June 19, 2014

The Greed Factor Is Starting To Kick In

CBS 12 reports from Florida. “The number of homes snapped up for $1 million or more in Palm Beach County rose in the first quarter of this year by 16 percent from the same quarter a year ago. In the past month, philanthropist Lois Pope paid $16.2 million for an ocean-to-Intracoastal mansion in Manalapan. The seller was Amway co-founder Richard DeVos. While $1-million-plus sales are surging, buyers are still discriminating, brokers say. Pope, for instance, paid nearly $4 million less than DeVos was asking earlier this year.”

The Sun Sentinel. “In Fort Lauderdale, Eric Roach, co-founder of the social media platform EveryoneSocial, spent $4.6 million for a home built on ’spec,’ without a buyer in place. The Del Lago estate sold for about $2 million less than the asking price from last year. ‘Everybody feels we’re undervalued on the luxury end,’ said Ron Shuffield, broker with EWM Realty International. ‘Many of these homes are selling far below the cost of replacing them.’”

From Equipment World. “According to the three panelists on a contractor panel held last week at Flagler Construction Equipment, construction has picked up in Florida. ‘There’s a lot of commercial and residential construction going on,’ says Rich Fuist, director of fleet operations for civil and utility contractor Ripa and Associates, Tampa. Cautions Don Woodruff, president, Woodruff & Sons, an underground utility and highway contractor: ‘There’s still a lot of housing available out there.’”

The News Journal. “Bob Fitzsimmons, president of the Volusia Building Industry Association, said the sales of new homes locally appear to have leveled off in recent months. ‘I had a flurry of sales in the middle of March from the parade, but it was a spike I was not able to maintain,’ said Fitzsimmons.”

“In the first five months of 2014, permits for new homes are up nearly 40 percent in Volusia compared with the same period last year, according to the association. Builders in Flagler County received 209 permits for new homes in the first five months of this year, up 33 percent from 157 during the same period last year. Fitzsimmons said local building permit numbers are up significantly so far this year thanks in part to an increase in ’spec building’ by national builders such as KB Home and D.R. Horton.”

The Naples News. “While prices in Southwest Florida are nowhere near the inflated prices they reached during the top of the housing boom, some real estate experts are worried a bubble is starting to inflate. Flippers, more lax lending standards, a pervasive inventory shortage, and a growing lack of affordability are to blame, they said. ‘It’s a harbinger of a bubble,’ said Daren Blomquist, VP of RealtyTrac.”

“He notes that in April, overall median prices were below peak prices during the housing boom, but still have risen considerably from their recessionary lows in 2010. Including single-family, condos and townhouses, prices in Collier County were up 60 percent from their trough, to $240,000. In Lee, they rose a whopping 90 percent, to $142,500. ‘It’s a warning flag,’ Blomquist said. ‘Properties are not necessarily selling for what people can pay.’”

“Naples real estate appraiser Tim O’Neill also has heard of investors who have purchased in this area flipping homes to each other, to bring up the values of their portfolios. ‘They’re falsely inflating prices,’ he said. ‘It’s a problem — and what happened leading up to the last boom. The whole greed factor is starting to kick in. We’re suffering from short-term memory loss.’ Lenders also are loosening guidelines as to who they will lend to, he said. ‘It resembles a lot of what was going on in 2005 and 2006,’ he said.”

“Naples real estate appraiser Tricia Eriksson said that overall, prices in the county have risen so much ‘we’ve already had a small bubble.’ FreddieMac chief economist Frank Nothaft said while he doesn’t think a housing bubble is imminent on a national level, in some markets, home price increases are ‘unsustainable.’ ‘Increases we have seen so far are eye-popping,’ he said.”

The Herald Tribune. “A total of 39,782 residential properties — or 22 percent with mortgages in Sarasota and Manatee counties — carried more debt than the homes were worth in the first quarter of 2014, according to CoreLogic. In Sarasota and Manatee counties, another 5,108 homes, or 2.8 percent, were ‘near negative’ equity in the first quarter. Tampa-St. Petersburg-Clearwater had the highest percentage of mortgaged properties in negative equity at 29.5 percent.”

“‘Despite the massive improvement in prices and reduction in negative equity over the last few years, many borrowers still lack sufficient equity to move and purchase a home,’ said Sam Khater, deputy chief economist for CoreLogic.”

The Palm Beach Post. “Owners in a Boynton Beach condominium community are suing a company that is trying to turn the development into apartments, saying they were ‘threatened’ and told that they should sell to the company or lose their homes no matter what. Via Lugano, which suffered huge drops in property values after the real estate bust, now has 90 percent of its units owned by Northland Investment Corp. A state condo termination law gives the company the ability to turn the units back into apartments, but it must offer fair market value to owners or give them a share of the new converted complex in exchange for their units.”

“Many of the remaining owners bought their units at boom-time prices, meaning if they sold for fair market value, they could owe deficiencies to their bank. Dale Domanick, who is named in the suit, paid $313,900 in 2006 for her unit. In 2013, its total market value was $74,000. ‘Now we feel like our homes are being stolen from us, like we’re not even living in America,’ Domanick told The Post last year.”

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