Looking for deals in "wildly overbuilt" bubble markets... "Threre's going to be blood in the water"

For those of you patiently hording cash, cutting expenses, and renting... your day will come. If you're out there making low-ball offers (50% off?) your day may already be here.

Don't forget, it's all about the P/E ratio. It always is. It always will be.

Jonas Lee spends most days driving slowly through unfamiliar neighborhoods. He may look lost -- constantly leaning out the window, craning his head in contorted ways -- but don't be fooled.

He's doing the most critical part of his job: scoping out homes for his Washington, D.C., investment firm, Redbrick Partners, to add to its growing stable of rental properties.

Lee is doing more drive-bys than ever these days. A handful of housing markets, such as southern Florida and certain neighborhoods of Washington, D.C., are wildly overbuilt.

Prices are dropping. And developers who raced to build new houses and condos during the boom are likely to soon be begging for buyers.

"There's going to be blood in the water," Lee says. "A big pileup."

South Florida's 'Ugly' Future

So where is Redbrick prospecting now? No region has Lee more bullish than southern Florida -- where the long-term prospects are attractive but, as Redbrick co-founder Tom Skinner puts it, the near-term fundamentals are "out of whack."

It's a new market for Redbrick, and Lee, who has been scouting parts of Miami, Fort Lauderdale, and Fort Myers, predicts that buying opportunities will begin in early 2007.
"The next couple of years will be ugly," he says, optimistically.

Lee says developers are offering condos in the region at 20 percent below appraisal value. Redbrick expects the discount to grow to 40 percent because developers lose money every day they own a property. Making the equation even more appealing is that rental prices are holding steady.