Making Money Off Mass Delusion
The Sun Sentinel reports from Florida. “Some buyers are solving their house-searching woes through prose. They’re not writing poems or romantic novels — just notes to sellers, telling them how happy they’d be to buy their homes. Writing a letter probably is one of the easiest things buyers have to do to land a home these days, said Samantha DeBianchi, a Fort Lauderdale real estate agent. Sometimes even pets are part of the deal. One of DeBianchi’s clients had to adopt the seller’s cat as part of the purchase. The client was a dog owner, but she agreed to the deal. ‘This is just how it is,’ DeBianchi said. ‘Sellers are completely in control.’”
“Rick Rapp, a real estate agent in Broward and Palm Beach counties, said a client made at least 10 offers at or above the asking price, but all were rejected for being too low. Investment firms are driving up prices by paying 20 to 25 percent higher than the list price, Rapp said. His client finally closed on a three-bedroom home for $238,000, but even that deal was in jeopardy. The seller, an investor, had a better offer and wanted out of the contract, but Rapp refused.”
“‘This reminds me of 2005,’ said Rapp, of Travers Miran Realty. ‘The bubble is coming.’”
The Miami Herald. “Jacque and Stephan McLean, who have been house-hunting near Miramar since December, have submitted five offers, all in vain. The McLeans, who are renting a home, plan to make a 20-percent down payment and get a conventional mortgage for the rest. ‘The last offer was $20,000 more than the listing price and we still didn’t get it,’ said Jacque McLean. ‘There is a lot of greed going on. We’re going right back to what happened in 2006 and 2007 in Florida.’”
The Tampa Bay Times. “‘Lots of times we run into people who already lost out on one or two deals and are now incredibly motivated to purchase,’ Keller Williams agent Lonnie Orns said. Added Re/Max Bay to Bay agent Rae Catanese: Buyers ‘can make an offer within an hour, but even that’s no guarantee.’”
“‘Every time something comes on the market and it’s decent, there’s instantly five or six other offers,’ broker Melody Stang said. ‘It’s hard for the buyers to really find a decent house. … It feels like 2003 to me, all over again.’”
The Herald Tribune. “Some contend that these investors are overpaying for their Southwest Florida holdings. Some critics contend that will come back to haunt them, or whoever ends up eventually taking ownership of these properties in the next generation of sales. ‘We have never seen hedge funds and large companies dominating the real estate market like this before,’ Jack McCabe, a real estate consultant in Deerfield Beach who correctly predicted the bust, lamented in our April report on regional home sales. ‘These companies are involved in 70 percent or more of recent sales — many of them at artificially inflated prices.’”
The News Journal. “Volusia Property Appraiser Morgan Gilreath released a rosy pre-preliminary tax roll estimate that showed the area’s property values increasing to the tune of more than $800 million this year. ‘If someone is interested in purchasing real estate in Volusia County, they’re already a little bit late,’ Gilreath said Thursday after releasing the early numbers. ‘Because the market has started to go back up. They missed the swing a little bit. If they’re interested here, they might want to talk to a Realtor ASAP.’”
“‘We still have a lot of foreclosures out there,’ he said. ‘The percentage of bank-owned transactions is about 10 percent. A typical year is about 1 percent. So we don’t have a normal market yet, and until other signs of normality start showing up, it’s not going to be a truly normal market. It’s just acting like one now.’”
“City officials would like a recount, please. They’re skeptical of Property Appraiser Mike Wells’ figures showing the property values in New Port Richey fell another 4.2 percent this past year, even as the county remained flat and a couple other cities saw an uptick in value. Wells told the Times he sticks by his numbers. The city has old and deteriorating housing stock, especially along U.S. 19, he said, and New Port Richey lost its biggest taxpayer last year when Community Hospital moved to the Medical Center of Trinity campus outside of town.”
“‘The fact of the matter is the city has very little growth right now,’ Wells added. ‘If you combine it all, that’s the reason for our assessed value.’”
The Palm Beach Post. “In Florida, the more than $1 billion Hardest Hit program has been operating for two years, awarding struggling borrowers 12 months of mortgage payments and between $18,000 and $24,000 to bring a mortgage current. But some homeowners exiting the program are finding themselves still in debt and on the same path to foreclosure after their lender subtracted legal costs from the Hardest Hit stipend. ‘Those are the credit union’s expenses, not mine,’ said Sandra Morales, about the court costs included in her arrearage by Florida Central Credit Union.”
“In 2005, after the death of her husband, Morales refinanced to a five-year balloon mortgage believing she would sell the home and downsize. Then the real estate market crashed. ‘I wish I had never done that,’ she said about her refinance.”
The Orlando Sentinel. “Orlando resident Jose Polanco considered himself lucky when he was one of the few chosen to receive mortgage assistance from Florida’s billion-dollar Hardest Hit Fund. The unemployed computer-repair technician said he is thankful the program recently began paying his $1,617-a-month mortgage. But when his slice of assistance runs out later this year or early next, he will still be left with a $350,000 mortgage on a house now worth about $190,000.”
“‘We’re looking for the bank to reduce the principal,’ said Polanco. ‘If the funds for the principal come from the Hardest Hit fund, I don’t care. If the money comes from heaven or wherever, I don’t care. Just drop down the amount to the point where it reflects the real amount that the house is worth.’”
“The unemployed father of two said he looks for jobs daily and would like to stay in his neighborhood, but it will be difficult to find a job making the kind of earnings he made back when he bought his home. At that time, at the height of the homebuying frenzy, he was selling condominiums.”
“Apparently, house flipping is once again the cool thing to do in Orlando – the clever man’s way to easy cash. RealtyTrac recently reported that last year Central Florida was the most profitable market in the country for flippers. My finely tuned sense of financial paranoia can find little good news in this. Couldn’t we all just curl up with a drink and breathe for a bit before jumping into bed with some ‘can’t-miss’ deal on a ‘cozy 3 bdr. 2 ba. with lots of potential?’ Who’s up for a little ’steady as she goes?’”
“If the Great Recession taught us anything, shouldn’t it be that house flipping is not for the faint of heart – or anyone short of disposable cash? It’s the real-estate version of golf. It looks easy when you watch it on TV, but in reality, it can claim your sanity and your fortune. Of course, it’s easy to lose sight of that when you’re drunk on home values that seem to know only one direction. And much of Central Florida was pretty snockered before the bottom fell out.”
“The upside to all this is that real-estate investors – big or small – tend to have more stomach for the risk involved. The downside is that their willingness to burn cash can cause the market to overheat. Right now, no one seems overly concerned by that because their presence has helped clear out some inventory and boost home values. But if the market is going to fully heal, we’ll have to hit that sweet spot where prices make sense, credit is available and flippers make money off solid investments, not mass delusion.”
