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I am getting itchy to put some bids in for real estate that I always wanted, coastal real estate that I could develop as a place to go in conjunction with some other friends who took the plunge a few years ahead of me before things got really prohibitive.

Why not join my buddies in Florida for three or four times a year if the declines in Florida real estate are as large 30%, 40% even 50% from where they traded two years ago.

But I am no pioneer. I got the idea from another of my friends who was trolling for real estate and found a three bedroom condo on the beach in Vero, in an ocean front building. The properties traded at $1.2 million two years ago and they are taking any and all offers. He figured maybe half that would do the trick. But before he bid, he checked with a local bank to see mortgage availability.

My friend is wealthy with a high FICO score and no problem making the down payment. The local bank turned him down flat. He then expanded the area for credit a little further. Same deal.

The problem? It would have been a second home.

The banks don’t want to make second home loans.

To me, that rejection was shattering.

The big real estate declines in this country are in Florida, Arizona and California. Much of the decline in California is in homes in developments that are far inland and were built as $300-400,000 homes in out of the way places, where people commuted long distances.

Some of the declines are in and around Palm Springs, though, an area that I love and am visiting in November. I went last year to look and the prices were down about 10% to 15%.  I am told the same places could be had for big discounts.

But now I am thinking twice because the prices don’t matter if the loans aren’t there.

My friend’s experience has been replicated subsequently by others who are only looking for second homes. Right now the banks are having a hard time securitizing second-home loans. Fannie Mae hasn’t been willing to take them, perhaps because of this crisis. They ALWAYS used to have a program set aside for second homes. The banks don’t want to get stuck with them.

I think this fact dramatically changes the situation for a potential turn in vacation real estate, where some of the best values are. It also has me worried about my foray into Hampton properties.

So, a warning. If you are looking to take advantage of the decline in price because of the dramatic overbuilding of beach-front properties that has taken place in the last few years, keep in mind that price is only a part of the equation.

When the rich are getting turned down for second-home mortgages, it is a sign that the prices are simply illusory UNLESS you can buy in cash. Perhaps that’s next down the road as the price of real estate grounds down.

One bit of good news, though. Had these properties been places to live in, the money was plentiful, in keeping with what Toll Brothers says about the higher end of the market. The money’s there,  and the money’s at a much lower price courtesy of the government’s takeover of Fannie and Freddie this weekend.

Random musings: the site has a real good article about personal wind mills. One of my close friends put one up after assurances from the power company that he could get rebates from the utility when he produced excess power. Turns out they didn’t know how to do it since he was the first to put one up. Power companies have an easier time using water mills than windmills!