‘The Momentum Is Away From Soft’ In Florida.
The Orlando Sentinel has this editorial from Florida. “The Florida housing market is spiraling down. How hard we land remains a matter of speculation, but the momentum is away from soft. Those who bought a downtown condo with the intention of flipping will get burned unless they have deep enough pockets to hang on. Last month, the Realtors’ association reported selling only six condos valued at more than $400,000.”
“The phrase ‘investment condo’ will become an oxymoron for a while, a long while on the coast.”
Myrtle Beach Online from South Carolina. “Condominium developers are reacting to a softening market by slowing condo building in Horry County - reversing a three-year trend. ‘Builders will have some excess inventory, and that will end up being good news for consumers. They have to work out that inventory and that means softening prices,’ said Bernard Helm, (who) tracks real estate markets.”
The St Petersburg Times. “The number of building permits issued in the Tampa Bay area fell an average of 43 percent between July 2005 and July 2006. The hardest hit: Pasco County, where permit totals plummeted 63 percent. (Broker) Jim Knetsch in Carrollwood, said that while some cautious lenders have placed a ‘temporary moratorium’ on funding for new subdivisions.”
“Though clusters of ‘For Sale’ signs have provided abundant proof of a housing glut, evidence that home builders were getting the message was elusive until recently. ‘Everybody has revisited their plans and business plans.’ Anyone who says otherwise is lying, he said McCar Homes executive Kevin Robles.”
“The prospective buyer and seller of a 416-acre parcel on State Road 50 say their deal has fallen through. Attorney J. Patrick McElroy of Citrus County, said the trust was willing to extend the contract but that Mercedes pulled out because of the sagging demand for new homes. He read a letter explaining that Mercedes was choosing not to buy the land ‘due to declining market conditions.’”
“Among the skeptics about the current market is County Commission Chairwoman Diane Rowden. ‘They can use all the excuses they want,’ Rowden said. ‘They can figure out that the market is not there for new homes.’”
The Palm Beach Post. “Two mixed-use condominium projects touted for years as key pieces of the city’s downtown redevelopment sit idle. One of them, 500 Ocean Plaza, this month asked the city for its second one-year extension for the site plan. Initially known as the Arches in 2003, the proposed project at Ocean Avenue and Federal has yet to begin sales or construction.”
“Similarly, Promenade, at Boynton Beach Boulevard and Federal, hasn’t started building and late last year canceled sales contracts and raised prices, citing soaring construction costs.”
The Star News Online. “Dear Mr. Berko: In May of 2005 we bought a condominium on St. Pete Beach, Fla., for $885,000. Five months ago my wife and I lost our jobs in the travel industry. We immediately put our condo on the market and have lowered the price twice, finally to what we paid for it.”
“Last week we got a lowball offer of $795,000, which is the only offer we’ve had since we listed the unit. At first we thought the offer was a joke because shortly after we bought our unit, two other condos in our building just like ours sold for $1.1 million. Then we were shocked at the possibility we might have to take an $83,000 loss.”
“Now we are frightened that we may have to keep the unit making mortgage and interest payments and paying maintenance taxes and insurance until the market gets stronger. That would certainly bankrupt us because we can’t afford the $7,000 monthly costs. It’s killing us and the possibility of taking an $83,000 loss would wipe out all our savings and we’d still be about $18,000 short.”
“We’ve read that the experts believe housing prices will increase this year between 3 percent and 7 percent. It seems that interest rates have stopped rising. So do you think when rates begin to fall again that the condominium market will get stronger? If so how long do you think it will take? D.S.”
“Dear D.S.: You folks are in big trouble and so are tens of thousands of others who bought homes with zero money down using an adjustable rate mortgage. And the banks may be in deep do-do, too, because in almost every instance the amount of those mortgages exceeds the market value of those homes.”
“I’m quite familiar with that section of Florida and I know that the number of resale listings has increased fourfold in the past five months. Your unit is competing against a surging glut of thousands of resales as well as a record number of unsold new units sitting empty and a soaring number of unsold ‘new builds’ that will soon triple the already swollen unsold inventories.”
“Now I know my advice is going to be hard to swallow, but you’ve got to consider the circumstances and take your loss and lump it. The housing boom, no matter what the experts, real estate agents or builders tell us, is going bust. Of course housing experts are predicting a 3 percent to 7 percent increase in property values this year. But these well-paid idiots completely ignore the fact that there wasn’t a sane reason for the astronomical rise in housing costs during the past five years.”
“Common-sense valuations suggest that as of January the prices of most homes and condos were 40 percent to 50 percent too high. So sell that unit before the buyer rescinds his offer.”
Thanks to the readers who contributed to this post.
‘At first we thought the offer was a joke because shortly after we bought our unit, two other condos in our building just like ours sold for $1.1 million. Then we were shocked at the possibility we might have to take an $83,000 loss.’
Imagine what the folks that paid $1.1 million are thinking!
“Last week we got a lowball offer of $795,000, which is the only offer we’ve had since we listed the unit.”
The folks who paid $1.1 million ought to be thinking that they might well be looking at a $305K loss ($1100K - $795K), which is 28% off the peak price in percentage terms.
Wow, some straight talk back to these clowns too!
Where do I start . . .
68K in savings and a 865K “investment’” condo? What am I missing?
Jobs in the “travel industry” (notoriously cyclical and volatile - consumer driven) and an 865K condo?
Actually since they’re in Fla, I’d tell them to take the 68K, pay off their primary residence (homestead) or however much it takes off that, default on the condo mortgage, wait however long it is now and then file chapter 7. At least try that one. Lots of land mines in my plan there but it assume that there will be an avalanche of that kind of thing and so every individual won’t be pursued to the fullest extent or cases will be settled fast.
their ira accounts are exempt assets so they should just file as soon as they can, all they will lose is their non-ira savings
and they can try to preserve those too by sinking them into their Fla homestead and making the lender on the condo come after them w/an adversary proceeding if he wants to try to recover anything. I’d take that shot myself.
They may not be able to go Ch. 7 if they qualify under the new BK laws of 2005. I can’t imagine both of them being unemployed for 5 months. Regardless, they will have to do w workout schedule and see where the chips fall. They need to RUN to a BK lawyer.
Oh, they can be unemployed if there’s motivation for it . . .
This kind of “bankruptcy planning” used to go on all the time in the bad old days. It was fairly common for people to personally guarantee loans or obligations of LPs that held RE notes or properties or oil & gas crap, what have you. They would have to file personally to get rid of the obligations. I certainly remember a few partners in big law firms doing that after they decided to get into the “biz” themselves when seeing their clients get “rich” finally got to them and they tried it too. The gig here used to be to rent an apartment in Plano (Collin County) for the 60 or 90 day period it took to file down there and you were finished and back shortly thereafter.
My last comment would be if these people pay another dime to their lender, insurance company or HOA, they’re dumber than they were when they bought the place. This deal is in the ditch. Time for damage control.
The only advice I don’t see is that they should do the right thing and use their savings to try and make up the difference when they sell.
Accountability went out the window in this country.
So, let me understand this. If you were a cardiac surgeon and a patient came to you and said, “doc, I have 80% blockages in 3 arteries because I was stupid and porked out for years on sat fat and red meat and never exercised” - you would refuse to operate on the guy because he “did it to himself?”
Not to intrude but what I think he is saying is that this couple has the legitimate means to pay back the money they borrowed in their “get rich quick” scheme and thus might consider upholding their end of the contract they signed. True, they can shelter those funds and utilize different laws in order to dodge this obligation. I believe the question was whether they should feel obligated to do what they signed in the loan contract or take the “entitlement” path and dodge the responsibility as best they can?
It’s the American way. Every possible loophole is exploited by the wealthy, why not everyone else.
Comment by txchick57
2006-09-03 11:01:49
It’s the American way. Every possible loophole is exploited by the wealthy, why not everyone else.
Really you nailed it. They should look into their hearts, get down on their knees, pray to God. Then get up and do what GW and our great VP would do. It is truly the “American Way” If you are not with the “Right wing” then do what ex-Prez Clintion would do ask them to difine “is” and never cop to anything!
If Donald Trump can file BK while exampting Mar-a-lago, and then trun around and open a retail mortgage brokerage after stiffing his investors for tens of millions of dollars, tou really can not begrudge Mom &Pop Damnfool from protecting their ERISA protected assets.
At least it may have the beneficial effect of keeping them off the dole in their golden years.
So, following reason, if some prices are already around 30% under peak and the REAL pressure is not yet on, it is easy to see future price drops of 60 - 70% from peak, and this may still not apply sufficient correction to bring the market to the 30 year trend, or bring valuation into line with rents.
Wow 30% drop in one year. Wasn’t somebody saying something about prices being ’sticky’ on the way down?
“…if some prices are already around 30% under peak and the REAL pressure is not yet on, it is easy to see future price drops of 60 - 70% from peak…”
The dawning possibility of this large a drop is pushing me farther and farther from the listings sheets. I’d been waiting for a lowball deal in the 25-30% range, to get back in, but it’s starting to feel like there is much farther to go than that.
Here in Florida, there are a lot of schools that have much lower-than-expected enrollments this year. I’m beginning to believe that this error is largely or solely the result of schools basing their expectations on building permits and sales, and that the higher-than-previously-guessed percentage of non-resident speculator buyers is what screwed up the kiddie estimates.
I bet there still telling their so called friends what great real estate investors they are. You need to stamp “I’m the bagholder on their forehead”.
oh, their holding a “bag” alright…but being it’s Sunday and all, I spare the details….
make that they’re
Imagine when the other condos sold for 1.1mil, I bet they acted like they had the 200k in the bank. Probably spent like crazy. I wonder if they get to keep the Hummer after Chapter 7?
Not sure what kind of drugs these people are on who are paying these ridiculous prices for condos.This is pure speculation at it’s best. I would not want to be on this train wreck as the greed turns to fear.
I think this is the 2nd internet bubble. For the first time, you have tons of RE money moving all over the world because of the ability of e-commerce. I look at the homes that have been selling around here (central Florida) at greatly inflated prices that few locals can afford, and most of them are bought by out-of-area speculators who think our real estate is “cheap” compared to their hometown (or they did until last year or so). So many houses (and especially condos) around here are purchased sight unseen, and never lived it. And that is why this bubble is the first national RE bubble, and why RE is no longer a local market.
“Those who bought a downtown condo with the intention of flipping will get burned unless they have deep enough pockets to hang on.”
This concept of “hanging on” makes no sense to me. If the value of an asset drops that is a loss regardless of whether it is sold or not. The propeller heads at FASB that think about such things recognize this. GAAP requires homebuilders (or any other company) to write down the value of land or other “impaired asset”. This results in a direct hit to earnings (that is, a loss) even though cash is unaffected.
One of the best pieces of investment advice I’ve ever heard is “You don’t have to make it back the same way you lost it.” Meaning if you bought a house for $500k and its now worth $400k you should not feel compelled to “hang on” until the value goes back to $500k. You have a $400k asset on your balance sheet. This is not a bad thing (unless of course you also have a $450k liability on your balance sheet in the form of an option ARM).
The question is how to use that asset to maximize your net worth. There may be other ways to invest $400k that offer a better expected return than “hanging on” to your house. Yes there are potential tax/bankruptcy/foreclosure/transaction costs issues. But the point is you have what you have right now, not what you had last year.
One of my favorite investment adages is, “Think about the money you HAVE, and not the money you HAD.”
Unfortunately for these folks, even the $1.1 million others HAD doesn’t apply to them. You don’t make money until you sell - until then, it is all wishful thinking that you can match the success of others.
It sounds like they didn’t even consider that the market could go down as well as up. Hard to be sympathetic.
On the flip side - it was the same FASB propeller heads that gave the mortgage industry gaping loop holes so that they could make a killing while hawking option ARMs to FBs like these.
parting words of an old Wall Street sage “:The Trend is Your Friend”. Every time I try to reason the market figures, I go back to this saying, and it has paid handsome dividends. If the real estate market is heading downward, it is only going to get worse. Keep thinking your situation or your city is different, and you will get killed.
david cee, to quote “Forrest Gump” … You are a f–king genius! Everyone should listen to this man!!
I say that with a grin, because it took me quite a while to accept it myself. I’m always been too rational, and willing to say a market is out of whack with fundamentals… missing out on gains.
Psychology and expectations are what drive markets. Not fundamentals, sadly.
- “Common-sense valuations suggest that as of January the prices of most homes and condos were 40 percent to 50 percent too high.
- “Dear D.S.: You folks are in big trouble…… NO SHIT! yOU PAID 885K FOR SOMETHING WORTH 240K.
What’s even worse is those who bought at $1.1M will likely keep waiting for the market to come back to sell at no loss. It may never happen or at least not soon enough that they would have to sell for $200K when they need the money the most.
“paid 1.1 million”
I bet they “borrowed” 1.1 million…
Maybe if they had to write a check for 1.1 million, then their thinking may have been much different.
Good point Pen. The buyers who have been borrowing like it’s Monopoly money are now in a lot of trouble. Some of them are now landing on the “Go To Jail” square and it’s quite sobering…Do Not Pass Go, Do Not Collect $200. Ouch.
$1.1 million = $4,583 per month in interest income in all of the Fidelity money markets except for their Treasury fund. Which is paying about 20 basis points less.
Pen — that’s what I picked up on, too. “Just put it on my tab.”
Imagine the chaos in this country if payroll income tax withholding were done away with and people had to write a check for their taxes at the end of the year. Would any politician be re-elected? If we can get back to 20% down and beady-eyed bankers, house prices will head for reality in a relative instant.
This is kind of like the neighborhood I’m following in Broward. Houses sold for 250k in 2004, 350k in 2005, and one got sold on 1/06 for 400k. Now there are 3 houses listed for 349k for couple of months, nobody is biting.
I wonder what the guy who paid 400k is thinking! I was thinking of contacting all 3 sellers, pitting them against each other, and telling them that they have to make *me* their best offer. I wouldn’t accept anything above 200k.
Also request a family portrait and a letter explaining why you should by their particular house.
I mean, wasn’t this what sellers were doing to buyers less than 2 years ago after people camped out overnight in their driveway??
Yup, I was looking to buy in 2004, but gave up when there would be 5-6 other people looking at the house and offereing 30-40k above asking price. Also, maybe I should tell them they have to come back every month to feed the squirrels
it gets worst. now citizens insurance policies are being brought by new startups that are charging 100 to 200% more this year from last year. (today’s south florida sun-sentinel.) and people are still building. i saw a 200+ unit off of hillsboro and the turnpike. townhouses at 300,000 and in tamarac, hundreds of new townhouses off of nob hill and commerical. everytime i drive, more is being built. these builders own the loan and must build or lose their shirt. i am waiting to see how many more projects are coming on the market in broward. i dont need to talk about miami dade. just going on biscayne on friday is too much to bear. thank god, i didnt buy since 2002. oh, i forgot the new condos at sawgrass. i see state farm, all state and others smiling from ear to ear.
In this market you can do much better as a buyer than having the seller back once a month to feed the squirrels.
How about having the seller back once a week to cut the lawn and clean the pool?
Dade, Broward, and PB county are ground zero my friend. I will venture that at least 50% of all purchases in the last 2 years were specuvestors.
What were these houses going for in 1996 or better yet 1985. This is the price I would offer them.
“Dear Mr. Berko”
I am glad that Malcolm Berko is in our camp. When I read this and saw his name it was a total deja vu. I used to live in Florida and in the mid 90’s I was considering investing in internet stocks. Then I read his column where some one had written in asking if Amazon.com was a good investment. He totally debunked these internet investment s for me with common sense financial advice. Since then I was a faithful reader of his column and the man knows business. Kind of reassures me.
“Dear Mr. Berko: In May of 2005 we bought a condominium on St. Pete Beach, Fla., for $885,000. Five months ago my wife and I lost our jobs in the travel industry.”
Don’t real estate “experts” often claim that real estate is a long term invetment? Why worry about any minor dips that might occur in the short term?
If only reality would always cooperate…
Also from the Star News article response:
“I learned years ago never ask a barber if you need a haircut or a banker if you need a certificate of deposit. And never ask a real estate agent if he thinks property prices will come down.”
Good advice, eh?
Or a mortgage broker if you need an option ARM
“Now we are frightened that we may have to keep the unit making mortgage and interest payments and paying maintenance taxes and insurance until the market gets stronger….”
You’ll be fine, the market should pick up right after the Super Bowl….
Barbara Corcoran, is that you?
Wow, this is really economic Darwinism playing itself out. It seems to me that a small slice of the population seeing themselves savings short made a huge one time bet to try to try to gain some modicum of financial independence and it totally backfired. I do feel sorry for these folks on many levels, they were desperate to try to get ahead and got caught up in the madness and there wasn’t one recognized expert (Corcoran, Greenspan or otherwise) out there advising them not to drink the poisonous punch.
I stuck this in the local bits bucket, but it is FLORIDA.
Tampa, in particular, you may want to give it a look.
http://pasco.tbo.com/pasco/MGBNRXWEMRE.html
Another owner is going to buy their NEW HOUSE with the equity from their OLD HOUSE, which hasn’t sold yet.
The list of idiots is endless.
As my dad used to say “an idiot is born every second”
“Now we are frightened that we may have to keep the unit making mortgage and interest payments and paying maintenance taxes and insurance until the market gets stronger. That would certainly bankrupt us because we can’t afford the $7,000 monthly costs. It’s killing us and the possibility of taking an $83,000 loss would wipe out all our savings and we’d still be about $18,000 short.”
As hard as I try, I just cannot muster any sympathy for these people.
Their first mistake was to buy a condom on St. Pete Beach for $885,000.00. Next time, instead of condoms, try abstinence. That way they won’t get screwed.
“Just say no to bubbles”
I was just out there today, basking on the sand, at least until the rain clouds rolled in and forced a hasty exit. Judging by the number of “for sale’ and “for rent” signs in St. Pete Beach, that couple is in terrible trouble, although it’s no different from anywhere else in the Tampa Bay metro area.
Even more amusing are the absolute crap condo towers visible once you pass over the Gandy Bridge into Pinellas County. I can see how someone might want to live a walking distance away from the beach, even if it was a little expensive. I can’t see how anyone would want to live in a glorified apartment surrounded by fetid mangrove swamp and overlooking a RaceTrac. Good God.
Wait till they get their 22k annual property tax bill. I know the condo they bought in, and the tax rate for that area. Their 800-99k unit originally sold (pre-construction) for about 400k, but flippers bought most of the place, and immediately started asking a million or more. The construction is terrible, but they have a great view.
I can’t even begin to imagine what their insurance bill might look like. Any thoughts?
Waaaaaaaaiit a minute…. these fools paid DOUBLE what these units sold for within a year after construction and didn’t give that any thought?
As Carlos Mencia would say… ” Dee Dee Dee.”
Is it the small-ish condo building near the Don Cesar?
This was my point yesterday on a thread that the higher end luxury condo market was going to come down the most and the fastest ,( I guess it depends on the area ).
The FB’s lost their jobs in the travel industry . Back in the old days of sane underwriting of loans the banks would consider what type of job a person had and if the job had anything to do with sales the lenders would usually require more down and lend on the lowest income average .
It looks like some goof lender gave these people a low down loan on that high of a sales price . One would think that these people had some sign that the business they were in was having problems ,but maybe not . Also if they were short term employees in the travel business ,I question the lender lending that much money .
I just think that the lenders that were tied in with these projects were somehow in bed with the luxury condo developers to approve such questionable loan applicants .
At least in New York they really screen the buyers for net worth in alot of project to protect the other owners in the project ,(which I think might be a good practice ).To bad we can’t count on the lenders making intelligent lending decisions .
In the final analysis I really feel like these borrowers were really speculators going for the big kill thinking that the short term profit would be higher on the higher priced units .
florida is the worst of the bubble markets by far you have to see it to believe it, the units going up right now are mind staggering.
No kidding, redfish, I see it every day. And are the taxpayers of Florida, already stretched to the max, going to have to pay to have these eyesore developments plowed under when they are abandoned?
You got to LOVE Florida it the price you pay to live in paradise ! Im not sure what the paradise is, but I can see the price. And yet they keep building !
“And are the taxpayers of Florida, already stretched to the max, going to have to pay to have these eyesore developments plowed under when they are abandoned?”
Stretched to the max? Florida has no income tax! Try living in states like New York, Massachusetts, Maine, etc… which have sky-high income AND property taxes. I have a hard time feeling sorry for Floridians in terms of tax burden.
People used to come to Florida to escape the taxes of the New York, Maine, Mass, etc. I have a hard time feeling sorry for people those states, seeing as how they accept those taxes. That, and the fact that as soon as Connecticut imposed a state income tax, the sleazebags couldn’t get here fast enough to declare main residency in the state of Florida.
Well, like it or not, Floridians will need to accept a higher tax burden sooner or later, or leave the state…. Running a government requires money, and if you have no income tax, it must rely much more heavily on things like property tax, transfer taxes, etc… With Florida’s real estate market going into the toilet, that source of revenue will shrivel up. With the insurance crisis in Florida, and private insurers raising premiums or cancelling homeowners’ policies, the State-run insurer of last resort will be subsidizing more and more of Floridians’ insurance costs. All this means Florida has some tough decisions to make. I hate over-bloated state government bureaucracies, overly generous government employee pension and benefits plans, etc… as much as you do, believe me. Good luck with convincing the state legislators to do something about it, though.
TG, I fear you are right.
“Good luck with convincing the state legislators to do something about it, though.”
How about, keep un-electing them until a crop of them actually begins pruning government way, way back? A few years back, a politician rang the bell at my mother’s house in Orlando. I answered it and engaged the guy. He said that he was totally against raising taxes. I asked him pointedly what he would do to lower taxes. He had no answer, nothing at all. Lower the size and reach of government and you can lower taxes.
Like Palmetto, I observe that people from high-tax states flee to low tax states, then most of them begin bellyaching and demanding services that will raise taxes in the new place. Florida is screwed.
TG
it won’t be long for Florida to add the income tax. when the housing slows the taxes will have to cover the expenditures. all the happy dancing with impact fee will be gone. just like any other county. Florida did add discounts to get people to move to the swamp but it cost more in the long run with all the other taxes and fees added in. Florida likes to use the assesment to get blood from a stone.Just ask anyone that moved there form the north but you might have to find them in Ga. SC. NC. and Tenn.
Before this whole bubble thing, Florida was a good deal compared to many northern states. No state tax, inexpensive housing, nice weather (in the winter at least, summer sucks). Now due to the rise in insurance, property tax, housing prices and constant hurricanes it’s slowly becoming a bad deal for many people. I have friends who keep using the old “1000 people move here a day” slogan. That is a statistic that has become outdated. On this site an article was posted regarding a loss of students in public schools here in Florida and administrators don’t understand why. Hello, families (not to mention retirees) cannot afford to live here anymore. Cost of living has gone up dramatically and the pay stays the same. (Florida has always been a low paying state.) Half-backs are also becoming popular (move here from up north and then move half way back to the Carolinas). Florida is no longer a great place to live.
absolutely, it used to be a great cheap place to live. when i got my first real job i had an apartment in a nice part of palm beach for $450 a month (cheap because i was willing to rent year around) used to have saturday lunch at hamburger heaven, burger fries and milkshake (a REAL one) for $6.50.
“Stretched to the max? Florida has no income tax!”
And no roads worth a crap!
Why would people with $65k in savings take on a 30 year commitment for $7k/MONTH?
My question throughout this entire real estate mania has been “WHO..is buying all these $500k and up properties?? And are there REALLY that many people in America with that much money?”
well, I think the answer is becoming clear, and it’s a resounding NO….lots of buyers with no where near enough money to be buying these properties and also NO COMMON SENSE. jeesh…
NO COMMON SENSE IS IN GREAT ABUNDANCE IN THE USA! NO SHORTAGE THERE!
To answer your question of “Who buys these condos?” well here is one answer. I work in Hawaii, This past Friday (9/1/06, 2 days ago) I was speaking with a few of the folks (highly skilled Software folks for the goverment) who work for me and I thought they were going to talk about the Holiday week-end. They started talking about RE and how good an investment it was in Hawaii and how the prices always GO UP!!! I kept my mouth shut and just listened in utter amazement.
One young lady about 29 informed us that she owns several condos in Hawaii 2 on Ohau and 1 on the Big Island. She earns about 55K, less than half of what I earn. She then described a Choice she had to make on one of her condos that was losing about 6K to 7K per year. Another lady, 28 about 65K, who works for me comforted the 1st lady with a story of another friend who bought a condo in Hawaii at 180K went bankrupt with a forced sale at 160K only to watch the condo re-sell 2 years latter at 300K. Her take away was just hold on a you will become rich. The 1st lady nodded and agreed with the second lady they then both smiled and life was good.
I sat in utter amazement and dumbfounded and did not say anything. My next thought was when I assign work to these ladies I will really have to double check thier work or make sure the tasks I assign them requires no thinking. A lot of folks in the RE game just do not think through their decisions or plan for worst case outcomes. My wife and I earn about 130K per year and rent and keep lots of cash and pay for everything in cash and plan for any purchases over 200$ months in advance. I cannot believe the risks that people are taking in RE. As the Florida travel couple learned most people are one or two paychecks from fianicial disaster. All we can do is to pray for the folks and try and educate.
Since americans are broke (Witness the negative savings rate for the last several years. This nation is bankrolled by Chinese, Japanese etc. to the tune of $750B a year) the proper qustion to ask is who are the IDIOTS lending them money. Chinese and Japanese central banks through purchases of agencies?
“We’ve read that the experts believe housing prices will increase this year between 3 percent and 7 percent. It seems that interest rates have stopped rising. So do you think when rates begin to fall again that the condominium market will get stronger? If so how long do you think it will take? D.S.”
Dumber than a box of rocks.
It all depends on the area your in ,what the job market is in the area ,and how much supply of housing is in the area your questioning .IMHO if the interest rates go down again it will help somewhat in that it makes homes more affordable but the speculation frenzy might be gone for good ,(hopefully it is ). With the speculation demand gone you don’t have that force driving up prices so supply with keep prices from going up .
I admit I’m a bit young and don’t understand macro-economics all too well … but after turning down the spigot in the late 80s and helping to precipitate that era’s housing downturn, didn’t Greenspan turn the spigot right back on again in the very early 90s. Given the our amazingly short attention spans, it is a bit of surprise that investors didn’t immediately flood back into the same housing market that just handed them their but a year and half earlir - no, they went “new paradigm” hunting again. So, I’m guessing history may very well repeat. Maybe this is the Feds “master plan” - housing bubble, recession, stock market bubble, recession, housing bubble, and so on …
Either way, I think it will be at least 7 - 10 years before people are buying $900K luxury condos in St. Pete Beach, Fla again.
The dam has broken and there is nothing we can do to save the village.
What a disaster! I am positive we will be reading or hearing about thousands of similar cases in the near future. Unlike DS however, thousands more will quietly hope things will turn around until its too late and they drown in debt.
By the way I know a lot of you think DS deserves what’s coming to him and maybe he does. Afterall, only a speculator with little cash savings buys a second home and tries to sell it in less than a year. Only an irrational speculator hoping for quick riches places less than 1 percent down on a 900 thousand dollar second home.
However, if you ask the following questions you will soon realize other people contributed to this tragedy and deserve some of the blame. Who underwrote such a speculative transaction? A negligent banker. Who persuaded this couple with such little savings that they could afford a property in this price range? An unscrupulous realtor. Who later reassured these speculators that they made the right decision by telling them other units sold for 1.1 mil. Probably the same unscrupulous realtor. Who later using his podium at the NAR gave this couple hope that things will soon turn around; consequently, allowing them to consider holding on to their failed investment? The father of all unscrupulous realtors, David Lareah.
It is ALWAYS buyer beware in the USA! Always.
If you don’t due your homework, 9 chances out of 10 you are going to get screwed. Just ask the guy they interviewed on When the Levees Broke. The guy’s house got wiped out, but fortunately he had home owner’s insurance AND flood insurance, so he was safe. Yeah, right! Using all the fine print, the insurance company wrote him a check for his house and life savings. It was $675.00.
Buyer beware. Sharks are all over.
Don’t due homework, 10 out of 10 chances of getting screwed.
Dive into a pool of sharks, you will get eaten. Don’t dive.
Your homework is due on Tuesday. If you don’t do it by the deadline, it will become overdue!
I get your point, but in the end, it really is caveat emptor. Buyer Beware, Be Very Ware!
I live in St. Pete Beach in a rental. What’s so pathetic is that all of these people pay, err, I mean borrow through the nose for something that is relatively cheap. I live two blocks from the beach. Rentals in my hood go for $600-$900/mo. for a 1-2 Br. And there are TONS available.
We eat at the same restaurants, watch the same sunset, swim in the same water, walk the same beaches… they’ve trashed their lives for nothing. You can work at McDonald’s on Gulf Blvd. and live right around the corner on your McSalary.
It’s not expensive to live in Florida by the water. It’s expensive to OWN in Florida by the water. Let someone else sweat the responsibility.
Blind Pass was created by a hurricane. I wonder what people will say when a Cat 5 hits SPB and cuts it in half. “I can’t believe this happened!?!?” Meanwhile, Trooper Larry Coggins will be on Baynews9 saying, “It’s a small price to pay to live in paradise!!”
Small price for me, at least.
Right on, SPB Dude. I’ve noticed that rentals over in St. Pete are cheaper by far than across the bay in Hillsborough County. Over here, FBs are desperately trying to cover their new mortgages, especially on those “lugjury” condoms they bought.
John’s Pass was hurricane made too.
these people are going to be looking for a bailout. sorry we didn’t put a gun to their heads and make them roll the dice. i’ve been a lawyer for twenty years and i know i can’t afford an 800k condo, they should have known better. they are being undone by their greed.
redfish, you are EXACTLY right.
It is kind of interesting though to take the “problem” and see if you can figure out a way to lessen the damage, whether it’s this or stock repair or what have you. That’s what professionals are for.
txchick, that’s true. At least these people in St. Pete, if they are real, are asking for a solution. It remains to be seen if they will take the advice given. I think part of the problem is, when FBs confront how screwed they are, they are sort of set up not to trust the person who is giving them the bitter medicine.
i don’t think they are asking for a solution so much as asking for a miracle. they know they are underwater and don’t want to face up to it. notice they don’t suggest paying the lender back as a solution, they want a painless cure, that is not taking responsibility, it is clicking your heels three times while saying “there’s no place like home, there’s no place like home”
It’s not going to be painless no matter what happens. Just as a practical matter, one has to stop the bleeding before the wound can be assessed and dealt with. If they go to an attorney who suggests what I did, they have to be prepared to pay him to litigate against the lender if need be, to have their bankruptcy filing challenged or the discharge of that particular debt. There’s a lot of things that could still go wrong.
Also if they attempt to pay down the loan in part so they can protect money by the homestead ,it going to recast the loan and alot of lenders won’t do that .Don’t the bankruptcy laws also state that any attempt to hide or shelter funds within a certain time of declaring bankruptcy is disqualified .
I would go to the bank with the offer they got , explain they lost their jobs ,give the bank the money they have and asked for a short sale for the balance .
Txchick ….I didn’t see your post and I know you think they have a shot the BK route but the risks are much higher and they will have the attorney fees as well as the loss of the savings in the end .They don’t even currently qualify to pay down the loan and get it re-written ,so they could shelter it .Maybe a attorney can go in there and present the case to the bank so they can qualify for the short sale . That would just leave them with the IRS taxes on the short-fall ,which wouldn’t be that much in the lower tax bracket they will be in for a while .
The only other way out is for these people to get high-paying jobs immediately and hold the property long-term and it just doesn’t look like that might happen .
In addition ,I’m beginning to wonder about some of these condo deals and the prior sellers . I think a investigation is in order on these sellers ,the people that sold to them etc. I might be wrong , but there is just something fishy .
I have a solution. Why don’t they go and get jobs!! They never mentioned that. Or maybe they had a little bit of the
“wealth effect”, going and the planned was to “lose”, their jobs all along. MAYBE, they were thinking, “You can take this job and shove it, cause we are rich real estate speculators, tra la la la la.”
I used to work with a lady who started investing and flipping real estate and she became very hard to work with, she wanted designer hours, that did not match up with the needs of the company. Finally they squeezed her out by not giving her any work. So she took a couple of years off, and I just heard that she is trying to get on at another job, same type of work. Anyway, I looked up what she made on real estate and while she did well, it is less than what she would have made if she had stayed employed.
…and WE the responsible citizens of the USofA will end up bailing out these idiots one way or another!
Comment by robert
2006-09-03 10:16:46
…and WE the responsible citizens of the USofA will end up bailing out these idiots one way or another!
I really do not think so. I think they will drown one by one. I do not think the Goverment will give a “rats ass”. They will all face their own personal fates case by case as the, new BK laws are set up.
In some ways these folks are “lucky” they will lose their money and that is it, they will get back in the game and live to play again!
We are at war…… at least the Gov dosen’t want you!…. yet in my day they could take you and “own” you get you killed or shot-up and back home while you were still 19.
sad sad sad.
an uncounted number of americans are being rounded up and marched into roman slave ships where they will be sentenced to row for the remainder of their lives on this earth.
Developers and politicians decided after 2004 that ALL the older (e.g. built prior to 2001) homes need to be GONE. Developers have a money motiviation, politicians have a political motivation - they need to get private insurers back into this state, and said insurers are only willing to insure new homes.
Senior citizens in older homes they’ve owned for many years are getting annual insurance bills for between $4K and $8K on a nothing-special 1200 square ft concrete block home. Two years ago, their bills were less than $1K.
The day after the bill comes, they put the for-sale sign out in front of the house. But guess what? No one is buying. If they own the home outright, they can go without insurance until something happens or the market improves. The former is more likely to happen sooner than a market upturn.
The value of a home in Florida built prior to 2001 is now equal to value of the land. Homeowners haven’t figured that out yet.
Thanks for the tip, westcoast. I far prefer an older masonry Florida home to the crap that’s being built during the boom/bust, so maybe I can use the “value of the land” as leverage in negotiating. And pay cash. And self insure.
I have such contempt for the majority of the politicians in this state and the ads they run at election time don’t do much to ease that contempt.
imo the best value is a cbs home built in the 60’s 70’s, these tend to have small bathrooms and kitchens compared to new houses but they hold up well to a storm and termites. the frame/stucco houses imo are not as good a value, you really need a good inspection before springing for one of those.
I think if you build it correctly, you don’t have to worry that much about hurricanes and can easily “self insure”
Don’t forget nice-to-haves like permanent storm shutters you can close and secure when a hurricane is approaching would be banned by most Home Owner’s Assoication’s CC&Rs for being “ugly”. So buy in a place (if you can find one) with NO CC&Rs and HOA.
Our florida house (in Orange county) has been architected, but we’re waiting for the bubble to pop some more before finalizing a builder.
One thing we’re doing is buiding on a pier foundation, with a crawlspace, the way they USED to build houses. You can fix a lot more when you can get UNDER the house! Most of the houses built today will not last 30 years.
In about 15 years, the plumbing that runs through the slab will start to leak, and all the floors will have to be ripped up and the slab jackhammered just to fix the plumbing!
I follow orlando closely, because I own a large-ish piece of land in Orange County (20 acres) on which I plan to build my retirement home (and put a big wall around it!).
About 6 months ago, a young associate was boasting how he “bought” a 400K condo in downtown Orlando on an i/o loan. His plan is to sell it in a couple of years and “move up”. I told he he was crazy and will lose his shirt. He looked at me like *I* just didn’t get it.
I don’t think I’ll remind him now! The sad thing is, he probably won’t even be able to sit tight. In a year or so when principal payments become due, and his voodoo mortgage adjusts up, he’ll have no choice but to BK.
It’s killing us and the possibility of taking an $83,000 loss would wipe out all our savings and we’d still be about $18,000 short.”
Perhaps if they decline the sale, they can wait a year and come up $118,000 Short? These idiots need to take good money from this generous fool, and move on.
It’s almost 1:00 here on the West Coast (Sunnyvale CA — Silicon Valley). I’m going to grab my camera and go to Open Houses! Maybe I’ll get some good photos for this blog! (And lets hope I find realtors that serve cookies/brownies!)
ut what most agents are wondering is when and IF the Valley’s housing market has finished its cooldown
I think that the IF says it all.
One Tampa Bay real estate broker put in ad in her local newsletter pleading with homeowners to STOP SELLING!
“WHY IS EVERYONE SELLING?
MORE HOMES FOR SALE MEAN LOWER PRICES!
STOP SELLING!”
Ya think it’ll work?
http://www.tbo.com/pasco/MGBT3IMBLRE.html?imw=Y
New Port Richey is ground zero for the insurance-driven housing meltdown. Many of the homes there were built in the 50’s and 60’s and are owned by retirees. They’re only insurable by the state-run Citizens insurance, and the bills they are getting are in the $6K range for one-years worth of coverage. Retirees can’t take that kind of hit, so the entire area on the Pasco coast is ‘for sale’. Inland isn’t much better in Pasco or Hernando counties - because of sinkholes. In that case, it doesn’t matter how old or new the home is - it’s uninsurable except by Citizen’s. For $4 to $5K per year.
“STOP SELLING!”
Yeah, right. You first.
LOVE that article. It just says it all. Has anyone noticed how these bubbles are characterized by all sorts of insanity? Pasco County is toast. It’s a shame, too. Used to be a pretty little county with a nice rural atmosphere and low cost of living, but within reach of Tampa.
Oooh! Can I play too? Let me try:
DEPARTURE FROM FUNDAMENTALS MEANS LOWER PRICES!