Example: A 3 bed 2 bath home generally rents for between $1500 to $1800 per month in my area. That means a loan amount in the neighborhood of between $240,000 & $290,000. That's just for the loan now you have to factor in taxes, insurance and HOA fees. These three combined can cost close to $1,000 per month in my area, effectively lowering the buying power to between $80,000 and $120,000 in order to rent the property at market value and break even on a monthly basis. If you are putting 20% down then that would mean a sales price of between $100,000 & $150,000 would be required to make this deal work.

In South Florida I bought my 3/2 for $124,000 in 2001. I have said it in the past and i will go out on a limb to say it again, we will not see a rcovery until prices go back to 2001-2002 levels. Right now a 3/2 is still in the $190,000 to $220,000 range. So I expect price declines through the 3rd quarter of next year then a possible recovery will start to take place.

Another factor compounding this situation is that foreclosures have driven up HOA fees thus squeezing the profit margins even greater. When homeowners stop paying their mortgage, they also stop paying HOA fees and the rest of the community gets to foot the bill. The problem is not as prevalant in communities built and occupied before 2003, go figure.

Noel Padilla