According to the National Association of Realtors, there are more houses on the market today than at any time in the last 19 years. At the same time, housing sales have fallen for the last several months. That adds up to a picture that looks like it should be titled “The end of the real estate bubble in America.”

But was there ever an American real estate bubble? Or was it a local thing?

I read an article recently in The New York Times which pointed out that (except for the New York area, Southern California, Florida, and a few other spots), most of the country has been unaffected by the so-called “bubble.” In fact, the cost of an entry- or mid-level home in most parts of the country is less now than it was 25 years ago.

If you compare average mortgage costs as a percentage of average income, housing costs are lower today, the article said. Generally speaking, Americans are paying only about 20% of their income for housing. That’s about five percentage points lower than in 1980.

Much of the reason for this is because (1) people are buying less-conservative (i.e. low- or no-amortization) mortgages, and (2) interest rates have been lower than they were in the 1980s. But those lower costs are also due to the fact that in many parts of the country the costs of buying housing didn’t appreciate as much as it did in the hottest areas.

I’ve been looking at some of the deals Justin Ford has been scouting in Austin, Texas … and I can tell you that they look much better, in terms of pricing and projected ROIs, than anything you can find in Florida. The same is true for the proposals EP has brought me from the Phoenix area.

Back here in Boca Raton and Delray Beach, you can almost hear the air rush out of the bubble. Since Hurricane Wilma, there have been, comparatively speaking, very few properties sold. At The Oaks in West Boca – a community in which I made a big investment (and probably Palm Beach County’s hottest development for the last several years), sales have come to a virtual halt. The developers are hoping things will pick up this month … but the jury is out. I’ve got most of my local properties up for sale (as do some of my partners). Yet, I’ve sold only one condo. (No complaints there. I made a $176,000 profit on a $70,000 investment in three years.) I expect to see my other properties selling for 15% to 30% less than what I might have sold them for six months ago. We’ll see.

Prices in this area are still high because they are not based on recent sales of comparable properties. They are based on what was happening six months ago. And that, in turn, was based on 10 years of non-stop, double-digit price inflation. If sales don’t increase quickly in the new year, I believe we’ll see a significant drop in prices when all the amateur speculators realize they can’t afford to hold onto their dismal, small ($200,000 to $350,000) properties because of the ridiculous property taxes ($4,000 to $7,000 a year) … and because of post-hurricane windstorm insurance ($1,500 to $3,000). Not to mention rising interest rates.

Yes, it’s a perfect storm against real estate in Florida. That’s why I’ve been selling my properties here (except for my house and office) and plan to reinvest much of my real estate portfolio (which has appreciated about 35% a year for 10 years – again, I’m not complaining) into places that didn’t appreciate as dramatically and so still have room to grow. I’m considering places like Phoenix and coastal areas in Latin America and the Caribbean (such as my property in Nicaragua) that will offer retiring baby boomers a slice of paradise for what they’d pay for the condo from hell in South Florida or Southern California. According to the National Association of Realtors, there are more houses on the market today than at any time in the last 19 years. At the same time, housing sales have fallen for the last several months. That adds up to a picture that looks like it should be titled “The end of the real estate bubble in America.”

But was there ever an American real estate bubble? Or was it a local thing?

I read an article recently in The New York Times which pointed out that (except for the New York area, Southern California, Florida, and a few other spots), most of the country has been unaffected by the so-called “bubble.” In fact, the cost of an entry- or mid-level home in most parts of the country is less now than it was 25 years ago.

If you compare average mortgage costs as a percentage of average income, housing costs are lower today, the article said. Generally speaking, Americans are paying only about 20% of their income for housing. That’s about five percentage points lower than in 1980.

Much of the reason for this is because (1) people are buying less-conservative (i.e. low- or no-amortization) mortgages, and (2) interest rates have been lower than they were in the 1980s. But those lower costs are also due to the fact that in many parts of the country the costs of buying housing didn’t appreciate as much as it did in the hottest areas.

I’ve been looking at some of the deals Justin Ford has been scouting in what he calls “the Secret Sunbelt Cities,” These are a handful of small cities he’s identified that have diversified economies, growing jobs and population, and a high quality of life… yet haven’t been affected by the real estate bubble in other areas… yet.

I I can tell you that the values he’s uncovered look much better, in terms of pricing and projected ROIs, than anything you can find in Florida. The same is true for the proposals EP has brought me from similar areas.

Back here in Boca Raton and Delray Beach, you can almost hear the air rush out of the bubble. Since Hurricane Wilma, there have been, comparatively speaking, very few properties sold. At The Oaks in West Boca – a community in which I made a big investment (and probably Palm Beach County’s hottest development in the last several years), sales have come to a virtual halt. The developers are hoping things will pick up this month … but the jury is out. I’ve got most of my local properties up for sale (as do some of my partners). Yet, I’ve sold only one condo. (No complaints there. I made a $176,000 profit on a $20,000 investment in three years.) I expect to see my other properties selling for 15% to 30% less than what I might have sold them for six months ago. We’ll see.  [NOTE TBD: I changed $70k investment to $20k because assuming you put 10% ($7k) down and then closing costs and some remodeling and you’re probably in it for $20k max.  From there, the rents paid for everything.]

Prices in this area are still high … because they are not based on recent sales of comparable properties. They are based on what was happening six months ago. And that, in turn, was based on 10 years of non-stop, double-digit price inflation. If sales don’t increase quickly in the new year, I believe we’ll see a significant drop in prices when all the amateur speculators realize they can’t afford to hold onto their dismal, small ($200,000 to $350,000) properties because of the ridiculous property taxes ($4,000 to $7,000 a year) … and because of post-hurricane windstorm insurance ($1,500 to $3,000). Not to mention rising interest rates.

Yes, it’s a perfect storm against real estate in Florida. That’s why I’ve been selling my properties here (except for my house and office) and plan to reinvest much of my real estate portfolio (which has appreciated about 35% a year for 10 years – again, I’m not complaining) into places that didn’t appreciate as dramatically as Delray Beach and so still have room to grow. I’m considering places like Phoenix and coastal areas in Latin America and the Caribbean (such as my property in Nicaragua) that will offer retiring baby boomers a slice of paradise for what they’d pay for the condo from hell in South Florida or Southern California.

Tomorrow, ETR’s real estate expert Justin Ford will give you the details of what we think you should be doing with your real estate portfolio in the coming year.

[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]

Mark Morgan Ford

Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Wealth Builders Club. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.