The ‘Tables Have Turned’ For Buyers In Florida
A housing report from Florida Today. “If there was any doubt that Brevard County’s housing boom has ended, a new construction report should squash it. Housing construction permitting in Brevard dropped in June to its lowest one-month level in nearly four years.”
“After two years of sharp increases, local housing prices have leveled off in the past year, and some housing industry officials think it could be 2008 before the dynamics of the market change.”
“With price increases drying up, investors and so-called property ‘flippers’ are canceling their purchases, forgoing their security deposits and backing out of deals, instead of taking on mortgages while waiting for prices to go up again so they can turn a profit, Dave Armstrong, secretary of the Florida Home Builders Association said.”
“‘You see ‘For Rent’ signs up in front of $500,000 homes,’ Armstrong said.”
“For home buyers, the bright side is that builders, now with an excess of inventory, are more willing to negotiate on price and other perks. ‘Plain and simple, the sudden slowdown in the housing market has created excess inventory,’ said Mark Neubauer, for Mercedes Homes, Brevard’s largest homebuilder.”
“‘In Brevard County, Mercedes Homes has nearly 100 homes that are completed and ready for move-in,’ Neubauer said. ‘A few months ago, a buyer was lucky to get on a list to buy a home. But, now the tables have turned, and we’re experiencing a buyers’ market.’”
“A slowdown in housing construction has led to widespread staffing reductions among homebuilders, as well as a marked decrease in work for subcontractors in Brevard County and other areas of Florida.”
“‘We’ve experienced more people looking for work in the trades in the last three month than we’ve seen in the last four years,’ said Armstrong. ‘We had a great market, and it’s amazing that it lasted that long.’”
From The Ledger. “Realtors across Polk County sold 554 existing homes in June, down 16.3 percent from a record 662 in June 2005. Sales in Lakeland fell 10.5 percent to 366, while East Polk sales dropped nearly 27 percent to 177.”
“In June, Polk builders pulled 571 permits, a decrease of nearly 49 percent from 1,119 last year. ‘Higher mortgage rates are finally starting to cut into the housing market. I think it’s not an unexpected slowdown,’ said Kevin Brickey, an economist who follows Polk.”
‘Housing sales are slowing in Southwest Florida, but you wouldn’t know it by looking at the Manatee County Commission’s schedule. Developers continue to seek approval for thousands of new residential lots most months. At meetings this week, the commissioners will review plans for several thousand housing units in northern Manatee. The largest project, Curiosity Creek, would boost to more than 5,000 the number of houses planned for a two-lane stretch of Buckeye Road near Interstate 75.’
‘ I would like to respond to the article from July 24 regarding school enrollment dropping in Florida. Many young college graduates and families with small children cannot afford the homes in Florida anymore. Florida is the loser in this highly inflated housing market.’
Manatee County is in deep trouble as this housing bubble unwinds. There is literally no economy there, except for house flipping, old people, and a Tropicana factory. White trash has been cashing out HELOC money down there for the past few years, and blowing it on flat panels and SUV’s.
Now that the party is over, the hangover is going to be harsh.
What on earth are you talking about? Falling home prices? No industry? Harsh comedown? Dont you know this is a POST-INDUSTRIAL economy were in? This is a new era. There are no comedowns anymore. History is over. Toss out those useless commie history books you’re reading. We don’t need jobs! Everything will be FINE.
History is OVER for the US and Europe. It’s just beginning for places like India and China. Post brain economy is coming. Who needs a brain anyway? Just rent it or buy it on credit. Go ask your politicians and your FOX TV CNN media guys. It’s the leisure society promised by Alvin Tofler. Poor Alvin, poor us. He forgot to tell you, that the leisure in question won’t be paid a salary. Full of leisure with no money and just huge debts. Don’t you like the post industrial society with no history and no brains? “May you live interesting times.” like the chineese proverb says.
it was a terrible market for lower and middle income people. the bigger issue is, what will happen to prices (how low must they go) to get people back to home buying. i think it is going to be much worst than people expect. every increase in cost of living, including insurance makes affordability tougher. i see 50% drops. in broward county, they have a new program, but you can only buy a house at 230,000 lower. that means either a small condo and houses in the hood. it wont work, because of crime rates and poor schools. that means more inventory.
everytime i go to some workshop or seminar, no one wants to drop prices, but rather come up with other crazy creative housing program. but, i do see changes once everyone gets their insurance policy. (tropical storm chris has arrived)
The politicians and builders are so desperate to keep prices inflated, it is almost painful to watch them do anything to avoid the simple and obvious solution, which is “DROP THE PRICES!”
“in broward county, they have a new program, but you can only buy a house at 230,000 lower. that means either a small condo and houses in the hood. it wont work, because of crime rates and poor schools. that means more inventory.”
That program is a scam. The builder is selling POS condos with a $150,000 minimum in crack neighborhoods, using neg am loans to get the suckers in on a “low payment.”
In this area, there is a $200,000 affordability gap. Until that closes, the market will be dead. There are no more buyers or specuvestors. Imagine going to your local car dealer and they have an 18 month supply of vehicles on the lot- a new SUV is $90,000 when the price should be $40,000. Would you buy it simply because of 0% financing or would you wait until the price came back down to reality?
WHY do people think that a house is different than any other coomodity? Like every of speculative bubble, the top is in the rear view mirror. Forbes just ran an article where they stated that the Miami- Ft. Lauderdale area is 54 % overvalued. No amount of gimmicks can change that.
thanks big daddy for your reply!
Florida has a huge inferiority complex. Instead of emphasizing and preserving its positive features, it always wants to be like someplace else, like a combination of New York South and SoCal East. I think this is as a result of the deadly combination of the politicians and out of state investors with their propaganda about “It’s always done better somewhere else”. And sadly, so much of the local population drank that KoolAid. I’ve seen this unfold over the years. When I lived in South Florida during the Miami Vice 80s, the business development people were hyperventilating about how Florida was going to be the next Hollywood and films and shows would be produced here in droves! AS IF! Someone forgot to tell them that we just don’t have the right climate or diverse topography that California does. Miami Vice was a noble experiment in shooting an entire series on location in Florida, but it didn’t work out in the long run, which is why Miami CSI is mostly shot on sets in LA, with standard cover footage of the Miami area edited in. Hollywood hates Florida. Not enough skilled production people or talent, and from June to October, you can’t shoot outdoors after 1:00pm because of the summer storms. They send their own camera crews in to take scenic location footage and fly out as fast as they can.
During this housing fiasco, the idiocy I heard out of the mouths of locals who should know better (but were all fired up because some had property holdings nobody had wanted for years and now there was some interest) went something like this “Prices aren’t going to go down. We’re going to be like California. All the boomers are going to be moving here.” Be careful what you wish for. Yep, we’re like California, all right, without the mountains, decent weather or wages. But we do have lots of illegal gang bangers, KB Home cookie crapper developments, high housing prices, gridlock and pollution.
Hi palmetto,
I’m a fan of your recent postings in the Florida threads telling people how it really is down here. I’m not old enough to truly remember ‘old Florida’, but the changes I’ve seen in my lifetime have been bad enough. Assuming this really is the beginning of the end for Florida, what is to become of our once great state? Is all the crime and faux culture going to leave with the investment jerks, or have we been irreparably damaged by these locusts?
Hi, Orlando. There are still pockets of old Florida, many in your own area, if you can get out to see them, like the Wekiva River, and the springs, some of the old towns, etc. I lived over there briefly, in Sanford, because I thought it was so charming, but found out I was trapped in a town surrounded on all sides by crime and development and horrendous traffic that I wasn’t willing to cope with to get to the beaches and springs. No, it was worse than that, I was scared s–tless to drive in the area.
I am a silly optimist in some ways, especially when I hear from younger folks like yourself who have concerns. Looking around, the damage looks pretty bad to me. But it would be interesting to hear from fellow Floridians what their thoughts would be on handling the aftermath. Ideas are where it all starts and sometimes things have to get bad enough before they get better. We need ideas. Any ideas, no matter how far fetched they may seem.
What to do.
I came of age in Orlando and enjoyed places like Rock Springs and the big scrub. That was a half century ago. But I offer this view. I find each place I go has a beauty of its own. That is, with the right outlook, one can find things things positive about every place. Whether it’s the transformed landscape of Florida or tougher mill towns of New England or industrial struggle and aftermath in the mid-west there are positive observations to make. I suggest that people who care about their community are worth the trouble getting to know. Almost everyone has a story to tell.
How to change as a society. The automobile will be the death of communinities. Folks who think that it is worth their while to drive 15 miles up US 19 in Clearwater or a similar distance to go to church or a grocery store in Sarasota are destined to spend way too much of their lives on the road. That that engenders congention for everyone else, too. Instead, walk a short path through a scrub palmetto field and look for signs of rabbits or other trivia. Help a neighbor prune a hedge, or each do one side. Attend a local civic meeting. Folks who want to improve things are worth getting to know. There is a illusion that we have to go great distances to find happiness.
As a goal, we have to support mass transportation and water conservation. For example, the effect of filling up all those vacant condos in Miami and elsewhere in Florida will lead to unbearable traffic congestion. Water resources in SW Fla are becoming an issue south of I-4, in general. The western interior of Florida could support several nice communities, but let’s not help the developers.
There are a few pockets of Old Florida left, and they are slow to develop. Cedar Key is a an example or a place to visit and veg out, and Crystal Beach is another. I haven’t been to Dunellon in a while and it might be different now, but it used to be a very sleepy, Old Florida spot. Micanopy is another favorite place. I suspect Key West is high camp nowadays. I can relate, however, that some cosmopolitan folks couldn’t handle the Old Florida scene for more than thirty minutes. Then they need to find a bagel or Chinese takeout. We can’t all like the same thing.
There are too many folks moving to Florida hoping to be happy and then moving back somewhere. They are chasing a dream.
In summary, rather than fret about the half empty condo complexes with vacancies due to absent flippers and investors, it could be much worse if and when these “communities” are filled with auto-dependent seekers of “happiness” who need to travel to big-box stores.
Albert, I love posts like this. That is wonderful. Really, it is in the true communities that problems can and will be resolved, by people who care enough. We’ve got water up here in our part of the state and that water will be a precious commodity for the southern part of the state in the very near future, I suspect. I think we up here are going to have to band together as a community or group of communities and tell them it isn’t going to happen. Correct, automobile has been a large part of the problem.
Old FL? I’ll tell you about old FL. I would visit in the 80’s to see family. We would go play golf and I liked a course out by the Military Trail. My uncle made a comment to the effect, “Who the heck wants to play out in the middle of nowhere.” We couldn’t get him to go past Military Trail. That was too remote for people back then. The golf courses had alligators all over them. Real ones, not the garden ceramic variety.
Now military trail is considered east. They’ve built up probably 15 miles everything in site west of that road these days.
I miss old FL
Has anyone heard if builders like Mercedes has starting laying staff off in the Port St. Lucie/Martin County area? I have several friends working for builders in that area.
“Has anyone heard if builders like Mercedes has starting laying staff off in the Port St. Lucie/Martin County area?”
If they haven’t yet, look for it to begin very soon, IMO. I thought Mish’s post about the Atlanta RE broker was very telling relative to how quickly a market can turn. Corporate decisions on further construction and employment at companies like Mercedes quite possibly could be taken on a Friday and implemented on Monday.
‘Higher mortgage rates are finally starting to cut into the housing market. I think it’s not an unexpected slowdown,’ said Kevin Brickey, an economist who follows Polk.”
Oh, really? Funny, most economists seemed to dimiss such a theory as “conspiracy theorism” a few months ago. I’d love to hear what spin David Learah has on this.
higher prices not higher rates.
BW,
Yeah, this gross over simplification always grinds me too. Painting the Fed as the Grinch ignores so many other obvious (and not so obvious) factors. The good news is realtors are getting ZERO mileage out of this desperate spin. Plenty of folks have had mortgages at substantially higher rates than are being offered today so they know the real deal. Even with sterling credit I was paying the better part of 9% on a VA loan in the early 90’s. It was just the going rate at the time. You don’t have to be a lot older to remember double digit mort. rates. Their spin doesn’t make sense, NO ONE is buying it and they’re making themselves look cheap and desperate. So by all means (keep it up guys).
I wonder what trailer sales are in Polk County? Largest population of trailers in the state of FL. Was hit directly by 3 hurricanes in 2004. There were plenty of blue tarps for a year afterwards.
Tropical storm Chris forecast for arrival in So. Florida on Sunday.
http://www.storm2k.nhcwx.com/cgi-bin/hw3.cgi?config=&forecast=tropsystems&year=®ion=NT&hwvstormid=3&alt=tropsystempage&hwvmetric=
Also, when Castro dies and the govt in Cuba changes, Cuba will be open to US investment, the supply of frost-free land near the continential US will explode, and the vacation home market in South Florida with tank -
Havana hovels for everyone. Each buyer will also receive a classic 1950 BelAir with purchase. Hurry they aren’t making any more.
Europeans have been doing business in Cuba for years. The Spanish and Dutch own many of the luxury hotels in Havana. there will be deals to be had but they’ll be transactions that are not necessarily being negotiated with the Cuban government.
I’d live there.
Not to sound like a preacher, but this reminds me of Sodom & Gomora (sp). The builders will continue to build, they have to in order to stay in business regarless of the demand. Much like the auto industry, they will build and build until they run out of money or product. Demand is an after thought.
‘Demand is an after thought.’
That’s a good comparison. The houses that are being built aren’t suited to the buyer, much like the US automakers building gas guzzlers.
That’s exactly right. When my place was sold, the home inspector, a nice guy originally from New Jersey, was talking about some of the new homes he had inspected and was completely astounded why builders in Florida were building homes that were not suited to the climate or weather in Florida.
That way, it will solve the real estate glut. It will be that much easier to tear them down or burn them. Maybe the job will be done by the hurricanes ? Are these houses insured? If that is the case, some insurers will enventually be in deep trouble. Not worry. They will just pass the bill to all the suckers.
My house has a tiny wall heater for 2500 sf and no AC. My neighbors need to run heating or cooling almost constantly to keep their stucco prisons liveable.
Robert Cote’
Robert, just curious but when was your place built? Sounds like all of the “energy efficient” windows and great design features in “today’s home” aren’t what they’re cracked up to be?
1962. 3 foot roof overhangs, large central thermal mass, careful hillside siting and landscaping, thik walls and plaster. Glass is huge, 1960s very thin single pane in aluminum frames otherwise known in the energy efficiency industry as gaping holes.
Today with vinyl framed sealed e-glass and othe modern components it should be easy to construct pleasant houses that use 1/4th what the typical home uses but there are too many forces allied against sustainable development practices. Indeed the biggest opponents are those claiming to be promoting sustainable development.
Our house was built in 2003 in humid VA. The sunroom has 21 windows, and the house is about 4000 square feet above the basement. It has three air conditioners. The amazing thing is that our electric bill averages $120 a month all year, and in the summer I don’t worry about keeping the air conditioner turned up to an uncomfortable level. (From the end of June to the end of July the bill was $240). I think the high ceilings help. Our house doesn’t have those crazy two-story windows that beat in the heat, which helps a great deal, and the sunroom windows are a special energy-saving kind. Last year our neighbor (who does have those gigantic palladian windows) paid $500 on electricity in August.
That’s what happens when the lubricant is all used up. A lot of back pain.
Brings new meaning to the term “disappearing liquidity.”
“With price increases drying up, investors and so-called property ‘flippers’ are canceling their purchases, forgoing their security deposits and backing out of deals, instead of taking on mortgages while waiting for prices to go up again so they can turn a profit, Dave Armstrong, secretary of the Florida Home Builders Association said.”
“‘You see ‘For Rent’ signs up in front of $500,000 homes,’ Armstrong said.”
“For home buyers, the bright side is that builders, now with an excess of inventory, are more willing to negotiate on price and other perks. ‘Plain and simple, the sudden slowdown in the housing market has created excess inventory,’ said Mark Neubauer, for Mercedes Homes, Brevard’s largest homebuilder.”
Let’s see — now that prices are drying up, so savvy flippers are staying clear of falling knives, the bright side has appeared for buyers? Sounds like a case of builders desperately seeking greater fools, now that the flippers have wised up…
GetStucco,
That line caught my attention too. We’d love to rent a 500K house in LV, FOR A MONTH! Then after our extended “working vacation” we’ll just drop off the keys and say good bye. I just can’t see there being any kind of a market for “high end luxury rentals” in the form of a long term lease. I can’t imagine a scenario where this proposition would make sense?
Well, the problem is that no ones buying them because they’re too expensive for the vast majority of people. If they rented them as a “luxury rental” then they’d probably face the same problem of lack of renters due to unaffordability. Hopefully they’ll lower it way down and people can start renting huge homes for almost nothing.
There is a fairly strong renter market in coastal Florida for high-end condos on long-term lease, but the big catch is that the ceiling on rents is about $2,000/mo. unfurnished, north of the Palm Beach area. Don’t know about farther south. Cash flow on a $500-700K luxo property with just $2K rent is pretty miserable, and with prices headed south, stuck flippers might bleed cash for years and years.
My cousin works for a roofing business in NE Florida that roofs for Mercedes Homes. He said Mercedes had a promotion to sell 96 existing new homes over one weekend a few weeks ago where “all offers would be considered”. He said they sold 32 homes that weekend. Some of them sold for as much as 1/3 off list price. Many more sold for over $100k off list price.
He also said that the local roofing business has lost exactly 2/5 of its business in the last two months due to new home builders cutting back. He’s been keeping people on, but he said layoffs are coming soon.
Double the price in 2 years, then a huge ‘Slashing’ discount of 33% !
There are still many fools on the fence ….. even if they’re not the greatest.
But yet, according to economists, there is no recession coming on…
In Mercedes Homes’ neighborhoods a 33% discount equals 100k.
I am closely monitoring this promotional campaign. Mercedes Homes advertised on the radio last weekend “that all reasonable offers will be accepted”. Their website shows slashed prices and “willingness to accept all reasonable offers.” I even received an 11 x 6 postcard indicating that “I had the power” (shallow reference to a buyers market), and that “all reasonable offers would be accepted”, plus (drum roll please) “Mercedes Homes is offering up to 6 months no mortgage payments.”
Yes, you read that right, 6 months no mortgage payments. I think that type of advertisement is better suited for furniture or electronics products not 300 and 400k homes.
The Sun Sentinel this past weekend had the Mercedes add listing each home approx $50k reduced and asking for reasonable offers
Speaking of FL… Here is a MAJOR player as far as land ownership goes in NW FL…
————————————-
St. Joe earnings fall sharply, cuts 2006 outlook
By Ciara Linnane
Last Update: 7:19 AM ET Aug 1, 2006
NEW YORK (MarketWatch) — The St. Joe Company (JOE : JOE
said it earned $19 million, or 25 cents a share, in the second quarter, down from $37.9 million, or 50 cents a share, in the same period a year ago. The Jacksonville, Fla. real estate company said revenue fell to $194.7 million from $259.7 million. The average estimate of analysts polled by Thomson First Call was for earnings of 26 cents a share on revenue of $214.3 million. The company said it’s cutting its 2006 outlook to a range of 70 cents to $1.05 a share to reflect a challenging near-term enviroment. The First Call estimate is for 2006 earnings of $1.21. Shares closed Monday down 2.7% at $44.90.
St. Joe owns huge tracts of swampland, which they have tried to market as some sort of rustic Florida eco-settlement. LOL! But unfortunately most of that land is too close for comfort to Katrina country and is basically just a delivery system for West Nile Virus.
I shorted that POS last summer in the 80s. That was a great time to be shorting all that homebuilder junk if one had a high pain threshhold. I wish sometimes I still had the position.
It is sad and should be criminal to see what ST. Joe is doing in the Florida panhandle. They are taking thousands of acres and creating a yuppie suburban wet dream out of swampland and beautiful forests. I drove from Tallahassee to Tampa on the back roads in June and must have passed 3-4 ST. Joe development signs. Once those forests and swamps are gone, there will be nothing of old Florida that is left.
Take comfort, Moman. Their little development experiment is failing. This is hearsay, but I have a friend up in the Panhandle who told me that St. Joe wanted to sell off their land holdings and didn’t get the takers they expected, so decided to go ahead and develop. And that’s not going well either. On the other hand, I just wonder what Florida is going to look like after this is over? Vast tracts of deserted developments? Slums covered with grafitti?
I heard a similar story. The St. Pete Times did a Sunday article about it circa 2003. The problem is there is no reason to retire in the panhandle as it’s just like the midwest/mid south, is temperate, and sports a very low aggregate educational level, and is currently vastly more expensive than other comparable areas of the country.
ISM # up 54.7 from expected 53.8..Go ahead keep building like there’s no tomorrow,and see what happens. They keep building ,and keep this going fo a bit longer..We’ll pay that much more for the hangover later.
And core inflation up at the same time. It’s getting harder and harder for a ‘data-driven’ Fed. to justify an IR pause.
Just curious because he is such an over the top ass. Does anyone know what area “Jeff” from the SDCIA web site owns in in FL? Same with Lereah, I remember him saying last year he “owned condos all over the FL area.”
I think Jeff is a blowhard who probably owns a maximum HELOC’d house in San Diego and a doublewide in Reno, and not much more. Gawd, can’t stand the sight of that clown.
You said it! His arrogance will be his downfall, I said as much over there before they booted me off the site…too funny.
Sadly, his arrogrance will be the downfall of the people who listened to him, like that one poor smacked ass amateur investor who got caught by the short and curlies. txchick tried to give him his medicine, but it wasn’t well received. If he had been on this blog instead of that one, it would have saved him a world of hurtin’.
That is what strikes me about the folks on that board. They have no concept of what they are doing to society. I understand that this is capitalism. But how about getting rich while being productive for society as well. These folks are buying loans for houses that could otherwise be bought buy others and living off of borrowed money. Its not like they are providing subsidized housing for the needy, they are actually hurting those that need affordable housing. They are not contributing one single productive thing to society or the economy other than loan interest (and more and more of that each month buy the way)
I could spend all day going back and forth with those idiots but would not be able to dent their arrogance/denial complex, nor would they be able to change my mind, so it’s a complete waste of time and bandwidth, although fun at times.
Jeff owns 5 houses (of his 12 total) in/around Fort Meyers, where sales have already dried up to nothing. He’s currently using equity withdrawls from still appreciating (for the moment) houses in SLC to fund his negative cashflow on every house he owns.
Even the bulls at the SDCIA site are bearish about Jeff’s chances of avoiding bankruptcy. He’s going to be the poster boy for failure.
Weather impacted wastelands?
http://www.xanga.com/russwinter
condos for everyone!
http://tampa.craigslist.org/rfs/188837866.html
I’m rubbing my posterior already.
SDCIA has always rubbed me the wrong way -especially when senior members recommend patently illegal tactics.
Any poster boy (girl) from that greedy clique is certainly worth national exposure. “)