Florida Condo Boom ‘Screeching To A Halt’
The Orlando Sentinel reports on the condo craze. “The unprecedented boom in condominium towers is remaking downtown Orlando’s skyline. But with fewer than half of the 30 announced projects completed or under construction, the timing, even the survival, of the rest is now in question because of rising costs and prices.”
“Those 18 unbuilt projects are competing not only with one another but with the eight towers that are being built and with sales in the four that are already open. They also have to contend with the thousands of city-center units in apartment-to-condo conversions.”
“‘At best, there could be delays,’ said Charlie Lentz, director for a national real-estate-consulting firm. ‘At worst, some projects may not be financially feasible at this time.’”
“The housing market has softened this year, and some of the downtown projects are clearly stalled. North Orange Condominiums was first proposed in late 2002 as apartments for a site just north of Colonial Drive. Yet the site remains vacant, a sales office has come and gone, and the developer couldn’t be reached for comment last week.”
The Sun Sentinel. “During the past six years, South Florida’s landscape shifted from low-slung homes to condominiums hundreds of feet high. The seemingly unstoppable juggernaut has come face-to-face with economic realities making even the most maverick developers gun-shy.”
“As supply outpaces demand, prices already are leveling off and values of newer condos could tumble by 30 percent or more by the time the market hits bottom, experts say. ‘The condo market isn’t just breaking lightly,’ Miami real estate consultant Lewis Goodkin said. ‘It’s screeching to a halt.’”
“As a result of rampant overbuilding, lenders are leery of financing condo construction, forcing developers across the region to cancel, delay or revamp projects.”
“As of June 30, almost 52,000 condo units in Palm Beach, Broward and Miami-Dade counties were either under construction or finished and still vacant, according to Metrostudy. That doesn’t include the thousands of units built in South Florida since 2000, when the housing boom started.”
“Roughly 104,000 units are planned in the coming years, although analysts doubt most of those will ever be built. ‘Things are going to get worse before they get better,’ warned economist Mark Zandi.”
“Once housing became so hot, developers started buying land in less than prime locations, Goodkin said. And it will be those condos that are most vulnerable to big price cuts, he said. ‘As we got more and more into the boom, what we found was that a lot of basics were overlooked,’ Goodkin said. ‘[Developers] started to believe their press clippings. It got out of hand.’”
“Analysts say the condo problems can be traced to short-term investors, who funneled money into real estate after taking a beating on Wall Street. That trend artificially inflated demand, driving up prices and leading developers to build more.”
“Across South Florida, not enough long-term owners bought condos, creating a glut of properties for sale as investors try to dump them. More than 11,000 units remain unoccupied in South Florida, according to Metrostudy. Investors are desperate: they’re slashing prices and tossing in plasma TVs and other perks to woo fickle buyers.”
“In Palm Beach County, for example, more than a quarter of the 379 condos at The Moorings in Lantana are for sale. One real estate listing agent said earlier this year owners were mostly investors looking to bail. Completed properties in Broward and Miami-Dade also have investor-owners trying to get out.”
“Industry observers call these high-rises with many vacancies ’see-through condos.’ ‘You can see right through the building because no one’s living there,’ Miami housing consultant Jack Winston said.”
“Certain lenders have stopped financing condo construction. Others have tightened lending practices, insisting on 60 percent or more pre-sales. Before, some lenders had no pre-sale requirements. ‘That’s going to kill a lot of projects,’ said consultant Jack McCabe.”
“Already hurt by rising costs of construction materials, developers have canceled projects, returned deposits, put land up for sale and are at risk of foreclosure. ‘I don’t know anybody who’s doing much residential now,’ said Doug McCraw, a Fort Lauderdale builder who canceled his 205-unit Brickell Point condo tower.”
“Developers and investors are trying to salvage something from the condo downturn by converting units back to apartments. More than 1,800 units in Palm Beach County converted to condos have gone back to apartments since the start of 2004, according to McCabe’s research. In Broward, 1,088 condos became apartments, while 672 condos in Miami-Dade returned to apartments.”
“‘The thing that sellers liked to say is that if you don’t buy now, someone else will,’ said Michael Cannon, managing director for Integra Realty Resources in Miami-Dade. ‘Those other people aren’t there anymore.’”
“In Palm Beach County, the 550Q condo project has been shelved. Steve Maslo had reserved a two-bedroom $800,000 condo at 550Q. Maslow is relieved the project won’t be built in such a tenuous environment. ‘It just seems like the market hasn’t yet found its equilibrium point,’ he said.”
‘Analysts say the condo problems can be traced to short-term investors, who funneled money into real estate after taking a beating on Wall Street. That trend artificially inflated demand, driving up prices and leading developers to build more.’
So the developers were unaware that this was just speculation?
From the News Press: ‘Once it’s finished, more than 11,000 people could live downtown in 432 acres along Cape Coral Parkway. ‘I think they’ll want to have all ages coming downtown,’ said Cape Coral resident Bob James. ‘You’ll want to keep younger people from going to Fort Myers and spending their money.’ ‘We have a plan. We have willing investors. We have willing customers,’ Kuehn said. ‘This is not a gamble. It is a prudent investment.’
‘Analysts say the condo problems can be traced to short-term investors, who funneled money into real estate after taking a beating on Wall Street. That trend artificially inflated demand, driving up prices and leading developers to build more.’
The root is actually traced back to Feds’ continuous pumping of the money supply. The money found it way into the stock market then into real estate. The key is to now see where it goes next. The question is, where will the next bubble show up?
I suspect the next bubble will be in precious metals. This market has just begun to mushroom. I believe that when the Joe Schmoe starts to get in we will see astronomical levels in precious metal prices.
Joe Schmoe is always the one that pushes the prices the furthest and at the end of an upward price movement. As in real estate, the same thing occurred in the stock market. As a matter of fact the speculative boom begins when Joe Schmoe enters. So, when you hear your barber giving you an investment tip in any market then you know that the boom is here and the end is near.
——-Analysts say the condo problems can be traced to short-term investors, who funneled money into real estate after taking a beating on Wall Street.
They bought condos at low pre-construction prices and watched the units rise in value before having to close on the properties. Then they “flipped” them to other buyers for hefty profits, essentially trading condos like shares of stock.——–
Analysts??? HAAAAAH!
Yeah, I’m sure greedy politicians, government bribing developers, fraudulent and manipulative mortgage brokers/appraisers, and complicit media had ABSOLUTLY nothing to do with it.
The root is traced back to the idiot ‘investors’ who took out the loans thereby pumping the debt money supply. No one put a gun to their heads. The privately owned Federal Reserve does not control the money supply - the debt saps who sign on the dotted line/swipe the credit cards do.
‘Analysts say the condo problems can be traced to short-term investors,
what about the freakin city/county planners of these communities. how could they grant these development licenses when they had to know there wasn’t the community to support them. the greed and irresponsiblity for this mess is across the board.
Yup, I used to work for City Govt in S. FL, and let me say, the housing boom has been a godsend to these organizations.
Honestly, I think you could get a permit to put a garbage dump on the beach on PB island, right next to Trump’s house, if you had the right amount of money. The permitting/inspection process is nothing more then another tax imposed by govt. Only, you have to ask to pay this tax (and sometimes beg).
Anyway, I think that most govt felt like “its not my problem” collected the money and turned their backs. Think about how good this collapse is going to be for them (at least in the short run). All these developers have paid for permits; the work is never going to get done (at least not until the permit expires). So govt gets the money; and none of the hassle (inspections/etc) that go with it. However, its a short term boom; people were paying 3-4X the normal price to have inspections done (off hours/holiday/etc), desperate to get their buildings done. All that money flowed right back into the govt coffers. Those days, I am afraid, are long gone.
I agree with you on this. The fees we charge in my department are nothing short of criminal, but the builders have done nothing to challange it yet. In my area the inspection is outstanding and has saved a lot of buyers a lot of money and grief. Yes, it’s all coming to halt. Can government learn to live within a budget again?
And why should they? They are just passing it on to totally price insenstivite flippers, who are just rolling that into the number that they expect to rise at 30%/yr.
One thing that KILLS me about the govt in S. FL. How in the hell can you not adjust the till rate (the rate at which every dollar of home value is taxed) when home prices doubled in 3 years?? Now govt services cost double as well? What in the hell kind of math is that? They are just homes, they do not require much investment of city/county time. How can you justify doubling your budget in 3 years, when your providing exactly the same services? And that does not even count the money brought in by the permits; just the tax toll on the people.
What do you think of the “Save our Homes” tax portability that is being proposed? I am temped to go buy a dog house somewhere just so I can set my tax basis now; but I think its the worst idea I have ever, I repeat, EVER heard. Now you not only tax those most unable to pay (new homeowners) at an astronomical rate, but you also provide them with the knowledge that they will ALWAYS be overpaying as compared to their neighbor who moved in 3 years ago. Talk about creating a society of haves/have nots! I suggest that anyone looking to buy in FL in the next 10 years purchase a doghouse (I mean that, a doghouse, it does not matter what you used to own, only when you bought it) today to establish you tax basis.
In my city, the hot-rod planners are encouraging all sorts of new housing development. Only problem is, the population is DECLINING!
Big problem in Florida, crash. The Tampa Trib had an article Saturday about the enormous sums the local governments have raked in during the housing boom, in fees and taxes. The problem is, that money has been pretty well spent. Nothing was put aside to handle the present and future problems all this overbuilding has caused.
‘Nothing was put aside’ - Exactly!
- This is the American Consumer’s motto.
What in the hell do they think tomorrow will bring - only sunshine?
It’s actually good that they were allowed to be built. Remember, the long term solution to over-priced housing is too much supply. The problem is it’s own solution.
Yep, linda…I asked that SAME question a few topics ago. Permits have to be issued for these projects, so our county/city planners definitely share in this huge mess.
BayQT~
I heard another “its different here in South Florida” story yesterday. In a strange twist of fate my IT guy who tells me its ONLY in S. FL that the market is turning downward. Phoenix, Vegas and the West Coast are still taking off.
He later said to me he was “not drinking the kool aid.” I just nodded and handed him another dixie cup full of grape flavored punch.
Still on the up in Phoenix?
Show him these two links.
http://www.benengebreth.org/housingtracker/location/Arizona/Phoenix/
http://bubbletracking.blogspot.com/2006/08/tracking-phoenixmaricopa-pinal.html
younger people are leaving fort myers. it is all about housing prices. there is alot of wishing and hope in florida these days!
“As supply outpaces demand, prices already are leveling off and values of newer condos could tumble by 30 percent or more by the time the market hits bottom, experts say. ‘The condo market isn’t just breaking lightly,’ Miami real estate consultant Lewis Goodkin said. ‘It’s screeching to a halt.’”
That should be “values of newer condos could be 30% or lower from there present price.”
No, condoes –WILL BE– 30% of their current price.
30%? Has anyone ever heard one of these shills OVER estimate the extent of a downturn? This rosiest picture that can be painted is 30% declines? The current condo craze (notice how no one flinches at the word) is uncharted territory. This isn’t about prices anymore. This is about viability. Condos are muticellular symbiotic organisms. They cannot survive when 1/3rd are nonproducing. The math stops working. In any one complex once about 1/4 become distressed the entire system implodes. Eveyones elses’ taxes go up by a 1/3rd to cover, the repossed units get rented to substandard tenants and those pressures alone put another 1/4th of the units underwater. The good news is that the result will be affordable housing as certain unamed asset vultures prepare to peck the eyes out of these corpses and return them to market at rents approx 100 times the purchase price. Try not to harm my nice drywall with your cheap plasma on the way out and don’t forget to sign your 1099 reciept on the debt forgiveness there’s a good future renter.
Robert can be one of the more flustering personalities to read here, but he’s dead-on with this one. I know of several 1970s-80s complexes a few miles from me, that are loaded with repo’d condos that were sold by the banks for as little as $35/sf to absentee landlords, who rent them out to illegals and gang-attire types.
If more than 1/4 of the units of a complex become investor owned, then it becomes difficult for the owner occupants to sell to new owner occupants. Banks get very leery of financing the sales. So more units end up in foreclosure… or must sell cash-only to new landlords.
“Flustering? As in comforting the afflicted and afflicting the comfortable? Ju’s calls ‘em as ah sees ‘em.
I like you just the way you are; don’t ever change.
that were sold by the banks for as little as $35/sf to absentee landlords, who rent them out to illegals and gang-attire types.
Exactly! In Central Florida, esp. close to the theme parks, at BEST they’ll be rented to families/college students by the month, but eventually they’ll fill up with Section-8 freeloaders, crack dens, and meth labs.
“….but eventually they’ll fill up with Section-8 freeloaders, crack dens, and meth labs.:
Now, now….in as much as a lot of people try to equate Section-8 with “freeloaders, crack dens, meth labs”, and other undesireables, let’s not forget that there are senior citizens who rightfully qualify for Section-8 housing.
BayQT~
“rents approx 100 times the purchase price”
wow, that would be quite an amazing investment!
That’s a normal investment. We’ve gotten so far from normal that it only looks amazing. $100k property rents for $1000/mo. Two months to taxes, one month to insurance and upkeep. 20% down would otherwise pay $1000/yr in a fixed investment, 1 mo to capital costs. So, now you’ve got $8000/yr and the rule of thumb is 1 mo vaccancy after those expenses. $80k mortgage at 6% is $6000/mo. -IF- there is no appreciation and no unexpected expenses and you average one month between tenants per year then you make make a grand minus and gain some tax deductions. Good investment, not amazing. 100x is also the extreme I expect 120x to be more typical and 140x in special cases like California.
Hi Robert, I was just being picky/silly. I was assuming you accidentally had it reversed when you wrote “rents approx 100 times the purchase price” and meant to say “purchase price approx 100 times rents).
I do agree with you that things will adjust to where purchase priced is around 100xrents or better.
Oh, I get it now. I’m just so used to going from crazy to extreme to visionary to mainstream that Iget used to defending myself out of habit. I’m still trying to figure out what Mozo Maz finds flustering about my personality.
The same can be said about these new single family subdivisions with HOA’s. The viability of many of those areas depends on the level of funding for the infrastructure maintenance and overall appearance. I fear many are underfunded.
There’s gonna be some real interesting fights in California over subsuming HOAs and Mello-Roos into municipal budgets.
…also with an HOA, you don’t really own your house. You can’t even paint your trim unless some old biddy on the “Review Board” approves it. And most homes sold in florida have some private fascist government HOA controlling them. This is just another fuse on the housing bomb.
Totally agree, I don’t see how HOA can continue to operate under these conditions.
Robert, what are your thoughts on this rental issue nationwide? Do you see rents rising or falling? I keep seeing articles on rents rising but I don’t see how that can sustain itself given what we know about the number of unoccupied/unfinished units coming on the market? I know a generalization won’t be accurate in all areas but just wondering your thoughts?
For the medium term I stick to my claim that rents will rise. I must have posted a thousand lines on this already and until the last few weeks the kindest comments referred to my mental condition. Yes rents are ising like I predicted and will continue to rise on inflation fears and the progression of the rental markets’ cost basis towards much higher. The start of the bust won’t help. These things are not only not on the market but their presumed customers will be still renting applying even more pressure. There are no mechanisms in place to rent out the kinds of properties that will be defaulting soonest. Even if there were systems in place the market for sale mix is not what the rent market is loking for. Hardcore renters cannot afford to buy a car and pay $3.00 gas just to get a bargin in Chandler or Palmcaster. Oh, and all those former owners? They’ll be looking to rent as well and again not rent the stock they just lost.
Robert, looks like a TON of independently-owned rental units are coming online. I know this because I raked the PB County market in Feb to find my place that I moved into in March. There are at least 3x’s more listings on Craigslist now than when i was looking….at about the same price as in March that are comparable to my place (2/2 condo for $1300/mo in East Boca). Maybe Craigslist is just catching on for realtors and indpenedents….but would that account for all of increase. I guess we’ll see about the pirce, but jsut thought I’d comment…
Estanley, yes, the “for rent” inventory will be flooded as people try to find some way to make their failing ownership work. They didn’t know how to be investors, they didn’t know how to be flippers, they don’t know how to owner occupiers. Being a landlord can be much harder than any of those things. The rents won’t be right, the background checks will be inadequate, oversight insufficient, etc. Then there’s human nature. When you are losing $2000/mo and the market is saying $1000 rents people will go hungry before they rent out. Whyinthehell should a smart investor/owner like me “give” some renter slob a $1000/mo to let him live in my house?
Answer to your last sentence: Because it’s better than nothing. And that’s the choice the we will be seeing, to either lower your price to where it will sell or rent for a year at a drastically reduced price hoping for a brighter sell price a year down the road. I am seeing this personally….i.e. see my post below about my co-worker who lives in the Moorings of Lantana…..1500/mo rent when to buy is 400K. Also, girl next door just sold her identical condo to mine at 230K in East Boca, my rent is 1300/mo. Not nearly as drastic as the Moorings example but still a far cry from meeting the 1:100 or more conservative 1:120 rent/mortgage ratio. All of the others owners who are holding out to sell…well good luck. As we can see from the article, in thr Moorings they’ll have alot of direct competition with over 25% of the units in the complex vacant and on the market.
Investors are desperate: they’re slashing prices and tossing in plasma TVs and other perks to woo fickle buyers.”
How stupid is the average person to buy a home for a free plasma TV? I guess pretty stupid, because I see a homebuilder in Denver offering the same thing, $90k off, and a free plasma TV (Capital Pacific Homes, cph-colorado.com). It must work.
Yeah…about that plasma TV incentive. Yesterday, on a 4 mile walk with a friend of mine, we were spotting houses/THs for sale and picking up flyers. One of them that she picked up I already had. On it though, she said that they were offering a plasma TV. I said, yep, that’s one of the things that a lot of people are using to sell their properties. Several pictures were at the bottom of the flyer, one of which was the den with the TV.
Fast forward to today: I read the above post, and then the thought occurred to me to read that flyer (same one as noted with the tv, but I had collected it on August 8th). Well, la de da, wouldn’t you know it, but THAT week the offering for the plasma TV was NOT there, although it was the same TH, same asking price, same pictures at the bottom of the flyer, same den with the TV. Not wanting to reduce the price, they think that the TV is gonna bring in a buyer.
DOM per zip realty: 25 days, since 7/26/06. And that’s only if this isn’t a re-listing.
BayQT~
So the developers were unaware that this was just speculation?
I would guess that developers just move together, like a herd. From the magnitude of this bubble, reasoning has taken second place.
Sorry, OT - The link below is to a NY Times article about rising rents. It discusses the link to escalating housing costs.
http://tinyurl.com/hqcee
Rents are going up in the DC area as well. However, what happens when all these “investment” properties can’t sell. Won’t they flood the rental market thus lowering the rental rates?
exactly. everyone that owns to make profit is in denial. salary vs housing cost. the same people who cant afford even a 300,000 home, cant afford a 200,000 condo, or rents that are above 1,000 month. now you have all these condos in south florida and they are stuck with mortgages, rising taxes and insurance. you think the single family home insurance is a shock, wait for the multi-family unit insurance prices this year. all an owner can do is shift the cost to? not the condo owners, except for rising condo fees. the remaining apartment renters wont live at places that raise their rates 100 to 300 dollars this year, (priced out). this means rate issues. the real economic (salary) market is now running the show. without house prices appreciating at a strong 10%+ year to year clip. it is really over.
Yeah, all this is going on right in my neighborhood. 550Q was to be built about 8 blocks from where I live. It is directly across from the county courthouse (an attractive building, but, nonetheless a hangout for criminals) and one side of the building was abuting an active railroad track. I could not believe the prices they were asking in there, the only way I would pay 800K for a 2br (probably around 1200 - 1500 sq/ft) is if there was a bag 600K bag of cash in the middle of the room. The location is much less desiriable then where I am, and they jacked the price by about 70% / sq ft (using my current, psycho values for pricing).
I wonder if that guy with 800K down realizes how lucky he is. He probably would have lost 200-400K by taking possession of that property in a year. Talk about dumb luck!
You know, I have a suggestion. We need a place to put pictures and comments together. I really think it would be helpful for people to see what some of these 800K 2br apts look like!
And yes, I supposed some people are dumb enough to buy a home to get a plasma TV. Thank god, as I always say, its the stupid ones who are subsidizing my lifestyle right now. If not for them, I would not be living the same way.
I grew up in WPB (used to work in the Pink Palace building) and am also amazed that they build such expensive units in what has historically been a very undesirable location.
Ha. Crack town is right next door to these new complexes. The last time I went down to Clematis Street, I got 3 different requests from wild-eyed or drunk individuals for cash.
When I used to work there and had to park a couple of blocks away from the building I used to get stalked my a maniac who was incensed at me cause I am a “half-breed” or so he said. Have no idea what he meant but getting followed around by crazy people is no fun.
It sounds like builders believed their own BS about “not any more land”. They bought in marginal areas, because they figured it was the best they could do….
I would not be surpised. Ever notice, if you say something enough times, in your mind, it will become true? I am sure that some of the builders, at least in the last year or so (after so long a boom) really began to believe the crap/lies they were spewing.
Oh well, not my problem. I know some of these builders payed (in Palm Beach) 3-5X the real price of land. Talk about taking a haircut! You bought something for 50 million, that is only worth 10? Ugh..
the silence is deafening. the grinding halt in FL RE is so major. I work with a guy who should have retired at the end of June. I saw him 2 weeks ago and asked why he was still a corporate shill. He told me long story, can’t retire.
The fool bought a copuple of properties in the dog dead center of FL and they obviously hit the crapper and he can no longer retire because he was obviously counting in the “equity” he “amassed” in these 2 POS properties.
C’est dommage.
Just posted a new ditty about guys like him, in the Bits Bucket.
Waitasec… It must be a great time to “invest” in a condo, cuz “they’re not making any more condos!” Ha!
LMAO
Hold on - on the WCI conference call (WCI is the #1 builder of these towers in Fl) they said this downturn would be shortlived and that in 6-12 months everything would be ok. They were so confident they stated their stock was seriously undervalued and they would use their cash to buy back stock. Either they are blind or just liars!?!?!
Must have some executive options that need some propping up!
Yeah, interestingly enough, they HAVE no cash, and have been using their credit line to buy back their shares.
I listened to that call — worth a thousand laughs. At least the guys at Pulte,Toll, KBH recognize there’s a problem and have vowed to cut back. The only builder I’m short is WCI, and after hearing their denial I’m convinced to go even shorter.
condos! try townhouses. they are building them all over the place at (300,000) a pop. dont they know that they have priced out everyone and the flippers are gone. all along 441 and in some crazy (crime ridden) places.
add insurances and taxes to one of them and whoo nelly!
Have a friend who lives in The Moorings in Palm Beach County. He says it’s great, he has the entire complex to himself. The gym is empty, he walks around with no shoes, he fishes off the marina that has few boats. And yes, he rents….1400/mo wih a roommate in a 2/2 1250 sf. Would this cover the costs of purchasing one of these units for 300K? Answer: Not even close.
$1500/mo actually
One more corretion “Moorings of Lantana, 1,2, and 3 br’s starting from the 400’s.”
Double HA!
At least The Moorings sounds as though it has features like a marina and (I assume) good water views on one side.
When prices tumble, all the condo plexes in crappy locations will have to compete against the likes of the Moorings. If prices go low enough, the Moorings etc. will skim all the buyers for a while and the secondary-quality places will languish even more than they might otherwise.
Moorings-type places will cost a bit more, even at the bottom, but qualified buyers might stretch. I’ve lived in a place like that before, and it’s a nice experience. In any event, the Moorings will have only one strike against it (the glut). The crappy stuff will have several, including the deteriorating client base noted in the comments above.
“”At least The Moorings sounds as though it has features like a marina and (I assume) good water views on one side.”"
Yes, and you can see the Mediterranean and Italian islands when you look out the window of your POS condo located in “Venetian Isles” down here in Florida. OOh No wait.. their just mosquito invested mud-holes filled with drainage. My mistake.
True. Most notable in my example though is what my frined is paying for rent (1500 per mo) and the starting price for a 1 br (from the 400’s). Insurmountable difference if someone wanted to purchase and rent out for positive cash flow.
Bubble joke: The punch line is: A condo in Florida
The question is: What’s harder to get rid of than a____________?
Fill in the blank.
STD?
LOL. Toenail fungus.
unwanted house guests.
A condo in Phoenix
An unemployed college graduate living at home.
Rush Limbaugh with a microphone. Joe Lieberman with a Senate seat.
About 18 months ago, I looked at one of these new Orlando condos. They wanted about $700,000 for a roughly 2,400 s.f. unit with get-to-work convenience but no particular view. The condo fees for the unit were $1,000/month. No idea how many they sold, but it sounded like mostly-flipper action at the time. Downtown Orlando is growing a lot, but I really doubt they have anywhere near the number of high-paying jobs needed to support the populations these condos are seeking. Nor will the workers be able to pay anywhere near what a cost-recapture rent would be. Tough times are coming for many of most of these downtown O-Town condos, I think.
Recently saw, for the first time, a flipper lose big money, net-net, on a new condo in a flipper-heavy complex. Riverfront unit, bought in 2005 for about $460K, sold a year later for about $380K.
Chip, how’s the beltway working out over in Orlando? Because the Hillsborough County commission is beating the drum for a beltway over here.
Palmetto — presume you’re talking about 417/the Greenway. It’s outstanding, IMO. It’s a toll road, but we use E-Pass and they are converting to no-slow lanes for pass-holders. I use it all the time. It is not finished on the western end, but I don’t go there much anyway. The east-west expressway, which runs right into downtown, is too crowded for me and I avoid it when possible, like I-4.
Chip, thanks for the input. I was watching a local show this morning on our proposed beltway vs. a public transit plan. The argument against the beltway here was the sprawl and accompanying pollution it would cause. I’m a big fan of mass transit, but I don’t discount the need for decent roads. The mass transit cheerleader held out Altanta’s beltway and Orlando’s beltway as two examples why a beltway would be a disaster. So not knowing a lot about the Orlando beltway, I thought I’d ask someone on the ground. I value the opinions of fellow bubble bloggers, if it was a bad thing for the area, I’m sure you’d say so.
Palmetto — I don’t know a lot about the Atlanta beltway, other than that it’s a a nail-biter getting through there. There is a KEY difference between it and Orlando’s 417, IMO — Atlanta’s beltway is also a main corridor for people traveling north/south on I-75/85. Jacksonville has a similar issue, though less crowding. Because Orlando’s beltway is not finished on the west side, there is no attraction to it as a way for people to bypass Orlando, unless they are headed for the international airport. The turnpike and I-4 carry all that traffic. If the Tampa beltway does not draw north/south traffic from the Interstates, and I think it would not, then you should be OK and it could help your traffic a lot.
I spend about a week a month in central florida (and own 20 acres of land there which we’ve had for a long time.)
I think Orlando will crash even harder than, say, San Diego or San Francisico because there’s no inherent “quality” to the land. There are no hills, no views, (if you’re not on a major lake), etc. One piece of swampland or former orange grove is just like another, and there’s still TONS of undeveloped land in Orange county.
About a year ago, I saw condos/timeshares start to go up in a PARKING LOT for a STRIP MALL and said to myself–THIS is what will make people realize that it’s stupid to take out exotic mortages to buy this crap as an “investment.”
I know quite a few folks who decided that they need to “get in now” and got a 400K mortgage on a hastily converted rental-to-convo, (I/O of course).
And that’s another reason the condo market will crash. Well-off folks aren’t going to waste their time “investing” in these. They need places to park CASH, not a piece of paper to hold that indicates more debt. Probably the vast majority of the people buying these condos are poor folks who got an exotic mortgage. And if they’re young or single, they’ll simply walk away when they can’t make the payments anymore.
I have a question for everyone about the rent/purchase numbers.
I have heard over and over, that in a typical housing market, rent X 100 = Purchase price. Do you think that equation is going to be true again after the fallout if finished from the housing market? I ask, because, in my area (WPB), its so far from that, it would just be amazing if the numbers went back to 100X rent. Even 150X rent would be a huge (50% in some locations) haircut for speculators.
Also, it seems to me that the more expensive the home, the more skewed the multipier is. My condo, on the market for 280K, rent for 1250 a month. That a multiplier of about 2X, and would indicate that that the fair price for my condo is between 125K and 135K. However, as you move to higher end property, the number gets worse, not better. I am looking to move into a SF home; its for sale for 750K, or rent for 2200/mo. That’s more like a 3.5X mulitplier.
I would not expect that; you would think that with the condo glut; it would be more difficult to rent a condo then a SF home, and therefore, drive the prices of condo rental even lower?
I do have a theory, however. 2200/mo is a very large rental payment when your median income (in the PB area) is right around 55K. Perhaps it is very difficult to rent these homes because there are just not many people around who can afford a 2000+/mo rental payment? Again, this is just a theory; and I would really like to see what some of you think is causing this.
Another thing, I cannot believe the realator can give me those numbers with a straight face. We are walking though this home a few weeks ago; with the brochure that says 750K as the sale price. After we finished; I told the agent that we are really looking to rent for another 2 years, and to let us know if anything in the area is for rent. He then replied “you can rent this place for 2200/mo”. You should have seen the look on my face. If they had any idea how stupid they sounded telling me something like that… I would think they would divide the “for sale” and “for rent” listing between 2 agents, just so you do not get people like me laughing all the way out the door of the place.
I think the realator realized his mistake, and tried to quickly counter with “but if you own, you will be building equity every year in this great home”. Yeah, right. That home would have to appreciate at a rate of ~5K/month for entire time I lived there to match the difference between rent/own costs. Sorry; I don’t know where you learned to do math, but I think I will be renting.
Michael — rent reflects reality. It has to be paid for in cold, hard cash and cannot be higher than a renter’s ability to pay. You can’t leverage rent. As for high-priced houses and condos, there is, at least in my part of Florida, a ceiling of roughly $2K/mo. (maybe $2.5K for a very nice SFR) that people will pay in rent. So, as you observe, if you can shell out a few more bucks in rent, you get a proportionally much nicer place.
Chip:
“Michael — rent reflects reality. It has to be paid for in cold, hard cash and cannot be higher than a renter’s ability to pay. You can’t leverage rent.”
beautiful comment Chip !!!!,
can’t put it better than that.
Thanks, Dmitry.
Exactly why I am currently renting at about $100/SQ FT.( 2100 sq ft 4/3/1 car garage in a gated community). vs buying a SF for double that in this area. I cannot imaging paying $400-$500,000 for what is on the market. Unless I am dead wrong prices need to come down another 25-30% before it makes sense to buy.
When you put the numbers down in a rent vs. buy calculator, no way a home makes sense to buy here.
All of my friends tell me that there are dozens of homes for sale in their communities. It’s just started- the mirror image of the runup.