Speculators will halt RE decline?

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xy31_IHB

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<p>I am no finance dude, so I have only been following this stuff on the margin. What I read in the Economist, NYT, and WSJ is that basically people (funds and other investors) are getting out of traditional investments. But this money has to go somewhere. A lot of them have been buying gold and oil and other stuff (look at how much investment in oil increased from "non-users"), this also allows them to hedge against the weak dollar. </p>

<p>Now I just read two articles that tells anectodal evidence of investors flocking to housing auctions in particularly hard hit markets like CA and FL because they perceive those prices to be good and think they can rent the properties. </p>

<p>Whats your opinion. You think if this catches on, some funds may be tempted to do this in large scale? Sounds too much trouble with all the crap that is associated with renting properties. </p>
 
It just seems like the number of speculators and number of dollars they might put in would be a pittance in comparison to all of the properties languishing on the market. . .
 
seriously... normally there would be 10 speculators jumping into this game. these days there's 1 and the other 9 are the guys having their houses go up for auction.
 
<p>Would you buy gold as a hedge against a falling dollar if it (gold) was daily declining in value and you knew the next couple of years some high volume mines would be coming on line?</p>

<p>I would stick with oil and coffee beans if so inclined and so far the facts support that my inclination is not uncommon.</p>
 
I only worry about the buyers who see the dramatic price drops, and jump in because they think they've got a bargain. I think they'll slow the price declines down a bit.
 
I agree. However, after a year or two of continual price declines, I imagine the potential hair-trigger fence sitters will say "forget it!" and shy away from RE. Kind of like mice who for a long time used to get a treat for hitting the button, but now keep getting zapped. Eventually they stop hitting the button! "That thar button stings! You gotta be crazy to touch it! Let's leave!" A little while later is when I POUND the button! "Gimme dat cheese!"
 
In my neighborhood a 2/2 rents for $2,000 and sells for $500k.





At 500k, if you put 30% down (150k) and finance the remaining 70% (350k) via 30 year fixed rate loan @ 6%, the monthly payment is $2,100 (P+I).





Then we have property tax, mello roose, $200/month HOA, etc.





I'd say that 500k property needs to fall to $350k for the purchase to make sense.





At 350k purchase, 70% loan is $245k, 30 year @ 6% results in monthly payments of $1470. If you add HOA + property tax, the monthly rental income of $2,000 will result in a monthly negative cash flow of couple hundred bucks. Not great, but acceptable for newish properties.
 
<p>Speculators saving us in Fla. Giggle giggle, , snort, guffaw. Hahahahahaha. And also hah.</p>

<p>The only thing that would save South Fla is a good strong destructive hurricane. Oops, I heard last nite on NPR, that Fla's catastrophe plan is only up to 10% of it.</p>

<p>With, according to Buffet, 82,000 listings in Miami-Dade and Broward Counties, and another 20-30,000 condo units coming on line. . . well, let's just say I would jump in only when prices got under 100 a square foot. Maybe 75 a square.</p>
 
<p>What is a "sovereign" fund? Or should this read foreign?</p>

<p>With the run on Bear Stearns, I get the feeling that no one will be speculating in the future. Least not in RE!</p>
 
Sovereign wealth funds won't buy individual houses. They might buy an entire skyscraper. I think the word soverign refers to the fact that it is owned or controlled by a government, altho I might be wrong.
 
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