Below is something I posted on my institutional website for real estate flippers, speculators, gamblers.  While some things apply to residential buyers looking for homes to live in, the message for residential buyers is to select carefull.  There are tremendous buys out there if you are going to live in the home.  The gamblers are selling at whatever they can get.  If you are buying to flip, don't call me.  This is not a market that is going to turn on a dime, but this is a market for owner/occupiers to get tremendous deals.

Here's the piece . . .

Over the past few weeks, that is what I am hearing from investors of condos and single family homes. Some say it with complete confidence. Others say it with a slight tilt to there head and in a softer voice, as if they are asking me a question. My response is still . . . it gets worse . . . much worse. 

When and Where: Last week a group of men sat me down for a very serious dinner. They all wore suits and ties, I showed up in slacks, flip flops and a Tommy Bahama shirt. But I took the evening far more serious than they did. It's just that living in Florida has changed me. I'm serious when I'm dressed comfortably. I'm attending a funeral when I am in a suit and tie. Maybe I should have had the suit and tie on for that dinner.

Who: The group were brothers and brothers-in-law. Three were very prominent businessmen, one a surgeon, one obnoxious, know-it-all hedge fund manager, two high-power attorneys, and a CPA for one of the Big 3, 4, 5 (I'm not sure what they call themselves anymore).

What: These brilliant, successful, well-dressed titans of their professions owned a combined 18 condos and a few very large waterfront homes in gated communities. All of the units are empty, and they have been empty for on average a year. Some of the units have only recently closed. They are underwater in all of them. The simple math showed they paid a $19,200,000 for the units. But before they told me how much they paid, I did my napkin math and told them the combined units were worth between, $7M and $12M depending upon what I saw inside and where their particular units were located. At first there was mumbling among the brothers, as to who was going to throw me out the window. Instead, the leader of the group decided another round of drinks was in order . . . doubles.

Discussion: No matter how hard I tried to point out facts, the brothers insisted this must be the bottom. They wanted to know how they could pay $19M for something only worth $7M. They were sure the Baby Boomers were coming and would buy up everything. They were sure prices would return to normal if they held for three or four years. They didn't want to hear about electric bills, utility bills, association fees, club dues and minimums, maintenance, taxes, insurance, security, monthly empty unit checks, etc. At this point I asked the elder of the group to cut off all drinking. I really didn't want to waste my time if these guys were wasted. Now I pulled out my laptop and I ran through some numbers, as well as MLS sales, listings and a variety of information. We were in a private room with a display, so I had the captive.

The Slow Turn: The bigger the ship and the more crew doing their own thing, the harder it is to turn. But after the picture show, I started putting some numbers up on the white board with the assistance of the CPA brother. It became clear to all, the only way out was to sell now and put the money to use elsewhere (like shorting the builders and financials). The CPA brother ran through several scenarios, and none of them justified holding. But there were a couple of hold outs.

Solution: We are going to list all 18 properties at the average of the lowest price in their areas, and then drop the price on each by 1% per week until the phone starts ringing with showings. Once we start talking to potential buyers, we will determine how much lower the price must go. Some of these properties will be sold with financing, as some brothers are in that position. They are going to lose more than double their initial investments (down payments). In some cases up to 4x as much, but if they wait, things get worse. You see, these are not the only big boys caught in these problems. The little boys have been running to some extent. They simply don't have the staying power. Up to this point, these titans have had more money and pride, than common sense.

Up, Up and Away - The hold outs were sure the market was going to turn and return to 2006 levels. We put some statistics up, showing 20-35% price increases during the bubble. We have never in the history of the US seen anything like that, except just prior to the Depression. If we are at the bottom (and I say definitely NO), when prices do start up, it will be a 1-5% appreciation depending upon the area and your particular unit. Even at 3%, it will take 15 years to even get close to where we were . . . and that does not include the carrying costs.

Bottom Busters - The majority of consumers, investors, speculators, hedgies and sharp guys at the big financial institutions, think we are at the bottom or we will see it this year. They are all WRONG. I return to my discussion of inventory, which I have been writing about publicly for more than three years. And it has not gotten better. It is worse because builders continue to build, because banks and now the government want to give them money. It gets worse because our economy is in a downward spiral that we no longer control, and these folks are losing their homes. It gets worse because the lenders and groups like Fannie Mae and HUD have no clue how to process inventory. In fact, it is the latter issue that will be the silver bullet we cannot escape. I know, because I have the personal experience with all of these group. I get goose bumps when I hear some of the nonsense coming out of Fannie Mae and HUD. It's not scary, it's like the worst nightmare of my life . . . and it's real.

MORE INFO - If you would like additional information or how to find sacrifice sales, "real" foreclosure deals, and "real" short sale deals, please call me at 772-260-5448 or email me at Mike@MorganFlorida.com or visit our website at www.Treasure-Coast.us