Florida Housing Bubble ‘In Peril’
The Sun Sentinel reports from Florida. “School district figures show that 284 teachers stated in their May exit interviews they were moving out of Palm Beach County, up from 210 in 2005 and 140 in 2004. The information doesn’t specify where the teachers moved or why. But district officials say they’re hearing anecdotal evidence that many teachers find it’s too expensive to live here.”
“‘My data processor said that’s where she’s sending all her records to. They’re all fleeing to Georgia,’ said Bill Fay, principal in Delray Beach.”
The Orlando Sentinel. “Old-time swamp peddling has gone high-tech, thanks to Internet-auction sites such as eBay. The pitch, speculation on near-worthless Florida real estate, is decades old. But today, a new generation eyeing property for investment or retirement is buying land that’s miles from civilization, has no roads or utilities and sometimes is underwater.”
“‘You cannot do anything with the land,’ said Robert Derogene, a Coral Springs mortgage broker who paid $46,500 for three acre-and-a-quarter lots at a paper subdivision known as University Highlands in Volusia County. ‘A whole bunch of people were misled, and I didn’t like that.’”
“Not every buyer is unhappy, however. Even though hundreds have been offered state-mandated restitution, some want to hold on to their land. ‘It’s a gamble,’ said Robert Thompson of Palm Beach, who is one of the 187 University Highlands buyers being offered a refund. ‘I don’t know if I ever will be able to build. I believe it’s going to take off.’”
“South Florida’s condo market might be taking a fall, but that’s not stopping Hollywood officials from providing downtown developers with incentives to continue building. Just two years ago in July, potential condo buyers lined up around the block in hopes of snagging a unit at Young Circle’s luxurious Radius, now under construction in downtown Hollywood.”
“Today, it’s the condo developers who are lining up before City Hall.”
“Developers say the slowing condo market and rising construction costs are putting the project in peril. That is, unless the city’s Downtown Community Redevelopment Agency cuts them what essentially would be a $6 million tax break.”
“At a recent agency meeting, City Commissioner Sal Oliveri asked what would happen if there were no incentives. ‘We can’t build today,’ answered co-developer Cliff Findeiss.”
“Developers noted condo sales, largely fueled by investors, have dwindled. Throughout South Florida, as supply outpaces demand, prices are leveling off and could tumble by 30 percent or more by the time the market hits bottom, experts say.”
“As of June 30, almost 52,000 condo units in South Florida were under construction or finished and still vacant, according to Metrostudy, a West Palm Beach-based consulting firm. About 104,000 units are planned, although analysts doubt most will be built.”
The St Petersburg Times. “Frustrated by the failure of local developers to land financing for Trump Tower Tampa, the Trump Organization said it will take the lead in finding lenders for the proposed luxury condominium high- rise. ‘Everything about the project has been a total success. It would be a shame not to get it built,’ Donald Trump Jr. told the St. Petersburg Times.”
“But lenders have remained skeptical. Roughly 10,000 unsold condos clog Tampa Bay area real estate listings. Many were scooped up by investors who are struggling to find buyers in the relatively tepid housing market. Few of those units, however, approach the price and luxury touted by Trump.”
“Trump suggested his company, with its billions of dollars in assets, might have better luck approaching banks and lenders. But he made no promises of success. ‘If it can be done, it will be done,’ Trump Jr. said. At what point would the Trump Organization consider backing out of the project? ‘We don’t like to think that way,’ he said.”
there is a pretty strong article in yahoo finance this morning. it lays out the 5 reasons we’re going to have a hard (not soft) landing this time.
some want to hold on to their land. ‘It’s a gamble,’ said Robert Thompson of Palm Beach, who is one of the 187 University Highlands buyers being offered a refund. ‘I don’t know if I ever will be able to build. I believe it’s going to take off.’”
Once again, “‘I don’t know if I ever will be able to build. I believe it’s going to take off.’”
OH__ MY__ GOD
Talk about drinking the kool-aid!
This guy MADE the Kool-aid.
He gets to pay property taxes forever.
Oh, it’s ALREADY ‘took off’… it’s just a matter of what you mean by ‘took’ and ‘off’.
who’s funding the refund ? taxpayers
Robert Thompson of Palm Beach, who is one of the 187 University Highlands buyers being offered a refund. ‘I don’t know if I ever will be able to build. I believe it’s going to take off.’”
What did he just say? This is a Dumbass !!!!!!!
I’ll bet this fool is probably holding Enron stock, waiting for it to take off.
Didn’t this people ever watch Glengarry Glen Ross?
ROFL!
Great movie. It’s where I learned to be a clsoer - that and Tom Hopkins.
It’s where I realised I could never, ever be a ‘good’ salesman.
Florida has and always will be a minor league state, paying subpar wages, with subpar education, and for the most part filled with lazy, uneducated rednecks or displaced New Yorkers.
The major reason people relocated to Florida ( mostly South Florida) was that you could live there for a lot less than up north. The taxes, insurance, housing, and daily cost of living was vastly less than where people were living currently. Well, now that gap has greatly diminished. So now there is very little incentive to move here. Add to that the wages in Florida are far less than in the northern states places a double whammy on the housing market.
Florida has been known for decades as the land of scam artists and con men. Whether it is stockbrokers, lawyers, drug dealers, and real estate huscksters, they all seem to gravitate to the Sunshine state.
Florida is going to suffer a meltdown similar to the 1920’s and it there is nothing that can be done to stop it. Over 90% of the residents cannot afford to buy a house. The middle class is moving out in droves shrinking the tax base. I would wager that almost 20% of the economy is related to housing. With almost 100,000 condos slated to be built or in construction in the Miami area alone, the upcoming crash will be monumental.
BD: Don’t you wish McCabe would shut up already though? I get the very strong impression he’s going to get his “investors” in way too early.
Tx,
I think McCabe is a smart guy and realizes that this is a looong drawn out event. He was one of the only people to take a stand 2 years ago and tell it like it is. For that , he has taken alot of heat locally. Yes he is outspoken and speaks often, but I don’ t think he will be as dumb to try and catch a falling knife. He is a private company though, so there is no disclosure.
I think McCabe is a smart guy and realizes that this is a looong drawn out event.
I knew this guy 20 years ago. He was a penny stock broker in the 80’s. Buyer beware.
So what?
That was 20 years ago. And I assume that you are in the same position that you were 20 years ago? Not defending the guy, but please. Wirehouses sold “penny stocks”. Investors lost more $$ in Enron than all the penny stock scams combined. If he was sanctioned by the NASD or SEC then you might have a point.
Btw, what company was he with?
Well, we can quickly find that out by pulling his CRD from the NASD ADR site.
“The major reason people relocated to Florida ( mostly South Florida) was that you could live there for a lot less than up north.”
I thought it was due to lack of state income tax, lax law enforcement on fraud, and the homestead laws that allow con artists to keep up to an acre of land within city limits and 20 acres outside of city limits, which drove many major spammers, timeshare and mortgage lead telemarketers, and multilevel marketing scammers to locate their businesses there.
Times can change.
Exactly the same logic applied to the South-Eastern Australian perception of Queensland. It was nicknamed ‘The Deep North’ for many decades (and for good reason; I spent a few holidays there in the 70’s when the white-shoe development brigade were active on the Gold Coast).
Queensland is now in the healthiest financial position of any Australian state, with a fully funded government-sector pension scheme and generally low (by our standards) fees/taxes.
Tourism and retirement-to-the-sun are still big factors, but Qld is now steadily moving up the food chain in many business areas. The mining industry has helped.
Florida may have its problems, but (observing from afar) it would seem that it will probably increase its relative standing in the years to come.
Mr. Thomson quoted in the article is Exhibit A to why this bubble got as insane as it did. People are just stupid. Call it a failure of the gene pool, a failure of the educational system, a failure of simple common sense. Greed.
THEY ARE BARELY MORE INTELLIGENT THAN THE AVERAGE ROCK
the phrase you’re looking for is “dumber than a box of rocks”.
I read that Sun Sentinel article this morning, I was hoping you would put it in today. Here’s my favorite part:
“Certainly there aren’t a zillion people knocking on our doors to stick anything on U.S. 1. Certainly not with stainless steel and granite tops,” Mayor Mara Giulianti said. “I think it brings energy, and I think it brings young people who love this type of living.”
Stainless steel and granite tops = energy? Does Einstein know about this? Maybe they should just drop some granite in the middle of the road, attract some young people.
An unintentionally revealing description of the current Trump business model.
You’ll see the Donald on an informercial hawking “natural male enhancement” before long. lol. He just had a kid, you know, and how old is he, 62?
Heheh… You go, Donald!
I’ll watch from here
The article says Donald Trump Jr., is that him or his kid?
Donald’s father was Fred, must be the son. Must be time for the new generation of ‘real estate investors’ to take over.
The Tampa Tribune has printed several articles about the Trump Tower over the past two weeks, filled with pithy arrogant quotes that only hint at the psychological Grand Canyon that is “the Donald’s” ego. “Banks love me” and “I know as much about caissons as anyone” are two of the Trump quotes I remember, the latter made in response to the revelation that there was a “subsurface anomaly” at the site that would require the building to be shored up, if it is built in the first place.
In other Tampa housing news, the movie theaters at Hyde Park Village officially have closed. Overpriced, s__tbox, cookie-cutter condos are forecast for the site, not that this should come as a surprise to anyone. And speaking of departures from the Tampa scene, Moman, where the hell are you?
>movie theaters closed
Those theaters were at least 10+ years old. No way with only 8 theaters and unconfortable seats they could compete with the 20+ screen megaplexes.
Hell, as much as we HATED brandon we’d occassionally make the drive just from Hyde Park just to go to the theaters. I can’t remember ever going to Brandon for any other reason; what a freakin’ redneck brigade.
A buddy of mine teaches at a popular, fairly upscale government high school in teh west part of Orlando. He told me that student enrollment this year is quite a bit below projections and that teacher slots are being cut.
Wonder if any administrative positions are going to be cut at the central school board offices.
Didn’t know how to key in “sarcasm on” for the rhetorical question.
Well, they wouldn’t start cutting administrators until the last teacher was let go, right? [/sarcasm]
Would this school be Olympia High?
Would this school be Olympia High?
“Would this school be Olympia High?”
No — Dr. Phillips.
>”We’ve been hit very hard from the cost side of things,” Trump said. “The brand is good, but it’s the cost side.”
From what I understand of this project (one of my personal friends knows the builder), Trump has no financial stake in this project. He was paid $2M to use his name and that’s it.
So, if this is true, I don’t see where he’s lost anything other than a little trim off his member — which probably translates into trillions of dollars in Trump’s own head.
What a tool.
We were in the nick of time.
You were in great peril.
I don’t think I was.
You were, Sir Galahad, You were in terrible peril.
Look, let me go back in there and face the peril? It’s too perilous.
**The St Petersburg Times. “Frustrated by the failure of local developers to land financing for Trump Tower Tampa, the Trump Organization said it will take the lead in finding lenders for the proposed luxury condominium high- rise. ‘Everything about the project has been a total success. It would be a shame not to get it built,’ Donald Trump Jr. told the St. Petersburg Times.”
“But lenders have remained skeptical. Roughly 10,000 unsold condos clog Tampa Bay area real estate listings. Many were scooped up by investors who are struggling to find buyers in the relatively tepid housing market. Few of those units, however, approach the price and luxury touted by Trump.”
“Trump suggested his company, with its billions of dollars in assets, might have better luck approaching banks and lenders. But he made no promises of success. ‘If it can be done, it will be done,’ Trump Jr. said. At what point would the Trump Organization consider backing out of the project? ‘We don’t like to think that way,’ he said.”
**
maybe this time Trump will go bankrupt for good and with no bailout
So, if it’s going to be such a sure-fire winner, why doesn’t the Trump Organisation apply those billions in assets and just build the damn tower using its own resources?
‘maybe this time Trump will go bankrupt for good and with no bailout ‘
Trump invests little if any cash. His partners us his brand name to get projects done and much higher prices. I sure wish he would go under like last time and never come back but unfortuately he is now too smart for that to happen. Most everybody who remembers the last bust has much less at risk for the coming bust.
I own a chunk of florida “swampland” in Orange County. (20 Acres — that’s physically adjacent to Walt Disney World) I’ve had it for a while and plan to put my retirement house in the middle of it, surrounded by a big wall.
While I’ve held this land–which I paid very little for–I’ve watched the market bubble to laughable proportions. There’s still TONS of empty land, even in Orange County, yet people with no savings are gambling everything on i/o mortgages for CONDOS built in the parking lots of strip malls! Crazy! (Work takes me to Orlando about 1/week a month–I consult for the entertainiment industry.)
The other thing about Orange County in particular are county-mandated CC&Rs and homeowners associations. (My land isn’t ruled by one!) Even in a single-family detached home, you don’t really own your home. If you want to paint your trim or relandscape, some old biddy on the “architectural review board” has to approve it. (All in the name of “preserving property values!”). Who can live like that? I can’t…. And forget about putting up a basketball hoop for you kids, or letting them play hockey in the street!
The funny thing about “maintaining” property values with HOAs is to contrast it to where I have my house in Sunnyvale, CA. There are no HOAs here. There’s a purple house down the street from me. Someone else has a crazy idea of lawn art. A few people have left their holiday decorations up way too long. There are basketball hoops everywhere. Then “zillow” 94087, and you’ll see that this is one of the most expensive areas around! So I can’t believe that controlling house color or basketball hoops makes any difference in “keeping up property values”.
Robert (or anyone)? Do you have any idea what the average HOA fees are for all the gated communities in Florida? We live in the Tampa Bay area but not in a gated neighborhood. We pay less than $200/year. but, my inlaws live in a community that has a round-the-clock guard and a community center that houses a fitness room, swimming pool, senior center and more. It just seems like that would cost a lot and a potential buyer would have to consider that right up there with taxes and insurance.
“…for all the gated communities in Florida?”
Those numbers would be all over the map. In Florida, a gated community is responsible for maintenance of its roads and street lights. Therefore, you almost always see a noticeably higher charge than for any non-gated HOA, since the gated HOA needs to build up a sinking fund (reserves) to pay for the upkeep. Lake Forest, on the north side of the Orlando area, has fees of right at $200/month because the fees pay for the additional upkeep of a clubhouse, community pool and guardhouse, boulevard landscaping and a 24/7 guardhouse and roving security. I don’t know Isleworth’s HOA fees are, but you can bet they’re waaay more than a few hundred a month. Some people love these neighborhoods and some hate them — what’s great is that we have such a wide variety of choices. If you have the money to live in Florida (I used to, but no longer), there is something for everyone, from no-restrictions to “Your papers, please.”
Thank you. Actually, they like the place at first, but once the “home values doubled” the HOA seemed to become possessed and now act like Nazis. They can’t move because of high prices and the tax situation. Also, I don’t see how they could unload it at this point, unless they found an insane person with a ton of money.
HOA’s only keep up property values where you have people who don’t have a sense of appropriateness and who don’t care. Motor heads, people who tie up their dogs to atree 24/7, people who don’t mow their lawns, have sceaming domestic arguments, etc.
HOA’s have value!
All it takes is one so-called animal lover to ruin a nice neighborhood. Been there done that.
‘The major reason people relocated to Florida ( mostly South Florida) was that you could live there for a lot less than up north. The taxes, insurance, housing, and daily cost of living was vastly less than where people were living currently. Well, now that gap has greatly diminished’
I agree with much of what you say. It is sad to see what greed, short term thinking, demographic shifts and global warming have done to the state this decade.. Some very smart people I know say the middle class in Florida is going to shrink dramatically. Many of great wealth but also many more struggling to get by.
For all you folks who love/lament the state of Florida, I’m curious how many of you have read John D. MacDonald, the mystery writer [Travis McGee series] who was a huge environmentalist — he was railing against the rape of Florida in the early 70s, I believe.
The “rape” of Florida is a different problem. I, too, lament the destruction of natural beauty. But you can’t fix that by confiscating people’s land so they can’t develop it.
If the people of Florida want to preserve land (a worthy goal), they should vote in a state income tax, rasie money to BUY the land from the people who own it, and preserve it.
The aforementioned “biddies” would never let a state income tax happen. They are the only people who vote around here.
Yes, of course I realize that a state income tax would never be approved by voters in Florida, but it’s funny how many folks want the government to confiscate private land by declaring it “wetland” or “conservation” *after* people bought it.
On the lot I own, there’s some “wetland” near the back. I bought knowing this, so I’m not complaining. What’s interesting is this “wetland” has been caused by a trench that was dug by an electric company right-of-way. It’s easy to see on the satellite / flyover photos I needed to puchase in order to get a “conservation area determination.”
So if my land turns into wetland because of natural or man-made circumstance, it gets taken away from me (at least development rights are.)
But if poor people in New Orleans land becomes “wetland” through perfectly natural causes, we spend billions to rebuild. I just don’t understand this country sometimes.
Frank-Love the John D. MacDonald books. Fabulous commentary about the state of Florida way back in the sixties and seventies. What would he think now?
Frank-I used to own a boat named the Busted Flush.
Yeah but do you have a Rolls-Royce pickup — purple, I believe.
Sorry, I sold that also.
Actually, I have.
I was an avid fan of the TRavis McGee series.
I remember some rather profound prediction of Mr. McDonald’s that I quote from time-to-time.
At the time there were about 12 million people living here.
John D. said that the State of Florida would keep attracting people until the population reached about 30 million. Then, the State’s roads and towns would be so crowded that no one would want to live here anymore.
We are about 2/3 there, and I believe John D. was very much correct. When I was a kid, Florida had 7 million population.
I am now 50. I miss “old” Florida.
“Those who study history are doomed to know it’s repeating…”
Anonymous SlashDotter
From Home Sweet Florida
Here’s a general question: Why are people concerned about falling house prices anyway? Aren’t falling prices a “good” thing?
Let’s say new car prices fell by 50%. That would seriously impact the amount of money you could get for your trade-in (assuming you’re not like me and drive cars for 15 years). Nobody in their right mind would complain?
Why do people complain when their house “loses” value! It’s a GOOD thing, isn’t it?
Robert-Yes, I agree. Falling prices let people buy at a discount. Patience is the most important part of any type of investing. After the Nasdaq debacle and prices fell as much as 90%, There were some wonderful buys for terrific companies.
I favor such deflation, though a number of posters here do not, and for a variety of reasons. Re your trade-in: if new car prices dropped by 50%, it is almost certain that the value of your trade-in would drop by about the same percentage, everything else remaining equal. Most who favor deflation assume that their wages will not deflate as a result. When a single bubbled asset retreats (housing), this is probably a decent assumption but when all assets deflate, don’t expect your pay to remain where it was. Since housing price declines will affect a broader segment of the labor market than, say, automobile production declines, it remains to be seen what will happen to the average wage.
Digressing a bit, late 2006 is a terrible time to talk about raising the minimum wage. Personally, I think there should be no minimum wage, any more than Peter should be required to pay Paul, who is poor, a minimum of $3,000 for Paul’s used car solely because Paul is poor. (The latter is not an original example — it was in a Lew Rockwell article.).
Though it’s not quite deflation….housing prices rose because of new financing tools made available, and the “howmuchamonth” attitude that most people have. If you could let the average joe get a million dollar mortgage for $1000/month for the first year (hypothetically), house prices will rise to a million dollars. We’ve seen that exact thing happen.
So I guess when the bubble bursts, it’s “deflation”, it’s not like the price of some stable commodity that’s been tracking the cost-of-living starts to decline in price. This is more of a Ponzi scheme coming to an end.
One other interesting way to see this is if you track the price of larger tracts of land outside of developments, say 10 acres or more, in places like Florida or Central California, you’ll find their prices haven’t gone up the same percentage that houses and condos have. Why? Because you can’t get mortgages on them. The best you can get is a lot loan, which usually comes due in 2 years or less.
Since you can’t buy this without cash, the prices stay stable. That should tell you something.
Robert,
It is not a “good thing” to an owner of an asset to have the value drop while owning it, especially when you have an loan outstanding for a value that may be higher than the current value. Look up the word “negative equity.”
To give you just one example,millions of FB’s took out neg am loans that are blowing up on them because the amount of the monthly payment did not cover the principal amount. So in addition to having the underlying asset depreciate in value, they have been actually adding to the amount owed each month. Not a good thing. Imagine owning a house and owing $200,000 or more than what it is worth.
Not to jump on you, but that was a silly question.
I don’t think it was a silly question.
Why should people care when their house ‘loses’ value? They only care because of the debt attached to the ‘value’ of the house and the inability unload it.
A house is an illiquid, long-term purchase - do not buy unless you plan on living there a long while. Then you won’t care what the value is.
It is a good thing for a neg-am fb to have the value of their house drop - it will teach them a lesson they deserve to learn - the hard way.
Wanted to pass a good observation today,,,
I’m in bubble central, Miami Fl, and was in the elevator today with two elderly ladies, about late 60’s and overheard this conversation…
Lady 1 Hi nice to see you did you just move back?
Lady 2 Yes last Tuesday.
Lady1 Did you buy?
Lady 2 No! I’m renting.
Lady1 Me too! Did you hear the other building they can’t sell so they are renting?
Lady 2 Yes, I’m glad to be renting and not buying.
Lady 1 well have a nice day..
Lady 2 You too…
My point is that even little old ladies can see the written on the wall… how the heck can realtors spin this anymore..
—AL
Those “little old ladies” probably come from a generation that remembers the depression, or at least heard about it from their parents. Although stories abound of retirees being taken for their life savings, most of the older folks that I know have a lot more common sense than to have been taken in by this bubble. Having had the benefit of a better educational system, most of them bother to read the fine print and understand what it says, or at least have an accountant or attorney review things for them. Most have stayed put, with either older mortgages or paid off homes. Around here, some moved when things got ridiculous and some are right now trying to get away, since their insurance and taxes have been jacked up royally.
So I would make the case that the writing on the wall was probably obvious to little old ladies from the get-go. When the 20 to 30 somethings start being able to see the writing on the wall, that’s when I’ll know the realtors can’t spin anymore.
Al, those 2 little old ladies probably grew up with this preposterous concept:
Before you buy something you MAKE THE MONEY TO BUY IT!
Today, the opposite is true. Want something? Borrow the money and get it NOW. Then spend the rest of your life trying to pay it all off.
Fortunately I was brought up by parents with that ridiculous old fashioned idea. I think the single most damaging invention of my lifetime is the credit card. It is going to bring out country down.
” n 1926 in Florida the real estate market declined from peak to bottom. Land that was bought for $1 million could, within six months, be resold for $4 million before crashing back down to the pre-boom $ 100,000 level. ”
http://www.greekshares.com/florida_real_estate_crash.php
” If you look at the prices of some houses, you will see that after almost 70 years some houses are still selling for less than what the then owners paid for them. “
Florida needs to crash hard. Period. There are so many overpriced pieces of junk it’s not even funny. The problem is so bad that I will most likely relocate as a result.
I know so many people that are leaving and hear stories of people “waiting to sell their house” all of the time.
It’s gonna be real bad for some folks. I know a few people who bought last year for fear of being priced out. I really feel bad for them. They will be chained to those properties for a very long time.
The carrying costs are even more ridiculous. Lawmakers are clearly in bed with utility and insurance companies. Two costs that have no return value; outgoing cash only.
Even if your home costs $100k, who wants to throw $1,000/mo. away on utilities and insurance?
It’s a joke.
‘…They’re all fleeing to Georgia,’ said Bill Fay, principal in Delray Beach.”
Dear lord, no. This could threaten Florida’s preeminence in American education.