‘Fault Lines’ In Florida’s ‘Embarassment Of Riches’
Some housing bubble reports from Florida. The Bradenton Herald, “52 percent-fewer single-family homes were sold in Manatee County in June than a year ago. ‘Definitely I think the bubble burst. If it hasn’t, it’s leaking badly,’ said (realtor) Helen Robinson.”
“One area where the downturn is more pronounced is condo sales, which produced few sales and a lower median price. Robinson is worried that if real estate taxes and insurance rates continue rising, it could discourage snowbirds and second-home buyers from investing in the market.”
“‘If taxes and insurance rates go up, the second-home buyers are going to be hurt,’ she said. ‘We’re really killing the goose that lays the golden egg.’”
“In June, 560 homes were sold compared to 1,025 in June 2005, Dale Friedley of the Manatee County Property Appraiser’s office said. Likewise, the sales of condos continued to tumble, falling 41 percent from last June’s sales.”
“Forty-two single-family residences were sold versus 117 last year, down 64 percent, according to the Anna Maria Island Property Sales Report. Anna Maria condo sales plummeted 78 percent with 26 sold in the first half of 2006 compared to 116 last year. Four condos were sold in June 2006 versus 19 last June.’
“It’s a sign that Polk County is no longer owned by the sellers. ‘Our incentives are in response to the market slow down,’ said Callie Neslund, Southern Homes’ marketing assistant. ‘It seems like it is a nationwide trend.’”
“Southern Homes in Lakeland is now offering a buy-down incentive. ‘That ends up being over $70,000 in savings,’ Neslund said.”
“‘We have three times the listings that we had at this time last year,’ said Jan Bellamy, a Realtor in Lakeland. ‘We have fewer buyers, too, and the investors are all gone. Most homeowners only have one home to sell,’ she said. ‘These builders have millions (of dollars) in inventory and hundreds of employees to protect.’”
The Palm Beach Post. “Mark Vitner, economist at Wachovia Corp, said he has begun to temper his once-bullish outlook on Florida. He warned that fault lines have begun to appear in the state’s solid economy.”
“The housing market has slowed dramatically, Vitner said. In addition, he said Florida employers are starting to leave the state because of the rising costs of insurance and real estate, and the tight labor market.”
“‘We’ve gone from a situation where everything was so positive to a situation where we’re victims of our own success,’ Vitner said. ‘Florida is beginning to choke on its growth a little bit.’”
“Vitner, who once was the cheeriest of cheerleaders for Florida’s economy, is feeling a little less sunny about the Sunshine State. Among the economic clouds he points to: The end of Florida’s wave of real estate speculation. Many people who signed contracts on new homes never planned to close, instead hoping to flip for big bucks, he says. Now they’re backing out or taking title to homes they had hoped to sell.’”
“To put Vitner’s sober outlook in perspective, understand that he was the picture of optimism during last year’s boom. Here’s how Vitner sized up Florida back in November: ‘It’s hard to come up with the correct superlatives. We have the best economy by far in the nation. I don’t want to say it’s an embarrassment of riches, but the economy is so strong in Florida from coast to coast.’”
I was staying in a hotel in Palm Beach last week and every time I went to my car I had to brush the fliers off my car like it was a light snow or something.
At one point I was upstairs for no longer than 2 hours to find 6 fliers on my car advertising everything from a “just reduced $1.6 million condo” to boat slips to real estate investing seminars…
Nothing expresses the high class and luxery of a $1.6 million dollar condo than a cheap flier stuck under your windsheild wiper!
Apparently this is a new marketing tactic being used by investors to get rid of their properties. All up and down the east coast of Florida they pay kids to cover cars in hotels, airports and anywhere else they can find out of state folks to take their investment off their hands… Truely this is the “greater fool” concept looks like there are no more fools left in Florida so they are trying their best to find some from other states who might still think the market is white hot!
It must be a real mess out there. Never been to florida but it sounds like flipper capital of the usa. Seems everyday I read about the mess they have going on. Yes, putting fliers on cars for million dollar homes is very tacky.
The land of Flipper! Creswell predicts from bungaloes to burgers.
Ooops! Bungalow.
Yesterday in my neighborhood the mother of an Eagle Scout wanna-be was going door to door leaving fliers for her son’s project to collect school supplies for underprivileged kids. I told her I wouldn’t be donating, because it looks like she’s the one doing all the work.
OT, But a very comprehensive discussion this week on Financial Sense newshour concerning the SPP legislation (that no one apparently knows about in congress) signed by Bush administration that effectively discards the constitution and sets up a European union type gov’t between U.S., Mexico and Canada.
http://www.netcastdaily.com/fsnewshour.htm Go to 3rd hour and use cursor to scroll to minute 47 to start discussion.
This is real folks, not some tin foil hat bad dream. If you are not outraged by the end of the discussion and interviews (congressman Tancredo) then you weren’t paying attention to the plan! This sounds like plan B to the dollar collapse (the “Amero” being the new currency) and is being fast tracked RIGHT NOW. The gov’t whitewashed info is on http://www.spp.gov (obviously they don’t explain what they are exactly up too so that the herd doesn’t get startled but I include it so that any thoughts that this is just BS are dispelled). Please email your respective congressman & Senator demanding explanation. That is the only way this will be stopped.
This is where it gets deep and most people will just not be able to approach this and then think about it because it is so SCARY and because it so clearly illustratest that the plan for the average American is to be a serf. While out of country on a trip I had an interesting conversation with someone who said that the American 1%’s already had a plan how to handle the (total) economic bust that seems to lurk in the horizon. According to him they will establish their own state where only they are allowed because there is no plan to keep America going as we know it. While most of us has been busy consuming it is as if we have been let to the slaughter by the “carrot”. Pretty creative thinking from an outsider…Then again he has the advantage of having read some history. I often find myself trying to expand the minds of my friends by bringing up old Russia and how communism is nothing but ultracapitalism. If you analyze what happened in Russia you might get a glimpse of the possibilities that lie ahead of us.
Well, I don’t have any idea what the plan is. If one steps back from this SPP and takes in the bigger picture it seems quite possible that this is one step forward towards one world gov’t (that tin foil hat theorists predict is the plan of the banking cabal that instituted the FED back in 1913)where only one currency is left to be manipulated by the elite. That pretty much makes the rest of us serfs attending to their needs. Of course for any of this to actually come about requires us to be stripped of our rights in addition to the collapse. Since americans were eager to give those up following 9/11, I leave it to your imagination what the triggering event will occur that closes the loop on giving up what rights remain (which are precious few at the moment although no one really seems to recognize that fact). If one were to look up the various Presidential Orders (PO) that have been signed by Bush in the past few years, one would see that all is readied for a quick move into martial law and a complete dismantling of constitutional rights. I once had a link to this list with actual verbiage but can not find it right now. I’ll post it if I find it. At any rate, just food for thought for those of us trying to look past the RE collapse.
You are absolutely right, I had mentioned this a few months back, but no one seemed interested. Real Estate in a mere precursor of what will really happen, the plan is to load the american consumer up on so much debt that they cant see beyond the trees due to stress and unemployment. The low interest rates were to entice them and divert there attention away from more pressing issues they we were facing (unavoidable recession, bankrupt states and fed. govt.). I find it interesting how some people on here get a kick out of the FB’s getting hosed on bad RE investments (nothing but glorified impulse shoppers looking to make a profit). When these people fall, does everyone believe that they can just swoop in and buy there RE dirt cheap??? With a faltering economy where will that money come from, how easily will these people leave on peaceful terms when they have nothing left??? As this country falls and the recession picks up in late 2006/07 watch and see who is buying Real Estate and who is not. It is time too wake up and look at the real pressing issues not just RE.
Tinfoil hats for everyone!
Betamax -
My take is this is serious and hilariously funny at the same time.
“Greetings, my friend. We are all interested in the future, for that is where you and I are going to spend the rest of our lives. And remember my friend, future events such as these will affect you in the future. You are interested in the unknown… the mysterious. The unexplainable. That is why you are here. And now, for the first time, we are bringing to you, the full story of what happened on that fateful day. We are bringing you all the evidence, based only on the secret testimony, of the miserable souls, who survived this terrifying ordeal. The incidents, the places. My friend, we cannot keep this a secret any longer. Let us punish the guilty. Let us reward the innocent.”
source: Memorable Quotes from Plan 9 from Outer Space (1959)
This is a back up plan for when the Chinese figure it out and don’t want to sell us goods for our worthless currency. The Gov’t forms the new state, the corporations get the cheap labor and we get a polarized world. West Vs the East.
Go to this site to fax your legislators. The letters are already written (you can change them). This site has a wealth of details on the immigration fraud being perpetrated by Congress and the president (not to mention the government of Mexico). It is a little to the left of center.
http://www.numbersusa.com/index
The existence of the SPP provides proof positive that immigration legislation is a fraud design to placate the masses while opening the border continues. No other way to interpret that.
…and the codes on the back of street signs are for the UN troops when they invade the United States to make sure this all goes down smoothly.
Come on. What they’re proposing is such an idiotic conspiracy theory of “discarding the constitution” which simply is not possible. There’s a difference between working for common goals between countries, and merging those countries into one. We aren’t part of China just because we’re both in the UN, and we won’t be part of Mexico just because we’re both in the SPP.
All the SPP really is is an amalgamation of already-existing ideas and concepts into one body. No legislator in their right mind would ever vote to “discard the constitution”.
The consitution has already been discarded.
constitution
I, for one, am NOT suggesting a conspiracy: just that our Senate and President have sold out to greedy businesses that want cheap, slave (illegal immigrant) labor, and illegal voters (illegal immigrants) and their relatives. These businesses hire illegals, and when they’re done with them, dump them on everyone else, and American taxpayers have to pick up the bill (medical care, social security, massive crime, etc.) that the law-breaking employers were too cheap to cover. The Senate bill that Bush supports would actually give complete amnesty to all employers of illegal aliens, and all illegal aliens, including those who have stolen social security numbers and other I.D.s, often destroying the credit of the United States citizen to whom they belong. It will also give social security benefits to the illegal immigrants (who will no longer be illegal), AND their relatives, including those living in Mexico and elsewhere. This is a scam of such enormous scale, most voters would be horrified if they only knew about it. This is why Web sites such as numbersusa.com are important. Lou Dobbs’ site (at CNN) is also useful.
http://tinyurl.com/pjde
Neither of these sites has anything to do with conspiracy theories.
That should be plural “United States citizens.”
auger-inn -
Thank you for the links. The relevant segment ran about 46:55 to 1:06:40 (a bit less than 20 minutes) on the 3rd hour MP3 file.
Hey Incredulous,
using Lou Dobbs as a source is very revealing about the quality of the argument.
Actually, he’s a great source, considering he’s a Republican. Numbersusa.com is heavily Democratic. I wanted to cover both sides.
Obviously you have vested interests. There are now thousands of sources to back up my statements, including the Congressional Quarterly.
A couple of more links concerning this legislation.
http://www.eagleforum.org/column/2005/july05/05-07-13.html
http://www.humaneventsonline.com/article.php?id=15809
Thanks.
‘Housing seems to be slowing more than people realize,’ Vitner said.’
I’m curious to hear from folks in Florida; is the weakness in housing well known?
In Manatee county people are either unaware of the bust or their still in denial. This week I looked at three homes, prices between 380-500k. Two of them empty, specuvestors who bought at the top and can’t sell for much less than their asking due to prices that were paid. I think the only way out for the majority of these people is to leave the keys on the counter, but if that happens en mass then I think gov bailout, scary proposition either way!
Denial is pretty much the word. What I hear from people is that this is temporary and that the market should get back in gear in few months. Personally I think this has lot to do with the fact that many of these flippers and first time owners never saw that their property was going to become such a gold mine or that they could actually buy what they did with no money down that they are looking for that same house fairy that made that wonderful irresponsible way of life possible to come and fix things so that it could go on indefinitely… Like never having to work again, I mean why should they, they have had their house working for them for the last couple of years and one can really get used to that… And lets not forget that it is the right of the smart people to get things for nothing.
People often think that “prices rise and fall”. They’ve been conditioned by the fluctuations in interest rates, gas prices, holiday sales events. They don’t grasp the illiquid nature of real estate, and how growing inventory is like a huge barge moving in one direction…
Miami Beach has cranes and half built condos as far as the eye can see, and the buildings (like mine) are more than half empty. The few people in my building are all realtors as far as I can tell, I’m the only one with a job skill in Miami Beach. They acknowledge the slowdown but by-and-large they are viewing this as a buying opportunity. I am suprised by the unprovoked anger and hostility though. I have heard a few folks discuss “offensive” offers so there’s little recognition of a real problem brewing.
I suspect most of those people in “denial” or trying to get rid of their property and don’t want any talk of a slowdown, till they find a sucker to bail them out.
Right!
Ben, I think it must be like SD, or Phoenix. Signs on every corner mostly 2 or more! Signs evrywhere ,yet I don’t think ‘Reality’ has hit. It’s much like deer in the headlights ,impending wreck yet seemingless clueless to the impact. Watching CNBC yesterday, I head Recession all day,and even heard Depression’ twice. I think you have to be pretty naive that we are not at least heading for a serious recession. You need to get your ducks lined up ,as once the tide turns it will be too late. The tide is just turning on RE, the people in the headlights are making the connection yet….When they do, it won’t be pretty. We here, are way ahead of the curve.Too close to what’s happening. We talked to a couple in Pensacola from Ohio asking why everyone was selling…Not a clue.
It is becoming more and more known in my areas of operations…. The major bulk of my purchase transactions are either:
a)investors taking advantage of a property they think is a “deal” at being sold below the appraised value.
b)uneducated first time buyers that apparently don’t read the newspapers. I actually found myself thinking of “suzanne” during an appointment last week, the entire transaction was being driven by the wife and the husband got a glazed look in his eyes when I gave him his loan options. btw I don’t even offer the “suicide” aka option ARMS.
3)Folks that put sizable deposits on preconstruction homes… Somtimes I wish people would realize a 25K+ loss is better than a 350K depreciating liability.
The cracks are there it just appears as if sheeple are ignoring them…
I’ve been following these boards for a few months. Many times people have refeered to Suzanne. Can you clue the newbies in as to what all the “Suzanne, I researched this” refers to. Thanks!
I’m curious to hear from folks in Florida; is the weakness in housing well known?
Yes and gaining fast. There is still some denial but it’s night and day compared to 6 or 12 months ago. I always take the opportunity to chat people up on the subject and there is widespread acknowledgment of housing trouble.
The folks I know in Naples are well aware of the weakness in the housing market. That’s because they have been specuvestors that made a bundle on a couple of properties they bought and then sold. However they are still stuck with three more properties which they now concede are dropping in value by the day.
It’s well known except to anyone in the real estate business. 52% drop with a glut of inventory and they are still convinced we will not see price drops!! I see listing prices here in Bradenton that are down 20-30% from 4-5 months ago and they are still sitting. Vacant new-home communites are everywhere.
I talked to 2 people this week locally that are in financial dire straits.
One left her banking job to get into the appraisal business and her dad has to bail out because she hasn’t made a dime and is having a hard time finding another job that paid what her banking job did.
The other bought a spec house and her loan has adjusted from 5% to 8.5% in the past year and she now can’t afford the payment. Oh, she can’t sell the house either. Also trying to borrow money from her dad.
But like all the Realtor’s, Broker’s and Appraisers are saying, prices have bottomed!! No bubble here!!
Does anyone know how much average appraisers make ?
This month’s sales reports seem to show broad declines in many markets, most of them the countries largest. Lereah’s last prediction was for something like a 7 percent decline in existing home sales until now, any guess on where he’ll be next month?
(To help you out he started the year predicting a 4.4 percent decline)
Gary Watts has revised hes estimate of Orange County appreciation from 15 percent (”in the bag”) to 11-12 percent. “I really think that we are pretty close to the bottom of our real estate prices,” Watts said. “August ought to be the last month of weak appreciation numbers.” http://www.ocregister.com/ocregister/money/housing/article_1218707.php
Ben,
Here in Miami folks are still under the ether. There is an obvious glut of housing, and foreclosures are starting to pop up in unlikely neighborhoods, but the “fools” think if they buy a foreclosed property they are picking up instant equity. Maybe that was true a few years ago, but more likely they are getting a property at true market value.
The “it’s different here” argument is being used in neighborhoods and buildings alot. “Its different here in Miami Beach, or its different here at ICON, Majestic, The Collins, Canyon Ranch, Trump”X”, etc…property values are holding.”
But in fact they are beginning to crack under the weight of the newly adjusting payments. Add to that the insane condo fees and “special assesments” that can be as much as 15K per condo in some buildings and you realize there is little chance the denial will last much longer.
So far we have had little tropical cyclone activity, and that has keeped the frayed nerves to a minimum. But if we take a direct header from a CAT 3 or greater then all bets are off.
In the rental market there has been attempts to raise prices…unsuccessfully. The corporate managed complexs have had to offer car dealer inspired incentives, and the individual property owners have cut their throats to make a deal.
I’ll chirp back in from time to time to add more chipper news as warranted.
Veritas
The last sane man in Miami
Here in Arizona, a foreclosed property would probably still be cash flow negative, suggesting it costs too much. Falling knives indeed. Thanks for the input.
Cape Coral / Fort Myers Florida Area, this area is dropping jobs by big numbers. must sell signs are up all over with prices lower every week, help wanted signs are long gone. I see alot of u-haul truck driving north. things dont look good here.
denial is so real in south florida, i dont talk to people about it. it is like people think, (we deserve the money we will earn from this house). there is so much inventory and no one can afford it. the palm beach post claimed last week that 90% of its residents can not afford a home of any kind using a traditional 30 year loan. the bad part is there is still homes being built everywhere and many condo - condo conversions on the plate. fort lauderdale beach and hollywood has nothing but cranes in the air. the said part that no one talks about is the priced out individuals or people who brought homes with adj or sub-prime rates. these are your perspective buyers of homes. not everyone in the northeast or overseas are going to buy homes in america for ever. the dollar is weak, so why invest here now. retirees are leaving (9% of all retire areas are empty. talk to everyday working people. look at the job market, especially govt. jobs. there are tons of jobs. then look at the pay and add the numbers up. these salares with two people cant truly afford a 200,000 home. its so crazy now that at a church my family goes to for 3 weeks in a row, there was announcement that a family is leaving. tenn, georgia or carolinas. BEN, get a copy of the saturdays’ palm beach post and sun sentinel. i have co workers who are trying to sell for months and nothing. one guy reduced his price 100,000 and still nothing. 450,000 to 350,000. lastly, i know one govt agency that is not hiring any more people that make 30,000 to 60,000, but reclassifying the positions, at lest 20 - 25 new positions in the next few years to lower salary positions. they cant recurit anyone to come down to south florida and they have more success with lower income positions than professional income jobs. and to be a teacher in south florida? parents better be prepared for 40 - 50 students per class real soon. teachers are leaving in droves. this bubble is pure greed and selfishness. i never thought about making any more than 5% per year on my housing when i lived in south florida. now that i move, my family tells me what is going on. they saw what i did with housing, brought two homes and paid them off and moved to north carolina in 7 years. when you house doubles in value i moved and put down at least 20% toward the next house. i get instant equity. after 50% of the house is paid off, i take out an equity loan of 20%, use 50% for basic need (paid off a car) and and 50% of stocks, bonds, mutual funds. i still have 30% of my house paid off and sold one more time to move to north carolina, buy my dream home and buy an apartment complex for graduate students. and i have raised rent every year, because the housing cost when up. i make more more off the rentals than the true value of the rentals. instead of selling it off in 15 years, i can do it in lest than 10 at this rate. dump it and my house is paid off. i travel overseas at lest once a year and went back to school. by the time i am 50. i have my home paid off and teaching at some university with no debt!
=)
Not that I know any of them personally, but I think people on the financial side of the real estate industrial complex have to be aware of what is happening. Why else would there be layoffs? Why else is inventory skyrocketing? As for the rest of the general public, in my opinion the truth remains an utter heresy and, in some cases, an unacceptable personal challenge. The latest talking point: “it’s a buyer’s market out there right now.”
And by the way, the idea that Florida has a strong economy without real estate/development is absurd. We don’t manufacture anything; there are no mineral resources other than phosphate; our agricultural capacity is shrinking as farms are turned into sprawl; tourist, call center, and retail jobs pay terribly; and the workforce is alarmingly badly educated. Besides the weather, which only was made tolerable by air conditioning, the only thing we had going for us was cheap land. Now that’s gone. We are in deep, deep trouble.
You are right, insiders are well aware of what is going on. Witness Robert Toll’s sales of his personal stock LAST SUMMER at the absolute height. He saw what was coming. Watch what they DO, not what they SAY!
Said so well !
Its crazy here in the Winter Haven ? Davenport area of East Polk County.
The newspapers keep a lid on it; but a trip up to the Four Corners area of north Polk puts a smirk on my face everytime I drive by……literally hundreds of foreign-flipper owned properties for Rent / Sale….either Realtor or FSBO..
Bandit signs are starting to spring up here in Winter Haven as well; where according to the MLS we currently have ~700 SFH’s For Sale….the 33880/33881 zip area only has about 65-70,000 people…In Lakeland I bet the inventory numbers are well into the thousands…
Its funny to go to the tax assessors website and see where many of these properties were bought in the last two years and the current bagholder, from out of the country or out of state, expects a quickie 50%-75% appreciation on their investments.
MANY people here in Central Florida, have already cashed out over the last 1-11/2 years and half-backed up to Tennessee or North Carolina where there are better and more plentiful jobs……a guy that I worked with over the last ten years divorced, sold his 3bdr/2ba cinderblock hut near Crackville and bought a brand new 4/2 with a double car garage on 1-1/2 acres near Maryville TN and paid CASH.
I am hanging on….I love Florida and will weather the change….but instead of a downpayment a house with my $ 10,000 I saved from my secure state job I will buy a nice fishing boat from one of the distressed noveau riche down here…..
In Spring 2007 I look for Cash to be King……
This is an excerpt from today’s Barrons:
A Free Pool Means Housing Trouble
Housing Industry Overview by JMP Securities
600 Montgomery St., San Francisco, Calif. 94111
July 17: Florida appears to be in serious trouble. Following our recent Florida trip, which focused on the condo market in the Southeast and Southwest coasts of Florida, this time we spent three days touring three of the largest [housing] markets in Florida including Orlando, Tampa, and Port St. Lucie/West Palm Beach to better assess the current situation in the Florida single-family housing market.
What we observed and the conclusions we draw in this report are in many ways similar to our previous observations and may seem dramatic, but we believe they speak of the speculative excesses over the last couple of years in this market.
“Turn the Key and the Home is Free!” This headline comes from a two-full-page ad in the Orlando Sentinel. It refers to a promotion for which Lennar is offering to give away 110 homes in Central Florida next month for visiting one of their communities and participating in a drawing…We found several promotions, including:
“Your first-year mortgage is on us.”
“No money down. No closing costs.”
“Free pool, $1 moves you in, 12-month locked-in rate, lower your payment with a 50-year loan.”
“Guaranteed pricing is here — if at the time of closing, the price of the home has been lowered, we’ll reduce the price to match”…
“Zero, Zip, Nada, No matter how you say it, it still means no money down!”
“Guaranteed buy-out program for your present home.”
Sold-out communities are ghost towns. Many of the communities we toured that were nearly sold out are essentially ghost towns. We would characterize them as about 20% to 40% occupied, half likely by renters. The remainder consists of unoccupied homes, most of which have lockboxes and for-sale or for-rent signs either on the lawn or in their windows. Several of these homes are for-sale-by-owner, thus they do not appear in the inventories reported by the Multiple Listing Service.
We spoke with many of these investors and their brokers. Most have sat on these empty homes for six to eight months, and though they may have dropped their asking price from their initial levels, they’re still asking for a few thousand above their cost…Very few are mentally prepared to accept losses. A few…are asking for prices that are 10% to 20% below “market” prices, and yet have received [no] offers.
50 year loan!!!! Are you serious????????????
Ben,
This is being posted using Linux software, which often doesn’t attach to the correct post. I don’t know why.
But, in response to your question……The Florida Market is at a cross-roads. People in Real Estate DREAMLAND juxtaposed by rising inventories and BIG DISCOUNTS.
As an example, a girl I work with has been thinking about adding on to her house, but as an alternative has gone shopping recently.
In Palm Harbor, last week she told me about a NEW CONDO project 3/2 about 1400 sq. ft. Sale Price…..$199,000. Includes S/S upgrades, granite countertops, etc, etc, AND they will pay first years FEES/ ALL closing costs/ and MORTGAGE PAYMENT.
I almost was ready to sign up myself.
But in the same vein, she came in yesterday and has been looking at another $500k house that she really likes and wonders if she can really afford it…….on her $40k salary.
She has NO BUSINESS looking at properties like this, but someone is putting these ideas in her head……..”Well give you a 1% first mortgage, with a graduated payment…..blah, blah, blah.
It makes me want to puke!
Conversely, near my parents in Tampa suburbs sits a HUGE MOTOR home outside a modest 1500 S.F. house, which 5 years ago would have sold for 80-100k. I don’t know the price, but similar asking prices have pushed 250k.
They have an OPEN HOUSE, everyday of the week, ALL day long, sitting on the front porch of their virtually empty house, while living in the motor home. This has been going on for at least 6 months. NO TAKERS. I don’t even think there are many lookers.
Meanwhile, the Clearwater Beach “condos” continue to build, while others that have been on the market for as “conversions” for over a year are still “FOR SALE”. That includes ALL the other beach communities as well from Jax Beach to Ft. Lauderdale down the east coast and Panama City to Clearwater down the west coast from the panhandle.
Everyone’s still trying to get their retirement pay out of house flipping, while newcomers try to sort out the numbers….huge inventories and stagnant sales.
It is truly a market in TRANSITION. Most people, I believe, still think that housing is the next ENRON, that prices will rise into the stratosphere, and they will be rich.
Comparing this to the STOCK MARKET FRENZY, Florida is in May of 2000. The fall has started and people have realized some losses, but they are still optimistic that prices will “recover” and we will continue the upward trend to everlasting prosperity. They are beginning to have some doubts, but are still mesmerized by the fantasy world of the past 5 years………………..Give it another 4-6 months before reality sets in.
“The fall has started and people have realized some losses, but they are still optimistic that prices will “recover” and we will continue the upward trend to everlasting prosperity.”
This is what people just don’t grasp about real estate. Pricing does not hump up and down, like their mutual funds do. Once a firm trend is underway (whether up or down) it just keeps going, until there is a fundamental reversal. These trends last for years, or decades.
Excellent point.
I think most people are right - housing will be the next Enron.
I want to start out by saying that Jacksonville is a little bit different than the rest of FLorida. Jacksonville is very blue collar compared to the other cities in Florida (it’s kind of the armpit of Florida). The area has fewer retirees and has less of a tourism based economy. A large part of the economy is based on shipping, transportation, military, etc.
With all of that in mind, we have five times the housing inventory of this time last year. Nothing is selling and prices are dropping. But, the general public has no idea about the crash. The local newspaper has plenty of articles about how real estate will keep skyrocketing due to healthy job growth. Most people not in RE believe this. What the average person doesn’t understand is that the vast majority of jobs coming to NE Florida are $10/hr jobs that can’t afford $500k homes. And, without a large number of retirees, there are very few people who can afford new homes. Things are only going to get worse.
I think the real Florida crash is going to come right after the first 2006 hurricane. Things are softening up very quickly and I think one good storm is going to have devastating affects.
Wow , what a mess . I just wouldn’t want to buy into a ghost town tract that might have alot of foreclosures from flippers .
The very “flippers” that helped the builders raise prices are now thorns on the builders side in these overbuilt areas .
Flippers can’t establish prices because they have no taste and don’t really know the neighborhoods . Flippers will buy anything ,sight unseen . Flippers never compute rental ratios like real investors do or consider who they are going to sell to . Frenzy speculation is all it is .
There are alot of bagholders out there in Florida that can’t find a greater fool now .
A lot of us assume that builders have a big cushion of profit they can cut into. Maybe not. They could have been waiving their hands collectively, at various cost overruns and fat bonuses, thinking that they’d never have to cut prices back to “real buyer” levels.
Throw in Sarbanes-Oxley writedowns next year, and this could be a real problem for their books.
Homeowners hit hard as adjustable-rate mortgages reset
Can families absorb the shock? Some can; others prepare for bankruptcy court
(St. Paul Pioneer Press)
… bankruptcy attorneys around the Twin Cities say they’re seeing more homeowners throwing in the towel after their adjustable-rate mortgages adjusted, leaving them with heftier monthly payments.
As interest rates on some $2 trillion worth of first mortgages in the U.S. reset over the next three to four years, industry watchers wonder what the economic fallout will be.
“I had four new clients yesterday and all four were adjustable-rate mortgages,” Barbara May, a Roseville bankruptcy attorney and a director of the National Association of Consumer Bankruptcy Attorneys, said recently. “I’ve already had another one this morning.”
One of May’s clients came to her after an interest-rate reset drove a monthly payment up $600. The Smiths’ attorney, Curtis Walker in Minneapolis, said he sees a couple of such cases a week. Arlene Smith said that when she was sitting in Walker’s waiting room, she overheard his paralegal telephone him to say, “I have another ARM in here.”
“This is going to be a big mess,” said Walker. “I think it might be really good for my business and really bad for this country.”
Filing for bankruptcy may be an extreme example of what can go wrong. Yet there is little dispute there will be plenty of what economists call payment shock to go around as homeowners start shelling out more.
Another group at particular risk for payment shock are borrowers who chose ARMs around 2002 and 2003, when interest rates were at rock bottom, and are soon to experience their first rate adjustment.
Altogether, about $400 billion in ARMs will reset this year. About one-quarter of the total pool of first mortgage loans in the U.S., or about $2 trillion, carry interest rates set to adjust in the next three to four years, according to an analysis by LoanPerformance, the San Francisco research unit of First American Real Estate Solutions.
If a $250,000 ARM resets from 4 percent to 6 percent, the monthly payment for principal and interest jump from $1,094 to $1,499. That’s like dropping a new car payment into the budget.
What worries economists is whether consumer finances are solid enough to withstand the payment shocks.
On top of this, sliding home values can shut off mortgage refinancing as a way to tidy up debt problems, since lenders probably won’t make another loan to people whose mortgage is worth more than the value of their home.
Full article at
http://www.twincities.com/mld/twincities/business/15096014.htm
If $600/month pushes you into bankruptcy court, you have bigger problems than a house.
Any reason one of the “owners” couldn’t get a second job to pay the $600?
They already have second jobs. What you mean is getting a third job.
Exactly
From all of this thread, it sounds like all of Florida is for sale.
Florida Flipper Houses for all.
$600 mortgage payment + $100 gasoline + $50 food + $100 air conditioning.
Most people live check to check. Just the food and gas costs alone would cause strain.
It was idiotic for people to take out an ARM when rates were at historic lows (or sleazy for banks to push them to make more money on future resets). ARMs have been around for awhile, but only used when interest rates were high. In 1983, I bought 2 quadplexes using an ARM–the interest rate was 12% then!! (Why did I buy? before Reagan, I was in the 44% tax bracket for only two years and needed a write-off). The ARM has worked out very well for me, down to 6% two years ago before I paid it off. Why would you get an ARM when interest rates were 5%? What are you going to do when it goes to 12%? Has anybody who bought lately been told that interest rates could go to 10 or 12%? What is their plan when that happens? (It will happen again some-day).
Yes, Dave, you are absolutely correct.
It WAS idiotic. But then, when you stand a chance to pick up an easy 100k by buying on LEVERAGE, much more than you can afford, you are not concerned with future costs…………..
You plan to UNLOAD and collect your easy money.
That’s what this whole ‘game’ has been about, and now all that’s left is the unraveling of the scheme……………………………
diogenes.