“People Lost Their Minds” In Recent Years: Florida
The Ledger reports from Florida. “September brought more hard times for the local housing market as new home construction and home sales fell sharply, according to The Ledger’s monthly Polk Business Barometer. Polk’s 295 single-family building permits last month plummeted 82.6 percent from a record 1,692 in September 2005. September’s percentage decline, the largest in Ledger records, beat the previous record of 62 percent in August.”
“Mike Hickman, president of Lakeland-based Hickman Homes, said Polk and other areas are now seeing a ‘market adjustment’ after the feverish pace of building and real estate speculation in 2004 and 2005. A continued slowdown in housing could affect hiring levels in affiliated industries, said Hillsborough County economist Kevin Brickey.”
The News Press. “Builders in unincorporated Lee County, Bonita Springs and Fort Myers Beach pulled 444 permits for single-family houses in October, according to the Lee County Community Development Department. Compared to October 2005, a record-setting month, single-family residential permits are down 48 percent, the department reports in a statement released this morning.”
The Orlando Sentinel. “Masterpiece Homes, a major home builder in Volusia County, trimmed about 30 jobs this week, more than a third of its staff, in reaction to the slowing market for new homes. Founder and President Bob Fitzsimmons also took an early retirement as part of the restructuring.”
“‘This was in reaction to marketplace changes,’ said Executive VP Dean Amann, of the parent company. ‘It’s a normal course of business. We had overstaffed the organization” during the building boom of the past several years.’”
The Tampa Tribune. “A New York lender fears it is on the hook for millions of dollars in loans that now total more than the New Port Richey properties are worth. Lehman Bros. filed suit in Tampa on Tuesday against a group of investors, title companies, a mortgage company and an appraisal company involved in potential mortgage fraud at a Pasco County condominium complex.”
“Fifteen defendants used overvalued appraisals in a ’scheme to defraud’ the bank, according to the lawsuit. The 13 properties each were appraised for $733,000. The lawsuit says the triplexes are worth ‘barely one-third’ of that value.”
“Lenders across the country are investigating mortgages that may be worth more than the market value of the properties. Part of the problem, they say, is that lenders usually don’t spot problem mortgages until buyers start missing payments.”
“Lenders are discovering overvalued loans now for two reasons, said Doug Pollock, a mortgage investigator in Sanford. For one thing, fraudulent loans were easily overlooked during the past five years’ real estate boom. Second, industry professionals may be tempted to participate in fraudulent deals to attract business, Pollock said.”
The Herald Tribune. “Piero Rivolta is not completely convinced of the great baby boomer influx that is gospel to so many of the region’s real estate professionals. Though there are millions of boomers getting ready to retire ‘not too many of them are Great Gatsby boomers’ who can afford condos priced in the millions, said Rivolta, the developer of the Rivo condominium on Main Street in Sarasota.”
“Rivolta unabashedly acknowledged the frothy pricing of the past several years. ‘People lost their minds’ in valuing Southwest Florida land here in recent years, he said.”
“During the recent pullback in residential financing, largely because developers are increasingly unable to meet lender deposit requirements, development activity has been shifting to retail, office, hotel and apartment construction, said panelists.”
“‘Watch out for raw land deals right now’ was the message from one panel of bankers. Land with no immediate development plans is almost impossible to finance, as is highly speculative property that depends on substantial rezoning or unusual permitting.”
“Single-family home sales are off by a third statewide this year, down by 42 percent in the Tampa-St. Petersburg market and by 28 percent in Sarasota-Bradenton. Condo data was even worse, with a 41 percent statewide drop this year. Sarasota-Bradenton condo sales were hit harder, down 55 percent in 2006. Tampa-St. Petersburg condo closings fell by 41 percent.”
“Overall residential prices are down across the board by as much as 14 percent, Guido said.”
The Sun Sentinel. “The National Association of Realtors is advertising in some of the country’s largest newspapers, hoping to persuade skeptical consumers that it’s a good time to buy a house. The Washington, D.C., trade group cites interest rates near historical lows, a plethora of homes to choose from and the security of a long-term investment.”
“‘Nobody is telling that story,’ Tom Stevens, president of the Realtors group, said.”
“Part of a $40 million public awareness push, the full-page ad appears today in The Wall Street Journal and USA Today and will run Sunday in The New York Times, Washington Post, Los Angeles Times and Chicago Tribune.”
“Prices of existing homes in South Florida and other parts of the country have declined, compared with a year ago. Many buyers say they’re waiting for prices to fall even more, causing homes to stay on the market for months.”
“‘We see people on the fence right now,’ said Jupiter agent Pat Fitzgerald, chairwoman of a national Realtors committee that agreed to start newspaper advertising. ‘We’re looking at them and saying, ‘C’mon. Let us show you the benefits.’”
“Realtors associations in Palm Beach and Broward counties say they plan to ‘piggy-back’ on the national campaign. Mike Larson, an analyst for Weiss Research in Jupiter, said he understands the national association’s motive.”
“‘Obviously, a lot of agents are hurting,’ said Larson. ‘When agents don’t sell homes, they don’t make any money. That’s what it boils down to. But past real estate downturns have lasted years, and this downturn has a long way to go. I don’t see a reason to rush in.’”
This NAR campaign is going to be a big story today. More Florida links:
‘Momentum is gathering for changes that could have sweeping effects on how much Floridians pay in property tax. ‘We don’t really have a feel yet for where this is going,’ said Orange County Property Appraiser Bill Donegan. ‘But it’s wide open. Every option is on the table.’
‘Throughout three decades , Samuel Vangel clung to his retirement dream of New England summers and Florida winters. Vangel’s dream is all but dead. Property taxes on his Kingston Shores condo have tripled and crushed his hopes of keeping two addresses. ‘They’re getting into a squeeze. The cost of gas and heating oil is going up, and that’s going to be more expensive to maintain their homes up North. Now it’s tougher to sell those homes,’ Lake County Property Appraiser Ed Havill said. ‘Some of these people are really getting into trouble. What happens when you get into trouble is you get rid of the toys, and in Florida the toys are the second homes.’
‘Recent buyers in Florida’s housing market are learning hard lessons, come tax time. Jamie Tingen, a Florida resident for a half-century, she traded up from a two-bedroom to a three-bedroom townhouse on the same street. Her tax bill more than tripled.’
‘If the tax rate stays the same by the time his home is built, a million-dollar assessment would cost Mike and Martha Greer almost $22,000 a year in property taxes. Said Greer: ‘I’m in a situation where, if the assessment stays as it is, I may not be able to afford the house.’
‘Sown in the boom years between 2001 and 2005, the area of Big-Bend Road and U.S. 301 has begun to bustle with sprawl. About 20 subdivisions, totalling about 21,000 homes, have either been built or are planned. ‘If you’re not out there by 6:30, you’re not going because it’s bumper to bumper for as far as you can see,’ Dunlap said of her husband’s former northbound morning commute.’
‘For now, a housing slowdown may be the area’s best hope for traffic relief. ‘The market is cooling, and it’s very possible that there will be less home construction on that corridor than was earlier anticipated,’ Baier said. ‘If you do your homework, you buy a house, you know what development is going to be happening,’ said Ron Proulx, who helped broker the U.S. 301 deal as former president of the Riverview Chamber of Commerce. ‘If it occurs you shouldn’t complain about it. People buying homes are hardly being hoodwinked about the traffic and development situation in Riverview; most people come knowing they will have to deal with headaches for the next few years, he said.’
‘The Lee County Housing Development Corp.’s offer of the reduced-price condominiums in Estero to teachers is welcome news. With 45 applications for 63 units, the program can be deemed a success. Using words such as ‘just’ in conjunction with the program, since it did not reach 100 percent participation, would degrade those it helped. With deadline extensions and increasing the maximum qualifying income, private-sector consortium officials tried to maximize participation for the condos at Osprey Cove, priced $200,000 to $232,000.’
‘The Bonita Bay Group announced Thursday that the condominiums it purchased for teachers are available to public school support workers, firefighters, law enforcement officers and the medical community. The developer bought 60 condos at Osprey Cove in Estero with the intention of reselling them to teachers at reduced prices. Forty-six teachers have applied for the housing. There are 60 condos available, so Bonita Bay decided to open the program to other professionals.’
Lee County Housing Development Corporation director Treva Gilligan said teacher application turnout shouldn’t be interpreted as a lack of interest. Bonita Bay spokeswoman Mary Briggs said she wasn’t disappointed by the teacher response. ‘These condos are available almost immediately,’ Briggs said.’
“The National Association of Realtors is advertising in some of the country’s largest newspapers, hoping to persuade skeptical consumers that it’s a good time to buy a house. The Washington, D.C., trade group cites interest rates near historical lows, a plethora of homes to choose from and the security of a long-term investment. ‘Nobody is telling that story,’ Tom Stevens, president of the Realtors group, said.”
Do their ads tell the story about how far underwater last year’s buyer is by now already?
Maybe we can all chip in to have Ben run a counter ad outlining why it would be stupid to buy today.
That’s an entertaining idea, but actually I think the NAR ad will be its OWN counter-ad. If anybody who has actual money pays any attention to the ad, he/she will probably feel very happy hanging onto his/her wallet.
Actually, the more yelling and hollering by NAR about how people should buy now, the more people realize that the bottom is a few years away. NAR is now recognized by most people as a whore mongering organization intent on separating people from their money for the beneift of their whore-membership, and no amount of advertising will change that perception.
I agree that NAR is their own worst enemy here, but don’t you still run into people who are completely oblivious about the direction of housing prices and who consider themselves lucky to be talked into an option ARM? No matter how bad the news gets, I’m still amazed that there are yet more GFs who want to buy a house, despite the fact they are divorced, broke and have no credit…
Yeah sure, those people are out there…..and they deserve to lose their money and credit worthiness. No research+ no thinking= poor. Should it be any other way?
Wasn’t Tom Stevens finding it impossible to sell his own house?
Yep, from CNN:
“Even the savviest sellers can get stuck in this situation. NAR head Tom Stevens is himself a tweener: He’s been trying to off-load his Virginia home for more than a year. “The housing market is going through a period of adjustment,” he told Congress. “I have experienced this firsthand.”
gotta love it!
I’m sure this helps Tom justify spending $40 million NAR dollars on an advertising campaign… perhaps this campaign will help Tom find the one GF he needs to buy his overpriced, empty Virginia home.
Real savvy when you don’t know enough to make the purchase of your next home contigent on the sale of your existing home. That has only been around forever…way not to know about it.
We talked about that one some time ago. Personally, I think there is a lot of disinformation in it. Just trying to portray a “We’re just like you!” image. Bull.
“The National Association of Realtors is advertising in some of the country’s largest newspapers…”
Is’nt this another NAR contradiction — rolling out a ‘national’ advertising campaign when everyone knows ‘All Real Estate is Local.’
nice spot mrkmaven!
Good lord Ben. Your “after thoughts” in the comments are now as long as your articles.
interesting how the local and state govs blow the $ taxes.pop and inflation barely move, but welfare is limitless
…because “large home selection” is irrelevant right now. Wait and see a larger more desperate selection in a few months/years.
…because “security of a long-term investment” made sense 3-5 years ago, but not at today’s inflated prices. (or maybe “buy low, sell high” has become “buy high, sell low”???)
…because interest rates will always be “near historic lows”. It just depends how you define “near”.
…because no one outside of NAR would believe this “story” to be true.
“Lenders are discovering overvalued loans now for two reasons, said Doug Pollock, a mortgage investigator in Sanford.
…
Second, industry professionals may be tempted to participate in fraudulent deals to attract business, Pollock said.”
Does it make it easier for a lender to discover an overvalued loan if they participated in a fraudulent deal to originate it?
Lenders are certainly not victims of mortgage fraud. They are accomplaces, with their track record of looking the other way at loans that obviously should not be approved. When crooks hear that its really easy to get a huge mortgage without much documentation, its no surprise that mortgage fraud increases. Why rob a bank with a gun when its much more profitable to do it with a willing mortgage broker?
Your so right Pete . One of the reason Lenders use to have down payment requirements was to discourage fraud . Crooks don’t like to put any money in the game ,they like to take out money . Going to need to go back to prudent old underwriting standards and double-checking appraisals to stop the fraud trend .
“…Second, industry professionals may be tempted to participate in fraudulent deals to attract business…”
Hence the downside fraud will be 10x’s worse! Gotta pay for those brakes and top ramen, ohh and MB, McMansion, etc…
Crispy (TM)
Right . If a real estate agent suggests to you that you inflate your selling price because they have a buyer that will only buy if you give them a cash kickback ,immediately report the crook agents to their broker/real estate office, the police ,whatever.
The crooks will take you down with them if they get busted and try to blame you so its not worth it to even think of it . If a agent suggests a listing price that the comps they show you do not support the grossly inflated price ,you might be dealing with a agent that is sitting up a straw buyer to use your property for a fraud deal . Make sure your given accurate comps and double check different sources.
Just remember that normal people don’t overpay from current market comps and listings or fair prices by 50k to 300k unless there is something wrong . The days of the over-bid are gone .
But if you immediately report the the crook agents to their broker/real estate office, and the broker/real estate office says something like “I understand your concerns, but you know the market has changed and about a third of all deals in this county are now being done this way to reflect the changing market place,” then what do you do?
TCM…Than you have a broker/manager in denial or they are a crook also . Than you go to other sources like the police , the real estate board ,etc.etc.
“…then what do you do?”
You go straight to the state’s licensing body and notify them. It should be easy to do, by e-mail or phone. In Florida, it is called the Department of Business and Professional Regulation. They probably have a separate division for the profession you’re complaining about.
But how can you rely on the comps?
They are ALL over-inflated !!
That’s how they got away with over-pricing in the first place.
When has real estate ever gone up 30% YOY ???
They should have been the first clue to start looking into the valuations. Instead, it led to this MANIA!!
‘When agents don’t sell homes, they don’t make any money. That’s what it boils down to. But past real estate downturns have lasted years, and this downturn has a long way to go. I don’t see a reason to rush in.’”
Fools rush in.
It’s nice to see our own Mike Larson quoted in the press, though. Mike, you’ve got to spout more doom & gloom catch-phrases!
‘We’re looking at them and saying, ‘C’mon. Let us show you the benefits.’
C’mon and catch yerself a falling knife.
C’mon buy a house - screw the brakes in your car, just get your shoes resoled!
No resoling until FBs get new jobs! A staple in depression era movies was the pavement pounding job-hunter sticking a bit of newspaper in his shoe to make up for the fact that he had worn through the sole.
I own a lot in a development being carved out of a scrub pine forest near Ocala and just got my property tax bill. Last year was $300–this year is $900. This isn’t a big deal for me but I’m having second thoughts about whether I should hold onto the property with an eye toward building in 10 years. The value of the lot supposed increased from $20K to $60k, although I doubt that it’s worth 60k today. It’s easy to imagine how people with homes feel, especially retired people with fixed incomes who bought recently and aren’t covered by the “save our …” (or whatever law). Also consider young families who are stretched to pay mortgages and suddenly are faced with taxes and insurance bills that rival the mortgage payments. Local governments in FL are clearly facing a revolt when they “double” property taxes by not adjusting for the big paper changes in assessed value. This will also create problems when values go down faster than assessments do. Just what are the local governments going to do with the windfalls?
Get all your neighbors together and all of you appeal your assesment. Assesment appeals are expensive, complicated and embarassing to the municipality/county. Here’s the kicker; make sure you all submit values of $1,001.00 and refuse to negotiate. Demand your hearing and bring lots of bubble data and extraneous evidence and ramble on about liquidity and then launch into a diatribe about how the assesors abused their discretion in the new assigned values. Then the assesor has to actually show that he did the work that by now is obvious he did not do. Make it a circus, especially if you can get a board memeber on your side willing to stand up for the little guy. The cool part is still to come. You all do this and the board can clear 5-6 per meeting. If they don’t address your case in some time period, your estimate is automatically accepted. Teach the b@st@rds a lesson using their own medicine.
The problem with your suggestion is that you presume the assesment is not correct. In SFL most assessments are way under the comps in the area. So even thought tax values are rising they are not rising anywhere close to the market value.
So in 2 years you will have paid more in PT then you paid for the land?
Holy Cow! $900 tax on a 60K lot? You gotta be kidding? Screw that program, get yourself to a state that doesn’t enjoy taxing the sh*t out of it’s residents.
Yes, $900 on a 60K lot. My home in rural Indiana is a custom made very high quality, 8 yr old home, 2000 sq ft, with geothermal heating and cooling, a 2 1/2 acre lot and a second unheated storage/garage/shop of 500 sq ft. I pay $1,000 per year in property taxes on this property, a good deal no doubt, but one that makes me really wonder about paying the same amount for a much smaller, undeveloped lot.
“Just what are the local governments going to do with the windfalls?”
That is my gripe — you’ll find that 95% of them spent it. It’s not there anymore. They added cops and firefighters and administrators and teachers and schools. They should have saved and invested it or, as (presumably) you and I prefer, reduced the tax rate to provide a steady year-to-year revenue stream adjusted only for inflation and actual warm-body population increase.
join one of these
http://www.fcta.org
“Just what are the local governments going to do with the windfalls?”
Invest it in affordable housing programs by subsidizing big builder projects, of course. Heads I win; tails you lose. Ha..Ha..Ha.
The “schools” they are building are mini Taj Mahals… not just a place for learning but a monument to the local school board.
Good point. Some of the new schools are way over the top. With all the new technology, I can understand them putting money into a good computer lab, but alot of the other details are completely ridiculous. My elementary school was at least 40-50 years old and was of a modest construction. It certainly was not an architectural statement. Kind of seems like today’s school boards are more concerned about asthetics than they are about teacher quality.
Agreed. I would prefer to see the rate reduced. However, if they are unwilling to do that, then the windfall should be saved for a raind-day fund or spent on one-time costs (e.g., deferred maintenance, etc.). Using it to add employees makes it a recurring cost that is hard to get rid of once the boom unwinds and the windfall disappears. Totally irresponsible.
OTOH, I’m in favor of impact fees on developers. At the end of the day it makes sense to pay capital expenses like new schools and roads from one time fees. Property tax rates should be set ST current assesments yield a return = population x some inflation adjusted fixed amount and be the same for everyone, no matter when you moved in. Yes, a real estate bubble shouldn’t either yeild a bonanza for the local government or huge increases in taxes. OTOH, current residents shouldn’t shoulder the burden for capital improvements needed for new residents.
Here is what bubble central (West Palm Beach) is doing with the money.
Notice the lovely DOME on the top of the building. Also, the photo museum in City Hall is a nice touch.
http://www.wpb.org/citycenter/index.html
I actually worked on this project (I am a former employee) and can tell you, the costs taxpayers are seeing is about 1/2 the real cost to build this project.
Bill - re: your question “Just what are the local governments going to do with the windfalls (from higher property taxes)?”
i know, they’ll treat them as recurring income, hire more people, and permanently build them into the budget, making tax cuts all but impossible.
I visited Lake Tahoe a few weeks ago. I was pulled over by a cop… driving a BMW motorcycle. (He let me go.)
I guess it helps that Tahoe doesn’t have any real crime and there are lots of absentee landlords who aren’t concerned with what it costs to live there, but don’t be surprised if your friendly local Bubbleland Police Department has recently started driving around in shiny expensive vehicles.
The BMW bikes are a great deal for police. Low total cost of ownership and high resale value and the cops like them and they are safe.
Cote is right. California Highway Patrol ran a test a number of years ago comparing the costs of the BMW vs. the Kawasawkis they had been using. Initial cost of the BMWs was, obviously, much higher, but within less than two years, the lower maintenance costs of the BMWs had wiped out the purchase price difference. They ended the study early, as it was clear that the costs actually favored the BMWs, and the cops liked them much better, too.
Agree with the 2 above.
Where I live in Australia, the police have been running BMW motorcycles for a long time. They ran some comparison tests when BMW started marketing a ‘police special’ version of the K-Series, and picked them because the TCO was lower.
And yes, the riders do like them (I knew a couple via sport). Some police riders in fact purchase their work bikes through the disposal auctions for personal use.
The Polk County school board is trying to do just that with the extra $30 million it got from this year’s proprety tax. They want to use all of the money to give teacher’s raises. I know some teachers are underpaid, but what do they think is going to happen in a couple years when the tax shrinks?
spend it
I think there’s going to be a lot of money needed for future obligations for generous state and municipal pensions/healthcare. These may be well-deserved rewards for these workers — but they are going to be expensive as heck down the line.
I work for county government and can only pray that my pension will be there in 30 years when I’m ready to retire. Can state governments screw their workers out of pensions like the big corps do?
Sin duda. If their investments don’t work out, or there’s a taxpayer revolt, or any number of other possibilities - for example, the 30-years-to-retirement which is almost certain to change.
Hell, in 30 years, we could easily be in and out of Great Depression II, World Nuclear War I, and where you live may be The Republic of South Florida, the Bahamas, and Cuba.
Own a couple of mobile home lots and a rental mobile home in charlotte county, Florida. last year’s taxes, $600. This year $1,750.
Bill - I’m a little late in this posting - but, is it similar to this listing?
http://jacksonville.craigslist.org/rfs/229556037.html
This just in from the WSJ: The Fed admits to causing a housing bubble!
Fed Official Says Bad Data
Helped Fuel Rate Cuts,
Housing Speculation
By GREG IP
November 3, 2006; Page A6
In an apparent and rare in-house critique, the president of the Federal Reserve Bank of Dallas said that because of faulty inflation data, the Fed kept interest rates too low for too long earlier this decade, fueling speculative housing activity.
A number of critics have said the Fed under former chairman Alan Greenspan kept monetary policy too easy from 2003 to 2004. But Richard Fisher’s remarks to the New York Association for Business Economics yesterday mark the first time some Fed watchers could recall a sitting Fed policy maker making such comments.
Ooops…. we made a mistake? I don’t buy it.
Interesting, but also, kind of one of those things we all just look at and say “Duh!”. We all knew that inflation was running like crazy, and we also knew why; as it was cheaper to borrow money then to not borrow it. The Fed, imho, was determined to keep us out of recession; if you use a powerwasher to blow money into the economy (I love that mental image) you can pretty much assure yourself that people are going to keep spending it. But to do that; and at the same time tell us that inflation is not a problem?? Ugh, unless everyone is taking all this money and putting it in the bank (yeah… Sure)…
I don’t buy it. This is no mea culpa here, but rather an attempt to blame bad policy on bad data. The Fed conducted an experiment on the economy by using the “balm” of a protracted period of negative real interest rates to try to fend off deflationary pressures, and what we got as a consequence is the housing bubble. A couple of basis points worth of error in the PCE could not have possibly mattered much to what ensued.
GS, Everyone is in CYA mode…NAR, Builders, now the FED. They know what’s coming ,and will keep up the din so when this really starts speeding up they can say we’re sorry ,but yes we warned you and did our best….
Fisher’s a loose cannon. He’s moved the market several times in the past year.
Maybe he’s finally listening to Danielle, his in-house housing bear.
What was once stated only in private - is now stated in public! Once again the blogs are ahead of the MSM!
“This is no mea culpa here, but rather an attempt to blame bad policy on bad data.”
Precisely. The same reason for the Middle Eastern debacle. Imagine what the money spent on that could have done for the taxpayers of the US. Now it is in the hands of Halliburton, Bechtel, Blackwater etc. Returning vets can’t even get proper medical care in many cases. Sorry if the political commentary offends anyone, but I view the housing bubble as part of the same phenomena. So-called bad data. So, the FBs got bad data, too. Will they be let off the hook like politicians, the Fed, realtors, builders, fraudulent lenders and appraisers, etc? AS IF! If Lehman Bros. gets a good screwing, so be it. I hope they can’t get a dime from those they are trying to sue.
“Middle Eastern Debacle” and your suggestion back in 2002-2003 was to do what?
Not invade a country that had “nothing to do with 9-11″ (GWB II).
NOT overthrowing Saddam, good response. So your strategic answer in dealing with the causes of extremism in Middle East would have been not to do something. So having two democracies surrounding Iran would not be a good thing. Next week we will have your type of thinking in charge, not doing something. Not intercepting terrorists calls. Not questioning terrorists using sleep deprivation, not using water boarding. Not sharing information between federal intelligence agencies. Pretty much the same thinking we had before 9/11. Sorry Ben I will not post OT about this after this. Thanks for indulging me.
Because in the past three years Iraq has made SO much progress towards democracy.
And let’s not forget all the progress towards a better democracy that we have experienced here in the USA throughout this administration’s oversight.
1). Habeas Corpus (the underpinning for the Bill of Rights) is gone. (military commissions act)
2). Banking privacy (patriot act) is gone.
3). Medical privacy (HIPPA) is gone.
4). Communications privacy is gone (unknown act but recent passage overruling FISA act).
5). Jan 04, 2007 we all have to ask permission to leave or enter the U.S.A. (New homeland security provision)
6). RFID chips now being implanted in passports and soon to be req’d in all cattle, pigs, etc.
Hell, there is a couple more big ones and a dozen smaller ones but off the top of my head this will have to do. The reader gets the picture though. This country is going into lock-down mode here in the near future and both parties are complicit. Good luck to all.
NOT overthrowing Saddam, good response
Well, actually, back in the 80’s when he was our allie and stalwart foe of Iran or Don Rumsfields business partner it made a lot sense not to overthrow him.
Remember when Reagan condemed Israel for bombing Saddam’s nuclear plant back in the early 80’s.
Yeah, back then it didn’t make a lot of sense to spend $1 trillion dollars and 2k+ lives to over throw him.
But now, I say hell yeah!!! That’ll teach that damn Bin Laden to mess with the good ‘ole US of A!
My sentiments exactly, skip, auger, jim, halifax. To me, the housing bubble is a symptom of a much larger problem. Bad date indeed. Seems like a convenient excuse for all sorts of vicious acts, financial and otherwise.
OOPS! I meant “Bad DATA”, not bad date. Although, bad dates are not much fun, either. I’ve had a few in my life.
To BP:
No WMD. No contact with Al-Q. No connection with 9-11. USA funded SH, OBL, Madrassas.
Policy? Just ask Richard “house of cards” Perle.
http://www.vanityfair.com/politics/features/2006/12/neocons200612
The West has been liberating the Middle East for centuries:
GWB to Rush 11/1/06: “I say, ‘If they control oil resources, then they pull oil off the market in order to run the price up, and they will do so…”
Current threat? Markets don’t think so, not with Dow at 12K, USD at 85, UST at 111. Are you keyboarding from the ME? Any 1st degree relatives there?
Whenever politicians talk about getting rid of “useless bureaucrats,” the people who collect the data are the first to go. After all, if they do their jobs honestly, they are not cronies, and thus have no constituency.
You get what you pay for.
I paid $1.18 for GWB. I want a refund!!
Faulty inflation data? Huh? Several years back they admitted the 1982-base CPI “overstated” inflation, so they changed it in favor of the CPI we have now!
“Faulty inflation data? Huh? Several years back they admitted the 1982-base CPI “overstated” inflation, so they changed it in favor of the CPI we have now!”
And 1982 was roughly the year all this outrageous borrow and spend ideology started. Make no mistake, we’re gonna pay for this, yet the balloon floaters keep harping on the idea that outsourcing jobs and the enormous shift of tax burden to the masses is a good thing.
When I see Alan Grenspan … he of the $100,000-a-speech fee (or whatever the going rate is) … come out and say something like: “You know what, I screwed up. I inflated the biggest bubble in U.S. housing industry. I’m donating all of my speech earnings for the next 5 years to a foreclosure prevention charity.” Then maybe I’ll get in a more forgiving mood. But frankly, that just isn’t happening. It’s nice to see Fisher make this comment, but where’s the rest of the Fed? And what about the developing bubble in commercial R.E.? So much money is flooding into that sector that it’s driving asset values through the roof and cap rates to multi-year lows. Could that be the next thing to pop? And while we’re at it, where’s the “Sorry for that $70/barrel oil … fundamental started driving oil up and instead of tightening policy enough to cope with it, we ‘accomodated’ those gains by keeping the taps wide open?”
The list of problems that too much easy money has wrought kind of goes on and on when you think about it. As for the current state of FL housing, here’s a piece on how things are going in my neck of the woods …
http://tinyurl.com/ycchlh
Mike: regarding the comm. RE bubble. Thanks for posting. It’s good to see that I am not alone in asking WTF. A new office building broke ground near me recently, and yet I look just down the street and see buildings that are empty. Who is going to lease this new space? Cap rates have become a joke. I am in the bay area, and 5% is probably commonplace. SF has seen some insane deals closed. Is this the result of central banks flooding the world with money?
This is the thing that has gotten me. By looking at productivity and CPI and PCE data the Fed says there’s little inflation (at least until recently). But my contention is that asset inflation is a form of inflation that has yet to work its way into the backward looking consumer price data.
I seem to remember Marc Faber in Tomorrow’s Gold talking about a bowl of liquidity (or something like that) and not knowing exactly where the liquidity would go every time (sometimes commodities, sometimes certain asset classes). But the back to back manias in stocks and housing certainly seem to be shouting that money is not only not too tight, but is way too loose. And eventually, that liquidity will work its way into consumer prices.
After all, one definition of classic inflation is too much money chasing too few goods. Well an asset bubble could be described as too much money chasing too few assets. What you are really getting is a dollar devalued versus housing. And if that isn’t inflationary, I don’t know what is.
Bloomberg had a great story a few days ago titled: “Global cash glut fuels investment boom, rate concern.” It basically makes the point you describe here, and what I’m thinking — asset inflation is the new inflation, the result of too much money floating around in the ether looking for a home. Global central bankers are starting to focus more on this (in Europe, for example). But to date, our Fed has bascially said it doesn’t attempt to control/target asset prices. Here’s that Bloomberg story, by the way …
http://tinyurl.com/yc6hxc
But presently it isn’t chasing too little (consumer) goods, it’s chasing too little returns (stock market, then real estate). In both cases this has raised the prices without improving earnings. Of course rising prices increases the speculative benefit of ownership without improving the underlying asset. Result: speculative bubble.
“Part of a $40 million public awareness push, the full-page ad appears today in The Wall Street Journal and USA Today and will run Sunday in The New York Times, Washington Post, Los Angeles Times and Chicago Tribune.”
“Prices of existing homes in South Florida and other parts of the country have declined, compared with a year ago. Many buyers say they’re waiting for prices to fall even more, causing homes to stay on the market for months.”
“‘We see people on the fence right now,’ said Jupiter agent Pat Fitzgerald, chairwoman of a national Realtors committee that agreed to start newspaper advertising. ‘We’re looking at them and saying, ‘C’mon. Let us show you the benefits.’”
This is astounding. I have one response to NAR and their shameless pandering; FUH-Q!
Or, here’s another response: Whiskey Tango Foxtrot?
More like Tango Uniform for most Realtors™ and FBs.
I have some better ones….
C’mon, let us show you the benefits of KY jelly.
C’mon, let us show you the benefits of buying a declining illiquid asset.
C’mon, let us show you the benefits of buying a new BMW for your local RE agent.
C’mon, let us show you the benefits of BK.
C’mon, let us show you the beneifits of committing mortgage fraud.
C’mon. If it’s such a great deal RE agents themselves need to step up and buy all those homes.
“Lenders across the country are investigating mortgages that may be worth more than the market value of the properties. Part of the problem, they say, is that lenders usually don’t spot problem mortgages until buyers start missing payments.”
Rather disingenuous, wouldn’t you say? These guys were willing to suspend disbelief and gloss over their due diligence just like the average retail scheep so long as the gravy train kept running. They’re no different than Joe Flopper except they have the money to chase down the “bad guys” (better stay away from the mirrors though!)
Gee, this guy works as a shift manager at burger barn. He stated that he makes 130k when he got a mortgage for his 600k house. But we couldn’t POSSIBLY figure out that this might be a problem until he started missing payments. There are none so blind as those who will not see.
What a bunch of BS . You don’t wait until a loan defaults to determine that its a bad loan risk . The whole world has gone mad .
See you guys later, I am writing my resignation letter and getting a job at Burger Barn. This consulting crap is too much work anyway; just oversee a bunch of high school kids and make 130K. That sounds great!
“The National Association of Realtors is advertising in some of the country’s largest newspapers, hoping to persuade skeptical consumers that it’s a good time to buy a house. The Washington, D.C., trade group cites interest rates near historical lows, a plethora of homes to choose from and the security of a long-term investment.”
Today’s stop for the NAR express…
Desperation Station
“Mike Hickman, president of Lakeland-based Hickman Homes, said Polk and other areas are now seeing a ‘market adjustment’ after the feverish pace of building and real estate speculation in 2004 and 2005….”
Gimme a break Hickman! Are you kidding me with this happy talk, ‘market adustment.’
Dude, you are on fire! Duck and roll then run for the exits.
“The National Association of Realtors is advertising in some of the country’s largest newspapers, hoping to persuade skeptical consumers that it’s a good time to buy a house”
so how many are they buying ?
=0
“Single-family home sales are off by a third statewide this year, down by 42 percent in the Tampa-St. Petersburg market and by 28 percent in Sarasota-Bradenton. Condo data was even worse, with a 41 percent statewide drop this year. Sarasota-Bradenton condo sales were hit harder, down 55 percent in 2006. Tampa-St. Petersburg condo closings fell by 41 percent.”
And this is BEFORE the really big panic sets in. Just imagine what it will be like 12 months from now, after no real progress on insurance rates and property tax “relief.” There are a LOT of investor properties not on the market yet, as well as a lot that are for rent, that will go un-rented. A Wil-E-Coyote moment.
Property tax is going to fix itself; when homes are 50% of peak value; suddenly that issue does not seem so important anymore.
My question, what are they going to do with the massive flood of people wanting re-assesments as the values drop (to adjust the tax base downwards)? I have a feeling the tax appraiser is not geared up for reappraising an entire county at a time; but if I remember, there is a law that they must respond in a timely fashion to a tax challange? Anyone have more info on this?
“Property tax is going to fix itself; when homes are 50% of peak value”
Mike — I think that would have been true, and it certainly would be logical — if the local governments hadn’t scrambled to find every possible way to spend the money that came in. But by and large the money is gone. Now I think they will cry like stuck pigs about the thought of reducing local government employment to retrench, causing local commissions to raise tax rates or curtail services. I think we’re screwed either way.
Heck, LOL, look at the employment increase they’ll need in the assessors’ offices to handle the mountain of reaiiraisal requests!
Well assesments ARE “sticky downward” as they say…
Mike, The problem is in SFl most tax valuations are not true market valutations. So even if median prices were to go down 30%-40% the consumer would see only a savings of maybe 10%. Of course if the new valutations were 30-40% under the new market median then you would see real savings.
This is the beginning of the ending of NAR’s credibility with average people who don’t follow the housing news. When the prices decline even faster during the “spring buying season” I expect that many average Joe’s and hopefully, a few gullible journalists will remember the call to buy at higher prices some months earlier.
“A New York lender fears it is on the hook for millions of dollars in loans that now total more than the New Port Richey properties are worth. Lehman Bros. filed suit in Tampa on Tuesday….”
ROTFLMAO! HA..HA..HA.. MEGA bank got stuck with bad loans.
Maven, I think we all here have our anecdotal stories of the incredibly twisted loans ,and financing that went on…The piper must be paid, the banks, foreign investors in MBS’s, hedge funds, even us will be getting that” bill due ” sooner than later. I truly hope our leaders can engineer a solution…..there again, that’s who allowed it to happen.
–
Also un-Employment down ? ahemm….maybe but of what quality? Anyway as most here know. Lots of jobs,and wage increases come at the end, just like 2000, 80’s ,90’s …then boom cutbacks…See Auto, Mtg. lenders, construction. After the election we should be seeing bellybuttons at least…..
There will always be jobs at Burger Barn. Oh, and the tax appraisers office for all the reassesments. Might as well lump in BK attorneys and I can see the next employment boom.
I think the #’s I saw were 60K manufacturing jobs lost, ~150K service jobs created . . . looks like crap replacing quality.
New Port Richey… goes down on you faster than Nicole Ritchie.
Gotta love those arrogant wall streeters getting stuck.
They’re not stuck. Don’t worry. This is truly disingenuous BS.
Not sure I understand your comment txchick. There is a lot of this paper running around wall street. Who will pay when they can not collect.
I think she means that said lender probably either sold the loans or has some sort of derivative strategy in order to offload the credit risk on some other poor sap.
Not stuck? I’ll bet everything I own that you’ll see the likes of JPM, GS, LB taking earnings hits from these loans that were packaged up by Q2 2007. You don’t think these geniuses are already looking deep into their exposed positions?
These things manifest themselves into swaps and derivatives that can blow the hell out of earnings. Having worked at one of the aforementioned, I can guarantee you there will be an impact and that the cause-and-effect relationship for this type of exposure is WAAYY greater than you will ever be allowed to know. There are some bullets being sweat as we speak.
dd
you’ll see the likes of JPM, GS, LB taking earnings hits from these loans that were packaged up by Q2 2007
Or maybe you’ll see the likes of your IRA or 401k or pension fund’s “stable value plan” taking earnings hits from these loans that they bought as a nice, safe investment — while the likes of JPM, GS, and LB who packaged these up and pawned them off simply shrug and move on.
Oh yeah, derivitaves will save them when the flood of foreclosures hit. Can you say, “counterparty default?”
exactly. and to the earlier point they won’t escape (unforntunately) - they eat their own dog food.
dd
I hope we have a followup on this here, after a year or two. I am skeptical, like TxChick, and will sleep a bit better if we’re proven wrong.
A two-line assessment of Florida’s property tax debate:
“Forget fair. Who are we going to be unfair to?”
“Piero Rivolta is not completely convinced of the great baby boomer influx that is gospel to so many of the region’s real estate professionals. Though there are millions of boomers getting ready to retire ‘not too many of them are Great Gatsby boomers’….”
Reading this quote it dawned on me that maybe Zandi of Moodys.com drank the REIC kool-aid and that’s why all his percentage drops predictions are so low and that’s why his timeline for the trough achievement is 2008, it is aligned with the date the first set of boomers retire.
“During the recent pullback in residential financing….Land with no immediate development plans is almost impossible to finance, as is highly speculative property that depends on substantial rezoning or unusual permitting.”
The residential RE credit crunch is here. It’s here. Residential RE lenders are clamming up!
“Mike Larson, an analyst for Weiss Research in Jupiter, said he understands the national association’s motive.”
Is this our Mike Larson? Link: http://interestrateroundup.blogspot.com/
No. Our Mike is Mike Larsen (v. Larson).
It is Mike_in_FL
Check the link and Mike_in_FL link earlier today, look at the pictures, and the name is the same Mike Larson
“Fifteen defendants used overvalued appraisals in a ’scheme to defraud’ the bank, according to the lawsuit. The 13 properties each were appraised for $733,000. The lawsuit says the triplexes are worth ‘barely one-third’ of that value.”
Poor Bank….. I thought property’s were valued at what one would pay in the market place.
I’m confused.
This is the logical consequence of hiring appraisers to “hit the number.”
From the Herald Tribune link, quoting the host fo a large RE conference in Sarasdota: “Overall residential prices are down across the board by as much as 14 percent, Guido said.”
That’s not what the Florida realtors association says (or Moody’s). Quite an admission, for one that actually made it into a newspaper — we are down by close to 14% this early in the bust. I used to think that 30-35% was where it would bottom out. Now, along with many here, I’m thinking more like 40-50% - rational in that it does nothing but give back the above-inflation gains of the post-200 period.
That’s why whenever a lender sees to high of a increase in that short of a time its a questionable deal . Either you got a bunch of speculators driving up the market and its not stable or its some fraud deal where someone is taking the money and running .
Especially now since we are in a declining market it’s not likey that a sale comp has any merit if say it has a 15% to 40% increase from the last sale, as a example .
Also , just because some fool wants to overpay for a property doesn’t mean the lender has to go along with it . Lenders have a right to weight the risk of a higher sale not being the true market trend .
Of course. Last spring some lady in AZ wanted me to lend her $95000 towards the purchase of a $100000 lot-plus-trailer plus “Arizona room”. I said no way Jose. She said how about 90%. I said no way Jose. She said why. I said nobody owed me more than $77K on any comparable property and that that was already a little high. She asked about other lending sources. I said get a concession from the seller.
After all, the question a lender* wants to knowis: “What is the SECOND greatest fool likely to be willing to pay?”
*In this case the bagholder who’s money is actually on the line, not just whoever writes up the loan before it is sold.
It sounds like NAR is trying to make a big push for a spring rally in 2007, with TV/radio ads appearing next year.
Here’s hoping we see part II of the debate.
I’d like to see the wife’s vein pop out when the husband tries to stop her from buying an IO neg-am investment property in Florida.
“Fifteen defendants used overvalued appraisals in a ’scheme to defraud’ the bank, according to the lawsuit. The 13 properties each were appraised for $733,000. The lawsuit says the triplexes are worth ‘barely one-third’ of that value.”
“Lenders across the country are investigating mortgages that may be worth more than the market value of the properties. Part of the problem, they say, is that lenders usually don’t spot problem mortgages until buyers start missing payments.”
————————————————————————-
Sad fact is other sellers used the $733K as comparable on other homes on their market. One bad apple in the a particular market will riple through out current and future sales– as it did for several years now. Correcting for the fraud of one however did not correct values of many. ”
There are frothy layers of fraud, in the RE bubble. They cannot be justified by only low interest rates.
That’s why you have to go back to what is a reasonable amount of increase in a area , in a appreciating market in any given year , verses anything some buyer might pay . Let the buyer put more money down or the seller take back a second to assume the risk in a market that is inflating to fast and that would cut down the fraud to .What if they whole damn block has straw buyers . So lenders can’t necessary go by “market value comps “,to determine value always . Come on ,the lenders/appraisers have got to know the areas . If you have a 80k area and than all of a sudden it gets sales for $160k with nothing leading up to that than it might be straw/fraud buyers .
Own some property in Charlotte County, Florida. A couple of mobile home lots and a rental mobile home. Taxes were $600 last year, $1,750 this year. Appraisal went from 44K to 96K.
everywhere you go, no matter where it is at, people are going to talk and babble about something not going right, but just take a moment in time to clam down… ofcourse everyone wants a home, thats they’re own, or a RTO rent to own. something… but even though u get a house the land isn’t yours, i mean what kind of squato is that? it belongs to the city? then what the hell are we paying taxes for? well, let me re- adjust here for a moment folks the thing is, as long as u got a place to live wether its a condo, a home you bought or that was give to u as a pass on, or a rent to own, duplexs at least its somthing worth for… so take care of what u got and focuse on life and live well