, chief economist for the National Association of Realtors, predicts that the U.S. sales slowdown is about to bottom out. He said stubborn homeowners are starting to realize they will need to lower their asking prices to attract buyers.
==========================
What the planners/developers call in-filling is occuring in San Antonio. Lots that have been vacant for decades next to residential developments are being built on. Old houses/lots are being purschased and razed for luxury homes (Alamo Hts, Terrel Hills, vicinity). Big lots are being sub-divided to put up large luxury homes out of character with the neighborhood, causing the recent re-zoning/density battles in SA.
=============
San Antonio Express-News (TX)
Inside the loop
Jennifer Hiller EXPRESS-NEWS BUSINESS WRITER
Publication Date : July 30, 2006
Most San Antonio home buyers head straight to the suburbs.
Others go on a more elusive search: trying to identify the next King William or Monte Vista.
Interest in San Antonio's older neighborhoods is picking up, in part because of rising gas prices, traffic congestion and a desire for distinctive architecture.
But with home prices skyrocketing in some of the city's original suburbs, some buyers are turning to other neighborhoods where entry-level homes can still be had for a song -- and maybe a lot of elbow grease.
Buyers, architects and real estate agents looking for the next big thing are targeting neighborhoods that include Mahncke Park, Government Hill, Alta Vista, Beacon Hill, Lavaca, Tobin Hill, Woodlawn Heights and Olmos Park Terrace.
For entry-level buyers, the homes there represent a more realistic option than the high-end homes in Alamo Heights, Olmos Park, Terrell Hills, King William or Monte Vista -- a few of the neighborhoods where sales prices can be hundreds of thousands of dollars higher.
Many real estate professionals point to the Broadway corridor south of Hildebrand Avenue as an area primed for renewal.
Nearby, developers have started turning the 22-acre Pearl Brewery into a mixed-use urban village. Also along Broadway, the refurbishing of the old Butter Krust bakery into C.H. Guenther & Son's headquarters, an expansion proposed at the Witte Museum and the construction of a high-rise condominium on the site of the former Earl Abel's are helping drive interest in the area's neighborhoods.
Prices have already ed in Mahncke Park, located off Broadway near the San Antonio Botanical Garden, but there are still a few deals to be found there -- if a buyer wants to do a lot of work on a house, real estate agents say.
Sales prices in Government Hill, farther south off Broadway and near Fort Sam Houston, are much lower, said Julie Hooper, owner of King William Realty.
Government Hill has been on the brink of a comeback for some time. It was designated as historic by the city and lately has attracted local artists as buyers. But neighborhood revitalization is rarely a smooth and rapid process.
"Hopefully it will be a natural progression now," Hooper said. "There are some fine houses there."
Architects, contractors and real estate professionals say excellent architecture -- or "good bones" -- is one thing that helps older or historic neighborhoods attract new buyers.
Most people attribute Monte Vista's continued popularity to its housing stock -- large, unique homes built primarily of rock and brick in the Spanish Eclectic, Craftsman and Colonial Revival styles.
Mike Idrogo, a real estate agent with Bradfield Properties, said the historic designation in 1975 helped improve property values in the neighborhood.
Now he sees the same thing happening in Monticello Park.
Monticello Park, west of Interstate 10 and off Fredericksburg Road, recently was designated a historic district. It includes Art Moderne, Spanish Eclectic and Gothic Revival homes built in the 1920s and 1930s.
"It hasn't really kicked up like Monte Vista," Idrogo said. "There's still some you can get deals on."
Pat Howell, a real estate agent with Bradfield Properties, also likes Woodlawn Heights, near the Monticello Park Historic District.
"They look real similar to little Olmos Park homes, but they haven't been touched yet, which is really good," Howell said. "I try to get my investors to look over in that area. I think it might take a while to catch on, but I love the homes."
Howell also said buyers can still find reasonable prices and good architecture in Olmos Park Terrace, northwest of Olmos Park, but they have to move quickly.
Liz Chiego, a real estate agent with the Phyllis Browning Co., said Monte Vista's popularity is helping drive renovation in the neighborhoods that fringe it.
"There's a proximity to downtown, and gas prices are very high," she said.
Edward Alanis, also with the Phyllis Browning Co., said prices in nearby Alta Vista and Beacon Hill are moving higher and that homes are moving off the market at or near asking price. Alta Vista is near San Antonio College and San Pedro Park, and Beacon Hill is west of Monte Vista.
Buyers also are looking to renovate and remodel in Tobin Hill, south of Monte Vista.
"People seem to be proud of them even if they're in terrible condition," he said. "To get a deal you may have to spend tens of thousands of dollars in renovation."
Darryl Ohlenbusch, an architect who lives in Lavaca, which is near King William, recently purchased a 90-year-old Craftsman-style home in the neighborhood near St. Cecilia Church.
Ohlenbusch and others describe the St. Cecilia area, south of Lavaca and King William near Roosevelt Park, as a once-middle-class neighborhood that declined in the 1960s because of nearby freeway construction.
"It's beautiful housing stock," he said. "I don't think the noise is really an issue."
Ohlenbusch, his mother, an aunt and other friends recently have bought homes in the neighborhood and started renovations. He and his business partner, contractor Robert Alvarado, say it's one of a few areas where it's still affordable to buy and renovate or restore a historic home.
"After King William it was Lavaca; after Lavaca it was St. Cecilia," Ohlenbusch said.
There's an inherent risk in buying a home in a neighborhood that might -- or might not -- be on the fringe of a comeback.
But buyers can take comfort in this: The King William Historic District, which houses some of San Antonio's best residential architecture gems, was famously forgotten for several decades. Its Victorian, Greek Revival and Italian villa homes declined with neglect, then were rediscovered in the 1960s.
This year's average sales price: $139 per square foot, with many homes in the half-million-dollar range.
[email protected]
Last edited by boutons_; 08-11-2006 at 10:27 AM.
Generally they are in the textbooks of my finance classes, and are harped on repeatedly by the PHDs that teach the classes.
Risk=Demanded Rate of Return.
This is why low risk borrowers like the US government get 3-5% interest rates on US treasury bonds, and you get 12-22% on your unsecured credit cards.
Rates of return for any investment works the same way.
It will at some point in the future that neither of us can get at. It is statistically certain.
You are right in saying that it probably won't be any time soon. I would however always advise a bit of caution and common sense when looking at any investment. It would be very easy for builders in the SA area to overbuild, as is always the case in any "hot" market.
It is if you don't like being in debt. I hope you realize that the extra payments are towards the principle and not just "extra payments" as in principle+interest.
It is also a good investment for real novices who are very shy of stocks and such.
I would also ask any financial planner to find an absolutely 100% guaranteed 7-8% return for 20 years. Again, you will miss out on a small tax deduction on the interest, but I think it is outweighed by the fact that one gets out of debt quicker.
The thing about investing in a home that most financial planners will miss, is that you can take tax-free capital gains when you sell a house.
Buy into a mutual fund, you have to pay overhead, and might just as well throw darts at the Wall Street Journal as far as returns go.
Buy into stocks directly and unless you have a LOT of capital up front to diversify, you are taking on a lot of risk.
One other small thing that paying off your house early will do for you:
Cash flow.
Let's say you pay off your house early and now suddenly don't have to worry about not being able to make house payments, and can just worry about the relatively minor insurance and taxes.
What does that really free you to do?
Take that cash flow and invest in something that earns truly massive returns. Yourself.
Start a business and/or add to your education. These two things will add more to your earnings potential in the long run than anything else.
"But RG, don't most small businesses fail, and won't that leave me in a bad spot?"
If your business fails, the bank won't repossess your house because you can't make the mortgage payments.
I really truly believe that this is a very solid way to go. If this parts ways with most financial planners, so be it.
Scenario 1:I would also ask any financial planner to find an absolutely 100% guaranteed 7-8% return for 20 years. Again, you will miss out on a small tax deduction on the interest, but I think it is outweighed by the fact that one gets out of debt quicker.
Home costs $160,000
I pay 20% down: $32,000
Payment: $1000/mo, $120 principal, $880 interest
Rent: $600/mo
1 year later:
House value: $172,000
My equity: $45,440
My total payments: $44,000
Rent would have been: $7200
Plus I got a tax credit of $2640
So my net payment = $34,160
So I'm ahead $11,280
Return = 33%
Scenario 2: I make an extra payment 6 mos. after purchase
I don't refinance, so my payment schedule stays the same.
I pay an extra $1000 and get $1000 additional equity.
Equity: $46,400
Total net payments: $35,160
I'm still ahead $11,280
But my return is 32%.
I'll get my $1000 back in 29 years when it is discounted to $550 or so.
Sounds like extra payments are a bad idea to me.
An exception would be if your interest rate is lowered once you hit a certain equity trigger (sometimes done on PMA for purchases w/ < 20% down).
also, many houses are financed at 5-6%. with the tax deduction the rate is even lower.. plus, you lock up money in your house... you can get a HELOC, but then you just borrowed your own money at a higher interest rate!
also, paying extra you forego earning higher interest rates the market brings.. you can find tons of mutual funds with rates higher than 10% averages over the past 10-20, even 30 years..
You are assuming the average couple has the cash flow to afford mutual funds.
Most studies I have seen have put the performance of mutual funds below or well below market performance.
Factor that in for starters.
Factor in the fact that most brokerages that set up investment accounts will charge fees for not having enough money. That reduces the rate of return earned on having money there if you are just starting out.
Another happy fun thing about mutual funds is that one never knows what one is getting into. The "timing" scandals as well as tons of other brokerage scams that have happened with alarming frequency and almost invariably involve taking money from small investors.
I will readily accede that, in theory and in the past, one could earn a slightly better return in the stock market.
In practice, however, that increased rate of return has come with a price to pay in terms of income volatility.
Let's say you sock your money away in mutual funds and keep that house payment.
You get sick or lose a job, and have to live a greatly reduced income, AND the market at that time tanks reducing the rate of return on that invested money. You then have to no only use up the interest, but start eating the principal as well, taking money out and paying taxes on the interest and any capital gains.
Pay off the house sooner, and you can afford to either refinance, and reduce your cash flow requirements, or were lucky enough to have paid off your house, having a greatly reduced cash flow requirement.
I am not saying to sock everything in your house. One still needs to diversify eventually. But if you really want a conservative investent, with a 100% guaranteed return, investing in one's debt, such as a mortgage loan, is a very good way to go.
You don't have to waste time picking a mutal fund/broker, you don't have to worry about paying taxes on a good chunk of the capital gains, and you don't have to worry as much about the state of the economy.
Any difference between the two options is more than made up for by the financial security of home ownership, and the fact that after you finish paying the thing off you can take the cash flow that was going into the mortgage and stick THAT into the stock market.
Granted, it will not have the time to compound that the dollars that would have gone into the market would have, but you will have a LOT more money to stick into other investments at a time where the increased liklihood of illness and/or joblessness makes that security a lot more valuable than any difference in return would indicate.
In any good portfolio, you will have a mix of investments, that offer differing amounts of risk, from stocks to bonds, to treasury securities. Investing in your own debt (paying it off sooner) is absolutely riskless. This makes it on par in terms of risk with treasury securities that average 3%5% (at the moment). Sooooo if you have any debt at all that is ac ulating at a higher rate than that, you would do better to put that money into that debt than in US treasuries.
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