Some ‘Seeing Red’ In Florida
The Naples News reports from Florida. “Some local real estate professionals are livid. It’s bad enough that sales of single-family houses in the Naples area has dipped nearly 50 percent. An auction scheduled for Oct. 21 has some Realtors seeing red, as in the bookkeeping term for financial loss.”
“The proposed auction has tied up the real estate market for the next few weeks, some Realtors protested in early October. People have stopped buying so they can wait and see what they can pick up at the sale, at which they can bid online or at the Naples Beach Hotel & Country Club for some 45 homes.”
“Drake’s listings show the 45 upscale properties listed for a minimum of $1. Real estate professionals say it is especially obnoxious because many of the properties that will be sold on the auction block, by seller desire, not because they can’t pay the taxes, were purchased by speculators who likely attempted to manipulate the market.”
“‘The majority of investors are selling off with little or no profits. Look at the 11 homes (in Lake Park) going up for auction by an investor now,’ says longtime Naples resident real estate agent Jerry Krecicki.”
“One of the sellers who signed up for the auction has 11 properties, and probably counted on Naples’ continuing sales boon but, apparently, miscalculated, (realtor) John Turner said. Turner cited a house that listed for $569,000 on March 5, 2005. Moorings resident Marjorie Dresner bought the house on March 7, 2005, and closed on it on April 26, 2005 for $585,000, Turner said.”
“Collier County Property Appraiser Abe Skinner had the house’s appraised value listed as $450,726. Likewise, a home was listed for $625,000. Dresner bought it for $635,000 on June 10, 2005. The assessed value listed as $563,933. On Oct. 2, Dresner sold it for $564,000, Turner said.”
“‘She kept going around buying these (houses) and she was paying way too much for them,’ Turner said.”
“Dresner, who owns 26 of the 45 properties up for auction, could not be reached for comment. Dresner indicated to auctioneer Paul Drake that the Oct. 21 event is a business decision. ‘We are auctioning off everything she owns, except for her own home,’ Drake said.”
“Krecicki said when folks buy for more than the property is worth, they ultimately end up devaluing the neighborhood, he said. ‘It’s bad enough that we have a real estate market that is, as a whole, slowing down,’ Krecicki said. That kind of market manipulation is wrong, he said.”
“So much so that the Naples Area Board of Realtors wouldn’t allow Drake to include his auction properties in the organization’s multiple listing services. ‘Everyone called up complaining. Realtors are in an uproar over this,’ Krecicki said.”
“‘Nobody can deny that transactions are, arguably, down about 50 percent, and buyers are generally reluctant to make offers. They don’t want to overpay. Or they feel the market will continue to decline,’ Drake said.”
The Palm Beach Post. “Has the fat lady sung at Opera Place? A New York-based hedge fund confirmed it has contracts to buy two troubled downtown properties, including land belonging to the still-unbuilt Opera Place condo, the largest private development planned downtown since CityPlace.”
“The area has been struggling in recent months as a growing number of condo units chase a shrinking number of buyers, and CityPlace merchants complain of sagging sales behind fewer shoppers. Observers say the Opera Place deal reflects the troubled nature of the condo market, both locally and in South Florida as a whole.”
“‘West Palm Beach was caught off guard with the speed at which all these units were being developed,’ said Neil Merin, one of the area’s top brokers. ‘But it’s not an unlimited market where you could put up anything and sell it.’”
The Sun Sentinel. “Palm Beach County’s median price declined $25,400 to $386,000 in August, marking the first year-over-year drop in seven years, according to the Florida Association of Realtors. The August median for Broward County fell $24,200 to $362,800. It was the second month in a row that Broward’s median declined on an annual basis.”
“‘A lot of people are sitting and waiting,’ said Debbie Anderson, an agent in northwest Broward County. ‘I don’t blame them.’”
“Ashley Ostroff is asking $498,900 for her three-bedroom Palm Beach Gardens home even though her agent said she could get more. Ostroff has yet to field an offer. ‘Even people who are ready to buy now are waiting because of what they’re hearing in the media,’ she said.”
The Treasure Coast Palm. “Realtors could see the housing slump start to reverse course around the start of the new year, more than a year before builders see improvement. Martin County, because it has the least number of vacant homes, could be the first area on the Treasure Coast to experience a comeback.”
“An abundance of homes, which some conference speakers said would force down prices, is due in part to speculators overplaying their hands over the past couple of years. The Treasure Coast now has about a seven-month supply of vacant homes, according to Metrostudy.”
“St. Lucie County has more than 1,000 vacant homes, while there are about 600 unoccupied homes in Indian River County and 300 in Martin.”
“Brad Hunter, Metrostudy director for South Florida, said Realtors claim the housing slump should ease in three to four months, while builders say the turnaround will begin in 18 to 24 months. ‘They’re both right,’ Hunter said.”
‘Florida’s insurance crisis is causing many condominium owners to rethink where the live, according to a poll. More than 68 percent of those answering an Internet survey for the Condominium Association Leadership Lobby say they or their neighbors are considering selling their units and moving to another state where insurance premiums are lower.’
‘About 80 frustrated taxpayers gathered in front of St. Petersburg City Hall Wednesday, rallying behind a pledge to oust local incumbents unwilling to cut area property tax rates. ‘The politicians all thought the tax revolt was going away,’ said David McKalip. ‘Well, we’re still here.’
The insurance companies have to raise prices in FL, they’re not in the business of writing policies that’ll loose money, and they’ve lost plenty in the last few years due to the hurricanes. It’s just another reason not to own a home in FL. This thing is like a “Perfect Storm” isn’t it.
I really think FL, especially south-west FL, is ground zero for the housing bust. Over the years I have listened to some compelling arguments as to why the driving age should be raised to 18. Although some 16 year olds are mature enough to deserve a license, many are not. Same goes for adults with sub-prime lending; many couldn’t handle it and now we have a major trainwreck in the housing market. Marjorie and her ilk should never again be allowed to get a loan.
Yeah, yeah. It’s only “market manipulation” now when the bubble is bursting. While it was going on, it was the usual “not making any more land” and “buy now or be priced out forever” and “I just made $300,000.00 in six months in real estate” yadda yadda yadda. Now when they have to give that money back, it’s a whole new tune.
KIA,
That’s the first thing that struck me? What exactly is she manipulating again? Oh……… she’s conrnering the market on STUPIDITY! Perhaps this was an elaborate plan to create a “tax write-off for LIFE” scheme! Hmm, let’s see. By grossly overpaying on multiple “up-scale” properties without regard to geographic diversification I can……..? WTF?
I saw this in a small development were my parents live, a realtor scooping up a ton of places and then trying to flip them. I naively considered at one time buying one of those places and while talking to the realtor she mentioned having owned and flipped several of them. Been keeping track of them and a bunch have just been sitting on the market with hardly any price drops for the past 10 months. I ran the numbers on them at the time and buying one and trying to rent it out didn’t work (no positive or even break even cash flow). Then I noticed a bunch of them were for rent (too much competition). Even at that, who knows who would actually rent it or if it would stay rented year round. You’d have to determine that first before committing to something in the hopes of renting it. Too seasonal there, at the time I MAY have gotten break even rents 6 months out of the year, that’s still a negative cash flow alligator the other 6 months. And of course that was based on pre hurricane insurance and 2005 taxes.
Glad I found sites like financialsense.com and this site to save my arse. I was never comfortable with the idea of debt anyway, but after 15 years of watching people make out like bandits and not really knowing what’s driving it all on a large scale, anyone could be tempted to think maybe I’m being a fool saving up for stuff first (only to watch prices go even more apesh!t) instead of getting in the mix. I knew something wasn’t right way back when I got ridiculously low quotes for loans and then after researching it and finding it was interest only. I thought to myself, why the hell would I want an interest only loan if I’m BUYING it. Now I know, so people can speculate. No thanks.
financialsense is a great resource. Here’s a couple of others in case you don’t have them:
http://www.jsmineset.com
http://www.jameshowardkunsterl.typepad.com
http://www.kitco.com
http://www.thedailyreckoning.com
I highly recommend Kunstler’s website.
As do I. I own several of his books and am a big fan, even though I don’t always agree with everything he says. Be prepared–he detests suburbia, calling it possibly the greatest misallocation of resources in the history of the world.
I wouldn’t disagree with that.
IT’s worse, you can manipulate prices higher but not lower. Casey Serin manipulated prices higher for instance and he’s not the brightest bulb in the circuit even if he’s burning out in a blaze.
Here’s the difference: house listed for $100k. Offer $150k and everybody takes some cash out. Manipulated up. Offer $50k and nothing happens.
Exactly. I don’t get this at all. The owner is entitled to sell her properties whenever she wants, however she wants, at any price she wants. Why are the realtors upset over that? They had no problem selling to her at above listing price when she bought them. I guess they’re livid because they can’t make any commission on an auction sale.
Its funny how the real estate industry is so transparent. I guess they’re stupid enough to think we can’t see through their bull$hit.
Still, no doubt, only a relatively limited number of folks actually see the transparency. The rest follow the manipulators like lemmings. For instance, we know it’s a fool’s market right now, but the industry says “buyer’s market” and behold, like parrots, that’s all you hear out of most people discussing the market. This must account for the current buying activity, down about 1/3 when it SHOULD be off more like 75%.
Yeah, they do think people still stupidly consume their BS, and they’re correct for the most part. That’s why this bubble went as far as it did. Did you not, like me, think that ‘04 was surely the peak of the insanity? Yet it continued as the many many lemmings pushed forward toward the cliff.
Very good observation. Transparency has different levels for different people (thus the term “sheeple”).
Numbest, most obnoxioous group of so-called “professional” people in existence.
While in the appraise biz, I always thought I’d seen the worst, until the next day.
the real whores are figuring out the net makes them useless and in the way of a deal- observe
tThe realtors are mostly pissed because its going to be a mass dumping of properties at prices significantly lower than comparable individual listings. All of the listings not part of the auction are going to have to drop prices after the auction. Additionaly, any serious buyers (I would not consider you intelligent if you buy in Naples now) will wait till after the auction to see at what levels prices asjust. In the meantime, realtors are twiddling their thumbs with no income coming in.
The only reason realtors care is they still have their own flips to sell. As soon as realtors sell their inventory, they will applaud lower prices that actually cause inventories to drop.
I guess they’re livid because they can’t make any commission on an auction sale.
Bingo. That’s exactly why they are pissed. I love the fact they won’t let this guy advertise his auctions on the MLS. Like they have a monopoly anymore. What a joke.
Realtors (TM) , as a group, want it both ways. They want to be able to sell 11 houses (or even an unlimited number of houses) to the same person who is overbidding on MLS listings, but they do not want this same person to unload when the market turns on them. The time for action is when they know
The time for action is when they know (and please do not say “but I had no way of knowing”) that their idiot customer has bought 5 houses and is looking to purchase 50 more houses. The Realtors (TM) have nobody to blame but themselves.
When you’re greedy everyone’s always trying to chisel you.
Another sign of the times in S. FL? Yesterday I received a call on my old FL cell # from a granite installation company. They were calling to follow up on a quote they gave me for installing granite countertops in kitchens of 2 properties. It was a sales call letting me know that they were willing to discount significantly. The punchline is that these jobs were quoted 4/05! I explained that the jobs were done by another company, and both properties were sold over a year ago! It would seem that things must be different down there now, compared to last year. The granite guys were backed up then when I was trying to get those jobs done. Now they are cold calling 18 month old quotes for leads…
Just like the Aeron chair was a symbol of the .com bubble excess, I think the granite countertop will be remembered as the symbol of the housing bubble.
I’ve seen people use Aeron chairs around their dining table.
That said, I am sitting on one right now. Circa 1997.
Those Aerons around the dinner table are the “severance pay” that the dot coms welched on when they immolated.
A friend of mine who was in a dot com got a bounced check, bankrputcy paperwor—and, unofficially, a (now quite obsolete) digital camera.
Those Aerons around the dinner table are the “severance pay” that the dot coms welched on when they immolated.
A friend of mine who was in a dot com got a bounced check, bankruptcy claim paperwork—and, unofficially, a (now quite obsolete) digital camera.
- “Ashley Ostroff is asking $498,900 for her home
- even though her agent said she could get more.
- Ostroff has yet to field an offer.
WTF! Hey lady, your realtor is a fenderhead.
her problem is, she’s asking too little. She should raise the asking price 100K or so and get a bidding war going. It worked for her neighbors 12 months ago.
I saw this happening a couple of years back. Down the road, some guy had a lot for sale–a few swampy acres–for $800K. As the boom progressed, he kept rasing the price to match..to $1.5 Million, then $2.00 Million, then $2.5 million,
It’s still for sale (Because it’s FSBO, I have to call him and find out what he says today.)
$1
Please find out for us! This is too entertaining to pass up on!
OK! I called him. He said “Make an offer” and told me I’d be able to build 20 homes on this soggy lot. (VERY unlikely unless you were a well-connected developer. You probably could build 1 house, as long as you didn’t disturb more than 4/10 of an acre–which is what they’ll let you do for land designated “conservation” if you push them hard enough. They never take away all rights because then it could be considered a “taking” and they’ll have to pay you for making your lot worthless.
I thought you were doing a Haiku. Haven’t seen any Haikus around here, so here goes:
Bought too much RE
The Devil Take the Hindmost
That’s you, idiot!
Ben, we need a Bubble Haiku thread.
For Sale: Brand New Home!
Beanie Babies Included
Damn. No Suckers Left
The house sits vacant
A sea of for sale signs
Is that my Hummer driving by?
‘She kept going around buying these (houses) and she was paying way too much for them,’ Turner said. Dresner, who owns 26 of the 45 properties up for auction….”
This is the root of the bubble right here. Here is a greedy flipper who locked up 45 homes so she could make a big profit.
You have to wonder just how much of the bubble was caused by flippers scooping up as many properties as they could, starving supply, and creating a self-fueling upward spiral in price. I would like to know the state by state breakdown of total percent of properties owned by infestors, and how many properties each infestor own (on avg).
I hope Dresner ends up a bag lady…
- In California I was lead to believe that to purchase a property other than the PRIMARY RESIDENCE that you had to come to the table with cash (15 to20%). How could anyone possibly purchase 45 properties without some cash?
Here’s how:
http://iamfacingforeclosure.com/
Ha! Notice he sold the Dallas property to some idiot from NY. That’s telling. People out of state are still drinking the koolaid about Dallas. Nobody local would pay within 45% of that asking price. This is my old neighborhood. I know what that POS is worth and it ain’t 249K. Try 149K.
Let’s see if the sale actually closes at that price. The NY “buyer” seems perfectly happy to keep our Casey hanging, probably to see whether Casey will be forced to drop the price as foreclosure begins.
Alot of those NYorkers are waiting to sell their overpriced homes before moving out and you know what Northeast RE in general is tanking already , it is just another dominou effect TX, FL will see in the long run.
See, I learned something in my real estate seminars)
You take a HELOC on your primary residense, which essentially winds up being a ‘cash’ purchase.
Actually - you have to wonder where/how she got the loans for all these houses. Even if she put the standard investor 20% down, if she bought the houses for an average price of $500K, then she must have needed 4.5 million in down payments. This lady is going to have a hard day.
I did not know about this auction! I will sign up and probably bid. Low.
Where’s the link to sign up?
For all the auction info:
http://www.jjmanning.com
http://www.jjmanning.com/naples/101206%20Naples%20catalog.final.pdf
auction brochue
She owns 26 of the 45, not all 45. She (Dresner) is probably a flipper, though, since at least 2 of her properties she bought in 2005.
Flippers (speculators) *should* be very willing to lower their prices quickly. First, they will recognize that they need to cut their losses. And since these “flipped” houses aren’t their permanent residences, they will have less trouble letting them go. Finally, by going into business as speculators, they understand risk and probably have a pool of funds for short sales, just like any speculator would.
That being said, I think that naive speculators don’t understand many of the basics of speculating, and too many lenders were willing to give them loans.
I think you are giving them way too much “credit”, no pun intended.
I hope Dresner ends up a bag lady…
She’s a “DDL”-DEAD FLIPPER FLOPPING!!! to coin Auger-In’s new FB terminology.
The money may already be in her bag. This is how: offer 150K for a 100K-listed house, ask for 25K cash back.
Multiply by 26 by 25K, that’s more than 500K in her bag already.
Now just dump the houses back to the lenders.
How could she buy 26 houses? Lenders were committing fraud too.
Mike Fink,
You are at City Place. Is Opera Place going to be the first of the downtown condos to not get built? Everytime I drive down there I see they haven’t dug a hole yet. I guess itwould make sense since NONE of the condo towers are really needed.
“Brad Hunter, Metrostudy director for South Florida, said Realtors claim the housing slump should ease in three to four months, while builders say the turnaround will begin in 18 to 24 months. ‘They’re both right,’ Hunter said.”
Brad, they are both wrong. It will be 24-36 months (or more) before the slump is over.
Nope, there have been a few cancellations. 550Q was cancelled about 3-4 months ago. They are building a south tower to CityPlace (which is across a VERY busy street from CityPlace, not really a great place to walk home drunk), which, as last I heard, had about 20% cancellations and rising (people walking away from their deposits). The Prado is built, but totally empty. Its scary; that place is like a ghost-town. That’s another one, they put a 500K plus apt building in an area… Well, its kind of slummy, to put it nicely.
So, no Opera is not the first not to be built. Nor will it be the last.
I have another bubble topic for people familiar with WPB. I used to work for the govt down here; is anyone following the CityCenter project? This is a new city hall building that has the residents up in arms (to say the least, they are in appeals court over it right now). Just curious, I can give alot of insight into the project because of my position on the inside; if anyone is interested, I will be happy to post it up.
Oh, DAP, stop by 610 Clematis sometime. Another totally vacant building that just got finished (8 months ago or so).
Mike,
I had forgotten 550Q was cancelled. I know One City Plaza, The Prado and 610 Clematis have been built and all are ghost towns. They are building Two City Plaza and City Place South (busy street condo building). They are also building one by the Wachovia building as well. I suspect the others planned, like Opera Place, won’t get built.
For those not familiar, downtown WPB is a bit sketchy at night. No way should you pay $300K-$600K for a condo there. The 800 sq ft units should be selling for about $150K (or less) not $300K (or more).
How is Singer Island taking it?
Probably up the @ss like the rest of Florida. I have not been over there in awhile but I am sure it will suffer the same fate as condo towers elsewhere.
“It will be 24-36 months (or more) before the slump is over.”
What do you mean by “slump is over?” Are you saying it’s when the bottom will be reached, or it’s when prices will be back to bubble peaks?
My prediction is bottom around mid-2007, but the peak bubble prices won’t be reached again for at least 10 years (probably longer). The climb back up will be very slow.
Bill… don’t think I can agree… I think it will be longer than that. When you consider the resetting of ARM’s alone ($200-300 B worth before the end of this year + $1T in 2007 and at least another $1T in 2008) we’re looking at a pretty long row to hoe.
Exactly, this thing is only getting warmed up. It’ll be 10 years after the last ARM resets. And speaking of 10 years after, this whole thing makes me think of their song “I’d love to change the world.” Excellent song. To bad no fiat money references in it.
It’s going to take a lot longer to hit bottom than one year. A lot of sellers now are still hopeful that prices will bounce back and they will get what they want. You have to wait until they are so demoralized that even they drop their prices a lot. That takes several years. You have to reach the point to where everyone thinks real estate is the worst investment in the world. When that happens, you’ve hit the bottom.
Are you really serious?
Only 8 months from now?
That would be the shortest housing downturn in history if that were the case. The previous shortest? 6 years.
It will be 24-36 months (or more) before the slump is over.
You’re not going to unwind this unprecedented boom/bubble period in 24/36 months.
Took 10 years for the late 80’s cycle to clear.
This fiasco is infinitely worse.
Ancient Mayan astrology scrolls says the world ends in 2012.
So the point might well be moot.
The best thing that can happen for realtors in this area is that prices are reset from this auction down 50%. If the bulk of these houses go for that kind of haircut then that ought to open the floodgate of repricing for the rest of the houses on the market and you should see some sales pick up from knife catchers.
I’d love to see the analysis on how much this bonehead loses after the auction is complete. How can you go out and buy 26 homes to say nothing of overbidding on each one. It makes one wonder how someone this stupid ever came into contact with that much money to begin with.
auger-inn,
I used to pull my hair out over that for years. No more. After years of watching heirs take their WWII parents hard earned wealth built up through buying shares in John Deere only to be squandered in a matter of months on dot-coms I no longer agonize over this.
The notion that “rich fools are in short supply” is misleading at best! Heirs typically look at their parents and think to themselves, “The old man could have been a lot MORE wealthy if he wasn’t so cautious (and stupid)”. What took him/her decades to accrue I can do in a year (two tops!). After they’ve managed to pee away an entire generations worth of hard fought appreciation and dwindled the account to pocket change they still INSIST on being treated as one of the banks “best clients” and demanding they get their “value” through the services you offer. They want the red carpet treatment and the truth is as clients, they have NO potential. This isn’t like helping some young and hungry risk taker come up through the ranks (which is really kinda exciting for everyone involved). These “infestors” (TM) (much thanks to SeattleMoose) had their shot, and they blew it! Now they’re determined to make your life as miserable as theirs. If you haven’t worked at an investment bank, you really should try it!
Heirs with no brains are great for society. At minimum, a good way to redistribute wealth (at least if they can’t persuade political cronies to save their a** like the former owner of the Texas Rangers).
This isn’t entirely true –and that’s the problem. In a truly “free” market, there would be considerable downside risk for rich idiots, and the truly stupid ones would get washed out of the system altogether. In a perfectly functioning and transparent free market economy, GWB would probably end up pumping gas somewhere in Crawford.
Unfortunately, the system doesn’t really work like that. Rich idiots have all sorts of family & political connections to bail them out (often at taxpayer expense) when they make colossally bad financial mistakes. So they get all the upside profit potential when they make gambles, but none of the downside risks.
Hence, one of my favorite mottos: “Privatize profit, socialize risk”.
Overall, a fast drop would be less painful that a slow downward slide. It would finally create a point where normal people can both afford to buy and not be afraid of prices dropping further. Of course it will be more painful for the FBs, but they’re pretty much screwed no matter what. Let them go ahead and file bankruptcy.
Right. There has been no price discovery yet. Yet.
I agree with this comment. Sales could pick up if the comps are reduced by 50%. However, I doubt that that will be enough (or maybe too much?) to start a new round of buying by speculators and developing by builders. Naples is usually listed as “the most overpriced market in the nation.” so it is appropriate for the biggest cuts to start their.
the depressioin that would cause may make it tough to buy anything
This is NOT a bank auction. The winning bidder on these properties is getting involved with her old loans. Who knows what the balances are on those I/O and Arms? Boy, you put the word “auction” on anything today, and the interest overwhelms the intelligence. I remember the RTC auctions from the 90’s. Even the auctioneer, who had done all the research and had all the numbers, wouldn’t let any of his friends, neighbors, brother and sister, bid at the auction. Almost all the winning bids were way more than the property was worth. It was really exciting to be there, except if you won the bid and had to pay up
I was involved in an auction back in 1992 in So Cal. Purchased a townhouse for $142,000 during the auction. Two months later the developer was selling similar left-over condos in the same complex for $100K-$110K.
At some point auctions will bring fair value. Right now they’re just catching falling knives. Most likely the best deal will be the foreclosures.
Oh yeah,,, prices drop $25,000 in ONE MONTH but according to MOODY’s prices will only drop 5% and reach bottom. Uhm,, that’s a 6% drop in ONE MONTH.
Who cares about hurricanes? What a red herring. You still have the problems of insurance, taxes, ARM resets, foreclosures, a 3 year supply, rising rates, and tighter lending standards.
Even the truly moronic ones are buying this BS anymore.
While I think that the Moody’s piece sounds like wishful thinking, it’s my understanding that they were talking about a 5% national drop in prices, not in a particular market. As for Florida, it’s 1926 all over again IMHO.
NO JIm,
You obviously did not read the report.
The report stated that South Florida would see about a 5 to 6% TOTAL drop in price and that the bottom would take place anywhere from NOW until 2007, depending what county you live in. A pure fluff piece and a nice bedtime story.
Well I feel dumb for my comment, but smarter than the Moody’s analysts so I guess it’s a wash.
I like that take. Made me chuckle.
Bigdaddy, you’ve just made the best laundry list of ALL the factors, both local and national, that affect the Florida real estate market. It really IS different here and yes, we are working off a completely different economic model, but not the way the cheerleaders meant. The insurance situation is a real problem. But as far as taxes go, I wish they would forget about tinkering with them. Taxes will go back to normal once prices plummet back to where they were pre-2000, or lower. It’s just a matter of time.
“Some local real estate professionals are livid. It’s bad enough that sales of single-family houses in the Naples area has dipped nearly 50 percent. An auction scheduled for Oct. 21 has some Realtors seeing red, as in the bookkeeping term for financial loss.”
It really is tragic. Seriously, what did the realtors do to deserve this? All they did was lie through their teeth about land shortages and how prices always go up to con unsophisticated buyers into getting in over their heads. I, for one, feel very sorry for the realtors.
So in Florida, I guess that would be “Alligator Tears”?
they’re flowing down my face as I type this.
You’re not alone, man. I’m all broken up about this. Does anyone know, is there any way to adopt a realtor? I know it would seem a little strange to some folks to adopt a full grown adult (not necessarily intellectually), but something needs to be done about this. You know, come to think of it, the realtors already have glamour shots and a multiple listing service; it should be hard to reuse these for realtor adoptions. They’ll need to add a field for “Boob Job? y/n:” though.
I will gladly take in two of the Malibu realtor/former Playboy bunny types to save them from the only other profession for which they’re qualified. Just trying to do my part.
I think Sally Struthers is already all over this one.
Are you THE Craven Moorehead?
“Krecicki said when folks buy for more than the property is worth, they ultimately end up devaluing the neighborhood, he said. “
That has to go up near the top of the list of stupidest things ever said on this topic.
Thank you. When I didn’t understand what he was saying I thought it was just my inability to understand a profound new concept. I guess it just never occoured to me that something that stupid would ever find its way into print. Nothing in the story makes any sense. Those realtors seem to live in a world where spin has become their reality.
Link to Drake auction….
http://www.pauldrake.com/
“An abundance of homes, which some conference speakers said would force down prices, is due in part to speculators overplaying their hands over the past couple of years. The Treasure Coast now has about a seven-month supply of vacant homes, according to Metrostudy.”
It’s kinda funny - in times past, when you bought investment property, the RE agent always said “hey you’ll have no problem renting this place for a few years until it’s time to cash in.” I guess renting an expensive house is not so easy afterall. Most of these people are attempting to rent to the upper 5% of the market.
“Some local real estate professionals are livid. It’s bad enough that sales of single-family houses in the Naples area has dipped nearly 50 percent. An auction scheduled for Oct. 21 has some Realtors seeing red, as in the bookkeeping term for financial loss.”
See? Now THIS is whining.
Realtor: The new “JBR” of 2006 …..
Fear has definitely set in, which of course will turn to stampede. This really is going to be 1926 all over again. People down there will start to sh!t their pants when they see house auction signs going up along Rt. 41 and whatnot.
Lessee: property taxes in FL are about 2%, and aren’t capped if you are an out-of-state investor. Insurance rates have now increased to be 1-2% annually. So to cash flow at all and not even compensate for inflation, an investor has to get 3-4% of the property value in rents.
This assumes the investor paid cash for the home. There’s no way on planet earth any investor can also recover interest on a loan to buy the property as well.
That 3-4% works out to about $700/m for a typical Fl. home. Let’s see…can an ‘investor’ get $1500/m for a 200K rental? Not.
Fla. property tax rates actually go up to 2.75 % in some places. In most of Tampa’s nicer neighborhoods, the rate is 2.5 % of “fair market value.” Of course, the county tax appraiser decides, ultimately, what this is, regardless of selling price. If someone buys a house for less than the tax appraise thinks it is really worth, he can ignore the sales receipt, and inflate the “fair market value” at whim.
Ben, thanks for the SW Florida articles. I knew this area would implode big-time but I wasn’t finding much on it a few months ago. When I started reading this blog I noticed a lack of SW FL articles and yet having spent enough time there knew that it was ripe for a collapse, and had to be just as leveraged as SoCal and Phoenix and whatnot which was being covered heavily.
Is that a banner with Erick Estrada pitching condos at the top of this blog? I took some funny stuff in college, but I’m pretty sure that’s for real and it’s REALLY freaking me out.
I saw that too! LOL! Wonder how much “work” Erik has had done. Who’s next, David Hasselhoff?
Beachfront, baby. The Hoff loves the beach.
I’ve seen him pitching a few different places on late night infomercials, too. You know, the type of ad where “we’ll fly you up here to look at this place and sell you a lot that you can build your dream home on.” I guess it pays well, but I just couldn’t look myself in the mirror or sleep at night if I was doing that.
“Brad Hunter, Metrostudy director for South Florida, said Realtors claim the housing slump should ease in three to four months, while builders say the turnaround will begin in 18 to 24 months. ‘They’re both right,’ Hunter said.”
So, I guess in 3-4 mos, they’ll look at the post-holiday uptick in sales activity and say, “See, no more bust! What’s that you say? YOY data? Oh nevermind that….”
Oh, and what’s this “They’re both right” BS.
I’ve been writing and speaking of the housing bubble for years (and figured 2007 was when it would deflate — after the election, oops). There’s a big problem many people here have to understand: Bernanke is definitely deflating the currency base, NOT just increasing the FOMC interest rates. This means less real money. Look at some banks (notably, WaMu and some other larger cap banks) that are desperate for money — they’re offering huge CD interest rates to cover their problem for the next year.
Bernanke’s deflating the money in order to bring down the gas prices pre-election. Nothing to see here. Housing prices fell as well, due to the lack of available funds and the higher interest rates, but the U.S. government MUST inflate away their debt with more money creation and more easy credit (lower interest rates). There’s no way it can stay afloat of its debts if it tries to fix the 90 years of errors the FRB has created.
I liquidated my property holdings last year (completely) and moved into a tiny 2 bedroom 1 bath home (and bought hard currency with the profits). I can NOT see the bubble truly bursting — the FRB and the average US consumer LIKES monetary inflation as it creates a false sense of wealth.
Just as the tech bubble profits rolled into housing, that money is STILL OUT THERE. It might not be in housing anymore, but it still exists. Bernanke can not deflate forever — it would really anger consumers who see falling wages (even though it would be a GOOD THING since it would allow many investment markets to correct properly). They’d rather see their wages going up (slower than consumer goods — a bad thing) than going down (slower than consumer goods fall — a good thing).
When the FRB returns to an inflationary policy — and they will! — where will the money go this time? Guarantee that the realtors will say that today’s bubble deflation was just a “temporary plateau” (they’ll negate some numbers and point to some manipulated housing averages to show a plateau rather than a drop), and that the new boom is coming. The money will flow again into housing as it did into the tech bubble, and more people will get hurt.
The only house to buy is a house you can honestly pay off in 10 years. If you can’t, don’t buy it. Ignore the entire spectrum of “no bubble” or “big bubble” advocates — both are wrong. The dollar value of a home is a useless figure — the only figure that matters is what is the purchasing power of the dollar value in comparison to YOUR living expenses. If a house takes more than 15 years to pay off, you’re paying too much or are buying too big.
“The only house to buy is a house you can honestly pay off in 10 years. If you can’t, don’t buy it. Ignore the entire spectrum of “no bubble” or “big bubble” advocates — both are wrong. The dollar value of a home is a useless figure — the only figure that matters is what is the purchasing power of the dollar value in comparison to YOUR living expenses. If a house takes more than 15 years to pay off, you’re paying too much or are buying too big.”
That’s about the most laudable sentiments I’ve read on all the millions written about the bubble. My Grandad said if you couldn’t put 20% down and carry it on a 25 year note at 7% you’re overreaching. My Dad went one better and said aim for 15 years.
So, my first purchase as a nipper was in ‘88 and when I told the banker I wanted a 15 year amortization he looked perplexed. But the nature of that advice meant that when rates shot north & the economy went south in ‘90 (along with RE prices), I had ‘wriggle’ room by going to a 20 or 25 year amortization. No fancy, ‘refi’ hijinks - just reverting to what everyone would consider a sensible repayment scheme.
As things worked out, I didn’t need to do a thing and managed to pay it off in 12 years.
Aside from the crushing interest accrued on a 25 or 30 year amortization, a short mortgage gives you flexibility when times get tough - and no one has a crystal ball looking out 5 years, let alone 25.
And if the primary goal of homeowners (as they all state) is security, then what better than pounding the mortgage down to zero. Hell, you can always take on another mortgage when the 10 years are up!
I have to agree as well. Of course the first time my wife and I bought, I couldn’t believe the amount of interest we would pay over the 30 year note and this was fixed. Most of the sheeple don’t realize that with a 7% loan you will pay 3 times for the house: 1 for the prin. and 2 times for the interest. Therefore, what Dada says is correct. Take that mortgage out only for 10 years. However, I would still argue that 15 would be reasonable in some of the bubbly places like S. Calif and Boston, but only when prices come down because even at non-bubbly prices the cost of living in these places is higher. However, if you are looking at paying off in 10 years, most people would need more than 20% down, which in this day and age is a preposterous notion for most.
I went ahead and got the 30-year, but made sure there were no prepayment penalties, and squirreled as much extra money into the mortgage in its early years as I could. When we sold the place last year (job relocation), after owning it for 7 years, we had about $11K left to pay off, and 3/4 of our monthly mortgage payment was going to principal.
It can be done. Well, it used to be possible, anyway. Definitely tough today.
I’m always up for a contrarian view but what you’re saying is pricing will continue to escalate. Yet, I have never seen a major correction in any market reverse direction and continue it’s climb.
Can you provide some historical evidence to back up your assertion?
Pricing and value do not go hand-in-hand, remember. We need to consider “will prices in comparison to income and other expenses change?” I think it will — I’m seeing in many industries a singificant bifurcation of wages and value, as we all are. I personally experienced a 16% increase in my income this year-to-date, but am I wealthier? Definitely not (although my living expenses are under $1000 per month). I feel bad for my friends who get a COLA wage increase — they’re definitely poorer.
The problem is not the common man or even the idiot flipper who has money, the problem has always been what do the people who control the money do? All this money in the housing market is real money (funny fiat money, but still real) that was thrown around after the tech bust. That money existed — people saw wage increases, saw huge gains in the tech inflation, and put their new wage increases there, not realizing that consumer prices would rise to meet their wage increases. The minute that consumer prices catch up, all that money invested is quickly divested when you have to pay the piper. Oops.
Will housing prices rise? I think they will quicker than not. Why? Because once wages truly fall significantly in terms of buying power (and they are already), the fraudsters at the FRB will “do something about it.” We have a Presidential election in 2 years, so that usually means waiting 6-9 months before the election to turn on the inflation again. Wages will rise, people will feel solid about the housing market (due to liars and fraudsters in that industry), and will once again jump back in. The consumer prices won’t rise until after the election, so the party in control will cheer that the saved the economy (be in Democrats or Republicans). Guarantee it.
Sure, there will be laws regulating how to loan out money, but do you REALLY think that the banking industry won’t write these laws? The bankruptcy laws changed little — the powerful bankruptcy lawyers wrote them. For months people were afraid that they couldn’t go through bankruptcy, but as we see now, that was a bogus fear, the bankruptcy lawyers now tell you “secretly” that they know the system and found work arounds. Of course they did.
The same will happen in the second bubble. We’ll see profit money fall out of housing during the soft deflation (which I love), that money will get invested in a new bubble (foreign tech investments, I think), and then Bernanke will turn on the printing press at the Treasury again. Whoever takes Congress and the Senate will demand it in late 2007 so that the economy looks to recover. The elections in late 2008 will show a solid growth (yea, right) without inflation (sure, sure), those in power of Congress and Senate will take the Presidency, and 6-9 months later consumer prices will skyrocket (hyperinflation, maybe?) to slam on the consumers again.
I’m happy with gold and silver — the buying power is SOLID for me even with the ups and downs. My house is a cheap POS but it costs me nothing to live here, I bought it in bad shape and I’ll sell it that way and forget that I lost 20%. 20% of $100,000 isn’t a concern compared to what buying a house at 2-3 times that cost is. I planned it, and I’m reaping the benefits of not worrying about a mortgage or big maintenance or anything else.
This recession is different than past ones because of the inflation/deflation/stagflation profiles in various consumer markets. No one knows what will happen, but think of this recession as necessary for the politicians to get elected — on both sides of the party line. They both wanted a recession since it lets them make new laws, create new organizations, and focus on how they can rape the consumer/taxpayer for the next 8 years.
Housing prices will recover versus buying power quicker than we think because the FRB will be demanded to fix things pre-election 2008. 6-9 months of run up, 6-9 months of stability and “I told you so’s” from the morons, and then 6-9 months of rocky times when we who knew will laugh, sit in our nice small homes, and count our blessings for being away of the mess the regulated market makes on the average citizen.
I laugh every day at the for sale signs, the bank auctions, and the realtors who keep mailing me their postcards. I’m stable, I have nowhere that I want to go but here, and I’m not afraid for tomorrow or 20 years from now. Gold, silver, paid off home, 3 paid off older model luxury vehicles, and everything else I need. I should retire for a few years and grow some tomatos — I never want to live a life that requires 80% of my income just to pretend to be wealthy.
OK, you win. I’m tossing it all away to go live in a barrel like Diogenes.
Nice argument AB Dada. Three points, however, (1) monetary policy did not reflate the Japanese Land/Housing Bubble to its previous peak, (2) the Japanese Stock Bubble to its previous peak, and (3) the US dotCom bubble to its previous peak.
The US housing bubble is yet to be determined. However, I’m guesing we won’t return to peak for a very very long time no matter what the frb does b/c buyer sentiment will not return to peak levels until another generation of buyers without any recollection of this bubble reach maturity.
The stock market - 1987
Then nobody should EVER have bought in San Diego. Hey as far as I am concerned thats a great idea, will you spread the word? I agree that your post has a central theme that rings true, “the only figure that matters is what is the purchasing power of the dollar value in comparison to YOUR living expenses.”
On the other hand arbitrarily picking a number such as ten years seems silly. In some places that makes sense in others not so much. If it takes you ten years to pay off a house in SE Kansas, man did you overpay. If you do it in ten in San Diego, or say Manhattan, you have done very very well.
Josh
Barnaby 33-
Ten years to pay off a house in SE Kansas and you’ve overpaid?That is preposterous, I’m from SW Missouri near the KS border. Lots of people I worked with commuted from SE KS. Even professional jobs pay like absolute crap there. I should know, I was just living that life earlier this year. I’m trying to sell my house and property for well under $100K in a small town- tons of interest, nobody can pay. Housing may seem cheap there to the ignorant outsider, but it is commensurate with local wages.
“When the FRB returns to an inflationary policy — and they will!”
“The only house to buy is a house you can honestly pay off in 10 years.”
A.B. Dada- With your first statement, predicting the return of inflation and the second one intimating that one should pay off a home quickly, that doesn’t make sense to me. In a return to inflation, you should take out a long term fixed rate morgage at todays low interest rates and pay the lender back in inflated dollars. I knew people who bought homes in the sixties and locked in low rates and after 20 years their wages had risen substantially. The morgage looked like a joke compared to their wages.
Excellent point Jones. Moreover, why stress your cash flow with a short maturity note? Get a longer maturity low fixed rate cash flow managable note w/out a prepayment clause and make extra principal pmts equal to a 10-15 yr note.
Whoa, whoa, perhaps my little pea brain is not firing this morning but your post didn’t make a lick of sense to me.
1) “Bernanke’s deflating the money in order to bring down the gas prices pre-election” ??? How does deflating the money supply bring down gas prices? Oil prices are set by supply and demand and while there may be some fudging by oil companies to manipulate prices the macro trends are too large to be manipulated for long. Plus, most of the oil producing countries hate us. Do you think Hugo Chavez is doing anything to help Bush or the republicans? Saudi Arabia just came out with production cuts to prop up the price of oil.
2) “Bernanke’s deflating the money” ??? This is just out and out wrong. It might be correct if you are looking at the narrowest definition of money but if you are considering overall credit the spigots are wide open. If Bernanke was really trying to contract money and credit we’d be looking at a deflationary depression immediately. The Fed is desperately trying to stave off deflation by reflating (generating credit). For an excellant weekly update on the global credit situation read Doug Nolands column at http://www.prudentbear.com.
I second your recommendation Grant; Noland is on the money
I respectfully disagree A.B. Dada. You are absoultely 100% wrong. The money supply is not being deflated. Unfortunately, M3 figures are no longer made public so there is no way of knowing for sure, but some economists have tried to get a sense of the M3 by piecing together FED reports and they all agree it has actually increased from 8% to 9%.
Futher, the collapse of the housing bubble had nothing to do with the increase in interest rates.
As far as assertion that “Bernanke’s deflating the money in order to bring down the gas prices pre-election” - well, that is wrong too. True it was politicaly motivated, but the decrease in gas priced was brought about largely by the “crack spread” - the profit margin by oil refiners. The crack spread since around August is close to an unprecedented zero. Simply, big oil is selling gas at no profit. Not to be discounted is the unwinding of the speculative froth in all commodites, including oil, likely due to a coming recession.
Yes, the money is still out there looking for a home? Where is it going? Mostly bonds, REITS, Money Market, and blue chip stocks. People are looking for yields. The JUNK bond market and REITs have been on a tear lately.
Not only the “crack spread” is at unhistorical lows, but just about at the top, in August or so, Goldman Sachs changed the composition of their commodity index (which funds buy like the S&P500 index) and reduced the weighting of unleaded gasoline by ****2/3rds*****!!!
Who just became Secretary of Treausury? Henry Paulson. What was his former job? CEO of Goldman Sachs.
Sometimes conspiracy theories are TRUE.
Refined products (gasoline) are ogilopoly controlled by domestic producers who obviously have a clear financial interest in keeping our current crazed corrupt Republicans in power. Reducing crack spread for 3 months to ensure a few more years of massive uncontrolled profits during peak oil? Investing in dirty politicians is much more profitable than investing in clean refineries and new technology.
Gasoline went down much more than crude oil. All of a sudden.
Crude–and near term spot crude only—peaked at $78 and is now $60. From 2003-2004-2005, $60 was a pretty high price.
Don’t even get me started on GS and JP Morgan.
I did HOURS of indepth research about 2 years ago on the back and forth movement of people from the GOV (particulary the CIA) between these two firms. It’s a revolving door.
And it’s not a “conspiracy” - it’s a plain proven fact.
When there is smoke there is a fire. If people only knew.
The “dynamic duo” JPMorgan and Goldman Sachs are running rampant, making money like bandits, coming and going, in market sectors which rise or fall. Or are they “evil twins” instead? They have a partner in the USGovt and immunity from investigation, audit, and prosecution. What has this country come to? A laundry list of questionable market practices and government activities can be cited. Start with the GSax commodity index (GSCI) whose unleaded gasoline weight was reduced from 8.45% to 2.3% without warning or justification. Fully $100 billion is invested in indexed commodity funds tied to the GSCI, managed by fund managers, brokers, and individuals. They were forced to sell a lot of gasoline contracts to abide by enforced weightings.
Let’s be real clear. It would be great if I could put my personal $30 thousand short position in place on a trade, then change an index weightings, then wink to the Dept of Defense on selling a scad of crude oil from inventory, then pull a string at EIA on a weekly story on reduced national energy demand, then sell the heck out of positions which my client hedge funds hold (knowing their important support lines), then to sit back and count my $100k profit a month later. Wow! Isn’t it great that the USGovt has JPMorgan and Goldman Sachs as partners to protect our freedom and to ensure market vitality? This media debate on the realistic belief of one third of the public harboring suspicions of election engineering in the energy market is interesting. THEY OPENLY DISCUSS EVERY IMPORTANT FACTOR EXCEPT JPM AND GSAX!!!
I know it’s fashionable to believe in conspiracy theories, but aren’t there really simpler explanations for the decline in oil/gas prices (Occam’s Razor and all that). There was a huge premium built into futures markets based on a fear of more destructive hurricanes in the Gulf like Katrina that didn’t happen this year. That and the fact that the previous high prices increased supply while demand took a breather, and this is the shoulder season with a warmer than normal winter predicted. In commodities markets the cure for high prices is high prices. Sometimes a cigar is just a cigar.
Of course, I have no idea where things go from here. Will people continue to move from SUV’s to cars incrementally to get better gas mileage or will they decide happy days are here again and buy the Hummer? My personal opinion is that with the MEW being harder to come buy people will hunker down a bit in that regard, but who knows.
The explanation is given. GS changed their weighted index. That is a fact that is not in dispute along with the resultant futures selloff from that change that drove down the cost of fuel.
The only question remaining is why? Who benefits? why now? for what purpose?
Sorry, but I’m firmly in the manipulation camp on this one.
I understand about Goldman changing their index, but to believe that they are manipultating the market to help Bush because Paulson is now Treasury Secretary makes no sense to me because Goldman has a lot more Democrats than Republicans in house (Robert Rubin and Jon Corzine are a couple of former GS’ers, too). So I’m supposed to believe that Goldman is openly manipulating the market for Bush’s benefit and none of the Dems in the organization either complain or tell the New York Times on background? I realize I’m bucking the conventional wisdom here, but this just seems like way too elaborate of a combination conspiracy bankshot to be for real.
I’d like to agree, but a 10-year payoff is a stretch for a first-time buyer on one income even in good times. Unless I want to live in a shack and dodge bullets, 15 years would be the lowest I could go. (More likely, I’d take out a 30 and pay it like a 15, to give a cushion.)
I think AB Dada might really be Marjorie Dresner ……
And that 100K POS house is the one she’s keeping.
Florida has benefitted from retirees — property and sales taxes, no kids in the public schools or other public services — for a long time. Florida has no income tax.
Well, a rising share of these seniors are getting very old and feeble, and their money is running out. When they have to go into nursing homes, guess who pays 45 percent of it? Florida state taxpayers. Where will that money come from?
In New York, it comes from a much higher tax burden.
Nah, they’re all gonna bail and go back to the North where the hospital care is better.
It’s another reason why New England is economic toast.
No matter how you slice the RE market after the flippers,RE agents spec’s, 2nd homes spec’s, etc. have left the playing field the pool of new buyers simply declines 30 to 50% depending on the numbers you believe.
Now add the new federal lending guidelines and the pool gets even smaller.
So just imagine a RE market with YOY sales 60% less then
05 top and factor in the surplus of condo and new homes
that have been built and others now finishing. Vacant homes for years, small pool of buyers and millions trapped in HELOC loans that will take a lifetime to payoff.
OMG, having to live in a Medicaid nursing home in Florida? Yikes!
Anyone know any Hollywood types? I think this could be a new horror film genre.
Would that be the sequal to the TV series “Golden Girls”?
Several months back, there was a report in the Sacramento or Stockton area about a senior home that wasn’t providing adequate diaper service for bed-ridden seniors. So perhaps the title could be “Golden Shower Girls”?
if you bought after 03 you’ll be in the red everywhere- any exceptions ?
local sonoma newspaper published this piece this morning. http://www1.pressdemocrat.com/apps/pbcs.dll/article?AID=/20061012/NEWS/610120304/1033/NEWS01
When you see articles like this in Northern Ca you know the market is at a critical point.
Good article! Also, enjoyed the comments at the end!
‘Even people who are ready to buy now are waiting because of what they’re hearing in the media,’ she said.”
I am amazed how many sellers point blame at the media and not at the over-priced junk they are trying to dump. I seem to recall they were not complaining on the way up, and got a great deal of favorable press. Does this person REALLY believe she cannot sell her property because buyers are led around by the media with nose rings?
Wait a tick! Who is really manipulating the Naples market? It reads like the Naples realtor association is trying to eliminate any record of these short auction sales in an attempt to water down their impact on the NARs monthly YOY price statistics. Can NABOR getaway with this type of blatant statistical manipulation? And is this type of manipulation limited to Naples or is it happening in markets all over the country?
Seriously, a sale is a sale. Should be included. Even if it doesn’t eventually it will catch up with them.
The MLS is a joke as is anything that’s derived from it. I found that out several years ago when I wrote my undergrad honors thesis at UCD. I’ve wondered for a longtime if there’s money to be made for a small business to publish impartial real estate figures and market them to intelligent potential buyers.
Real estate professionals say it is especially obnoxious because many of the properties that will be sold on the auction block, by seller desire, not because they can’t pay the taxes,
I just can’t come up with a comment funnier than the quote itself…
It’s really unfair when the mls monopoly is threatened by free enterprise. It’s just so unAmerican.
It doesn’t matter if these properties are in the MLS or not. From what I can determine from almost 3,000 miles away is that everyone in that buying area is going to be watching the auctions. The realtors have got to know that buyers won’t be paying much (if anything) above that auction price.
The realtors are just pissed that people smarter than them are getting out without paying the realtors 6%.
Anyone want to guess how many flips those realtors(tm) own?
Neil
It’s like the scene in Animal house where Neidermeier is abusing the pledges - “hey they can’t do that to our pledges (future FB’s), only WE can do that to our pledges (future FB’s)”.
Come on, somebody please post the “we’re working off a whole new economic model” in Florida line for me. I read all the way through, thinking that someone would post it on this thread.
South Florida,” he said, ”is working off of a totally new economic model than any of us have ever experienced in the past” according to a realtor who predicted that a land shortage will support higher prices indefinitely.”
- New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05