The Prospecting Professor

Pop!...Goes Mr. Housing Bubble

Is there a whistling sound in your ear? It could be the sound of Mr. Housing Bubble...deflating.

Check out this report from Naples Sun Times (see link to article). As you may know, Naples, FL has been the epicenter of real estate speculation in the housing market in the U.S.

• In February, there were 5,417 single family homes listed in the Naples Multiple Listing Service (MLS).
• Similarly, there were 5,289 condos/coops for sale...that's a total of 10,706 between the two.
• In February, 383 properties in the Naples areas were sold.
• Doing the math...10,706 divided by 383 ='s 27.95 months.
• In other words, if no other properties come on the market in Naples (a very big "if"), it will take 28 months for all listed homes to be sold.

Whooosh!

Do you have clients who have become over-loaded in real estate? If so, let me strongly recommend the following report...put together by the folks at Wharton, "Protecting the Value of Real Estate-Rich Portfolios"

The authors point out that many high net-worth investors have real estate portfolios that are characterized by the following:

1. Highly Concentrated...relatively few asset types make up a large proportion of net worth.
2. Highly Correlated...those holdings tend to behave similarly.
3. Illiquid...investments are locked up for many years.
4. Interest Rate Exposure...aggressive use of leverage with floating-rate loans.

Very good article...and be sure to read the recommended Investment Strategies, at the end.

Whither Mr. Housing Bubble?

Is Mr. Housing Bubble losing his froth? There have been a number of recent articles that point to the End of Bubblicity.

In yesterday's L.A. Times, it is reported:

"Six months of gains in Southern California's median home price were wiped out in January while sales activity dropped sharply, further signs that the region's once-hot real estate market continues to lose steam."

In today's N.Y. Times, in an article entitled, "Farewell, Condo Cash-Outs", stories abound about the end of the Great Condo Gold Rush.

• In Donald Trump's luxury condos at 120 Riverside Boulevard in Manhattan, 20% of the building's 250 units are marketing their apartments.
• In San Diego, about 33% the units in the Alicante, which opened last fall, are on the market.
• Last week, Toll Brothers, the luxury home builder, said orders for new homes fell by nearly 30% in the three months ended Jan. 31st.

This is in marked contrast to the last few years, where speculators were beckoned to real estate by the allure of double-digit appreciation. In 2005, median condo prices increased by nearly 13%, to $218,000, according to the National Association of Realtors.

Boink!...in San Diego, one of the hottest markets in the country, the median home price rose at an annual rate of just 2.5% in January...compared to 20% one year ago.

Do you want to see if Mr. Housing Bubble has burst in your neighborhood? Check out this new site, "www.zillow", an online real estate service. Created by Rich Barton and Lloyd Frink (founders of Expedia), Zillow has data on more than 60,000,000 homes around the country. Type in your address, or the address of Mr. FancyPants across the street, to get a sense of where the market is.