Real Estate Values: Buying Opportunities?

My family has always been involved in residential real estate-single family homes in middle class neighborhoods in large Sun Belt suburbs. I have done the same here in Tampa. Unlike my family, I do not hold my properties indefinitely. I sell when I believe their rental and market values have maxed out, and I try to do it while everybody else is buying.

I have sold most of my properties in the last 9 months. There is no doubt the market here in FL (and elsewhere, for that matter) is flat and declining as the price of oil and fuel trickles down through the economy, slowing it down, and redirecting the utilization of personal income.

I'm *guessing* there may be some significant buying opportunities in the 12-24 month time frames.

I do not keep track of the Canadian or European economies that much. I suspect they are under the same economic pressure driven by the cost of fuel, perhaps to a slightly lesser extent, as here.

I also understand that Europeans, Canadians and Americans are primarily responsible for the strong run-up of real estate values in the DR the last 24+ months.

I'd like to solicit some opinions from the braintrust on this forum about what you think the future value of the vacant land (for non-resort development), single family home and villa markets might be in the next 24-36 months.

To what extent do you think a slowing world economy (that I think will happen) will have on the supply/demand (and thus pricing) of "good" Dominican real estate?

While I certainly agree about the long-term trend, my question is more about a 24-36 month window, which is about how long economies enter and leave recession, longer for a depression.

Recessions erode equity wealth, and make deep-pocketed folks more short-armed. Second and retirement homes are more often purchased during the up-cycle peaks, and fall drastically in downturns.

I see a world wide economic slowdown in the future. I sold most of my properties at peak value. I'd be interested in buying properties in both the DR and US at what might be the bottom-when sellers exceed buyers, and sellers are more "motivated" to sell second/future retirement properties because of the cash drain they may have become.

gary short said:

I 100% agree with you. Real estate speculators beware you may get caught with your shorts down in which case PM me and I'll offer .25 on the buck...good luck..

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PM me first. I offer .26 on the dollar...

duhtree said:

I would think that you had to do some nimble foot steps to get the top even 9 months ago. Market has been dead for all but the re fi people for over 15 months or so.

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Not so in better Atlanta and Tampa neighborhoods. I put properties oin the market starting May '05 when the feeding frenzy was still happening because the demand pipeline was still full vis a vis supply. Ain't so today, at least not in my neck of the woods.

I don't like lending $$$. Too much bulls#!t to foreclose. Just not my thing.

gary short said:

No good lending in order to foreclose on anything that is devaluing.

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I agree. People walk away for a reason.

There

Steve Costa Azul said:

Cobraboy
I think that one should swallow up as much real estate as his or her assets will let them, regardless of country, and KEEP IT!! This way you don't need to play the game and think you have a crystal ball with all the right answers. Too many times I have been told by well off seniors who have tried everything from stocks and bonds and any other investments in their lifetimes, that by far, "The biggest return I ever made was from REAL ESTATE!"
Knowing that these wealthy people have seen every money making oportunity/scheme that my generation will see, and consistantly swear by real estate, that's all I needed to hear. I cashed in rrsp's to by more real estate after they were flat for 5 years. My latest real estate venture in Cabarete in March 2006 is already proving to be a wise purchase.
I did a bit of homework before buying in the DR and was convinced that it was the best value in the caribbean followed by CR in South America.
Buy it and KEEP IT!
Good luck!
Steve from Canada

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To a greater extent, I agree. It depends on the strategy and how the market and neighborhood developes. My parents did that, but a couple of neighborhoods went south after 20 years of ownership. They benefitted well, but could have profited by another 40% if they had been paying attention to values instead of just the rent roll.

I have never bought anything without an exit strategy.

There is also a point when being a landlord is a pain in the a$$. I have been there.

ecarignan said:

As a DR real estate investor from Canada, the DR offers more return on investment. I started investing in the DR early 2003, have bought, sold and built vacation homes. Sure prices have increased and sold double of what I paid in 2003, but there is still plenty of room to grow. Again, this is only my opinion, but since north americans discovered affordable real estate in the DR, the word is out and people are buying.
Are there still undervalued properties? not really, you pay what the land or home is worth today. No one is really selling off fast to get out, everyone is aware that DR RE is worth something. Is it undervalued versus in 2 year, I certainly think so. Buy a piece of land in a desired area, subdivide it, sit on it for 2 years or build on it.
So, come to the DR and explore the many opportunities in RE.

Good luck.

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Don't you think that the explosive property value rise in the last several years in both the US and Canada (I don't have a clue about Europe), fueled by a very low interest rate environment has trickled down to the DR from excess cash/leverage in real estate portfolios?

What do you see happening in the next 18-24 months when the market sours (like it is), interest rates rise, and a whole bunch of 1-2-3 yr. ARMS start coming up for rate hikes. I know folks here in FL already terrified because the jumbo mortgage they qualified for at a 1-1.5% initial rate will be heading toward 7-7.5%. They thought they'd bail before that happened, and now see their real estate market value has decreased 5-8% due to excess supply vs. shrinking demand, and their leverage has evaporated.

FL is a hotter RE market than most, and developers are already advertising creative financing of their overbuilt inventories. DOM has increased from 20 days to 70 days in Tampa Bay-a hot market-alone.

suzannel said:

I do not pretend to be an expert, but can you really compare the FL mrkt to the RD mrkt?
I believe that if you do a search of the market availability in FL, Palm Beach, Hallandale and especially in the Miami are. you will find more than 20,000 units on the market.
I dont' believe you can compare these markets.
RD is a relatively new market for investors, up to 5 years ago the only units on the market were very cheap ... Now a new market has developped the higher end investors... Baby boomers have discovered the country and the still affordable investments. Where else can you purchase a seaside property for under $200,000. US in the Carabeans, the U.S. or worldwide.
Evidendtly one need to invest with eyes opened and know when to get out, but I believe that this mrkt will flourish for at least 10 to 20 years as the last of the Boomers retire....

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To an extent, all RE markets can be compared. The term "market" implies supply/demand market forces are involved. Both supply and demand have complex factors which the price agreed to by a willing buyer and seller, neither under extraordinary pressures in the transaction. Additionally, the resort condo market is quite different from the non-tourist local SFH market.

Long term, I agree with you (although I know nothing about the Miami/Hallandale/PB markets; I CAN speak about the Tampa Bay/FL West Central Coast markets with some confidence).

My question is more short-term. There are many factors across the world pointing to an economic slow-down (how long and deep is beyond me). That clearly affects capital purchase/investment decisions, especially if a debt instrument is involved.

And I also agree that the last few years have seen a boon in RE investment in the DR. But even it is slowing down, due to cost. It wasn't but a few months ago that the price for the main materials for construction-concrete, block and rebar-went through an astronomical increase the day or two after the May elections. Additionally, there is also a glut of units on the market, especially in the resort areas. What was a bargain 5 years ago no longer is; I see some rigid price inelasticity as costs and prices increase. Maybe CAFTA will lower some material costs, however.