The Next Cycle of Wealth Creation has Begun. Are You Ready?

For the same reason that people didn’t get out at the top, they now hesitate to get in at the bottom. The intrepid ones will be the biggest gainers.

Palm Coast, FL – November 6, 2009 – Real estate, like the stock market, is a risk/reward market.  But successful real estate investors don’t make money selling real estate. They make money buying real estate. They lock in their profits up front by taking advantage of great bargains. Great bargains are not found at the top of the market. They’re found at the bottom. And that’s where we find ourselves now.
Remember the boom times when we suffered irrational exuberance? I can only characterize our present condition as irrational pessimism. But we are at the beginning of the next cycle of wealth creation, but many are still hesitant. If you want a safe investment, buy anytime stamps. They’ve appreciated 29.36% since 2006. You can’t flip them for a quick profit, but they will never go down and they will certainly rise over time.

The intrepid investors will be the biggest gainers.

What is the difference between a real estate investor and a real estate speculator? One answer I’ve heard is that an investor makes money. A speculator loses money. It’s much more than that.
The investor takes time to analyze a potential investment. What are the downside risks? What is the upside potential? What is the exit strategy? Is there a plan B? They can be found picking up the scraps at the market’s bottom. Tim McGee, an industry insider, says those who succeed are among “the optimistic few who are willing to dig through a roomful of horse manure because they are convinced that somewhere in there is a pony.”

A speculator is best represented by the “flipper.”

In the extreme, speculators are otherwise rational people who somehow morph into someone who would fearlessly buy a property for $50,000 more than the seller paid only a few months ago, confident that the person in line behind them will do the same. Speculators can be found at or near the top of the market, picking up properties whose value has already been inflated by previous flips or by developer hype. Underlying value does not correlate with the speculator’s purchase price. Nor does it play a role in a speculators purchase decision. thinks that now is the time to go shopping for bargains. Don’t count on catching the exact bottom of the market. That only happens through luck. There’s a time lag of several weeks to months between a sales contract and the transaction’s close. In the meantime, the public is in the dark. So most of today’s closed transactions represent contracts inked in June – September. Of course, we need at least three months more to make sure the "bottom" is a trend rather than a blip.
But look at the data and draw your own conclusions.
There were 130 single-family Flagler County homes sold through MLS in October, compared to 98 in October ’08, an increase of 32.7%.
Flagler County residential homes sold
Year-to-date, 11% more homes have been sold vs. the same period last year.
While the median selling price was $135,000, down 16.5% from $160,000 in October ’08, the aggregate value of all sales was up. Total sales in October were $20.5 million, up 19.3% from $17.1 million a year ago, representing the second consecutive month of year-over-year aggregate sales growth.
Flagler County total sales value of home sales
Distressed sales (lender-owned via foreclosure and short sales) continue to drive pricing, accounting for 56.9% of October residential sales. Yet prices and inventory remain stable, indicating that the continuing flood of foreclosure driven inventory has a ready group of potential buyers eager to grab good bargains. The median selling price has remained in a narrow band between $132 thousand and $142 thousand since January.
Median selling price Flagler County residential homes
The median purchase price per square foot for a single-family residential home (including the land) has been in the $70 range all year, down from $80 in 2003 and the 2006 peak of $139.
Flagler County median price per square foot residential homes
Certainly some of the increased sales activity was driven by the $8,000 first-time buyer credit, set to expire at the end of November. A bill to extend the credit to June 2010 has past both the House and Senate and awaits the President’s signature, expected today.

Summary of other October real estate news

Toby Tobin was a guest on the WNZF News Radio’s Chamber Chat program on October 24th. The audio will be available for at least a few weeks at the WNZF website. Toby is the second guest. <Audio>
Foreclosure and fraud are a consistent news theme. Fraud is real. It is much more pervasive than one would guess. Watch for upcoming articles about ongoing investigations.
The Conservatory drew attention in October when a lot originally purchased for $425,900 was sold at a tax deed sale for $15,185. The sale stirred a previously lackluster market for Conservatory lots. Many list prices were quickly lowered, prompting three pending sales contracts. The listing prices of the three pending sales are $18,000, $22,900, and $29.900. Four Conservatory lots are on Flagler County’s November foreclosure sale schedule. Two are on the November tax deed sale schedule.

The recent trend of foreclosures against up-scale properties continued. October foreclosures included:

  • An Ocean Hammock home and an Ocean Hammock lot
  • Six Conservatory lots
  • One condominium in each of Tidelands, Surf Club, Ocean Beach Club, European Village, Oceanside, and Canopy Walk
  • Two homes and a lot in Grand Haven
  • Two condominiums and a lot in Hammock Dunes
  • Four condominiums in Hammock Beach
  • Three lots in Yacht Harbor Village
  • Two Ocean Marina condominiums

What do you think? Your comments are always welcome.



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2 replies
  1. John
    John says:

    Conservatory – Price reductions

    This is the first I have read about the Conservatory lot listing price reductions to the low $20’s. Do you know if those were lender owned lots, short sales, or something else?

    If they are bank approved that should really send a message about the VERY poor underwriting standards when these properties were first financed!

  2. Toby
    Toby says:

    Reply to John

    4 of the 6 Conservatory lots listed below $30K are lender owned, including one listed for $19.9K.Two lender owned lots have been sold under $25K. One lot sold at a tax deed sale for $15.2K.

    Three sales are pending. One with no contingencies, one lender owned, and one short sale.

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