The Bubble Mentality In Florida
Florida posters discussed what part of the state would be the best place to see the housing bubble. “Miami or Ft. Myers? Largest inverntory and steepest declines.”
A reply, “Palm Beach (island) isn’t really a condo haven. West Palm Beach is where the condos got out of control, they probably have 10X units for the ‘real’ demand for the product. Even worse are some of the condos that were built OUT of downtown! There’s less then no demand for those units; they will never sell (tear them down, or convert to section 8). WPB is good (and if we all met up there, we could go see my favorite buildings, the million dollar condos in the mall parking lot, and the condos that require a bulletproof vest to enter).”
An observation from New York. “The only reason I’m interested in Palm Beach is co-workers keep buying condos there… Although some have invested in Miami, and some in other parts of Florida.”
“Personally, I’d never buy a condo in Florida. A house, yes (a cheap one). A condo, no.”
The Sun Sentinel. “Sales of existing homes rose 47 percent in Broward County in March, to 680 from 463 a year ago, the Florida Association of Realtors said Thursday. The median price plunged 30 percent, to $219,500 from $311,400 last year. In Palm Beach County, sales rose 20 percent, to 685 from 572 a year ago. The median price plunged 29 percent, to $228,100 from $320,200 last year.”
“Broward County has 28,898 homes, townhouses and condos for sale, down 19 percent from the end of November, according to a Bal Harbour-based real estate consulting firm. Palm Beach County has 26,808 properties, a 10 percent dip.”
“Lewis Lopater recently bought on a three-bedroom house in Palm Beach Gardens. He paid $174,000 for a home that was listed last summer for $229,900. Lopater and his wife, Dawn, have a monthly mortgage payment of about $1,400, only $200 more than they paid in rent.”
“‘It’s well worth it to have a fenced-in back yard and a piece of the pie, so to speak,’ said Lopater, 48, a father of two and a food service employee at Boca Raton Community Hospital. ‘I really lucked out.’”
The Palm Beach Post. “Myles Minns, head of Continental Properties, was reluctant to say the market finally has turned. ‘We had a great March, but we’re down 20 percent from March to April,’ Minns said. ‘If I could have three really good months in a row, I could say, ‘Yeah, we’re there.’ We’re still not there.’”
“Minns worries that lenders, who paused foreclosure proceedings late last year, are poised to flood the market with foreclosed homes. ‘We’re going to see hundreds if not a few thousand foreclosures hitting the market instantaneously in May,’ Minns said.”
“‘You’re seeing increased volume, but it’s coming at the expense of price,’ said Mike Larson of Weiss Research in Jupiter. As chaotic as the housing correction is, it is proceeding logically from the irrational prices of three years ago, he said.”
“‘The message there is that markets work,’ Larson said. ‘The reality is that falling home prices are what’s going to get us out of this, as painful as that is for people who are upside down on their loans.’”
The News Chief. “Sales of existing homes in Polk County were up again in March, making it six months out of the past seven that gains have been shown in year-to-year comparisons, according to the Florida Association of Realtors. ‘These sales (in Polk County) are a lot of first-time home buyers and a lot of FHA (Federal Housing Administration) loans that had gone away for a while, as in not popular, but now they are,’ said Sarah Armstrong of ERA Merline Parker Realty of Winter Haven. ‘It is because it is less money down - only 3.5 percent down on an FHA loan than on a conventional bank loan. They are not as strict as they used to be.’”
“Tony Fridovich, the owner-broker of Remax Paramount Properties in Winter Haven, tracks home sales and reports the statistics to the federal government every month. He said that short sales - sales in which the agreed-upon price for real estate is less than balance owed to a bank or mortgage company - and foreclosures are forcing everyone who is not a foreclosure situation to drop their home prices to compete.”
“‘In the next couple of months, we are going to see an increase in the foreclosures, and some of the lenders we represent say that that is coming,’ Fridovich said. ‘They have held off and held off due to the administration (of President Barack Obama), but the floodgates are going to open.’”
The Orlando Sentinel. “The Orlando area experienced one of the sharpest declines in single-family home prices during March for metro areas across the state. Four-county Metro Orlando’s median price for single-family existing-home sales dropped by about a third — from $222,600 in March 2008 to $151,600 last month. Only four other Florida metro areas had more dramatic declines: Fort Pierce-Port St. Lucie, 58 percent; Miami and Punta Gorda, each 39 percent; and Sarasota-Bradenton, 37 percent.”
“Orlando’s median condominium price dropped more than the median in any Florida metro area, plummeting 57 percent from $130,800 a year ago to $55,700 in March, according to the statewide Realtors group. The number of condo units sold locally also was down, to 104 compared with 364 a year ago.”
“University of Central Florida economics professor Sean Snaith said he didn’t expect values to snap back quickly because many homeowners will try to sell once the prices begin to revive. ‘You need to see these price declines start to level off before you could see a return of that market,’ Snaith said. ‘Right now, we’re clearing some of the casualties from the battlefield. . . . That’s why we’re seeing some of these pretty gaudy prices.’”
The Herald Tribune. “The number of single-family homes for sale in Manatee, Sarasota and Charlotte counties has fallen to levels not seen since December 2005 — the month that arguably signaled the end of the housing boom. Some economists have their own doubts about whether the housing market has hit bottom.”
“‘I don’t think this is the time to start stomping around going, ‘Ding-dong, the wicked witch is dead,’ and the foreclosure problem is over,’ said Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness. ‘Until I see prices level out, I’m not going to look at inventory levels to say we’re on the other side of the crisis.’”
“Jack McCabe, a Deerfield Beach-based consultant who was one of the first market watchers to warn of an impending housing bust…attributes the fall in inventory to: Auctions, short sales and foreclosure sales that have attracted first-time home buyers taking advantage of the government’s $8,000 home-buying tax incentive. ‘The problem is, with the amount of foreclosures coming onto the market, prices will stay at the bottom,’ said McCabe.”
“The economy, tight credit and homeowners struggling to pay their bills drove delinquent taxes in Manatee and Sarasota counties to a record $102 million, as the payment deadline came and went earlier this month. Similar increases in delinquent taxes are being reported across Florida. In Sarasota County, the biggest nonpayers were developers.”
“Working out a deal with the bank is the biggest problem facing many developers, said Lee Wetherington, whose development company’s land is now in the hands of a trustee liquidating assets to pay bills. ‘They may be holding back paying taxes right now,’ Wetherington said of the building industry. ‘I’m guessing their thinking is ‘Why pay the taxes if they’re still negotiating with the banks?’”
From TC Palm. “Organizers for Friday and Saturday’s job fair to recruit workers for Florida Power & Light Co.’s Solar Plant in this rural community expected to receive 3,000 applications over two days. They had no idea that number would be eclipsed before lunch Friday morning. At one point, cars were backed up from the park west to State Road 710 in Indiantown, a distance of two miles, and for several miles east on Citrus Boulevard, deputies said.”
“‘I’ve had people already from North Carolina, New York, Alabama and Maine through here,’ said Florian Mandiche, Workforce Solutions veterans’ representative of Martin County.”
“Tom Bourgault, a Rhode Island carpenter with 40 years experience, said he was visiting Florida to care for his ailing father. ‘I could go back to Rhode Island,’ Bourgault said. ‘But there’s no work there.’”
“Mike Twiddy of Stuart was upbeat and on hand to offer a variety of skills. A veteran who has a Class A commercial driver’s license, heavy equipment experience and a background in aircraft maintenance, Twiddy said he is working temporary jobs ‘and doing about anything you can to survive.’ ‘I’ve got a lot of experience,’ Twiddy said. ‘But right now it doesn’t seem to do a lot of good. We’re all walking wounded.’”
The Gainesville Sun. “After leaving a job fair that featured far fewer employers than in recent years, University of Florida student Ashley Kohler bluntly summed up the frustration of soon-to-be graduates. ‘I want to put it on a T-shirt: It sucks to graduate right now,’ she said.”
“Florida’s unemployment rate is approaching 10 percent and the situation is nearly as dismal elsewhere. ‘This is not your standard recession,’ said Wayne Wallace, director of UF’s Career Resource Center. ‘It has seemingly crossed across all sectors of employment and geographic regions of the U.S.’”
The St Petersburg Times. “A prominent Atlanta developer headed for bankruptcy court this week, casting uncertainty over two high-end Pinellas condo projects. Water’s Edge, a $100 million high-rise in downtown Clearwater, sits nearly empty. Only 10 of 153 units have sold, a hefty drag on Clearwater’s downtown market.”
“By January 2008, Opus had contracts and down payments for 109 of the 153 units. Then disaster: A legal glitch voided all contracts. With the condo market slumping, buyers took their deposits and walked. Since Water’s Edge opened in September, only 10 condos have sold; the average unit costs $750,000.”
“Opus intends to leave the condo market. ‘It’ll be like every other property the bank takes over,’ said Clearwater developer Guy Bonneville. ‘They’ll auction it off, sell it for what they can get, and get it off their books.’”
“If that happens, it could shake up Clearwater’s condo market. A neighboring high-rise, Station Square, is also largely empty and is putting units up for rent.In St. Petersburg, Opus South has sold all but 19 of 400 Beach Drive’s 93 units. The most recent sale was last month, when a 3,306-square-foot condo went for $1.2 million. In June, a same-sized unit sold for $1.345 million.”
“A development boom is brewing under the radar of Floridians distracted by deteriorating real estate values and record foreclosures. The state is processing an unprecedented number of proposals for new homes and commercial development. If approved, these projects could pump more than 600,000 rooftops onto a market suffering from a surplus of product and slowdown in population growth.”
“Mike McDaniel, a planner at the state’s Department of Community Affairs for 22 years, finds the surge stunning. ‘Instinctively, most people would think there would be a slowdown,’ he said. ‘And it may be true at the other end, where the developers apply for the permit (to build). But there’s been no letup here. It’s a gold rush.’”
“McDaniel said landowners, eager to turn dirt into money, are behind the push for a record number of new planned communities. Regardless of whether these megaprojects become reality, the owners stand to win. ‘They want to get the land use change, strike it rich, then move off to where there are not a lot of people,’ he said.”
“But where will that leave Florida? McDaniel points to a satellite map of Flagler and St. Johns counties that shows plans for four projects totaling more than 20,000 homes and 7-million square feet of nonresidential space. ‘My jaw dropped when I saw this,’ he said. ‘Can there possibly be this much need? And is this area really suitable for this intensity of development?’”
“The planners at DCA see themselves as gatekeepers of the state’s growth management laws. Now there’s a sense inside the department that the sentries are being stormed at the gate. Florida’s legislators, eager to jump-start the economy, have proposed everything from eliminating the oversight agency to carving out exemptions for bigger and bigger sections of the state.”
“Another factor behind the deluge of requests for land use changes? Developers’ fear that the Florida Hometown Democracy amendment will pass in 2010. It would give local residents, not just municipal or county officials, the right to vote on land use changes in their neighborhoods. ‘We hear from large landowners all the time that they just want to get their property entitled before Hometown Democracy goes into effect,’ McDaniel said. ‘They say, ‘We might not do anything with this land for 50 years, but we want these entitlements now!’”
“In Gainesville, veteran economist David Denslow said he never considered the possibility that, in light of the current downturn, a glut of new projects would be under review at the DCA. When the department recently pulled together data on all major developments pending and approved since 2007, the totals were staggering: projects covering 410,126 acres, with a potential for 630,965 new homes and 479.5 million square feet of nonresidential space.”
“‘This really catches me by surprise,’ said Denslow, who is with the University of Florida’s Bureau of Economic and Business Research. ‘I’ll have to revise my thinking.’”
“Denslow fears that the behind-the-scenes gold rush will doom Florida to relive its past. His assessment: When migration to Florida picks up again, newcomers will find affordable housing aplenty. Existing Florida homeowners, on the other hand, can kiss goodbye any dreams of cashing out big on their homes.”
“‘In the 1980s, Florida had a huge increase in population but house prices, adjusted for inflation, didn’t rise at all because the state and counties had been very friendly to development,’ Denslow said. ‘Now nobody in their right mind, even an amateur flipper, could look and say that (housing) prices are going to double in the next 10 years. Prices just won’t go up all that much when you’ve got that number of projects in the pipeline.’”
“McDaniel said that if Pasco stopped approving new housing today, the county could accommodate new residents through 2035 — and still have more than 90,000 empty homes. But McDaniel has learned that open spaces in Florida, whether they’re in cattle or crops, are often treated as little more than a placeholder.”
“‘Many people seem to believe that agriculture is temporary; that someday the land will be developed for housing,’ he said, saying that kind of thinking led to the quick-flip behavior fueling the last real estate boom. ‘A lot of that is the bubble mentality.’”
The Northwest Florida Daily News. “Steve Riggs has decided to stop development of Heritage Plantation, a 1,000-acre, upscale residential and golf development 10 miles north of Crestview. Estimating his loss at $6.5 million, Riggs has turned the entire project over to BB&T, the bank that is his creditor. ‘It’s not my first failure and it probably won’t be my last,’ Riggs said. ‘I had budgeted for slow, but not for dead in the water on real estate sales.’”
“Plans called for as many as 780 upscale homes in a gated community, with a ‘buffer’ of at least 25 feet from the lot lines. Homes ranged from 1,727 square feet starting at $359,000 to 3,851 square feet starting at $693,400. But of the 297 sites in the first two phases, only 57 have been sold and four have been built.”
“‘I would have been OK with 20 to 25 lots a year,’ Riggs said. ‘But I think we sold one in all of 2008. Someone is going to make a lot of money on this project. ‘I had hoped it was going to be me, but apparently it’s going to be the next guy.’”
