How Meredith Whitney Rocked The Tallahassee Real Estate Blog

I want to thank all of our long-term readers for their contribution to the discourse at the Tallahassee Real Estate Blog, especially during the past two days. Recently, we received a visit from "Greg" who has categorized me and this blog as typical of the real estate industry.

I beg to differ. After being compared to cheerleaders, cool-aid drinkers, and "average" REALTORS, and then being accused of being either "deceitful or just blinded," I figured I would respond to each part of his comment, point by point. Rather than do it in the comments section where it would be missed by many of our readers, I felt that I would feature my response in the form of a new blog post. This way, we can pull many more of our readers into the discussion. Enjoy.

Meredith Whitney Believes that Peak To Trough Drop Will Exceed 33%

Greg writes:

No offense, but I give a heck of a lot more weight to the opinions of a Meredith Whitney, who is disinterested and has been ahead of the housing curve for a long time, over someone like you, who is invested in the issue and has continually pushed housing as a good investment. Whitney recently said that peak to trough "will be far worse than 33%."

Tallahassee Real Estate Blog on Housing
  • When somebody starts a sentence with "no offense," it usually means that they will be saying something offensive. Ironically, I agree with you to a significant degree. I am invested in the Tallahassee real estate market, and Ms. Whitney is not, meaning that her bias will not be based upon living here, working here, and making micro-observations of our local market. Of course, this means that her opinion is generalized for the whole country and we won't hold her opinion as a statement for each market, rather just all the markets put together. Some will do better, some will do worse. Agreed?
  • I do not know you, so I'm not so sure that your unqualified opinions can truly offend me. I welcome them. I encourage bears and bulls to voice their opinions. My experience has taught me that when everyone is bullish, I should be bearish. When everyone is bearish, I should be bullish. And when the market is balanced, I need to do extensive study. One could certainly argue that we are moving very close to "everyone is bearish." How can I say this? I don't have to say it, you are my proof. Market extremes turn the internet into a NY street corner. People come out with the "end is near" signs and speak as loudly as they can, to anyone that will listen.
  • You credit me with "continually" pushing housing. Hmmmm, what do you recommend? Live in the streets? The way I see it, people can choose to rent or they can choose to own.  Some people buy a home to live in, some rent from strangers, and some rent from their parents (or other family members). The right answer for each person depends upon a multitude of personal factors (which I write about daily). You on the other hand appear to be "against housing," yet I suspect you actually live in a home (meaning not in the streets).

Well-Priced Homes In Tallahassee Are Good Investments

Greg writes:

I wonder how your clients who bought homes in 2006 at prices which I'm sure you then opined were "very-well priced" feel right about now. Your comment about well-priced homes being a good investment is tautological. Current prices are far, far from being well-priced. I'm sure you disagree, like all your fellow brethren cheerleaders.

Tallahassee Real Estate Blog on Tautology

Here is where you lose a bit of credibility from myself and many of the readers who have provided feedback to your comments. You start by wanting to make a valid point (2006 was the worst entry-point into this market) but instead you turn it into an unsubstantiated statement which you are "sure" that "I opined" .... This is where you depart from adding to the discussion with your opinion and diverge into verbal vomit that really does not add to our discussion or learning on this blog site. You are obviously very educated and very intelligent, I would just think a "scholarly acting" person would do at least  as much research as a typical college student would do before making such invalid statements.

I suspect that our clients who purchased in 2006 and need to move now are sick to their stomach with worry about the housing market. The ones that know they don't need to move for quite a while, who have fixed-rate loans (or are switching to fixed-rate loans) most likely are not-so concerned, as they are paying for their home in the manner in which they expected. Unfortunately for those who need to sell, they are in a very tough position. I'm wondering if you actually read the response by a reader "Tom" who did buy a Tallahassee home in 2006?

Your opinion that my "comment about well-priced homes being a good investment is tautological" is laughable at best. Since I do not have a "word of the day"  calendar on my desk, I asked my friend Dr. Roy Barineau (a really smart guy) for his definition of this big (not Joe Real Estate Blog Language) word. He told me that it meant redundant or repetitious (or something like that but he lost me when he started using big words too).

  • Do you mean that "by definition, well priced homes in Tallahassee will always be 'good investments'" and that is why my opinion was tautological?  or
  • Do you mean that I keep repeating myself by saying Tallahassee homes are good investments?

Regardless, it matters not. You undo your whole point when you make an unsubstantiated claim about current prices of homes being "far, far" too high! Well you've made the statement, now demonstrate that you bring more than a large vocabulary to the discussion (and I honestly believe you do). Just as I do not think bulls are idiots, I do not think bears are idiots either. I believe that too much fear has driven away your ability to take in all the clues, so you focus completely on the negative ones. But here are some questions for you to consider:

  • What would Meredith Whitney say about the Tallahassee housing market over the next 10-20 years? Most projections on population in Tallahassee are for growth at a higher rate than we have seen in the past.
  • If Meredith Whitney thinks the Peak to Trough is going to exceed 33%, do you think you need to know where we are now, peak to trough, before you start "opining" on the market being "far, far, from being well priced?"
  • What source of local data will you use to determine what you will believe in the future?
  • What source of mortgage data will you use to speculate the influence that we will see from "Outside Influencers?"

And now on behalf of my brethren cheerleaders....

Home prices in Tallahassee are still falling. Many of the 3,000+ homes for sale in Tallahassee are priced at a point I would not make a buy recommendation. However, there are some homes that are priced to sell. Remember, you cannot hold the purchase of a home in a vacuum. You have to compare it with the other options that the potential buyer has today:

  • Does the buyer live in a home that is also losing value?
  • Does the buyer live in a hotel and need to buy or lease a home immediately (we are faced with this every week with corporate relocation clients)?
  • Can the buyer find a suitable rental property to meet his lifestyle?
  • If the buyer buys a home that still has potential to depreciate, is that financially worse than buying in two years (or five years, etc.) at higher interest rates?

I do not believe the answer lies in a blanket opinion, meaning that buying now or not buying now is based upon individual personal needs and you won't find one singularly good answer for everybody.

A No-Brainer Investment in Tallahassee Real Estate

Greg writes:

Your no-brainer investment was actually a rental. You ignored the risk of price stagnation/depreciation because you drank the cool aid that home prices would never go down and that rent/price ratios don't matter. You likely still believe that "over the long run" home prices would never go down. Tell that to the poor guy who bought a Summerbrooke house for 220/sq ft in 2006; the same one that has a current value of 120/sq ft and is dropping like a stone by the minute.

Tallahassee Real Estate Blog on Investment Options

I had to read this statement of yours five times to try to figure out what you really were sayng.... You say my "no-brainer investment was actually a rental."

  • Uh, yes. That is what makes it a no-brainer investment. You see, tenants will actually pay the owner of the property rent for the enjoyment of living there. Analyze the flows and buy it because your ROI exceeds 15% with the right amount of down payment. Stock market yielding 15% these days?
  • Again, buying real estate as an investment does not exist in a vacuum. You must compare the investment you will make to buy it with your other opportunities... you must apply a risk factor to each, then make the decision to get the highest yield that you can achieve without violating your tolerance for risk. So, let me ask you a simple question.... Had an investor bought that house when I wrote the article, how would their investment be compared to say buying shares of stock in Lehman Brothers? Or how about just buying a Dow Index Fund? I suspect more of their investment would be safe in Tallahassee real estate.
  • Additionally, you again attribute a conclusion to me that was not made. As a matter of fact, it is in complete opposition of what I believe and what I write about. You wrote that I ignored the risk .... That "rent/price ratios don‘t matter." Why do you think I was showing that property as an example in my blog? Historically, rent/price ratios (Gross Income Multipliers) have had rental properties trading around 100 times monthly rent. For example, monthly rent of $1,200 is a property that will trade at $120,000. Historically, I have endeavored to purchase my rental properties under 90 times rent, and 80 times rent was a "home run." The purpose of that article was to show a rental property that was well below 100 times rent (even though the rental market was still overpriced at greater than 110 times rent.

Outside Influencers Can Have Serious Short-Term Affects on the Tallahassee Real Estate Market

Greg writes:

What makes you think that if mortgage rates substantially increase, that that itself wouldn't cause a further reduction in demand for housing which would cause a further reduction in prices? This is further evidence of your bias. All of a sudden home prices would magically become insensitive to mortgage rates. What do you think would happen to prices if mortgage rates went to 8%? I know you're smarter than that, but I can't tell whether you are being deceitful or just blinded by your emotional investment in the issue.

Tallahassee Real Estate Blog on Outside Influencers

Again, you probably would benefit greatly from reading many more of my previous blog posts. While they are not "research papers" that are worked upon for weeks (as a matter of fact, I usually write my daily blog from  the house at 5:30 a.m. before I go to my real job), my blog articles are written based upon my collective experiences. Unfortunately, that means that the blog meanders and addresses issues in a whimsical manner. You actually have to read more than 2 or 3 posts before you lump me in with the typical REALTOR who is writing a product-based blog.

  • So, about mortgage rates, please read what I wrote about "Outside Influencers." You will see that I believe that rising mortgage rates will put downward pressure on home prices for a while, however, one point that you fail to address in all your lengthy comments is population growth. If you believe in the agencies who do mid-census population evaluations, we are growing. Historically, Tallahassee grows at a rate just above 2% per year, meaning that if it continues, then we will consume more homes than we currently have  available now (Refer to my recent article on population versus home consumption). If we ultimately need more homes, how will they be delivered to the demand of the market at prices below that which they can be built? You see, I look at the long-term cycles of the real estate market, not just the current fear-filled market.
  • Fear and Greed operate in all commodities markets. That is why in 2004 I was advising clients to "run away" from the beach markets. Many of them ignored me and made a ton of money in 2004 and 2005. They even made money in 2006, but most of them gave it all back in 2007. I was a little premature on my advice, but it was based on sound math, economics, and population data.
  • I have not recently sold many investment homes to clients (it was the bulk of my business from 1996-2004) because the rent ratios have been out of whack. But this is changing. Current rental home prices are still a bit high and I struggle to find good buys right now, but within a relatively short time, 20% annualized returns will be back (refer back to my blog article on the real estate stack).

Keep Your Eye on Tallahassee Real Estate

Greg writes:

I'll check back in 6 months and we can see who's right. I say prices down another 20% and you like Hank Paulson will be calling the bottom for the 78th time.

Tallahassee Real Estate Blog on Daily Blogging

Greg, I truly hope you'll be regular contributor here. Your insight for the most part is great, you just temper a good point with personal attacks in your discourse. I suspect when you are too lazy to verify or find collaboration on your opinion, you use your intellect to belittle the opposing view and hope that a personal attack will steer readers away from the fact that your point might be unfounded or at least lacking enough proof at just face value.

As far as "calling the bottom for the 78th time," you might want to check out what I have already written about the future of the Tallahassee real estate market. It's follow-up article about softening prices in Tallahassee is a good read too!

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#1 By Steve at 7/11/2017 3:44 AM


I think you’re very mistaken in analyzing housing bears. You assume that we are either poor, unstable, or do not consider real estate to be a good investment. Nothing could be further from the truth.

First, most housing bears like me do “consider the purchase of a home a worthy endeavor” under the correct circumstance. Personally, I have made far more money buying and selling real estate than I ever did with any other investment. In 2005, I owned a primary residence plus three rental properties in South Florida – all the properties were purchased prior to the bubble. However, late in 2005, I started to notice that the prices in South Florida were far exceeding the median incomes for the area, so I decided to sell. I sold despite the fact that all three rentals were cash-flow positive. I sold my primary residence despite a very small mortgage and my very healthy Save-Our-Homes protection.

If you follow the real estate market, you know that my decision to give up homeownership and my rental properties to become a lowly renter was, in retrospect, a very smart move. The properties I sold are now worth nearly 50% of what I sold them for. Needless to say, since I did come out ahead on those investments, I absolutely love real estate and still consider it a “worthy endeavor.” That's why I read this blog (and other real estate blogs) on a daily basis.

However, I am more than content to remain on the sidelines until I am convinced we are at the bottom. Once I perceive a bottom, I plan to buy both a primary residence and as many cash-flow positive rentals that I can find and afford.

You assume that housing bears “don’t factor in the necessity of a place to live.” Of course we do. When I moved up here to Tallahassee to take a job, I needed to find a place to live. Since my family is accustomed to a certain lifestyle, we compared the costs to rent a high-end home versus buying one. To me, the decision to rent – under the current market conditions – was a no-brainer. We are currently paying $1850 a month to live in a house that was listed to sell for $800,000 when we signed the lease. I would have needed to put around $600,000 down on the house in order for my PITI to equal my monthly rent. Pulling $600,000 out of the money market where it currently parked (thank God my most of my money is in MMs rather than equities) would have cost me $22,800 per year pre-tax. But, that’s just a tip of the iceberg; during the time that we have been renting, the house has probably lost $100,000 or more in value.

Sure, I’m paying my landlord’s mortgage (my landlord is actually cash-flow positive – the house we’re renting only has a $135,000 mortgage on it), but I have saved more than six figures by renting since I moved to Tallahassee. At least for me, the decision to remain a lowly renter has been nearly as smart as it was to be a homeowner prior to 2005.

Ultimately, I think debates about whether this is good time to buy or not are worthy and worthwhile. Discussions on the direction of the market are great as well. However, making assumptions about the motivation, finances, and stability of those that happen to disagree with you is simply not productive.

#2 By Arnold - Mr.Gadget at 7/11/2017 3:44 AM

Thanks for addressing all your critiques in a mature and informative manner Joe :)

I find your blog interesting as it gives me a real perspective of the U.S. real estate market.

#3 By Rick Fetherolf at 7/11/2017 3:44 AM

Great discussion points, Greg needs to cite some of his references as Joe does in his blogs, otherwise it comes off as drivel.

#4 By CTRealEstateUnleashed at 7/11/2017 3:44 AM

I'm handled a few people on my blog who resort to name calling and the best way to handle them is to argue their points and toss in a little humor. It's hard for us to hear from people like this because if you're anything like me, you bend over backwards to give people good information and help people make good life decisions. For many people, buying a house is good choice no matter the market. It may not always be good enough to be an investment but where else are you going to live? Does he want everyone to be renters?

#5 By Celia at 7/11/2017 3:44 AM

Hi Joe,

In no uncertain terms, this blog keeps us well-informed on what’s happening with Tallahassee real estate, at least every few days or so. In June, July, August, and September, your blogs described Tallahassee home values as depreciating. In following your inventory graphs and explanations, I have a cautious but gleam of hope that next year may show improvement because of the decreasing inventory and sharp market correction. (I would have no knowledge of any of these concepts if it wasn’t for your blog.)

I remember you also recommended that if at all possible, do NOT put your real estate on the market at this time and if you do, be ready to accept a considerable drop in asking price over last year’s property appraisal. This certainly doesn’t sound like a cheerleading blog to increase sales for your benefit.

Thanks, Celia

#6 By Greg at 7/11/2017 3:44 AM


Re: the tautology issue--let me put it another way: the statement that "well-priced real estate is a good investment" begs the question: what is a good price? Anything is a good investment at the "right" price. Even those junky mortgage backed securities are good investments at some price. The question is whether current prevailing prices are right. I think in housing they are terribly high; accordingly, I think that buying housing right now is anything but a no-brainer.

Just curious--were you bearish in 2005 when "everyone" was bullish on housing?

#7 By Greg at 7/11/2017 3:44 AM

Also, to give you an idea of where my intuition about Tall. housing comes from: we moved to Tallahassee recently and have been looking at houses since March. We have a list of 80 houses we've seen over the past seven months, and exactly 4 have sold (one was the summerbrooke house that sold for 120/sq ft). This is evidence of one rotten awful market.

My instincts are that the negative bubble will more extreme and longer than the positive bubble.

#8 By Joe Manausa at 7/11/2017 3:44 AM

Greg, some solid points and great questions. I only have a minute so I'll address "when did I become bearish."

Depends on the individual situation for owner-occupants. At the beach, I was premature and was recommending out of the investment market (take the profits) back at least two years before the markets turned. As I mentioned in the previous post, many clients made a ton of money at the beach even after I told them to get out.

As far as my personal pool of investors who are buying rental properties for investment in Tallahassee, I think the last one purchased (closed) in August of 2004. The rent ratios just went too high after that. There have still been some good buys since then, I just wasn't that exited.

Where I made my biggest mistake was letting taxes slip in under my radar. Property taxes in Florida are crazy high and they are changing my "comfort level" on rent ratios. Where I used to estimate that 40% of my collected rents would go to expenses, I now have to estimate 50% for the same thing. That reduces ROI and ultimately will have an negative affect on value (versus living in another State).

#9 By Joe Manausa at 7/11/2017 3:44 AM

Nicely said Julie, thanks for the feedback. Warren Buffett is truly a wizard and somebody that has earned my respect.

#10 By george fergusson at 7/11/2017 3:44 AM


Thank you for your insight into the Tallahassee real estate market. We relocated here three years ago, paying cash for a beautiful, but modest, new home. We made a killing (as it turned out) with the sale of our home in South Florida. Our previous home barely increased in value for more than a decade, then nearly quadripled in price in five years. It is now in foreclosure. We feel fortunate to live in such a beautiful area.

#11 By Joe Manausa at 7/11/2017 3:44 AM

Thanks for the nice remarks George. It sounds to me like you're one of the lucky "blessed with market timing!" I agree too about Tallahassee.

#12 By Joe Manausa at 7/11/2017 3:44 AM

Steve, thanks again for more valuable and valid comments. I for one have never understood the high-end rental market in Tallahassee..... Hmmm, I can rent a student rental 3/2 for $1,000. I can rent a mid-level family home ($150,000 value) for $1,300 per month, but the market caps out at an apparent $1,800 per month... I guess we just have so few high-end rentals (high end meaning anything over the median home value). I certainly wouldn't try to convince you that your math is invalid. Thanks again for stopping by to contribute.

#13 By Joe Manausa at 7/11/2017 3:44 AM

Greg, you wrote "My instincts are that the negative bubble will more extreme and longer than the positive bubble." I suspect that you are correct. If you review an article I posted about 10 days ago ( about predicting the future of the market, my "theory" on all markets being full of discretionary buyers (variable amount due to outside influencers) and non-discretionary (fixed amount relative to population size), I don't think our annual unit sales can drop low enough for the down-market to be as quick as the up market was. Therefore, I suspect our next "average" or "expected" market year will be 2012.

#14 By Joe Manausa at 7/11/2017 3:44 AM

Thank you Celia. I've seen you comment from time to time and I'm happy to see that "the message is spreading."

#15 By Joe Manausa at 7/11/2017 3:44 AM

Thanks Arnold. You're definitely our "Furthest Guest,"commenting from Melbourne, Australia. Have a great day and stop on by anytime!

#16 By Joe Manausa at 7/11/2017 3:44 AM

Thanks Bob. I read quite a bit about the Denver real estate market in your blog. Keep up the great work!

#17 By NM at 7/11/2017 3:44 AM

It sounds to me like Greg is a college grad student. He has the vocabulary of socialist /liberal critic of free market capitalism. They are soooo smart. way above everybody else. They know the answers etc. He knows how those greedy real estate people think etc.. BUT they don't work, and I bet has no skills that would make him self supporting. He may get a salary from a school or something but actually EARN.a living? I doubt it.Would you hire him ? Could he sell anything.? If he had to go and earn a living and struggle with law of supply and demand and competition he would have a better view of real life.
Let him talk... The more rope you give him the easier it is to hang him. Thanks for your FACTS about the real estate market in our county. nm

#18 By I Know Big Words Too at 7/11/2017 3:44 AM

Joe, I read with great interest your responses to Greg’s tirades about your Real Estate Blog. I read your Blogs every morning and don’t think any are redundant, but rather a result of well-researched real estate market statistics. Greg using words like tautological sounds pretentious and petty. I certainly do not share his beliefs.

#19 By Eva at 7/11/2017 3:44 AM

Greg- Welcome to Tallahassee! I hope you and your family come to love it as much as most people do when they move to this tree-canopied town.

One mistake you are making as you search for your new home is using the sq. foot price as a comparison. Not a good idea. The different amenities, acreage, etc. that come with homes can vastly alter the sq. foot. price so that you're not comparing apples to apples so to speak.

Real estate professionals, while you dont't particularly favor us, do NOT use the sq. ft. price to compare or measure the value of the home. It is essential in contructing new homes, but not very useful in existing homes.

And on the price issue, if what you want is "cheap" real estate, we can find you that - in any market. Right now it's called a Short Sale and it can take a while but there are some beautiful properties to be bought, below mortgage and value.

You just have to be ready to take action.

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