‘Losing Money By Building Homes In Florida’
The St Petersburg Times reports from Florida. “Evidence is mounting that the downturn in Florida’s real estate market may be broader than experts had expected. St. Joe Co., the largest private landowner in Florida, is exiting the homebuilding business in the state. Giant homebuilder Lennar Corp. of Miami is reducing its third-quarter earnings estimates. And the National Association of Realtors predicted home sales will be lower than projected throughout the remainder of the year.”
“‘Given difficult market conditions, we have limited our land purchases while we have remained focused on..minimizing completed inventory,’ said Lennar president and chief executive Stuart Miller, who said his company is limiting land purchases and minimizing inventory because of market conditions.”
“But analyst Alex Barron said he remains unconvinced that other builders, who are also feeling the strain of slow sales, will jump on St. Joe’s offer of sites. ‘All homebuilders find themselves with too much land and are in the process of writing off land options and trying to shrink their land portfolios,’ said Barron. ‘Joe’s decision to exit the homebuilding business is a clear indication that builders are now losing money by building homes in Florida.’”
The Tallahassee Democrat. “St. Joe’s departure, and the entry of national home builders into the region, could mean stiffer competition among subcontractors resulting in lower home prices, said David Wamsley, CEO of K2 Urbancorp in Tallahassee. ‘When they come in and see some of the pricing they have had to see with subcontractors in this market, I think it’s going to shock the system a little bit,’ Wamsley said. ‘Ultimately it will reduce the price of a house.’”
“The Miami Herald. “Signs the once-hot housing market continues to cool keep coming: Homebuilder Lennar said Friday its third-quarter earnings will be much lower than projected. The Miami-based company blamed a decrease in new orders, increased use of sales incentives, and certain land adjustments.”
“While many builders believe the South Florida market’s long-term prospects are very bright, the ‘duration of this transition is unknown,’ said Antonio Mon, CEO of Hollywood-based homebuilder Technical Olympic USA.”
“The Miami City Commissioners expressed skepticism about using any community redevelopment funds to assist the developers. The developers have requested $200 million in such funds.”
“Developer Mark Siffin wrote to ask for help to pay for a parking garage and street improvements near the arts center. He said the project would provide public benefit and cited the ‘current environment of increasing construction costs and high land prices.’ Miami Mayor Manny Diaz said the developers approached him earlier this year and asked for $200 million from city coffers. He said it would be a poor use of public funds.”
“‘The answer was very clearly no,’ Diaz said. ‘I couldn’t see government putting money into that kind of a private project. In a property like this that is right next to the PAC, where every major private developer in the world submits a bid, and they want a subsidy? I flatly rejected them.’”
The Tampa Tribune. “Real estateagents Bethany Ezell and Kesia Thompson didn’t set out to manage rental property. But the sluggish housing market has turned them both into quasi-landlords.”
“They were among more than 50 students attending The Landlord Academy’s recent eight-hour property management class. Ezell and Thompson attended because the glut of houses on the market has turned some would-be sellers into accidental landlords. ‘It’s kind of fallen into our laps,’ says Thompson.’
‘In recent months I have received so many of these calls alleging mortgage fraud, quitclaim fraud, escrow fraud, you-fill-in-the-blank kind of real estate fraud that I can’t remember them all, never mind investigate each one. So why won’t my phone stop ringing?’
‘In the most lucrative forms of real estate fraud, ‘you can close the deal through the mail and walk away with a half-million dollars,’ Dollar says. ‘It’s not surprising it has become the white-collar crime of choice.’
this, my friends, is just the beginning. and you wonder why we started getting out of the business twelve months ago.
from the globe:
BOSTON –State regulators ordered 11 firms to stop doing mortgage business after investigators found evidence that brokers steered prospective home buyers into mortgages they couldn’t afford, and lenders looked the other way.
The Division of Banking on Friday also made emergency amendments to state regulations governing the industry, and sent a letter to brokers, lenders and financial institutions statewide threatening further action should more evidence of wrongdoing emerge.
The division said recent surprise investigations of lenders and brokers turned up evidence that some firms intentionally steered customers into home loans they couldn’t afford, typically by inflating borrowers’ actual income in application documents.
Also, some lenders who bundle mortgage loans and sell them as securities on so-called “secondary markets” failed to correct the income discrepancies before selling the bundled mortgages, Commissioner of Banks Steven Antonakes said.
“Some of the lenders have perhaps not been doing the level of due diligence they should be doing, and underwriting the loan,” he said.
Many of the abuses involved customers with low- to moderate-incomes, often with limited ability to speak English, he said.
The division established a mortgage fraud hotline for consumers to call if they believe they have been victims of unfair mortgage practices: 800-495-2265, ext. 1501.
The 11 firms that were sent “cease-and-desist” letters included mortgage companies that were properly licensed, and parties acting as brokers even though they weren’t licensed, the division said. The letters require the businesses to stop soliciting or accepting mortgage loan applications, and place any pending applications with a qualified broker or lender. Fees collected from consumers must be placed in escrow.
Two industry organizations, the Massachusetts Mortgage Association and Massachusetts Bankers Association, issued statements welcoming the enforcement actions and pledging to join state regulators at a statewide mortgage industry summit in the fall to discuss the issues.
Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, said in an interview that his group “applauds the division for taking a proactive approach.
“We have sort of come upon a perfect storm in the industry, where interest rates have cooled and real estate prices are high,” Cuff said. “In a competitive atmosphere, everyone is fighting for business, and it’s appropriate to regulate the industry.”
Below is a list of firms that were sent cease-and-desist letters:
– ARBC Financial Mortgage Corp., Woburn
– Achieva Home Loans Inc., Worcester
– Diamond Mortgage, Lawrence
– Equity Solutions Inc., Worcester
– Fintera Capital Corp., Natick
– National Lenders Inc., Lynn
– National Lending Corp., Houston
– R & R Financial, Lawrence
– Reyes Mortgage, Lawrence
– Synergy Mortgage Group, Lawrence
– The New York Mortgage Co., New York
I hope this type of crack down on these bums sweeps across the nation. The funny money has been steadily destroying this country from the inside out…it has got to stop…Americans have to get back to living within their means.
what these regulators fail to realize is that these “toxic” loans were the only thing that was keeping the real estate market moving. it really was a credit bubble. this will just accelerate the plunge. look out below.
You’re right. The combination of slowing house price appreciation or declines, higher interest rates, continuous criminal investigations, and tighter lending standards is going to crush this market.
I hope the AG’s from every state sees this. I am going to forward to the Ca AG.
Finally some action! The tide has turned in the last few months. A few months ago I felt like Job!
Crispy, that is an excellent idea - every atty general in every state, especially mine in WA State should get a copy of this. This crap has GOT to stop, Seattle is a mess with toxic loans.
Go Dukes!
I was just thinking the same. Please keep us updated on the Seattle Blog as to your correspondence with our AG.
This is going to separate the wheat from the chaffe. Whether or not your state AG will get with this program is a good indication of just how corrupt and in bed with REIC that state is.
Love the part about “neglecting to correct income falsifications before selling onto the MBS markets”.
Housing Wizard (below): someting is a LOT better than nothing and this is definitely a case of better late than NEVER.
Something is better than nothing ,but they are a little late in busting what has been going on .
From the LA Times this morning on SubPrime Lending:
http://www.latimes.com/business/la-fi-mort9sep09,1,3876966.story?coll=la-headlines-business
Great article. So the # of these loans doubled from ‘04 to ‘05.
Any guesses on what the ‘06 stats would look like. LOL.
Looks like somebody knew they HAD to crash this market before ‘07 with this many “buying fools” out there.
From the article:
“It also said borrower-specific risks generally increased, pushing more buyers into non-prime categories.
Piggy-back lending — the use of second-lien mortgages to allow buyers to buy homes with down payments of less than 20%, also grew substantially in 2005 and accounted for more than half the increase in the number of higher-priced loans.”
——————-
Because they ran out of qualified buyers in 2003 and have been scraping the bottom of the barrel ever since, IMHO.
Best Quote:
“Showmanship is another characteristic of a successful landlord, Chavis says.”
No, Showmanship is needed to make $25,000 in an 8 hour property management class giving out information that is readily available for free.
Some free advice not included in the seminar: You have already made or lost your money on your real estate the minute you closed.
Do your homework, before you buy. Once it dawns on you that you have made a mistake, get out quick, so you can start putting your money toward a positive investment as soon as possible.
Ain’t that the truth. And isn’t that a bunch of BS anyway. Screen, this check, that check, demand this, that etc. from the tenants.
Most of these fools are in no position to demand anything. They need money, any money to defray part of the monthly cost of their stupidity.
“They need money, any money to defray part of the monthly cost of their stupidity.”
And that’s why rents have been dropping like a stone in east central Florida. Many more “for-rent and for-sale” signs, but I think those are foolish because any savvy renter will steer toward the rental with apparently less likelihood of being sold out from under them, all else being equal. The carnage is in progress in Florida; press coverage of it is lagging noticeably, IMO.
Chip,
Very much agreed. The Palm Beach post does a decent job, but really, I can’t believe its not all over the news every night.
The level these people must be bleeding, to offer 1/2 to 3/4 million dollar homes for rent for under 3K a month?
They are just desperate to hold on a little longer. When in the end, the music has already stopped, and everyone has sat down except for them. They just don’t realize it yet.
they just believe that someone is going to buy their home eventually and 1000 people move here every day. what a joke. just take a drive in south florida and implosion is occuring. the clearest sign is the schools LOSING students for the first time in over 30 years. i mean no one would have thought this would ever happen in our life time. one last lesson. when 90% of the population can not afford a house in south florida without an exotic or any loan, they cant. with taxes and insurance cost, can we say 95 to 98%. prices must drop just based on people affording any taxes or insurance.
I have seen so many properties that have been on the market for almost a year now turning to rental properties. Some of these homes are still double what the homeowner paid for them. When I see an $890K(paid $400k) home turn to a rental, I question whether the owner owes the bank more than they can get for the house. One particular house started at 1.2 million lowered several times over the past year to a final price of $895k. Now it’s listed as a rental as well for $2900 a month. The market in Florida is worse than the high builder inventory indicates. too many people up to their eyeballs in debt!
Can anyone tell me where my friends(and realtors and those in complete denial) get the 1000 people a day are moving to Florida. From what I see, it seems to be 1000 people a day are moving out of Florida. I am so sick of hearing that qoute!!!! If they are, why is the housing market such a mess here???????????
That’s the only answer it could be. The equity has been liberated to buy other “investment” houses, toys, boob jobs and other BS. So they “need” the amount they’re trying to get. Too bad.
A good question, Why are they losing money? Because buyers are walking away at these price levels. The land has to come down for profits to rematerialize. It’s just one by-product of a financial mania.
I am seeing the same for rent/for sale scam here. The other big one is - Lease Option to Purchase! This is EVERYWHERE in todays paper. My favorite part is - “Lock in the price of a home today with a lease purchase option”.
Question - How does the realtors commission work on a Lease purchase option? I assume they only receive a % of the cash paid monthly towards future home ownership?
here’s what I don’t get. they make it sound like at some point in a year or so they won’t be making any money? what’s going on here?
they can’t build houses so they’re living off inventory for the next year or so?
ok, I get it. they are just selling their florida land.
Why on earth would you want a lease/purchase right now? I think this is another desperate attempt by the FB to get some cash flow.
From my understanding, when you sign a lease/rent agreement, your paying more for rent, and have already negotiated the price on the home. So basically, its an option to buy.
I don’t want options on depreciating assets!
I wonder how many, if any, of those lease-purchase properties move off the market. Every one I’ve seen sets the lease payment either at about the amount of a normally-amortizing mortgage or at the payment amount of the toxic ARM held by the owner, so it is way higher than the normal rent for a similar rental-only property, at least in this area.
according to census ACS, Florida population is growing about 2.3% a year, which is about 1100 people a day, for the last two years, just about twice the national rate of growth. That said, the inventory of housing is growing much faster, and since it was soaked up until recently by spec investment, the pop figure isnt that relevant, esp because some of the growth was because of teh bubble.
What if census ACS based its numbers on building permits or home sales, multiplied by average family size? The talk around here is about the people who left or who are leaving. Property taxes and insurance have screwed the retirement dream of many folks who would have been headed this way; that could change, though, if prices revert to 1999 levels.
1,000 people a day move into Florida but 1,500 people per day die in Florida.
Just try to find a U-hual truck to move out of Florida. I think more are moving out of florida each day.
Net -500 — LOL.
SALIM SULEIMAN Born 1946 More Information
3830 CAMINO LINDO Recorded: 02/26/2003 SALIM SULEIMAN business listings
LA JOLLA, CA 92037 County (858) 554-0243 Leave a message for SALIM SULEIMAN
http://www.ZabaSearch.com/Google - Background Check
Could be Sam’s dad
3830 Camino Lindo, San Diego, CA 92122 1 week change: $264
Last updated: 09/01/2006
ZESTIMATE™: $501,468 (What’s this?)
Value Range: $456,336 - $576,688
a very small home for 3 people in la jolla
I think that is Sam. Sam is his nickname. Good find!
FYI, the just released August numbers suggest the bottom is falling out of the DC / Northern Virginia housing market. The area median price is already down over 8% YoY.
I think this is highly significant because this is actually an area with some of the best fundamentals in the nation due to high wages and strong job growth from the government sector. Home prices are out of line with incomes, but it’s not quite as bad as other areas with poorer fundamentals.
In other words, you’d expect the DC area to weather the storm better than the typical market. This makes me think we’re headed for a real blood bath in the rest of the nation.
Ah… mean to put this in the other thread.
Meant, even.
True about the fundamentals. But I suspect the envirnoment for building and availablilty of land are such that they can build lots of houses fast to meet the demand.
Kiplingermagazine (October 06) had an article written by Thomas M Anderson about Third Avenue Real Estate Value fund (TAREX). According to the article, their top holding is St. Joe (JOE), the largest private land holder in Florida. The fund manager, Michael Winer was quoted as saying “I wish I could find six more companies like St. Joe”. Damn, things change fast.
the easiest way to combat the 1000 people a day are moving here is to find out when the population of FLA was growing and when it had a housing bubst. if I’m not mistaken, ARZ was growing a lot and it’s RE was stagnant in real terms for years.
well do a search on Uhaul. It looks like the demand (price) for Uhauls moving out of FL is much higher than for those moving in.
http://www.uhaul.com and do your own quote.
26′ truck quote, one way:
Miami, FL to Austin, TX $3,522
Miami, FL to Phoenix, AZ $3,062
Miami, FL to San Diego, CA $4,858
San Diego, CA to Phoenix, AZ $646
San Diego, CA to Austin, TX $4,015
San Diego, CA to Miami, FL $1,443
Austin, TX to Miami, FL $436
Austin, TX to Phoenix, AZ $651
Austin, TX to San Diego, CA $729
Phoenix, AZ to San Diego, CA $174
Phoenix, AZ to Austin, TX $2,693
Phoenix, AZ to Miami, FL $1,376
["Phoenix West" is the actual destination].
Whoa.
Miami to Austin = $3,522
Austin to Miami = $ 436
So it costs EIGHT TIMES as much to move from Miami to Austin as the opposite.
This like an aberration of the old days when you could drive a Hertz car from Florida to northern cities for zero cost, and they would pay for your motel room.
26′ truck quote, one way:
Miami, FL to Austin, TX $3,522
Miami, FL to Phoenix, AZ $3,062
Miami, FL to San Diego, CA $4,858
San Diego, CA to Phoenix, AZ $646
San Diego, CA to Austin, TX $4,015
San Diego, CA to Miami, FL $1,443
Austin, TX to Miami, FL $436
Austin, TX to Phoenix, AZ $651
Austin, TX to San Diego, CA $729
Phoenix, AZ to San Diego, CA $174
Phoenix, AZ to Austin, TX $2,693
Phoenix, AZ to Miami, FL $1,376
["Phoenix West" is the actual destination I had to enter].
More UHaul quotes for Florida
Florida Uhaul Index
Lizziebeth… It’s Westchase Tom…
Shoot me an email at mrhousingbubble@aol.com
Any politician who votes to subsidize another condo in the state of Florida should be tarred and feathered. It was awful to subsidize any in the first place, for that matter. Free markets seem to exist only in textbooks anymore.
Agreed. Also, any politican that wants to bribe a company to come to Palm Beach county with taxpayers money. Well, they get the tar, then the feathers, then a slow turn on a spit over a nice open fire of taxpayer money that they are throwing away.
Why should we (the taxpayers) have to PAY to bring a company here?
That bugged me about the Burnham Institute deal that Orange County just made. As if Burnham ever had any intent of being in Port St. Lucie instead of being where they ended up at Lake Nona, about two miles or ten minutes from a major international airport. But nooooo, the politicians here had to throw a zillion dollars at them to boot. Saps, they would have come here anyway!
The perfect storm hits Florida Real Estate.
As the slow down continues in Florida, those of us who are in the real estate business, are worried. Conditions are looming which could cause the largest property value meltdown since the 1928 bust.
Most of our markets are overpriced for the median income family, you know, the people actually trying to make a living here. Home prices in most of our major metropolitan areas have been driven up by a false demand created by outside buyers and speculation. A classic asset bubble seen before in real estate and the stock markets. Natural population growth has stopped in the past two years, since the 2004 hurricane season. School enrollments have dropped in most South Florida Counties. Housing inventories continue to grow. All this we know. However, I’m telling you, this is the good new!
Most single family home insurance rates for wind storm damage have increased to a factor of 1.5 to 3.0 over rates prior to 2004. These rates are capped by state law. After the November elections expect the caps to be removed. The insurance companies demand this, and will leave the state otherwise. Many have already done so, or are not writing new policies. Unknown to the general population, the State of Florida has allowed the insurance companies to drop ALL apartment and condominium projects in the State! The only remaining source of insurance available is the State’s own “Citizen Insurance” which is referred to as the “insurer of last resort”. The insurance rates for these projects (Wind Storm Coverage) will average at least ten times the rates of two years ago. I’m told that on average, you can expect a $100 per bedroom/per month insurance expense for apartment and condo projects.
Real Estate tax assessments have lagged behind our markets due to the system. In Florida, your real estate taxes reflect the estimated value of you home as of January 1st of the prior year. TRIM notices of January 2006 assessments are sent out over the summer with final tax bills in October or November. Taxes are past due in May of 2007. So, the market sales data used for your current tax bill reflect last year’s price levels. A typical entry level home of $250,000 (Assessed Value) will have a tax bill (new buyer) somewhere around $6,000 to $7,000 a year after a homestead exemption of $25,000. That’s a monthly expense of $500.
Real Estate Taxes and Insurance expenses will remain high. There is no relief in sight.
Now, the really bad news. Most think of Florida as the land of Oceanfront mansions and million dollar boats a la Miami Vice. There are 17+ million people in Florida. Most are younger GI generation or older boomers, mostly middle class retirees, living off a FIXED INCOME. Given current price levels, most could not buy the house or condo they are currently living in. They are stuck where they are, and they’re not happy about it! Bottom line: The cost of living in Florida has exceeded the benefit of not having a State Income Tax. Most of these people will not leave the State. They will stay here and eventually die in their condo boxes like all the others. But, and this is the main point, THEY WILL NO LONGER TELL THEIR FRIENDS, RELATIVES OR ANYBODY ELSE, THAT FLORIDA IS A GREAT PLACE TO LIVE! This fact, more than anything, is going to hammer Florida Real Estate.
Florida condo group sues the property appraiser…
“More than a dozen Perdido Key condominium associations on Friday filed a lawsuit against Escambia County Property Appraiser Chris Jones, Escambia Tax Collector Janet Holley and the county’s Value Adjustment Board.
Property owners are alleging the county has overvalued their property, which is inflating their tax bills, and that they don’t have enough time to protest the valuations.”
http://www.pensacolanewsjournal.com/apps/pbcs.dll/article?AID=/20060909/NEWS01/609090321/1006
In addition I have noticed that in the “Letters to the editor” section of the paper locals are writing in almost every other day bitch’n about insurance and property taxes.
Yup, one of those people is me!
I live in Palm Beach county, and let me tell you, on our blog (Palm Beach Post) we have some SERIOUSLY delusional people.
Come on over and set some people straight with me.
http://www.palmbeachpost.com/blogs/content/shared-blogs/palmbeach/realestate/comments
I’ll check it out.
And if amidst all of this Castro passes away,
expect a flood of Cubans to return back to their homeland.
They wont be taking back any of their houses with them.
Recently spoke with a family member of a friend who works as a customer service rep. for Lennar homes. Lennar is set to have a huge discount on their homes. He stated that with incentives and discounts a $480,000 home will have a sale price of $420,000 - $440,000. Still overpriced in my book. But get this, the friend told me that the actual cost of building the home, including site prep, and land acquistion is in the range of $100,000 - $150,000. I still can’t believe that homebuilders would still be this greedy in downward market. Either that, or the information I am hearing is inaccurate. Anyone care to comment?
imo that is inaccurate, LEN doesn’t have those kinds of margins, you can look up their last 10q to see the actual margin.
Reviewed their 2/2006 10Q. It seems as if they have about a 15% margin.
With each home ,along with the sq. ft. building costs/permits you also have marketing costs and holding costs for the builder . I
Looks like LEN’s margin is shrinking as I have LEN at May 31, 2006 with gross profit margin of 12% per quartely data posted at:
http://finance.yahoo.com/q/is?s=LEN
Ah, I wish it were true, the cost figures you note. I’ve been factoring in, as an alternative to buying a used house, the building of a custom new one. Excluding impact fees, land, anything but the house itself, you should be able to build a house here for $60-$100 per square foot, depending on the level of trim you want. Of course, the sky’s the limit for luxo homes, but Lennar quality should not cost more than $100/ft. to build even with nice upgrades. They probably are pricing in a chunk of change for their lots, which will drop in value whether they sell the homes or just the land itself. Hang in there — I predict Lennar’s prices will drop. Then drop some more. Then some more … until the bottom is reached and the subs don’t earn enough to buy gas to get to the site. The last thing Lennar wants to do is build no homes at all.
Where are you building and what custom builders are qouting these prices. We have found a piece of land we like, but the builders we’re talking with are close to $200sq. ft. That’s including excavation and septic though.
Where in Orlando do you want to build — I can check around for builders who work your area. $200 is a total rip, unless you specified very high ceilings with triple trays and faux painting, etc. Mind you, you need to be willing to work with a stock floor plan, but there are limitless numbers of those. My work would be based on a floor plan I purchased for a couple of grand. There are outstanding plans available online — my favorite source to date is:
http://www.stephenfullerhouseplans.com/
Even Heidenescher, who built nice-nice top-end stuff in Lake Forest, “only” charged $160/sf plus lot when last I checked.
We’re in Bradenton now. Lakewood Ranch area.
The land isn’t in a neighborhood, it’s on 5 acres. We’ve only talked with two builders so far. As we think the cost of the land may go down as well!
Should have added, but surely you already know, that if you use a builder who already has houses in the ground in the neighborhood you want, you’ll do a lot better on the price because their workers/subs do not have to go to a one-off site.
Sorry for the extra posts — keep in mind that I said Lennar-quality should cost no more than $100. Lennar is not custom. I am happy to take a ready-made floor plan and make very minor changes to it. What turns me on is the interior and exterior finish and a two-cooktop mega-kitchen, which you can make work with a decent size footprint. You sound sophisticated enough to shun shutters, for example — there are awesome window units out there. The one thing I learned so far about building: make up your mind, cut your deal and live with the results unless you’ve made a horrific mistake. Change-orders will bleed you dry. Also, bag the landscaping package and cut a deal with someone independent, unless you don’t care or you *really* trust your builder.
The land costs are not in included in that number…
“Real estate agents Bethany Ezell and Kesia Thompson didn’t set out to manage rental property. But the sluggish housing market has turned them both into quasi-landlords.”
LMAO! Bethany was the realtor for the home I’m renting! Fortunately she is not my landlord, I work directly with the owner who is very nice. I’m not the type who usually speaks poorly of others, especially in a public forum, but I’m just warning all to think twice before having her as your landlord. For the record, she is a nasty b%^&* and deserves this. She talked down to me (this was late last year) for wanting to rent, and ridiculed me for my reasoning of why I felt prices will come down. She still goes around spouting the 1,000 moving to Florida a day rhetoric, and is convinced this slowdown is very short term, prices will rise soon and blah blah blah. Now renters are her bread and butter. I hereby declare victory!
Too funny! I bet she’s an accidental “quasi-landlord” because she invested heavily in the bubble herself… That must be new bubble terminology: quasi-landlord is someone who didn’t intend to be a landlord, but ended up being one on a flop.
Jon
Very funny, thanks for the personal anecdote. Vindication is sweet.
My fave quote from the article: “Those passing the final exam become certified property management specialists.”
LOL. Wow, they’re certified specialists; no doubt the path to riches.
There are not 1,000 people a day moving to Florida. I have debunked this real-estate-cheerleader-myth before on other boards.
Check it out:
http://www.city-data.com/forum/florida/12371-1-000-people-day-move-florida.html
I welcome any criticism of my research.
I also look forward to the 2010 Census (A 1,000 peopla a day are leaving Florida!).
Hi, Muggy. I read all the posts but with all the back and forth and argument it is difficult to see the bottom line. Would you be willing to fully post your position and stats on this board? It would certainly help me and others to have it summarized. Thanks for considering.
It is indeed true that 1108 people a day moved into Florida
between July 1 2004 and July 1 2005.
1074/day between July 1 2003 and July 1 2004.
864/day between July 1 2002 and July 1 2003.
896/day between July 1 2001 and July 1 2002.
826/day between July 1 2000 and July 1 2001.
This is the source of the data from Censu Bureau.
(Lemme know if my calculations are wrong)
http://www.census.gov/popest/national/files/NST_EST2005_ALLDATA.csv
It will be interesting to see what the rate will be for between
July 1 2005 and July 1 2006.
What are they basing these numbers on? Drivers license, house closings….?
Interesting that Ben brings up the fraud issue. It is alive and well, in
every corner of this country.
We recently received two letters over the past couple weeks or so from lenders who are asking if we have any information or have closed transactions with…they give a list of individuals, loan officers and appraisers. I imagine that they are sending these letters to all escrow firms and title companies.
A couple months ago I submitted a post about the “stress” levels of agents, loan officers and the public we serve. It is now so obvious that people are starting to panic about their financial stress. Not everybody of course, but a lot.
The one thing we have noticed is an increase in the refinancing of people in the business.
ARM’s are still king and it is THE 30 yr product of today. I’m really starting to believe that 30 yr fixed rates have it’s days numbered. I suppose people can argue that we will have to go back to it, but I just don’t know if that will be the staple anymore. There is just no way many people can afford to refinance INTO a fixed rate. What we are seeing is refinancing into LONGER ARM’s fixed for 10 yrs or so.
My guess is that the FED is really in a pickle with rates and is receiving a lot of pressure to keep them low. I can’t imagine what will happen to the market if fixed rates bump up over 7%. With a median income of around $50-60K in our area, how the heck can people qualify at a fixed rate for a $500K-$750K home? And that is why I think that traditional fixed rate mortgages days may be numbered.
I hope that the traditional fixed days aren’t numbered ,but they might be . The secondary market doesn’t like fixed in spite of them being less risk ,because they are so afraid they might get stuck with low-yield performing fixed loans for long term .
This was the problem back in the late 70″s when the secondary market quit buying fixed and the lenders raised the rates to 15-18%. This is why they came out with more adjustable product in the early 80″s .The people with the gold call the shots .
I actually designed a loan for the company I worked for in early 80’s that the secondry market accepted and the consumer liked as well, and it was copied by other lenders .The new adjustables are creepy by comparsion .Back in those days people had to qualify for the adjustable also as well as put a down payment down .During the 80″s adjustable margins were lower ,they tied the loans to slow moving index and the loans were set up for low potential for neg. amortizing ,and they had payment caps.
There has to be a fair balance between the secondary market and the consumer . To put people on loans they can’t afford , if they adjust up, just so you can insure a future high yield potential is just wrong .
S-Crow — I can’t say that you’ll be proven wrong, but in my view, anything other than, roughly, a traditional 30-year paydown of principal is hocus-pocus. Even the dumbest of the JSPs will learn or hear before long that it is pointless to tie yourself into ownership of an asset where the great bulk of your risk is on the downside. There would have to be a cabal of most non-impoverished nations on earth, buying up every available property here, to fix rents above what people can pay — and what would be the point of that?
Nope, people will in the near future come to understand housing principally as shelter and secondarily as forced savings, just like the Japanese have done, and things will get back to the way they used to be, for the most part. Lots of pain on the way, to be sure, but we didn’t learn to ride bikes without crashing a lot, either.
And that is why I think that traditional fixed rate mortgages days may be numbered.
Why is a 30-year fixed mortgage any riskier than a 30-year bond? France was kicking out 50-year bonds last year and the market ate them up. Institutional investors want safety & predictability as much as borrowers, so I can’t see fixed rate products ever going away.
Interesting, though… given the huge fallout expected on ARMs, perhaps the market will require borrowers to qualify on the highest possible payment and not the lowest? That would bring prices down farther than reverting back to 30 year fixed loans.
The underwriting needs to be different on these adjustables ,thats for sure .Did lenders think that real estate always goes up so it would cover the defaults? If lenders get tighter on the qualifications on the adjustable loans that will kick out more buyers . So I guess I agree with you tj.
Can’t imagine how anyone thought borrowers **shouldn’t** have to qualify based on the worst-case scenario. After all, if you’re a lender, don’t you want to know that you will get your principal back, no matter what happens to the resets, etc.???
The lending these past few years defies all logic.
At least in coastal areas, insurance costs are a further millstone around Florida sellers’ necks. Non-Floridians, check your annual premium notice. Is it anywhere near 2% of the insured value (e.g., a $5,000 annual premium for $250k coverage)? I’m paying a quarter of a percent here, only one-eighth as much.
A quarter of a percent sounds right in our area (New England quite some distance from the coast).
We just upped our coverage and it’s a probably .2%. The insurance costs in places like Florida really devalue a home. That $4,000 extra per year for insurance costs what it would to finance another $40,000 in home value.
My brother-in-law just bought a house in his neighborhood that he plans to fix up and sell for a big profit. Can you believe it? My jaw dropped. He’s the type who doesn’t read newspapers… This guy was complaining about money problems just a few months ago and now he’s carrying two mortgages on a specualtive bet in a market he doesn’t understand.
A lot of deer are going to be caught in the headlights…
“That $4,000 extra per year for insurance costs what it would to finance another $40,000 in home value.”
The understanding, by buyers, of that essential point is what is biting Florida sellers in the butt.
It’s really simple: take the population change and subtract births.
Population 2005: 17,789,864 (est.)
Population 2000: 15,982,378
Population Change: 1,807,486
Divided by years (5) = 361,497
So on average the State of Florida grew by 361,497 people each year.
Now, here is the fun. Subtract newborns and then divide by 365 and that will give you the amount of people that moved to Florida every day.
Here is 2004:
Average 361,497
Births 218,034
NET INFLUX: 143,463 (Divide by 365)
Average people moving in to Florida: 393 per day
The phrase “A 1,000 people a day are moving to Florida” is a lie; it was used to sell homes; it is unethical to say.
My calculations are unassailable, repeatable and based on the census. As always, challenges are encouraged.
Shouldn’t you subtract the deaths if you add the births? And from what I observe the demographic distribution of FL to be (inference - not exact knowledge) I would expect more deaths than births …
That was suggested to me on the other boards. Here is why I am right: The census counts deaths and births. It’s just a sweeping head count of who is alive and in a given geographic area. What my numbers do is separate the population growth into 2 categories: newborns and people that actually moved to Florida.
Get it?
I guess it would be productive to try to figure it based on people likely to buy homes. Deaths would seem likely to boost homes on the market. Births are unlikely to have an effect, but maybe the number of people turning 23… whatever the average are for someone to rent or buy a home.
Then you have to figure ratios, maybe 1.5 deaths = 1 home sale, 2.2 newcomers = 1 housing unit, 1.2 new 23 year olds.
The problem is, the market probably determines behavior to a large degree.
Sorry, I still don’t get it.
Let’s work this out step by step.
Say the population in state FL in 2000 is x1. Say the population in state FL in 2005 is x2. The difference over 5 years is x2 - x1. The average growth over one year is (x2 - x1)/5. OK?
With respect to the population of one state, what are the factors that affect it over one year?
1. Births - call this A
2. Deaths - call this B
3. In-immigation from other states, countries - call this C
4. Out-immigration to other states, countries - call this D
OK? Anything I missed here?
Let’s make an assumption here. Let’s say that the population increase seen over 2000 to 2005 has been in equal yearly increments. Therefore, for a given year in 2000 to 2005
(x2 - x1)/5 = (A + C) - (B + D)
Now, from the census figures we know that
(x2 - x1)/5 = 361,497
Therefore,
(A + C) - (B + D) = 361,497
You will need to know and consider the factors A, B and D before you can state with certainity what C (In-immigation from other states, countries) is.
Let’s make another asumption here. Let’s say that FL is such a great state that nobody is leaving. That is, factor D is insignificant and can be considered to be zero.
Therefore,
(A + C) - (B) = 361,497
That still leaves the factors (or more properly, variables) A and B to be determined before C can be calculated. And these (A and B) are not insignificant.
Anything wrong with the derivation and assumptions? This is a bit outside my area so I could be making a major error somewhere …
Texas and California grew by similar numbers. New York also grew - which I use to illustrate the contrapositive of my Florida argument: not everybody is leaving New York in droves. There exists a trend, but no mass exodus.
it should be very simple and yet the outcome as unpredictable as our now below average hurricane season:-)). I feel often that I lucked out by not buying and renting and this is cause for many sleepness nights. My household income of 70k p/y with one child and no debt is not enough to buy a decent home. I live in Miami and I can’t imagine prices keep going up, there are just too many of us who simply can not afford it! The 1000 per day who move to Florida, do they also calculate the second home buyers and the foreigners who bought condos?
YVONNE!
You are my twin! “My income of 70k p/y with one child and no debt…”. Same here only in Tampa.
You have to put this in perspective. We make more than 95% of working American women, and probably more than 99% of Florida
working women.
Use that as your bench mark, and ask yourself, “Why does it seem like 95% of the people I know are doing better than me financially?”
Well the answer is they are not. The economy is screwed up and those people are in big trouble.
Save every penny, I was able to save half of my take home pay last year partly because I rent. In Dec 2003, I almost bought a condo, but I got cold feet and instead put my down payment in the Florida Prepaid College fund. I paid cash for the 4 year university, 4 year dormitory and 4 year local fee plans. Everyone said I was crazy and to instead put the money into 529’s(which I am now doing ) or real estate.
I watched the price of the condo I was going to buy soar to much more than I paid for the prepaid, so I thought I was pretty stupid for a while. Well here we are today and college prices have soared about 7% a year-so I have made 7% p/y on that investment, because the prepaid is locked in at old price. The condo has been decreasing in asking price almost to where they were in 2003 and they have had special assessments for mold and termites, about half of them are for sale.
Another great thing about the prepaid if you are a single parent is that if something ever happens to you you know your child is going to have money for college. No one can touch it if you die, no worries about whether a guardian or ex and new wife will spend your money on your child’s education. That is what really sold me on it.
Sadly I have seen situations where mom dies, kid goes to Dad and new wife, Dad and wife have kids, Dad dies. Entire estate goes to new wife. Do you trust new wife to take care of any of this, think Cinderella. It is all about peace of mind.
One caveat is; that it is 95% of “working women”, you have to throw out all 2 income women, women with alimony, child support, inheritances, widows, disability etc. If you factor those women in we are probably in the, I am guessing 50th percentile.
Just hang in there, continue to be wise and conservative, and you will be very glad that you are you. “Money is a terrible master, but an excellent servant”-P.T. Barnum
I feel the same way. I feel so lucky to be renting right now. I was tempted to buy about 6 months ago. At some point, you have to take a deep breath and say, “this makes no sense.”
I know people that bought at peak, and while I am generally adversarial on the internet, it’s much different when it is someone you know. They closed one month ago and I estimate that they are already $20k upside down since they rolled in closing costs and have PMI.
This was supposedly their “starter home.”
I have a friend at work that jokes that she bought her starter home 30 years ago and had no idea then that it would be her “ender home” as well.
Also, regarding the 2nd hownowners and snowbirds: this is one objection I have raised to my own numbers as well.
I would guess - it’s only a guess - that those numbers, if factored in, would actually show the influx to be even less than I have calculated.
I personally know about 8 people who “winter” here. Half of them own properties. So which state do they reside in? I have no idea, but they certainly affect the housing market.
One Miami based condo conversion company closed their office here and opened one in South America ( not sure what country) to sell directly to wealthy SA who want to own property here. I can tell you that the average person here who has a masters degree can not afford one of the many high end condos for sale here ( 1million and up). These condos are mostly sold to the wealthy world wide ( South Americans, Europeans). These people don’t live here and don’t fill up the seats in the Miami Dade county schools. If this goes on you will have a greying of the population whereby those who bought their homes pre bubble are able to stay and live here ( unless they used up their equity) but the new college grads will have no choice but to look elsewhere. The poor will become poorer and will stay as they don’t have the means to move elsewhere . As poverty and crime go hand in hand we can only imagine the outcome of a city with an even larger gap between the have and the have nots.
I see asking prices coming down in Florida but only asking prices , last year’s prices are still lower than this years. Can only hope..