Value Is In Vogue In Florida
A report from Florida Today. “The man was a truck driver. And his woman companion worked from the house. That was what the Realtor told the Satellite Beach couple about the new renters in their Palm Drive house. In late 2008, owners Kathleen Burgess and Ibrahim Yalcinsoy had moved to Marble, N.C. It was May by the time the Realtor found the renters. The seemingly quiet couple paid their rent on time. They seldom made contact with neighbors. On Dec. 17, the landlord and neighbors found out…they had allegedly been operating a marijuana grow house out of the four-bedroom residence.”
“Burgess said she is angry, and feels helpless by the financial strain. She is not sure if their insurance will pay for the damage. The owners of the Satellite Beach house said damage to their property was about $60,000. ‘They even dug into the foundation of the house to put pipes and wires in,’ Burgess said.”
The Palm Beach Post. “Living in a Singer Island condominium might provide you with a lush lifestyle and a load of top-notch amenities. But you’re not guaranteed heat. Amid one of the longest-lasting cold fronts ever to hit Palm Beach County, condo residents are suffering heat outages, and in some cases learning they don’t have a heating system at all.”
“That’s the case at the Connemara, a Singer Island condo building that never installed a boiler system when its cooling tower was put in place seven years ago. 69-year-old Suzanne Harding said her heater hasn’t worked in days. She said the condo manager has provided few answers. Harding said management told her to buy a space heater, which she considers a safety hazard.”
“Property manager Melody Cook said condos at Connemara were dipping down to 57 degrees. Cook said she directed her residents to purchase space heaters. She said she wasn’t at the condo seven years ago when the board decided against a boiler system, but that it needs a heating system. ‘I feel for the people that have come from a really cold climate to come down here, when they could be home up north with heat,’ property manager Melody Cook said.”
“While the real estate boom spurred 9,000-square-foot single-family homes, the bust has born new models from luxury builders advertised as opulent, yet ‘efficient’ — read slightly smaller, less bling. ‘What happened in 2004, 2005, and 2006, it was all about the bigger the better, that was the mantra,’ said Ken Endelson, chairman of Kenco Communities. ‘We started out in 2003 building houses that were 4,700 square feet, 5,500 square feet. Then, three years later, people wanted 6,000 feet plus.’”
“Nationwide, builders say they are trying to cater to post-recession buyers who still want luxury, but at a discount. A survey released last year by the National Association of Home Builders found that nearly 90 percent of builders are designing smaller homes in response to requests from architects and consumers.”
“They can’t just wipe out luxury elements altogether. For example, Toll Brothers’ new designs may still have stately columns, but they’ll be high-impact foam instead of stone. ‘The market is very wise,’ said Ron Blum, Toll Brothers’ senior vice president, Southeast Florida division. ‘The type of home we’ve designed now is inexpensive to build, and that brings us to a marketplace where we can reach more people.’”
“‘There’s a whole new economic reality and people are much more pragmatic,’ said Scott Agran, president of Boca Raton-based Lang Realty. ‘Builders don’t have a choice but to redesign. They can’t ask for $5 million anymore.’”
The Herald Tribune. “Many of the area’s real estate professionals have been issuing their predictions on whether the Sarasota-Bradenton housing market will see any heat in 2010. The second half of this year, in particular, could be difficult, said Michael Moulton, an agent with Michael Saunders & Company’s Longboat Key office, when government incentives begin to disappear and the potential for another wave of foreclosures looms large. The result? Continued price declines ahead.”
“‘Unlike many, we do not believe we are finished with the downward pressure on prices. In most price points, inventory is still strong and with a ’shadow inventory’ estimated at over 1.5 million properties (at all different price points) about to hit the market, we can still see prices having another 10-15 percent to fall,’ he wrote. ‘Though demand will be strong for the first 120 days of 2010, it could be dwarfed by the surge of properties coming to the market. And a high percentage of that inventory will be at discounted prices.’”
“Buyer of commercial real estate were as scarce as polar bears in 2009 and agents are not optimistic about a return to buying in 2010. ‘We’re hearing 2010 will be a tough year,’ said Renee Richardson Kling, an agent in Sarasota. ‘We’re hoping that because housing is starting to bounce back that people will be more positive, take more risks and start new businesses. But we’re not seeing much of that right now.’”
“Sales in 2009 brought in only $99.8 million — 59 percent less than the $242.8 million generated the year before. There was a 94 percent drop in the dollar volume of bank branch sales, an 86 percent drop in the dollar volume of restaurant sales and an 85 percent drop in the dollar volume of vacant commercial land sales.”
“‘It was a year to forget,’ said Ian Black, who runs a Sarasota-based commercial real estate agency. ‘Buyers are concerned about paying the right price. As they are under no pressure, because supply exceeds demand, they can take their time.’”
“‘We have over 12 percent unemployment in Sarasota and Manatee counties, and that had significant impact on all commercial sectors,’ said John Harshman, another Sarasota commercial real estate broker. ‘We see the trickle down everywhere. Businesses that offer elective medical procedures and therapy — everyone from massage therapists to dentists — are feeling it.’”
“‘We are seeing many banks flush with raw land and no one wants to buy it,’ Harshman said.”
“The foreclosure phenomena is creating severe financial problems for condominium associations across Florida, but none has been hit harder than the Condominiums at Waterside near Englewood in Charlotte County. Three out of four buyers in the 42-unit complex walked away from their mortgages, leaving just six owners to cover $8,000 in monthly expenses and a $16,000 annual insurance bill.’
“‘If it wasn’t for Charlie, Waterside would be an abandoned shell now,’ said Steven Haber, a board member of the Condominiums at Waterside Inc. homeowners association. Haber said Bray took command at the 3-year-old complex as the unpaid bills piled up. In one case, Bray shelled out $1,800 of his own money to keep the water on. In another, he got rid of a transient who had moved into one of the vacant units.”
“For his efforts, Bray initially received $60 a month — $10 from each of the six remaining condo owners — and a promise he would be Waterside’s exclusive rental agent as things recover and it came time to sell some of the units. In the meantime, Bray has filled 16 units with renters, and has received a modest bump in pay of $15 per unit.”
“‘I already had a couple units out there I was renting for people, so I knew the project and I saw the potential there,’ Bray said. ‘I wanted to get in on the ground floor and make it flourish. If I work hard, I hope to rent all of the 42 units in a few years. My hope is everyone will make some money on their purchase eventually.’”
“Foreclosures are hitting Florida’s condominium communities hard — so hard that Fannie Mae has decided to relax some of its lending rules for condo buyers to help restimulate the market. Fannie Mae is sending a team of six mortgage experts into South Florida to reassess ‘hundreds of condo projects’ to see if it can make exceptions to its lending rules, granting a special status designation to allow “lenders to originate and deliver mortgage loans secured by units in these projects to Fannie Mae,” the housing lending giant said in a news release.”
“‘This new initiative is geared toward providing maximum support for Florida’s distressed condo market as we continue to provide liquidity to the housing market more broadly,’ said Karen Pallotta, executive vice president Single Family Mortgage Business. ‘The state’s condo market has been particularly hard hit by the housing downturn and we’re working with the industry and our partners to do all we can to stabilize the market and help spur recovery.’”
“Banks don’t pay maintenance fees and upkeep on foreclosed properties they own, forcing the people who are making their mortgage payments pick up the slack on costs or defer major repairs. It’s the single most important issue facing condominium associations, said Gary Poliakoff, a Melbourne attorney who founded Community Association Leadership Lobby, whether they will survive the economic stress caused by the large number of unit owners and banks not paying assessments, ‘forcing the other unit owner to pick up the bad debt which in some communities is 40-50 percent of the budget.’”
The News Press. “Lloyd Mandel says he fulfilled his part of a bargain with SunTrust Bank: He built a strip mall in south Fort Myers, and leased out most of it. Now Mandel wants to convert his construction loan to a mortgage at the rate agreed upon two years ago when the project got started. But, he says, SunTrust won’t honor the deal, citing various ‘outs’ in the contract such as a drop in the value of the property.”
“If banks start exercising their rights on a large scale to get out of agreements to lend, Mandel said, ‘no piece of commercial property in Lee County is safe if it’s got a mortgage on it.’”
“‘Since mid-November, I bet I’ve had a dozen people call recounting similar fact patterns across the Southeast,’ said Jack Williams, a bankruptcy professor at Georgia State University. ‘The story unfortunately isn’t new to me. I think it’s an indication of things to come.’”
The St Petersburg Times. “Tampa Bay housing starts spiraled to a new low in 2009. Builders broke ground last year on 3,545 homes in Hillsborough, Pasco, Pinellas and Hernando counties. That’s an 83 percent dive from the 21,438 housing starts in the supercharged real estate year of 2005. The previous low was 4,721 in 2008.”
“Tony Polito, housing consultant with Tampa’s Metrostudy, predicted 2010 would be ,marginally better” than 2009. But Tampa Bay’s 12.3 percent unemployment rate is doing builders no favors. ‘All this is smoke and mirrors if we don’t get job growth,’ Polito said.”
“Mortgage borrowing remains a problem. That has forced builders to slash prices. Taylor Morrison, for example, is selling 1,300-square-foot stand-alone houses in Ruskin’s College Chase neighborhood for $99,000, a price not seen in about a decade.”
The News Journal. “The collapse of the country’s housing market and the associated nationwide recession combined to eliminate more than 800,000 jobs in Florida and prevent retirees in other states from selling their homes and moving here, experts say. And those factors slowed, and may have reversed, the state’s population growth.”
“Stanley K. Smith, program director for population studies at the University of Florida’s Bureau of Economic and Business Research, said migration slowed significantly, beginning in 2007. ‘From 2002 through 2006, we had some of the largest population increases ever. We gained about 400,000 a year,’ Smith said.”
“But in 2008 and ‘09, he estimated, the state population probably fell.”
“When Steve Prielozny, head of Bank of Belle Glade , calls his approach ‘conservative’ and ’stick to the basics,’ he’s probably proffering an accurate self-description. The little bank has hefty capital ratios. It’s reporting a profit. And it’s the only financial institution based in Palm Beach County and the Treasure Coast to receive a five-star rating from BauerFinancial for the third quarter.”
“Ask Prielozny for an explanation, and he first credits his customers. When pressed, he describes Bank of Belle Glade’s strategy of relationship banking and its scrutiny of loan applications. ‘We don’t take any real chances if it’s a marginal deal,’ Prielozny said.”
“Bank of Belle Glade is one of only three five-star banks on The Palm Beach Post’s list of 72 institutions that take deposits in the region. Only two years ago, our list counted 14 five-star banks. Since then, downgrades have been the rule. More than a dozen banks on our list became less safe in the third quarter, according to BauerFinancial.”
“Prielozny predicted further fallout. ‘I’m not sure the banking industry has hit bottom yet,’ he said.”
The Orlando Sentinel. “Last year at this time, glum-faced analysts predicted that unemployment in Florida could reach 8.3 percent by the end of 2009. How quaint.”
“As tens of thousands of workers discovered, those estimates were wildly optimistic. The state blew past 8.3 percent by February, on its way to a jobless rate of 11.5 percent in November. In the last two-and-a-half years, more than 736,000 jobs have been lost to the worst recession in 70 years.”
“‘Very difficult choices lay ahead,’ said Sean Snaith, an economist with the University of Central Florida. ‘The new lower rates of population growth are a game-changer.’”
“Short sales and foreclosures continue to clog inventory and will do so for the rest of 2010. Developments planned during the boom will be shelved for years and some will never get built. UCF’s latest projections describe a ‘doggedly persistent surplus of housing’ that will depress prices and new construction. Snaith predicts housing starts won’t recover to 2001 levels until 2013. Homeowners, meanwhile, can only wait until the market finds equilibrium and bottoms out for good.”
“Economists call that process tatonnement, a French word that literally translates as ‘groping.’ To Florida homeowners, said Snaith, the process will feel ‘more like molestation.’”
“Central Florida’s tourism officials anticipate only slightly better treatment in 2010. The rebound is good news, but it may be offset by bargain prices. Travelers — both business and leisure — are still wary about the economy and focused on saving money. So they’ll be looking for deals, pitting airlines, rental car companies and hotels against one another.”
“‘Value is in vogue,’ said local travel-business expert Peter Yesawich.”
“Condominiums and high-end homes, particularly in remote locations, will likely be the last housing type to recover from the slump in Central Florida, experts predict. Not everything is expected to recover at the same pace. Poorly situated condos and luxury homes will likely trail the rest of the market, said Randy Anderson, a University of Central Florida real estate professor, who specializes in commercial but follows residential.”
“‘People were trying to turn Class B and C apartments in places that were not meant for ownership, simply because the financing was there,’ he said. ‘You have to get prices down to … where they make sense as a rental.’”
“Among the problems that have contributed to the downfall of condo prices in the market — from a median of about $114,000 in the third quarter of 2008 to $50,000 a year later — are the legal issues involved when investors consider purchasing units in ‘fractured deals,’ where units were originally offered for sale but then transitioned into rental units. He described it as ‘a lot of brain damage involved in turning those projects.’”
“At present, Anderson said, a lot of condo owners are renting their units for a fraction of their monthly mortgage payments, and that’s not a sustainable plan.”
The Sun Sentinel. “Homeowners stuck while banks mull whether or not to approve short sales could benefit from new federal guidelines that give lenders a 10-day limit to respond to offers. The rules from the U.S. Treasury, which also allow for financial incentives to sellers and lenders, likely will figure prominently in South Florida, as the housing slump meanders into a fifth year.”
“The 83 loan servicers participating in the Obama Administration’s Home Affordable Modification Program, including Bank of America and JPMorgan Chase, are required to follow these guidelines for all borrowers who request short sales or who did not complete loan modifications. The rules do not specifically apply to loans guaranteed by Fannie Mae or Freddie Mac, which represent about half of all U.S. mortgage debt. The two government-run mortgage companies are working to finalize their own guidelines.”
“The Treasury plan, which must be implemented by lenders no later than April, is meant to help sellers like Dawn Sclafani, who has been waiting since October for her lender to approve a short sale offer on her Margate home. A buyer has offered $155,000, and she owes $233,000. Sclafani said she’s eager for the bank to approve the deal so she can put the experience behind her.”
“‘I want to move on … but I can’t until somebody gives me permission to,’ she said. ‘I’ve heard that this is a horrendous process. The banks are just not very cooperative. I do believe these new rules will help.’”
“The $3,000 cap on short sale proceeds is not sitting well with second lien holders, who have been demanding more money from sellers, the first lenders and real estate agents in exchange for releasing their claims and allowing the short sales to proceed. ‘This is a great program if all these mortgages had only one lien holder,’ said Travis Hamel Olsen, chief operating officer for a company that helps lenders complete short sales. ‘But many of these properties have two liens.’”
“Meanwhile, some local real estate agents remain skeptical of the guidelines. Broward County agent Ron Rosen said he thinks ‘the banks will still play their little games with people and make life difficult for everyone.’ Edward Goldfarb of RE/MAX PowerPro Realty in Davie doubts the Treasury will enforce the new rules. ‘There’s no teeth to them,’ he said.”
