Downturn ‘Becoming Cliche’ In Florida
A housing report from the Tallahasse Democrat in Florida. “It’s almost becoming cliche, of late, to say ‘real estate market downturn.’ However, sales numbers for July released this week by the Florida Association of Realtors continues to confirm the slowdown in sales of existing homes. The glut of more than 2,600 single family homes listed for sale in Tallahassee has forced sellers to lower their prices, another trend exposed by the July numbers.”
“Local Realtors expect sellers to continue to drop their prices as the market continues to favor buyers.”
From the Ledger. “Maybe it was the heat. Home permits dropped sharply in July and Polk County’s jobless rate ticked upward. Local builders pulled 409 permits for new home construction last month, a drop of 56 percent from 932 permits in July 2005. It was the largest year-to-year percentage decrease since The Ledger began keeping records in 1994.”
“Polk also had 462 existing homes sold in July, down more than 24 percent from the previous year. Sales were down about 25 percent in both Lakeland and East Polk. Buyers are becoming more educated and, because of the economic market, they are waiting for prices to adjust, said Richard Castret, a Realtor (in) Lakeland.”
“‘Obviously when you look at general economic conditions, we’ve reached the peak of activity,’ Economist Gordon Kettle said.”
The News Press. “The sales price and number of homes sold in Lee County tanked in July. A house sold with the assistance of a Realtor dropped 8 percent to $264,600 from $287,500 a year ago, and the number of homes sold dropped 32 percent from 1,026 to 694.”
“Those buying homes now are often getting deep discounts. Real estate agent Christa Brooks’ client Roger Lolly closed recently on a Gulf-access canal-front condo in Cape Coral for $189,000, $60,000 less than its assessed value.”
“‘There are some sporadic sales, but boy, you have to have an outstanding piece of property. Never mind marketing; price is what talks right now,’ Brooks said.”
The St Petersburg Times. “Educators across Florida are scratching their heads over a new phenomenon: Far fewer students than expected are showing up for school. After more than a decade of rapid growth, school enrollment slowed last year. Educators thought the dip was an aberration, but early indications show enrollment growth has slowed again this year, even in traditionally high-growth areas of the state. Enrollment is down by thousands of students in Miami-Dade, Duval and Broward counties.”
“William Person, who oversees Hillsborough’s student enrollment, said it’s too soon to say exactly why the numbers are off, but he has some theories. ‘Generally speaking, the housing market has cooled,’ he said. ‘You’ve seen increases in property values in what was moderate housing,’ he said. ‘Now the average home is $250,000. For many families who move into this area, to purchase a single family home that is $200,000 to $250,000 is prohibitive.’”
“In nearby Palm Beach County, enrollment slowed to a crawl last year. The district expected 5,000 new students but ended up with only 400.”
The Sun Sentinel. “When it comes to South Florida’s pillow-soft housing market, certain real estate agents and industry professionals are fed up. The market’s downturn is pitting agents against the analysts, with the media caught in the middle.”
“From 2000 to 2005, agents made gobs of money when homes sold quickly. But now fewer homes are selling and prices are falling, causing agents to, well, shoot the messengers.”
“One reader this week criticized Mark Zandi, saying the chief economist for Economy.com ‘has been attacking real estate in every newspaper in the country.’”
“The same reader finds fault with Deerfield Beach housing analyst Jack McCabe. ‘The analysts … didn’t build all these buildings,’ McCabe said. ‘We did not finance the buildings. We did not speculate on the buildings. All we have done is count the numbers and report our findings.’”
“Bill Hardin, director of real estate programs at Florida International University in Miami, said few people complained about media coverage of the souped-up South Florida housing market during the past five years. ‘Losing hurts more than winning feels good,’ Hardin said. ‘In today’s market, people are feeling that they’re not getting the return they thought they would get, and that sense of loss is magnified.’”
Faster, please.
Some in the press seem to want a ‘Ok, it’s a bubble, can we move along’ timeline to this. If only it were so easy. Then again, prices can just be reset lower:
‘The Bonita Bay Group is reserving 60 condominiums for Lee County teachers, who will be offered units in a new development at a steep discount. Browder hasn’t revealed names of the movers and shakers comprising his focus group as to not jeopardize the philanthropic nature of their mission.’
‘The way the price of housing has gone up, it’s not just people on lower income levels that are having trouble,’ said Treva Gilligan, director of Lee County’s Housing Development Corporation, a nonprofit agency that will assist Bonita Bay and Lee schools in the project. ‘It’s the professionals like teachers and firefighters.’
As if prices only went up for government employees.
Reminds me of Billy Zane in Zoolander when he says, “It’s a walk-off. . .it’s a walk-off.”
It’s a bubble. . .It’s a bubble.
Buy now and wait a minimum of ten years for your nonperforming asset (aka, home) to return to its current all-time high value. That is a long time to have ten-times your annual income locked up in a highly-leveraged investment, and that is in the good scenario where you don’t go bankrupt trying to keep up with the payments, and where prices don’t head south for a much longer period like they did in Japan after the early 1990s bust.
See David Lereah’s slide number 35 for the hard evidence on this (and I bumped the 7-years minimum time to return to peak price level up to ten years to take into account inflation).
http://paper-money.blogspot.com/2006/08/lereah-mea-culpa.html
I was surprised how candid Liarreah was, and how quick a turnaround too. Pretty soon, he’ll be saying, “This is what I’ve said all along.”
And as someone said on that blog, “Pretty scary if that is the best spin that this paid shill can put on the present RE train wreck!!!”
How true! If that’s the best thing Liarreah can say, we must really be headed for a meltdown.
The best thing he and NAR can do now is telling the truth and persuading the Fed to keep the rates low. If they keep saying there is no bubble, why would the Fed do anything to help them?
goleta –
I believe you have put your finger on it. This is also why Bob Toll is talking up the “hard crash” scenario right now. Their objective is to scare the Fed into respiking the punch bowl. But if that fails, Plan B is to blame the Fed for causing the hard landing. Never mind that only a year ago, both Toll and Lereah were trying to convince everyone that “the sky is the limit.”
Stucco,
Very insightful observation!
Ha, it’s like a coal camp or a migrant workers camp…Now for Teachers! I wonder if they are going to issue them their own special currency for use at the company store?!
LOL, Michael Ledeen.
School enrollment may also be dropping because people are no longer moving to FLA, but because existing people are moving out.
And it is not just the cost of living. The schools are wretched. People might still buy an expensive house, and write off the fat property tax on their 1040, if the schools were decent.
I know it’s bad form to reply to one’s own post — but..
Seriously? If you are willing to send your kids to third-world schools, why not just move to Central America? It’d be a lot cheaper.
Paying through the nose for a home, and then scrambling to pay for private tuition is unjustifiable to many people. So, they leave.
What is good form for adding ancillary thoughts which come to mind after you have already hit the “Add comment” button? Sometimes it makes more sense to add those thoughts, rather than keep them to yourself…
Thats a good idea. But with the dollar in the doldrums, its not so cheap anymore. For example, vs the brazilian real, the dollar has dropped from 4 to as low as 2 and change recently.
Nevertheless, its a good idea. I’ve heard that very good private schools can be had for around 200 dollars per month.
$200/month for a good private school? In the 1980s here in Florida I had to pay $300/mo per kid to grade 8 and $7,500/yr for an admittedly outstanding high school.
$200/mo. is a steal, if you can find it. Best value (IMO), though in many ways more elusive, is home schooling.
Mozo, that’s exactly right. Florida schools are abysmal. This year, in the Hillsborough County school system, the majority of children entering the first grade do not speak English, and their parents don’t either. Many of those parents are here courtesy of the housing boom. But they can’t afford the houses they built and live instead in subsidized housing.
BTW, interesting news over at Mish’s blog on the guy who was electrocuted here in Florida while installing a dryer vent in a Lennar Home. Apparently, the entire house had current running through because a wire was nailed through to the steel frame. So turning off the main breaker didn’t do squat.
What is intolerable is that fact that parents have to purchase most of the school supplies for their children - including items like paper towels, tissues, copy paper, and other items.
Where is all of the money from our taxes? The lottery money? Even the ‘A’ schools are filled with uncaring teachers and administrators and degenerate students.
BigDaddy, I’ve been wondering where all those taxes went, too. Schools were built that nobody wants to attend. Buildings don’t educate students, teachers do. But their hands are tied.
The talk about schools makes me think about the tax base. Prices drop, assessed values drop, tax revenues (jeez, what a misnomer that is) drop–and yet, as we see again and again (especially in California), city/state/federal budgets are based on best-case, highly optimistic tax projections. When the money is there, expenditures expand to fill the vacuum, yet when the inevitable downturn comes, the handwringing begins anew. As if they didn’t see it coming. Again.
If only budget officials would work out something like an average based on past revenues… I mean, they’re supposed to be smart people, right?
“It’s a cycle…it’s a cycle.” (Thanks, cayo_ron. I love Zane’s delivery.)
I’m sure folks from California are looking at Floridians and slapping their thighs laughing, considering history is repeating itself here, only worse, because Florida is not a high income state. Florida’s economy is primarily based on the low paying tourist, health care and retirement service sectors. Some real estate, but that is cyclical and in this case, about to go bust. Some agriculture, also low paying. Education is traditionally poor, so not too many businesses locate here. There was a middle class of sorts, mostly self-employed. They owned modest homes and raised families, because a relatively low cost of living allowed them to do that. Now, they are priced out, between housing, insurance, gas, etc. Since these are the main pillars of the tax base, when they leave, the bottom falls out. Now the tax base is mainly composed of traditional landlords and bag-holding specuvestors who won’t be able to hold on much longer and those retirees who are either re-locating themselves or thinking about it. And declining small businesses that are stretched to the max. Empty houses built for families that never arrived, so no taxes coming from there, and these will ultimately be sold for back taxes.
As the tax base declines, however, there has been an enormous influx of non-citizens who were employed as cheap labor in the housing boom who are heavily dependent on the tax base for subsidized housing, education and medical care and who expect these services to be provided to them. As they are laid off and dumped back onto the shrinking tax base by the builders and developers, they will be more dependent on taxpayer subsidized services. Many will be unable to go back to those agricultural jobs they had before the housing boom, since much of that land was sold off to development. They will find they have been screwed, because whereas, crops come up year after year, the same house gets built only once. There will be fewer landscaping jobs, as many people, to save on expenses, will be cutting their own lawns or letting them go. Fewer retirees to care for, as many will have left the state. It is not going to be pretty.
What taxes? Most states have an income tax, sales tax, and property tax, but Florida lacks the first one and a lot of people have their property taxes capped by “Save Our Homes” or whatever it’s called. Low-tax state, lots of kids (many who are English Language Learners) you get the services you pay for.
You are right about the English language learners, that was the main point of my post. As to taxes, ask “what taxes” to homeowners in Florida and I’m sure you’ll get an earful. Save Our Homes is not a bad idea, I was very grateful for it and only recently has it become an issue. As to state income tax, it isn’t needed when taxes collected are allocated wisely. For example, when $300 million of taxpayer money is spent to bring 300 jobs to the Orlando area (quoting Jim Davis, candidate for Governor), that is idiocy. And that is just one example of many. State and local governments have made a mint in this housing boom, but I doubt they paid off back bills and set the surplus aside for the rough times ahead, because the powers that be have drunk the Koolaid about “Housing only goes up” and “1000 people move to Florida every day”. The rampant development had visions of dollar signs dancing in the heads of the local pols who are so clueless, I wonder what planet most of them are on.
Back in the day, I knew someone who had some nice undeveloped oceanfront property in Stuart that he had paid $179,000 for (this was like 12 years ago). Not bad at the time, until the city and county decided to hit him up for $12,000 for sewer and another $15,000 for “Dunes reparation”. And of course, he didn’t receive a damn thing for his money. Ended up selling to the city at a loss. What a crock.
The Big Lie about the Florida Lottery and government education: I have a friend who was on the core group of people that got the commitment from the state legislature to pass lottery revenue to the school system. Typical, oh so typical, of these sleazebag politicians is that they *subtracted* virtually the same amount from the normal/previous funding level. So, at the end of the day, virtually no lottery revenue went to enhance the school system — it merely replaced existing funding in a political sleight of hand.
I do not believe in government schools, btw, but many of my friends do and I have long had the information about the initial treachery first-hand.
The St Petersburg Times. “Educators across Florida are scratching their heads over a new phenomenon: Far fewer students than expected are showing up for school. After more than a decade of rapid growth, school enrollment slowed last year. Educators thought the dip was an aberration, but early indications show enrollment growth has slowed again this year, even in traditionally high-growth areas of the state. Enrollment is down by thousands of students in Miami-Dade, Duval and Broward counties.”
Same thing going on in virtually all of Orange County, California. No children in the schools, and districts shutting down schools that have been there for decades. Almost scary, really. Birthrates are down because this generation seems to have bought into some delusional idea that having a lot of children is “wrong”, and of course the RE prices drive young families out of areas as well.
Not coincidentally school districts report gains in enrollment in areas of the country where RE prices are very low.
What happened to the days where people had children without the obsessive concern of economics, as if you can put a price on family and people? I’m beginning to think a family like mine with more than two children is a dying breed, especially here in OC. And as I’ve mentioned in other posts, we’ll be leaving OC, if prices don’t collapse soon. We don’t need to live here…
Is that true Jason? That schools are being shut down in OC, if you have any info. on this can you post a link. I find this to be very interesting because OC is so overhyped.
I lived in Aliso Viejo for a couple of years and escaped every chance I could down to San Diego…
Heck, the schoold districts in OC were unable to sell a few schools because they wanted too much money for them.
Personally, I think it’s foolish and short sighted to sell schools. LA county mothballed some of theirs in the 1980s, but they were needed again when demographics shifted.
Shannon posts here and works for a school district that tried to sell 2 elementary schools and failed.
I think that a lot of young people are holding off and having fewer children is because of the cost of living. This national ponzi scheme, to allow baby boomers to retire off of their real estate and get the Fed off the hook for social security, has crushed the american dream for the up coming generation.
No problemo — other countries are sending over hordes of families, whose children are rapidly replacing what would have been the next generation of America’s native population.
Demographics must play a role. I’m 30 and was born during a demographic bust period; high school classes in my suburban hometown downsized by 30% between my sister’s class (born 1969) and mine. They’ve gone up again since then but it’s us “baby busters” that are now the prime child-rearing cohort.
Also, the number of teenagers and unmarried people having children has been in decline since the early ’90s.
That said, these are two factors among many, and nationwide trends can conflict with regional factors if a lot of young families move to one particular place. Also, higher rates of immigration are also an issue.
Another factor is people are marrying later….I believe it’s late 20s instead of early 20s.
Also a greater proportion of women have pursued careers. That pushes back the child bearing too. I had my 2nd at 37, when it came time to have my 3rd at 40ish I didn’t know if I wanted to take the chance of a birth defect. (Plus I always joked I didn’t want to be attending high school plays at 60)
Don’t feel bad, my youngest boy just graduated from high school and I just turned 66yrs. Was 37 yrs when my first of 4 were born.
God Bless - a wealthy man
True enough, Amigo
Stucco — So what? We’re all immigrants, it’s just a question of how many generations have passed since we got off the boat.
So the anti-abortion protestors are going to team up with the NEA? Velly intellestink.
“What happened to the days where people had children without the obsessive concern of economics, as if you can put a price on family and people?”
The days when people didn’t worry was when one household member could take care of everything with the single income. A century ago we were more agriculturally based, Daddy was just over on the east field and the boys were out helping. Now with both parents working “offsite” to pay for the basics and childcare being deducted from that takehome, additional children mean you might not have that college fund covered. In the “old” days most families did not even consider saving for college.
My mother in law did share with me that people did limit their family size during the Depression. And that the Catholic families always stood out.
LOL, In the upper penninsula of Michigan (Yooperland), it is not uncommon for families to be in excess of 5 kids TODAY! I have friends that have 10 kids and are expecting another. Not Catholic, I think it has something to do with 300 inches of snow and -20 temps.
Oh, economics was still involved. It’s just that parents used to consider their children financial assets rather than liabilities, to help with chores and work, and take care of them in old age. The government has taken over much of the old age part, which has been one of the main economic variables in the trend toward smaller family size.
Why should us childless folk pay for you “breeders”?
If you love children so much, you should pay for them, and their schooling.
Why should we pay?
You should pay a lot. My kids and their friends will be pushing you around in a wheel chair in a few years.
Funny how some people expect others to pay for their own children’s schooling/healthcare, but complain about illegals coming accross the border demanding the same thing.
Funny how some people think they can comfortably grow old with a cadre of drug pushers and criminals about who will mug them and pick their pockets instead of holding open the door for them.
Visit Dallas some time and come meet the fine graduates of the Dallas Independent School District. You might want to invest in a concealed gun permit and a nice Ceska Zbrojovka 9mm first though.
In 2003 Dallas had the highest crime rate in the country (if you just include rapes, murders and aggrivated assault, Dallas came in 3rd place).
You must admit though, that DISD does pay some of the highest salaries in the country - the average salary for a head football coach in the DFW are is $82K. And as a result we have amongst the lowest standardized test scores in country.
GetStucco-Am not sure I agree. Nowhere in the Constitution does it say that the government is supposed to pay for free schooling for all children. While I do agree that education is essential for us to maintain a skilled workforce, who should pay for that expense?
If there was not taxpayer financed education in the US less than 1% of the population would probably obtain a proper education. Basically we would be at the same level as Honduras or Guatemala.
I bet 99% of the people that say they could or would provide an education for their children are themselves or their US ancestors the product of a US taxpayer financed education. So suck it up!
Maybe not the U.S. Constitution, but the California Constitution (and other states) do in fact say that the government is supposed to pay for free schooling for all children. It’s a great thing, as long as they are great children. (i.e., not undesirable illegal aliens)
P,cola popper-I was making a point that education in this country is not a God given right. Free education is just another Social Democratic rule that has been pushed onto the people by Liberal Social Democrats. The real problem is that people like yourself and others take no responsibility for cleaning up the beaurocracy and waste in the system. At the very least, take some responsibility for the freebies you enjoy at others expense.
Peter, you can say that education is not a right, but the fact is that in this country, every kid IS entitled to an education. If you question that, try protesting universal schooling by not paying your taxes… then count the days before the IRS gives you a nice little phone call to remind you who’s in charge, and that this is not a purely capitalistic country.
Moreover, think about how many kids would not be in school if we weren’t paying for them to be there. Where would they go to work? I’ll tell you where they will be….in your house stealing your DVD player and your wifes jewelry, or selling drugs to YOUR kids after school…shoot, get enough of them together doing nothing all day and they might get some funny ideas about storming the gated communities….etc…
What about child labor laws? You’d have to get rid of them too. I’m sorry, but you must first placate the masses first, and keep them all in the same place where you can watch them, and at least make them BELIEVE that they are receiveing some semblance of “education” before you can have a stable area to live in…and if you think about it, I think you may change your attitude about universal schooling.
EStanley-Was just trying to make a point. We live in a Social Democracy. I did not say all children do not deserve some form of education. In fact, if you read my original post, I indicated it was extremely important. I wanted to point out that the Constitution does not require we provide it. In fact, education is an enormously important part of our Democracy. I support it, but for goodness sake, if you enjoy that privilege, be responsible for it, and hold the unions and politicians accountable.
K, hope I didn;t come off as snarky in my post…
GS - that’s a crock - only if he PAYS them to push the chair.
I agree - I am sick of paying for ill-bred, dumb, cynical lazy offspring of buffoon breeders….
Thank you. I was waiting for someone to say that.
Yeah, my three will be paying your retirement with their social security. Plus, we pay a fotune in taxes, and homesvchool.
homeschool. hit enter before I could fix it.
… and “fotune”. And you said you’re home-schooling?
like we have already paid for granny???
I guess I need to add the same disclaimer that is tagged to my emails. “Please ignore any typos, as this message was typed on a blackberry.”
Yes, why should anyone else pay? We home educate our children so we pay to educate our own children AND other people’s children (via forced taxation)!!
And the parents who talk about “free” schooling **upsets** me to no end….
Danny, just wondering how many hours a day do your kids spend on academic subjects? Can you honestly say that they are they getting an education equivalent to a public or private school? Do you have them in home school for religious reasons? And do you educate them yourselves, or do you also employ a private teacher/tutor? Also, how can you spend the appropriate amount of time educating each kid to their age-appropriate level of rigorousness if they are all different ages?
Estanley: check my blog [click the link to my name] for details but to answer quickly as completely off topic:
1) about one hour a day of any real academics and 9+ hours of self-directed studies [i.e., "recess" for most people]. I’m an unschooler in philosophy so I oppose any spoon fed schooling.
2) No, because we practice delayed academics philosophy [my wife's choice] so we started phonetics when my oldest was 8 [it wasn't too forced so I consented with her way].
3) Yes and No. We’re less concerned about their academic achievements and more about their moral characters and raising our 2 sons into manly men.
4) Yes and No. Things we can teach on our own, we do, things we don’t, we hire: piano, English composition, science classes, Tae Kwon Do, etc.
5) That’s easy: we teach them the basics and then let them self-educate [autodidact] and learn at their own pace [e.g., my eldest son lies on his bed while listening to CD to do his studies like math and English composition].
I sincerely wish you good luck! It seems to me it would be a better outcome for all parties involved to find a good private school (if it can be afforded) than to home school if your public school doesn’t make the grade. I went to a good public school and they have things like honors and gifted programs to help those students who actually want an education.
Estanley: Thanks but we won’t need any luck!
In fact, our sons attend the best private school in the world: our home. No teacher on this planet loves our sons more than my wife and I. And, unlike some random teachers, we also know which learning styles [visual, audio or kinesthetic] work best for each son. And what topics peak their interests [and what topics to avoid].
As for gifted et al: it really is up to each person to take what they have and run with it [a child or an adult]. So, if our sons have an interest, we help them take off: no need to label things [within reasonable budget, of course].
Yes, and my kids will be paying for your Social Security as well.
Child rearing is a responsible thing to do, not irresponsible. My kids will be paying for your retirement.
Bullshit, I’ll be paying for my retirement. Your kids will be too busy scrabbling a living in post-peak oil conditions to support anybody.
I prefer to think they will be out fighting Third Worlder’s for oil.
No one truly pays for their own retirement. You’re hoping that your children or others will provide for it.
Whatever the past may nave been, WE ARE ON OUR OWN in the future - I do not want to hear how YOUR spawn is going to help me. You will be LUCKY if they help YOU. The are selfish and kind of stupid and I question just how good they will be to their own parents in the new economy - the one that does not yet exist. Fast forward 25 years.
scary
MBA, agree with you on this one. We are truly entering uncharted territory…
What happened to the days where people had children without the obsessive concern of economics, as if you can put a price on family and people?
Lots of people have no concern of economics when having children, it is called Mexico.
It’s also called Utah, because a multinational religious corporation told them to have as many kids as possible.
Mexico, like most countries around the world, are rapidly converging with the U.S. Fertility rate has dropped from almost 7 in 1970 to 5.3 in 1980, 3.6 in 1990, 2.7 in 2000 and lower today. See this link:
http://globalis.gvu.unu.edu/indicator_detail.cfm?IndicatorID=138&Country=MX
Similar numbers in North Africa, South Asia (incl. Bangladesh), and everywhere else in Latin America. Just about the only exceptions are the Muslim countries where women have the fewest rights, including Saudi Arabia, Afghanistan, and Oman, along with the Gaza Strip where childbearing is a form of war.
What happened to the days where people had children without the obsessive concern of economics, as if you can put a price on family and people?
So you’re saying people should breed wantonly, whether or not they can pay for it? (I hope not; I’m just baiting you.) Hey, I’d much rather people not have kids, especially if they can’t pay for them. I’m 40 and my wife and I don’t have kids, and yes, it’s primarily been because of economics: I just recently started making the kind of money I need to be able to raise a kid or two. Not to mention being able to buy a house to keep them in.
good for you - you put thought into the process… most do not.
The average age of child bearing goes up every year in industrialized countries…people are delaying it for one reason or another. Right now, I think it’s 26 or 27 average age….compared to 50 years ago it was prob more like 21.
Same thing going on in virtually all of Orange County, California. No children in the schools, and districts shutting down schools that have been there for decades. Almost scary, really. Birthrates are down because this generation seems to have bought into some delusional idea that having a lot of children is “wrong”, and of course the RE prices drive young families out of areas as well.
Exactly right. That’s because white people kill most of their children before birth (abortion). (It’s convenient for me.)
If you think about it, the old mantra of “Why have children you can’t afford?” becomes “Well, now we have to pay much more to live in communities that have a higher birth rate.”
live in= NOT live in
Sorry about that, chief!
Duh!
It is interesting to see anecdotal evidence of how the housing market bubble is beginning to affect demographics in the U.S. Personally, we are not purchasing because we don’t want to devote such a high percentage of our income to housing. There are too many other things to enjoy in life.
As more people begin to understand that housing is not an investment, we will see many “Nest Eggs” evaporate. We are so glad to be outside of the effects of the bubble burst (in terms of losing our shirts) and to be taking advantage of the speculators influence on the market (renting a brand new home for less than half of what it would cost to buy).
Wahoo!!!
“It is interesting to see anecdotal evidence of how the housing market bubble is beginning to affect demographics in the U.S. Personally, we are not purchasing because we don’t want to devote such a high percentage of our income to housing. There are too many other things to enjoy in life.”
Amen! When I talk with friends who bought too-expensive homes and are now cash-strapped about not wanting to be owned by a house they just look at me like I have 3 heads.
“Local Realtors expect sellers to continue to drop their prices as the market continues to favor buyers.”
Palmetto: Now that’s what I call rocket science.
“Educators across Florida are scratching their heads over a new phenomenon: Far fewer students than expected are showing up for school. After more than a decade of rapid growth, school enrollment slowed last year.”
Palmetto: Genius. Could it be that the word is out that Florida schools rank as the 4th WORST in the country? Hello?!! And the paragraph above demonstrates exactly WHY Florida enrollment is down, because the “educators” can’t figure it out, so just imagine what happens to the children they “educate”. Maybe the educators should go scratch something else besides their heads.
“William Person, who oversees Hillsborough’s student enrollment, said it’s too soon to say exactly why the numbers are off, but he has some theories. ‘Generally speaking, the housing market has cooled,’ he said. ‘You’ve seen increases in property values in what was moderate housing,’ he said. ‘Now the average home is $250,000. For many families who move into this area, to purchase a single family home that is $200,000 to $250,000 is prohibitive.’”
Palmetto: Great. Now we have folks from the school system becoming real estate analysts. Everyone wants to get in on the act. Note to Mr. Person: Not only are the prices prohibitive, but families just don’t want to put their children in recruiting centers for gangs.
“Never mind marketing; price is what talks right now,’ Brooks said.”
Palmetto: Ya think?
‘In today’s market, people are feeling that they’re not getting the return they thought they would get, and that sense of loss is magnified.’”
Palmetto: Tough noogies. Live with it.
“Never mind marketing; price is what talks right now,’ Brooks said.”
I think this is great news. Hopefully people will get the hint on competing via price rather than giveaways like cars, trips, maid service…
Hopefully, we’ll soon see articles on strategies for buying in a glutted market. “Sorting strategies: How to sort through your housing market to find the most desparate seller for a 1400 sq ft house”
“Never mind marketing; price is what talks right now,’ Brooks said.”
Is it? Or is it perceived value?
If every property on the market right now was reduced 20%overnight how many people would buy tomorrow?
It would be seen as a sign of panic in the market. Buyers would anticipate greater reductions to come and remain on the sidelines. This would lead to greater reductions, more panic and fewer buyers.
A rapidly falling market is more likely to scare buyers off, even though prices are cheaper.
However, if one seller in a neighborhood reduces their price by 20% and nobody else does (assuming they were all similarly priced to begin with) they have a good chance of selling. As more sellers reduce their price to the lower level the perceived advantage is deminished and buyers will once again start moving to the sidelines.
As humans we are much better at comparing one price to another whether it’s bread, coffee, gasoline or houses than we are at determining what their true value should be.
For this reason, if you have to sell it is better to bite the bullet and go for a big upfront reduction rather than the slow bleed.
Just signed a lease to rent a SFH 3/2 in Miami Shores Florida. I came to learn from the realtor that the owners bought it about 4 months ago for 470K with 100% finacing. They were asking 2200 in rent. I negotiated it to 1800 including landscaping. Another thing I learned is that the owners own about 10 properties.
Last week they called me asking if I would like to purchase the house. Gushing with joy,( and laughing inside) I told them that I could buy the house, but why would I want to when houses are depreciating and rent is about 1/2 the price. She gulped and said to let her know if I change my mind.
My rental: $300/mo in interest, $130/mo taxes, $30/mo insurance. Maintenance has not been too bad, maybe $60/mo.
Rent? $800. And I am undercutting my fellow landlords by $100 to boot. Tenants have no interest in moving. Why would they?
Ahhh. Try THAT in a bubble market.
Did you check to see if house is in foreclosure? Your lease runs out went the owner loses it to the bank, and with this kind of negative, and 10 other properties, you might have a problem
how can I find out if its in foreclosure?
As a qualitative method, see how many times she phones you trying to get you to buy her alligator. Once a month, then twice a month, then once a week, then twice a week, then once a day, then twice a day, then silence for a month. The next phone call is from the GF who asks if you are going to buy, rent from them, or move…
I just came back from Florida yesterday. It is impossible to miss the desperation and quantity of desperate flippers in the classified ads. Miami-Dade and Broward counties are floundering. I also overheard the conversations of several desperate “investors” in restaurants. It was such dark comedy.
Nouriel Roubini was called an “eeyore” due to his negative assessment of the housing market and prediction of a serious recession in 2007. So by the same analogy can we call the real estate cheerleaders and flippers “a bear of very little brain”?
No. But we can call them “bulls of very little brains.”
For me the name Piglet comes to mind.
- “When it comes to South Florida’s pillow-soft housing market, certain real estate agents and industry professionals are fed up. The market’s downturn is pitting agents against the analysts, with the media caught in the middle.”
- I sounds like a lot of girls in a Cat Fight.
Billy hardin says‘In today’s market, people are
1 - feeling that they’re not getting the return they thought they would get,
2 - and that sense of loss is magnified.’”
That’s the problem, people were imagining these gains. The lie was fed by the above mentioned ‘Cat Fight’.
I just came back from Florida yesterday, and it is impossible to miss the desperation of sellers in the classified ads. There are numerous mentions of “price reductions” and “reduced to fit market conditions”.
Nouriel Roubini was called an “eeyore” due to his negative assessment of the housing market and prediction of a serious real-estate induced recession in 2007. Thus, by the same analogy can we call the flippers and real estate cheerleaders “a bear of very little brain”?
In today’s market, people are feeling that they’re not getting the return they thought they would get, and that sense of loss is magnified.
Translation: “The walls of the dungeon amplify the shrieking of the other prisoners in housing hell. The anticipation of the coming torment weighs heavily on the minds of the sellers. The buyers come by and cruelly throw bits of bread through the prison bars but they land just out of reach because the FBs are chained to the wall.
LOL.
The 38% overall appreciation gains that Florida got in 2005 is quickly eroding .Any place that goes up that much in one year ,is bound to come down ,and than some . I just wonder how much of the visions of Katrina and people fleeing Florida in bumper to bumper traffic broke the spell of the housing frenzy in Florida .
Wizard, I think you are right. The housing frenzy was peaking just around the time of Katrina. After that, it was a real snowball effect, with hikes in taxes, insurance and energy costs. I think I’m going to go out today and check out some of the developments just for s$its and giggles. I was looking at realtor.com yesterday and getting a good laugh over some of the listings in the new developments. Starting at $250,000.00. I’d give them $70,000. Maybe.
And Ernesto may about to come knocking where Ivan landed two years ago.
http://www.thestormtrack.com
Thanks for the link, Mozo, geez, this could really be the death blow to that part of the Gulf coast. I think Jebbie was hoping he’d leave office this year without another hurricane to contend with, but it doesn’t look like he’s going to make it. OOPS! That storm could really put the kibosh on any kind of solution to the insurance situation in Florida, not to mention the rise in oil prices that always come along on the heels of these Gulf storms. Wow. It could really, really suck around here, and soon.
Here’s the final commentaty from the National Hurricane Center’s 11 AM discussion. When they start talking about “upper level anti-cyclone” it’s a setup for major hurricane formation.
————–
The large-scale models continue to forecast the development of a
large upper-level anticyclone along the forecast track…although
so far they have been too fast in doing so. If the models are
correct…the current 15-20 kt of westerly shear should diminish
during the next 12-24 hr and allow Ernesto to strengthen. The
intensity forecast calls for slow strengthening during the first 36
hr…and steady strengthening thereafter. The intensity forecast
calls for Ernesto to reach 100 kt intensity in 120 hr…in good
agreement with the SHIPS and GFDL models…and the storm could get
stronger than that. It should be noted that the intensity
guidance…for as of yet undetermined reasons…calls for little
intensification after 96 hr even though there are no obvious
inhibiting factors.
In summary…Ernesto could become a potentially dangerous hurricane
as it moves across the northwestern Caribbean Sea and the Gulf of
Mexico. Interests in these areas should closely monitor the
progress of this system.
“Interests in these areas should closely monitor the
progress of this system.”
As in oil interests, insurance interests, homebuilding interests. BTW, when a hurricane forms, there is a certain period of time during which sales of homeowners insurance is suspended, until the hurricane has run its course. Whatever meager activity is going on in the Florida real estate market at this time will just come to a halt, unless it is a cash deal, not involving any sort of mortage.
Ernesto = Son of Katrina
Relevant lead article in Money & Investing section of today’s WSJ:
“Housing Boom’s Dark Side — Underinsurance Lurks as a Nasty Surprise
…
According to a survey to be released soon by Marshall & Swift/Boeckh LLC, a firm that supplies building-cost data to insurers, 58% of houses are undervalued for insurance purposes. Of those, the average homeoner has enough insurance to rebuild only about 80% of his or her house, according to the survey.”
Those percentages have to look worse for past and future bubbleliciously overvalued disaster zones like Cali and FL.
How appropriate that it has an Hispanic name. Ver timely, wouldn’t you say?
I was thinking the same thing. It is interesting to see that Ernesto seems to be mimicking Katrina to a certain degree. Kind of weird.
OT, but did anyone catch the story in the Rocky Mountain Times about the development company building a solar powered community in Colorado? That might be a positive to come out of the housing bubble.
Just what FAR needs to spark the red-hot fall sales season…
Excellent site. I’ve added it to my weather links. Thanks
yeah that’s a good site. My favorite hurricane site is http://flhurricane.com/ but it can be hard to navigate because it just has so much information.
For insurance, in Florida there is a moratorium that kicks in whenever a hurricane is within 72 hours of potential landfall (if I recall correctly).
another good site:
http://www.usatoday.com/weather/stormcenter/front.htm
Check with your insuror, but I believe the “rule” is that once there is a named storm in the Atlantic or Caribbean, you cannot get a homeowners policy that will cover it. No policy (including policies that exclude a specific storm), no bank loan. Makes the Aug-Nov buying season dicey in Florida, particularly in the coastal areas.
We signed the contract to purchase our brand new Sarasota house in May 2002 and signed the contract to sell it in May 2005 (settled in July, whew!). We had 80% gross gain in three years, and I’m sure others did even better in that time frame.
To quote Mr. T, I pity the fool who bought my house. I went to the property appraiser’s web site and found he’ll be paying a $6,400 property tax bill this December. The neighbors in the exact same model next door will be paying a little under $4,000. Then there’s the homeowners insurance situation (debacle) in Florida.
No, we weren’t prescient. It was fear of hurricanes that drove us to sell and move.
P.S. I guess we were lucky, but we had no problems and no complaints with the quality of the materials or the workmanship. At least our buyer doesn’t have to worry about the structural integrity, unless (until) there’s a hurricane.
“Local Realtors expect sellers to continue to drop their prices as the market continues to favor buyers.”
How are buyers favored by falling prices? David Lereah’s own powerpoint slide number 35 (”Prices Do Decline — mostly in the late 80s or early 90s”) shows that it has taken at minimum of four years for prices to bottom out once a downturn in US residential RE has begun, and a minimum of seven years to return to the previous peak. My guess is that his discussion here is in terms of nominal prices, so you might want to bump your estimate of the minimum time to recoup real losses to ten years after having bought at the peak.
http://paper-money.blogspot.com/2006/08/lereah-mea-culpa.html
Thank you thank you thank you for that link.
That whole presentation is worth examining. It is now clear to me that he knows exactly what is approaching, and the “soft landing” comments are carefully crafted BS to keep his job and (attempt to) prevent igniting a panic.
The Miami debt-obligation slide makes it quite clear that Miami is prices need to drop 50% in order to revert to the mean. The prices-to-income shows that national prices need to drop 33%.
I think the words “soft landing” only appear once, and it looked like an afterthought, not an analysis. (What kind of soft landing knocks prices by 50%?)
“the “soft landing” comments are carefully crafted BS to keep his job and (attempt to) prevent igniting a panic.”
The ppt confirms what we have all suspected — David Lereah is no dummy; he knows perfectly well what is going on, and feeds a carefully scripted line to the press which does not exactly harmonize with views he shares behind the scenes. In all fairness, any reasonable person in his position would feel compelled to do this; you wouldn’t want to be the messenger whose job was killed for having favored the truth over truthiness in public comments.
Note to Ben: If you haven’t already done a post on that PPT, it would be well worth considering.
PPT? But, But, that’s a myth isn’t it? I mean, there is no hard proof is there? I mean, that would imply the government was cheating and deciding which investors were “winners” and which were “losers” wouldn’t it? That would mean that there is no “free market” wouldn’t it? All that reporting on the Central Banks selling gold into the market to suppress the price of gold, the BIS admission to manipulating gold and currencies, the new FED rule that authorizes foreign currency trading, the existence of the off budget, non-reporting- Exchange Stabilization fund, The Reagan legislation that allows federal intervention in the stock market, the existence on COMOX of a handful of shorts controlling the pricing of certain precious metals (with no resulting price-fixing action by the SEC), etc, etc., This is all nonsense, right?
You must be delusional.
OK. Slowly now. Take off the tinfoil hat. Put it down where I can see it. Now back away slowly.
PPT = powerpoint extension. The file that GetStucco linked to is a set of POWERPOINT slides. With DATA. From David Lierah from the NAR. It is a beautiful exposition of why housing is going to drop by 33-50% in price, from one of the cheerleaders.
Now, if you were just mocking me, well then you’re just going to have to replace my mock-detection system.
Wrong ppt, sorry for the confusion! (I left my tinfoil hat at the office…)
P.S. Thanks to Mozo Maz for importing the Lereah presentation link from another blog. I hope I am not crowding out too much blog space by repeating this link in several places, but if the bubble has taught me one thing about economics, it is that information is far less perfect than textbook economics suggests, and it spreads far more quickly when widely diceminated. I believe Lereah’s ppt slides are the best documentation of a housing crash since Christopher Cagan’s (First American Realty) “Has the Fire Burned Out?” ppt presentation, and I am hoping that everyone who has a friend who is thinking about buying a home will share this critical information about the perils of buying at a market top.
In one interview, Lereah admitted that he had bought “many” condos in Florida. He wasn’t just protecting his job, he was trying to protect his investments.
Beta, I heard that, too. In multiple interviews he made allusion to owning condos in FL. One interviewer asked him where in FL and he said “All over.”
‘All Over’ Indeed.
*Schadenfreude levels…dangerously high…need…cold…cloth…
What’s with the polar bear on the opening slide?
Not just a bear market, but a Polar Bear market. Bear surrounded by cold, dead terrain.
Nice imagery if you ask me.
And notice that the bear is looking DOWN (wondering how deep the bottom is).
Jon
Once this bubble got rolling and the slobbering, clawing rabble started to smell money it’s obvious that the RE industry did nothing but whip up the frenzy. If the top RE economists had suddenly spoken with subjective discretion maybe the fringes of the steam-rolling juggernaut would have fallen away but it would have done little to keep the colossal majority of it from barreling towards a town near you.
Lereah is just a tool for turning a spark into a fire and then stoking the inferno until it burns itself out or is doused. Econflagration at it’s worst.
Can other people share what they’ve read that Zandi of Moody’s has predicted in their local area? The Balto Sun has a print verison of a sotry that will be available on the web tomorrow called “Realty Check” that was obviously, IMO, written before the lastest data were released and focuses on the price gains at the beginning of the year. Zandi is quoted as saying that the region, which Moody’s thinks is one of the most bubble, might drop next year 5-10% “at worst” and then go flat for a few years prior to rising again in 2008 or 2009. After 80%+ gains in 5 years, I think that’s optimistic to say the least, and if that’s their prediction for an area that hey think is one of the most bubbly, what are some other predicitons?
Thanks.
St Pete times needs to watch their phraseology. They say that growth in school enrollment has slowed. No, growth had not slowed, that would indicate that enrollment is still rising, albeit at a smaller place. Actually, the total enrollment of students has decreased, meaning that growth has REVERSED, not slowed. The number of students enrolled is SHRINKING.
Estanley, just want to acknowledge that you are right about this. It is a situation that is being largely ignored. I think the class size amendment will become a moot point.
I swear to god, in 6 months everyone is going to “know” that a downturn was going to happen. they’ll act like the people who posted on this blog, in the face of a housing mania(in both prices and sentiment), weren’t swimming against the tide.
“they’ll act like the people who posted on this blog, in the face of a housing mania(in both prices and sentiment), weren’t swimming against the tide.”
Hey, you figured out my handle! When I first started reading this blog last Fall, I really felt like I was swimming against the tide. When we sold our house and started renting, people were dumbfounded. No, they were down right condescending. Don’t we know, housing never goes down. Washington, DC is recession proof. I used to spend hours scouring the Internet for news about the bubble bursting, but then I found Ben’s blog. It saves me a lot of time (thanks Ben!), plus I’ve gained a priceless education from reading all the comments.
Nice…that’s putting your money where your mouth is, and it looks like your going to be right. You sold at the right time if you sold last year(that is if you didn’t already have a nice small mortgage by originally buying before 2004)….good for you, too bad for the people you sold to left holding the hot potato when the music stops!
I swear to god, in 6 months everyone is going to “know” that a downturn was going to happen. they’ll act like the people who posted on this blog,
Yes, but they will have a rope around their necks and a house on the other end.
Here are the stats from the Mid-Florida MLS site for all you polk-countians…
http://www.mfrmls.com/Statistics.php
They break out the home sales by price category and include the number of MLS listing by category. They are showing more than a year’s supply for anything priced over $250k.
The St Petersburg Times. “Educators across Florida are scratching their heads over a new phenomenon: Far fewer students than expected are showing up for school. After more than a decade of rapid growth, school enrollment slowed last year. Educators thought the dip was an aberration, but early indications show enrollment growth has slowed again this year, even in traditionally high-growth areas of the state. Enrollment is down by thousands of students in Miami-Dade, Duval and Broward counties.”
I suspect they are moving to Texas. My kid’s school district is growing at about 10% a year. Some of the other suburban districts around here are growing equally fast or faster (suburban Waco area). Part of it is regional population growth and part of it is families with kids fleeing the central city school districts.
I’ve come to conclude that here in Texas, one of the most critical factors determining real estate value is the school district. Around Waco you can practically pick out the school district boundaries from the air by simply looking where the development is happening. Since the land is pretty much all the same, the good school districts are sucking in all the middle class and upscale housing growth. It’s particularly obvious here because there are about 20 school districts in a county of about 300,000 people.