Slimming Down And Burning Off Inventory In Florida
A pair of reports from Florida. “Southwest Florida home builders, many of whom are still finishing residences ordered last year, are bracing themselves for the day when those jobs dry up by trimming their work forces through attrition and, in a few cases, through actual layoffs.”
“‘WCI has adjusted the size of its work force to be more consistent with the current business environment,’ said Steve Zenker, a spokesman for the company. ‘As stated previously, new orders through the first part of the year have been much lower than experienced during the same period in prior years.’”
“The picture is much the same nationally, but may be more exaggerated here because of the extent of the boom in 2004-05. ‘The market is definitely slowing down,’ said Michael Carliner, an economist with the National Association of Home Builders. ‘I think the outlook is for declining employment by sometime next year, perhaps before then.’”
“Builder Lee Wetherington seemed to agree: ‘We had too many speculators. Now we’ve got to burn all that inventory off. It will be burned out easily by this coming season. That is why summer and fall of next year is when you’re going to see the uptick. That is how business works.’”
The Gainsville Sun. “Condominiums in Gainesville are going up and being sold in record numbers, particularly around the University of Florida campus. One under construction is asking for more than half a million dollars: $546,984 for a three-bedroom, three-bath unit.”
“Realtor Eric Wild said the price tags are justified on a variety of fronts. ‘The contractors aren’t getting rich; they’re not getting greedy,’ he said.”
“‘For one, it’s the quality of construction that warrants the price,’ Realtor Bonnie Seide said. ‘It’s top quality, steel and brick exterior, granite countertops in the kitchens, great security and excellent management. And the location is highly appealing to buyers who want to be in a lively downtown area.’”
“Even though occasional outdoor events could disrupt someone’s sleep ‘when you’re four stories up, it’s not disturbing,’ she said. ‘Plus, some people want that sort of noise.’”
“John Marti said the amenities make the price worth it, with ceramic tile floors, wood cabinets, granite countertops and high-speed Internet access. ‘Internet, it’s like water,’ he said. ‘You really have to have it.’”"Realtor Wild said parents, many of them alumni, see value in the long-term investment. ‘If they bought a house in this area, in a couple of years they would be stuck with an old house,’ he said. ‘These will hold their value.’”
Rich Dad, can you buy me a condo in Gainesville?
Then the kid throws mad parties there, Dad thinks it’s a great investment, then some drunk kid falls off the balcony. Dad gets sued, the condo drops in value, and the kid becomes a college drop out. Anyone speculating on Condos in a pure college town in FL deserve to get screwed if they spend a half million dollars for a condo there.
Realtor: “It’s different here.”
They say they don’t ring bells at the top, but it’s so deafening I have to cover my ears.
Here’s another one from Florida in today’s Palm Beach Post. New Lennar house goes from $490K down to $315K.
http://tinyurl.com/hqhg9
“Obviously there’s demand,” Ackner said. “Wal-Mart brings strong traffic to the area.”
With sales still sluggish in the investor-laden Martin’s Crossing development on Kanner Highway, builder Lennar Corp. has resorted to dramatic discounts.
Real estate agent Howard Fishman’s friend and client closed last week on a five-bedroom model in the community. The price: $315,000.
The buyer, who lives in Palm Beach Gardens and did not want to be identified, months ago walked away from a $38,000 deposit on a $395,000 three-bedroom Martin’s Crossing house.
The loss smarted then, but now the investment could prove a boon: Lennar, eager to sell homes, let him use that deposit toward the new contract, Fishman said.
“So as far as Lennar is concerned, they truly sold this house for $277,000,” he said.
The same five-bedroom house was originally contracted for $490,000, said Mike Morgan, a Stuart-based real estate broker who has accused Lennar of shoddy construction practices and is in a legal battle with the company.
Morgan’s brother held the original contract and walked away.
“That’s only the tip of the iceberg of what’s going on,” he said of the price-slashing.
If it goes down that fast where will it stop? Talk about catching a falling knife …
$490,000 to $277,000, thats approaching a 45% hair-cut! Look out below! I do remember 1-2 months ago there was a story posted here about wanna-be flippers holding inventory in this very same development…Martin’s Crossing. Anyone have an update on how those Martin’s “investors” are doing.
Just for fun, I found the article on the flippers at Martin’s Crossing.
Home flippers’ investments flop
Here is a choice section:
Elizabeth Weed and her cousins were among the first-time buyers who got sucked into the craze. Early last year, they organized a girls’ day out to the sales office at Martin’s Crossing, where they quickly found themselves buying the pitch.
“The exact words that were told to us were, ‘Oh, you’re going to make money. It’s just a matter of how much you want to make,’ ” said Weed, 59.
Within days, each of the four women plunked down a $25,000 deposit on a 1,600-square-foot Lennar townhouse in Martin’s Crossing, locking in the $249,000 price.
Now, three of them are considering a lawsuit against Lennar and Centex, claiming the developers misrepresented how visible a nearby trailer park would be from their homes, and the fourth lost money on the home she finally managed to resell.
“It’s not as if we were these great big investors. The four of us said, ‘Let’s get together and do this.’ Never, ever, ever again,” said Weed, who splits her time between Stuart and Breezy Point, N.Y.
Gosh, a bunch of clueless would-be investors who do no research nor due diligence get burned on their investment. Who could have seen that coming?
But no securities broker could ever make the claim real estate brokers make about investments. Some of these law suits will stick. Perhaps not this one.
Lennar and Centex no doubt are sleazy, but I’m sure these ladies didn’t just open their checkbooks and write $25K checks apiece. (If they could do that, they wouldn’t miss the money.) They had plenty of time to thing about it as they gathered the funds, went through closing, etc.)
And since when is an “investment” a sure thing? They got what they deserved.
Ouch…That is like going from a mullet to a military cut…What
a haircut!!
Sucks to be a FB in that development. Imagine paying $490,000 when as of TODAY you can pay $315,000 for a home that according to Mike Morgan is built to substandard code. Nah, no bubble here folks .. only a 35% reduction in price. Nothing to see here.. keep moving. Keep buying. Prices always go up.
BWAHAHAHA
It sucks more to the actual homeowner, great job by the developer.
you know there are probably legions of out of town investors not keeping up with their “investment.” imagine their shock when their little side project is at least $100,000 underwater.
leverage fun just isn’t for hedgies these days!
I’ve been telling people in florida that their new homes could easily drop 40% in “value.” Now I’ve been proved correct.
Of course, the “value” was never really there in the first place! Basically the housing industry colluded with the lending industry to give HUGE loans to people with not enough income to make housing prices rise.
(And there’s no sour grapes here! I own a home in California–paid for–and land in Florida. I do not care what they’re “worth”. Let them drom 50% in value, and I’d be perfectly happy.)
Robert,
Do you remember the R/E troll that was quoted saying somethin absurd like, ” The prices have fallen but the VALUE hasn’t?” That is a classic in the same line of the permanent plateau.
Value; (n) an amount expressed in money or another medium of exchange that is thought to be a fair exchange for something.
As an ex-UFL employee, I’d like to know who is going to pay half-a-million dollars for a condo next to campus? Most students are packed 3 or 4 deep into a $600/month appt. And I don’t know of a single professor who has that kind of cash (outside the deans who have huge houses of their own). There is nothing else in downtown except the hospital and small businesses.
But of course all the rich alumni will buy up a half mill condo for there precious daughter to stay in… To think she could live in a apartment without granite countertops, tile floors, let alone a dorm room, would be just sickening… And on top of letting her live the life in college, its a great investment because they only can go up 15-20% per year.
Gainesville is different!!!
The same thing happened in Texas during the oil/RE boom. Suddenly, it was a great investment to buy the college student a house near campus. It’s really a justification for speculation.
Excuses are the next bubble. Get in early.
“…’If they bought a house in this area, in a couple of years they would be stuck with an old house,’ he said. ‘These will hold their value.’”
Translation: “These new houses are good, not like those old crap boxes we used to build around here, these are some sturdy, high quality homes here, and they never go down.”
High speed internet, what is that worth? A few hundred $ for an install, maybe. Yeah, I’ll over-spend for a house because it has cable hookups already installed, cable, it’s like water, you have to have it.
Same idiot thinking as stating that granite is such an overall quality improver. I just don’t get it. Sure, granite may be nicer than a base laminate countertop, but you are only talking a couple grand difference.
And it will immediately date the house to 2005 just like a butcher block counter says 1985. (laminate is timeless)
Good tile work is as close to timeless as you can get. Laying tile involves skill and time - two qualities not often spent on a typical slap-it-together house.
The only problem I have with tile is everything that falls on it shatters. I’ve never had granite so it might be true there, laminate (or the wood underneath it) has a little give.
Tile is hard to clean too, especially if you don’t keep the grout sealed. Just try to get grape juice out of grout.
$550K for a condo in Gainesville? Come on. But of course:
“‘For one, it’s the quality of construction that warrants the price,’ Realtor Bonnie Seide said. ‘It’s top quality, steel and brick exterior, granite countertops in the kitchens, great security and excellent management.
Steel and brick, you say? As opposed to what, breadsticks and bondo? And what does security and management have to do with construction quality? If I post a Marine outside my front door, does that make my house stronger? When the next hurricane comes my way, maybe I can hire someone to “manage” it around my house. What an idiot.
Gainesville
What, Gainesville (with a spectacular view of drunk and crazed college students throwing up on the streets.
“That is why summer and fall of next year is when you’re going to see the uptick. That is how business works.’”
Oh the proverbial ” wait until ( fill in the blank) and then you’re going to see the uptick.” How many times can they spew this garbage? I cannot belive anyone would still fall for such nonsense.
“You see Mr. & Mrs. Seller, don’t worry that your upside down in your overpriced house and it is going to reset 3 points higher in 3 months…. BECAUSE NEXT summer the prices will go back up and you will be able to flip this house for a gazillion dollar profit!!! That is how business works!!!”
Another fine graduate of the Ralph Kramden school of business.
No doubt - what happened to the real estate industry-saving Spring season? It is now the Hurricane-infested Summer and Fall? Eh?
Oh the proverbial ” wait until ( fill in the blank) and then you’re going to see the uptick.”
BUY ON THE DIP! YAY! I saw that movie in 2000. I didn’t like the ending.
Bow to the GOD of Endless Appreciation. Walk slowly, slowly. Now stop. Hand over the cash, come on. Now turn around and walk away.
“Bow to the GOD of Endless Appreciation.”
I like that one!
“Buy on the Dip 2″, the sequeal in October 2002, was the best damn movie ever made. Don’t tie up all your money on the first movie.
I earned my Master’s degree at UF. Go Gators!
Gainesville is a college town in the middle of nowhere. It’s 75 miles from Jacksonville and about 100 miles from Orlando. The county has a population of about 200,000 and Gainesville has a population of about 100,000, and that includes the student population. I estimate total enrollment at UF is between 40 and 50 thousand students, and faculty and staff adds about another 15-20 thousand people, maybe more.
Unless you plan to teach at UF or practice medicine at the affiliated Shands Medical Center, Gainesville is only a place to pick up an education and then move on.
Half a million dollars for a condo in Gainesville? No way, Jose.
“It will be burned out easily by this coming season”
Unless he’s speaking arson here, the only thing that will be burned out will be his life style….another season, same ole rhetoric…
The Treasure Coast area, Martin and St. Lucie Counties, are going to get plastered. The main employers are, Government, Hospitals, Schools, retail, CONSTRUCTION. This place survives on construction, without it the other sectors will also suffer. I recently moved from this area and I can tell you that many of my friends still have no idea how bad this is going to get. We are talking about construction workers who bought homes from the companies they work for, with I/O and ARMs. Its a giant avalanche of dominos that is starting to fall and most of them have no way out (even if they wanted to).
rage, I was talking to a realtor friend in Brevard county. He said
that to sell a SFH you would have to cut 20% to 30% off last falls
prices…It is already happening.
NAR existing home sales are out. The market is leveling off. Buyer’s will be coming back. Builder stocks up 1-2%. A successful soft landing has been engineered by the Fed, inflation is contained and the Fed will pause next month. Great news! (calling my bullion broker now)
Median prices of single-family homes are up 1.1% in the past year
MY C/D’ are at 5.1%!!
And inflation is ~4%, so there is an immediate 3% loss of investment.
OK, lets not compare home prices with inflation as they were defying inflation in the last years. And not to the CD rates. The 1.1% increase (or negative 2-3% in real terms) is so far near a much more deserved correction. I do hope it is only beginning to a very severe connection.
The inventory of unsold homes rose to a record 3.725 million, a 6.8 month supply at the June sales rate, the highest since July 1997.
“I hope we are hitting bottom,” said David Lereah, chief economist for the private real estate trade group, which is predicting sales of about 6.60 million this year.
__________________________________
KEEP DREAMING!!!
I particularly like this quote from Lereah…
“Sellers should expect lower prices, Lereah said, adding that he wouldn’t be surprised to see single-family home prices fall nationally.”
If my mind is recollecting correctly here, I can vividly remember a top selling point the NAR was pumping is that RE has never and will never go down in price YOY… Oh well, on to the next sales pitch!!!
They all told us this WOULD NEVER HAPPEN!!
That guy is an idiot and only a fool can’t see it. He talks out of both sides of his mouth. Why should prices fall nationally if, as he has said many times, there is not a national housing bubble?
destinsm
where did you see the Lereah quote that he wouldn’t be surprised if prices fell? I didn’t see it in the release?
http://www.marketwatch.com/news/story/Story.aspx?guid=%7B86EBF65E%2D67C0%2D4D68%2D97AA%2D9D76B47CEB18%7D&siteid=
wow - that’s huge. Thanks.
“bottom”??? But prices are still rising! (OK, not even enough to cover taxes, much less inflation, but I digress.) how can that be a bottom?
Eh, anyway we know that there’s no “national housing market” and that “prices never go down”. Fundamentals, kinda like F=ma and you can’t push a rope. So we’re safe from ever seeing a “bottom”.
(Yes, David, “hope” that ever-useful investment tool.)
HivTV last night had 2005 buyers poudly pimin thier 5% equity gain- how about in 06 homie ?
04 pricing by Thanksgiving or less
“we’ve got to burn all that inventory off. It will be burned out easily by this coming season.” …which season was that?
….what do they say about a fool ,and his money? If you are paying 500k in Gainesville this late in the game you really need to have your money given to a trustee so you don’t hurt yourself as you are mentally challenged..
As a current resident of Gainesville (renter) I know a few things about this dump. There is no shortage of housing here and condo conversions rampant. Over a thousand condocons have hit the market recently and they are not selling like hot cakes, will return to rentals. There is a hefty inventory of existing condos for sale also. Almost all condos I’ve seen in GNV are poor quality construction, have no garage (or covered parking for that matter) and very few justify the prices being asked for them. So what if there are a few expensive, luxury condos being built and sold? Doesn’t mean that this is a non-bubble market. The overall local market here is swamped with inventory and many homes sit on the market for months. Builders are still putting up homes and the “For Sale” and “For Rent” signs are popping up all over the place.
You clearly didn’t read the press release! Gainesville is now the place to be!
“Our location in the north central part of the state is a positive factor for the Gainesville market,” says Deborah Minck, president of the Gainesville-Alachua County Association of Realtors and broker-vice president of Tioga Realty Inc. in Gainesville. “The babyboomer generation is already starting to purchase retirement homes and second homes, and Gainesville is a prime market for them due to climate, location, the fact that we’re a university town and that we have one of the No. 1 medical centers in the nation, the University of Florida’s Shands Healthcare facility. All of these factors make Gainesville very attractive to a myriad of homebuyers.”
Same tired excuse of why housing should be expensive. The last people a bunch of old farts want to be living around is immature college kids.
There are plenty of good medical centers everywhere. The Gainesville climate is some of the worst of Florida. It’s temperate in the fall/winter, but hot as hell in the summer without any nearby beaches to provide sea breezes. If anyone wants to live in GNV, they can just as easily experience a similar environment in Alabama, GA, or SC for 1/2 the price.
Ms. Minck has correctly parroted GNV realtor talking points, big gold star for her. For a true slice of Gainesvile life, anyone interested in moving to here should first tour the WalMart 1 mile east of I-75 on Archer Road. If that doesn’t persuade you to find somewhere else to live, then this is the place for you.
I wish I had done that before I took a job here, somethings you just learn the hard way.
you’re not kidding!
The reporter for the Gainesville Sun used to be the gardening section editor. She knows very little about the real estate market and, in this case, has been taken advantage of. The condo market in Gainesville is over supplied. There have been far too many condo conversions and the buying season is spring, for the fall semester. Panic has set in. Most of the conversions are closed projects, not listed in MLS. Now that things are slowing down these developers have “opened” the projects with many listings added to the MLS system. This has resulted in the skewed statistics showing an increase in market activity and median price levels. I expect that the price reductions will be seen after school starts in August. Many of these projects will return to apartment use.
New Florida numbers are just out, and they don’t look so great:
http://media.living.net/releases/JUN%2006%20Stats%20Release.htm
Excerpt from the FAR release:
“ORLANDO, Fla., July 25, 2006 — Rising mortgage rates, rising inventory levels, rising insurance premiums and higher energy costs impacted Florida’s housing sector in June, as the state’s housing market continued to adjust following five record-breaking years.”
Wow, what an epiphany!
If only we had heard that before ( sigh)…
Another graduate from the Jeff Spicoli school of Economics and ear was removal.
“The Gainsville Sun. “Condominiums in Gainesville are going up and being sold in record numbers, particularly around the University of Florida campus. One under construction is asking for more than half a million dollars: $546,984 for a three-bedroom, three-bath unit.””
Who in the hell would purchase a condo for that price in a college town??? Are they going to rent it to college students??? WTF
“‘For one, it’s the quality of construction that warrants the price,’ Realtor Bonnie Seide said. ‘It’s top quality, steel and brick exterior, granite countertops in the kitchens, great security and excellent management. And the location is highly appealing to buyers who want to be in a lively downtown area.’”
This is hilarious. I lived in Gainesville when my father taught at the University there. It’s one of the ugliest, dreariest, most depressing places in Central Florida. The downtown is prehistoric; the only thing lively there is the strang plant growth that seems to be overtaking the entire town. I would not accept a condo there as a gift, even if it cost ten million dollars. I couldn’t wait to move, and now years later I still have nightmares about Gainesville.
Ms. Seide is clearly insane, an idiot, or a total sleaze.
Possibly all 3, I assume thats an option. I have never been to Gainesville, only Orlando and that was bad enough. I thought people had to be parolled to places like that. I never knew they went willingly.