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Florida's Half Price Real Estate Sale

|Includes: HOV, LEN, PHM, Toll Brothers, Inc. (TOL)

In 2005 we purchased two new Spring Hill, Florida houses.  Spring Hill is a bedroom/retirement community just north of Tampa, Florida.  At $84,000 each, the three bedroom, two bath, two car garage homes, built by Maronda, were ideal investment properties.  Both houses were quickly rented at $825 a month with positive cash flow. The timing was great.  About a year and a half later each had doubled in value reaching  around $170,000 each (by the way no one, including us saw this coming).  We sold one house, doubling our money in about 15 months!

The second house had great long term tenants, so we kept it.  Those great long term tenants are still there, now paying $875 a month rent.  Current value of the house?  Don’t ask!  It is only worth $98,000 according to Zillow.  Worse yet, when I went to realtor.com I found even nicer looking places for under $80,000.   Zillow, is a website which will give you the current value of most residential properties in the US.  Check it out for your home.

Your dollar, at least in central Florida, will now buy twice the house it did 3 years ago.  This is a layman’s way of seeing how the dollar has strengthened recently.  No need to follow the currency markets.  Near term, It is hard to see inflation coming back soon with these numbers, especially hyper-inflation.  Houses, of course, are tangible property and will uptick aggressively in a inflationary environment.

Looking at the flip side (pun intended), now may be a great time to buy Florida residential real estate.   I have a feeling mortgage rate increases may be coming soon.  If you can tie up a property with a long term, low interest loan, and rates increase in the future (as seems almost inevitable) you will be way ahead.

Florida has always been know for its boom/bust cycles in real estate.  Somehow though, people never learn.  At the peak of the boom most believe the party will go on forever.  Funny though, it works the other way too.  At the bottom of the bust, no one believes real estate is a good investment.  In today’s market you can again buy and get positive cash flow right from the start.

Some of the larger Florida Home Builders are Toll Brothers (TOL),  Pulte (PHM), Lennar (LEN) and Hovnanian (HOV).  These companies are already up off their lows of earlier in the year.  It may be a harbinger of better days to come for residential real estate.

Disclosure: No positions in any of the above.