‘A Lot Of Soul-Searching Going On’ In Florida
The Miami Herald reports on a failed condo-hotel offering. “The Royal Palm hotel missed its loan payment last month while facing a cash squeeze amid its stalled plan to convert 160 rooms into condominium units, an owner said Wednesday. The hotel’s troubles come as Robert Falor rethinks plans to convert both the Royal Palm and Coconut Grove’s Mayfair Hotel into condo-hotel complexes, efforts once expected to generate sales well in excess of $100 million.”
“But analysts question whether developers can wring enough profits out of running hotels to justify the sky-high prices they paid for the properties during a booming real estate market. ‘The question remains as to whether [the] debt on these complexes could be extinguished as an operating rental facility,’ Standard & Poor’s said in a report warning of problems in Florida’s condo-hotel market.”
“Added Francis Nardozza, an investment banker in Fort Lauderdale: ‘There’s a lot of soul-searching going on right now.’ ‘We all know buyers aren’t rushing in the door,’ Falor said.”
The Sun Sentinel. “The 28th Southeast Building Conference convened here Thursday, and some of the 18,000 participants blamed the recent housing downturn for what they say is a more subdued trade show. ‘Last year it was the sky’s the limit,’ said (homebuilder) Ray Puzzitiello of West Palm Beach. ‘Now this year, people are wondering how long this is going to last.’”
“‘Builders’ biggest problem right now, is the canceling of contracts,’ said Len Tylka, a West Palm Beach builder and president of the Florida Home Builders Association.”
“The Local Planning Agency might vote to recommend a land-use change that would enable developer Bill Reily’s condo development to go up where there is now an RV park. ‘We already have condo homes for sale that aren’t selling. Why do you want to add to the current inventory?’ said Mike Cilurso, the president of the Jensen Beach Group opposing the project.”
The Herald Tribune. “Ever since the residential real estate market fell out of bed last summer, staging has taken on even more importance as a way to accentuate the positive in what has become a very crowded field. A local real estate agent has begun posing a family selling the home in professional shots of the staged house.”
“‘If you look at a picture and there’s a human being in it, you’ll look twice,’ said Sarasota real estate agent Candy Swick. ‘They had no sales. I said, ‘Let’s let people know there are people who live in the building.’”
“As South Florida’s housing market slows down, there are more houses for sale on the high end than buyers who want them. But there’s still a severe shortage of mid-priced housing that doesn’t require buyers to live on the fringes of the region. So private developers are starting to shift gears.”
“‘The private sector is suddenly saying, wait a minute, no one is serving the middle class, and that is where we need to be,’ said Rafael Kapustin, who has a hand in two downtown Miami mid-priced projects and plans a third. ‘In today’s market developers also may not have much choice.’”
“The new race to the middle is nationwide, and it comes largely because home prices have risen far faster than wages in recent years, creating large numbers of professionals and middle-income earners who are priced out. ‘This sector has been left unaddressed for so long that need has become greater and greater,’ said Oscar Rodriguez, of Related Group.”
What will the press name the return-to-hotel trend?
- Nondotel
- Cond-notel
- no-go-tel
- Neo-Cond
- Neo-tel
Condominium-Tel, or, for short, Condom-Tel!
At least Vegas will be able to say,
“We’ve put the ‘Ho’ back in ‘Tel’!” or “We got our “Ho” back!
LMAO
CONDOM in Yum- cause if you bought one, your screwed.
Hoversion?
Holiday Innification?
Desperation?
Retrotel
Retail.
Business oppurtunity: Buy a truck, fill it with expensive furniture and some art, buy a camera, then hire several beautiful people. Drive through deserted specuhoods and stage photoshoots of empty houses.
Advice: Accept cash payments only.
Not a bad idea. However what happens when those pesky, high maintenance buyers want to actually come to the house and walk through it? Oh how we long for the good ole days when they’d sit at their coffee table in California and just phone the broker in FLA to buy buy buy!
ex-californian,
I actually have a buddy that does exactly that! They “place” couples in homes and stage furniture and decor so the place looks lived in. These couples actually pay a fraction of what a mansion like that would normally “rent” for! He occupies a place too. So far he’s been in the same “manse” for almost a year. Not bad work if you can find it.
A lady at my church gets a deal like that too. She lives in a $900k house (ok mansion - on 2 acres with barn) (median is $220k here) for not much more rent than a 3 bedroom town house. There is only two drawbacks - one she has to move out on 30 day notice if/when the house sells, and two is that her deadbeat ex (ditched her for a 20 something bimbo who then ditched him) moved back in and won’t leave without court action (won’t pay rent either).
DinOR, does he know anyone in Florida who does this?
“The new race to the middle is nationwide, and it comes largely because home prices have risen far faster than wages in recent years, creating large numbers of professionals and middle-income earners who are priced out. ‘This sector has been left unaddressed for so long that need has become greater and greater,’ said Oscar Rodriguez, of Related Group.”
I must admit, while it sounds great and it makes sense… what exactly is “mid-priced” to these guys? What are the chances builders will actually start building homes that the middle-class can afford with 30-year fixed loans?
..and this quote from the article ‘We all know buyers aren’t rushing in the door,’ Falor said.”
Some are walking out quickly ,others are standing at the exit looking at their watches, next the rush out…..
SFLA has a lovely combination of very low paying jobs unless you’re an executive of some sort plus unbelieveably high cost of living. Very greedy upper class there and huge gulf between haves and have nots. Let em eat cake.
I was wondering the same thing. South Florida is hurting for homes priced from $125K-$225K that can house a family of 4-5. When the median income is about $50K, you can’t go past $225K for the working class. Like TXChick57 says in another post, there is huge difference between the haves and have nots. Unfortunately, the have nots make up the vast majority of the South Florida population. I suspect these “middle class ‘hoods” might drive prices lower in the surrounding areas. Too bad for those who bought homes at bloated prices and nowhave bloated mortgages.
So what are they going to build for the middle class ? They already have apartment like condos going for 300k ,houses are 300K to 700k .What are they going to build 300 square foot cargo boxes for the middle class ? Why don’t they admit that they were selling 150K condos for 400K and 300K houses for
600K so they priced the middle class locals out of the market and the buyers lately have been investors ?
That’s exactly right. There is plenty of “middle-class” housing in SFLA — it’s just that it’s overpriced right now. By the time the builders build their little crap-box “middle-priced” houses, I suspect that the average house will have already gone down in price and give the builders a run for their money.
The problem with FL builders today is they no longer have pricing power. With record low interest rates they were able to increase home prices to record highs. Now with interest rates increasing home prices need to decline.
I am stunned and amazed by home builders for their unwillingness to admit they priced their product out of the market. Their incredulity is simply vexing!
A friend of mine is building a house that will easily accomodate a family of 4 and he is planning on selling it for a profit at less than 1/2 of the median price for the area (Denver - not exactly the poster town of the bubble).
There is so much margin in current house prices, and even material costs are mostly driven up by the current boom. OSB used to be $5/ sheet, now it’s $12. Wood chips and glue aren’t that expensive.
Land is expensive right now, and that is a major factor in driving up the TCO on the house.
Builders have been gouging the consumer big time throughout this bubble. They try to blame high prices on expensive land and the high cost of material but these cheap pieces of crap they are throwing up all over the place are not nearly as expensive as they try to suggest. I know a builder personally who said he could easily build a 1500 square foot house with all the upgrades for less than 150k in the current market. Builders have been making phenomenal profits. That is why the so many areas are overbuilt now, it was easy money. I don’t feel sorry for any of them should they lose their shirts. They have only themselves to blame. Given the amount of cash that was rolling in, if they did not have the foresight to save for a rainy day, then they deserve everything they get.
So why don’t you build a house, genius?
I am smart guy. Most of the work will be done by myself, save for the foundation, electrical, rough in plumbing, and a few small details here and there. I will save tens of thousands if not hundreds.
“This sector has been left unaddressed for so long that need has become greater and greater,’ said Oscar Rodriguez, of Related Group.”
Oh, brother, here it comes. Quick, everybody get a chastity belt for your posterior. Please, Oscar, don’t address our “needs”, please, I beg of you. Just let the market drop, because it’s ugly and it wants to die.
Furthemore, don’t we alredy have tons of empty “midlepriced” starter homes that are just triple overpriced. If the builders idea is to build any poorer quality housing that we already see marketed as luxury living for those that are “priced out” what will we do. Have national midsummer fireparties burning those developments down when they become environmental,social hazards while they sit empty.
Not only that, but won’t the people they try to sell these houses to think to themselves, “This is all I get for $200k?” They’re totally discounting the idea that a bubble is a bubble and the little houses were jacked up in price too and people might think that even the small houses are overpriced and just decide to wait that out too. More catching of falling knives.
Also in The Pensacola RE guide…Prices have really come down, and several condos on Navarre beach had ads that said 2004 prices buy now! Hundreds of for sale signs ,and yet, 3 less than half finished condos going up….Talk about rushing to the stop sign….
Folks should wait until they get to 1999 prices.
Or even lower. We won’t know the bottom until after the fact.
Japan’s real estate has been down since 1990: 15+ years and counting!!!
See the Japanese plot superimposed with US plot:
http://en.wikipedia.org/wiki/Japanese_asset_price_bubble
Interesting article.
All the mistakes we’ve been making (easy credit, throwing out lending standards, banks continuing to make risky loans even when the downturn is obvious, etc.)- they were all made by Japan during their RE run-up.
I am tracking a condo conversion in S. Fl. It went condo in February. Per county records, they have sold about 20% of the units. Is this a normal rate? I guess last year it would have sold out much quicker, but then I have no experience with conversions.
Where is this place?
I can think of a few conversions that are dead in the water.
It is in Coral Springs.
I see once a week two in Boynton, 2 in Boca, and a few in Broward. They are old crappy apartments that have a coat of new paint. some new sod and plants, and viola! $200,000 to $300,000 asking prices for places that rented for like $1200-$1500 a month.
One place in Boynton has sold less than 20% and another I think hasn’t sold ONE. The development I live in told me in NO way are they going to convert due to the fact that they converted a sister development in WPB and they are sucking wind.
There are new townhomes going up in West Boca. On Craiglist there are already dozens of them listed for rent. The places aren’t even finished yet.
Do you have a link to these? I know someone who needs to rent there.
chick,
the next time I drive by I will write down the names and post it here for you.
In the mean time, go to the Craiglist and you will see hundreds of places listed.
Not sure of the name, but one in Delray, on the corner of Congress and Old Germantown tried to go condo around a year ago. The prices were high - no way you could buy one and rent it out for anywhere near the cost. I doubt they sold many, if any. Apparently they’ve given up - there’s a “now leasing” sign out front.
Hey BigDaddy63,
I live on Village Blvd. in WPB. Any idea on these 3 conversions:
The Pointe……..Now a condo complex called Paradise Cove
Glenmoor……….Now a condo complex called The Sterling
Royal Palm Key…Now a condo complex called Ponte Verde
All 3 to me appear to be DOA as I drive by them everyday. These are next to/across the street from each other.
There is condo conversion in Sacramento that went condo almost three years ago and they still have sign triwllers out on the corner. All they need is more triwillers. CANT THEY SEE THAT. GEEZ.
I guess the irony is that by the time the builders get around to putting up housing for the “middle class”, there will be no more middle class left. I think the last jobs left for China and India sometime last week.
There is a lot of fool-searching going on in Florida.
I am an engineer who was born and raised here in So Fla. As a current resident, I can tell you there are about ten different companies I could move to right now for a nice pay increase, which I have been pondering as of late. They can’t get any professionals who don’t already live in the region to move here because noone who does not already live here is willing to move in to pay 400k for a tiny house out west, + new insurance rates.
I also hear of complaints, which corroborate my own complaints, about the bland monoculture of suburban south florida (not meaning the nice mix of ethnicities here, of course). If you’re not rich and not young (I.e. not interested in boats and golf, or nightlife and babes), the only real comparative advantage of So FLa are the beaches and the weather (ok, so this place isn’t too bad). However, having grew up here…I would never choose to live here. Traffic, lack of natural beauty, monoculture, sprawl, and…oh yeah, HOUSING PRICES. I would be long gone bar my family and girlfriend living here. Begrudgingly, I must give a nod to the once-burgeoning housing market for providing a nice chunk of our business…which makes me worry about future earning potential and ability to start my own business.
I have to laugh - first, Citizen’s Insurance (the insurer of “last resort”) becomes the largest underwriter of homeowner’s policies in the state. Then, to add to the welfare state (soon to be welfare EMPIRE), they just announced they’re going to create a similar insurance plan for PRIVATE BUSINESSES. The excuse is that several major employers are threatening to leave the state because their insurance rates are too high.
Add this, the “Subidize Our Geezers” property tax system, the boat-load of Amateur Investors who flooded the market, and the fact that that construction is now the #2 industry in the state (yes, that’s right, our economic engine is now extremely reliant on MORE PEOPLE moving here - so please, people from other states: please, please move here!!!! Please buy an overpriced home!!! Please pay taxes triple that of everyone else who already lives here!!! You’re our only hope!), and you’ve got the perfect storm for economic meltdown. Once property values start heading south, the state’s revenues will do the same.
We’re in for a long, bad trip.
I apologize if this was already posted. Good article from Fortune Magazine regarding real interest rates, Wall Street’s misguided focus on the Federal Reserve, and the affect real interest rates will have on stocks and real estate.
Link to story here (reprint on CNN Money)
Stocks are rallying in all sectors based on the jobs report that the economy is slowing and that the Fed won’t raise rates. It’s funny how so many people blame the Fed for interest rates which they do not directly control. It just proves how many people how uninformed out there and speak in half truths as if they are experts. With the economy slowing, I see the possibility of stagflation. Worse, I see TOL which is now over $27 and even hit $28 today toaking a big plunge when investor are shocked by the land write downs and the bad bad earnings. Oh well suckers, you bought based on a Fed hike pause instead of realizing it’s the economy stupid(s).
The guys at Comstock partners claim that the end of every Fed tightening cycle ended in either a bear market or at best flat stock prices. The average was a pretty severe drop.
http://www.comstockfunds.com - see yesterday’s commentary.
Yes but after the second rate cut, the market historically does very well. We may see that early next year.
They bought on the expectation of a Fed hike pause, which won’t happen. If the Fed stops now, the party will start up again immediately, so the Fed has to keep tightening, no matter what they’ve said recently (or what people think they’ve said). There’ll be a hike.
HAH! Stocks lost for the day. Suckers! You shouldn’t have bought in.
I want to see the dollar collapse even further, so I’m praying that the fed stops raising.
(Good article from Fortune Magazine regarding real interest rates)
What is the real inflation rate by which one should discount the rate of return on investments.
You don’t save money for t-shirts and toilet paper.
You do save to buy a house, pay for college tuition, and — once you are a senior — for health care. It seems the savings-relevant inflation rate is quite high.
Sucker’s Rally on Wall Street Today
Is it just me, or have the business practices that fed this housing debacle messed with anyone’s else’s head? I always had the image that banks knew what they were doing and had policies that limited their exposure to risk. I would look at major builders, developers and general contractors and think that they must know what they are doing, or they wouldn’t be so successful and I have often wished I had their business acumen. I always felt that they must be a helluva lot smarter than me and that’s how they got where they are.
Maybe my perception is really off, but to me this looks like a case of “The Emperor Has No Clothes” for many supposedly successful businesses. Do these companies not do any planning? Do they not read population and income figures for the areas in which they do business? Do they not examine past business cycles to know when to stop? Do they have no idea that sooner or later there are no greater fools to hose? Or have the executives at the various companies and sectors of business involved in this debacle drunk their own Koolaid and are now infected by the mass insanity? Are they truly that stupid, because if so, I certainly wouldn’t ever want to occupy a home built by any of the builders who participated in this mess and I, for one, have completely lost confidence in the business sector. It just looks like one big cluster f–k to me.
The only historical real estate debacle that even begins to approach the current scene is the Florida Real Esate Crash in the 1920s. Maybe also the Japanese bubble of the eighties. Are these reliable models to predict the outcome of this current bubble?
You have to look at who is holding the paper, and what is their real risk. Also, if you are a mortgage banker, is it better to fold up shop when the market is getting overheated, or make a bundle and fold up shop when the bubble bursts? It is a prisoner’s dilemma: cooperate with other market participants and tighten lending standards, or compete with other market participants and do as much business as you can. The cooperation keeps everyone in business in the long run, but if you cheat you do better than everyone else and they no longer cooperate. When nobody cooperates, the bubble forms. http://serendip.brynmawr.edu/playground/pd.html
Question is - now that the homebuilders have seen their stock prices decimated due to the ’slowdown’, logical to think the next progression leads to the FL’s (lenders). Prudent to short any of these guys/ Like a Countrywide , or Capitol One ? Or do they just originate and dump this crap on others. What public companies will get toasted the mosted when the FB’s default in crappin’ market? Gonna but some puts on a few this time - I knew I should have with TOL HOV etal , but never got around to it. If I had of done it , I’d be sitting in a big 7ooo SF McMansion right now lookin’ at my Granites and……. hey , wait a minute…
Seriously though - who are the best short candidates?
I’m pretty sure Fannie Mae and Freddie Mac are the big-time holders of the MBS’ you speak of, Huck. But you’re also right to assume that the front-end lenders are also going to take it in the shorts - Washington Mutual, Annaly Mortgage, Bank of America, Principal Finance, + many others.
However, unlike the il-liquid housing market, many of these stocks have the bleak home-lending future priced in already.
I would look at those companies that originate/hold a lot of Neg Am loans. These companies book the full interest payment as earnings, even though the debtor can choose which payment. As the market begins to tank, I suspect many with these loans will have the minimum payment sent which could hurt the cash flow and drop earnings/earnings estimates. I would certainly do some homework on this as I am no expert. Hope this gives you an idea to run with. I would think Countrywide, Ameriquest and WAMU, would be good candidiates to look at first.
Thanks for input. Am looking into it seriously. Gut tells me that along with the inevitable walkaways , it’s only a matter of time , short time , before many of these lenders face the inevitable onslaught of class-actions- I mean this is America , land of the litigious, they-made-me-do-it, ‘what-am-I-supposed-to-have-understood-this-stuff-and-be responsible-for-my-own-actions-or-something’ consumer.
Many of these lenders are predators. But as we know from nature , there’s a food chain, and predator easily becomes prey to the larger predator.
Baitfish : Hello Mr. Bluefish-the-predatory-lender, meet my new friend , Mr. Tort-Lawyer-theGreat-White-Shark.
Yeah, when the borrowers default they’ll have some killer earnings restatements. Nothing like having a 2% ROI turn into a 20% loss of capitol.
I would think the exotic/toxic/subprime lenders will fare the BEST if the market caves. Re-upping to a new teaser loan rate will be the only option for the reset masses. The more conservative loan type lenders will be doing zero business. The caveat being that these guys are selling their loans, and hopefully released, or securitizing and selling them. If they are smart, they are securitizing and tranching the hell out of them.
I am shorting Pulte (PHM) which has the highest market valuation of all the homebuilders. I think the stocks are going up with all the bad news because I am waiting for BK filings from of these builders, so they can reorganize and screw some of their creditors
There is no honor among theives
I shorted TOll and DR Horton but was too early and my puts still expired worthless. The homebuilder stocks have too small a market cap and have lousy options. I have switched my plan of attack to larger retailers that I figure will suffer when the economy takes a dump. I like Home depot and best buy. Who is going to buy a plasma tv for their new cardboard box?
ot but worth reading
“rate hike worse than al kaidi attack” after the hike in australia
http://www.markettradersforum.com/forum1/1389.html
jmf (germany)
http://www.immobilienblasen.blogspot.com/
Added Francis Nardozza, an investment banker in Fort Lauderdale: ‘There’s a lot of soul-searching going on right now.
You call it “soul-searching”, I call it “ass-pounding”. We both agree there is a lot of it going on right now!