“A Correction Of An Overheated Market”
The Philly Burbs reports from Pennsylvania. “Area home prices dropped in September on a year-to-year basis, only the second time this year that has happened and just the latest sign of a cooling housing market. ‘Until the sellers who don’t understand it’s a longer market are off the market, they’ll keep dropping their prices,’ says Jeri Gutner, a Realtor in Doylestown.”
“The amount of time it took to sell a house skyrocketed 168 percent to 51 days from 19 days a year ago. The number of home sales fell 24 percent from 564 last September to 428 this year. And the local inventory of unsold homes was up 46 percent, to 3,848.”
“‘If you don’t prepare sellers for how long their house is going to be on the market, you’re doing an injustice,’ Gutner says.”
“Most real-estate professionals see the current slowdown as a ‘correction’ of an overheated market. ‘You’re not doing business on the hood of a car anymore,’ says Jeri’s partner, Henri Gutner, comparing today’s market to last year’s superheated market, where houses were selling as quickly as they’d be listed.”
The Portland Press Herald from Maine. “Last December, developers of a proposed Westin hotel/condominium complex in downtown Portland were confidently predicting that they’d quickly get deposits on the project’s 97 luxury units and break ground during the summer. By March, they now acknowledge, only a dozen hopeful buyers had put down money.”
“‘The timing was off,’ said Tom Niles, executive VP for development at The Procaccianti Group. ‘I think people were starting to pull back and wait on the sidelines.’”
“Timing. The widely repeated mantra in real estate is location. But market timing can be just as crucial, although not as easy to recognize. That’s especially true for the handful of major, mixed-use condominium development plans that have attracted so much publicity in Maine’s largest city. To date, none has been built.”
The New Jersey Biz. “Will Kara Homes’ Chapter 11 bankruptcy filing create a domino effect in the homebuilding industry? Kara hurt itself by building too much too soon, says Gary Griffin, CEO of a turnaround and business consulting firm. ‘It was actually their aggressiveness, not the housing market so much,’ says Griffin. ‘They built a whole lot of houses on spec [before a buyer orders it], assuming the market was going to be there.’”
“Kara fueled its growth by borrowing heavily to build properties that then proved hard to sell. ‘It seems like the cause of this filing was a buildup of inventory caused partially by the slowdown in the housing market,’ Albert Savastano said in a research report.”
“Savastano says aggressive homebuilders like Kara will continue to be at risk. ‘We do not believe Kara Homes will the be the last home building credit that will potentially go bad in New Jersey or in other parts of the nation,’ he says.”
“‘There will be casualties in the market,’ concurs John Caulfield, senior editor at Builder Magazine. ‘The companies which were highflying, depending on a lot of debt, relying on the industry to have the same level of demand as it’s had for the last five years—those are the companies which are going to be in trouble.’”
“For Kara, says turnaround consultant Griffin, ‘there’s nothing to do now except liquidate. Can they turn around? No, I doubt it. There’s too much inventory.’”
From Newsday in New York. “The number of bankruptcy filings are starting to creep up again as people in dire financial straits are forced to navigate through the complex new system. In this area, 4,326 people filed for Chapter 7 bankruptcy in the first nine months of 2006 in New York’s Eastern District, which covers Long Island, Brooklyn, Queens and Staten Island.”
“More people are heading to bankruptcy court these days. More than 600 people filed in September, three times the number in January. The crowds at the courthouse are likely to grow in coming months, in part because of higher interest rates and flattening housing prices. These combine to make it harder to refinance and pull money out of the house to pay off debts.”
“Also, people who had adjustable-rate mortgages are finding they can no longer meet the monthly payments on their homes under the new terms.”
“‘I’m getting calls from mortgage brokers about people not able to refinance, suggesting they explore bankruptcy,’ said Stuart Gelberg, a bankruptcy attorney in Garden City.”
So which homebuilders are likely to fall the hardest and fastest? This is the big question on my mind.
‘We do not believe Kara Homes will the be the last home building credit that will potentially go bad in New Jersey or in other parts of the nation,’ he says.”
Of course not. There is nothing different in this RE cycle than any of the others we’ve experienced, except perhaps the potential severity. Yet patterns remain the same. Builders get burned everytime the market turns as predictably as the leaves turning in fall. It doesn’t take a lot of insight to see where this mess was headed three years ago, let alone seeing where it’s headed today. Patterns, fundamentals, averages, historical trends…..they’ve proved true in the past, so why bet against them now.
nnvmtgbrkr,
How true. We visited w/our daughter’s HS friend (now a L.O w/bank) and she showed us all of the NOD’s on her lap top. She pointed out that virtually all of the defaults were purchased in the last 3 years (many 2 or less) and most were ARM’s/IO. Shocking! She was eager to share her new found respect for more “traditional” financing so we were careful not to dismiss her revelations to off handedly. Seriously though, this is about as surprising as a frat party ending with a visit from security. Clackamas County was avg. about 5 defaults a day (Portland, OR area).
Or as suprising as Paris Hilton getting a DUI in her SLR..
Or as suprising as finding out Pam Anderson did a sex tape..
I could go on forever. If it looks like a pig, smells like a pig, maybe its actually a pig?
Michael Fink,
Or perhaps as shocking as finding a male over 18 in a country that has electricity that HASN’T seen Pam’s tape?
When my wife heard “defaults” her ears kind of perked up but the minute the L.O explained these homes are all under water she was instantly deflated. Well, what would any of us expect? Even being “past peak” I can’t recall seeing a listing that didn’t try to milk every last penny of “potential profit” out of the deal! Seriously, even when they’re in major arrears they still try to milk it for all it’s worth and then some! Even when it becomes obvious that “the jig is up” we still see people trying to “test the market”. What a joke.
OK. And what part did your Lending Officer friend and her bank play in creating these underwaters loans. Maybe she is sharing this deafualt info with you is to relieve some of the “guilt” she is feeling at putting these loans together. Everybody is trying toi pass the buck!!!
“OK. And what part did your Lending Officer friend and her bank play in creating these underwaters loans.”
I completely understand your cynicism toward anyone in the lending industry, but there are a few of us that didn’t sell out to greed and comprimise ethics.
DinOR,
That person does not exist; there is no one in this country that has not seen that tape. I am sure it has more airtime then the moon landing by now.
Oh btw, she had an equally “shocking” observation. Almost without exception there was ZERO equity in these homes! Shocking I tell you.
What are you talking about? I’ve been told time and again by highly educated housing industry experts ‘people don’t speculate in homes.’ They may speculate in stocks but never in homes. After all, where are they going to live?
That’s surprising to hear of defaults this early in the cycle in Portland - the prices really haven’t started to drop here yet - the only thing putting them underwater must be payment options or transaction fee’s.
On the Jersey Shore blog, I’ve repeatedly voiced concerns over those people who deposited earnest money with KARA for their new home. Well, it looks like they are going to realize their nightmare.
According to the Asbury Park Press (link provided below), it looks like “the company said 33 buyers rescinded their contracts before Kara filed for bankruptcy, and they requested that their down payments and deposits, totaling $1.8 million, be returned.” Kara is seeking $5 million of Debtor-in-Possession financing provided by some loan shark (18% interest)to enable it to refund deposits and build out its projects.
Problem with this situation as I see it is whether or not use of those deposits constitutes an unlawful or improper misappropriation, we are talking about pre-petition debts and a fundamental concept of Chapter 11 is you can’t pay pre-petition debts with post-petition borrowings. Yes I’m sure KARA will try to do that if possible to shield its responsible managing employees from potential personal liability, but if I were a trade creditor (say a material supplier) I’d be screaming loudly complaining that a plan which gives some creditors there money back (buyers) and stiffs me isn’t fair.
Looks like lots of people are going to get hurt.
For the article, see:
http://tinyurl.com/yxvh4b
I have just come from the Phila suburbs, where the rental prices were quite comparable to Los Angeles area, but the asking prices for housing on market slightly less than comparable LA neighborhoods. That could explain the decline setting in a little slower than LA decline. But a big decline there must be: price-to-rent ratio is very much out of whack in Bryn Mawr, Haverford, West Chester PA, etc. Also, days-on-market for RENTAL houses is very high. I looked at a few 2BR-3BR rental houses that had been on rental market for months. Maybe because rental apartments are many, and inexpensive
“…many, and inexpensive.”
Maybe add: plus, many complexes have garnered the prime locations within walking distance of the train stations. Also, how many would rent big house at $3k+utilities when they can get a modern 3BD/2Bth townhome for $1400-1500?
I am orginally from the Philly area, but have not kept up with RE much there. What would a 1000sq/ft condo rent/sell for in a good neighborhood now? Take a society hill condo, for example.
Just kind of curious, I have no idea where the prices are now in Philly, and also no idea of what the price/rent ratios look like.
Thx!
Decent burbs near train, can rent a $300k newer townhome for $1500-1750. Older ones for $1200 including utilities. Here’s a really typical listing in a working class neighborhood:
http://philadelphia.craigslist.org/apa/220649026.html
Society Hill, about the same- $1500 for 1000sf. Old City, $2k for a nice place.
I’ve seen many many more listings in the rental sections of the classifieds. Local realtors are advising sellers to rent their homes to “wait out the market”. Now a local “renters’ market” is developing.
From the PhillyBurbs article:
A prominent research house, Moody’s Economy.com, of West Chester, left the Philadelphia area off a report predicting declines in home prices in 70 U.S. markets. Topping the company’s list was Cape Coral, Fla., where prices will fall 18.1 percent, Economy.com said. At the bottom was San Jose, Calif., where prices will fall 2/10 of 1 percent, the company said. Closest to us — and indeed the only Pennsylvania market on the list — was Allentown, where prices will fall 8.2 percent, Economy.com said. Its omission suggests there will be no net decline in home prices in the Philadelphia area, according to Economy.com’s model.
Whaddaya know? It’s different here!
The realtress from Keller Williams is more of a straight-shooter than the PFR babes. Anyone contemplating buying in this area: be extra careful if dealing with PruFox, especially the eastern main line going into the city.
Hey philly girl I saw a year around “Rent Reduced” ad at the Jersey shore for the first time ever.
Don’t know where out friend Rude Karl went but I hope there’s a lot of bankruptcy work where you are, buddy. Since I think it’s Florida, better set up a cot in the office
My guess is that the value of Karl’s time has recently become to expensive for him to spend it here…
“too” not “to” (ugh!)
Ouch. That hurt. LOL
Fortunately for this blog there are still people who are generous with their very valuable time
Txchick, Any ideas on who will be the big winners in the coming unwinding? I have watched PRAA coming up since sept. etc.
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Also ,just on CNBC the CEO of Manpower said ” there’s no doubt the market is slowing down, blah,blah…..yet all the talking heads keep the cheerleading …Not surprising but wonder how many invest based on CNBC ,and as such will be killed when the “surpising recession’ arrives..
I remember Zucchi on Minyanville had a short thesis on PRAA about a year ago. Can’t remember exactly the thought process.
I have a sort of queasy feeling that they might have tech/internet/telecom in mind as the next echo bubble. That would be hard to play if you have any memory of the Nasdaq crash.
PRAA
PRAA: Some Good, Some Bad, And Some to Wait And See
Fil Zucchi
Feb 22, 2006 1:27 pm
Growth for this growth company continues to slow at an accelerated pace.
Portfolio Recovery Associates (PRAA) reported Q4 and full year results on February 14. I wrote about my reservations on the stock (here and here) given a number of risks which, IMHO, were (are) not priced into the equation. I’ll review them one by one and keep score along the way:
Risk No. 1: There is a very real possibility that the ERC and/or the receivables on PRAA’s balance sheet could show a nasty hit when PRAA reports the next quarter. There did not seem to be an impact on the balance sheet. We will not know the impact on the Estimated Remaining Collections (ERC) until the company files its 10-K. Management stated on the call that it expects the impact on ERC’s to be “de minimis.” I have no reason to dispute this at this point, unless the 10-K shows otherwise. This was a one-off risk directly related to the October 2005 changes to the Bankruptcy Code, so it’s fair to say that this risk has now passed. PRAA 1 – Zucchi 0
Risk No.2: Receivables prices remain challenging, and recent account purchases will merely replace - rather than increment - existing loan pools. Since there was no apparent impact on receivables assets from the Bankruptcy changes, PRAA A/R buying spurt has meaningfully increased its receivables base. Pricing of acquired receivables, however, continues at the very high end of the historical range. Management concedes that pricing is difficult. I specifically asked the company, why would banks sell off bankrupt paper at a decent discount if the collection process in bankruptcy is the same for the banks and PRAA? A valid answer by the company was that banks would rather have the money now than over five years. Another reason given was that PRAA is “better” than banks at navigating the filing and approval process for claims. This is hard to believe since there effectively is no “process.” To collect in a bankruptcy case the creditor files a one page Proof of Claim (99% of banks generate them automatically from their computer systems) and the claim is deemed allowed unless objected to. In 10 years of administering estates I cannot recall ever having objected to a bank’s unsecured Proof of Claim, or needing any involvement by the creditor in the collection process. PRAA 2 (on adding to balance sheet assets) – Zucchi 1 (on pricing pressures)
Risk No.3: Impact of Labor Problems: The turnover disruptions seen in Q2 and Q3 appear to have settled down. There remains the issue of hiring new collectors to work on the new receivables purchased. PRAA concedes that this will impact their collection efficiency metrics, with the caveat that, since most of the new purchases were of bankrupt paper, there is much less collector involvement in working those receivables. PRAA 2 – Zucchi 1 (collection efficiencies remains an item to be monitored)
Risk No.4: Slowing Growth: Perhaps the most important of the issues I raised, growth went from slow to slower, with “cash collection on owned receivables” up 16% Y/Y. The last four quarters trend now shows: 34.6%, 27.2%, 22.2%, and 16.1%. The company cautions that things are not going to get better anytime soon because bankrupt accounts “can really sit and produce very little cash for a year or two before they kick in.” (from PRAA conference call). I would suggest that 6 to 8 months is the outer limits of the time it takes for a Chapter 13 plan to be approved and payments to creditors to start. Whether unsecured claims such as PRAA’s must wait in line 1-2 years may depend on whether there are higher priority claims ahead of it, but in my experience that is not too common. Whatever the case may be, growth for this go-go growth company is slowing at an accelerated pace. PRAA 2 – Zucchi 2: growth is slowing at an accelerated pace.
The company has made the point that its cash collections will actually get a big boost ultimately because of the higher quantity of receivables acquired. That’s pretty much self-evident but speaks only to growing the overall size of the “receivables bucket” not the “rate of growth” of collections. . PRAA 2 – Zucchi 2: growth is slowing at an accelerated pace.
Risk No. 5: Does PRAA face a trend of poorer quality receivables? We will not know about quality trends until the 10-K is filed. PRAA 2 – Zucchi 2.
Risk No.6: Geographic Risk: None have shown up in the data released so far. PRAA 3 – Zucchi 2.
Risk No.7: Rising collection costs: Continue to rise as legal collections continue to comprise a higher portion of collections. PRAA – Zucchi 3.
Risk No. 8: Macro-economic risks and interest rate risks: still there and we’ll have to see how those play out over time.
Last year, the housing and associated industries accounted for 40% of the G.D.P. housing re-fi’s contributed billions to consumer spending.
So, the continued slide in housing will certainly lead to some kind of recession within the next two years.
“Area home prices dropped in September on a year-to-year basis, only the second time this year that has happened and just the latest sign of a cooling housing market.”
And let me guess — would this also be the second month in a row this has happened?
“The amount of time it took to sell a house skyrocketed 168 percent to 51 days from 19 days a year ago.”
How much has it skyrocketed if you correctly average in the time on the market for homes that are not selling?
Or factor in re-listings. From the article: Gutner actually suggests the days-on-the-market data reported by the multiple listing service, or MLS — a computer database of homes for sale run and maintained by Realtors — is deceptively low. She provided several examples of homes Realtors had pulled off the market and then relisted, a tactic that can make a listing appear “hot.”
In Plumstead, for instance, the MLS says homes that were sold in September sat on the market an average of 85 days. But Gutner, after examining every listing, says those properties actually spent an average of 141 days on the market.
Ditto for Buckingham, where the MLS data says the average home sat on the market for 48 days, but Gutner’s analysis shows those same homes actually took an average of 65 days to sell.
“The amount of time it took to sell a house skyrocketed 168 percent to 51 days from 19 days a year ago.
Remember also that this data is only for houses that have sold. Some houses never sell, but are listed for a long time.
Max –
That is my point. The time-on-the market data are censored, and to correctly calculate “average time-on-the-market”, one has to account for the especially long time on the market for homes that never sell because the wishing price is too high. It would also be useful to compute the time from when a home was first listed, not from when the RealtWhore (TM) last relisted it.
“Will Kara Homes’ Chapter 11 bankruptcy filing create a domino effect in the homebuilding industry?”
How would one firm going bankrupt create a domino effect? If one firm goes bankrupt, then whatever demand is out there gets spread over fewer surviving competitors.
Simple, it will make it more difficult and expensive for other home builders to get credit, forcing them into bankruptcy.
Also, by filing under Chapter 11, they are shielded from their creditors while (and to a lesser degree after) they devise the reorg, which puts them at a competitive advantage.
It’s called the Bankruptcy Disease, and it’s used to describe what happens when airlines file chapter 11.
I doubt that we will ever see Kara again. Unlike the airlines, even after cleaning up the balance sheet through the bankruptcy process, when it is done, there is no way they can unload that inventory in a timely manner, assuming there is any inventory left. The basic problem is that the housing industry is sliding into a maelstrom where it won’t be long before there just won’t be any bids out there as a practical matter.
Kara is toast, IMHO. And I stand by my earlier posts where I gave my opinion on TOL. I still believe it will be bankrupt before the end of 2007.
They can drag out a Chapter 11 for a loooooonnnnnnggggg time. Really. Heck, they get an “exclusivity period” for three or four months just for filing. They can extend the period with permission of the court, and only when it expires do they need to propose a first plan for their finances. There can be several rounds of plans before one is approved, and only then do they start paying anybody anything.
So if they owe anyone anything, that’s where the ripples or dominoes start to build up.
The ability to extend exclusivity ad infinitum has been excised by the new bankruptcy laws. They are even more creditor friendly in business cases than they are in consumer.
Airlines domino after each other because when one comes out of bankruptcy their fixed costs are substantially lower than the rest of the industry’s so they slash prices (to pick up volume) until the next on the list goes under and the cycle repeats itself.
How would one firm going bankrupt create a domino effect?
Peer pressure? You know, all the cool companies are doing it.
One issue is that prices on the Kara inventory are likely to be drastically cut. This could lower sales and margins for remaining builders. After the Kara inventory is cleared out, the remaining competitors will have an advantage, assuming that home prices have not dropped too much.
“More people are heading to bankruptcy court these days. More than 600 people filed in September, three times the number in January. The crowds at the courthouse are likely to grow in coming months, in part because of higher interest rates and flattening housing prices. These combine to make it harder to refinance and pull money out of the house to pay off debts.”
“Also, people who had adjustable-rate mortgages are finding they can no longer meet the monthly payments on their homes under the new terms.”
“‘I’m getting calls from mortgage brokers about people not able to refinance, suggesting they explore bankruptcy,’ said Stuart Gelberg, a bankruptcy attorney in Garden City.”
One of the great services Ben’s blog provides is to show how widespread and consistent are the bitter consequences of the bubble. The similarity between the stories about the growing number of bankruptcy filings in New York, Colorado and California is striking.
And just wait until they find out they can’t dump debt the way they used to . . . and go looking for the guy that set that up! Oops!
Don’t forget sunny Florida, we lead the nation in foreclosures!!!!
Bad news Cali took the title last month.
The good news is the future looks great! Florida’s 2003 and 2004 recruiting season boasted the highest number of Parade All-American FB’s including the highest percentage of top ten out of state FB’s signed to a mortgage contract. Expectations are high Florida will take back the title led by multi-propertied redshirt freshman David Lereah. There will be a lot of pressure on this young man’s shoulders however the touts are confident that “DL” can handle the pressure as team shill and starting FB. Go Florida!!!
Go David!
Wrong. If you don’t help sellers price their homes properly for the current market, you’re doing an injustice.
Long time on market = price too high.
Exactly. It’s not rocket science. If you want to sell, then you must lower your price. Why do people always think that the alternative is to keep the price high and “wait.” (Perhaps because if it takes long enough to sell, then inflation will erode the real price after all?)
Inflationary expectations.
“In a report released last week, UBS analysts Margaret Whelan and David Goldberg projected that the average third-quarter earnings per share for the industry’s top home builders will drop 44% from the third quarter in 2005.”
Don’t worry about this temporary 44% growth adjustment. Industry insiders and Wall Street analyst predict the housing market will quickly re-expand to 2005 levels by the end of 2007.
Moreover, these small builder and homeowner bankruptcies will have no deleterious impact on the lending industry and broader economy. It’s all good; doom-sayers need to take a deep breath.
damn, how could I have been so stupid!
Because “you” were bred in a system that is set up to breed dupes in the areas of economics, investments and politics.
Why?
Because that is highly profitable for our ruling elite. It is a planned and deliberate act on the part of BFNYC.
Jas Jain
“ruling elite” = leftist paranoia claptrap
“third-quarter earnings per share for the industry’s top home builders will drop 44% from the third quarter in 2005.”
That’s the kind of upbeat info Crammer needs to recommend a “strong buy” on his CNBC stock market show. What a goof ball!!
And he has a strong following of other goof balls who think they are getting good investment advice. Crammer’s track record is one screw up after another, and his followers keep promoting their “boy wonder” What a country!!!
David Cee-Cramer is nothing more than a carnival barker. There are lots of people out there who became very wealthy during the dot com days. Still think they are smarter than everyone else.
What do mean david cee? Crammmer is a geniasss. If stocks are half of what they were last year, it means they are cheaper and cheaper means discount and discount means a great deal, a bargain. The bargain price of the stock has nothing to do with the market it represents nor any revenue or profit trends. Make yourself another cup of coffee and buy, buy, buy!
“…..re-expand to 2005 levels by the end of 2007.”
I doubt it. The big problem, besides over building and fake mortgages and fake appraisals, is incomes. Most of the over-night spec investors sucked money out of their over inflated property ATM’s to invest in areas like Nevada and Arizona. They did NOT use their savings or pay for those extra monthly mortgage payments out of their current incomes. If most of those people could afford another mortgage every month, they would move to a larger more expensive home. Instead, they used money which had grown rapidly on a foundation of sand.
Now let’s take the BIG problem. Thousands (literally) of buyers who’s incomes were out of whack with property prices, used exotic loans. Now the party is over the piper wants to get paid.
By the time this Savings And Loans type mess is over and the already bankrupt US government has to inject massive amounts of liquidity into the system to bail out banks, they will draw up tough guide lines (too late as usual) for mortgages.
However, the main reason for this avalanche of defaults and bankruptcies, is INCOMES. If people could pay these prices, there would be no foreclosures, no defaults, no bankruptcies. It doesn’t take a rocket scientist to figure out that people cannot buy $300,000 houses on $40,000 a year (and in many cases much less). If wages were increasing rapidly, that would take some of the pressure off BUT incomes are not increasing that rapidly and any income increases are being wiped out by many factors including medical bills, etc, which employees are having to pay themselves. If anyone thinks those fake government numbers concerning inflation are accurate, I have a bridge in New York I can sell you, cheap. TRUE inflation is running at around 7% + a year at the moment.
The good $60 per.hr manufacturing jobs have gone. For good. As Lou Dobbs is always saying, the American middle class is under attack and that section of America were the ones who purchased good property which could be paid for out of good incomes.
Take a look, for instance, where I live in California. The older generation all bought in the 1960’s when a couple WITH ONLY THE HUSBAND WORKING, could afford to buy a house in a nice area. In the 70’s and 80’s, a young couple with both working could afford a property in this area. Now, a young couple, both working, cannot afford to buy a house in this area or they need very good paying jobs to just get onto the property ladder. The cashier at Ralph’s or Vons or the guy who drives a truck, the MAJORITY, could never buy a house here…..unless he/she was suckered into taking on a no interest loan which means that their dream of owning property is going to be short lived.
Of course, they could move to Las Vegas or Arizona or other areas but even then, their finances would be stretched to buy property. Most of the jobs in Las Vegas are service jobs paying low wages. Again, if people could afford to buy property at these levels, there would be no foreclosures and no bankruptcies. It’s THAT simple.
Property prices will continue to decline for a few years until they reach a point where buyers are able to purchase a home that doesn’t make them mortgage slaves for 30, 40 or 50 years or put them in a position where one medical emergency will put them in bankruptcy court. Personally, I think prices will drop to levels seen around 2000 -2001. The big inceases during 2003/4/5 will be wiped out. Then, I suspect, we will return to a “normal” market, without the boom and bust mentality, for many years until the memory of the bust fades and a new generation of suckers come of age.
A recession is just another element we might see being added to the mix.
“It’s officially a buyer’s market in Miami Beach and surrounding South Florida communities, according to Alex Shay, a prominent Miami Beach real estate broker, whose award winning website, http://www.alexshay.com , features some of the most beautiful residential real estate in all of the world.”
Well, not exactly.
“. . . according to data supplied by the Coral Gables, Homestead-South Dade, Kendall-Perrine, and Northwestern Association of Realtors or their MLS, in June of 2005, there were 3,261 single-family homes on the market in Dade County(which includes Miami, Miami Beach, and a number of surrounding smaller cities), with 1,196 sales. In January of 2006, there were 6,364 single-family homes on the market, with only 687 sales. In August of this year, there were 10,579 single-family homes for sale in Dade County, but there were only 705 sales.
The condo market in Dade County has been similar. In June of 2005, there were 5,550 condos for sale in Dade, and there were 1,564 sales. However, moving into January of 2006 there were 11,800 condos listed on the market for sale, but only 915 sales. In August of this year, there were 18,133 condos in Dade for sale, with the number of sales falling to a 15 month low of 823 condos sold.”
Wow, almost twice as many condos as SFHs and a 2-year supply. Keep ‘em comin’, boys!
http://www.emediawire.com/releases/2006/10/emw450861.htm
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““‘I’m getting calls from mortgage brokers about people not able to refinance, suggesting they explore bankruptcy,’ said Stuart Gelberg, a bankruptcy attorney in Garden City.””
Now that Bankrupters have done their job — making the mess — their cousins are making money by cleaning up the mess. What a f-in set up.
Jas
And this surprises you how?
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Do I look surprised? It has been years that I was surprised by what goes on in our system. I hope that I have a fair grasp of reality as opposed to the propaganda version of our econo-political system.
Jas Jain
Actually you look like 10 pt Arial. Quite becoming actually.
“I want people to buy real estate in Miami Beach, because Miami luxury real estate is always going to be a good investment. The doldrums of the real estate markets of the 70’s and 80’s are long gone, and in 2006 and 2007, those who invest in Miami real estate are going to be very glad they did,” said Shay, “and a buyer can make a great deal right now.”
http://www.alexshay.com
Execept for those 3-4 (or 5?) crashes that Miami RE has had in the past. Miami is in the textbook under “RE collapse” (no kidding, it was in my macro-econ book).
Miami RE has always, always been a risky investment. To put money into it right now, imho, is financial suicide.
‘Until the sellers who don’t understand it’s a longer market are off the market, they’ll keep dropping their prices…’
So the solution would be for them to maintain higher asking prices and let the inventory swell even more? I have a feeling this guy failed micro econ….
Repost (sorry if duplicate):
“. . . according to data supplied by the Coral Gables, Homestead-South Dade, Kendall-Perrine, and Northwestern Association of Realtors or their MLS, in June of 2005, there were 3,261 single-family homes on the market in Dade County(which includes Miami, Miami Beach, and a number of surrounding smaller cities), with 1,196 sales. In January of 2006, there were 6,364 single-family homes on the market, with only 687 sales. In August of this year, there were 10,579 single-family homes for sale in Dade County, but there were only 705 sales.
The condo market in Dade County has been similar. In June of 2005, there were 5,550 condos for sale in Dade, and there were 1,564 sales. However, moving into January of 2006 there were 11,800 condos listed on the market for sale, but only 915 sales. In August of this year, there were 18,133 condos in Dade for sale, with the number of sales falling to a 15 month low of 823 condos sold.”
Keep ‘em coming, we’re down to a 2-year supply of condos and only a year-and-a-half of houses!
http://www.emediawire.com/releases/2006/10/emw450861.htm
All one can say to those number is - wow. Miami is certainly in for a hurtin’. I hope there aren’t too many people with football helmets and cleats down there, else maybe the local hospitals would be a good investment.
Nice dig, GO CANES!
Well, pretty soon hospitals may have to treat more and more unemployed (and uninsured) people, causing them to hemorrhage money also. Don’t forget those fringe implications!
Downey Savings profits down 4.3 percent
Company blames a lower loan volume.
A drop in loans hit Downey Financial Corp.’s third quarter profits, with the company reporting net income of $57.2 million, down 4.3 percent from the same period last year.
Besides a drop in loan volume, the Newport Beach savings and loan said profits were hurt by an additional $10.4 million set aside for potential credit losses and a $2.5 million reduction in loan servicing activities.
The company said the decline was offset in part by an 18.4 percent increase in net interest income, a $2 million increase in real estate held for investment that was sold and a $1.6 million litigation award.
Are they not counting NegAm as income?
Traders see L.A./O.C. homes falling 7%
Traders in commodity markets think home values in the L.A./O.C. region will be 7 percent lower by August, analysis by Tradition Financial Services shows. Traders at Chicago’s Merc bet on how S&P Case-Shiller home price indexes will be moving. The latest reading — for July — showed prices up 11% in a year.
Here’s how nine other cities and a U.S. composite look:
Boston, -6.7%
Chicago, -5.3%
Denver, -5%
Las Vegas, -8.1%
Miami, -8.6%
New York, -6.2%
San Diego, -7.5%
San Francisco, -6.7%
Washington, D.C., -7.4%
U.S. composite, -7.3%
And. . . Miami leads the list. Clarification: U.S. composite just means a composite of these 10 metros, right? But the 7.3% is actually greater than a simple average of the 10 (by 1/2%) and looks to be even greater on a pop.weighted average. Arbitrage opportunity?
That’s hilarious - considering San Diego is down 8.1% from peak already - or are they predicting a further 7.5% drop over the next year ?
This is not a “prediction” - this is real money - a market. Prices are difference between now and August ‘07.
The S&P/CS data released thus far do not show an 8.1% drop from peak. Peak was Nov ‘05, with a value of 250.34. Most recent release was July ‘06, with a value of 249.05. That only off 1/2 of 1% from peak thus far.
Note however that the data for Aug/Sep is not yet released. I’m expecting larger declines to show up when Aug numbers are released on the last Tues of Oct.
Good think West Palm Beach is not on that list, I think we might take Miami over for drops (in certain areas; like downtown condos).
Buy now and be priced in forever!
The article is slightly misleaing on one point. The Aug’07 contract is for the data released in Aug’07, but that data is actually the June’07 sales data released two months after the fact. So traders are expecting these declines by the end of 2Q07.
Jon
Oh, one other thing: the data is also computed used a 3-month moving window of sales data. So the index number released in Aug’07 is computed on the Apr/May/Jun’07 sales.
I realize presenting the drops as percentages in the norm, but imagine if they presented in terms of dollars off of median home price of about $400,000..
Boston..down 6.7%….doesn’t sound all that severe…
until you do the arithmetic…
Boston..down $27,000 from $400,000 to $373,000…sounds worse to me…
medium price, days on the market stat etc are interesting but what drives the RE industry is sales volume. The industry is huge(RE agents,title co,home builders big and small, home inspectors,pest inspectors,
remodel folks,landscape professionals,lenders,brokers,
house driven retail etc)
YOY sales volume is what is driving the market and creates the jobs throughout the RE industry. Sales velocity matters.
B-I-N-G-O!
Yahtzee!
Check and mate!
For those who understand that our markets are being manipulated:
Markets have been moving in directions favourable to the Bush regime
Conspiracy theories have become the normal tittle-tattle of the financial markets. But ahead of the US mid-term elections on November 7, the blogging rants and radio phone-in hysteria have reached a pitch of intensity.
Are the commodities and securities markets being manipulated? Pre-election paralysis on the part of the US Federal Reserve is not unusual. Yet you do not require a suspicious mind to wonder whether smoothing and intervention may be happening on a bigger scale than normal. For the rest of this article, go to:
http://tinyurl.com/vyz59
With the exception of a few media ideologues and the party minions, I’m not aware of anyone who feels the slightest hint of confidence in what is being trumpeted as a great economy. Main Street is a very grim place regardless of the fools gold on Wall Street. I’m truly astounded that these people continue to repeat what everyone knows is a lie in the hopes that someone will believe it.
They are failing.
More nonsense. If the great and wonderous Bush was able to manipulate WORLD markets exactly why was the S&P up only about 3% by 10/04? Are you telling me that winning, largely gerrymandered, congressional seats depends on markets being up?
That an all powerful president who could manipulate markets (at will) WOULDN’T when his neck was on the line?
Do everyone a favor consipiracy kooks, take a look at some of the prices of things in 04. Oil was rising, the market was flat and gold was going up as well. Its fine to have your little theories but do a little homework and a little thinking before you pass them along.
Did I say anything about conspiracy? Newp. Not one word. I think someone is very sensitive to any criticism of govt.
Actually, I think the Bankruptcy Reform Act accomplished one of their goals. Look at the filing statistics in the EDVA here: http://vaeb.uscourts.gov/stats/trend/trend.html
You can see a massive drop in filings after October of last year. Even if filings are creeping up from last quarter, they’re still a far cry from where they were in 2005.
What does this mean? I’m not sure. I think from my discussions with debtor’s counsel that only the truly insolvent are filing. The other folks who just didn’t want to pay the credit card debt they racked up, have more or less stopped filing since they’d be forced to keep working and pay whatever they can to cover their debts over five years. In this respect, the Act is a success.
On the other hand, credit card companies haven’t lowered their rates (no surprise) and consumers haven’t really reduced their demand for credit (no surprise either). I think this is the equivalent of a plugged safety valve on a boiler and the pressure will continue to build.
A couple of points:
1. The filing numbers in Sept and Oct ‘05 were insane. Anyone who was even thinking about filing BK went ahead precisely because of the changes that BAPCPA (the giveaway to CC companies, er, reform) would bring. Someone who may have been able to hang on for a while longer just went ahead and filed for this very reason. While it is factually correct to say that the number of BK filings dropped off after October ‘05, this merely reflects the decisions of many filers to get out while the getting was still (relatively) good.
2. The number of filings has been increasing every month since BAPCPA went into effect. Several BK gurus are even saying that before too long, the number of filings will equal or surpass the filings in a more normal (i.e., 1Q 05) timeframe.