Waiting For The Bottom To Fall Out In Florida
The Gainesville Sun reports from Florida. “What a difference a year makes. In Alachua County last month, only 215 homes sold here, a 26 percent decrease. The number of condominiums that closed in the year-to-year comparison took a nose dive as well; 41 percent fewer this September than last.”
“‘We have definitely begun to see the effect of declining housing sales,’ survey director Chris McCarty said. ‘As inventory continues to build and houses sit on the market longer, sellers will ultimately realize that they have to reduce their asking prices. This will have multiple effects, particularly on those that are in a position where they must sell, and those that rely on their homes as their primary source of wealth.’”
“‘We manage a condominium whose yearly insurance went from $15,000 to $120,000. It’s a bad, bad scene,’ Aaron Bosshardt said.”
The TC Palm. “The surge in new-home construction in St. Lucie and Indian River counties has contributed to a glut of unused inventory, a housing report suggests.”
“Metrostudy reported 362 homes completed but unoccupied east of Florida’s Turnpike in St. Lucie County in the past three months. Metrostudy projects it will take 8.7 months to fill those homes. The 697 unoccupied units west of the turnpike are an 8.9-month supply.”
“‘There’s no doubt that there’s an excess of newly built developer homes on the market as evidenced by boosted developer incentives,’ said broker Sally Daley. Separately, Tradition in Port St. Lucie came in first in South Florida for new home starts, with 873 units started, however only 235 families moved into those homes. The Newport Isles subdivision in St. Lucie County came in fifth on the list with 429 new starts and 299 move-ins.”
“‘They keep waiting for the bottom to fall out but builders have already offered some very good incentives. They don’t want to lower their prices too much because they want to keep the value that they sold at before,’ said Richard Hope, president of the Treasure Coast Builders Association.”
From Florida Today. “A University of Central Florida study released Friday forecasts a slower-growing economy in the first half of 2007, mostly due to a continued sluggish housing market.”
“In Brevard County, the median selling price in September for a single-family home was $206,100, the lowest level in 11/2 years. That’s 6.3 percent below the August price of $220,000 and 8.5 percent below the September 2005 price of $225,300. It was the third consecutive monthly drop.”
“The number of home resales fell 30 percent September, compared with September 2005. Excess inventory, particularly in Florida’s condominium market, will create lower prices for homebuyers. ‘This, however, does not constitute a bursting bubble,’ Sean Snaith writes in his report.”
The Tampa Bay Business Journal. “Consumer intent to purchase new housing has fallen to its lowest levels since 1991 fueled mostly by the exit of many speculators in the market, Tony Polito, director of Metrostudy’s Tampa division, said. Tampa had 4,228 single-family starts during the third quarter, a 33.2 percent drop.”
“Pasco County saw one of the largest housing start drops, declining more than 50 percent. Hillsborough County’s starts dropped 28.5 percent.”
“Polito said the highest level of finished vacant inventory is located in both Hillsborough and Pasco counties. Finished vacant inventory has exploded, jumping 137.6 percent to 3,970 units, compared to 1,671 units the quarter before.”
The Florida Times Union. “‘Things have definitely slowed down, but it’s not like it’s a depression,” said Roger Day, president of the Clay County-based Rosewood Homes.”
“‘The last three years have seen a lot of growth, but 2005 was absolutely the craziest year of all,’ said Martha Dickerson, for Coldwell Banker on Fleming Island. ‘I would call this a normal market. Before, it was almost like a fantasy world out there.’”
“Much of that spike can be attributed to South Florida investors who came to the area hoping to ‘flip’ houses and make a tidy profit. ‘They wore out the market down there, and then they moved up to the Jacksonville area,’ said (developer) Roger Arrowsmith.”
“But when appreciation and sales slowed, many of the investors walked away from the finished homes, thinking it was cheaper to lose tens of thousands of dollars in deposits rather than pay for closing costs and then perhaps have to carry a mortgage for awhile. ‘So we have an oversupply of finished houses,’ said Arrowsmith.”
The Naples News. “The market needs to burn through its huge backlog of inventory, said Mike Timmerman, managing director of Hanley Wood Market Intelligence. Current levels are at two to three years of inventory, he said.”
“It may get a little worse, at least for some purchasers, before it gets better. ‘The black eye we have had is investors,’ Gates said. ‘Instead of selling to homeowners we were selling to speculators.’”
“That means there will be foreclosures coming down the pike for those who made unwise decisions and got into the market to make a quick buck, Timmerman said. The ‘unique’ mortgage products that were created to get everyone into a house will also, ‘come back to bite us and harder than we think,’ Timmerman said. ‘We all got into where everyone is living for the day,’ he said.”
The St Petersburg Times. “The statewide telephone survey conducted for the St. Petersburg Times highlights the angst over the rising cost of living. Cheri Riznyk sees no other way for her family to afford a home. ‘We pretty much do plan to leave here in another a year or so,’ said Riznyk.”
“The couple is among the 1-in-3 Floridians who said in a newly released poll they have seriously considered moving out of the Sunshine State.”
“James Kelly owns two houses in South Florida but is considering moving to Tennessee, where he just bought a home, because taxes and insurances are eating away at his money. He thinks Florida living is chipping away at everything he has acquired.”
“‘The price of living down here and the land is going up tremendously,’ Kelly said. ‘Florida is getting just like California. … It seems too hectic and a lot of money.’”
‘The price of..land is going up tremendously,’ Kelly said. ‘Florida is getting just like California.’
This is what the housing bubble cheerleaders were saying in the spring of 2005.
Related links: ‘Mark Raudenbush, president of Bonita Springs-based Idyll Construction, said ‘What we have is the froth coming off the top’ following the excesses of the past two years.’
‘I have eight projects in Collier County that are dead’ because to make economic sense, they’d require tenants to pay $33-34 per square foot, said Todd Gates, president of Naples-based general contractor and developer Gates McVey. ‘The average person isn’t going to pay more than $24-25.’
‘Tampa Bay builders dramatically cut back new home construction last quarter, but more finished homes are sitting vacant, waiting for a buyer, research group Metrostudy reported Thursday. Tony Polito, director of the company’s Tampa division said housing starts have fallen by a third and the inventory of finished homes for sale has more than doubled.’
This is also what they said in 2005:
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“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
Every single time I see this I laugh. I used to laugh when I heard that as prices were going crazy, and now its just doubly funny.
Land shortage? That person has never been to FL; and most certainly is blind if they have been. There are empty lots in the middle of many cities; its just the prices that are insane, not a land shortage.
That is going to be a quote that lives in infamy, I think we can all agree on that!
The land shortage thinking is nearly as stupid as “re prices only go up”. Dirt prices are extremely volatile and have no solid metrics to gauge price. Yet the uniformed speculator continues to enter this market and usually get slaughtered. I’ve bought and sold several large parcels over the years and some of the reasons these people buy dirt are frankly hilarious. My favorite rationale is “I need it to hunt on”. For what these retards pay in taxes alone buys me 2 weeks in Canada hunting elk/mooose/caribou, with lodging and airfare.
Cap’n Credit –
This is a great example of the premium that folks seem willing to pay for owning instead of renting.
I used to live in Cold Spring Harbor, LI.
Even though I was on the water I didn’t own a boat.
The dozen or so times a year I wanted to go around the harbor in a boat, I rented one.
It was many, many times cheaper than owning one!
“The dozen or so times a year I wanted to go around the harbor in a boat, I rented one.”
Sunsetbeachguy has a great one-liner about this. I won’t steal his thunder, unless the day is well gone without him posting it.
Bullseye, Reuven.
It’s amazing how much people are willing to pay to “own” an asset (typically a depreciating asset) simply to be able to say “I own an boat/mountain or beach house/airplane. I guess that people can’t do simple math!
I guess that’s why people buy timeshares (my favorite example of mathematical inability) — look on C/L and check out the “maintenance” costs — some are north of $1000 / yr. So it costs $52k per year to maintain a 2 bedroom condo?
So unless you’re REALLY going to use the asset, you’re ususally better to rent than to buy.
So, Captain Credit is a real estate speculator. That explains why he thinks middle income people (like most of us) are “wage slaves”. I have more respect for pimps and crack pushers.
On boats:
An old friend of mine who is a naval architect gave me this description of yachting: “It amounts to standing in a cold shower while ripping up hundred-dollar bills.”
Defintion of yacht (or boat): a hole in the water surrounded by wood, fiberglass or metal, into which one pours money.
OK, this one is from SunsetBeach, almost a year ago: “If it flies, floats or f***s, rent it.”
I’ve heard many former LI and Jersey shore boat owners lament that the worst day of their life was when they bought a boat, the best day was when they sold it. A hulking mass of fiberglass that requires constant maintenance (money) is hardly an inexpensive leisure activity.
The price of..land is going up tremendously,’ Kelly said. ‘Florida is getting just like California.
Ha!
I have property (not as an investment–it’s for living in) in both CA and FL, and I can tell you that FL is never going to be like CA. FL is one big flat low-class sandlot. There’s no world-class *anything* there.
Prices aside, you can’t deny that San Diego and San Francisco are nice cities. What does Florida have? Tampa and Orlando? Please!
The business I’m in forces me to keep one foot in Florida, but there’s nothing nice about it. There’s tons of empty land and–because it’s all flat–one piece of swampland is exactly like the next one.
I think half the state is addicted to Oxycontin, too.
Heard a report recently somewhere, I think it was NPR, that San Diego has lost practically all its middle class. Any truth to this?
For those of us who do not live in Florida (thankfully due to rising costs) how can a condo go from $15,000 to $120,000 in increased insurance costs? Is that a whole condo complex? How much would that be worth to have that kind of insurance bum up?
I suspect it’s a complex. I read a similar case on the Jax Biz Journal last weekend where a complex near the ocean decided to self insure b/c the annual rates went from 250k to 800k! There’s a popular revolt building in FL as a result of ‘out of control’ tax and insurance increases; FL is sinking.
“There’s a popular revolt building in FL as a result of ‘out of control’ tax and insurance increases; FL is sinking.”
Unfortunately, politicians here are campaigning on the “I’ll fix that, I’ll get the rates back down” lie. The next Governor might have some actual clout to *attempt* the impossible — get private companies to cut the heck out of their rates. But what is one junior Congressman or any other pol going to do? All of them think that flogging the costs on taxpayers from the entire country is a great idea, true to their slimy breed. Thinking of Jack Nicholson’s line, they just can’t handle the truth.
On the local level I suspect someone might soon propose a regional disaster insurance compact among the coastal states including SC, NC, GA, FL, AL, MS, LA, and TX. A lot of people in MS, AL, and LA are still fuming over unpaid insurance claims. It’s an issue ripe for political exploitation, IMO.
Also, don’t forget Florida has enough electoral votes to sway national elections one way or the other a la Bush v. Gore debacle. National leaders will not be able to ignore the plight of Floridians for too much longer.
Seems to me that a better way to lower insurance costs is to stop building houses in flood zones and start using better materials then particle board and stucco
Chip, as usual, you’ve nailed it with regard to the political scene. Tweedledum and Tweedledee, what a choice. One is all moist brown eyes and nods of sympathy, the other one walks around blatting into the face of his running mate. Both have plans, but plans are nothing unless they are put into action. There will be no insurance relief. At most, maybe an increase in the homestead exemption.
Palmetto — I agree — a doubling of the homestead exemption will likely be about all they can come up with as a feel-good. I think that mrktMaven is right, too, that there will be a “coastal alliance” proposed, but just imagine how the politicians will divide the risk in their minds, versus how the insurance companies would do it. Unless they try to become Leviathan Inc. and operate a huge version of Citizens (try to imagine FEMA running an insurance operation), I’m skeptical they can sort that out satisfactorily before the current mega-storm-cycle is over.
I have a simpler solution:
Lower the price by 50%. Cut the Assessment by 50%.
Then taxes and insurance will decrease by 50%.
Problem solved.
“‘We manage a condominium whose yearly insurance went from $15,000 to $120,000. It’s a bad, bad scene,’ Aaron Bosshardt said.”
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Typo???
Maybe they mean the whole complex.
Yes, if Aaron “manages” a condominium, it would be the whole bldg, not just one unit.
Yes, if Aaron “manages” a condominium, it would be the whole bldg, not just one unit.
I am suprised that some ambitious congressman from FL or SC , NC etc has not made a run at a seat based solely on a campaign of ending the recent price-gouging by the insurance companies . Rove would’ve been all over it.
I seriously doubt Rove let the insurance issue slip by him…..rather positioning it for a much more important political contest…..’08.
Think about it for a minute…FL….Presidential Election….Close race. Hmmm….where have it seen that before?
Hate him if you will; he’s not stupid and little, in the way of political fodder gets by him.
“I am suprised that some ambitious congressman from FL…”
It’s already a campaign issue. One of the candidates for governor is campaigning on lowering taxes, insurance and saving FL families. It’s a really big crisis guys. Most Florida families cannot afford to live in FL anymore.
Almost nobody I know who owns a house could afford to sell that same house back to themselves because of the tax implications (losing their SOH cap). That should tell you, danger ahead, if nothing else does.
Also, if you take into account the increased price of the home, I would guess that 90% of the people I know could never afford to buy the same home again with the income they have now. That should say “crazy danger ahead”..
They want to give “portability” to the tax exemption down here. That would get property moving again, but it would be the end of the RE market down here. Those who bought 20 years ago would have taxes 1/4 to 1/5 of those who buy today. And that situation would never get better; at least now, when you move, the taxes are equal again. If they pass portability, that will be the end of RE in S. FL; it will effectively cut off all new sales, only people who own now will be buying anything down here for a long time.
Isn’t there anyone in Florida who realizes that killing capital mobility is really, really bad for the economy and severely limits the value of the capital? They should do a little research into the Middle Ages.
Residents of coastal communities are the ones getting pounded by the heavy insurance premium increases. There are only three possible sources of payment for those premiums: 1. from the owners who benefit from the coverage; 2. from other taxpayers in Florida who do not benefit from the coverage (relative to the risk premium); 3. taxpayers of other states. The pols imply that #3 will work. Sure.
I’m one of the ones planning to buy out of state for retirement, after a lifetime here, primarily because of the taxes. I don’t like it, but that doesn’t make it some family in Louisville’s responsibility to help me stay.
Agreed, Chip. I’m just hanging on here myself, planning to move if things don’t improve. Either that, or just snarf up a little plot of land and put a tiki hut on it and live the good life, if there’s any left to be had.
They don’t want to lower their prices too much because they want to keep the value that they sold at before,’
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Until they can’t! Then they will just screw the comps and drop the price!
Yeah, competitor pricing will take care of that kind of wishful thinking.
“‘Things have definitely slowed down, but it’s not like it’s a depression,” said Roger Day, president of the Clay County-based Rosewood Homes.”
It’s not a (depression, crash, bursting bubble, hard landing)…
PIck a disclaimer, lather, rinse, repeat.
Yeah GS, these guys up on this side are not prepared for the worst. At the moment, they are residing in a bubble induced reality detachment coma after getting jacked up on all the recent price increases. I suspect in 3 - 6 months the fallout will become very evident in Jax and the surrounding areas. It’s a comparative geographical location phenomenon where prices drop or increase in South FLorida then the trend slowly works it’s way up North.
Tradition is “supposedly” going to be the biggest development in all of FL, up in St. Lucie area. Its going to have its own police system, hospital; basically a self sufficient city.
However, for people who know the area, where on earth are going you work. Everyone I know from up there commutes down to WPB or futher south for work. For those who know the area, that is a horrific commute (40+ miles, 1 hr min).
I always wondered who on earth was going to buy all this crap; people always say that PSL is the next Miami. I just shake my head and laugh.
Yeah and there are a lot of fools buying on that premise; I know a couple of them. The area was orginally marketed to retirees but prices drove some regular families further up North and as you say the commute is no picnic even on the Turnpike and forget about 95 with all the ongoing construction in PBC.
“thinking it was cheaper to lose tens of thousands of dollars in deposits rather than pay for closing costs and then perhaps have to carry a mortgage for awhile.”
And if the builder gets desperate enough they can take that deposit money and lower the new house price even below cost and still break even. This will push prices even lower, which will drive comps down, which will make those who just bought at the high prices even more underwater.
Yes, but if even the flippers have figured out that deposit is peanuts compared to the price drops, I suspect that this is a minimal factor.
Deposits for new homes are getting very low in parts of SoCal, as little as $800 in some cases. Builders are doing everything they can to get a buyer on the hook. With lower deposits it’s getting easier to cancel.
Which means that deposits are being used in the opposite manner to what they are suppose to be used for. They are supposed to keep the buyer tied to the purchase agreement so that its safe for the builder to build, but if they lower the deposit then it makes it easier for the buyer to bail out leaving the builder holding the house. Looks like the sales department is screwing over the rest of the company since they are getting sales which are not sales.
Yes, and the higher “sales” figures prop-up the stock price. This is the statistic (increased new home sales figures) that Greenspan and others pointed to as evidence the HB lull was at an end. This stat was a poor indicator when buyers were putting down $20K for a new home. But now it is totally bogus, the low deposits can cause the cancellation rate to go higher. It’s already in the 25% to 40% range for most builders.
$800 ? - at that level, it’s more like a short-term “option” to purchase rather than a deposit.
Yep, instead of “in for a penny, in for a pound.” they’re hoping for “in for a farthing, in for a fiver.”
In Gainesville, my observations of the local RE market indicate that 40% of the listed homes are vacant. Due to the presence of UF, the rental market is large but not limitless. Delusional real estate people continue to think that SoFla refugees are going relocate here,
they’re not. The property tax scheme here is a great disincentive to purchase, anyone with an ounce of sense has cashed out and left the state. Its gotten so bad here that I am living rent free, I pay utilities and and provide caretaking services on a small (100+ acre) farm. Its not a posh estate by any means, but it looks like another year of 10k + in the old savings account.
Sounds great. I am about to pay a visit to So Fl relatives. Of course I want something more coastal and warm, but if the cost gradient is huge I would consider saving some dough. I don’t need a job.
Savings? What is that? I’m unfamiliar with that word? Can you explain yourself? You sound un-American.
I think for most americans, “savings” is the amount of credit left on all of their credit-cards, plus the amount that some bank is willing to get them a mortgage for.
“For things to really pick up, the market needs to burn through its huge backlog of inventory, said Mike Timmerman, managing director of Hanley Wood Market Intelligence. Current levels are at two to three years of inventory, he said, but “people are beginning to see the light at the end of the tunnel.”
Can you imagine if any other business had two to three years of inventory available what would be going on. Think about it. Put it in perspective. Where the hell would you store two to three years of automobile production at one time? Two to three years of anything! Pick your favorite product! It is truly mind boggling.
Luckily housing inventory is fixed, so there is no problem with figuring out where to store it
The same thing about sales volume being off by 30%… When applicance and automobile sales dip 10% it’s alarming news to the MSM.
And economists just keep on saying, “There is no immenent recession coming”
““…people are beginning to see the light at the end of the tunnel.”
Unfortunately, the light at the end of the tunnel is an oncoming train.
…and the train is carrying toxic waste.
…and high explosives. And manure.
I think will all the manure from the past 5 years a little more won’t hurt anything.
- ‘“For things to really pick up, the market needs to burn through its huge backlog of inventory,’
Boldly, the builders and spec’s are still pulling permits. The woodpile continues to grow.
“Can you imagine if any other business had two to three years of inventory available what would be going on. ”
Bingo! Can you say “Depression” - larger than any on record.
to really pick up, the market needs to burn through its huge backlog of inventory,
Is he telegraphing something here?
“For things to really pick up, the market needs to burn through its huge backlog of inventory, said Mike Timmerman, managing director of Hanley Wood Market Intelligence.”
Timmerman might be good at collecting tons of unrelated MI data but he certainly does’nt have the capacity to absorb, synthesize, and interpret said data. Moreover, his statement reflects a high deficiency in basic Marketing principles.
Wow. LOOK at how many sources Ben gets to quote now. Just about every major city in Florida… Remember 8 months ago, when he would just link one “somewhat questioning” article about the future of housing?
Wondering if anybody has theories as to why the MLS stats for miami-dade don’t show any big losses ala palm beach county. Speculative building here is second to none. Is there some kind of skuldugery going on with sales stats? Is it just plain low sales volume at high prices (a trickle of greater fools) .
I firmly believe MLS stats are being manipulated. Miami culture is so fraud prone anyway so there is no reason to believe otherwise. Just look at Broward and rest of SFL how could Miami be different? The answer is they are not.
- ” Speculative building here is second to none.”
STOP IT! You have not been to So Cal obviously. The developments in Riverside, San Bernadino, Plamdale, Lancaster and High Desert can not be matched.
Sobay posts “STOP IT! You have not been to So Cal obviously. The developments in Riverside, San Bernadino, Plamdale, Lancaster and High Desert can not be matched.”
The SFV and Oxnard/Simi Valley/Venture are hot on thier heels!
“This will have multiple effects, particularly on those that are in a position where they must sell, and those that rely on their homes as their primary source of wealth.’”
Luckily there are not many people who are dumb enough to rely on a depreciating asset as their primary source of wealth, right?
I think Florida had more like a 40% investor/speculator run-up between 2004-2005 ,(apparently 7 to 9 % is more normal ).Than came Katrina and than came the insurance rate increases ,plus the over- building . IMHO the speculators went nuts in Florida like they did in 1926. I just don’t understand why Florida is prone to this sort of mania where you get prices going up 39% in one year . Are sunshine states more prone to manias ?
Good question. Everyone wants to live in Florida! Not!
“Consumer intent to purchase new housing has fallen to its lowest levels since 1991 fueled mostly by the exit of many speculators in the market, Tony Polito, director of Metrostudy’s Tampa division, said. Tampa had 4,228 single-family starts during the third quarter, a 33.2 percent drop.”
Prices will have to fall to reflect the sudden exit of speculators who were willing to outbid all rivals in order to catch the self-induced wave of record appreciation. Most folks who want a home as a place to live will not be willing or able to pay anywhere near the levels to which gambling flippers bid up the prices.
This time, as opposed to the 1990’s, these over extended speculators are all going to shake out very quickly. This isn’t a recession driven correction. It’s a correction due to the bubble ending, the loss of growth.
The market will hit a brick wall.
And then we’ll have the recession :-;
I have been keeping track of MLS numbers in the Mid-Florida Region. The Metro Orlando area to be exact. I’ve been doing this since February 9th of 2006. I believe Metro Orlando encompasses Orange, Seminole & Osceola Counties. On 2/9/06, the number of listings that were “Active” for sale in the tri-county area were 13,883 (these listings include houses, condos, vacant land, mobile homes, etc . . . ). Additionally on 2/9/06, the number of listings that were “Active” for sale Single Family Homes in the tri-county area were 10,154. Today the numbers have increased by 50%. Total active listings in tri-county area is 21,869. For Single Family Homes the current active listings is 15,664.
I believe we are only at the beginning of the downward trend with numbers like these it will take months or even years for the inventory to subside. Furthermore, there are many other sellers out there that I can’t account for because they are FSBO.
The housing crash hasn’t even begun yet. When this fiasco is over, an entire generation will be soured on Real Estate. Dad’s will tell their sons - never buy a house, always rent. Real Estate Agents will cease to exist as a profession. Houses won’t be selling at prices 1/3 of today’s prices. Lowes will be bankrupt. A 2×4 stud will sell for $0.80.
George Campbell-
Good !!!! What you’ve described is the best thing that could ever concievably happen to a real-estate market as warped as what we’ve been thru the past few years. Its needs to be completely and totally destroyed and re-built from scratch. Hopefully in a sane manner. Anyone who has hoped to make quick money on fiipping deserves to be living out of a cardboard box under the overpass for the next 10 years, for the damage they’ve done.