Random Vacation Observations, Part One
We had one of those “black swan” experiences. Northwest Florida is apparently suffering from a severe drought, yet it rains 12 inches over the two full days we’re there. Simultaneously, the annual but unpredictable red tide comes in, washing up scores of dead fish on the beach while causing respiratory irritation within 1/2 mile of the beach, for which I paid extra for a direct-on-the-beach condo. We did our best to enjoy, and for my readers a few random observations, to syndicate over the next few days:
1. The Florida real estate bubble is bursting, but right now most people are still in denial. About 30-40% of the properties on some streets are for sale, but the asking prices seem exorbitant to me, at least based on fundamentals. Compare: a $120,000 house in Houston might rent for $1200 a month. The $2 million 3-bedroom beachside condominium I rented was $300 a night, or $9000 a month, but probably more like $7500 a month when one accounts for vacancies and real estate management fees. That would imply a value of about $750,000 for the condo, max $1 million if you discount the uncommonly efficient (though aesthetically distasteful) Houston builder machines. So while it’s amusing to see a real estate bubble bust in realtime (as those of us with more frugal, long-term strategies must also suffer through this sort of silliness every few years as it moves among various asset classes), the blood is not yet in the streets. When it does, it would be nice time to buy a condo. But for my money, renting is a bargain. Most vacation home purchases seem to me not a rational way of deploying excess capital but an irrational attempt to crystallize positive vacation experiences that have everything to do with locale and personnel and little to nothing to do with ownership vs. renting.
October 22nd, 2007 at 5:38 pm
Living in the Florida Panhandle for 16 years, I was surprised to see that Hurricanes actually drove up the price of property.(The owner of the 1 million dollar condo buys a $300,000. home to live in while waiting on repairs, and it trickles down)……During the “Huricanes Don’t Come Here” period 1989-1995 I lived in a 2 bedroom townhouse on Santa Rosa Island(Gulf Front) for $450.00 a month. Clinton closed the Naval Base in Memphis, relocating and consolidating to Pensacola NAS causing a housing shortage!…………………….It was great while it lasted!
October 27th, 2007 at 6:17 pm
Better yet in Beaumont a $70,000 house gets you $1,000/mo with no vacancies for the next 5 years.