‘Builders Combat Lethargy’ In Florida
Some housing bubble reports from Florida. “Incomes throughout Florida have failed to keep pace with runaway home prices. Since 2003, median home prices in Florida have soared 77 percent as the real estate boom swept the state, but incomes grew a meager 1.4 percent. One West Palm Beach man doesn’t have to read Tuesday’s report, called ‘Florida Priced Out’ — he’s living it.”
“Jamie Dryer, a 48-year-old consultant, is also an experienced securities broker and a former budget adviser to President Ronald Reagan. ‘I am surprised at the lack of outrage by the voting public, and especially businesses, which will suffer unless something is done,’ Dryer said Tuesday. ‘It’s unacceptable.’”
The Palm Beach Post. “Following a year in which local builders couldn’t build fast enough to keep up with demand, new-home sales are slowing and cancellations are rising. The shift is prompting builders to offer everything from status automobiles to free granite countertops, stainless steel refrigerators, cash incentives and discounts.”
“‘Hurry Home One Day Sale!’ shouts an ad in Wednesday’s newspaper by giant home builder Lennar Corp. ‘Buy a home on Saturday, July 22, and claim your share of the 8 million dollars being given away! Any reasonable offer will be accepted!’ Looking more like a Macy’s end-of-season clearance sale than a typical real estate ad, it also offers special financing and ‘food, fun and amazing savings!’”
“But a leading new-home expert says buyers expecting to be handed a million dollars are going to be disappointed. ‘Lennar is not giving $8 million away,’ Bill Hall says emphatically. ‘They’re a public company and their stockholders would go ballistic.’”
“‘Builders are trying to combat a lethargy that’s probably caused by people being afraid of buying a house today and finding out the same house is priced less in two months,’ said housing economist Bradley Hunter. ‘Lennar is basically saying ‘make an offer,’ figuring that’s a good way to make people feel comfortable that they can get a good deal.’”
“Buyers are not going to see prices tumble, said Hall. ‘Builders might offer cash at closing instead of upgrades, or buy down the interest rate,’ he said. ‘The buyer out there is in a little bit of fantasyland thinking he will get a reduced price.’”
“But Realtor Sarah Mazor oin Boca Raton says it’s still a good time to buy. “‘This is the time to do it before the market gets back to a normal pace and these incentives disappear,’ said Mazor. A lot of condo conversions are waiving developer fees or paying the first year’s mortgage, she said. One large home builder is offering $30,000 at closing, she added, while others are pledging to sell homes at lower prices if they go down after buyers sign contracts.”
“‘It’s up to consumers when they decide it’s safe to go back into the water,’ said Hunter. ‘They will go back to thinking of a house as a path to a lifestyle and not a way to get rich.’”
A letter to the editor in the Sun Sentinel:
‘ As a native and resident of Palm Beach County for 49 years, I find that living here is a nightmare. No one wants to insure homes or businesses. We’ve either lost our homeowners insurance or seen our premiums skyrocket. The market is flooded with homes, yet they continue to build more. What used to be cow pastures are now strip shopping centers on every corner..condos, townhouses, more condos, etc. Traffic is unbelievable!’
‘In our neighborhood, 18 homes are for sale, and they are not selling. Why impact us with more homes?’
I can tell you from personal experience that insurance costs are out of control for everyday residents. Personally, I don’t live right on the beach and my house came through Wilma last year with not even a scratch (and Frances and Jeanne in 2004 before them, when it was still under construction). It’s built to the most stringent, recent codes. Thanks to a combination of soaring rates (and the fact we were underinsured to begin with), our yearly/monthly insurance costs are in the process of roughly doubling. Fortunately, we can afford it by tightening our belts elsewhere. But those on fixed incomes, those without a lot of wiggle room, you name it — they’re getting killed as we speak.
because south florida allowed developers to run the govt. build and build anywhere and going to the highest bidder. on fort lauderdale beach, it is a nightmare. new condo after new condo. the beach is so small, a cat 2 will flood each one of them. now sellers expect people to buy. get a life.
it is so bad down here, that only one city, coral springs has an affordable housing initative. fort lauderdale’s mayor called working class people, communist for wanting to have workforce housing. the city looks like slum since wilma. alot of businesses never recovered and new development has all but stop. all the money from real estate and until recently fort lauderdale was broke. now midtown miami, one of the largest condo development in the history of miami is being sold by developer. not one condo is finish and the developer is running out. across the street from midtown miami is a warehouse ghetto.
south florida housing is dead.
Build baby build!!!!
But all the Rich Europeans and South Americans will save South Florida. Also South Florida is working off a totally new economic model. They aren’t making any more land, so you better buy now or be priced out forever!
I hate that line “priced out forever”. It is completely counter to any economic logic. If people were priced out, land prices would fall, so that they were priced back in. Or else, there would be no housing industry.
“If people were priced out, land prices would fall, so that they were priced back in.”
Hi everyone, I’ve been lurking here for a long time and just had to reply to this. One of my highschool teachers (around 87) lamented to the class one day that he didn’t know how we were possibly going to afford a house when we start working because prices were going up so fast.
well in 98 I bought my first home for 10% more than what my mother paid for her house in 83 (although older, mine was larger and nicer).
In anycase, the “priced out forever” statement just brought back that very sobering memory. Thanks all, this blog is great
south florida housing market is dead.
I was being sarcastic people.
Sarcasm expected AND welcomed!!!
“It’s different this time”
If you built it, they will come…
…after the 50% price crash, when they’ll be glad to take it off your hands at your loss.
My wife and I sold at the peak and now rent in Jacksonville, FL. We have been going to open houses for fun and to keep our thumb on the market. We have been throwing out verbal lowball offers to the RE agents to see what their reactions will be. In the last two weeks we have thrown out several offers 1/3 off asking price and the agents have said such offers would be considered. Last night we threw out an offer of $150k below asking and seller pays for all inspection fees, closing costs, etc. The agent said it was a done deal on the spot. I had to walk around the house and point out “problems” and “change my mind”.
Sellers are getting VERY desperate here in Florida.
David-
My fiancee and I are moving to Jax from NYC next month. We’re renting a 1 + den in Berkman Plaza for $1300. There are 8 similar units for sale…none asking under 350,000. I perceive an “arithmetic gap”.
any one paying any price in jacksonville has lost their minds. 1,300? never in the jax.
Thanks for the post. WCI, my favorite short, has been getting crushed. JOE is the one I cannot figure out.
Mish’s latest Mike Morgan post on Florida is devastating.
Walker,
Great link. Mike Morgan has been a regular “crusader” and should be commended for all his efforts. The link to the “Lennar Sucks” web-site is chalk full of reasons NOT to buy home built over the last several years w/85% having some form of defect, 15% of which are SERIOUS defects. 75% of felons cite the construction trades as a former source of employment. (I guess they’ll take anybody). The call the McMansions of today (the “tear downs” of tomorrow). I’ve said for sometime that if I were looking for a home (and I’m not) please do not show me anything built, bought or even re-fi’d from at least 2001 on! This really affirms that. Thanks for the great info!
All serious bloggers need to read this link!!!!!!
The Mike Morgan post is a most interesting (and scary) read.
I live in Irvine (Orange County) Ca. and have only visited Florida
on business, let alone do I have even minimal knowledge or
expertise about the Florida real estate markets.
My question to the more knowledgeable is: As buyers default
where does the tax base come from for basic infrastructure
services such as Electric, water,sewer,schools, Police, fire, etc
to support all these new dwellings either occupied or unoccupied?
I think what happens in Florida may serve as a precendent for
what may happen in so called “wealthy” areas such as Orange
County, Ca. Even here in Irvine, which is considered a very
wealthy area by many measures, schools are strapped for
$$. It seems to me that it wouldn’t take much to push
the whole shebang off a cliff.
From MM’s post:
Quality - Builders have been selling the vast majority of their homes to flippers. Flippers don’t care about quality. Rarely does a flipper order a competent home inspection. Rarely does a flipper even do a walk through. They are only concerned with flipping the contract as soon as they close. The builders did not let this opportunity go unnoticed. They built lower and lower quality homes, often ignoring building codes. How? In many markets the pace of construction has outpaced the ability of the local authorities to inspect homes, so these markets allow the builder to hire their very own private inspectors. Now if you hired an inspector that flagged your homes, how long do you think you would keep that inspector? So the builders find inspectors that are willing to look the other way. Many of the homes on the market today do not meet building codes. We are seeing an escalation of defective roofs, defective trusses, defective stucco and the list goes on
Corruption right from the governmental building inspectors; to the rubber stamping sleazebags appraisers who punch the numbers for the loan originatiors.
And all the regulators go whistling in the dark.
OMG, That Link is like an atomic bomb going off. That was brutally one of the best articles on this FL and National RE bubble that I HAVE EVER READ!
Agree, outstanding link! I couldn’t help from laughing, thinking that GetStucco could take on an alias from the post as Defective Stucco, exposing how poor the quality of construction has been lately.
Would hate to distract him frm his very entertaining and educational posts, however. But I love it when sometimes he bites, not like the TxChick, who rules the category.
it’s official- first soft landing in financial history !
http://biz.yahoo.com/ap/060720/bernanke.html?.v=7
How can they even call a “soft” landing when the plane is still in the air quickly running out of fuel! The wheels are still 20,000 feet from the runway and the landing gears are malfunctioning.
Ben just jumped off the Empire State Building and crossed the 50th floor. “Everything looks OK so far….”
“so far … appears to be”
So, reactionaries take from this “FIRST SOFT LANDING IN HISTORY” and realists will hear “CRASHING NOW SO BAD I CAN”T TALK ABOUT IT MORE IN PUBLIC”. Seriously, the man went so far as to spin his comments at eighth grade level readers and people still can’t get it. If our nation is at this level, then what point is there?
Incomes throughout Florida have failed to keep pace with runaway home prices.
As if incomes SHOULD keep up! Oh c’mon! So if house prices are insane, then wages should follow. No. And then this loon:
‘I am surprised at the lack of outrage by the voting public, and especially businesses, which will suffer unless something is done,’ Dryer said Tuesday. ‘It’s unacceptable.’
I take it he thinks the salaries/wages are unacceptable? Ha ha! It’s not wages, my dear boy, it’s just the bubble price of the houses themselves. I guess I take real issue with his “…unless something is done…” statement, which is patently ridiculous. Do what? Regulate house prices?!? Yeah, price controls, that’s the ticket!
Anyway, something *is* being done, and as slow as the housing bubble is taking to unwind, it will in the end unwind, and prices will eventually (and in some cases painfully) retreat to more normal wage/price ratios.
But then, he worked for a government budget office, didn’t he. Well, maybe that explains why he can’t figure out how someone can afford to spend a limited amount of money given a limited amount of income!
Dear Mr. Dwyer: If you cannot afford to buy, then DON’T. There is an alternative: Rent. You can afford to rent. Really, I think so. I know it might pain you and your Palm Beach neighbors to join the plebes and live like I have most of my own life, but renting *is* affordable, even there.
And I’m not even saying that you should even be able to rent a nice place. I usually didn’t! I often shared a place with other people. If the house you can rent is not the palace that you think you deserve, well join the rest of us who earn a living and live within our means. Life does not mean McMansions for all.
Same goes for buyers. When I bought in 1987, I had a roommate. Always had a roommate until I married. Bought below my means and still live here. Sacrifices can lead to an early payoff of the mortgage, if you live well below your means and always make a greater than minimum mortgage payment.
I do, however, like many of the other well-slammed “boomers” on this blog, empathize with those who are now priced out of the market. I waited 15 years and “pounced”.
I sincerely hope that those of you who want to, can “pounce” in the falling market. Be patient.
“But Realtor Sarah Mazor oin Boca Raton says it’s still a good time to buy. “‘This is the time to do it before the market gets back to a normal pace and these incentives disappear,’ said Mazor
My backside! is not this a desperate cry. Housing prices went up about 70-100% in the last five years. Nobody’s salary went up that much. Therefore , prices need to come back to what it was 3-5 years ago. Beyond that is BS and Realtor spin. For the comment above Rich S. Americans and S.Europeans. Sorry there are not thousands of them but there are thousands and thousands excess inventory that is not moving.
This is NASDAQ in April 2000. This is amateur investors, brokers and analysts saying, “it’s a great buying opportunity.” Remember the bear market of 1998? Markets dropped around 25% in about 3 months, then roared ahead in the 1999 mania. When prices dropped from the March 2000 peak, the rookies thought we were in another 1998 “buying opportunity.”
The article certainly portrays Mr. Hall as an “expert” but if he’s anything it’s a “defensive expert”. Every statement seems to center around strength in the FL market. “Buyers are not going to see prices tumble”. “Lennar is not giving away 8 million dollars”. “The buyer out there is in a little bit of of a fantasyland thinking he will get a reduced price”. Who is this guy? The only thing I can think of is that these guys have ALREADY taken so much of a “pounding” he just can’t imagine it getting any worse? BOHICA Bill. BOHICA.
Mr. Hall’s title is Director of New Homes and Communities by Illustrated in Palm Beach Gardens. What does that mean? Your guess is as good as mine.
I love the “They’re a public company, their shareholders would go ballistic” line. Yea, well GM and Ford are public companies, yet in the last few years we have seen major discounting, 0% financing, etc. Besides, I wonder how those shareholders would feel if Lennar just sat on the inventory, stubbornly holding to 2005 prices.
LAMoneyGuy,
Exactly! I wondered if this esteemed expert had the slightest idea as to how publicly traded co’s operate? They certainly don’t sit on un-saleable merchandise quarter after quarter. Where does the media find these guys?
‘The buyer out there is in a little bit of fantasyland thinking he will get a reduced price.’
No no, the reduced prices are in tommorowland!
Yup…That little snippet there is going to take two, maybe three flushes to get that pile on its way to the sewage plant…and, still need to scrub the bowl.
No, buyers have been in fantasyland for years. Thinking that ARMs won’t reset, homes always go up, and non-existant raises always come. He needs buyers BACK in fantasyland. The illusion is gone, it can’t be recreated.
Enough incentives. Just lower the damn price!!
Slighlty OT
The headline bits coming across from the Dr Horton conference call (I assume) are shocking to hear from a CEO of any company. I’ll post a link to the full story when I see it.
..stock down a little more than 50% YOY
http://finance.yahoo.com/q/bc?s=DHI&t=1y
Toll down 60% yoy
http://finance.yahoo.com/q/bc?s=TOL&t=1y
Bernanke with congress today… 20% of Morts. are adjustable in the U.S.
10% will reset this year. Consumers are in a neg. savings rate. 1% of the pop. have 90% of the wealth in this country. Seems Congress’ questions focus on what will happen when the bubble pops.
Is that 10% of the ARMs? In other words, 10% of the 20%? Or is it 10% of all mortgages will reset? In other words, 50% of the ARMs?
LAMoneyGuy, I took it to mean 50% of the ARM’s ..though he is speaking to Congress so I can’t always hear the double-speak. It just seemed the focus was on the RE downturn ,and the effects on the economy.
Some housing bubble reports from Florida. “Incomes throughout Florida have failed to keep pace with runaway home prices. Since 2003, median home prices in Florida have soared 77 percent as the real estate boom swept the state, but incomes grew a meager 1.4 percent. One West Palm Beach man doesn’t have to read Tuesday’s report, called ‘Florida Priced Out’ — he’s living it.”
This stat right here shows that the Florida RE boom was not built on strong economic fundamentals. Anyone who doesn’t see a nasty correction coming is either in denial or the most financially inept person on planet Earth.
bystander,
I read that their 3Q earnings droped 21 percent. Imagine what their 4Q and 1Q earnings will look like!
http://www.myrtlebeachonline.com/mld/myrtlebeachonline/business/15082345.htm
Here is what I am seeing from the Dow Jones Headlines:
Stuff like
“Sales fell off the richter scale in June”
“Speculative homes are 40% of inventory”
“Company to reduce land buys, starts and speculative homes”
“Doesn’t see housing rebound for 3 or 4 quarters”
For Florida, a nasty correction is in order to reset pricing. I used to live in Orlando and lived in a new townhouse that I bought for $80,000 in 1997- a price that was in line with local fundamentals since so many people in the area in travel/tourism/service industry. I assume the fundamentals are the same since wages have increased only slightly.
Does anyone have any info on the Florida Land Grab in the 1920s? I wonder what the parallels are and if the crash may be as severe.
here ya go:
Florida land boom of the 1920s
http://en.wikipedia.org/wiki/Florida_land_boom_of_the_1920’s
Florida Housing Bubble: Comparing A Bubble From the Past To What’s Happening Today
http://www.investmentu.com/IUEL/2002/20021118.html
Written in 2002.
“No, I don’t think we’re in a housing bubble. If prices double from here, and the word on the street is that “the easy way to get rich is to buy real estate”… then we’ll be in a bubble. That will be the time to get worried.”
There we have it.
Just a comment about mean-spiritedness.
I can be as mean as the next guy - and I come from hillbilly country so that’s pretty damn mean. But I try not to paint with too broad a brush.
There are a lot of very decent, not so smart people out there getting their comeupance and I think it’s hardhearted for us to be so gleeful about their misery. We tend to call them the FB’s or first time buyers - or f**ked buyers.
My friend runs a high end old-folks home in the Bay Area and we recently went to a housewarming for Jose, her Culinary Services Director. He makes about 40K a year. His wife works at a MacDonalds and makes squat. They have three kids between 4 and 12. About six months ago they took the plunge and bought a run down house in a run down flea infested section of Antioch, CA. It’s a dive and he paid nearly $400,000 for it using every ounce of leverage he could muster. No down, reverse equity, with a reset that makes a beartrap look like a pair of tweezers.
We were schmoozing with the very multi-ethnic crowd. I met the real estate dealer - a friend of Joses - who was from Peru.
Jose’s an OK guy. Not so smart but I’d sooner have a drink with him than any of the dumb f**ks in Homeland Security. Or have him as a neighbor just so long as his kids keep the damn jukebox down.
Jose is a FB and it stands for both. In a year or so he’s going to be topsy turvy upside down when the loan resets. He’ll lose his house, his credit and it’s going to be damn difficult for him to rent with a FICA of 100.
I’m not saying he’s blameless but I think we should look at his situation and not give him the GWB smirk. Here’s a decent guy trying to provide housing for his family who go sucked into the maelstrom. He goes to work every day and does useful work for the society.
This is the real tragedy. We forget that there are millions of potential and likely homebuyers who don’t understand the first thing about how these toxic loans work, the history behind r/e cycles, and just assume that the realtor is working for their best interest.
It’s not just the Joses of the world. My brother has a Masters Degree from Maryland, and was considering buying a condo in San Marcos, CA. He doesn’t know if he’ll be there more than three years, but figured he might as well build some equity as long as he is there. Thankfully he listens to me. He’ll be renting for less than half the cost.
Exactly. Who is responsible? We, as people are. We live in a democracy. We have voted people in office who we trust to do what is in our best interest. We think of gov’t as some omniscient being, instead of what it is — just people with the same human emotions of greed and fear. There are supposed to be checks and balances to prevent what we have. Through time, without the constant questioning of things that don’t make sense by the “people”, those checks and balances can, and will, be eroded. Why not, if they can?
Jose fell into the trap of “why would gov’t allow bankers/mortgage brokers/realtors to ruin me”? He trusted them. These same people we trust to do the honest thing, not the most financially prosperous for them, are going to look for every person they can to blame. It is a vicious circle to say the least. When you hear people screaming in mass “How are we going to heat our homes”, and the answer coming back is “Just burn all those dollars we all have”, then what I said will make sense. If you don’t think it’ll happen, then I guess it is different this time. Just like the housing bubble leveling off.
everyone ecp gov workers will get hit. everyone
Keep telling yourself that.
Flat is a one note wonder!
I agree.
I’ve used my friend as an example before on this board (makes about 35-40K, bought a home for about 450k or so). everybody thought I was stupid for feeling sorry for him, and thought he got what he deserved.
There are many people who made poor choices out of ignorance (which is different than stupidity IMO). They TRUSTED the RE complex to care for them, just as the RE complex has barraged us so many times to do. (they have their code of ethics you know). Our newspapers and gov’t treat the NAR as “experts” and nobody says boo about them being biased. The general schmoe out of IGNORANCE makes then a bad choice: to trust these “Experts”. Obviously, there is some speculation going on as well, and maybe even buyer’s greed.
but it doesn’t mean that they aren’t essentially good people getting burned BADLY.
sad
clouseau
I think you make a good point about not being able to rent, because of bad FICO score. I never thought about that before.
Yes, lots of landlords now run credit checks on potential renters. And there are some landlords (one of my friends, for example) who won’t take anyone with a low credit score, period. Most will acknowledge a foreclosure, though, and if you look like you’re clean and worked out of that, they’re OK with it as long as the rest of your finances seem to be in fine shape (e.g. you make enouhg money to cover your post-foreclosure debt payments).
One thing, though, is that with a low credit scre, you are not their first choice in tenant, so you might end up missing out on some places that are priced right enouhg to give the landlord a lot of applicants.
As for my landlord friend who refuses to rent to anyone with a low score, his place has been standing empty for months! Doh!
In Dallas, bad credit is so common that property managers ignore just about everything except for utilities and past rental history. I suspect that the rest of the country will follow suit soon enough.
LJR — I couldn’t agree with you more; in fact I’ve been meaning to say something about it too. A lot of folks on this blog assume that all the FBs are flippers, and all the HELOCed to the hilt are using the equity to buy luxury items. I think that if we were able to track these people (does anyone do that), we’d probably find the majority of them are probably in the $30-60K family income range, and that HELOCs were/are paying for things like clothes for the kids, unexpected medical bills, food, electricity, gasoline, etc. When their ARMS reset, they will end up — where? On the street? I suppose you could say they never should have bought in the first place, but at least in the DC area, there’s so little rental (much less sale) housing for people under $40K that sometimes buying a crappy townhouse on a 1% adjustable ARM was their only choice.
The streets of downtown DC are already starting to look like Mumbai — there has been a very perceptible upsurge in the number of street people over the past year. And as the policy folks keep pointing out, a lot of people on the street actually have full-time jobs.
Great post, LJR!
I guess they deserve our pity in a general way, and the fact that they got ripped off by a fellow national is an all-too common story; recent immigrants often foolishly trust people from their country of origin, without reflecting on whether they would trust them so blindly if they were doing a business deal back in that country.
That said, I have a modicum of pity but zero sympathy. I know how to spend money too, but I don’t. If they spent their spare time educating themselves instead of watching sports and American Idol, they wouldn’t be in this predicament. Stupid is as stupid does; these people are wasting the big brain they were born with, and objectively speaking they deserve everything that’s going to happen to them.
It isn’t about them, it is about us as a community. If we encourage loan sharks to vend toxic products then we will all have to live with the fallout from that. It isn’t that we should feel sorry for the people that screwed up, it is just that having them thrown out on the street begging for money and their kids totally out of control isn’t going to help anyone. The world can be made safer than an only the paranoid survive state if we agree on some reasonable rules for each other in doing business. Even something as simple as additional disclosures in a simplified format could reduce the scale of another bubble.
Definitely agree with making and enforcing rules for business — especially when they hold themselves out as “experts”.
As much as people here like to see “stupid” people suffer, we must realize that not everyone was born with a high IQ. While I don’t believe in protecting people from their own stupidity in their personal lives (I think they can smoke, drink, do drugs, not wear seatbelts/helmets…as long as it doesn’t affect others outside of their families), we must protect society from the large-scale damage done when businesses are allowed to act in unethical ways. At the very least, loan packages should be simple and easy to understand for even the simplest of minds. For instance, those with suicide loans should have the worst-case (MAXIMUM payment at lifetime cap rate, fully amortized with max neg-am loan balance, paid over XXX years) scenario printed in BIG, BOLD letters. And L/Os should not be able to say, “you just refi before it resets,” because rates could be much, much higher and housing prices might not allow the LTV balance to be refi’d.
Lax lending standards (and the unqualified idiots who use suicide loans) affect the entire nation/world. We need strong regulations and/or very transparent markets (esp secondary market…all the way throught to the investors in bond funds, hedge funds, etc.). We should also require thorough and accurate underwriting of these loans, so fraud would be highly discouraged.
Betamax post’s reminds me of this quote.
Albert Einstein
He who joyfully marches to music rank and file, has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would surely suffice.
Everyone is responsible for their own due diligence and the consequences of their due diligence.
It is morally wrong to shield people from the consequences of their decisions. Experience is the only reliable teacher for the densest parts of humanity.
When their poor due diligence and decision-making affects my ability to purchase a home, the gloves come off.
In my best Anthony Hopkins from the movie Legends of the Fall. “Screw ‘em”.
On CNBC :BNP Paribas. ” With nearly 1Mil homes on the market ,we have a once in a 100 year indicator ” -my paraphrase-,… He sounded really bearish on housing in the U.S.,and the likelyhood of a soft landing…
“Here’s a decent guy trying to provide housing for his family who go sucked into the maelstrom.”
Did Jose buy hoping to get rich? That mentality has been keeping me renting for the last couple of years — wife and I can’t afford to buy anything in LA that we’d want to live in.
To point out how absurd things are: We have a maid once every two weeks — she’s not legal and doesn’t have a great education. Recently she asked me why I hadn’t bought a house yet and that she’s looking to give up being a maid and getting into selling real estate. I swear.
I doubt Jose was looking to strike it rich. Most people have been sucked into the “you’re wasting your money renting” nonsense. Slick realtor and sidekick broker ran some numbers on a couple of neg am mortgages and he figured he could swing the monthlies. I wonder if they even mentioned in passing that the payments will skyrocket not too far down the road.
When my relative, who never met a get-rich-quick scheme he didn’t lose money on, told me he was looking to “get in” with a mortgage broker in Fla. - and then a week later a co-worker who never owned a piece of Real Estate was going to “invest” some of her family’s hard-saved cash in some SFR knock-down condo project in New York that hadn’t even been started yet , (both about two months ago, and both when these ideas were sooooo far past their time of being a good idea) - well then I had my final assurance that the bubble was bursting…
There’s no doubt in my mind anymore … Florida is doomed.
Living in Pittsburgh, I could only imagine what the rest of you have been seeing in CA, FL, AZ, etc. I just got back from a 1 week vacation in Clearwater Beach, (an area that really doesn’t get a lot of bubblicious talk), and what I saw was staggering.
Hundreds (and I mean HUNDREDS) of “For Sale” signs, everywhere. Clearwater, Clearwater Beach, St. Pete Beach, Sand Key, Bellaire Beach, Indian Rocks Beach, even crappy Pinellas Park.
Dozens of new condo construction projects, some complete, most not, and the incomplete projects looked as if they’ve come to a complete standstill. Along Clearwater Beach, the tallest hotel (The Adam’s Mark) was razed, and a condo sales office was installed, which looked to be closed. Two other hotels, the Best Western Sea Wake and the Spyglass, are scheduled for demolition, to be replaced by huge condo towers. (Of course, my belief is that this will never happen.)
Of all the “For Sale” signs I saw, NOT A SINGLE ONE had a “Sold” sign on it.
It was mind-boggling. I just drove around, muttering to myself “Florida is doomed… our economy is doomed”. And to think, this wasn’t even Southern Florida.
On the St. Pete side of Gandy there is a highrise condo called “The Mangroves” that is just a concrete skeleton. No work is being done on it. On the Tampa side there is Newport, another massive development bust. In Hyde Park/Soho there are the “Townhouses of Soho,” which look as if they will soon become the knock-downs of Soho.
Our local legislators allowed developers and flippers to do this, and many were themselves involved in the ponzi scheme. They completely ignored zoning laws, or suspended them. Now we’re stuck with hideous buildings in all directions, many unfinished and doomed to never be completed. Did you check out Channelside in Tampa? What a nightmare.
Count the cranes. There eare easily over 50 between Ybor, Channelside, Downtown, and Hide Park. Heck throw in Harbor Island too!
But, are any of them moving? Where’s Trump Tower (two years later)?
I’ve frequently driven by the Gandy condo development you mention. It is spectacularly hideous. It looks to me like the sort of thing you would sell to a speculator who had had never been to Florida and who had no intention of ever occupying the unit, but who just wanted to get in on the boom. The property was much better off as a fetid mangrove swamp, which is what it was before.
There is nothing of any consequence nearby, unless you count adult bookstores, highway overpasses, or (on the Tampa side of the bridge), the standard panoply of fast food purveyors. For those savvy out-of-state investors, however, I bet the marketing amply plays up the “beach” across the highway, which in reality is just a thin strip of sand frequented by the Confederate flag crowd.
You made me laugh. The humans who swim in that water (especially with the waste treatment plant right there) are actually mostly from up North, where any beach is considered heavenly.
On a more serious note, imagine the damage to the environment and all the poor animals there if they have to knock the highrise down. Construction should never have been allowed in mangroves, but then our revolting politicians couldn’t care less about Nature and wildlife. They’d kill anything for a buck.
Here it is people, wow
Sorry for posting the whole thing but I think it is pretty alarming for the bulls.
D.R. Horton Doesn’t See Housing Rebound For 3-4 Quarters
DOW JONES NEWSWIRES
July 20, 2006 12:37 p.m.
By Janet Morrissey
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–D.R. Horton Inc. (DHI) Chief Executive Don Tomnitz predicts the housing sector will continue to struggle with high inventories and incentives for another three to four quarters before the market returns to more normal levels.
During a conference call Thursday, Tomnitz said his company is cutting back on land purchases, housing starts and the number of speculative homes it builds in an effort to bring its production more in line with the depressed demand. Currently, he said speculative homes, which refers to homes that have been built without a confirmed buyer, represent about 40% of the company’s 40,000 unit inventory. He said he expects to reduce this to between 30% and 35% of inventory by the end of its fiscal year, which wraps up Sept. 30.
Tomnitz made the comments as he discussed the company’s fiscal third-quarter results, which saw the company’s earnings decline 21% and orders fall 4%. Tomnitz said sales had been stable through May - before suddenly “falling off the Richter scale” in June. This prompted him to ratchet down the company’s guidance for the remainder of the fiscal year.
D.R. Horton slashed its fiscal 2006 guidance to $3.65 a share from its previous estimate in the range of $5.25 to $5.35 a share, and now expects to close 50,000 homes, down from 58,000.
Tomnitz said he considers the $3.65 a share guidance to be a conservative “floor” in this volatile housing environment.
“We do not have a double-digit sales environment - which no builder has - and also we have significantly higher cancellation rates - which all builders are experiencing - so we’re trying to give you an absolute bottom line number that we can hit or exceed,” said Tomnitz. “We gave you a number that would incorporate a more dramatic change in the fourth quarter than what we experienced in the third quarter because we do not want to have this conversation again.”
“The market is constantly changing on a day to day basis, and California continues to get softer and incentives continue to increase in Florida,” he said. “We’re looking at the future market with very, very clear vision with no rose-colored glasses on….and if we’re going to get punished and we’re going to get pummeled because of the fact that we’re being more accurate than some people think we need to be, then so be it.”
Despite the deteriorating housing market, Tomnitz noted that he expects fiscal 2006 to be D.R. Horton’s second most profitable year in its history.
D.R. Horton’s shares recently traded at $20.23, off 62 cents, or 3%, on volume of 3.4 million shares, compared with average daily volume of 4.3 million.
- Janet Morrissey; Dow Jones Newswires; 201-938-2118
…and if DR Horton is saying 3 to 4 QUARTERS…you can be guess what they really, privately are thinking is 3 to 4 YEARS! But they can’t scare the shareholders you know…not good for the stock options if the stock is $5/share. The amount of denial around the housing market is just astonishing. These are ugly facts to face…so let’s just not! lol
Or three or four decades.
Some housing bubble reports from Florida. “Incomes throughout Florida have failed to keep pace with runaway home prices
Like this news?
This situation exists everywhere in the country because Greenspan’s money policy and the GSE’s lax underwriting standards have allowed the basic element of putting a roof over your head to double in a span of 4 years.
Because the cost of a house so far outstripped the incomes to afford as much the succeeding “boom” and attendant escalating price structure was financed thru voo-doo ARM and neg/AM finanacing.
Meanwhile the impact of underground working illegals and a global economic wage structure proceed to put American incomes into the toilet.
No way out of this mess.
O/T:
Re: Bernanke’s testimony today…
OMG, the last rep (don’t know the name) is trying to get BB to change the “imputed rent” portion of CPI. Basically criticizing the Fed for raising rates because more buyers are being priced out of the housing market. BB replied that the reason buyers are priced out is because housing prices have been rising by double-digits in the past 5 years. He said it couldn’t continue like that, arithmetically, and that is why people are priced out. Rep said “supply and demand” — demand is soooo strong, it’s only interest rates that are keeping people out of the market (implying it’s NOT the price!!!!). Says declining prices are a BAD thing, and people who bought in 1989 had to wait until 2000 (in the “stagnant” market) to sell for break even.
Okay, just had to vent. I’m going to send a letter to that idiot!!! Sounds worse than Gary Watts!
it’s only interest rates that are keeping people out of the market (implying it’s NOT the price!!!!
Keeping interest rates down are like putting out fires…for a little while.
How long can it go on?
Interest rates are still historically low.
Ok, so we will lower rates and have inflation off the charts. Stupid politicians. We elect idiots to run this country. No wonder it is so f*cked up!
Right on,
Getting too much glee could be harmful. When we buy into the American Dream, there is a supposition that we must be stupid if we don’t strike it rich by the time we’re 35. Most people are programmed to be enveloped by the bubble
From another board for owners of a condo-conversion in West Palm Beach - all flippers/investors are indeed idiots…
“The condo should be insured by the HOA and is part of your dues. The renters should have renter insurance. I don’t think you need additional insurance.”
“Was anyone smart enough to get their taxes included in their first? I was not and I am trying to plan for that hit in December and April. Anyone out there that could help me on that?”
“Also, does anyone know what their unit was appraised at? I couldn’t find that info in my loan package.”
“I am just wondering if there was any appreciation on the units since the start of this project.”
Appreciation? Hahahahahaha