posted 05-31-2005 17:04               

As my daughter and I left the pool today and went to buy some overpriced resort pizza, we went through the sales office and saw at least 6 people signing on the dotted line, financed through the developer at an interest rate of 10% on an average of $14,000 for 10 years.

Buying real estate is for most people a thought out decision. Buying a timeshare is a desire in the heat of the moment to have what everyone else has, or to not lose out on the deal of the century.

And when the bottom falls out of the real estate market, timeshare will continue to be sold by developers. People do not look at this as a real estate purchase.

I suppose if you really want to make money in timeshare, you should buy land and build cheap condos and then sell them for 10 times what they are worth.

posted 05-31-2005 17:52               

Have been thinking a little about this real estate bubble. I always pick up the local real estate ads/magazine thingy at the grocery store….was browsing all those $4 million vacation homes on the side of the ski mountain.

Related to this, we toured a model home of some $1.7 million luxury duplexes (extremely fantastic on the inside, but not that spectacular of land/view. Salesman/realtor said his data/opinion is that too many baby boomers are “parking” millions of $$$ in real estate since the stock market is weak. This is driving a real estate appreciation boom there locally in CO resort towns. Secondly, many affluent are inheriting millions and buying the second home (and/or choosing “investment real estate”)…but the homes are empty 95% of the time.

If that’s the case, why won’t this trend continue? I realize that second homes might have a different bubble-phenomenon than primary residences, but does it “have to be” a bubble?

I was “right” about tech stocks being over valued…and I avoided them (about 5 yrs too early; missed out on big gains). If I sit on the sidelines on real estate, the hot market either continues, slows, or “pops the bubble”….but I’d miss out on big gains if I thought the bubble had to burst tomorrow, and it delays 20 yrs. (or 10 or 5)….

Interesting, that in addition to fully owned duplex for $1.7million, you can buy the furnished model for $2.4 million….or a 1/8th furnished fractional for $320k. Plus you pay $1,300 per week M/F. Apparently there's a growning market for this luxury, too. (I wonder if those millionaires realize that at least 2 of their 6 weeks per year are "blue" and not worth $50k upfront and $1300 M/F.)

So, I’m happy to report there’s a new fractional vacation property option in town….but it won’t be trading RCI/II.

posted 05-31-2005 19:14            

When we were in Honolulu, we were told that a lot of Japanese are buying timeshares in Hawaii too. The big Timeshare Developers must have done their research to make sure there is a market to sell their timeshare weeks to and it may not be so much to us Americans but to the foreigners instead who want to travel and see the world too. I spoke with several salesmen and they all told me that timeshares were selling like hotcakes. I believed him because they were writing up contracts. Ski Resorts may be another example.

An investment letter, we subscribe to, recommended not buying anymore real estate in Florida for an investment or a vacation home as it may be nearing a bubble there but it seems to be different yet in California because of more people wanting to live AND work here. When we were in Kauai and looked at some condos overlooking the ocean, we asked why they were selling and the answer was that it was a fantastic seller's market and people had more than doubled or tripled their money. Maybe, they are the smart ones and sell too early but have big profits in their pocket and not on paper that could disappear overnight. Still, the demand is definitely there by people from other Nations as they are getting more affluent and want the good life too and the Japanese are back finally after a decade or so. From what I understand, the prices of these timeshares are not too high for them because everything costs so much more in Japan.

------------------
Emmy

posted 05-31-2005 21:32               

Checking our 401K plans the other day we noticed that the market value is almost back to pre March 2000 levels. Yes it is 5 years later but if you are a long term investor you just ride out the cycles.

posted 05-31-2005 21:57               

A contrarian approach to market analysis occurs when one takes the minority perspective of any market, i.e. when everybody is buying stocks the market is approaching a top. When everyone is selling the market is nearing a bottom.

When one uses the "contrarian" philosophy of picking market tops and/or bottoms, the timing element is completely dismissed. One can use the contrarian philosophy to sell at a supposed market top only positions one already has. One can be contrarian to buy at supposed market bottom when one is covering shorts. Why is this the better approach than to sell short at the top or buy new longs at the bottom? BECAUSE contrarian attitudes are NOT precise in timing. They give you a general feel for the topping out action or the bottoming action.

At the end of 1999 I told my wife that we needed to unload stocks for our own account and ask clients to sell out too. Some listened and some didn't, but my wife and I liquidated ALL our portfolios, lock, stock and barrel. BUT we did not short the market. Could we have shorted the market around that time? We decided that shorting was extremely difficult in the market at the time. Every time the market dropped prior to the wholesale collapse at the end of the first quarter of year 2000, the market in those individual stocks ran up and nailed the shorts to the wall.

Instead we looked about for other areas that had not moved and that we concluded would rise, and or at least stay stable, if the stock market collapsed. We went and bought real estate. In the months of March, April and May of 2000 we bought a property a month. We were running back and forth from real estate closing agents to banks and banks back to sellers during that three month period.

My wife and I jokingly tell friends that our current mortgages on those properties, bought about five years ago, are now more than the original purchase prices.

At the time we bought property we did not expect the goofy Greenspan to drop interest rates a record 12 or 13 plus times in a span of two years. We did see him improperly hike up interest rates non-stop to curtail the stock market exhuberance. We just figured out that the interest rates had to go down, but did not know he would even overdo this. I am on record as saying that Greenspan was the most incompetent US Fed Chairman we've ever had at the time of his rate hikes. He tried to manage the economy using macro tools when he should have used micro tools available to the Fed chairmans: hike up margin loans for stocks, increase reserve requirements for bank CDs, cajole the wirehouses into curtailing speculative stock purchases, push the SEC to tighten up IPO requirements. Instead the moron hiked up interest rates ACROSS the board, killing the stock market and also at the same time killing the economy. Volker, his predecessor, micro managed better.

This time, in a rising interest rate environment, he appears to have learned his lesson. The Fed spokespeople have just recently indicated that they will ask banks to make loans more stringent, as opposed to hiking up interest rates even more. They've shown concern for the interest-rate loans and want less of those loans on the banks books. This is the way the Fed needs to control: the bark is more threatening than the bite. It use to be that even a hint of what the Fed was up to was enough to move the markets in anticipation. Now, the Fed, under the mismanagement of Greenspan, has shown the hammer and uses it. Before the threat was enough to get the financial institutions to toe the line.

Sorry, I went off on my soap box. Greenspan became easy to read and figure out. We positioned for the real estate move and we have done very well. At the end of 2002 we made it known that we expected the market to move up over 30% either the next year or the year after. We conducted limited seminars and told that at our seminars.

The real estate market is overheating, but not anywhere near a frothy top. A frothy top is when you see people make money who've never made money. You might read of isolated stories of people who've made money in real estate who you never would have thought of having the ability to do so. We haven't seen those stories yet. There are more appearing similar, but not an overbundance.

The factors that a global analyst sees will continue the real estate move upwards.

How will we liquidate our real estate holdings? One piece at a time because we know that we cannot pick the top that easily. With two pieces to unload, it increases our ability to pick a range of time that we can get closer to a market top.

As I said to my wife last year: it's closer to a top than the year before. As I said to her last week: it's closer to a top than the year before. As I most likely will say next month: it's closer than a month ago.

It is getting closer, but nowhere near a top.

posted 06-02-2005 04:31               

quote:

---

Originally posted by PerryM:

P.P.S. How long before timeshare-hotels? Instead of whole ownership a fractional ownership and a hotel. Now this makes sense for quarter-share ownership. When you don’t use it you rent it thru the hotel. Could this give timeshares a run for their money? Perhaps at the high end market to start with – followed by cheaper quarter-share. Who knows?

---

posted 06-02-2005 06:29               

1) That a real estate bubble is forming will burst, and we can somehow know this and sell our real estate holdings. (Unfortunately we can’t “short” the real estate market if we had that information).
2) That we can make money by buying a timeshare. All the timeshare Trumps out there might share their secrets to making millions in the timeshare market (developers need not reply).

Both zingers are extremely hard to do.

A better approach is to look at the real estate history for the past 5 – 10 years and assume it will continue that much into the future. Why? Well what information do we really have that the real estate trends are coming to a screeching halt?

I guess interest rates are the biggest factor that affects the real estate market. The rates are higher than a few years ago, but not earth shattering.

I guess those evil foreign investors (you know who you are) are gobbling up prime real estate and may suddenly liquidate all their holdings.

As you see it’s just a guessing game and the best course for future prognostication is to just assume the trends will continue in the near future.

IMHO.

posted 06-02-2005 06:58               

quote:

---

Originally posted by nthc:
[B

Buying real estate is for most people a thought out decision. Buying a timeshare is a desire in the heat of the moment to have what everyone else has, or to not lose out on the deal of the century.

JMHO,
cindy[/B]

---

------------------
Seth
My Website

posted 06-03-2005 09:26               

Article Here

posted 06-03-2005 10:26               

When we sold our house and left San Diego, we knew it was permanent as we would never want to buy back into the wildly escalating market. Sure enough, they are now almost $250,000 higher for the average home than they were when we left 3 years ago.

We got into a (then) little known, *much* lower market in a small city in Northern California. I picked up my house on half an acre for $88,000.00. We didn't stay little known for long. People heard about the prices here and are moving up here in droves, bringing the equity from the sale of their homes in the big cities, as we did. My place now appraises at $260,000.00. Salaries have stayed almost exactly the same - very, very low. This is a city that had such low housing prices for so long, they never bothered to build much in apartments or condos. However, they are building expensive new housing on every corner. Over 40% of the houses bought here are now "flips", often from people living in nearby cities.

The market may be climbing, but the people who live here are often not a part of it. Many have nowhere to live with their $9.00 an hour job, and are leaving. Is this a bubble? I believe so, and so do many local experts.

posted 06-03-2005 14:29            

quote:

---

Most of my Manhattan Club and Hyatt buyers from 3 years ago are extatic, seeing significant gains.[/B]

---

Seth,

How would you rate Marriott in this overall equation? Are there any particular Marriott properties that you've seen do really well?

posted 06-03-2005 21:57               

quote:

---

Originally posted by ACCfan:
Seth,

How would you rate Marriott in this overall equation? Are there any particular Marriott properties that you've seen do really well?

TIA

---

Marriotts as a whole are up about 7 % per year for the last 3 years. The individual properties that stand out are Marriott Aruba Ocean Club, Marriott Ocean Club, Marriott Summit Watch. Their prices are up about 25% in the last year. Marriott Beach Place Towers is up about 20% in the last year.

posted 06-03-2005 23:08               

quote:

---

Originally posted by roverjohn:
I think the saying is - "They don't ring a bell" for when the market changes. But it certainly looks dangerous. And so did the stock market. Stupid valuations there and stupid in Real Estate now. People are buying based on the assumption that someone is going to buy from them for twenty percent more. It will stop, like most pyramid schemes do. Interest rates will rise and kill the market. And you can sell stocks quickly, even at a loss. But not a home when everyone wants to sell. As for timeshares - the sun is shinning now because after a long period of hotel rates not moving much, they are going up this year and for the foreseable future. Now a fixed rate (almost) for a timeshare room at a good to great property looks very attractive. But if there is a severe crash in the real estate market - cash will be king, both is buying distressed properties and timeshares.

---

I have a few hundred thousand dollars in timeshare property ownership. With the recession comming to an end and people spending money on vacationing and the probability of increased inflation (if interest rates rise), I would rather have my money in high end timeshare properties than in cash. I don't see developers allowing the prices of their properties to fall and expect the properties to rise in value at least as much as inflation, if not significantly greater.

------------------
Seth
My Website

posted 06-04-2005 17:09            

I'm ready for a bigger and newer house. Just so happens a new housing development is springing up in Inglewood, CA. (If you've ever been to Los Angeles via LAX, you fly right over it a minute or two before you land.) Anyhow, I'm numbers 579, 1100+, and 800+ on the interest lists with the 3 different developers who are erecting a total of 375 homes on the vacant land. I don't think I stand a chance. Oh Well.

If it is a bubble, I can wait for it to burst, cash in hand.

posted 06-04-2005 20:56            

quote:

---

Originally posted by nikki33866:
I'm glad I read this topic because I almost got caught up in the tulip, opps I mean housing, frenzy in Los Angeles.

I'm ready for a bigger and newer house. Just so happens a new housing development is springing up in Inglewood, CA. (If you've ever been to Los Angeles via LAX, you fly right over it a minute or two before you land.) Anyhow, I'm numbers 579, 1100+, and 800+ on the interest lists with the 3 different developers who are erecting a total of 375 homes on the vacant land. I don't think I stand a chance. Oh Well.

If it is a bubble, I can wait for it to burst, cash in hand.

---

I wonder how many people on that waiting list are brokers or investors just wanting to buy the new construction to flip it. I bet it's more than half. If the market ever starts to swing the other way, then these "waiting" lists will quickly go away.

I don't like the way homes are now being treated in some areas like stocks or something to make a quick buck on because real everyday working people are usually the ones who get stuck holding the bag and being hurt when the market changes. I saw it happen in NY in the 80's when a family friend purchased a house at the height of the market only to see the value drop 40+% over the next several years. Due to this, they were upside down in the house for many years even though they had a traditional mortgage and it took them 5+ years before the market recovered and the value started to return.

When the real estate market starts to swing wildly (now in the positive, but maybe possibly negative at sometime), it can have the detrimental effect of completely freezing the everyday working person in their tracts if the market starts to have a downturn. They can't move from where they are b/c they can't afford to sell their home.

posted 06-04-2005 21:57               

quote:

---

Originally posted by ACCfan:
When the real estate market starts to swing wildly (now in the positive, but maybe possibly negative at sometime), it can have the detrimental effect of completely freezing the everyday working person in their tracts if the market starts to have a downturn. They can't move from where they are b/c they can't afford to sell their home.

All of these prognosticators who predict an unending 20+% year over year gain in some markets will quickly disappear once the market cools off. These high gains are just not sustainable over time. I really hope the market just cools and doesn't crash. I hope it returns back to the steady 2-7% year over year appreciation as that's a much more sustainable market and the average working day person is at less risk for really getting hammered if there's any downturn.

---

There is one significant diference between now and the late 80s. If you purchase a home and take a traditional fixed rate 30 year mortgage you may still be ahead of the game even if prices fall. You can lock your interest rate in at historical lows (about 6%). If the prices of the homes fall and the interest rates rise, your monthly payments may actually be higher than if you buy now.

posted 06-05-2005 10:23               

quote:

---

Originally posted by ACCfan:
I wonder how many people on that waiting list are brokers or investors just wanting to buy the new construction to flip it. I bet it's more than half. If the market ever starts to swing the other way, then these "waiting" lists will quickly go away.

---

The waiting lists are legitimate buyers. This is not a new phenomena in California as there is a chronic shortage of housing. When we were searching for our new home here in Murrieta in late 2001 there was a waiting list at every development. You submitted your name for the home you wanted and then you were entered into a drawing to go on the waiting list. We were extremely lucky in finding our home because it had just fallen out of escrow the day before we bought it. They were building houses as fast as they could with probably 25 new developments in the area but the demand far exceeded the supply as it still does.

I expect that prices will soften here as there are signs of that now but they will not crash barring some unforeseen event. This cycle has been going on here for years and years. The only time I actually saw the price of homes decline substantially in San Diego was in the early 90's. That was caused by very large cutbacks in defense that led to the loss of thousands of jobs in San Diego alone. A less severe decline occurred in Silicon Valley as well. Of course prices are now at least double what they were prior to the decline.

Even though the Fed has raised short term rates, mortgage rates are continuing to decline right now. Some are predicting 4.5% for conventional fixed 30 year loans.

I remember buying a new home in San Jose, CA in 1972. We sold it 5 years later at almost triple the price. I said that this cannot go on. I was sure wrong because that house is now worth 20 times what it cost in 1972.

I do see a potential serious problem. That is the number of people that have been qualified to buy homes at 1.0% teaser rates. It used to be that you had to qualify at the true rate and not the teaser. These folks are going to get a shock when their monthly payments go up several hundred dollars.

posted 06-05-2005 21:11            

quote:

---

Originally posted by sethnock:
There is one significant diference between now and the late 80s. If you purchase a home and take a traditional fixed rate 30 year mortgage you may still be ahead of the game even if prices fall. You can lock your interest rate in at historical lows (about 6%). If the prices of the homes fall and the interest rates rise, your monthly payments may actually be higher than if you buy now.

---

That's true and is a good point.

posted 06-05-2005 21:24            

quote:

---

Originally posted by John Cummings:
I remember buying a new home in San Jose, CA in 1972. We sold it 5 years later at almost triple the price. I said that this cannot go on. I was sure wrong because that house is now worth 20 times what it cost in 1972.

---

John,

I agree with you that in the long term you can't find a much better investment than one's home. However, the long term data can sometimes mislead as to what's going on in the short term.

For example, a 10K home in 1972 that's now worth 200K (20 times) has really only gone through less than 4.5 doubling cycles. Over 30 years, that's roughly 10% appreciation per year on average. At a 20% appreciation per year average, that same 10K home would be worth around 2.5 million 30 years later. My numbers may be a little shaky as it's midnight and I'm doing this in my head, but the power of just a few extra percentage points in compounding interest/appreciation is amazing.