Us Housing Is A Bargain Now?

[frugalboy]

Thanks for that little gem FB. I'd recently been toying with thoughts of US property .... not any more .

I was referring specifically to all the recently built high-rise condos (imagine dozens of buildings in and around downtown Miami (and the beach) with only a handful of lights on at night - truly scary). If you look at older smaller developments with fewer amenities (where there would be no possible justification for high and ever-increasing maintenance fees) I'm sure you could find some good deals if you have the cash (the foreclosures are apparently still coming through thick and fast though, so prices won't be going anywhere but down for a while).

[ccc]

I have long thought about buying a place abroad whether it be a ski chalet or place in the sun.... in the end I decided that I'd be much better off sticking the money in some form of investment and just renting somewhere when I go away.... if you do your sums for the most part people take far too little holiday and local taxes/admin burden is so high as to just justify it from my POV... I just didn't want to arrive somewhere and then start dealing with a list of stuff.. I want a genuine holiday.

Similar thoughts here. I would only get a 'holiday home' if I literally had a massive pile of cash sitting there doing nothing. Totally 'extra' money. No idea what to do with it. Otherwise I do not see the point.

For the cost of paying for a pleasant villa in Spain in a nice area ? You could probably have 3-4 stress free holidays per year to similar nice villas in different places for perhaps 50 years ? Nevermind the interest costs if you have a mortgage on it.

I suppose many like the idea of renting it out for a portion of the year and using it themselves for the rest. Pays for itself and all. I am sure it doesn't quite work out that way for many.

It is only the 'rich' that have been able to afford holiday homes. That has only really changed in the past few years. I don't think what we see today is the 'norm' in any way.

[indirectapproach]

"Prices still have 1-2 years or more to the low."

Yes but despite that you might find outriders in the margins, where even though the numbers are likely to improve, they are perfectly good enough to do business with now.

Let not the perfect be the enemy of the perfectly good enough.

[swissy_fit]

Question for the folks on this thread living in Florida.

I have this image of it as a giant sweaty mosquito-laden swamp full of fat people who elect Jed Bush.

Is this in any way accurate or am I being completely unfair? I acknowledge ignorance, I've never been there...

Then a more practical question :

Doesn't health insurance make the cost of living very high, even though most other things are cheap?

How much per month for a family of 5, ages 45, 37, 16, 12, 1 all in good health?

Let's say a level of cover equivalent to the NHS, I daresay quality is higher.

I'm expecting a very big number in response.

Add that to the property taxes and the picture may not look too rosy, but other than that the 6 bed villa with a pool for 100k looks incredible, just need to move it to Geneva!

[Home_To_Roost]

Your selling it to me!

I must admit, a life in the sun will be very appealing when the time is right.

Florida – Westridge Ph 4 spacious 6 bedroom villa with private pool in a gated community CONSIDERING ALL OFFERS!!!!!

£96899 http://www.escape2usa.co.uk/propfulldetails.aspx?propid=16894&Currency=S

It just highlights how much of a f#cking ripoff the UK house price scam is

2 Bed Apartment in Florida, with good weather most of the year = £34,000

2 Bed FLAT in the South East of the UK, with shit weather for 50% of the year = £120,000

[Home_To_Roost]

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Edited March 9, 2010 by Home_To_Roost

[frugalboy]

Question for the folks on this thread living in Florida.

I have this image of it as a giant sweaty mosquito-laden swamp full of fat people who elect Jed Bush.

Is this in any way accurate or am I being completely unfair? I acknowledge ignorance, I've never been there...

Then a more practical question :

Doesn't health insurance make the cost of living very high, even though most other things are cheap?

How much per month for a family of 5, ages 45, 37, 16, 12, 1 all in good health?

Let's say a level of cover equivalent to the NHS, I daresay quality is higher.

I'm expecting a very big number in response.

Add that to the property taxes and the picture may not look too rosy, but other than that the 6 bed villa with a pool for 100k looks incredible, just need to move it to Geneva!

I've been in Miami (and done a bit of travelling around south Florida) for just under a year and a half and it's nothing like you describe. It's got a nice vibe and is quite cosmopolitan (and I don't just mean the Haitians and illegal central/south americans although there are tons of those). South Florida and central/north Florida are like totally different entities though - the further north you go (and therefore the closer you get to what you'd think of in the US as "the South" - Georgia/Alabama etc.) the fatter and more Bush-loving you get. You can't really come up with one description for the entire state (although "sweaty" comes close - for 6 months out of the year it will be unbearably hot for most Europeans).

Don't know much about health insurance rates for families but could be as high as $1,000 pm for what you describe (or less if you got coverage through an employer) - I look forward to being corrected!

[GrillsBears]

I've been in Miami (and done a bit of travelling around south Florida) for just under a year and a half and it's nothing like you describe. It's got a nice vibe and is quite cosmopolitan (and I don't just mean the Haitians and illegal central/south americans although there are tons of those). South Florida and central/north Florida are like totally different entities though - the further north you go (and therefore the closer you get to what you'd think of in the US as "the South" - Georgia/Alabama etc.) the fatter and more Bush-loving you get. You can't really come up with one description for the entire state (although "sweaty" comes close - for 6 months out of the year it will be unbearably hot for most Europeans).

Don't know much about health insurance rates for families but could be as high as $1,000 pm for what you describe (or less if you got coverage through an employer) - I look forward to being corrected!

My parents lived in the states for 15 years. $1k covered the bare minimum for my mother (healthy 45 year old). Unless you get healthcare for work covering a family will be more than that I reckon.

[tomwatkins]

I've been in Miami (and done a bit of travelling around south Florida) for just under a year and a half and it's nothing like you describe. It's got a nice vibe and is quite cosmopolitan (and I don't just mean the Haitians and illegal central/south americans although there are tons of those). South Florida and central/north Florida are like totally different entities though - the further north you go (and therefore the closer you get to what you'd think of in the US as "the South" - Georgia/Alabama etc.) the fatter and more Bush-loving you get. You can't really come up with one description for the entire state (although "sweaty" comes close - for 6 months out of the year it will be unbearably hot for most Europeans).

Don't know much about health insurance rates for families but could be as high as $1,000 pm for what you describe (or less if you got coverage through an employer) - I look forward to being corrected!

Me and the Mrs. pay $500 a month and we hav very good coverage. Low deductible, office visits etc. If you want a high deuctible (say $5K) you can cut the premiums a lot. I agree with what you say about the "north/South divide". Our American workmates in Ocala/central Florida tend to be redneck. On the heat last year was a record for temps in the 90's for six months. Humidity was brutal as well but the best idea is to get on the coast if you can. Big contrast between West Palm side and say Tampa dn district although we do a good bit of work inCollier County which is really Naples-nice area. I would suggest that anybody looking to have a house but keep ties to Britain should just take out extended travel insurance-miles cheaper. Just pay for any "office visits" as they come up.

[Spoony]

Thanks everybody for the replies.

This throws up some interesting ideas. I wouldn't advise people invest all their money in the US, just some as mentioned and thats what I would do. There are 2 options:

1. Buy a holiday home (villa). Rent it out most of the year if possible and have a week or two out there a year for a holiday myself. Then when I retire in 20 years time I can live there half the year (visa maximum 6 months) OR:

2. Buy an apartment (residential) as previously posted for letting.

Working there would be nice but its hard to get the green card. My firm does have branches out there but my chances could be slim as they could just employ an American to do the job - why transfer me, although some people (managers) have made the move before.

The downside of the holiday home is letting it is harder; there have been too many built too much competiton. Property tax is higher and outlay is far higher. There is a worry about hurricanes therefore buying on the coast is a bad idea. You have more protection inland. Insurance can be obtained ok but apparently the lifespan of a property is only 20 years so by the time I retired would it be still standing?

I've been told that its now impossible to buy with a mortgage; you must be a cash buyer. Of course this is no problem for most people on this site.

My concerns are having the place unlet with all the property tax to pay, service charges etc. Also when the UK finally faces its demons and property returns to fair value I will have not so much left with which to buy in the UK.

Anyway great discussion - £40K for a Florida apartment vs £200K for one in miserable cold shit weather UK is a tempting thing as an investment even more so if one could live there.....

[LuckyOne]

Too soon.

Prices still have 1-2 years or more to the low

I don't disagree. 1 to 2 years in the US and 3 to 5 years here sounds about right.

I am terrible at picking absolute tops and bottoms. I am slightly less bad at picking "near to" the top and bottom some of the time. With liquidity, discipline and patience, this is not a terminal flaw.

[gersuk]

My link

Note the comment from ByGeorge. I had the same experience.

[Si1]

My link

Note the comment from ByGeorge. I had the same experience.

Well, buy away,if you intend to be very hands on - and I mean be there at least once every month or so. We owned a property for holiday rental, and for our own use, on a lovely settled development just 10 minutes from Disney. In the end after years of struggle and frustration we couldn't get rid of it quick enough.<BR clear=none>I know from bitter experience the frustrations of dealing with people who know and abuse the fact that you are at least a 10 hour flight away. The rip-offs and false promises. Promised the earth by various agencies and management companies, we saw the management accounts bled dry month by month. Bookings that never materialised or were at rates way too low. Repairs were billed that hadn't been done, or never needed to be done. And the British holidaymaker who expected a 4 bedroom villa with private pool in guaranteed sunshine (well almost) for less than it costs to rent a caravan in Cleethorpes.

Very much - unless it is for your own use and you have trusted people to maintain it - caveat emptor.

[LuckyOne]

If the unilateral, collective action by tenants that I learned about in the commercial world spreads to the residential world, prices have a lot further to fall.

I thought that we were getting close to the bottom on a yield basis in the US before I went there this week. Now I think that incomes will drop significantly as tenants simply cannot afford current rents which will drive prices lower again until both rental yields and rental incomes have stablised.

http://www.housepricecrash.co.uk/forum/index.php?showtopic=138697

[LuckyOne]

I dont think they are comparable markets

All housing markets have one common denominator : very few buyers can afford to pay cash for the houses that are selling so prices are reliant on the availability of credit and the willingness of buyers to take on debt to purchase houses.

If prices in any market were to revert to those that cash buyers would be willing and able to pay, prices would drop significantly.

On this basis, all markets are comparable.

I know that your thesis is that taking on as much debt to buy property is a great trade as inflation eats away at the liability side of your balance sheet and feeds the asset side of your balance sheet creating "magic" wealth.

This has been true most of the time in most of the world. It certainly hasn't been true since about 2006 in the US, since about 1992 or so in Japan and just about anywhere in the world from 1929 until the early 1950s.

I think that we both agree that history might not repeat itself exactly but that it often rhymes. We probably disagree as to which era it rhymes with. From what I have read from you, you seem to think that it will rhyme with the 1980s. I expect it to rhyme with the 1990s and 200s (so far) in Japan.

[LuckyOne]

Be careful.

Make sure you take into consideration property taxes.

They can be very high in he uS

Agreed.

I am a very careful person. I have not been able to find anything to buy there (or here for that matter) that made sense since the late 1990s.

I get the sense that we are much closer to the bottom there than we are here.

As the saying goes, no-one rings a bell at the top or the bottom of the market.

[LuckyOne]

No I am saying that rust belt housing markets in the North of the US are different from Florida. Most of them had not had any appreciation since the 80's unlike Florida. Inner cities at this time also had racial problems whereby white Us such as Polish migrants etc started to move out of the cities as Afric an Americans moved in. Prices dropped and never appreciated since. Disinvestment was the go and the cities of the rust belt deteriorated big time. This is till the case although I feel in the long term that will change due to population growth and the existing underutilised infratsruture.

The white shoe brigade never done the rust belt, the rust belt still have population and economic decline. They are different markets even now. I think you would find that in recent times in general house price drops in the rust belt are minimal compared to those of Florida.

I do agree with your general point that the remaining deleveraging required in global rust belt markets to bring house prices to sustainable levels is much less than the remaining deleveraging required in global sun belt markets.

[getdoon_weebobby]

I do agree with your general point that the remaining deleveraging required in global rust belt markets to bring house prices to sustainable levels is much less than the remaining deleveraging required in global sun belt markets.

i agree with luckyones take of 1-2 years in the states , 3-5 years here (nominal bottoms)

ive had a chat with luckyone before and having been supplied with some good info from luckyone and doing my own research i'd say buying to let in North/south Carolina - few cities such as charlotte , raleigh , charlestone makes more sense than florida

[LuckyOne]

Only if and it is a big if you can get an honest Proeprt6y Manager that isn't going to pocket the rent or hit you up for nonexistent repairs.

If you can’t get one of them then it will be far less stressful to burn a twenty pound for each day that you own the joint.

Luckily the situation in the mid-Atlantic states is so dire that many "hangers on" are simply trying to survive rather than trying to extract wealth that they do not deserve.

The result is that honesty is making a rather strong comeback in this part of the world. I expect that this trend might become global over the next few years.

[whiterabbit]

Location is all in Florida, there are nice parts and very cool areas all over the state including towns such as St Agustine in the NE. It really is a varied state. I spend a good bit of time there and am working with people who live there remotely. Here are some observations.

Wages are high in FL compare to most places, there is no state income tax, examples being we are paying Cisco engineers between 75k and 145k US. These guys have the highest standard of living in our company compared to equals in the UK, Europe or NE US. In FL they can afford 4 bed houses in nice areas without going into massive debt.

Property tax depends on location but most I know in houses a few blocks back form the beach worth 300-500k are paying between 4 and 6k which is tax deductable. Same people are paying about 1.2 to 1.5% of the value of the house on insurance. Mortgage interest is also tax deductable.

Before people think condo fees are high look at the facilites. Most monthly fees include insurance, untilies, maintenance, internet, swimming pools, gym etc. If you add up the costs of these at your individual home then the fees are not so bad.

Overall I agree as a BTL FL is not so good unless you have a house in the keys etc but as an investment for personal use or as somewhere to live and work or retire its pretty attactive compared to Spain or similar. I also think now is a good time to buy and do not think things will go down any more.

Edited June 4, 2010 by whiterabbit

[Realistbear]

Hi guys

I've seen some flats to buy in Florida for as little as $50K with sitting tenants (supposedly achieving $800 PCM rent). The US have had their crash. We haven't.The USA will beat us out of recession. The UK is still shafted given the incompetance of Browns government and the size of the debts. Merwyn Somersert Webb said the US looks good value a few months back.

I am worried also about having all my STR fund in £. And also about inflation. If £35K of it were in housing surely that would protect it against inflation too?

Would you do this?

I lived in the US (CA) for many years and sold in 2003 to return to this country for job reasons. My STR/STM fund is still in US$ so I have seen a 25% or so correction in prices relative to exchange rate changes. I believe we will eventually catch up with the market in CA and see around 50-60% off peak prices at the bottom.

I am tempted to buy in CA as you can pick up a golf course Condo in San Diego county for under $200k whereas they were selling for well over $500k at the peak. However, I wonder if the hassle will be worth it given the amount of time I would live in it and all of the overheads. The market in the UK has yet to see any effects from the biggest banking crash in history and the fallout from the cuts will take awhile to hit. We live in a fools paradise in this country which suggests an overseas investment may not be a bad idea. However, be careful in FL, their climate is awful and CA is much nicer and will rebound harder after another drop which is coming due to the austerity program now under way.

[Spoony]

I lived in the US (CA) for many years and sold in 2003 to return to this country for job reasons. My STR/STM fund is still in US$ so I have seen a 25% or so correction in prices relative to exchange rate changes. I believe we will eventually catch up with the market in CA and see around 50-60% off peak prices at the bottom.

I am tempted to buy in CA as you can pick up a golf course Condo in San Diego county for under $200k whereas they were selling for well over $500k at the peak. However, I wonder if the hassle will be worth it given the amount of time I would live in it and all of the overheads. The market in the UK has yet to see any effects from the biggest banking crash in history and the fallout from the cuts will take awhile to hit. We live in a fools paradise in this country which suggests an overseas investment may not be a bad idea. However, be careful in FL, their climate is awful and CA is much nicer and will rebound harder after another drop which is coming due to the austerity program now under way.

Hey everyone, I never got a chance to say thanks for the replies to my thread. After lots of thought I am still tempted but the things stopping me from a holiday villa are:

Property taxes paid by owners

Sitting empty a lot with letting company stinging me for repairs

Maintenance costs. stuff to sort out when you do manage to come for a holiday

Being bored of the same holiday in the same place

Probably will cost more than a villa rental from someone else in the end

That all said its the fact they are so cheap now and I dream of retiring to the USA one day. If I had that house now..... Almost worth a flutter..

Or a residential let should in theory break even and make a little bit of yield...

[BuyInOxford]

As someone who used to own a company selling overseas property i personally wouldnt touch a property 1000s of miles away in a land where you dont really know what youre getting yourself into unless youve plenty of cash and if need be can just right it off.

If youve a large enough deposit for a b2l in Blighty, then you might aswell use someone elses money to make money.

IWhen well off but not stupidly rich yachty types by a yacht they say the 2 best day theyll ever have in it are the day they by it and the day they sell it ... i believe the same rules apply to most overseas property purchases.

Edited September 21, 2010 by BuyInOxford

[matroskin]

That all said its the fact they are so cheap now and I dream of retiring to the USA one day. If I had that house now..... Almost worth a flutter..

Or a residential let should in theory break even and make a little bit of yield...

Don't buy for cash, get a mortgage with GMAC/Ally and you'll eventually have that house for free

[Toto deVeer]

OK I'll put in my 2c worth.

1. Taxes are high in most metro areas. Mish (for example) pays $12000/yr in smaller Illinois metro, I saw a property profiled on the Business Insider that had dropped 50% in value, but the tax was $60,000/yr. Not unusual to pay $15,000/yr or more most metro locations for an average property.

2. House prices are simply not as sticky in the US as they are in the rest of the world. The reason is that mortgages in the US are written against the property, not the buyer (thank you Franklin Roosevelt). In the rest of the world, like the UK, the bank writes the mortgage against the buyer and against the property. So you can expect the property market to clear faster in the US than most other places will.

3. Even though the properties will reach bottom within the near future, I just don't think there is a lot of upside (generally) for a long time yet. That's because the property taxes+maintenance fees (in some cases) will have to be gutted. These monthly service costs are more than monthly cost of finance in many locations. This means that many metro areas are going to have to completely restructure. I think this could take more than 10 years to work through.

4. Many properties built during the last 5 to 10 years are not of a high standard. I designed an extension for a property in North Carolina 10 years ago and was appalled at the material that was used to construct it. Off cuts of lumber, patched together. The floor had to be underpinned to stop it bouncing.

All these factors make the US property market quite treacherous for the time being. This is not to say that there wont be individual instances where good investments can be made, I'm only describing the more general case. Beware and take care.

Edited September 21, 2010 by Toto deVeer