http://www.msnbc.msn.com/id/47865074/ns/business-forbes_com/
I know all the indicators point to how great texas is for jobs etc… however its counter intuitive for Real estate investing.
simply because lack of zoning and unfettered ability to create new for the cost of exisiting keeps up with rental demand and housing demand creating a very flat market over time.
and those with exisiting homes have to compete with new construction and unless you bought a direct foreclosure not one thats had 5 layers of profit taken out.. Its not likely to see capital growth if you really had to sell it.
Its the exact reason the OZ property values are so high,,,, and same with any other major metro area in the world… they have tight building restrictions limited land supply….
In Texas in exhaustable land,,, and cheap mexican labor for all the subcontractor trades create a market that just sits still.
If building in Texas had come to a halt like Atl… or Ca or NV or AZ… the prices there would have crashed as well…
So I come back to my question what is better to buy… the house that was 150 in Atlanta and you are now in it 60k for 900 rent. Or the house in Texas that has been 100k stayed a 100k rents for 1000… and builders can create the same house brand new to compete with your used house… Plus add all sorts of builder incentives….
I have seen this play out for the last 30 years in Texas,,, I honestly cannot tell you of one person I have done business there that ever bought retail and sold for a profit unless they held the home for 20 plus years… And then with property taxs double to triple almost anywhere else in the country… they really lost money…..
this is really magnified in the Multi family business.. this is why there are so many Multi family foreclosures in Texas… Builde3rs build new.. tenants move over to those… exsiting old buildings suffer large vacancies no money goes into the property.. and next thing you know some investment group comes in and buys at wholes sale and because there was a big loss from the first buyer they can afford to do the captial improvements and undercut rents to get the units full… Then once full they sell them to the next group that thinks texas is all that and then more.
Can't stress enough in the US how land use and building policy dictate long term values…..
When there is no more land in SF NY LA and these areas the prices rise, Just like OZ where there is limited habitable land.
In states were land is flat and sprawl is acceptable… with stable to very low land prices for subdivision lots… New builders just compete very well.
So you need to look at These markets Like WI has stated… look at replacement value and then move backwards.
And that is why certain markets have been so compelling in the states… buying these homes at 30 cents on the dollar to build and the land is free…. thats not the case for the average investor trying to get into texas… Your going to pay at least 70 to 90% of what it cost to replace the HOME TODAY….
Like to hear opinions of others for the opposite aurgument… Large stats and graphs are nice but they do not take in the sliver of the market that landlords are buying they take in the state as a whole and the market as a whole… So they also lump in the 200 to 500k houses and distortion happens.
Couldn't have put it better myself Jay. I have been looking for the right words on how to describe Texas but this hits the nail on the head. For the last 2 years, I am more favorable on Replacement cost. It is one of the bigger reasons I like improving markets of Florida. Example: I just sold a 4 home package to one of my Indonesian investors. Their average price for their home was $105,000, and rented at $1,250 a month… City water / sewer in and paid (no assessments), great area of Cape Coral with thriving business, blah blah… Investor had an appraisal done and also bought insurance. Appraisal replacement cost came in at $190k and insurance was $215k.
I agree that the property is not worth that yet, but right now, builders cannot compete with prices. There is plenty of room for upside and I cannot stress UPSIDE enough when looking at current US real estate.
Now I know what article to send my clients when they ask what advantage FL has over TX. Instead of shrugging my shoulders and replying "we have tourism", I will print out this article for them
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeCan I get a referral fee for this nugget
It’s a double edge Sword if building stopped in Texas like the rest of the country you would have had massive construction layoffs like these other markets…. It’s a conundrum for sure
Jay this is a more accurate assessment of the supply demand metric in Australia for your info;
http://www.macrobusiness.com.au/2012/06/housing-shortage-arguments-collapse/
jay wrote:Just like OZ where there is limited habitable land.Mate there’s more habitable land here than you can poke a stick at. The problem is not supply. That’s a myth perpetuated by the RE industry clowns. Demand is the issue here. Trouble is when bureaucrats and govt’s meddle in markets they simply bring demand forward then wonder why they have a bigger problem when demand runs out again
Frekle,
When demand is high in the US prices tend to stay or rise…. when demand falls off price decline or stay stable.
In OZ if demand dies what does the market do…
Your market is already very hi based on affordablity factors vis a vi average wage to average purchase price… I see your market on a parrallel with the best SF Bay Area markets… Very high for the best locations… And only 1 time in my 35 years did I ever see the SF property ( the city) and the penninsula devalue in price quickly and substantially,
And that was 1989 to 1992 ish… The first war in Iraq and the Earthquake that flattened a few free ways and bridges..It happened thankfully right before the A's and Giants world series game otherwise there would have been thousands more deaths.
Any way point in fact… Some of the only real estate to basically not crater during all this in the last 4 years has been SF to Silicon valley… It flattened and some price compression…. 1.2 mil 3 and 2's 1500 sq ft that you guy anywhere else in the country for 150k or less… they may have fallen 10%… But that was it….. In 1989 we had especially on the high end and i mean 3 to 10 million dollar homes they devalued by 50% or better.. then stayed there until 97ish with the real start of .com and doubled in 4 years crashed a little with Dot. then went up from 2001 to 2008 another 10 to 50% depending….
The only way this market is kept in the lofty position is the new money… Apple in cupertino,,,, Google and Facebook , in palo alto menlo park etc…. So you had many cash in their stock options so they could put 500k down on a 1.2 house… in cupertino..
Seems to me… If you have land in OZ to build and build at will… price's would not be where they are at… In the Bay Area new construction is simply tearing down the old house and building new,,, subdivisions are non exsistant… So builders pay 500 to 1 million or more for tear down houses. I know I bought one in the peak of 87 for 735k.. tore down the house paid 350k for a new nice 2600 sq ft home… that was worth probably 1.5 in the day.. now well over 2.5 prime palo alto.
jayhinrichs wrote:If you have land in OZ to build and build at will… price's would not be where they are at…Dude Ozzy is a strange place sometimes. I was driving back from a small country town some years ago. We were about 5 miles out of town I suppose when we come across a row of about 10 terrace houses in the middle of nowhere. Go figure. More room that you can poke a stick at and they want to live on top of each other. I’ve been trying to figure this place out for 10 years and still can’t get my head around it.
A fact that might interest you;
…governments control 72% of the land in Australia, aboriginals 13% and 15% is held in private freehold.
http://www.ourcivilisation.com/cooray/rights/chap813.htmFor the western US those numbers you quote are about the same… Huge amounts of National Forests parks and BLM (bureu of land management) BLM is usually the land that no one wanted to really own,, huge parts of the west are high desert non productive property.. Where its probably like your out back takes 640 acres for one cow calf carry capacity… Now we are getting into ranching and cattle raising,,, be a full service RE broker I need to know this stuff… Just like I need to be on top of the wine industry as well,,, as everything else the public expects.
East coast those numbers would be reversed 72% private then state and federal then aboriginal ( or Native Americans)
You could get away with building 10 houses in the middle of no where in Texas where you have virtually no zoning laws
Freckle wrote:Jay this is a more accurate assessment of the supply demand metric in Australia for your info; http://www.macrobusiness.com.au/2012/06/housing-shortage-arguments-collapse/jay wrote:Just like OZ where there is limited habitable land.Mate there's more habitable land here than you can poke a stick at. The problem is not supply. That's a myth perpetuated by the RE industry clowns. Demand is the issue here. Trouble is when bureaucrats and govt's meddle in markets they simply bring demand forward then wonder why they have a bigger problem when demand runs out again
Thats right, Supply and demand, in Oz people want to and live on th coast or near capital cities.
WI…
So OZ average citizen will not drive 90 minutes one way in bumper to bumper traffic to OWN a home that they can buy for half of what it cost in the inner city…. Like we do here in the US and has created the Metro areas????
Not when gas costs around AU$5.40 or more a US gallon, and you have to drive on crappy roads!
jayhinrichs wrote:WI…So OZ average citizen will not drive 90 minutes one way in bumper to bumper traffic to OWN a home that they can buy for half of what it cost in the inner city…. Like we do here in the US and has created the Metro areas????
Same everywhere I’m afraid. Mid 00’s everyone was moving west (Sydney) for lifestyle blah blah.. The Blue Mountains, Windsor Kellyville etc quickly became popular with first home owners who figured with first home owner subsidies and cheaper housing out west they could find RE bliss. RE prices quickly overtook the grants (within months sometimes) and you had the proverbial bubble thing happening.
We used to move people west in the early to mid 00’s. Couple of years later many were selling up and moving back to the big smoke. They’d over looked the time and real cost of moving away from their place of work simply to chase what seemed to be cheap housing. By the time you added transport costs to mortgage costs it was actually cheaper to buy a more expensive place closer in and recapture the 2 hrs they’d spend commuting each way every day.
When I first came to Oz with my family we went north to the Central Coast. Rent was really cheap and we had the beach lifestyle. It was a 65 minute commute by express train and about 2 hrs on the regular train (all stops). We all (2 sons and wife) worked within walking distance of each other on the North Shore. We would get up around 0500 be on a bus by 0555 at the train station 0620 and on a train by 0630 then get off at our destination at 0740 and walk the rest of the way to work. Then you reverse that at night and get home around 1930 at the earliest. Don’t fall asleep on the train and miss your stop or it’ll take you around 4 hrs to get back!!
On a Saturday (no express trains) I’d often commute 5 hrs to do 3 hrs work. 12 months of that I was over it. We all pooled our transport costs and moved to the burb we worked in. It saved us countless hours of commuting and about $20/wk in costs. We’d go to the beach on weekends to get our lifestyle fix.
Jay, I’d have to say Sydney traffic is up there with the worst in the world. Rush hour starts around 1530 and goes through to around 1930. Forget trying to get anywhere at that time. It’s bumper to bumper. God help you if there’s a pile up.
We got caught in city central on approach to the harbour bridge going north one time. There was a pile up on our side that closed all lanes north bound. It took us 2 hrs to get across the CBD (a matter of a few miles) to get on the harbour tunnel approach. Took 5 hrs to get home that night and we only went a matter of about 15km
Ouch,
those are not good commutes at all…
My commute here in Oregon,,, is 2 stop lights 12 minutes and a country drive through the farm land to my office (of which I own the building)
Now get on the wrong side of town where the cheaper housing is and you have 90 minute one way commutes on a daily basis.
When I lived in SF I lived in Palo Alto and commuted to the SF airport area on hwy 280 so commute was 30 miles 30 minutes.
In Napa,,, well that was heaven,,, I flew to Oregon on Monday came home thursday and worked like an airline pilot 9 days a month the rest I played golf worked from home and drank some darn nice wines.
JLH
jayhinrichs wrote:I flew to Oregon on Monday came home thursday and worked like an airline pilot 9 days a month the rest I played golf worked from home and drank some darn nice wines.JLH
Yep that’s the way to do it amigo. People often forget the value of time. It’s priceless and no amount of dollero’s will ever buy it back. Give me a modest income and time to burn and your the richest dude around.
Freckle wrote:…a row of about 10 terrace houses in the middle of nowhere. Go figure. More room that you can poke a stick at and they want to live on top of each other…Been wondering about that one myself, seems to be the go in more than one "middle of noweheres" (which we have far more of than "middle of somewheres"). What's on with that???
Ziv Nakajima-Magen | Nippon Tradings International (NTI)
http://www.nippontradings.com
Email Me | Phone MeZiv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property
Been wondering about that one myself, seems to be the go in more than one "middle of noweheres" (which we have far more of than "middle of somewheres"). What's on with that???
I agree, and what's more… why on earth live out there at all….. what's the attraction ??
I give up.
Can you drive fast on those roads to nowhere?
Like say. 220khm or better looks like you can
Hi Jay,
Naa,
140khm in the Northern Territory is the highest limit.
Don’t want to get hit by a Kangaroo at 220 km/h
You must be logged in to reply to this topic. If you don't have an account, you can register here.
