‘Waiting For The Market To Hit Bottom’ In Florida
The Florida Press reacts to the June home sales. “Roxanne Arnold quit her job and started flipping houses. But now a three-bedroom Fort Lauderdale town house she owns has sat on the market for more than year, and things are so slow that she just got a part-time job.”
“‘Everyone that needs a home to live in has bought one, and the people that still need a home can’t afford these prices,’ she said. ‘I would not call it a buyers’ or sellers’ market, because there is no market.’”
“‘I am advising all sellers not to blink,’ said Craig Studnicky, (who) primarily sells new condos. ‘If 1,500 people a day are moving to Florida, the demand curve could catch up by fall.’”
“Condo owner Arnold is willing to wait, although not much longer. Already, she has come down from her initial asking price, and she notes owners of similar units nearby are dropping prices. ‘You can’t be greedy these days,’ she said. ‘The old market was just a freak thing. They are out of their minds if they think it will happen again.’”
The Palm Beach Post. “The zoo is not the only place to look for ostriches these days. A lot of local homeowners also have their heads in the sand, analysts say, because they refuse to believe the unprecedented five-year real estate boom is over. ‘It’s ostrich investing,’ said John Pankauski, a West Palm Beach investment lawyer. ‘There’s a difficulty admitting they made a bad choice, so they don’t deal with it.’”
“‘So many properties are highly leveraged, 90 percent to 100 percent mortgaged, or even more, especially by investor-owners holding them as third, fourth or fifth properties, prices will not free-fall until renters can no longer cover the mortgage and banks foreclose,’ said Clemmer Mayhew, a Palm Beach County Realtor. ‘Then lenders realize perhaps they loaned $360,000 on a… property actually worth only $275,000.’”
The Sun Sentinel. “Broward County’s existing single-family home sales plummeted again in June. ‘It’s a stare-down between buyers and sellers, and as time passes, the pressure’s on the seller, not the buyer,’ said housing consultant Jack McCabe.”
“Many investors are now leaving real estate. ‘We knew condos had to collapse because there was nothing there supporting it, except predominantly speculation,’ said Lewis Goodkin, a Miami-based consultant.”
“Homes sales on the Treasure Coast dropped significantly in June. ‘Prices are going to drop like a lead balloon in the coming months,’ said McCabe said. ‘I think people realize that if they wait it out a little, they’re likely to find even better deals down the road.’”
“Existing home sales in the Bradenton-Sarasota market took a 40 percent tumble in June, and the median sales price fell $10,000 from a year ago. (Realtor) Barbara Edwards said she is still seeing people choose to leave the area rather than deal with rising insurance and taxes.”
“‘We’re seeing a lot of people, whole families, moving to places like Tennessee, Georgia and North Carolina,’ Edwards said.”
“Local condominium prices continued to fall in Brevard County, the Florida Association of Realtors reported Tuesday, down 6 percent from May and down 19 percent from June 2005. The number of existing local condo sales fell to 55 in June, down 261 in June 2005.”
“Ray Wright, owner of a Satellite Beach company that buys and sells local real estate, said he began noticing an increase in local foreclosures early this year. ‘People are waiting for the market to hit bottom before they start buying again,’ Wright said.”
“More than six months into a market correction, existing single-family home prices in Naples showed a year-over-year decline in June as sellers cut prices to lure buyers. The inventory of 9,700 homes and condos on the local market has stabilized at roughly an 18-month supply.”
“Naples-area single-family homes sold for a median price of $451,000 in June, down 8 percent from June 2005’s $491,400 median.”
“The post Hurricane Charley seller’s market is over. Zooming prices made many owners resemble cartoon characters whose eyes suddenly flash with dollar signs. Those days are over. Welcome back to reality. Locally, the Punta Gorda area reported 323 sales of existing homes during June, the report stated. This represented a 34 percent drop from 490 sales during June 2005.”
“To take one example from broker Ellen McCarthy’s recent listings, an owner was asking nearly $250,000 for a rather modest two-bedroom house with a and swimming pool. After six months, the house hadn’t budged. McCarthy said she persuaded her client to come down to a more realistic $181,000. She expects to have a purchase contract within a few days.”
“Bill Dryburgh, president of the local multiple listing service, said, ‘There are buyers out there, and the buyers are savvy and smart and doing their homework on the Internet. The homes that are priced right are selling.’”
‘When one of the politicians on the stage, state Rep. Ellyn Bogdanoff, R-Fort Lauderdale, wondered aloud when taxes would become so high that people no longer could afford to buy, some in the largely Realtor audience shouted, ‘We’re there.’
Thanks to the readers who sent in these links.
An unfortunate side effect of the “Save Our Homes” amendment to the Constitution. Amazing that anyone could look at the distorting effects of Prop 13 on California’s market and decide they needed to bring it to another state, particularly one like Florida which relies on high turnover of homes.
Taxes in places without Prop 13 protections are the equivanent of ARM loans or worse? Q: “How much will my taxes be in 5 yerars?” Ans: “Whatever we think we need to charge and/or feel like charging.”
People who object to Prop 13 either don’t understand it or condemn it because it isn’t perfect. Neither is a valid reason to object.
I understand that taxes must be applied fairly. Two identical houses on the same street should not be taxed at different rates.
Somebody who has lived in House A for 30 years might pay $200 in property taxes while a young family who buys identical House B next door might have to pay $2000.
This is flat out wrong no matter how it might benefit your favored class of people. I don’t pay less income tax because I’ve lived in this country 50 years. I don’t pay less California sales tax because I’ve lived here longer.
Taxes have to be applied equally or democracy will begin to crumble.
Binko for Governor!
With Prop 13, taxes are basically based on **ability to pay** not what your house is worth. People who bought in the 70s are likely to have made less than someone who buys in 2005.
The long-time owners should not have to move in order to make way for newcomers. It’s the newcomers who create the additional burden on our infrastructure, so they should be the ones to pay for it. We need more police/fire/schools, etc. because of the unsustainable population increases caused by people from other states and countries. Considering that the majority of prop taxes go to schools, one could make the argument that the long-time owners, whose kids are likely grown, should not have to subsidize the schooling of the newer owners, who are more likely to have school-age kids.
California has a history of very volatile housing markets. Flippers should not determine what long-time owners should have to pay in taxes. If taxes are too high, new potential buyers can wait until prices are in line with what they can afford. If they can’t afford paying such high property taxes, perhaps people should consider remaining in their home state/country.
BTW, I am a renter, and stand to “lose” based on what you call the “unfairness” of Prop 13. However, I do not feel it is my right to effectively evict someone from their home so my family can take over their home. My family’s housing is not their problem. We can move, if prices to not come down to a level where property taxes are manageable.
This bubble is causing a lot of people to try to place blame in the wrong place. The PROBLEM is LAX LENDING and suicide loans. Just wait. When **the problem** is fixed, voila…the prop tax problems shall be fixed as well.
I understand that taxes must be applied fairly. Two identical houses on the same street should not be taxed at different rates.
That’s EXACTLY the opposite of what Prop 13 does. Sheesh, the amount of ignorance surrounding Prop 13 is astounding. People who bought in 1976 are taxed at 1.81% of their purchase price while people who bought in 2006 are taxed at 1.00% of their purchase price.
Somebody who has lived in House A for 30 years might pay $200 in property taxes while a young family who buys identical House B next door might have to pay $2000.
So? Would you like your sales tax based on how much you paid or based on how much the stupidest person most overpaid?
I agree. Without save our homes, many of our working people - teachers, nurses, police and firemen, restaurant and retail workers - would be forced out, replaced by wealthy retired people that contribute no production to the economy. It’s aleady a huge problem, we already can’t get new people to come here to do those jobs because housing is so expensive.
You are acting like 2% increases in property taxes per year would keep up with the rise in EXISTING infrastructure costs. It doesn’t. In other words, with NO growth in population, or school age kids, Prop 13 on an annual basis pushes more and more of the infrastructure burden to income tax receipts and property taxes of recent homebuyers. Existing homeowners are getting a bigger and bigger discount on the services that they use.
The new homeowners are bearing a disproportionately high share of EXISTING infrastructure costs, not just new infrastructure.
Things with prop 13 have just gotten way distorted.
I do however acknowledge the benefits of prop 13, especially for those who’s incomes are fixed, or lower than average. I would be fine with prop 13, with 1 change and 1 change only:
1. Prop 13 should ONLY apply to your primary residence. I’m tired of hearing how Warren Buffet has a house in CA that is worth $5MM+, but he is paying taxes on it like it cost $500k- (and not paying any CA state income tax either). If you have a second home in CA (ie. a luxury item), or primarily live in another state (and therefore don’t pay into the regular income tax system), then you should be subject to re-assessment.
There are plenty of other ways to help out low-income people who are affected by rising property values. Like, for example, relying on an income tax instead of a property tax to pay for part of government. Or instituting means-tested rebates to senior citizens.
Prop 13/”Save our Homes” does BUNK to help a town house its teachers, firemen, nurses, etc. because except for those who bought in when the market was low the new teachers, firemen, nurses, etc. will have to pay the same artificially high property taxes any new homeowner would pay. Solution: they don’t move there, and you’re left with the elderly fighting your fires for you.
Prop 13 and Save Our Homes have good intentions, like much legislation that has passed, but the effect has been to pass the buck onto younger people. That poor old couple that’s devastated that their $10,000 house is now worth $800,000 can take out a reverse mortgage and EASILY pay off their property taxes.
I agree with the quote about democracy crumbling when privileged groups carve themselves exemptions from taxes. Do we really need to be like Brazil?
You are acting like 2% increases in property taxes per year would keep up with the rise in EXISTING infrastructure costs.
Don’t put words in my mouth. IF property taxes were the only source of revenue AND there were no returns on investment vis infrastructure AND it were possible to proportionately assign infrastructure costs AND there were no growth inefficiencies AND the government could be trusted with the money AND you could make the case that property taxes were the appropriate vehicle AND there were no special assesment districts AND no Mello-Roos and no redevelopment districts THEN you might have a case.
Existing homeowners are getting a bigger and bigger discount on the services that they use.
Evidence? No, really how do you come to this?
The new homeowners are bearing a disproportionately high share of EXISTING infrastructure costs, not just new infrastructure.
Really? Doesn’t seem that way here on the ground. Care to reimburse longtime residents for suffering congestion and pollution and crime that these newcomers are clearly causing and clearly not mitigating?
Things with prop 13 have just gotten way distorted.
Here you’ll get no argument from me.
I do however acknowledge the benefits of prop 13, especially for those who’s incomes are fixed, or lower than average.
And what makes them special protected classes? THat’s the problem with “fixing” Prop 13, everything I hear suggested, even ones I tend to favor all introduce less fairness.
I would be fine with prop 13, with 1 change and 1 change only:
1. Prop 13 should ONLY apply to your primary residence. I’m tired of hearing how Warren Buffet has a house in CA that is worth $5MM+, but he is paying taxes on it like it cost $500k- (and not paying any CA state income tax either). If you have a second home in CA (ie. a luxury item), or primarily live in another state (and therefore don’t pay into the regular income tax system), then you should be subject to re-assessment.
Primary home could work but rents would skyrocket. Add to thisthe business loophole being closed.
RC-
I was responding to someone who claimed that new homeowners should bear a higher burden because it is they who are responsible for service needs.
Despite all the misdirection you throw in there with Mello Roos, economies of scale, etc. doesn’t address my main point.
In a static system, call it Mayberry, nothing new from year to year, same players, same services, but you have inflation, if costs=revenue in Mayberry at the start, and costs are going up by more than 2% per year, and revenues can ONLY go up by 2% per year because it is legislated that way, you have a shortfall. It’s as simple as that. The additional costs need to be made up in other ways.
Because of prop 13, those kind of shortfalls have been made up from new homeowners paying more, increases in overall income taxes, Mello Roos districts for new developments, higher fees for new homes, cutting of services, etc.; pretty much everywhere EXCEPT existing homeowners paying more in property taxes. How can you say that existing homeowners aren’t paying less and less than their share?
The only way you can possibly argue such a thing is if you argue that the cost of running government has been going up by less than 2% per year.
It’s just math.
How would rents skyrocket? Landlords would charge more because they needed to charge more to pay their property taxes? No, they would charge exactly what they are charging today, which is as much as they can given the wages and supply of rentals in the area. The difference is that the value of their property would go down, since all else being equal, the costs to run the property would go up.
The intent for Prop 13 was to protect homeowners from losing their home due to property taxes going up. Let’s do that, but nothing more.
Please show me the masses of poor people who bought houses in the 1970s and are now forced to sell in order to pay taxes. This is a straw man argument. If you are really concerned about the poor elderly (in expensive houses) being able to afford their annual taxes, then put a tax lien on the house and collect once the property sells. Simple. Period. Solved.
You tax property because it provides income services. For the owner-occupier, they are “renting” the house from themselves, and a property tax will tax a portion of this.
The person who is paying $200 per year in taxes is gettting the SAME services from their house as the new comer who is paying $2000 per year.
So tax them the same. That’s fair.
If you’ve got a problem with large government, then work to cut it down in size. “Starving the beast” through low taxes on older owners just pushes the tax burden to someone else.
> If you are really concerned about the poor elderly (in expensive houses) being able to afford their annual taxes, then put a tax lien on the house and collect once the property sells. Simple.
That was the best suggestion I have read so far.
> “Starving the beast” through low taxes on older owners just pushes the tax burden to someone else.
Agreed.
And helps to create the “perfect storm” that seems to be swirling over the market in Florida
Prop 13 is a Good Idea.
Think of it this way. You’re a retired old lady, who bought a cozy house 40 years ago.
All of a sudden, crazy speculators move in to the neighborhood, bidding up house prices with dirty dotcom dollars, money from exotic mortgages, etc. Your cozy $1500 sq/foot house is now “worth” 2 Million dollars.
The guv’met raises your property taxes to match the value, and you, at age 85, have to move because you can no longer afford to live in your paid up house.
Is that fair?
I’m sorry but that argument does not stand up. For one thing Prop 13 was not passed to protect old widow ladies. It was passed because people who already owned homes and other property simply did not want to pay much tax. So they shifted the burden to those who did not yet own.
Why don’t we give the old widow ladies vouchers so they can buy food at 1970 prices? Then poor young couples trying to buy food today to feed their kids could pay extra to cover the difference. It’s ludicrous. But that’s exactly what Prop 13 does with Property taxes.
The primary reason houses are bought as investments and as speculation is because they get favorable tax treatment. One market distortion leads to another market distortion. Pretty soon all taxation is just a game of who can buy the most congressmen. Or, in california, who can fund the biggest propostion ad campaign.
Man is the ignorance running thick and deep today:
Prop 13 was not passed to protect old widow ladies.
This is EXACTLY what happened. Until an old lady out on the street story was pushed in the media Prop 13 was losing. It was widow on the street that put Prop 13 over the top.
“Save the old ladies” was the political rallying cry. But when long-time wealthy empty-nest owners living in view homes up in the Berkeley are paying less in real estate taxes than more recently arrived middle-income families in Richmond condos, you start to grasp the folly…
say my grandparents give me their paid off house in San Diego, they paid something like $50,000 for it back in the 60’s. If they gift it to me (not inherit it), would I get to enjoy their ridiculously low tax rates or would it bump up to the new assessed value of $500,000?
“Gifts of Real Property
As a general rule, under Proposition 13 California real property is not reassessed on an annual basis but only upon a “change in ownership.” Property transferred to a spouse or to a trust for a spouse is exempt from Proposition 13 reassessment. Property transferred from a parent to children normally is subject to reassessment unless it comes under one of two broad exemptions (which generally includes step-children and in-laws) under Proposition 58 (an amendment to Proposition 13): (1) the parent’s principal residence; and (2) other California real property, but limited to a lifetime aggregate assessed value of $1,000,000.”
Prop 13 works *except* in one respect.
My parents were about to sell their home prior to prop 13 as California was on such a spending spree they couldn’t afford the increase in property taxes. Thus, limiting the rate of property tax increases is in my opinion a good thing.
What is bad about prop 13 is that a person’s taxes can only be increased 2% a year (well below inflation). Thus people like my parents whom have owned their home over 30 years pay almost nothing in taxes. A prop 13 rewritten allowing a maximum 5% or 6% increase in taxes per year would be an ok law. Instead of $200 vs. $2000 it would be $1200 vs. $2000.
But the reality is California is the least efficient state and thus the tax money is wasted anyway… For every 3 dollars paid only one dollar goes to schools, roads, welfare, healthcare, police, fire, buildings, etc. The rest is eaten up by the “system.” Something is wrong there…
Neil
People paying $200 in 1976 would be paying $1083 in 2006. THeir tax rate would be 5.41% and the person buying this year would be paying 1.00% . A world best compared to “Logan’s Run.”
You mean 5.41% on the original value of the purchase price of the home.. way back when. which is worth how much now if they sell it?
I voted for Prop. 13. Older neighbors of mine on fixed incomes were selling their homes because they could not afford the increased taxes during the California housing “boom” that was occuring during the 70’s. Houses where I lived ,Costa Mesa, that sold for $30,000.00 in 1970 climbed to $125,000.00-$150,000.00 by 79. The only people that I personally know who disagree with Prop. 13 are individuals, mostly renters(sorry), who didn’t move to CA until the 80’s and didn’t experience the trouble firsthand that rising property taxes caused.
Those of you who disagree with Prop. 13 shouldn’t worry. Prop. 26 passed a few years ago. You now only need 51% (or is it 55%?)instead of the 2/3 majority that 13 specified to pass a bond. Slowly, 13 has been side-stepped.
While we are talking about fair let me bring up this topic. When I use to get into arguments with friends who were against Prop. 13 I would ask them if it is fair that an individual living in CA that owns zero property gets to vote on a bond issue that property or home owners will have to pay for? How about people(renters) who have children going to public school who own no property and thus pay zero property tax. If I recall correctly something like 90+% of property tax in CA goes to the school system. I would only use this anology to show that when it comes to taxes in CA both sides are treated in an “unfair” manner.
A horrible side effect of prop 13 is that many retired folks are stuck in oversize homes they cannot afford to maintain, heat cool etc, because if they move, they would then be re-assessed at the new purchase price of their new home. If we are to have a prop 13 type situation, it should apply only like any other form of welfare and be means tested. My grandmother owned a part of an oil field, and had a host of properties, yet paid virtually NO tax, despite the massive gains on her property. Prop 13 is simply another method of shifting as much tax as possible to the youngest and least able to pay. It places massive burdeon on young families who already are crushed with debt and expenses, while trapping the elderly in homes those young families may otherwise have been able to make good use of.
You can transfer prop 13 to an equal or less expensive house if you are over a certain age. You can do it once.
within counties no problem.
You have made a number of very intelligent comments regarding the current real estate bubble in the past.
Unfortunately, your comments on proposition 13 are just wrong. That form of law merely enourages higher prices for property since it descourages selling. It penalizes the next generation. It has created a geriatric time bomb for real estate as the older generation (that bought the properties for a song) dies and their estates pass on their homes to a generation that can not afford the property tax reset and will be forced to sell them.
It does not discourage selling. Senior citizens can transfer their Prop 13 protection to another home.
Also, it only “keeps people from selling” if they intend to stay in CA (thus the very high new prop tax). If they sell one house and buy another, there is no additional supply; therefore, there is no benefit to new buyers as you see it. Long-time CA owners can always sell in CA and move to a lower-cost state **if they want to** and pay similar prop taxes.
BTW, how many seniors do you know who sell their homes to move somewhere else? Fact is, aside from all the musings by the HB industry, most people want to remain in familiar territory, near their children and grandchildren. They want to see their friends and shop at the same stores they always have, see the same doctors, etc. It’s a farce, IMO, that seniors all want to move to some tacky condo instead of staying in their comfortable houses where they raised their children and have decades of memories.
Again…let’s look at the **REAL problem**, which is LAX LENDING STANDARDS! Lower prices will result in lower prop taxes. Those who are whining about Prop 13 do not have the patience necessary to buy when the time is right. Don’t blame someone else (long-time residents) for the newbies’ lack of patience and understanding of the very volatile CA housing market.
What is the “Save Our Homes” amendment?
I’ve always felt that Prop 13 was unconstitutional and deeply unfair. It was one of the many cases where the “haves” vote themselves more at the expense of the “have nots”. It’s market distorting effects have also been a disaster for California. Although property owners who personally benefit will defend it to the death.
Constitutional? The Supremes have already ruled.
Unfair? Com’on it is freakin’ tax law! It is SUPPOSED to be unfair.
FAct is Prop 13 is applied consistently. That makes it stand out as one of the fairest taxes around.
Oh yes, the supremes! Lol. Fine upstanding members of the wealthy property owning class. What is their average net worth? And how long has it been since they made any decision that favored the working man over the coalition of government, the wealthy and big corporations?
Just picture a 82 year old widow who bought a home in 30 years ago in the valley for $82,000, fully paid off and worth over $750,000. Living on social security, she still has enough dignity to live by herself and care for a garden, has neighbors and friends. It is a good mix for the neighborhood, and prop 13 centainly has stopped anybody from driving prices up dramitically. This lady only wanted to live in her house, and budgeted wisely. Prop 13 works well in this situation
FAct is Prop 13 is applied consistently. That makes it stand out as one of the fairest taxes around.
What the heck does that mean? Prop 13 isn’t a tax, property taxes are a tax, and property taxes in California are applied extremely inconsistently. Some free riders pay next to nothing while their neighbors have to pay taxes for both houses.
I mean, a tax imposed on everyone born on a Monday could be applied consistently, but that wouldn’t make it fair.
If the widow’s house is worth $750,000, she can take out a reverse mortgage and pay the property taxes to sustain her community and keep it livable. This can ensure that the young couple starting out in life don’t lose their chance to achieve the dream she has had, because they’re paying their own taxes AND the taxes of the sweet old lady with a net worth approaching $1 million.
Or they can all pay equal property taxes, with the state rebating a share to senior citizens based on their income and ability to pay. That way, the 55-year-old upper-level executive down the street who ALSO bought his house for $82,000 and his laughing his ass off at its $750,000 valuation of houses in the area can pay his share toward sustaining the community, putting kids through school, and providing medical care for the poorest.
Opponents of prop 13 can play the “poor pitiful case too.” Just picture the poor pitiful young widow raising two kids on an LPNs salary. She is forever condemned to a long commute from the boonies because she’ll never be able to afford the taxes close to her job. Why not target property tax relief based on actual income, instead of just who bought first.
“prop 13 centainly has stopped anybody from driving prices up dramitically.”
How? I don’t understand this comment.
I have to agree with Robert on this one. The only people who have truly benefitted are those who have been in the same house a very long time, usually the elderly (you get that way after a very long time) who are not upwardly mobile. Prop 13 isn’t helping any of the FB’s we discuss here so often, other than limiting the the amount their property taxes can be raised per year to 2%, and 2% per year on a $750k SB is plenty. The State is NOT screwed up due to prop 13. They are currently trying to figure out how to blow the windfall they are receiving due to this latest round of appreciation, and blow it they will, just like the boon’s they received from the .com era and previous housing booms. The state’s problem is the same as the FB’s, fiscal irresponsibility, borrowing long for short term solutions, spending more than they make, and generally just keeping the party going another day. If prop 13 were eliminated, and everyone’s prop taxes were raised to 5%, the State would still be in the red, the schools would still be begging parents for everything from pencils to paperclips (alot of good the lottery did), and the local governments would still be looking for more ways to pick your pocket. No matter how much they have, it will never be enough, and prop 13 is nothing more than an excuse to cover up their own inability to balance a checkbook, blame someone else, and above all, get re-elected.
One additional comment:
Prop 13 as written has kept many homes off the market that otherwise would have been sold, artificially keeping supply lower (helping drive prices up). I’m not talking about grandma’s home either. I’m talking about vacation homes in CA, second homes in CA. Prop 13 essentially puts a penalty in place for selling a CA home if you think you are going to want a home in CA at some time in the future.
On the margin, this has kept housing supply down, and we all know how things work on the margin.
Again, keep Prop 13, but ONLY for primary residences. Then I think we would all be happy. The people who need protection would be protected, and the distortions caused by prop 13 would be minimized.
Great post, and let’s not forget for one second that California spends a tremendous amount of money on their public schools (most in the nation per pupil if I’m not mistaken.) So let’s see: we are #1 in spending, and #47 in results. Hmmmm….something very broken here. My guess is more money for the schools will NOT help. As you correctly pointed out, the state government will just blow whatever windfall they get and we’ll likely have nothing to show for it.
You’re mistaken. California is far from #1 in per pupil spending, and actually spends less than the national average, despite the above-average cost of living and the high population of ESL students.
California used to spend a lot of money on education–back in the 1960s and 1970s. Something happened around the end of that time to cripple local governments’ ability to pay for schooling, and so funding failed to keep pace.
This is CTA pap. Around $12K a year per pupil is spent on Ca students last I heard. This puts Ca at or near the top in spending. The numbers the teacher’s unions throw around are as cooked as the CPI and NAR reports and don’t include things like bonds (big business in CA), local funds, lottery money, etc.
I was a teenager when Prop 13 passed.
Within 3 years most schools in urban areas stopped providing bus service. Libraries laid off librarians and stopped buying new books. Cities had to cut police and fire service.
When towns wanted to build new schools they had to pass special construction bonds since property taxes would no longer cover any new construction.
And finally, california which, prior to prop 13, was near to leading the nation in per student spending AND average student performance began a long slide towards the bottom. I think we are in the bottom 10 in both figures now.
Meanwhile, Howard Jarvis and the other multi-millionaires who funded the Prop 13 campaign returned to their mansions in their gated communities and crowed about their great victory.
Binko,
That long slide towards the bottom is a complicated issue but I would argue that it has much more to do with cultural attitudes, demographics (tons of illegals and non-English speaking), and teacher’s union corruption than it does with Prop 13 or actual spending. Sorry to turn this quasi-political.
Prop 13 is not the reason for California’s poor school performance. Immigrants get that blame. Our schools don’t need more money, they need less. That will put the blood sucking union leaches into competition with each other.
Binko, we could have gone to school together, but I also remember the runaway tax increases that had everyone up in arms. In 1986 the lottery was advertised and voted in to give the schools ADDITIONAL funding (http://en.wikipedia.org/wiki/California_Lottery). Unfortunately, the powers that be soon cut spending from the general fund to compensate, negating the advertised benefit to the schools everyone expected. This is very similar to what the feds do to Social Security (that fix is easy - STOP raiding it now!). We all here take what the RE pundits say with a grain of salt, and the same should be true with the political hacks - everybody has an agenda.
As to the taxes being unfair for similar houses on the same street ( $200 vs. $2000), wouldn’t it also be unfair that the others only paid half what a new buyer did? Should everybody on the block pony up more cash to make the new guy feel better about his purchase price? I’m sorry, but every time I hear “No Fair”, I think of a 5 year old making the claim because things aren’t stacked in his favor (comment not directed at Binko).
Again, the problem is NOT how much money the State receives, the problem is how the money is spent/wasted.
Darth Toll, my numbers were from the Rand Institute, not the CTA. Can you do better than “last I heard”? It’s a big Internet out there, go find us some sources proving California is the top spender in the country, or even close.
Rand (snicker). The Reason Foundation, pretty-much the anti-Rand, in it’s anti-prop 98 rebuttal shows the current budget at over $10K per student (Schwarzenegger’s own data for current fiscal year) which would place Ca. at 4th, and this doesn’t include the incredible amount of bond money, Mello-Roos, etc. which would bring the total in to $12K as I said. Did you know that Ca’s education budget is larger than any other state’s ENTIRE budget? How much money is enough money I wonder?
sorry to sound like a doomsday prophet, but i don’t see any way california will not eventually descend into chaos and violence… or at the very least slide into 3rd world bannana republic status - meaning a huge proletariat underclass governed by a tiny ultra wealthy elite (it’s already about 2/3rds there). the same fate awaits the rest of the USA, unless it changes course via drastic measures. this seems unlikely to happen though. as long as we continue to ignore the corruption and ethnic realities which are the underlying cause of the decline nothing fundamental will change - the rot will continue. money problems don’t just arise out of nothing. at this late hour, the debate over prop 13 is equivalent to arguing over a hand of poker on the sinking titanic.
It has on many occasions, where you in Cali for the riots? I was, I watched it burn for days. Remember what they say, Cali is a trend setter the nation follows. However I also remember that most people were good law abiding citizens, and we shared our amno and guns. I was in Simi Valley at the time. We were all middle class types. lots of cops live in Simi.
Of course if you lose the middle class in cali………
Did you know that Ca’s education budget is larger than any other state’s ENTIRE budget?
Given that California educates more than twice as many children as any state other than Texas, and a good bit more than Texas does, and that Prop 13 was responsible for shifting the burden of funding from local budgets to the state budget in a way rarely seen in other states–why should we be surprised? Education and health care are what states spend their money on. California’s state government isn’t funding a war in Iraq, running a pension plan for all citizens, or subsidizing sugar beet growers in the Dakotas.
Anyway, I went to the Statistical Abstract of the United States, run by the Census Bureau, and what I found is that California spends $7,860 per pupil, which ranks it as #32.
As in, not #1, not #25, but #32. These are statistics gathered by the federal government, not a libertarian/conservative think tank, using common methodology for all states.
HTH.
Distorting is correct.
* Prop 13 didn’t cut overall taxes, it simply shifted the primary revenue source from property taxes to income taxes. Landed retirees pay lots of income taxes, right?
* Business properties change hands less frequently than residential, leading to businesses paying a lower share of overall property taxes. IMHO, businesses don’t pay taxes, consumers do, since all business expenses must be passed through anyway. However, it does stack the deck against “new businesses” just as it does against “new residents”.
* Property taxes were generally collected and spent within the local areas that generated them, whereas income taxes are collected and spent primarily by the state. Lots of problems here, foremost among them that of cities prostituting themselves for businesses that generate large retail sales taxes.
* The paltry taxes on existing property has also driven up the cost of new housing by municipalities charging exorbitant “developer fees”, etc.
No matter. The coming depression will take RE values so far down that anyone buying at the bottom will become the new “landed class” for generations to come.
“With Prop 13, taxes are basically based on **ability to pay** not what your house is worth. People who bought in the 70s are likely to have made less than someone who buys in 2005.”
—————————————————————————-
Thats the stupidest thing I have yet seen on Prop 13. most unfair of taxes. Old millionares need to keep there 2000 + square foot houses in Cali. Oh and there rental income homes too.
cactus,
What makes you think most homeowners from the 70s are “old millionaires”???? The current (false) “value” of their homes has nothing to do with how much they have to live on. People should not be forced into getting reverse mortgages because of the suffocating influx of people from other states and countries (not to mention flippers). They are suffering enough with the increase congestion, higher crime rate, lower QOL, etc. We used to have a very decent QOL in CA, but that is long gone now, IMHO.
I used to work for LAUSD, and their problems have nothing to do with lack of funds from Prop 13 (and it isn’t due to unions, either). There are many problems with CA schools, but the main one is immigration, as others have pointed out. In the 60s and 70s, you had a fairly homogeneous middle-class, with English-speaking kids who had educated parents who backed the schools’ “authority figures” and demanded that kids learn. Now, you have the transient poor, whose parents often have little or no education, often lacking English skills — and even basic skills in their native language. They are living in drug-infested areas where being “smart” will get you into trouble. The parents threaten to sue if the teachers “bench” or suspend their precious little ones during recess because little Johnny (first grade) told the school secretary he wanted to f**k her. (True story, and this kind of thing happens waaay too often.)
You think teachers don’t deserve their compensation? You do it. Tell us about your experience after a year. I GUARANTEE you will shut up about the “evil” teachers’ unions after that experience.
Anyway, although **I am against property taxes in the first place** (I strongly support private property rights), they exist. Therefore, I agree Prop 13 should not apply to second/investment homes. It should also not be passed on to heirs. As far as I can tell, when prop prices (and resultant taxes) run too high on investments, LLs would have an incentive to place their rentals on the market for sale. Increased inventory should lead to lower prices, and the balance would keep home prices more in line with rents, IMHO.
I still stand by the fact that the newcomers create the extra burden on our infrastructure. The long-time residents could always vote for a bond (applied to properties) if they felt the need for better infrastructure/services. At least that way, the govt would likely be held more accountable for how & what they spend.
The kids of today are NOTHING like the kids of the 60’s and 70s. That goes for the parents as well.
Therefore, I agree Prop 13 should not apply to second/investment homes. It should also not be passed on to heirs.
———————————————————————
Ok I’ll go along with that. In Thousand Oaks CA I know many wealthy retirees and a few of them own many rental properties which are taxed lower because of prop 13. I think it is a 7000 dollar off the apprasied tax value one gets if its owner occupied. Raise that and I’ll be happier about prop 13.
Schools in CA, you are right about that one. How about that lottery, money for the schools? hahaha
“How about that lottery, money for the schools? hahaha”
———————–
Yep. It’s one of the reasons I support Prop 13. I am a former teacher, married to another civil servant (largely funded by prop taxes) and my father taught for the community college district (husband’s father taught for a state univ as well), so nobody can say I am biased against govt revenues. But I’ve also been able to see how the money is grossly mismanaged. I have no problem paying people who do the actual work and provide services to the public, but there are vast armies of bureaucrats who provide very little actual service, and are often paid more than the actual workers. Whenever the govt gets more money, the bulk of it often seems to be directed to the “politicians” in the civil service industry. It’s not the unions who create the problems, for the most part. There are many expensive “projects” and “studies” that get started and never end anywhere. Govt bureaucrats spend money in the strangest and most wasteful means possible. The politicians from the bottom up to the President U.S. have their fingers in the pot. This creates a lot of problems, as everyone is trying to serve his/her own agenda using public money and public workers.
Just so much to get into here, but you get my point.
Ben,
Welcome to Miami, the land of corruption.
http://www.miami.com/multimedia/miami/news/archive/housing/part4/index.html
I really think that So Fla sellers and “investors” have the most obnoxious entitlement mentality of any of the bubble areas. Probably because of all those pushy Yankees who migrated there from New Yawk.
The last time I was in the Miami airport, I had been on the ground 20 minutes before I heard any English being spoken.
how do you reconcile those two statements!
my thoughts exactly.
two different thoughts
disjointed, fast market
That is true Tx chick. A friend of mine just came back from Miami and he said it was like another country. Also he stopped to look at a open house and he was not allowed in. He thinks because he was driving a rented ford.
Dateline: July 2006
“‘I am advising all sellers not to blink,’ said Craig Studnicky, (who) primarily sells new condos. ‘If 1,500 people a day are moving to Florida, the demand curve could catch up by fall.’”
Dateline: March 2000
“‘I am advising all sellers not to blink,’ said Pets.com sock puppet, (who) primarily sells dog food. ‘If 1,500 new dogs a day sign up for
Pets.com, the demand curve could catch up by fall.’”
Don’t worry, that loser will be hawking supersized fries by Christmas.
I just don’t get this line of thinking from a person who makes their living from transactions. There is just no benefit for this Mr. stud-nicky to offer advice that only perpetuates stagnation. I wonder if this is SDCIA *Jeffs* agent for his florida holdings?
And how did it skyrocket to 1,500 per day?
Where are they warehousing these new poeple?
They’re obviously not buying houses.
1500 per day, do I hear 2000, 2000 once ,2500 do I hear 3000,
I have seen the numbers drop but maybe I forgot to multiply by 3,
The Sun Sentinel reports on the states schools. “After decades of runaway school growth, educators across much of Florida are asking, ‘Where are all the kids?’ Enrollment has swung into reverse in several of the largest school districts and slowed dramatically in others.”
The other day some small town Fla. politician put the number at 1,000 people moving in per day.
Of course neither saw this quote in the Sun Sentinel:
“‘We used to grow by 10,000 kids a year,’ said Jane Turner, budget director for the Broward district. This past year, however, it lost almost 2,500 students. Some districts, including Seminole and Palm Beach, are teetering on the edge of an enrollment drop.”
young people like myself have decided not to have children, its too expensive these days.
Dateline: December 2006
“Your granite countertop looks beautiful, Mr Flipper. And loook at all of that beautiful equity!FOR ME TO POOP ON!!!!”
Signed,
–Triumph
Ken Lay telling Enron employees stock was a terrific buy and he was selling every share and option he could get his hands on
This quote is the key: “‘So many properties are highly leveraged, 90 percent to 100 percent mortgaged, or even more, especially by investor-owners holding them as third, fourth or fifth properties, prices will not free-fall until renters can no longer cover the mortgage and banks foreclose,’ said Clemmer Mayhew, a Palm Beach County Realtor. ‘Then lenders realize perhaps they loaned $360,000 on a… property actually worth only $275,000.’”
For anyone wondering why prices are slow in dropping it is because people have 100% loans and NO equity. They will hold until it becomes unbearable. Also, many of these fools have no money to come to closing with, so they can’t undercut comps, they are stuck like a mastadon in the LaBrea tarpits. Bad for them, good for us who are patient…
And with IO loans, they aren’t paying down the principal at all, so even after 3-5 years, they still need appreciation to cover selling costs just to break even.
Article in the Washington Post.
http://www.washingtonpost.com/wp-dyn/content/article/2006/07/25/AR2006072501513.html
After 5 Years of Growth, Home Prices Drop
In what may be the most telling sign yet that the real estate market here has shifted downward, median prices of homes in several parts of the Washington area have declined when compared with the same time last year.
In Loudoun County, for example, the median price of homes sold dropped 1.2 percent last month, compared with June 2005, according to Metropolitan Regional Information Systems Inc., the area’s multiple listing service. In Fairfax County, prices fell by half a percent in May and a tenth of a percent in June. And in the District, the decrease was 0.8 percent in March and 1.2 percent in May, compared with the same months last year, even though prices in the District in June were higher than the year before.
“Could it be a 5 percent drop in prices? Could it be 10 percent? Whatever it is, it will be short-lived, because demand is right there on the sidelines,” said David A. Lereah, chief economist of the National Association of Realtors.
…demand is right there on the sidelines
Yeah, and they’re all right here on this blog, and so is he. The only way he could know what’s really going on is by reading the bubble blogs. Hey Liareah, why don’t you tell the truth once in awhile? Nobody is buying what your selling until prices come waayy waaayyy down. Why doesn’t Dave the slave tell the truth? Crash time baybee! Pucker up. :0
for people like dave there’s not enough money in telling the truth
“Homes sales…dropped significantly in June. ‘Prices are going to drop like a lead balloon in the coming months. ‘I think people realize that if they wait it out a little, they’re likely to find even better deals down the road.’”
Bubble Nazi says:
“No sale for you!”
Wow, now it’s up to 1500 people a day moving to Fl. Maybe it’s just illegal Mexicans squirting out kids and not viable workers moving into the state. That being the case coupled with the fact that there’s probably 1.4 home for every family in Fl due to ‘investors’ would mean that there’s actually a lot of housing for these people for years to come, they’re just overpriced at the moment and have been turned into condos. You never hear about a lack of housing, just a lack of affordable housing. This will change. In Naples they complain about lack of affordable housing to the point that they’re trying to turning public golf courses into apartments. That’ll be even more inventory on the books to be liquidated over time.
I like how the one guy suggests that sellers shouldn’t ‘blink’. Of course not, if they blinked there might be a mad rush to the exits.
Yeah, how did they get to 1500 a day? I thought it was only 1000/day. Oh well, fuzzy math iz fun.
inflation adjusted numbers.. c’mon guys.
inflated numbers to go with his inflated prices
The rental truck companies used to penalize you for dropping a truck off in Florida. People drove them back to Ga. and S.C. to keep from being hammered. Now, they welcome them as they are going north 2x as fast. That is an easy computation.
Now that the layoffs are occurring in the construction industry there will be even more. Watch for Vans full of illegals headed west as well. Adios muchacho.
All the pawn shops are filling up with toolbelts for gas. ($20)
1500 is the revised seasonally adjusted number
that YOY migration increase is “statistical noise”
I posted a comment a couple months back that had Florida government officials testifying it was only hundred or low hundreds a day.
I saw an article yesterday talking about “the strong Florida job market” and “more workers needed in Florida” that stated only 75 people a day move to florida. All of these numbers are crap.
“Roxanne Arnold quit her job and started flipping houses”
Classic sign of a bubble. How long will it take until the first mass murder in a mortgage or builders office? I recall some day trader shooting up a brokerage firm in Atlanta after having lost all his money in stocks circa 1998.
“‘I am advising all sellers not to blink,’ said Craig Studnicky, (who) primarily sells new condos. ‘If 1,500 people a day are moving to Florida, the demand curve could catch up by fall.’”
We magically went from an arbitrary 1,000 people a day to 1,500 people a day. Wow!! Never mind that high paid people are moving out of south Florida due to the expensive cost of living.
Yep, lawsuits, perpwalks and Congressional hearings, spiced up with the occasional killing spree. That’s how mega bubbles end.
You’ve missed the taxpayer bailouts. That’s the worst part of all these bubble collapses. S&L as a good example and now we will get the interest rate bubble bailout, just around the corner.
I recall some day trader shooting up a brokerage firm in Atlanta after having lost all his money in stocks circa 1998.
FYI: that was an interesting story, partly because I saw (and dismissed) the warning signs.
I remember reading a post on SiliconInvestor.com from some guy trying to sell a kidney. I dismissed the post as a lark. It turns out it was a real post from the fellow that had racked up large losses. He went postal about some number of months after.
[Fortunately for humanity, somebody recognized his post as serious and tried to talk the fellow down. Unsuccessfully, but at least somebody tried...]
New incentives? Seller will pay closing cost AND throw in a kidney.
Is that the next bubble? Slightly used organs? Perhaps organlegger will be the next hot job.
I was IN that Merril Lynch office in 87 when an two people were shot and killed. A client that suffered huge loses in the October crash came in and was distraught. After a heated argument with his broker, he pulled out a gun and shot the broker and the manager, killing the manager. After that, we had locked doors and armed security for some time afterwards.
Although I would never wish that to happen again, I can see the likelyhood of a FB ( especially here in Florida) going postal on the people “responsible” for his predicament. Given the fact that we know there are phony appraisals and falsified credit applications- ( mostly to the uneducated and poor)- it is not out of the realm of possiibilities for someone to desire “street justice.”
We had a shooting in SF,CA in 1994 in a law office in a high rise. The client was losing money in RE deals and shot up the office. Not sure what the details were but several were killed. Another incident was a RE broker was shot by an agent in his office after he was foreclosing on a loan to that agent. My friend actually knew the RE broker that was killed.
So it is likely some of these incidents will occur when someone has lost all their money and is mad as heck.
101 California street? I know I hear a lot about the man who took the bullet for his wife.
I think the incident was also used to push a lot of gun control laws, and may have been used as inspiration for whatever happened in the movie ‘Runaway Jury.’
“Street justice” - I strongly believe that we will see an episode of this before this whole thing winds down. Here’s a sad example, and this was over a stupid car:
•June 18, 1990: James E. Pough, 42, went on a shooting spree in a General Motors Acceptance Corp. office in Jacksonville, Fla., killing 10 people and wounding four others before killing himself. GMAC had repossessed his car.
Here’s the brokerage story, I distinctly remember when this happened though I had the year wrong earlier:
•July 29, 1999: Former day trader Mark Barton, 44, killed nine people at two Atlanta brokerage offices and later committed suicide.
IIRC, that Barton guy lost a ton of money in a Meryl Lynch (or some company) account and just went lunatic.
http://www.usatoday.com/news/nation/2003-07-08-work-shootings_x.htm
Boy, do I remember that SI thread. It was called, “I Need to Sell a Kidney.” I posted on it after the original guy left and it took rather humorous turns from the original. Someone started another thread there called “I Need to Short a Kidney.” And to think, this was in the summer of 1998 right before the stock bubble really took off, although was also in the midst of the LTCM debacle, although noone knew it at the time.
Yes, it was certainly a doozy. SI left it up:
http://www.siliconinvestor.com/subject.aspx?subjectid=28684
Oh, wow. Edwarda was on that thread. She died later, you know.
No I didn’t… I stopped having time for SI around y2k. I got very busy with putting together an optical company.
PS. It would seem our paths have crossed before.
The key to understanding Craig’s mentality is the phrase, “who primarily sells new condos…” Craig doesn’t want current condo owners to blink. Gee, wonder why not? Might there be a little self interest, here?
Even with falling prices, Bradenton-Sarasota remained the fifth most expensive place to purchase a home in Florida, with the median price settling at $326,800. Lets see, prices fell 10,000 that equals a little over 3% decline. When we get to 40-50% decline then I’ll think about buying, after all, I will need that extra savings to pay for the home owners insurance and taxes.
Technically, this is a true statement. As I teach my students, if the hypothesis is false, then the implication is true. For example:
If 1+1=3 then flying pigs are real.
Bravo! Spot on.
It still doesn’t sound normal to hear that sales are down yet prices are up in a such n’ such market area. We get that here in Canada as well. What’s up with that? Doesn’t add up even with kindergarden economics… I can see maybe inflation rate increase in a flat market… but increases with double digit sales decline… why are buyers willing to pay more than last year… who are they competing against… themselves?
This has been occuring in almost every over-valued market:
‘ Existing condominium sales in the Fort Pierce-Port St. Lucie-Stuart area decreased by 50 percent. Prices increased to $230,400, a 14 percent spike from the $201,400 in June 2005. ‘I find it hard to believe that this happened because there is a sudden burst of strength in the market,’ said Brad Hunter, who follows housing trends on the Treasure Coast and South Florida for Metrostudy’s South Florida division. ‘I would say that some larger, maybe more expensive homes were sold then.’
this has been happening in many EU markets for years (just imagine the US situation and multiply the time span by 3x or so).
Some of it is market distortion caused by the (still) unlimited supply of credit. Other part of it is the 100% (or 120%) loans and NO equity (as mentioned above). And another (important) part is statistical distortions, caused by averaging of different regions (which are in a different bubble phase), a shift in the type of properties sold etc.
I would say it’s mostly the last part about there being a shift in the types of properties being sold. Obviously, when the wealthy want to buy a house, they simply buy one. Most of the truly wealthy realize that residential housing is not a great investment and they buy houses because they want another place to live (sometimes a 2nd, or 3rd house to live in only part-time.) Therefore, in a major volume slowdown as we’ve been experiencing, the peeps are priced out and volume drops, but the high-end housing continues moving as the wealthy could care less if there’s a bubble. This skews the median upward, while volume plummets.
This may continue for a while longer until all of the downward pressure starts affecting even the high-end stuff, and/or volume picks up with much reduced pricing at the low end. Not sure which will happen first but I’m leaning towards higher-end falling.
In terms of the 100% and 120% (suicide, neg-am, no-doc, i/o) thing, I generally agree that this is the underlying cause of all of this mess. IMHO, the effects of all of the above have pretty much been played out and the US market is, in fact, crashing as we speak.
It’s interesting to me that the EU would have such a long build-up and sustain mega-bubble conditions like this, and I’d like to hear your theory on why the EU’s bubble has persisted for so long without a crash. Is it possible lack of equity withdrawls in a house-ATM machine scenario, or perhaps a better savings rate, or maybe more multi-generational family housing situations? In Japan, an export-centric economy, coupled with a high savings rate helped prevent an immediate hard crash, although their “soft-landing” (if you can even call it that) lasted 15 years and was a brutal and torturous slow-depreciation the entire time. I doubt the US (with extreme leverage, negative savings rate, and no cross-generational support structure) will “enjoy” the same fate.
“I’d like to hear your theory on why the EU’s bubble has persisted for so long without a crash.”
I don’t have a real answer. Part of it is probably that when the bubble started in Europe, many of these countries were net-savers so most people had some financial buffer to start with. I think equity withdrawels are a bit less here too but still - many people will be underwater when home prices decline 20% or more.
Other issue is low carrying cost, e.g. in the Netherlands a 30-year fixed mortgage was around 4.5% recently, and with a 50% HMD that amounts to a little over 2%. Property taxes were quite low here too (but increasing quickly), so that the actual cost of the investment property might be as low as 3-4% per year. After more than 10 years of double-digit appreciation, people laugh at such carrying costs and are willing to wait a long time before they give in.
And another part is the fact that there are far more speculators in the US home market (in EU speculation is probably similar, but mostly in foreign RE markets). Speculation tends to speed things up, both up and down.
In the end I guess the downside in Europe is bigger, because the gains were much bigger as well. When all these smart EU ‘investors’ finally give up hope, the crash will be already far more advanced (like 20-30% down) than it is now in the US.
When you speak about housing in Europe, you should exempt Germany. Before 1982, housing had a high reputation as wealth storage (no surprise after two hyperinflations) and was long priced higher than fundamentals would suggest. 1982, after high interest rates and decreasing inflation, housing entered a long bear market in most regions, and observers are now reasoning that it will NEVER come back because of shrinking population. Unfortunately, as often, reasoning is following the price instead of leading it: Falling prices => “It must be so, because (fill in favorite cause)” => “They will continue to fall.” - Rising prices => “It must be so, because (fill in favorite cause)” => “They will continue to rise.”
yes, Germany is certainly a strong exception. I remember prices were consired high there 15 years ago, and they are still high in some areas. But nowadays, prices in the Netherlands are 2-3x higher than in German border areas, and >>10x higher than in former Easter Germany …
I think over the last 10 years (and especially the last 6 ECB years), fundamentals didn’t matter because of the unlimited flood of credit from the banks. Many foreign speculators are now betting on appreciation of German real estate, mostly because of new tax laws that favour RE investment trusts (similar laws provided a huge boost for RE prices in some other EU countries).
I would’t dare to predict which way prices are going in the near term; but if the EU bubble bursts, the downside in Germany will probably be smaller because there was no price appreciation and there certainly is less leverage in the housing market.
Wow, so many classic comments . . . where to begin?!
“Everyone that needs a home to live in has bought one, and the people that still need a home can’t afford these prices”
Agree with the general statement, but as for it’s phrasing…huh? If everyone who needed one has one, than how can there be anyone left who needs one?
“…she said. ‘I would not call it a buyers’ or sellers’ market, because there is no market.”
Agree.
“If 1,500 people a day are moving to Florida, the demand curve could catch up by fall.”
Delusional.
“‘You can’t be greedy these days,’ she said. ‘The old market was just a freak thing. They are out of their minds if they think it will happen again.’”
Bingo! Worth repeating . . . The old market was just a freak thing. They are out of their minds if they think it will happen again.
No shit. Tell that to the holders of JDSU who can’t even get $5 a share for it after 6 years, much less the bubble price of $100+
Just got my “Proof of Claim and Release” as part of the NT Securities Litigation Settlement. It’s now 2006 and the lawsuit was filed in 2001. While the amount of money is trivial, it’s a good reminder for me to remain vigilant over my investments at all times. A winner that turned into a loser. I sell anything that even has a whiff of potentially turning into a POS investment because it has been run up. Take the gain before it turns into a loss (or a small loss into a large loss).
txchick57,
Talk to me.. where you investing these days.. I read this blog every day and enjoy your posts.. I know your a bear come Sept ( at least thats what I remember), but whada ya think of oil/gas?
I won’t touch housing for 5 years.. unless it’s a foreclosure steal..
I’m long a few junkers but really kind of skating until it’s time to get short again.
P.S. O&G is another bubble. Would love to short it but don’t dare.
they’re using that old staredown analogy again.
sounds like the buyers are sitting on the sidelines doing their nails. not even paying attention to the game.
‘It’s a stare-down between buyers and sellers, and as time passes, the pressure’s on the seller, not the buyer,’ said housing consultant Jack McCabe.
Unfortunately, that pressure on the sellers will slowly [quickly?] turn into bail out by the taxpayers. Grim future ahead, if you ask me…..
Thought I would give an update on my quest for a Florida rental. Found the empty condo I want to rent. Appraisers office shows the owner as living two blocks away (definately an investment property). Bought for $350,000 last fall. Estimated market value is $244,000. I got his phone number and will be calling tonight to offer to rent the place. The neighboring unit is empty as well so I have more than one option.
Moman, where in Florida are you looking?
I’ll be testing the rental waters again in the Boynton Beach area come this fall.
Tampa Bay area
A $350,000 condo? Is that on Harbor Island? In Channelside? Or is it in one of the Bayshore Boulevard high-rises near downtown?
Let us know if you can negotiate the rent with the owner. Every story in the local news media is about rising rents, especially in south Tampa.
No, it is in Pinellas county. I am witholding pertinent location information right now lest the owner be lurking around here. I will certainly keep everyone updated on my progress.
-
Housing Bear Market: 1-1-06 to 1-1-09?
07-15-2005 (feed my squirrels) to 03-15-2017 (US issues gold backed dollars)
That’s like me selling old shoes on the corner for $300 bucks each and after buyers express little interest I call the market it a stare-down between buyers and sellers.
No one wants my smelling shoes for $300 bucks and buyers don’t want your $700,000 houses.
Huge foreclosure investor in SoFla is unloading a bunch of property at absolute auction this weekend. Desperate times call for desperate measures?
http://www.123sold.com/ph/realtor-mls-search-results.html
Seeing auction signs all over and also receiving fliers by email from Realtors espousing reductions, motivated, desperate every hour.
A banker friend of mine called and said he was receiving these same fliers in email. He was stunned and began to reassess their portfolio for exposure.
- Borrow a few million, it is the bank manager’s problem.
- Borrow a few billion, it is the bank’s problem.
- Borrow a few trillion, it is the taxpayers’ problem.
Jack,
where is this ?
Here is part of the reason why sellers are in denial and there are thousands of FB’s. Listen to this “expert”
FROM REALITY TIMES:
CONDITIONS™
By Local Real Estate Experts
Top > Florida > West Palm Beach
Market Conditions for West Palm Beach, Florida
Reported by Hoang (Andy) Lam, REALTOR
As of June 2, 2006.
Current Market Rating: 2
Current Price Trend: 2
“Buy, Buy, Buy, Buyer should act now before the market pick up. The market is in transition now and is shifting towards a buyer’s market from the very strong seller’s market. The inventory of homes is rising. Many homes are in the market longer than before. Sellers are more willingly to make a deal. Buyers have more selection. It is now good time for the buyer to make the move. “
“None of Florida’s 20 largest metropolitan areas showed an increase in sales from last year.
One of the worst declines occurred in the metro area that includes Tampa, St. Petersburg and Clearwater. Realtor transactions of single-family, existing homes declined 34 percent, dropping from 5,230 in June 2005 to 3,442 last month. Median sales prices still increased, however, rising to $239,600 in June, compared with $208,700 for the same month in 2005, a 15 percent gain. ”
http://www.tbo.com/news/money/MGBQ2T303QE.html
I understand that taxes must be applied fairly. Two identical houses on the same street should not be taxed at different rates.
Somebody who has lived in House A for 30 years might pay $200 in property taxes while a young family who buys identical House B next door might have to pay $2000.
This is flat out wrong no matter how it might benefit your favored class of people. I don’t pay less income tax because I’ve lived in this country 50 years. I don’t pay less California sales tax because I’ve lived here longer.
Taxes have to be applied equally or democracy will begin to crumble.
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And what’s so great about democracy. It’s real name is mob rule. Ben Frankling defined democracy (and correctly so) as two wolves and a lamb voting on what to have for lunch.
The young family should pay more taxes. They have kids to educate. Should the old people pay to educate their kids. I don’t think so. In fact, if you don’t have kids, you shouldn’t have to pay to educate someone else’s rugrats. In fact, you shouldn’t even be required to educate them, it’s just another scam to help keep the welfare/warfare state in business. Eff that noise.
“And what’s so great about democracy. It’s real name is mob rule. Ben Frankling defined democracy (and correctly so) as two wolves and a lamb voting on what to have for lunch.”
That’s why we’re a Republic (rule of law), not a Democracy (mob rule).
Except we don’t operate like either what with “signing laws”, Presidential orders, the WTO, The SPP in the works, Lobbyists writing law (NAFTA), etc,. adinfinitum.
Don’t forget the “protected classes”, now called “under-represented groups”. A friggin mess isn’t it?
“A friggin mess” about sums it up. I see nothing short of another revolution to fix it. Next stop is tyranny before we get to have the revolution, unfortunately. If history is any guide.
JDSU - someone bought at $200 and somebody else bought for $5 later. Stock share is identical but results are different because of timing.
Prop 13 taxes can be different for identical homes because of timing, but if you bought at the same time, they are probably the same. You pay taxes based on the market environment when you bought. What is unfair about that? Market goes up, you pay 2% more next year. Market goes down, you can petition to change the value of your property.
If you bought 20 years ago, your basis would be artificially low. You could petition successfully only if the current assessment is below that basis. Highly unlikely.
If you bought this year or last, a new appraisal could very likely warrant a lowering of your property tax.
Makes it a bit more fair.
As far as Prop 13 goes, here’s an idea, how about NO TAX for anyone. Who the hell said the government has the right to rob it’s citizens. NO TAX would have limited growth for starters and we wouldn’t be worrying about infrastructure to handle the socialist welfare sponsored cancerous growth of people. Need so infrastructure, directly pay for it. Ever see those wrought-iron fire placards in antique stores? They indicated that you had fire insurance and so the locally formed independent fire dept would put your fire out if they saw you had the placard. Have kids and want to educate them, here’s a novel idea, get rid of the effing SUVs, have the wife stay at home and take care of the kids as well as educate them, or cut back even more and send them to a private school. All novel idea that don’t require the this socialist state we live in and it’s fiat funny money.
“we wouldn’t be worrying about infrastructure to handle the socialist welfare sponsored cancerous growth of people”
Down with the freeway system! Down with education! Down with the military! Down with America! Abolish taxes — every man for himself is a much better system of governance.
We wouldn’t have had the growth that infrastructure demands if it wasn’t for fiat funny money and the socialistic state we live in. We’d stll have some freeways though … toll roads. For years before WWI we had a very limited military and we did just fine. Education is a scam outright.
Consumption Tax. You want a McMansion, you pay the taxes like you just bought a new BMW right at signing. You want a Geo metro to go from point a to point b, you pay less tax.
You live thriftly? Ride a bike to work, you should pay for a bike trail, not a 6 lane freeway you will never use.
Doesn’t Europe tax cars with larger than 2 liter engines at a higher rate?
Got kids, you pay a higher tax, you decide not to have kids, you don’t pay that tax.
And what’s wrong with every man for himself? We do it when it comes to churches and other private groups that meet. Why not the same with roads, education, self defense, utilities, etc.? Why should we be forced to pay for things we don’t care for or want? Just as people don’t want their tax money spent on churches, I don’t want my hard earned money taken by FORCE (i.e., taxation) to pay for education, police, military, welfare and “infrastructures.”
Just as I can choose what church(es) get my money, I want the freedom to pay for whatever services I deem necessary for my good [be it firefighters or armed guards or supporting local widows and orphans].
Or am I only “adult” enough to decide how I pay to churches but not when it comes to education, self/national defense and other “needs?”
Just as you don’t want me to tell you at gun point to pay to a specific church, I don’t want a gun pointing at me to pay for a specific school (i.e., local public school) or specific armored guard services (local city & state police and national military).
Andy, I think you’re on the wrong blog. You want a political blog.
“NO TAX would have limited growth for starters and we wouldn’t be worrying about infrastructure to handle the socialist welfare sponsored cancerous growth of people.”
Umm, no thanks. I prefer the 21st century to the 18th.
Don’t bitch about the taxes then. The finest government in the world was created in the 18th century, and it didn’t mandate taxes. The difference between the 18th century and now isn’t the socialist state we live in, it’s the technological progress that was made in those 200+ years.
This is why the libertarians need to dump both this portion (no taxes) and the absolute-no-foreign-aid portion of their platform, to even come close to being a viable political party. But if they do that, their worldview becomes basically identical to the neo-progressive/netroots platform.
“‘Everyone that needs a home to live in has bought one, and the people that still need a home can’t afford these prices,’ she said. ‘I would not call it a buyers’ or sellers’ market, because there is no market.’”
This is one of the more astute observations from a flipper-flopper that I have seen in print. One could have said “there is no market” on Black Monday, October 19, 1987, when the gap between bid and asked prices on the stock market became so wide that nothing was selling — liquidity completely froze. Luckily for stock market participants, when prices go into a free-fall, electronic circuit breakers shut the whole thing down for a cooling-off period, enabling the Fed to execute a Greenspan put and thaw out the ice jam. Sadly, there are no electronic circuit breakers for the housing market, and judging from the Fed governors’ comments since early 2005, there is little will to rescue housing market gamblers from the bitter harvest of a speculative frenzy.
I read that and thought someone finally has it right. And if the moronic realtor(s) “I am advising all sellers not to blink” is heeded. The transactions will become fewer and fewer. Lack of liquidity is the killer to any market.
“‘I am advising all sellers not to blink,’ said Craig Studnicky, (who) primarily sells new condos. ‘If 1,500 people a day are moving to Florida, the demand curve could catch up by fall.’”
Sorry, but methinks the inventory tsunami will drown out whatever demand materializes. Just MHO
He’s selling NEW condos. Of course he doesn’t want flippers/resellers to undercut him. What else do you expect him to say?
He said what I would have expected. But it is my solemn duty on to punch holes in specious real estate shill arguments.
But Craig, what if inventory is rising by 2000 units a month ? How much money do you think the sellers you are advising are going to lose in the meantime ? Hope you get into the witness reloaction program soon !
How many of these 1000 people/day actually moved there. Is it possible that the 1000/day were actually people buying second homes and the states estimated population is actually less than stated.
“Pay no attention to that iceberg over there,” said Craig Studnicky.
Andy should be exempt from paying to educate anyone else’s kids. And also from receiving services and benefits from anyone else’s educated kids.
Reminds me of someone who wrote an anti-child article about how other people bred children to support them, but he’d invested for his old age. Where did he think his future security derived from? If today’s children did not grow up to purchase his assets, what value would thos assets have?
How short-sighted can you get?
Actually, you’re comment is the short sighted one. Particularly the purchase my assets part. That’s the very Ponzi fundamentals of the Social Security system. More and more womb-turds are needed to support retired womb-turds. Problem is, the Boomer crowd and the Gen X crowd haven’t kept up pace on the womb-turd front, so we have a generational gap and not enough womb-turds to support aging womb-turds. Had the Boomer womb-turds saved instead of relying on the SS Ponzi scheme to support their arses we wouldn’t have a SS crises on our hands because it wouldn’t have been needed in the first place.
Actually, your assesment is short sighted as you too, Andy, are a “womb turd”.
I prefer “crotch loaves”. LOL
I’m not a kid lover either, to put it mildly.
But, Andy, how do you really feel? Hey, can you babysit for me Saturday night?
No problem, they can sit in a padded room in a straight-jacket with MTV going. They’ll be fine.
Actually, womb-turd is my new favorite word this month. Still, the fundamentals support my argument, and that is, SS is a Ponzi every bit as much as the housing Ponzi and anyone that’s arguing on a housing bubble blog against the housing ponzi but in favor of the SS ponzi needs to re-examiner their beliefs. They’re both socially engineered doomed to fail schemes based on funny money.
Rant #1 = Lax lending standards and underwriting
Rant #2 = Now is the time to buy = Greedy RE
Rant#3 = Greedy buyers who stretch and lie
Rant#4 = Specuvestors who stretch and lie
Rant#5 = Bubble is popping. No lie
See previous blogs for any and all details. We can all learn from history. We have officially, IMHO, seen the burst of the bubble. Enjoy observing the ride; hope you are not riding it down!
It’s a stare-down between the sellers and their egos. There are no buyers. Buyers are nonexistent. Buyers are in a multi-year hibernation, until prices are reasonable again. There are no stinking buyers. Get it?