‘Trend Emerging Of Motivated And Realistic Sellers’
A trio of reports on the Florida housing bubble. The Motley Fool. “Crane-counting. That’s a new game that I play with my family as we drive through downtown Miami. There are so many high-rise condominium buildings sprouting up, most of them in inexplicable places far removed from the beaches and nightlife hubs, that the one who guesses the highest number of construction cranes always winds up winning.”
“Last week, I rented a home just two minutes from the entrance to Disney World. You know it’s not a good sign when a new development is trying to sell its second phase of new homes in a community where the number of ‘For Sale’ signs and real estate agent-led open houses is exceeding the number of houses that were delivered just months ago.”
“Just down the street from the Kissimmee build-out, run-down motor lodges that failed miserably as hotels are trying to reposition themselves as condo hotels. The problem is that they’re trying to sell studio efficiencies for $125,000 or more in areas that struggled to fill rooms for $30-$40 a night in the past.”
“Did I mention that my wife and I paid less than that for a cozy three-bedroom villa with room to spare in a lively resort community just a few years ago?”
The Naples Insider. “To me the most notable event in the local real estate market is the number of of misguided sellers with outrageous pricing, and the number of listing agents accepting such listings as the normal course of doing business. Within most communities, you can have very similar properties with list prices up to 25% apart. Sure, such things as the view and other differentiators can account for some of the price difference, but not the extent of most differences.”
“For a condo with the exact same floor plan, the difference in list price between the low and the high end is 33%. The middle and highest priced units would need gold pouring out of the faucets to have a buyer consider a purchase.”
“The original list prices were often greater than highest price ever paid within the community. A belief by sellers and their listing agents that prices were escalating, while in fact they were decreasing.”
“The number of homes available for sale during July 2006 is in the 9,000 range. This is double the amount available for sale in previous years. and would suggest that Naples will be a buyers market for many years to come. A significant number of those homes are priced out of the market and can not really be taken seriously as a home, that is in good faith for sale.”
“There has been a trend emerging of motivated and realistic sellers. Some sellers have reduced pricing from an outrageous amount to just an absurd price. But others have reduced prices to year 2004 levels. A major reduction off of peak selling prices.”
“Let’s examine the group of homes that closed during the 10 day period ending July 18, 2006. Nearly all homes in this group had significant reductions off of the original list price, and some had significant reductions off the most recent asking price. In most cases it is probably a combination of the buyer getting a good deal, and the seller coming off a ridiculous asking price.”
The Bradenton Herald. “Few workers make the six-figure income needed to afford a median-priced home in Manatee and Sarasota counties, an affordable-housing coalition said Tuesday. A person needs to make at least $109,248 a year to afford a home at December’s median sales price of $322,700, the Florida Housing Coalition said.”
“Even construction managers, the two-county region’s top-paying occupation in the coalition report, don’t make enough to be able to completely mortgage a median-priced home.”
Be sure to check out the table at the bottom of the Naples realtors link to see the price reductions.
That’s exactly what is happening in my neighborhood. There are several identical homes (same builder and sq. footage) listed for $500,000-$550,000 and one home listed for $450,000. The $450k home has been sitting for two months and actually is on a premium lot. I don’t understand what the other sellers are thinking.
This is why I won’t buy in a newer (1980s+) neighborhood. “Several Identical houses….” Not to mention there is an oversupply of this type of housing which the builders are exasperating…
Yep..These homes have absolutely zero character. Square wood boxes basically.
They’re thinking the guy with the $450K listing needs a serious talking-to.
“The middle and highest priced units would need gold pouring out of the faucets to have a buyer consider a purchase.”
Classic line - BTW all the faucets and toilets in the SF Bay Area MUST have gold pouring out of them 24×7.
“Crane-counting. That’s a new game that I play with my family as we drive through downtown Miami. There are so many high-rise condominium buildings sprouting up, most of them in inexplicable places far removed from the beaches and nightlife hubs, that the one who guesses the highest number of construction cranes always winds up winning.”
I counted 17 cranes recently. Insaaaaane!!!
I’m in downtown Vancouver, BC and I can look out my window and count 5 condo cranes without moving my head.
After the BB testimony he answered some questions. One of the loser senators was obviously on the HB payroll. He was whining about how the HBs were going down hard, all the time blaming higher interest rates. I wish for the love of Pete that BB had replied: “Well senator the HBs have overbuilt and if you and your cronies would get a handle on government spending I might feel inclined to back off.”
The US congress is a bad joke.
he should offer that deal-cut spending and hold rates-seems fair
If Ben were smart he would resign right now. He will have to sit there and put up with all the bullshit that he did not create. I hope Ben will be our last Federal Reserve chairman.
I would have to assume, much like Hank Paulson, Treas. Sec., that these two men did not willingly volunteer to be where they are. I believe they were *told* to accept their positions.
Paulson may have volunteered; because he was forced to sell his Goldman holdings by taking office, he is allowed to avoid taxes on the gains. Great deal.
you forgot republican in front of congress
“Few workers make the six-figure income needed to afford a median-priced home in Manatee and Sarasota counties”
Who cares…with no-doc and stated income loans, you don’t NEED to have a high income (or any income at all for that matter). Get with the 2000’s, it’s a new paradigm.
The retirees in these areas might be screwed and have no clue yet. If the low-end workers who got sucked into suicide loans default, they are as likely as not, IMO, to move out of the area to escape the consequences of their problem. Where are the English-speaking low-wage workers to replace them?
Interesting comment from Sen Tauscher during Bernanke testimony : whether GSE’s limit on MBS’s could be raised during a housing downturn “emegency” .
See the Jim Bunning thing? Threw Bernanke a duster!
But it was a stupid thing to do.
Was that the dick that whined on and on about the stock market dropping ? Jesus, you’d think it was our god given right to have nothing but ever increasing gains in every market and damn the consequences.
PLEASE do not let “The Motley Fool” on our bandwagon! These guys were total bulls up until very recently. They pooh pooh’d the notion that there was even a bubble let alone an impending crash. “The Fool” has made (dare I say) a pauper’s fortune peddling the notion that any wino can invest with as much success as Wall Street firms. Their “bubble schmubble” attitude should not be rewarded with recognition this late in the game. Crane counting sounds like a lot of fun but many of their loyal readers have already made deposits on some of those units!
Not a big fool fan but they weren’t housing bulls really….early on they took a position that you can’t time the market and you should buy a home to live in. Hold it for the long term and you will be ok. The problem is that’s good advice for every market except for a bubble as buy-and-hold stock investors found out in 2000.
Nova,
They were pretty oblivious about the whole issue and continued to advocate owning RE long term. I suppose that’s O.K but that brand advice is so vague as to not really be advice at all. Now that things are soooo OBVIOUS it looks like they are attempting to cash in “arm chair quarterback” style and it just ticks me off. Just a quick example; buy a stock, any stock, doesn’t much matter. Buy it over time and dollar cost avg. yourself over a couple of decades. Well eventually your cost basis will be so low that you’ll be able to show a certain level of profitability no matter how poorly that stock performed. Well duh! If I throw enough turds against the wall some of them are going to start to stick. This is so typical of their “advice”. You can only get away with this in their type of format. I don’t see a lot of trusts and institutions that list the “Motley Fool” as their sub advisor and there’s a reason for that.
DinOr, I usually agree with almost everything you say, but I have to slightly disagree here.
The Fool was the first pseudo-mainstream site that I saw raise concerns about housing valuation, about 7-8 months ago.
I agree that a lot of their “advice” is wishy washy, and I also agree that their standards/value have fallen significatnly since it’s inception way back in the mid nineties…
BUT I also really like the fact that they try to analyse the situation thoroughly from multiple angles. They taught me about contrarian investing! (read their books, the first few are pretty good, although VERY basic, which is what started me on finance… especially “The Motley Fool Investment Guide”.)
I also like that they go back and critique all of their “advice” and show how it compared to various benchmarks.
The were slow to the housing bubble party, no doubt. But they’ve been running pretty bearish reports for quite a while now. ( at least 8 months) which is an ETERNITY for the mainstreamers… The first few reports weren’t saying “STAY AWAY” from housing, they were more cautionary like “hey, are we sure that housing’s that awesome?”
CLouseau
Housing Inspector Clouseau,
You are right, eight months is a long time in the MSM and I will say that have had more than a few chuckles reading their commentaries over the years. I WAS part of the Wall St. marketing machine for years so I know the folly of their ways as well and the boys take pains to bring that to light. So I’ll give them credit there. Thanks for the reality check.
DINOR - Everyone was oblivious to the issue…even this blog is only a little over a year old I believe. I think a lot of us suspected a bubble but didn’t have the data to back it up (these blogs helped a lot in that regard). As to the fool I don’t disagree with you. However, they have the same problem as the MSM in general in that they won’t take a position until that position becomes mainstream - i.e.,its ok to be wrong as long as your wrong conventionally.
NOVA fence sitter,
Again I’ll have to agree (as w/the Housing Inspector) that I was perhaps a little hasty. I will say though that I became concerned in the late 90’s when the tax code was changed from the “one time exemption” to the “every two year exemption”. So my sense of dread goes back quite a ways. You just can’t change the tax code that radically and expect rational results. I suppose their position is better than that of spin, denial and blind faith that we get from other camps.
NoVa - year and a half. Not a lot of difference, except it is 50% in a very nascent period. Ben was out in front of everyone in quality, quantity and prescience, IMO, and that is why his has been the #1 bear blog throughout. Saved my bacon.
Here are 2 examples. Again, just a few… there are several commentaries by the Fool decrying “bubble”. I would say their shift happened sometime in September of 2005. Again, LATE I agree, but WAY EARLY compared to the rest of mainstream media… just MO
clouseau:
========================
Real Estate Bubble? You Bet!
By Buck Hartzell (TMF Buck)
October 26, 2005
http://www.fool.com/news/commentary/2005/commentary05102606.htm
==========================
2nd example:
That Time of the Year
By Robert Aronen
December 20, 2005
Prediction No. 1: If you live in a “hot” housing market, 2006 will be the year that the real estate bubble begins to deflate. Being a renter in the white-hot market of Oakland, Calif., I’ve made this prediction to anyone who would listen for four years in a row. I’ve been wrong four times in a row, but I’m sure that rising interest rates will make the difference in 2006, and I am sure I will finally be right. In short, I will not be buying a house or stocks in homebuilders like Toll Brothers (NYSE: TOL), Meritage Homes (NYSE: MTH), or Hovnanian Enterprises (NYSE: HOV).
http://www.fool.com/news/commentary/2005/commentary05122005.htm
Way Early? Not really, if you search hard enough… in fact, look at how many articles using ‘house’ and ‘bubble’ are in this list (citing Boston Globe, WSJ, and other well-known newspapers): http://www.cswcasa.com/news/ … the list doesn’t appear to be intentionally bubble-oriented, but it somehow turned out that way.
Or this one which has Franklin Raines pooh-pooing the WSJ for their mid-2002 bubble coverage. http://www.findarticles.com/p/articles/mi_m1365/is_10_33/ai_100111502
I’d Google-up more examples, but suffice to say, the MF is hardly early to the party. All MF does is analyze the same stock that compose about 90% of the mutual funds in America and give trend-following advice on them.
Flat panel display sales are lower than expected. Could be a leading indicator of decline in MEW?
http://tinyurl.com/m3nc9
saw that ! I’ll bet high ticket non defense goodies are headed for the dumper
BB says it’s cool
GRENspin says get an arm loan , it will be cool
But wait, there isn’t a flat panel bubble. Sony&Samsung just anounced anouther LCD factory… You know prices will only go up, buy buy buy!!!
press release on the new Sony/Samsung $1.9 Billion factory:
http://neasia.nikkeibp.com/dailynewsdetail/004696
Seriously, this is great news. My siblings and I will be buying my parents a flat panel for Christmas. But wait… I’m “not a player” unless I’m in the market now.
Seriously, I expect Christmas to be ok, but with a drop in “luxury vacations” and big ticket items (like these TV’s).
50″ LCD HDTV’s for everyone!
Neil
Suze Orman is another one of those so-called financial “experts” (hah!) that recently switched gears and has started advising AGAINST buying a house in bubbly areas like California.
When I sold my house late last year, I caught an episode where she was telling some cash-strapped single mom in CA that she needed to buy a house because it was the best investment. A few weeks ago, when a caller from the Los Angeles area said that he wanted to buy a house, Suze snapped “Why buy a house now? Appreciation is going nowhere!”
Funny how these people are just realizing the obvious–things people on this blog saw in the making years ago.
My read on her advice is totally different. She does not advertise herself as an expert as much as someone with some common sense ideas in a setting that could use more of that. Most of her positive talk about owning compared long term rental situations and touched on retirement. This has to do with general financial planning, and no one who listened to her advice would have been buying in bubble areas. Sounds like you are another one of those so-called advice “experts” that makes snap judgements instead of really investigating things.
Can anybody tell me about Leesburg, Fl. My mom moved from there in 2000 and would be interested to know about the market in that area. I believe the developement was called ‘Highland Knowls’.
My parents live in the Villages near Leesburg. I don’t know the particular area your mom lives, but I think most of that area should fair okay. Prices did go up, but not to insane levels. There are quite a few for sale and rent in the paper. However, this is a retirement mecca. Many come and rent for 4 months in the winter. People go into nursing homes…… They will probably experience slowdown, but not a full blown crash! My parents don’t know of any flippers. Most of their neighbors live there year round and there are no houses for sale for several blocks.
It’s an area that will get hammered in the FL real estate meltdown. Why? There is NOTHING there except retirement housing. North-central Florida is just as overvalued (or more, depending on the data) as the rest of the state.
Clermont (Leesburg’s sister city) will be devastated. It has the reputation of being the yuppie Orlando suburb that will be devastated with $4/gal gas, loss of jobs, and loss of retirees moving due to inflated costs. Granted, Clermont is beautiful (real hills) but it’s future is staked on yuppism (wineries, shopping) that will soon be out of vouge.
“Clermont is beautiful (real hills) but it’s future is staked on yuppism (wineries, shopping) that will soon be out of vouge.”
I think this is true. When I was a kid, Clermont was a place to go on a weekend. In recent years, my wife and I looked out there as a way to get away from the congestion of Orlando. But it is waaay outside of central Orlando and you have to get onto clogged 27 or the way-out turnpie to get anywhere. Forget Route 50. I hadn’t thought of it again before this post of Moman’s, but that area could be valuation-toast with a double-whammy of $4 gas and the RE market tanking.
lumber is off 38% anyone have a line on granite
…..anyone have a line on granite
I heard they’re not making anymore of it.
Oh, they are making more….just VERRRRY slowly.
“A person needs to make at least $109,248 a year to afford a home at December’s median sales price of $322,700, the Florida Housing Coalition said.”
My Lord, what does it take in California then? $200K a year at least? Do they really have that much money there? Do CA people have gold dubloons coming out every time they go to the bathroom or something?
Nope. Just blind faith in appreciation and interest only loans.
I am pretty sure I do. You are more than welcome to come over each morning around 6:30am and mine for some.
What they didn’t say is, the median salary in Sarasota is about 32,000 a year. Teachers make about 40,000; police less. Salaries in bradenton are equal or slightly less.
CA does not make 200K per yr (except the very few rich). They just have been pretending to be rich from the HELOC, CC, and other fucked methods. Smart people are leaving in droves. Let the Governator save the day.
I agree with need 2 leave. I am also trying to high tail it out of socal. Does anyone have any info on North Carolina housing etc?
North Carolina is a beautiful state. Reileigh and Charlotte are very reasonable compared to socal. The western part of the state by the smokey mountains is goregous.
Um not everybody is leaving. I’ll stay, and I’ll buy when prices return to long term trends, perhaps a tad below.
Motley Fool to which I am a subscriber was later than the blogs to the RE overpriced party, but they were WAY before any other outlet that I have read, excepting maybe the Economist.
Even when prices do come down, housing in SoCal is always going to be expensive because lets face it, its still a nice place to live. Nicer than Florida anyday, twice on Sunday. I would also like to ask about the exasperated comparison of median income to median price, since when have they correlated? Its been my observation at least here is San Diego, that median income earners never own a home let alone the median priced one.
Nice place to live or not, California housing could become quite cheap again. My wife and I purchased a home (over 2400 sq ft, pool, 6000 sq ft lot)in Belmont Heights, in 1997, for $290,000.00. it was located on Park Avenue between Third and Colorado. It was a short sale. The bank ate $20,000.00 on lost rent, taxes and fines that hadn’t been paid for almost a year. After we moved in the mailman told me that the same home sold in the $400,000.00 during the late 80’s. I politely shook my head in the affirmative. However, when I shared this information with my wife we both laughed.
Even when prices do come down, housing in SoCal is always going to be expensive because lets face it, its still a nice place to live. Nicer than Florida anyday, twice on Sunday.
I agree SoCal (and NoCal) will always be expensive relative to other places –even post-bubble– but it’s not due to it being so much “nicer” than anyplace else in the U.S. It has everything to do with the NURB/NIMBY anti-development activists, insanely high “just because we can” local fees slapped onto every new project (above $100K per unit in some cities), and much higher population densities than in most other states.
As fas as “nice” goes, CA’s nowhere near as nice as it was when I grew up here in the 70’s and is getting perceptibly “less nice” by the minute. Just try going anywhere in L.A. County in the daytime on any day of the week and you’ll see what I mean. Crowding and pollution on the West side & SGV is starting to approach Mexico City levels (given where many of the new ‘residents’ are from, this is no coincidence). Oh, yes, I forgot about all those “lovely” CA beaches: http://news.yahoo.com/s/ap/20060719/ap_on_sc/beach_bacteria
This place is fast becoming a third-world toilet, with wages, income disparity & living standards to match. About the only thing CA still has going for it is so-so weather (I don’t consider 90-110 degree heat nearly half the year to be exceptionally “good” weather), great restaurants and Yosemite. And Yosemite is now regularly getting air pollution from Fresno.
Can I be around to watch when your head explodes?
You hate the laws people enact to try to maintain their quality of life by keeping out the hordes AND you hate the hordes?
Cognitive dissonance much?
“Motley Fool to which I am a subscriber was later than the blogs to the RE overpriced party, but they were WAY before any other outlet that I have read, excepting maybe the Economist.”
Their cover with the falling brick labeled “HOUSE PRICES” was June 18-24, 2005, in which they stated that “it looks like the biggest bubble in history” (p. 66). They started printing global house price indices back in 2002, and were warning of an overheated market not long after that–they were a bit early.
My own first warning in a public forum was Sep. 9, 2004 in the az.general newsgroup (”I’d be surprised if we don’t see a real estate bubble pop in the next year or two.”). I’m glad I added the “or two.”
“Even construction managers, the two-county region’s top-paying occupation in the coalition report, don’t make enough to be able to completely mortgage a median-priced home.”
So, the highest paid profession is in construction. I think I would learn the skills for the 2nd top paid job. The top jobs are on the chopping block.
My Guess:
2nd: Mortgage Broker
3rd: Home Appraiser
4th: RE Agent
Give broker Tom Doyle of Naples Insider some credit. He’s at least honest and sane about the housing market. If I’m a buyer in Naples, he’s the guy I’m going to go to. Level-headed brokers who look after their clients seem far and few between. He’s the type of guy who won’t do well in the short term, but he’s building a sustainable business by his credibility, if nothing else.
JMHO
DK - good luck in NC. I agree that CA will always be higher than other places, and in the future may offer good values if and when it does overcorrect. I will look at that in the future, but will stay living in New Mexico. It is providing a better quality of life for my family. I know many people will stay there, and I will always have many friends to visit there.
Sheeple still buying here in Tucson AZ but i’m happily renting, hope the rent doesn’t go up too much or I wont be so happy. (Could have bought whree i rent, a 1234sf townhome, no garage, in Oct’04 for $150k but declined because I had just gotten laid off from Gateway in April’04)
Zillow shows value up to $200k+ but everytime it rains the roof leaks (built in ‘99 for $90K) even though the landlord ‘fixed’ it twice. Still halfway kicking myself but it would been one of the 5 year ARM deals and I didnt feel right knowing i was unemployed. Anybody have any thoughts on this? The market here just keeps going up and now we are #7 on Forbes list of most unafforable places to live but #102 out of 112 for lowest wages. I feel like i missed out on a LOT of appreciation.
Thanks need 2 leave. I am just tired of the traffice etc. Looking for a slower pace of life. I was able to get out of the market with my shirt on my back and don’t plan on getting back in. Also the wife has family in nc. I know many californians that are moving to the south and Texas. Weather is great in socal but not worth all the problems.