Is there a safe haven in the US? A place where you can still buy a house and rent it out for positive cash flow if you needed to? A place that if you bought today you wouldn't be upside down four years from now?
Make your case here. Find me that place.
June 25, 2006
Where in the US will home values will not drop over the next 4 years?
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Buffalo. Down so far for so long everything looks like up. Hundreds for sale at sales prices that pass for comissions elsewhere. $20 grand? $15/sq ft?
Yeah.....but its Buffalo!
You can point to most places in the Midwest and probably assure yourself that home prices will not drop. I lived in Wisconsin for 30 years and you definitely get a sense that their spending habits are dramatically different than those in Washington DC, which is close to where I live now...and it's not all about the difference in incomes between these two locales.
I generally have found that in the Midwest, people are quite risk-averse. They do not trust get-rich-quick schemes and anything that sounds too good to be true. Even if an investment is legitimate, most people shy away from it because they tend to look at the risks rather than the benefits.
Part of this mentality may be that they can live the way they want to, and still be conservative in their investments. It is quite affordable to buy a house with a good-sized yard. And sure, there is not much to do in the evenings or on the weekend, but most of them are not looking for that anyway. That's why they live there already. And if you're not looking for entertainment, you're not going to be spending much money either, and possibly....you may want to sit down for this part....some of them actually save money for a rainy day! What a concept!
Their risk-averse nature also leads them to often want nothing for something. It is very common for houses to sit for several months without being sold. Nobody is in a big rush to get another place because they know it will always sit there for a while.
There may be a few large cities in the Midwest that could be vulnerable, but I am thinking more about the smaller cities and towns. They never joined the real estate boom....it's just business as usual for real estate.
My house! 117K to 155K in 8 years.
1 acre in SW georgia. Brick, cathedral ceilings, double vanity. 1550 sq feet. Nice house. Seems well built, no problems.
Housing appreciation around here has gone up maybe 40-50% in the past 10 years.
No one gets it yet, RE is not local, when the bottom starts falling out in the 4th quater, you will start to understand what is going on, no home will be spared, all will be down in 5 years. Some will be down 20%, others down 80%.
the midwest small towns aren't totallty immune. we are in a town of 3000 in rural MN and there are $500,000 condos that went up for sale this week- 100+ unsold homes plus 3-500 condos under development
the farm real estate though is not going up accordingly, the last farm crash is too fresh in people's minds.
IRAQ got the best RE. LOL.
Maybe Pittsburgh, but I also think no place in the US is truly safe...
As a city , I think Buffalo is alright. Job losses are bad and the place is dying .I also think it is one of the most misunderstood places anywhere. The weather can be nasty but it's not every single winter. New York state is killing itself with outrageous property taxes. People are bailing in droves. But it is not the snow that's at the heart of it. It's on the state and gov't level.
170,000 buys a beautiful 6 bedroom with cedar siding in the precious Deauvux section of Niagara Falls.
While no place in the US may be totally safe, the Midwest definitely may be one of the safest, because prices are so much lower than other areas of the country. A 15-20% decline in price on a $200,000 house in the midwest wouldnt be nearly as crippling as a 15-20% loss on a $600,000 house in the more expensive areas.
My house too! $92,300 to 132,000, assessed at 100%, 1988-2006(18 years, 43%.) And that’s after 900 sq ft in additions in 2001 on an already big place. 1.3 acres, 7000+ sq ft. seriously doubt I could get the $132,000 if I put it on the market. Nice place too, well constructed!
Already built older homes with land are still a good buy here.
Out of staters
putting up small, very over priced crap boxes
are another thing. They will take a dump, maybe. High end execs with lotsa money have no idea they are overpaying, don't mind long commutes, and probably wouldn't care if they did know.
Any kind of drop doesn’t affect me anyway. I'm not selling.
But when Mr. Exec gets laid off, or transferred, then we see how long these POS stay on the market and if a greater fool can be suckered in, and for how much!
you can run but you can't hide!! its a notionwide bust!!!
Alberta Canada.
The smaller cities of the Pacific Northwest(not California) People are fleeing California and moving north and they can't build enough houses. So prices are still going up!!
There may be a few large cities in the Midwest that could be vulnerable, but I am thinking more about the smaller cities and towns. They never joined the real estate boom....it's just business as usual for real estate.
- from chris g (above)
WAIT, you are missing something real big
The midwest did not get the flippers like Phoniex, but much of the middle class did refi cash out I/O ARMS to pay off credit cards and finance a lifestyle way beyond their long term means to pay.
Foreclosures and Bankruptcies are very high in the mid west. Home prices are expected to stay flat in nominal dollars for years, but drop in inflation adjusted dollars.
I have been searching for cash flow positive rentals in the mid west for the last three years and can't find any. There are to many newbie investors willing to buy rental prop and rent out at a slight loss to get the tax benefits. Plus, as mortgage rates rise and rents stay flat in the mid west; home prices have to drop even further to get to a cash flow positive situation.
And don't forget that true cash flow positive, must include an allowance for maintenance expenses and normal wear and tear of carpets, appliances, etc.
Bottom line. Now is not the time to try to enter the landlord profession.
When is a good time? When 10 times sustaniable monthly rent covers 100% of fixed annual expenses, including (mortgage, taxes, repair and replacment of consumable items). Good luck to all.
I think the majority of the "rust belt" and most parts of the Carolina's, Georgia, Texas and other central states will experience a long period of flatness. The rest of the country is going to see correction downwards, ranging in severity from the epicenters which are the Southwest (California, Nevada, Arizona), Florida, and New York.
NE Ohio. It is standing still in time. Of course there are no jobs either.
Rochester, NY. It's just an hour away from Buffalo, but has never been fully part of the rust belt. Wages and salaries are pretty good, but housing prices simply never rose faster than inflation. The city usually tops the national lists for affordability because of that combination.
I grew up in Buffalo and left the minute I had my college degree. Sure the weather ain't the best, but the economy is even worse. Has been for over 30 years now. That's why anyone who is smart and isn't a drunk has already left. Buffalo's mass appeal is that the bars are still open til 4am. That is soooo blue collar.
The midwest did not get the flippers like Phoniex, but much of the middle class did refi cash out I/O ARMS to pay off credit cards and finance a lifestyle way beyond their long term means to pay.
While I have no source to back up my claim here, I firmly believe that this is much more prevalent along the coasts than in the Midwest. The excessive and expensive lifestyle enjoyed in coastal areas does not seem to match the down-to-earth lifestyle that is the norm in the Midwest.
Foreclosures and Bankruptcies are very high in the mid west. Home prices are expected to stay flat in nominal dollars for years, but drop in inflation adjusted dollars.
Compared to the rest of the country, foreclosures and bankruptcies in the Midwest, especially in the Rust Belt, have been higher for quite some time. This is not exactly a new phenomenon. My thinking, however, was situated more in the western part of the Midwest states (Minnesota, Wisconsin, Iowa) that have reasonable incomes and are not suffering the levels of manufacturing job losses like in Ohio and Michigan.
Also, the negative cash flow situation you describe may be true, but I'm not sure if you were trying to explain this as a reason why home prices are vulnerable to decline in the Midwest. Out of the four main regions of the country, the Midwest has the most benign negative cash flow situation for rentals. Are you using a 20% down payment for your assumptions on rental properties? Also, if you are using this assumption as a basis for a possible price decline, you would have to assume that the other regions of the country would be even more vulnerable to declines in price.
The Bubble City Palm Coast Flagler county Fl
2000 - med price house 3bd 2bt $80K
land 1/4 $5K
2005------------ house------- $300K
land $100K
2006 june-------- house-------$240K
land--------$60k
med family incom $35K
90% job RE
population 50,000
houses for sale 3,000
houses for rent 2,000
land for sale 1,700
The City of Townswill
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