‘The Bill Comes Due’ In Florida
The Orlando realtors have their August numbers out. “The number of homes sold in August of 2006 dropped by 33.7 percent when compared to August of 2005. The inventory of available homes continued its upward trend in August with the addition of 7,039 new listings contributing to a total inventory tally of 21,077. A total of 2,077 existing homes changed hands in August through the MLS, for a year-to-date total of 19,404.”
The Naples News. “Luxury community developer WCI has pulled out of a deal to build the high-profile Sabal Bay project east of Naples. Steve Zenker wouldn’t comment on the reasons for the company’s decision, but the Bonita Springs-based developer has been buffeted by a declining Florida real estate market.”
“The company announced an unspecified number of layoffs in July and, in August, announced that its net income fell from $75.3 million in the second quarter of 2005 to $22.7 million in the second quarter of this year, a 70 percent drop.”
The Sun Sentinel. “The Boynton Beach Community Redevelopment Agency unanimously voted Tuesday to reconsider next month shelling out millions of dollars in cash incentives offered to developers of the Promenade and 500 Ocean, two defining projects for the city’s eastern front.”
“Neither developer has begun construction. Frustrated board members said they recognized the slumping real estate market but said it was no excuse for developers’ lack of response in updating the CRA on the status of their projects. ‘They just don’t respond,’ said board member Marie Horenburger. ‘I don’t care what the [real estate market is]. Tell us what you’re doing.’”
The Palm Beach Post. “In Palm Beach County, 2,241 homes entered some state of foreclosure in August, a 226 percent increase over the same month a year ago, when 688 homes entered foreclosure. Statewide, 16,533 homes entered some stage of foreclosure in August, more than any other state in the country and a jump of more than 50 percent over the previous month, RealtyTrac said.”
“Today’s foreclosure report comes on the heels of a Business Week investigation published in the current issue that shows 24 percent of all purchase and refinance mortgages in Palm Beach County are ‘option ARMs,’ or option adjustable-rate mortgages.”
“Only pricey Naples has a higher percentage of such mortgages, which Business Week calls the riskiest loan product ever created.”
The Bradenton Herald. “Homebuyers have been relying on a type of mortgage that gets them more house than they might typically be able to afford by offering them lower payments. But like all deals that seem too good to be true, the bill eventually comes due. A surge in foreclosures in Florida over the last two years suggests that time has come, experts say.”
“‘Since they’re paying less than interest only, they’re deferring interest which is tacked on to the bottom of their loan,’ said Catrina Foster, with SunTrust Mortgage in Bradenton. ‘So they typically can owe more than what they borrowed, particularly in a correcting market.’”
“‘We in Florida were able to experience a wonderful appreciation of our property values over the last several years,’ Foster said. ‘Well now, values are coming down and the market is correcting itself. A lot of people select the very first option (less than interest) to keep their payments way down. Not advisable. If you know you’re going to be in this house for six, seven or eight years and you continue to pay that option one payment, it could sting a bit at the end.’”
“Patrice Yamato, president of the Florida Association of Mortgage Brokers, insists the dangers of option ARMs are overplayed in the media. She said borrowers are informed twice in detail during the home-buying process about the specifics of the loan. ‘What else do we need to do to make those borrowers understand? We go over it and they sign a disclosure and then it’s disclosed again at closing,’ Yamato said.”
“‘I agree that option ARMs are not for everyone but there are so many safety measures in place that that type of scenario that’s being described in (articles) can’t happen,’ she said.”
‘More than 100 residents of Sarasota County sent a clear message to their elected officials during Monday night’s public hearing. ‘I’ve heard about all the exoduses that have been going on with people leaving Florida for Georgia and the Carolinas,’ Wigby said. “I just came from Massachusetts and I called it ‘Tax-achusetts’ because their taxes are too high. But your taxes are ridiculous. I had twice the house I have here and I had half the taxes I am paying here. So I may be leaving too.’
‘Holiday and other local builders are feeling the softening market. The number of housing construction permits issued in Brevard County plunged in July to the lowest monthly total in more than nine years.’
‘The Fort Myers/Naples area ranks fifth in customer satisfaction for new-home purchases in a survey released Wednesday by J.D. Power and Associates. ‘We basically purchased a brand-new fixer upper,’ said Dorothy Tursky, 37, who bought a 3,400-square-foot house in Stoneybrook at Gateway 15 months ago from US Home. ‘I gave them horrible J.D. Power reviews.’ Lennar/US Home officials could not be reached for comment Wednesday, but Tursky said every single room needed repairs. Faults included a driveway that had to be torn up and ‘whole walls where they missed the studs — the whole wall wasn’t attached to the studs.’
‘Palm Beach County commissioners Tuesday urged Property Appraiser Gary Nikolits to take a more lenient approach to assessing property. ‘The problem with taxes didn’t just begin this year,’ he said. ‘Since the beginning of the real estate boom, I’ve been warning every group I’ve been speaking to that unless taxing authorities … change their spending habits, the day would come when there would be a tax revolution by the owners of properties not protected by the Save Our Homes amendment. Sadly, that day appears to have arrived.’
‘Broward public school enrollment has declined for the second year, a change that could affect some school building projects and cost the school district millions. The drop, from 270,935 students last year to 262,616 this year, reflects a statewide trend. ‘We’re pretty sure people are still moving to Broward County,’ Leonard said. ‘The one conclusion I’m leaning toward is that there are a lot more single people moving to Broward County.’
People ain’t seen squat relevant to the escalation of state taxes…
Wait until these legions of public sector employed boomers retire with their indexed pensions and free for life health care insurance guarantees.
As George Will recently noted in an editiorial don’t think the government employee retirement legacy costs are one bit different than from Ford or GM-’cept the government can’t file bankruptcy.
Do you have detailed information about those retirement plans?
I would really like to look into it if possible. Thanks.
Where on earth does it say govt can’t file for bankruptcy. Check out 1933 and 1971, and that’t the US. Check out Argentina, Russia, Mexico…
Besides, they don’t even have to go to court to declare, it’s automatic, no one can stop them.
Cities and counties declare bankruptcy every now and then. If a future government needs to cut pension benefits to keep taxes low, nothing’s going to stop it.
The jaw-dropping part of that article was that the home listings for Orlando went up 7,000 in one month. That’s a 50% increase in the available listings in one month. Holy Moly.
Yeah the board here is a joke. They include sales from the MSA but listing in Orange and Seminole Counties only. The truth is the MSA has over 40,000 listings in MLS. Add another 20,000 FSBO’s, Discount Brokers, and 800 brokers and you have the true picture here.
Dormant completed subdivisions abound. 60% completed houses and no workers abound.
Hell this is nuthin’ yet.
Its just the price you pay to live in paradise,
“Its just the price you pay to live in paradise,”
Turning into “pair-a-dice.”
Telling Florida that they have higher taxes than Taxachusetts is a pretty big slap in the face to Florida. But why didn’t this guy research taxes before he moved down there?
He did! He looked at the previous owner’s bill!
.
.
.
.
Ok, I’m done laughing. I should feel bad for this guy who’s become the bag-holder for the “Save Our Homes” free riders in Florida, but given that he thinks Massachusetts has high taxes (and we don’t, not any more) he hasn’t shown himself to be the sharpest knife in the drawer.
An 800% increase on $119 a year is about $1000 a year. For property taxes? Boo-friggin’-hoo.
-
There’s always a “Day of Reckoning”. Whatever you do in life, be it good or bad, it will always come back to you.
Also remember that “No good deed goes unpunished.”
“Patrice Yamato, president of the Florida Association of Mortgage Brokers, insists the dangers of option ARMs are overplayed in the media. She said borrowers are informed twice in detail during the home-buying process about the specifics of the loan. ‘What else do we need to do to make those borrowers understand? We go over it and they sign a disclosure and then it’s disclosed again at closing,’ Yamato said.”
“‘I agree that option ARMs are not for everyone but there are so many safety measures in place that that type of scenario that’s being described in (articles) can’t happen,’ she said.”
Yeah right. Those “safety measures” are strictly designed to prevent your sorry ass from getting sued when, not if, the FB goes underwater. They do nothing to protect the FB. Now, I believe in accountability, but given all of the shady lending practices we’ve heard about on this blog, this quote really frosts me.
Option ARMs are a predatory lending practice for residential buyers. Period.
Mrs Yamato’s words are complete BULL SHIT!…..and that’s all I have to say about that.
Safety measures? Yea right. There there to shuffle the mortages onto the secondary market as fast as possible.
This is going to be ugly.
1. For the FB’s who bought into the “buy now or forever be priced out” BS.
2. For the bondholders (bagholders?)
3. For the mortgage originators for they are being stuck with a lot of the “late run” Option ARMs as they default early.
Neil
After going to the state trade show not too long ago I will have to second that….
The amount of option ARM lenders, wholesalers, resellers and etcetera that were pushing this product was sickening…. To the point that 85% of the lender booths had some version of this “suicide ARM”…
I did however find a couple of new fHA lenders…..
Maybe, but it is also quite likely that ‘flippers’ used the option arm to get into the place cheap and are now holding the bag. IMHO because of the flipper interest in Florida, “that type of scenario that’s being described in (articles) can’t happen” is happening. Florida is rhyming with the 20’s.
The “disclosure” becomes just another form to sign at closing in a bewildering stack of forms. Many banks “require” brokers to explain the risks, this way they can tell the public that “buyers are fully informed”, but most brokers just gloss over it… “You’re required to sign this form, but I wouldn’t worry too much about it…and moving on to the next form”. Banks know it, but choose to look the other way.
I believe in personal accountability, but you can read a story almost every day about someone losing their home because they didn’t understand the terms of their mortgage.
I don’t know - I pissed off the closing agent at one of our signings because I was making sure I knew exactly what I was signing. Sorry lady if you scheduled this for 15 minutes. But I’ve got a stack of docs here and I’m going to make sure I understand what they say before I sign unlike the sheep you trot through here most days. It’s my butt on the line. So get a cup of coffee and chill.
audet,
Good for you! I wish more people did this! I can’t recall ONE closing I’ve ever been through where we didn’t feel “rushed”. It’s like you’re just some dumb lay person that doesn’t work in “the industry” anyway and you’re too stupid to understand so just sign the things b/c I have to pick up my kid from daycare!
Well wait just a minute here! I’ve heard there is an atty. here in OR that will “review” your closing documents and finds more RESPA (and other) infractions than you can shake a stick at! He’s a little bit out there b/c he also contends in many cases you may not owe the lender anything at all! It’s kind of far fetched for my taste (I’m securities licensed) but his contention is that the “bank” never loaned you ANYTHING! They’ve basically attached their name to your doc’s as “lienholder” quite illegally. Not a tactic he uses often but he says at $2,500 fine per infraction he can usually get 50/75K knocked off your mortgage. I don’t know that I’d ever use the guy but he brings up some pretty blatant abuses no one else is even willing to discuss.
DinOR — that is very useful to know. Thanks.
Most buyers knew what they were getting into but they were betting real estate always goes up 20 to 40% a year IMHO.
Lenders likewise were betting the same .
ARM OPTION MTG. Disclosure should of said .
We the lender are going to put you on a loan at a teaser rate of 2.5% that will go up to 7% effective interest rate in three months .From that point on the interest rates could surge to a 11% highest rate cap and we will charge you for it ,even if we only increase your payment 1% every six months . We add interest owning to your loan amount .
So when interest rates go up you will not be able to qualify for the loan at your current income levels because we qualify on the teaser rate of 2.5 % .
We are also putting a pre payment penalty of 6 months interest on this loan because we know you will want to get out of the loan within two years and we want to pick up some extra cash there ,after all we gave you a three month break on the teaser rate and gave you to opportunity to invest in real estate ,when you couldn’t really qualify for the loan .
Please be advised that people who hold a note like this beyond two years are likely to get into payment trouble so you are advised to refinance at our local offices at that time when we can put you in to another loan product in which we can again delay you really qualifying for a loan on your real merits .
At some point, should the ‘lenders’ start calling a spade a space, namely “vig” or “juice” is the interest rate, and the “nut” is the principal.
And by the way, the mortgage brokers are either loansharks or “shys”.
And from the Sopranos, foreclosures could be called ‘busting out’ the mark.
Wiz — that is Truth in Lending. Sadly, I’ll bet there are a lot of people who would have signed anyway. As for one of them, I am going to feel bad, for a moment or two, the first time I sit down to dine in the house they had to leave.
You will think of them every time you flush the toilet.
Housing Wizard-
Any chance you could go testify at the Senate Hearings next week on lending?
After seeing the hearing on the economy and the housing bubble yesterday, it is clear that our good Seators need to hear from people who actually have some knowledge on what is going on.
At the very least, can you watch the show and give us your unbridled critique on what they missed?
I argued with the Supreme Court once and its a stacked deck .
IMHO , the reason why they want the hearings now are because they can hide behide the we don’t have the data yet .
If requested, I think most closing attorneys are suppose to provide you with all the documents 2-3 days in advance of signing. Someone, correct me if I am wrong.
I think you are right and would bet that it is required by the state, at least in Florida.
“In the world I see — you’re stalking elk through
the damp canyon forests around the ruins of Rockefeller Center.
You will wear leather clothes that last you the rest of your
life. You will climb the wrist- thick kudzu vines that wrap
the Sears Tower. You will see tiny figures pounding corn and
laying-strips of venison on the empty car pool lane of the
ruins of a superhighway.”
~Tyler in “Fight Club”
That is all I got to say…
Stephanie Ellison
http://www.deafdrummer.org
The bottom line, from what I’ve read, is that brokers like selling option ARMs because they pay heavier commish than other mortgages. And as for borrowers, many are stupid and don’t understand how to balance a checkbook, much less advanced financial concepts like negative amortization. Others are greedy — they know full well that these loans are toxic long-term, but as investors, they like the fact that they can be cash flow positive in the first year or two on an option ARM. And in the end, they’ll sell for much more than they paid … or so they were hoping. The reality is, both groups of borrowers are by and large screwed.
These products should have been confined to the small niche of sophisticated borrowers who used them in the late 1990s, when they were something like 1% of the market. Instead, they were morphed into an “affordability product” — and we’re going to see huge increases in delinquencies and foreclosures as a result. Sad.
And as for borrowers, many are stupid and don’t understand how to balance a checkbook, much less advanced financial concepts like negative amortization
You got that right, BUBBA!!!!!!!!!!
I figure borrowers figured they would refinance once they gain the big appreciation for a couple of years . I can assure you this was the way the agents for the lenders were selling this loan product .
From a logical standpoint the qualifying on ARM /IO should of been harder for a loan product that had the potential for interest rate increases in short amounts of time . Instead people were bribed into those loans because they would not of qualified otherwise . The goals of that sort of borrower was to just get in at a low down /low qualifying while real estate was going up . The lenders subjected themselves to great risk based on the same “betting on the come ” mentality .
Even with big appreciation it wouldn’t have mattered. For example, the house is 400K and the teasrer payment is say 1750/month. Even when the real payment kicks in how could anyone afford this? At 6% for 30 years you are still looking at 2400 a month just on the loan. Throw in taxes, HOA (if any), fire insurance and mortgage insurance and you are at 3,000/month no problem. Therefore, even with teasers most of these people were screwed from the start. That is what is going to make this a very bad situation for many.
It’s worse than that. Many of these resets will double the loan payments, based on examples we’ve seen all over this blog. Moreover, the option ARM crowd aren’t even paying the interest. It’s akin to running up a $10,000 credit card debt and then paying $10 per month on it. Except that the numbers in this case run into the six digits.
If a loanshark breaks your kneecaps, at least you’ll be able to walk again in a year or so. These option ARM folks are going to be ‘kneecapped’ for the rest of their freakin’ lives.
And this mortgage industry doofus talks about “safety measures”…
Yep, here’s our main safety measure: I got this here small mirror which I put in front of the borrowers face. If when I take it away there’s no fog on it, there’s NO WAY I’m giving him an option ARM.
my mom’s in SW FL house kept creaping up through 1989 to 1995
It is different this time
thought everybody paid cash in FL, retirees etc……
” that shows 24 percent of all purchase and refinance mortgages in Palm Beach County are ‘option ARMs,’ or option adjustable-rate mortgages.”
What else do we need to do to make those borrowers understand?
How about asking if they finished high school or have a GED and if not ask for a co signer.
Learning to actually apply high school math to the real world is the answer, and all too often that is not taught.
I believe it is more accurate to say all too often it is not learned.
*shrug* maybe. My high school taught geometry, algebra, trig, pre-calculus, and calculus (optional). I wasn’t exactly a motivated math student back then, so I can’t say I paid full attention all the time, but I don’t have the slightest recollection of ever being taught how to apply what we learned into how to calculate a loan payment or anything similar.
Now, this was in the ’80s, so things are undoubtedly somewhat different now. Exactly how different, you tell me.
What is commonly being taught is how to solve “specific” problems (i.e. the type of problems that may appear on a standardized test that will be used to evaluate the school). What is not being taught is general problem solving skills. Those are all you need to figure out an ARM. These days, if they haven’t seen the problem in class, they do not know how to do it (I teach math at the college level, and spend a lot of time “undoing all this damage”).
In fact, standardized testing has actually made this worse in this country. I personally know of numerous instances where an elementary teacher was doing nonstandard stuff that had really good pay-offs by the end of the semester (because this type of teaching can go slow at first), but was told to stop it because the students needed to be prepared for the test.
Yeah, well if real life situation teaching was really used alot of these test making cos. would go belly up. On top of that why teach anything that students might use in real life? It might actually make them wake up and realize they are next to be fleeced. The people in charge wouldn’t want that would they?
I only had one math teacher in high school that actually taught anything of practical value. He found ways to make it interesting and, imagine this, useful. One interesting project lasted half the year and involved picking and following stocks. Sadly, the political b.s. that takes place in today’s school system drove him out of the profession after 20 or so years. No big deal for him, as I believe he had always invested in the markets and income producing properties. To this day I am dumbfounded by how many adults cannot even figure out tips at restaurants! People, it can’t get much easier than that. That one math teacher took 5 minutes one day in class and taught us how to calculate the “mysterious” 15%. 14 year olds were grasping this, but most adults cannot! Truly appaling.
BTW, this took place in the late ’80s, so like fiat lux above, I do not know what goes on in today’s high schools.
Couple of observations:
1. The Sun -Sentinel is a rag. They have a story today http://www.sun-sentinel.com/business/local/sfl-zforeclosure14sep14,0,5334130.story?coll=sfla-business-front
with the headline, “Mortgage forecloses on rise across U.S., but Fla. had minimal increase.” Same day the PB Post has the story that there is a 226 % increase.
2. The weekly numbers for Miami are out. Median Price down again to $379,000 from $380,000 - down a reported 10% in a year. Inventory approaching 40,000 units- up about 200% in a year.
http://www.benengebreth.org/housingtracker/location/Florida/Miami/
3.Homeowners are freaking out about their upcoming tax and homeowner insurance bills. We are talking about a double or triple in cost. The only way to get insurance is through the state pool.
4. I would venture to say over 50% of purchases in the last 2 years were by specuvestors, using toxic loans that are resetting in the next year.
5. In the West Palm area, there is a THREE YEAR supply of properties. http://iprecom.tempdomainname.com/trendg/images/palsld.PNG
6. Goldman Sachs’ chief economist, Jan Hatzius, figures national home prices will decline 5 percent in 2007, further pressuring borrowers who are upside down. “If there is little or no equity, it will be hard for homeowners to sell their way out of trouble,” he warned. Merrill Lynch’s chief economist David Rosenberg dared look out a bit further. His forecast calls for home prices to decline by a further 3 percent in 2008, remain flat in 2009 and increase by 1 percent in both 2010 and 2011.
http://www.dallasnews.com/sharedcontent/dws/bus/columnists/ddimartino/stories/091406dnbusdimartino.2dfb58f.html
Florida is ground zero and I predict a return to 1999 prices over the next 2 years.
The prices in Miami are now holding at 2.5 x year 2000 prices, at least. Most properties are listed at 10-20% above their 2005 (peak) levels, and the reductions given serve only to bring sales prices in line with 2005 prices.
There is no way 2008 prices will be back to 2000 levels, unfortunately. If they get back to 2003, that itself will be remarkable.
An example: a house in Kendall I am looking at (not seriously, for now) - built in 2000, in a nice neighbourhoud on a rather small lot, probably cost 270k or so. Resold in Jan 2004 for 420k, now listed at 698k (which is 5% ABOVE Zillow estimates). I will be following to see what will be the sales price, if any - but it is not going to get under 400k in the next 2 or 3 years, that’s for sure.
Kendall?
Have you ever been to Kendall?
I wouldn’t live there if you gave me the property! Besides with 27/7 bumper to bumper traffic you’d never get anywhere.
Kendall is the poster child for South Florida of how not to develop areas-a sad pathetic poorly planned area.
Fool on if you insist.
Not the West Kendall, which is indeed terrible - but the areas close to US1 are quite nice.
Of course, Pinecrest itself is nicer - but there is nothing decent under $1mil over there now.
I may wish to pay cash, eventually, but not at these prices, of course.
but it is not going to get under 400k in the next 2 or 3 years, that’s for sure.
Troll!
TJ — ditto.
Pray tell what sort of price-fixing/revert-to-the-mean/correction defying magic will prevent prices from reverting to 2003 levels or earlier? In most bubbly coastal cities, it would require prices falling to at least 2001 levels before they aligned with historical long-term averages vs. rents and incomes –excluding inflation of course.
Of course, you could argue the Fed will try to inflate its way out of this mess and create double-digit inflation for everything else, while housing stays flat for several years (a-la Japan-style ZIRP). So, technically, prices could stay at or near current NOMINAL levels, while falling 50-60% in REAL (relative buying power) terms.
ZIRP could theoretically produce such a result, but the question is, is the Fed willing to try such a scam and will the financial markets (and voters) accept several years of double-digit broad inflation?
If the choice is between deflationary trap (Japan style) and severe inflation, the Fed will no doubt choose inflationary way. Since dollar is the world reserve currency, it can do so with relative impunity.
So, it is quite possible, that we will have 4-5 years of double digit inflation as a result of this mess - but even that will be less damaging psychologicaly to the public than a prolongd deflation/depression.
If we get 3-5% nominal drops in 2008-2010 + 8-10% inflation, this will drop the prices 35%-40%. In “non-bubble” areas, the nominal prices will stay flat or go up a bit.
I think South Fla is ground zero of the bubble, prices here are laughable, but in nominal terms they are unlikely to go back to 2000 or 2003 levels.
Btw, cash is king in deflationary contraction, it is less cleat what constitutes good investment in stagflation-type economy.
Don’t ya think we’ll need to see wages go up so that we can afford the houses that are staying at unaffordable levels?
Ubaldus — you may well and truly believe what you are saying, but you’ll find precious little support here. The most fuzzy of our bears here, I think, believe prices will go back to 2001 levels. The ones in the middle think 1999-2001. The anatomically-correct ones with cojones think 1997 is quite possible, as a typical over-correction from absurd highs.
We can point you to blogs that will make you feel better, though.
Re: #2. The median price is the median list price. They are not getting near those prices. Sept 2005 (the FL peak) the list prices were not only being hit, they were getting topped in many cases. So reality is prices down > 10%.
I’m not a teacher (and I didn’t even stay at a Holiday Inn Express), but here’s my math:
Price Drops + Closing Costs - Alligator (negative carry) = FB
Maybe this is the “New” Math!
“…and I didn’t even stay at a Holiday Inn Express”
LOL.
Good post, Shawn.
BigDaddy — “Florida is ground zero and I predict a return to 1999 prices over the next 2 years.”
I have been planning to move out of Florida, my lifelong home, primarily because of property taxes and to a lesser extent the insurance premiums. To be fair, we had a homesteaded place and sold it at a handsome gain; had we not sold, we’d have been able to stay at the lower tax rates, but wifey was itching to move.
A couple of times since, we’ve made offers elsewhere in the South, but they were based on your premise, which I’ve always believed in, that reversion-to-the-mean equates to 1999 prices or thereabouts. Florida now seems to be crashing so fast, and with so much flipper inventory not even on the market yet, that we might end up being able to buy back in here, if we have the patience to keep our powder dry just long enough…
Kinda’ reminds me of Dwight Yoakam’s “Wild Ride.”
Nikolits essentially said that he would not cook the books to appease the FB’s. He said that if others want to violate the law when it comes to appraisals, he won’t be a part of it. The corrupt appraisers, realtors, and loan officers all wanted the SALES prices to be the highest possible, but are now whining that Nikolits is holding their feet to the fire when it comes to paying the taxes on the “value” of these homes. Can’t have it both way folks. You can’t say a house is “worth” $500,000 when you want to sell it but only “worth” $250,000 when you have to pay taxes on it.
Ain’t that the truth - no responsiblity. Just like saying the math needed to understand these ARMs is ‘not taught’ rather than ‘not learned’.
Yeah, but the local governments have been way too quick to grab this extra money. They act like they’re required to take it because the house values went up. I live in Palm Beach county, and I love it here, but I’ve yet to see any quality of life improvements from all this extra tax revenue. Most public schools still stink, no new parks or recreation areas, etc. I’m really glad things are slowing down.
I used to work for a local govt in Palm Beach.
Let’s just say, I have some stories. I am sure you know about City Center. That’s only the start of it; you have not even seen the tip of the iceberg.
If you interested, the budgets are public record, you can just go down to any clerks office and ask for them.
Watch those number CLIMB baby.
The marina owner will cry a river that his taxes do not reflect the value of his business, then sell out the land at a premium at first chance. not that I blame him, but the real rub is that the commissioners want a ‘cute little marina’ to improve the area’s ‘feel’, while not wanting to be seen as handing out special favors. Their hope was to roll the county appraiser, and when he said in-your-ear, they realized their exposure. Here’s a cold one for Mr. Nikolits!
Read this bit on option ARMs. Mozilo has been CALLING customers to ask them why they let the loan go negative. Basically, they figure the house goes up in value more than the loan balance increases, so it’s a wash. YIKES!!!
http://www.latimes.com/business/la-fi-country14sep14,1,885362.story?coll=la-headlines-business
I wonder how many know they are negative, and how many more actually know what that means.
It’s a disconnect between CC debt and house debt: CC debt is viewed as spent money, with little tangible materials to hold for value. House debt is debt a solid, large, tangible thing caled a house - and how in hell can that debt ever be greater than such a wonderful thing? That the reality of debt load makes no such distinction as to the origin of the debt is lost on most people.
Even if that were true, do they realize that means their loan balance will never be paid off? I’m sure they didn’t factor that in, since their only concern was “how much a month”. Meanwhile, these idiots who have resigned themselves to renting their home from the bank think of themselves as homeowners and probably think they’re doing the right thing by “building equity”.
“…their loan balance will never be paid off…”
The return of indentured servitude, otherwise known as ‘back to the 18th century’.
There is more to it than that… That their loan balance will never be paid off is an indication that they feel in some way that you will never have the house as yours, not just because if you pay taxes on it, it’s NEVER really yours, but more importantly, you can’t take it with you when you die. What underscores that for me is the realization that when you die, there is currently no mechanism in place that allows the lender to track your death so that they know what body you become reborn into, if such a thing exists. Basically, they would go to Mr. Hill’s house when he turns 18 and goes, “Sir, umm, you remember when you were Mrs. Davidson and you had this house at this address?” (shows the original loan papers to him) “This is what you owe for 32 years of interest since your previous death.”
Stephanie “not sure if she’s lived before” Ellison
And, most of these FB’s do not know that when the value of their property goes below a certain LTV, the ARM goes away and converts to a higher rate loan.
wow, I’ve heard of resets ,but thats BIGGGGGGGGG
10% ?? where’s the trigger
Loans such as the Pay Option ARM loans usually have LTV (Loan to Value) CAPS also. Because these types of loans can incur negative amortization (where your loan balance goes up instead of down), usually the lenders will place Loan to Value restrictions (CAPS) on how high your loan balance can increase before they no longer allow the negative amortization to continue to occur. Many lenders will cap the loan balance from ever going higher than 110% or 125% of your homes value. When that point is reached, monthly payments may be set to fully repay the loan over the remaining term, and your payment cap may not apply.
So if you bought a $400,000 home 2 years ago with a neg am loan and now it is worth $360,000, it may convert to a fully amortized loan with a 28 year payoff at a much higher rate.
Here’s a link for some more info on this and other triggers:
http://library.hsh.com/?row_id=1245
Yes, I think these people know it won’t be paid off - they plan to flip it for the appreciation. As long as there are suckers (I mean people) who wish to buy, the party continues. From what it sounds like, most of these people know what type of loan they signed and will only whine that they don’t understand what they signed when they get into financial trouble. If they made money, they would be patting themselves in the back about how they put $0 down and made a killing in a few months.
If they make money, good for them. If they lose money, I hope they aren’t looking for somebody to bail these people out. That bankrupcy will linger on until they pay off the balance…
“it could sting a bit at the end.”
Sting!? It’s going to eat you alive.
I never hear tell of how the mortgage resets automatically when the LTV reaches a preset amount, say 110%. Don’t you think that the lender is going to send an appraiser out in 2007 after a 20% price drop and get every ounce of interest they can out of these buyers? You bet they are.
Let’s see, $300,000 home: 103% finaicing + 24 payments adding .2% to the balance each month + 15% decline in value = under water.
that would make a cool interactive chart !
figure 3 -5 years of declines
wow, totally suicidal
It could sting like a bullet ant.
http://en.wikipedia.org/wiki/Paraponera
I have seen video of these initiation rituals. Those guys are tough!
“it could sting a bit at the end.”
Sting!? It’s going to eat you alive.
Sort of like that “sting” when the mother Alien in the Sigourney Weaver films deposited her egg in you…..
Patrice Yamato said people are informed twice in detail about exotic loans. Give me a break! I can see it now. YAMATO: “You realize of course, when this loan re-sets, the payments rise substantially.” CLIENT: Yeah, yeah. What are the payments now?” YAMOTO: Again, I have to warn you, you realize of course……” CLIENT: Yeah, yeah. I heard you the first time. What are the payments now?”
Gotta’ love these “professional realtors and mortgage brokers”. The carpet baggers of the 21st Century.
These mortgage brokers are in a race to the bottom with those ‘payday’ loan guys, who go after our military service personnel.
Their ‘annualized’ loan percentages of 200-500% would make your typical mob loan shark blush.
http://www.pntonline.com/engine.pl?station=portales&template=storyfull.html&id=8801
Winter Haven here.
Me and two of my drinkin’/fishin’ buddies ( we are budget-concious state employees with above average incomes for the area ) have spent the last two years laughing at the fools that hurried in from out of state to greedily snatch up everything that had a front door and windows.
What also has been sad to watch has been the financial “shoehorning” of many young, naive twentysomething couples ( some not even married ) into these filpper / asshat houses that just got a fresh coat of paint.
Now we are sittin’ back and watching all those boats, Harleys, JetSkis and monster trucks pop up on the lawns of relatively-new homes all over Polk County. Most of these toys ( according to my buddy in boat sales ) have been paid for in cash with HELOC money. These toys are lying around everywhere here…
Another friend of mine works in boat sales at a local marina / dealer and shared two observations with me: #1) Sales have hit a brick wall since May. He has closed a total of five (5) deals and is looking for a new job. #2) People are pulling their boats out of marina dry/wet storage by the droves and taking them back home in order to save money….problem is, all the new development HOA’s don’t allow boats in plain sight in the driveway. So they end up “For Sale” in parking lots of abandoned gas stations and other roadside properties.
There are thousands of recently built homes for sale in this traditionally agrarian, low wage county. Bandit and pop-up signs populate every intersection screaming “Two houses for sale”, “Handyman special”, “Bad Credit OK”, etc….most of these signs are desperately scribbled and misspelled on bright cardboard, flailing in the wind. Many have out of state area codes.
What a friggin’ mess the “Orlampa” ( Tampa-Orlando Metroplex ) has become.
Yup those bandit signs are all over the place, “investment property!” lol, as if there weren’t 40,000 other “investment properties” on the market.
in 2-3 years every boat seller and car dealership guy(who probably is having to pay for their big expansion because business was so great because of the heloc boom) is going to be competing with a glut of almost new boats, cars and etc. that the average joe is selling.
Sounds like some serious “price deflation” to me!
The ~30% decline in home sales reported in Florida is matched by a corresponding decrease in San Diego, as reported in today’s LATimes. I’d hate to think that my San Diego was lagging behind you guys in Tampa-Orlando.
http://www.latimes.com/business/la-fi-homes14sep14,1,4002227.story?coll=la-headlines-business
So many good quotes by economist hucksters, probably Ben should consider a new posting on it.
“As soon as buyers realize that sellers may not be lowering their prices, we’ll see a radical absorption of inventory.”
What is he smoking?? He thinks people who keep saving are the one to rush and save these POS owers??
Why dont the reporters ask questions? why????
get back to work
I think the turning point is finally here!
Last night I was watching TV and a Hanes (sp?) Furniture commercial starts off with a voice-over saying: “Housing is over-priced” and you can’t afford to move up, it’s cheaper to buy new furniture and remodel your existing home instead.
RE related companies focusing their marketing dollars on the bubble, and taking it’s existance as a given fact, is huge.
The same day you have the stats released by one organization of a 50% increase in foreclosures then you have another organization with a press release in a different local paper with the complete opposite stats and headlines. Either a flat out lie or total incompetence by foreclosure.com and the Sun Sentinel. Amazing
‘Meanwhile, August foreclosure statistics for Florida released Wednesday show a minimal increase. Florida had 822 active foreclosures last month, virtually unchanged from 803 in July and down from 898 in August 2005, according to Boca Raton-based Foreclosure.com.
Broward County had 25 active foreclosures in August, an increase from 15 in July and 16 last August. Palm Beach County had 18 foreclosures, up from 14 in July and 11 last August.
Foreclosure.com also reported that Florida had 290 new foreclosures in August, which was flat compared with July and last August. Nationwide, there were 26,255 new residential foreclosures in August, a 7.3 percent increase over August 2005.’
http://www.sun-sentinel.com/business/local/sfl-zforeclosure14sep14,0,5334130.story?coll=sfla-busines...
http://www.siliconinvestor.com/readmsg.aspx?msgid=22811858
The Miami Herald’s story says Foreclsoure.com only counts end-stage foreclosures, whereas Realty Trac tracks all-stage foreclosures, including homes very early in the process (when lenders file notices indicating a desire to foreclose). More details here…
http://www.miami.com/mld/miamiherald/15513418.htm
Guess you can believe them, or believe Ben and the bloggers here.
In Orlando less than 10% of inventory sold during Aug. If this were my market, I’d be running not walking for the hills.
And, the Bradenton Herald says, “…more house than they might typically be able to afford.” No way, its more like paying more for the same house than it’s worth.
It gets worse, someone from liberal tax and spend Taxachusettes is complaining about conservative Florida’s taxes. Huh! Has the world turned upside down?
It looks like FL’s housing market is growing increasingly unpopular b/c it’s about to take a CAT 5 pounding from hurricane Bubbles.
Lately, here in Florida, everyone who is not worried, is confuses. No one is truly positive in their near-term outlook.
Sadly, it does appear that some of these Fb’s DO NEED a runaway Freight train screaming down the tracks straight at them with it’s whistle blasting… to see a Trend of things to COME !
sheesh
Mikey posts “Sadly, it does appear that some of these Fb’s DO NEED a runaway Freight train screaming down the tracks straight at them with it’s whistle blasting… to see a Trend of things to COME !”
Or some basic math and reading lessons.
If they were capable of discerning market trends and forseeing potential risks, they wouldn’t be FBs in the first place, would they?
Patrice Yamato, president of the Florida Association of Mortgage Brokers, insists the dangers of option ARMs are overplayed in the media.
Why shouldn’t they be over played as most people do not hear or see that they CANNOT AFFORD the product they are trying to purchase. HOW ABOUT LENDERS REFUSE the loans so these stupid buyers and brokers
Am I the only one who reads “Patrice Yamato” and thinks of Admiral Yamato, head of the Imperial Japanese Fleet in WWII? The Florida RE market may be like Japanese fleet heading towards Midway.
Sorry, should read Admiral Yamamoto.
At least Yamamoto had mo than Patrice, going for him.
even the bears on msnbc etc… are tepid
might fall
1% yoy
why not quote from aprill 1st
they have the numbers
why not quote same home sales only
apple to apples
I’m down 10% in VA and betting most of FL is off 15%+ since Jan 1st 06
None of the year-over-year price declines factor in the incentives by new home builders, especially here in San Diego.
“Statewide, 16,533 homes entered some stage of foreclosure in August, more than any other state in the country and a jump of more than 50 percent over the previous month, RealtyTrac said.”
Let’s say 50K loss each for the 16,533 foreclosures. That amounts to 826,650,000 , almost a billion dollars now, just for the start. What about the rest of this year, and next 2 years when the majority of ARMs reset?
“Today’s foreclosure report comes on the heels of a Business Week investigation published in the current issue that shows 24 percent of all purchase and refinance mortgages in Palm Beach County are ‘option ARMs,’ or option adjustable-rate mortgages.”
Does anyone know if this means mortgages issued in the past year, two years, etc., or overall?
“Neither developer has begun construction. Frustrated board members said they recognized the slumping real estate market but said it was no excuse for developers’ lack of response in updating the CRA on the status of their projects. ‘They just don’t respond,’ said board member Marie Horenburger. ‘I don’t care what the [real estate market is]. Tell us what you’re doing.’”
Good luck, Marie, the arrogant developers will dictate to you, when they feel like it, on the taxpayer’s dime. That’s what you get for putting your nose up the butts of developers, you and your counterparts in local government all over the state.
‘We basically purchased a brand-new fixer upper,’ said Dorothy Tursky, 37, who bought a 3,400-square-foot house in Stoneybrook at Gateway 15 months ago from US Home. ‘I gave them horrible J.D. Power reviews.’ Lennar/US Home officials could not be reached for comment Wednesday, but Tursky said every single room needed repairs. Faults included a driveway that had to be torn up and ‘whole walls where they missed the studs — the whole wall wasn’t attached to the studs.’
If people haven’t gotten the message by now that Lennar products are trash, especially when built by unskilled illegal labor, there’s world of hurt down the road as stories like these mount up.
Their ‘annualized’ loan percentages of 200-500% would make your typical mob loan shark blush.
—————————————————————————–
I’ve been harping on this issue for years! Who needs the Mafia when it’s legal to charge 500% interest on a “payday” loan or 30% on a credit card? Then to add insult to injury, the new “bankruptcy laws” get enacted to hold the consumers feet to the fire!
“Nothing could be finer than to be in Carolina in the morrrrrning.”
Left Sarasota in July 2005 and bought the cheapest house we felt comfortable living in (a foreclosed property) here in the foothills. For the first time in our lives, we own our house outright. Feels great!
Go to the UHaul web site and price one-way truck rentals into Florida (say Raleigh to Sarasota, and out of Florida (Sarasota to Raleigh). The price difference is amazing, and indicates the exodus from Florida has begun.
Hello, from a long-time lurker on my *fave* blog on the internet. I have a particular interest in the Florida columns, as I sold my house in the winter of 2005 and moved to Atlanta. Since then, I watched prices soar in my old neighborhood (Oakland Park area) for about six months before stalling, and now, of course, the great crash has began. I just read the comment about the U-Haul rates, and I checked out the current 1-way rates to Atlanta. I was shocked to see the rates of $1400, which is *double* what I paid for my rental. And this is just 17 months later! The same truck for a one-way down there is about 1/3rd that amount, slightly less than $500. I just cannot believe what is happening, and how close I was really cutting it. No wonder why Atlanta has become “the place to be”, with houses in my NE Atlanta neighborhood still selling at a brisk rate (I bought here in April 2005 - got a much bigger house for less money, I’m happy to admit).
The thing is, I grew to hate where I lived and was wanting to move even if I lost money on the deal - selling into the bubble was truly a “gift from above”. But I knew that the bubble couldn’t last - it’s just plain common sense to me, not to mention the hurricanes and the soaring cost of insurance, etc.
I am just so thankful that I am here rather than there…
And you are so wise to realize that you were lucky when you almost sold at the highest peak . I was also lucky in selling in 2005 . I wasn’t really paying attention to the market but it was time for me to make a change in 2005 .
I liked my last house and its taken me some time to get use to the new one ,but I’m glad I made the move . Wish you luck at your new location .
Funny how things get reported differently - local rags, who have to cow-tow to the realty lobby, as opposed to the national media, who have no problems with direct reporting on the issue. This is big news in Florida, and its almost shameful the way they reported on it locally.
2 Styles of Reporting on Foreclosures in Florida
Dude, we’re No. 1! How can they not put that info. on the front page. Florida loves winners!
FPL - nice analysis. Thanks. Got a clean fork and a sharp knife, bib in place. Just waitin’ for a plate of pig.
south florida is in some serious trouble.
there is simply so much being built, even today and no one can AFFORD TO BUY. that is the problem. you just cant price out people so far and offer them arm’s and not finally run into people who just say no. then, have rents go so high, no one can afford them and people just have to move to eat and sleep. i have never seen such stupid people as these cheerleaders of real estate in all my life. you just cant force people to buy a home. that is way school enrollments are dropping. kids are expensive and with these “horrible” schools, people are just leaving. florida salaries just cant go up 5, 10, 25% to even compete with insurance rate increases. if i hear other politician claim stupidity in regards to affordability, they need to be fired forever.
ben, come to south florida and just be amazed. there is townhouses being built in coconut creek and boca at 300.000 plus. really, no one can afford it. everyone who could afford this house with no money down, has a home. if they move, both there insurance and taxes are going to go up. and you flippers and so called investors, when you buy a 600,000 home, you should pay taxes at 600,000. when you make more money, the govt has to take their cut. please stop this crying and to claim “taxation revolution” is a joke. we cant take the time to vote anyone out. looks who runs tallahassee. citizens is run by tallahassee. is anyone going to vote those responsible out this year? nope. if 75% of the people in south florida make on 70,000, you have priced them out and with every foreclosuer, we lose other home buyer.
finally, anyone paying 500,000 in kendall, deserve to lose money. that nar lady yamato needs to fall on a knife for the crime she is commiting (liar) and prices will have to go down or anyone sitting in a home in south florida is going to have a long few years. i say by the 4q 2008, the median in south florida will be below 250,000 easy. find me these single people moving to south florida willing to buy at these rates. better yet, find me a job that i can afford these prices. then again, a cat 5 will drop prices below 150,000 for sure (remember andrew) what people should complain about is the lack of real infrastructure in south florida. any real rain event will flood the whole area!
I totally agree, I have seen things in the past few months in S. Fl that make me think “We are in big trouble”.
Walked through a home on Tuesday; for sale for 850K. I just laughed when the guy asked me if I was ready to sign the papers (this is about 3200 sq ft, about 3 miles from the water in PB Gardens, nice area, but nothing special). I told him I thought the market was taking a nose dive, and would not be purchasing anything for several years.
He seemed upset, and I got ready to leave. On my way out the door, he said; “Well, the owner might be willing to rent”. So, I turned around, and asked how much he was thinking..
2100/mo
I don’t think that would even cover the TAXES on the asking prices of that home. Definately would not cover the insurance (its east of 95).
Anyway, then I did not laugh. I took another look around the place, and took the guys card. If somoene wants to subsidize my lifestyle, and give me a contract to that effect; I am ready to get on that gravy train!
good morning and TGIF,
throw this in with an option ARM..
http://news-press.com/apps/pbcs.dll/article?AID=/20060915/NEWS01/609150425/1075