“Slowdown More Intense Than Anticipated”: Florida
The Palm Beach Post reports from Florida. “The newest single-family home community in the village will add 264 high-end homes to the State Road 7 corridor at prices once found only in Wellington’s large-lot communities. A partnership between Centex Homes and Engle Homes, is planning to build the community.”
“Some real estate agents privately bemoaned the development of more homes in an already-saturated market. The Florida Association of Realtors show a 47-month supply of homes for sale.”
“Homes in the community, named Castellina, will range from $600,000 to $1 million for 3,100 to 6,070 square feet of space. The $600,000 starting price is almost double that of Palm Beach County’s current median sales price of $365,500. But Castellina will be in good company. Last week, the Realtors’ MLS showed about 170 houses with roughly the same asking prices in neighborhoods along State Road 7.”
“‘A million-dollar home doesn’t have to be a $700,000 home that’s now priced at $1 million just because the market says so,’ Lewis Birnbaum, division president of Centex Homes said. ‘There’s a lot of homes on the market whose prices are really inflated.’”
“Housing analyst Jack McCabe said Castellina presents challenges. ‘These are very large houses with minimal distance between them,’ McCabe said. ‘My own opinion is this is going to be a very challenged project.’”
The Tampa Tribune. “Undeterred by the cooling housing market, a Tampa developer wants to build his third condo project in the growing Channel District. Ken Stoltenberg has proposed a 120-unit condo tower in the heart of the Channel District.”
“‘You have to look out into the future,’ Stoltenberg said. ‘You can’t look at what’s happening over the past three months and extrapolate what’s going to happen for years.’”
“Steven Bartlett, president and owner of the Spring Hill-based Coral Bay Homes, has turned himself into the Hernando County Jail after a warrant was issued for his arrest last week. With more than $1,000,000 in claims from 134 victims, investigators say Coral Bay Homes could be the largest home building scheme in Florida.”
“Home builders need to take responsibility for their financial state, Assistant State Attorney Phil Hanson said ‘A builder can’t be an ostrich and stick his head in the sand,’ he said. ‘They can’t say I didn’t know where I stood.’”
“With Florida’s soaring housing market coming in for a landing, government economists said Tuesday the state will have lower tax collections next year than previously expected. The state’s consensus estimate for next year’s incoming general revenue dropped by $466 million on Tuesday, almost entirely because of the slowdown in what had been a booming housing market.”
“Economists have noted the slowing housing market, and have warned for more than a year that the pace of sales would soon slow. ‘This is just more intense than what we anticipated,’ said Amy Baker, for the Legislature. She said that while the housing market is cooling off nationally, the retrenchment is hitting Florida particularly hard because of lots of speculative home building here.”
The St Petersburg Times. “Michael Cremeans opened his business in March this year with $50,000 and a whole bunch of hope. His Owl’s Nest Cafe was smack in the heart of Pasco Professional Place, a New Port Richey building that is also the headquarters for developer Lexington Homes.”
“Three weeks ago, his hopes died. He had to close his cafe after Lexington Homes laid off 80 of its 135 employees. ‘I depended a lot on Lexington,’ he said. ‘The building emptied out. At some point, I said, ‘I’ve got to stop the bleeding.’”
“Developers warn the worst is yet to come, as they expect to build about 40 percent fewer new homes next year. Major builders, like Ryland Homes, say it won’t be until 2008 that the residential market picks up again.”
“Some retailers are already postponing plans for more stores, dallying where they would have rushed in before. Last month, Wal-Mart put on hold plans to build a supercenter in Dade City because the company wanted to see more ‘maturation’ in the housing market there, its officials said.”
“As for developers, Lexington Homes is not alone in laying off employees. Builders big and small, from Pulte Homes to Southern Image Homes, have slashed their work forces. Down the production chain, contractors and subcontractors are hurting too.”
The Sun News from South Carolina. “More homes on the market and price cuts make today’s housing market ripe for first-time homebuyers, real estate agents say. ‘Get the Facts’ will be a one-hour free informational session held tonight in Conway. Mortgage giant Freddie Mac created the ‘Get the Facts’ program.”
“‘A 20 percent down payment and perfect credit are no longer the industry standards for getting a mortgage,’ said Theresa Ross, certified consumer credit counselor at the resource center. ‘Today, in most situations $500 is all an individual needs to put down in order to purchase their first home.’”
“Ross said it’s important to look at your budget and decide what kind of mortgage payment you can afford. ‘We want people to be able to live in their homes and not for their homes. Lenders always qualify you for more than what you can afford,’ she said.”
“Rachel Broadhurst said her company recently held a first-time homebuyer workshop. ‘It’s time for them to start to looking around because there’s some good buys coming up out there right now. People are trying to get rid of inventory so there’s a lot to choose from,’ Broadhurst said. ‘Prices are down and there’s more to choose from,’ she said.”
‘One month into the fourth quarter, Florida leads the southeast region and ranks second in the United States in number of foreclosures. So far this year, Florida has more than 95,000 foreclosures.’
A letter to the editor:
‘It is not surprising that Broward County had the second-highest mortgage foreclosure rate among the top 100 metropolitan areas. There are ‘For Sale’ signs everywhere because we can’t afford to live here. Today we are ‘leasing’ our homes from the tax assessor and the insurance companies. The 18 percent to 20 percent increase in revenues into the local government coffers has been squandered by our elected officials.’
“Today we are ‘leasing’ our homes from the tax assessor and the insurance companies.”
That is a great observation! Never been a better time to lease, right NAR?
Recent Florida homebuyers are the biggest suckers on the planet!
How many people’s HGTV fantasy about owning a house has turned into a nightmare reality of their house owning them. Fantasies are cost free but realities are all about choicemaking and tradeoffs.
Which is why I sold my bigger more expensive place last year and downsized to a place for about half the net proceeds. It’s not as fancy and doesn’t have the nice view but the carrying costs (taxes, hoa, etc.) are cheaper and less of my net worth is tied up in it. Peace of mind and better cash flow are worth something too.
About my only regret is that I just recently found out about this site in Barron’s. If I’d found it last year I might have sold and rented, but without a community of like-minded folks it was hard enough going against the grain and doing what I did. But I’m content where I’m at.
Like johnfromia, we have been downsizing our homes ever since the tax law change in 1997. Due to layoffs and job changes and then retirement, we’ve bought and sold more often than we would have liked.
Each “new” house was purchased for less than we got for our “old” house, and we invested or saved the extra. We especially lucked out with the Sarasota house that we bought in 2002 and sold in 2005. Our current house, where we hope to stay until it’s time for some kind of assisted living, is owned outright. You don’t know how good that feels.
Bill in Carolina,
I realize a great number of the posters here are younger and since most of their “frame of reference” for RE is “post 1997″ this is the only realty some have ever known. Seems like with all the wild times many of the older troops have forgotten about the one time exemptions as well! While I agree the previous tax code was pretty inflexible the new law has ushered in the free for all we now enjoy. Because you were afforded to do this incrementally had the music stopped you wouldn’t have been in nearly as bad a place as someone that waited until late 2005-early 2006 and then found they couldn’t sell at all! At any price! I’m not calling for the re-instatement of the old “One Time @ 55″ law (just toning this one down!)
There really should only be 3 or 4 major transisitions in our RE consumption. Renter to starter, starter to trade-up, trade-up to “dream home” and dream to downsize. Making this accessible every other year has created utter madness.
“There really should only be 3 or 4 major transisitions in our RE consumption. Renter to starter, starter to trade-up, trade-up to “dream home” and dream to downsize. Making this accessible every other year has created utter madness.”
This is why I’m skeptical of big government action — the law of unintended consequences.
I don’t write the tax laws, but I do take advantage of them. Former Iowa football coach Hayden Fry had a saying, “scratch where it itches,” meaning take advantage of what the defense (or offense) is giving you. Another saying that works for me is from Buffett (paraphrasing) be fearful when others are greedy and greedy when others are fearful. Whether stocks, houses, tulips, or whatever, I try to go against the crowd at extremes of over or undervaluation.
DinOR,
I know I’m not the only one whose career made him a “gypsy.” A few years here, maybe a decade there. Most of my moves were NOT by choice. When you work for over 40 years in many lines of work, you’re going to have to move a lot.
I must admit that I thought for sure the big gains in house appreciation were over once the Fed’s changed the rules in 1997. After all, if you can keep your gains and buy a cheaper house, why wouldn’t you? I guess I was one of the few who felt that way.
Recent Florida homebuyers are the biggest suckers on the planet!
I thank my lucky stars that I sold my rental units last January. Maybe a bit early, but I’m sure glad I don’t have to deal with the mess down there. Rents were $1100/mo.
I understand the association dues went up to $325/mo, and taxes are now $250/mo.
How the guys that bought these units expects to make any money is beyond me. I wish him well though.
Does anyone have info on the auction of the Buckhead condos? I think it was yesterday here in ATL if I’m not mistaken.
Jackie — I was interested in that, too. I understand that many of the units were t-i-n-y. But it should be a good bellwether.
I believe somebody posted that in the bits bucket.
“Economists have noted the slowing housing market, and have warned for more than a year that the pace of sales would soon slow. ‘This is just more intense than what we anticipated,’ said Amy Baker, for the Legislature. She said that while the housing market is cooling off nationally, the retrenchment is hitting Florida particularly hard because of lots of speculative home building here.”
This is one of the big problems with so much happy talk from Lereah and other REIC cheerleaders. When reality finally sinks in, everything is so-o much worse than anticipated.
David lereah needs to finally come out of the closet and realize what a mess were in. They will talk this thing up all the way down.
Walmart is building stores all over here in and around gilbert. There are about 6 super walmarts within 10 mile radius of me. Not sure we really need a walmart on every corner. Paving over awesome farmland for more un-needed walmarts seems a little strange. I think they are trying to build as many stores as possible before they are blacklisted here as in some parts of california.
If you haven’t done so already, you should try and the rent the WalMart dvd. Pretty scary stuff. The really scary part was watching the CEO of WalMart “pep-talking” to his audience of WalMart shareholders. He sounded like another David Learah, telling the audience that WalMart was socially responsible, created employment, had great benefits, etc. Then the dvd cuts to small towns which have been decimated by WalMart. Main streets with nothing but boarded up stores who were put out of business. Some had been in the same family for 80 years. Most of them paid health insurance and contributed to a pension fund, etc.
It’s gets worse. The dvd moves to China where several Chinese workers beg Americans not to buy WalMart products. They say they work 12 to 14 hour shifts 7 days a week (yes, 7 days a week) with 15 minute breaks to eat. Most make between $1 and $3 an hour. They show a toy made in China which costs 17 cents to produce. It sells in WalMart for $15. They interview US ex-Walmart employees who say they were told if they complain about overtime, they are history. They even interview an ex-WalMart medium level executive employee who was sent to check on a company which manufactures clothing for WalMart in the Dominican Republic. The guy was so shocked at the conditions he saw he went back to his hotel, broke down in tears and had to call his wife.
Back in China (wait for this one!) the workers were offered WalMart barrack room type housing. The rent was stopped out of their wages. However, if they wanted to live somewhere else WalMart STILL DEDUCTED THE COST OF THE WALMART HOUSING from their paltry wages. They had no choice.
I don’t get it. Why would the Chinese workers not want you to buy the products they produce? So they can lose the miserable job I guess. I don’t believe anyone is forcing them to work there in the first place. It may sound callous , but these workers have a choice , and working at Walmart suppliers is obviously better than the alternatives open to them.
Our consumers can pay a lot more (as long as the dollar remains strong!) — so much more that it is more profitable for Chinese manufacturers to incur the cost of shipping and then selling to US consumers than to sell at home. Of course, this is part of the symbiosis, because the reason we import from there is that there wages are so low (which explains why their consumers have no dough!).
“their wages” (must turn on mental spell check before posting)
FWIW, Chinese wages were up 23% y-o-y last year.
Workers in Shenzhen — a city that borders Hong Kong and increasingly attracts computer and electronics makers — earned an average 32,476 yuan ($4,107) in 2005..
China’s labour shortages, which first appeared sporadically in 2004, have now become a more persistent one. The problem has pushed up wages at a time when costs of manufacturing goods are already rising. This is likely to weaken Chinese-made products’ competitiveness on world markets, and force investors to move to lower-cost countries such as India, Vietnam, and Bangladesh.
Chinese factories had to raise the minimum wage this year by as much as 30 per cent to between US$ 70 and US a month, which is three times the monthly wage in Bangladesh.
The shortage of workers is most acute in the country’s export regions, namely the Pearl River Delta, which feeds into Hong Kong, and the Yangtze River Delta, which funnels into Shanghai. For example, it was officially reported that the city of Shenzhen, on the Hong Kong border, alone faced a labour shortage of about 300,000 workers this year. In Guangdong province, the government said factories were short more than 500,000 workers; and in Fujian province, there was a shortage of 300,000.
According to Chinese human resources expert, just a few years ago millions of young people were still flooding into Shenzhen to search for any job at any wage, and factories did not need to put up advertisements to recruit workers or tempt them with incentives and benefits. “Now we put up a sign looking for five people, and maybe one person shows up,” he noted.
This is how wages rise, due to the supply and demand of labor. If only the supply of illegal labor in the US would disappear. Oh how our wages would start to rise again.
HK,
Thanks for that post. Very interesting to hear that, as it’s not mentioned in the US (at least, not that I know of).
We can only hope for higher wages in China — for both the Chinese workers and for ourselves. At this point, it seems the US is on a rapid descent WRT quality of life. As the rest of the world balances out, we can hopefully reach some kind of equillibrium. Perhaps that will come sooner than one would expect.
Thank you for your insight!
If I recall correctly, the Chinese Wal-Mart workers were trying to unionize and I think Wal-Mart finally caved, but just for China. If that is correct, the motive for these workers to tell the story this way is obvious.
Does anyone know who produced the DVD, and their affiliations? Follow the money.
If it’s the dvd I’ve seen I believe it’s put out by PBS’s Frontline. Pretty one-sided. But then nobody likes Goliath. And the thing about the free market is that their customers have the power to shut them down by not shopping there. So far they are voting with their feet and keeping them in business. Who am I to tell them they can’t shop there if they want to?
PBS always a socialist platform, except when Lehrer lets David Brooks have a few minutes.
Mike,
What is this Walmart video you are referring to? I saw Enron: The Smartest Guys in the Room, and really found it interesting. This sounds good as well. We can debate whether the Chinese workers have a choice, but it is rather disgusting, the working conditions and certainly the profit margins on all the plastic crap we buy.
CA Guy
Someone lent my wife the dvd and she took it back after we watched it but I think it was called, “WalMart: The High Cost Of Low Price.” There have been several WalMart dvd’s but I’m ure this was the one I watched.
What’s disgusting is Americans who will sell their souls to purchase products manufactured by slave labor - as long as the price is right, that is.
Unfortunately, it doesn’t stop the dumba$$es from whining that their jobs are disappearing. 2+2=4 isn’t something they like to think about.
http://www.walmartmovie.com/
Mike: thanks for the info. crisrose, as well.
Well, now we see that the real price of a toaster oven is actually 3 times what Walmart charges. Americans traded their future for inexpensive appliances. Back in the 70s if your toaster oven was on the fritz you’d get it repaired, now you throw it away and buy another one from China-Mart.
Actually, some of us still repair our toaster ovens. Now microwaves, that’s a different story…
Walmart is an interesting topic. I believe this company has kept inflation at bay in the United States for years. Where else can you buy t-shirts cheaper today than 6 years ago? Believe it or not, the company has some pretty good ethics. I was reading in a Fortune article not long ago that it expects their executives to double up on rooms when they travel. They don’t stay in high end hotels either. They won’t let suppliers buy them or their families gifts (even if it is a pizza for a little league team). All this translates to allow people to afford items at cheaper prices.
What their suppliers know is that if they can’t produce an item at a low enough price, Walmart will go with someone else. Walmart knows that if it doesn’t go with a cheaper supplier, a competitor will.
I don’t think Walmart is the best thing since slice bread, but I don’t think it is the spawn-child of Satan either. They’ve already started selling generic prescriptions in Florida at a killer prices, which may go nation wide. I can see them forcing pharm companies to drop their prices. Not to bad for a population that isn’t saving jack and getting old at the same time.
You get what you pay for. You pay cheap prices - you get cheap crap. Curious why appliances, clothes, etc. that used to last years now break and fall apart after a few months?
snip:
I just read the story of Jim Wier, the former CEO of Simplicity and Snapper lawn mowers. Wier’s company bought Snapper, one of the highest quality mower manufacturers in the U.S., several years ago. At the time, Snapper had been selling its mowers at Wal-Mart for three years, but shortly after the sale, Wier began wondering if it was a good idea. The company wasn’t making money at the prices it was giving to Wal-Mart. So he decided to go to Bentonville, Arkansas to talk about it with the Wal-Mart v.p. in charge of his products.
When he got there, the v.p. tried to talk him into increasing Snapper’s business with Wal-Mart. Wier told him that his lawn mowers were still too high priced for most of the store’s customers.
“At the price I’m selling to you today,” he told the v.p., “I’m not making any money on it. And if we do what you want next year, I’ll lose money.”
The v.p. told him to find a lower-cost contract manufacturer so they could make a separate, lower-quality line with the Snapper name on it just for Wal-Mart.
That was an option, but Wier did something that might be unthinkable to some manufacturers. He said no.
Wier could have continued with Wal-Mart and not gone out of business, because more than 80% of his sales were with independents. But he decided that he didn’t want to compromise the quality of his products.
http://floordaily.net/features/FeatDistEv0406.htm
I wonder what economists they are referring to in this article because they sure kept it a secret from the MSM.
Every time I read things like this, and having followed Ben’s blog from almost the beginning, I feel like I am playing poker and can read the other guys’ cards and that it’s not cheating. Just amazing.
“This is one of the big problems with so much happy talk from Lereah and other REIC cheerleaders. When reality finally sinks in, everything is so-o much worse than anticipated.”
This annoys me to no end, the mindless happy talk. It is one thing to be optimistic, but to be downright ignorant of the downside is foolish. Evidently Americans are all for throwing caution to the wind. GetStucco is right, they will be stunned when the real world returns.
“Three weeks ago, his hopes died. He had to close his cafe after Lexington Homes laid off 80 of its 135 employees. ‘I depended a lot on Lexington,’ he said. ‘The building emptied out. At some point, I said, ‘I’ve got to stop the bleeding.’”
The ancillory damage of the bursting bubble. The part that the economists completely ignore.
Read the AP link. The economists saw it coming but failed to understand how reliant the economy had become on housing. Meanwhile the builders keep chugging along.
Well thank goodness for that I guess. Cause when the builders stop chugging along it’ll throw another couple hundred thousand people outta work and they’ll stop buying coffee too. And the coffe house owners will also stopo the bleeding and let go a couple thousand more employees who’ll stop going to McDonalds, which will let a few thousand teenagers go , who’ll stop buying CD’s and iPods, and the laid off Apple employees will not get their cars tuned up this year meaning the local mechanic won’t be able to make his mortgage payment and will go into foreclose.. Hey wait a minute….
Economists have noted the slowing housing market, and have warned for more than a year that the pace of sales - and the resulting windfall in taxes - would soon slow.
Now the question, how many states will be in trouble as they have begun to count on these new taxes. Last year California a (IIRC) a $2 Billion windfall. What happens when the money goes “poof?”
This will get interesting. How will states adapt? Some states will really be in trouble (besides Florida, Arizona, Nevada, No. Virginia, and California).
Neil
Ben,
HARM over at Patrick’s refers to this as the “REIC-based economy”. It’s obvious we desperately need a new growth engine and I’m not oblivious to the impacts on the broader economy but I’m not in a place where I can afford to lose a lot of sleep over some poor guy that ran a snack bar in an office complex. True it’s sad but perhaps he should have been a regular here?
Agree with you on the chugging along comment, Ben. I’ve visited the Phoenix area twice in the past month, and the developers are still building like there’s no tomorrow. And they can’t sell what they have on the market right now. Same’s true for the resale home market.
Huck Finn,
Huck I agree so don’t get me wrong but Mr. Coffeeshop can always just pull up his tent stakes and go down the road! Sure they’ll be expenses he hadn’t planned on and it WILL cost him to break his lease but he’ll survive. He’s not joined at the hip to the REIC so he can always find another building to “work”. These guys are as “migratory” as taco wagons or “camp followers”. Let’s not read too much into this. I’m bearish on housing, not capitalism.
DinOr,
I agree , and I was just being a little melodramatic :-).
My point really was that I just can’t stand these constant interviews various economics “experts”, who can’t see the tree for the leaves, never mind the forest. Bastiat’s pane of glass and all that. It’s not capitalism I blame , but the conastant meddling in the supposed free market system by various powers that be. I doubt there would be a housing boom at all if not for the FED’s and the government’s , harmful behavior following the dotcom boom and subsequent bust ( and the enduring nonexistence of reserve requirements and implied protection of imprudent lenders). The economy needs to sleep in the bed it has made sometimes is all. It does not need protection. And will only become weaker for it, in many ways. Bastiat’s pane of glass and all that.
Huck Finn,
Agreed. Hey sometimes you even have to sleep in a bed someone ELSE made! But it’s part of the process and we’d like to think we’ll walk away that much better informed the next time. Much has been said here that there’s no hope for reform in the lending industry. I beg to differ. It will be painful, take a long time and and a lot of money. FB’s will not likely be saved. Next time we’ll know better.
What are you talking about? What do you know about being a Mr.Coffee house? This kind of disrespectful and uneducated attitude is what keeps some people feeling insulated and smug in their own smartness. This thing is going to hit everyone. How do you know this guy has to money to “migratory”.
say what?
Look, I had a very conservative financial practice that was almost entirely ruined by the “last bubble”. After 10+ years of very hard work. Basically gone overnight, started over from scratch.
The inconceivable acts of greed on the part of others had cost me dearly. It cost ALL honest people in the securities industry dearly! Here we are in our mid-30’s to mid 40’s starting over. If anyone has a right to say “you’ll just have to start over” it’s us! That’s just how it works sometimes. Nothing personal.
Let’s look at the big picture for a minute O.K? Fannie and Freddie on the brink of collapse, publicly traded builders already in a panic and millions of soon to be no longer homeowners, who has time to shed a tear for every coffeeshop guy that does or doesn’t go belly up. I don’t mean to sound indifferent here but we have bigger fish to fry right now and yes, coffeeshops go belly up everyday!
Before you blather on about honest people and the securities industry, 4 out of 5 complaints to the NASD are against people that aren’t even registered and have no business conducting securities transactions of any kind.
If that sounds “disrespectful” and “uneducated” pffft, you know what? Just……whatever.
“Rachel Broadhurst said her company recently held a first-time homebuyer workshop. ‘It’s time for them to start to looking around because there’s some good buys coming up out there right now. People are trying to get rid of inventory so there’s a lot to choose from,’ Broadhurst said. ‘Prices are down and there’s more to choose from,’ she said.”
Sounds like a stockbroker talking about fiber optic stocks in 2002. JDSU was a great buy at 60 . It’s a steal at $30. Load the boat at $15 blah blah blah.
“Undeterred by the cooling housing market, a Tampa developer wants to build his third condo project….”
Damn the torpedoes! Full speed ahead. Boohyah!
This is why the Fed should stay the course on rate increases. Can’t they see that housing inventories are already at a record level of imbalance, and that respiking operations will only make this worse?
The Fed is in a pickle, no question about it.
“respiking operations”
Oh I’d be trademarking that one! If there’s enough liquidity out there to even consider further development (especially in FL of all places) it’s pretty obvious that money is still too cheap.
I know that lower rates are the NAR’s “wet dream” but at this point I can honestly say I don’t believe they’ll deliver the “salvation” they are looking for. It would only add volatility, not value.
Isn’t the classic definition of deflation..Plenty of money, but no one buying, and prices retracting?
It happened in Japan from 1990-2006, but it will never happen here. Our Fed is better at pushing on strings than the BOJ.
“respiking operations will only make this worse”
There is already quite a bit of purchase stimuli in the environment including interest rate buy-downs yet prices and demand continue to fall. So, let them respike. Sooner is better. I’m curious to learn if such an inefficient expedition actually keeps housing prices at current levels. Actually, I would be disappointed if they did not respike.
Maven — while I’d prefer that they raise rates and get the pig cooked, because I’m hungry, we’re in agreement that a drop won’t work. Many of us here have long agreed that at this point in the bust, even Fed rate cuts could not put enough air into the bubble to re-float it. The speculators are gone and will not be back, buyers have their eyes open and want lower prices, and lots of FBs are so far underwater they have no air. The Fed knows the bubble was a bad result and I can’t imagine they’d consider reflating it to be a good idea in any sense. They just have a PR need to call it a soft landing.
Actually, if they respike, the McMansion glut will keep growing, and growing, and growing…
‘A million-dollar home doesn’t have to be a $700,000 home that’s now priced at $1 million just because the market says so,’ Lewis Birnbaum, division president of Centex Homes said. ‘There’s a lot of homes on the market whose prices are really inflated.’
I guess he is saying there are million $ houses over-priced by $300K.
“…a 20% down payment and perfect credit are no longer the industry standards for getting a mortgage. Today, in most situations, $500 is all an individual needs in order to purchase their first home. Lenders always qualify you for more than you can afford.”
Yes, perfectly true. Here’s how you do it. You know that 1970’s clunker you’ve been driving to get to work everyday where you earn $15 an hour? The one with bald tires and 190,000 on the clock. Well, sell that for $500 and buy a $500,000 house. Well, not $500,00 but $350,000 should be okay. Then, go to your local Ford or GM dealer and when they punch up your credit they will see you are a responsible person paying a mortgage. That enables you to buy one of Ford or GM’s grossly overstocked inventory with no interest payments.
Welcome to the new America.
That makes me sick. I pay for my cars in cash and don’t believe in debt. Right now it’s harder for people like me to get ahead than the joker that works at burger hut.
Sigh…
At least for you, it’s real. To the other guy, it’s an illusion.
It WAS easier for the burger hut joker due to financing leverages your ability to create wealth. In a good cycle it allows people of very little means to grow at 2 times, 10 times, or even 100 times what they could without the financing they took out. Leveraging works both ways though. It can leverage these same people into debt at the same rates which they have no ability to climb themselves out of due to they are people of very little means (can’t get a high paying job that can overcome the loss) We have rounded the corner and will see many burger hut jokers fall just as quickly as they rose. Their only safety net is bankruptcy which they will choose since they had nothing to lose to begin with. I say keep it ‘real’ and nobody can take it away from you since you DID work hard to pay for the things you have!!!
“…a 20% down payment and perfect credit are no longer the industry standards for getting a mortgage. Today, in most situations, $500 is all an individual needs in order to purchase their first home. Lenders always qualify you for more than you can afford.”
Isn’t this statement exACTly the problem here?…
Only one of many problems, I am afraid…
‘You have to look out into the future,’ Stoltenberg said. ‘You can’t look at what’s happening over the past three months and extrapolate what’s going to happen for years.’”
47 months anyway
Right, like these dolts haven’t been extrapolating price gains into the future for the past several years.
Great…. just what we need. With a four YEAR supply of houses, lets build another 200 or so McMansions that are double the price of the alrady overinflated POS homes that no one can afford unless you take out a liar loan.
HB’s are like sharks, if they stop moving forward they die.
Haven’t they shat enough McMansions into the suburbs of every major US city already?
The ripple effect is just starting to get interesting in some of these states. Based on home building cities had to start infrastructure projections and projects that they may not need. After the building boom is over and people start to relocate into new job markets how many new schools, fire houses, medical facilities, etc will they really need in some of these areas. How are the different states positioned to dole out unemployment bene’s and will people move to states paying higher bene’s? The ripples start out small but will be increasing more rapidly then most government agencies are prepared to act.
(From a previous thread) Very open to slightly OT feedback!
One of the quotes from a builder in LV was that he was already willing to make the statement “boom, bust, boom”! (This in the face of overwhelming negative data on a daily basis). Is it truly possible that LV (or any early boom markets) “has seen the worst of it” and is ripe for a return to a “normal market”? Normal of course meaning 15-25 % a year appreciation accompanied by the usual bidding wars! Could this actually be the bottom for FL? LV? Or is this guy on crack?
He’s on crack with steroids. If anything, we are about to see the
classic “sucker rally” and we should recognize it for what it is, when the last of the greater fools emerge, thinking the bottom has been reached. We on this blog will probably have to suffer through the “happy talk” that will go along with it. But, take heart! The sucker rally happens just before the market tanks for real.
Consumer Spending Is Holding Up? You Do the Math: Caroline Baum
By Caroline Baum
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_baum&sid=aqJzNg5ENnsg
Nov. 15 (Bloomberg) — For two months now, the commentary following the retail-sales report has been that apart from gasoline-station sales, which are depressed because of falling fuel prices, consumer spending is holding up well.
How can that be? Retail sales fell 0.2 percent in October after a revised 0.8 percent decline in September. Sales at gasoline stations fell 6 percent and 11.1 percent, respectively.
“If consumers are using the savings from the sharp fall in gasoline prices to purchase other items, overall sales should not be declining,” says Joe Carson, director of economic research at AllianceBernstein LP in New York. “How are you going to get any nominal GDP when retail sales are falling?”
The average price of a gallon of regular gasoline was $2.232 last week, down from a record $3.038 in the first week of August, according to the U.S. Energy Department. The notion that the money saved topping the tank is finding its way into other goods isn’t borne out by the facts.
“It’s clearly not a one-for-one swap out of gas into everything else,” says Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York. “The drop in spending on gas since July is $6.7 billion. Spending on everything else is up $2.9 billion. The housing malaise is starting to bite,” he says.
First came the decline in home sales. Then home prices stopped rising and started to ebb. Sales of building materials followed suit, falling in six of the last seven months with what Shepherdson says is a typical three-quarter lag to home sales. In the three months ended in October, materials sales fell at a 10.9 percent annualized rate. As recently as March, they were rising at a 32.9 percent pace.
Wealth Effect Reversed
Home Depot Inc., the world’s largest home-improvement retailer, yesterday reported a 3.1 percent decline in third- quarter profit, the first drop in three years. Sales at stores open a year or more fell 5.1 percent.
To expect the slump in housing to be contained, with no spillover effect into other parts of the economy, is unrealistic given its broad reach and generation of wealth over the past decade.
“Since 2001 the market value of households’ real-estate investments has increased $9 trillion, a leap of 70 percent,” Carson says. “The gain in market value the last five years is roughly equal to the outstanding market value of housing when the boom started a decade ago.”
The value of the household sector’s real-estate holdings equaled its stock-market and mutual-fund assets in the late 1990s, according to the Federal Reserve’s Flow of Funds report. Now real estate is twice as large.
Broad Reach
Unlike the stock-market wealth generated by the 1990s bubble in shares of technology and Internet companies, “real-estate holdings are more broadly distributed across income levels,” Carson says.
In the third quarter of 2006, 69 percent of U.S. households owned their own home, just shy of the record 69.2 percent in the second and fourth quarters of 2004. That means the potential fallout could be widespread. A large share of the population benefited when housing was booming; that same large share stands to lose when the housing market sinks.
Unlike the stock market, the housing wealth effect has a tangible as well as an intangible aspect. In the intangible department, homeowners feel wealthier when their assets, be it a home or a stock portfolio, appreciate: They are more willing to spend earned income — or borrow to support spending — without realizing the capital gains.
Homeowners can’t extract equity from their stocks the way they can from a home. They take out a bigger mortgage as the value of the home appreciates.
Inventory Imbalance
The equity-extraction game is winding down, along with home prices. The median price of an existing home fell 2.5 percent in September from a year earlier, the biggest decline in the history of the series, which dates back to 1968.
What’s more, the number of new and existing single-family homes sold “fell 15.7 percent year-over-year in September while the number of homes for sale increased 30.4 percent,” says Paul Kasriel, director of economic research at the Northern Trust Co. in Chicago. Based on the supply-demand balance — or imbalance — “the housing correction isn’t near its bottom, and home prices still have further to fall,” he says.
It is just not credible that the U.S. can remain an oasis of prosperity under the circumstances, to borrow a turn of phrase from former Fed Chairman Alan Greenspan (who, by the way, was wrong when he said that in September 1998).
What about rising incomes? Doesn’t the consumer finally have the wherewithal to support spending after years of dis-saving?
Forever Up?
Spending leads income, not the other way around. Otherwise, how would we ever get out of recession? How would the economy ever come back to earth after a boom?
It’s funny how that works. Something encourages the public to start spending when things are most bleak and to cut back when times are good. Just maybe it has something to do with a change in the incentive to spend and to save, courtesy of the central bank’s manipulation of short-term rates.
It may sound simplistic, but as Kasriel is fond of reminding his readers, income is always up before it turns down.
(Caroline Baum, author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net .
Last Updated: November 15, 2006 03:45 EST
The money saved on gas prices, is going toward paying the cell phone bill that is 6 months behind.
$500 bucks to move into a house is less than a car down payment .
Oh well ,set up for foreclosure .The buyer is either going to be a slave to the house or they are going down . This whole process just seems like a terrible waste to me .
The one thing that was nice about home ownership in the past was you worked hard for the down payment and you expected that your neighbors were screened also . Now that it’s a big party God knows who is going to end up your next door neighbor . Alot of people getting a free car paying $500 bucks to get the house thrown in .
Don’t get me wrong , I”m all for home ownership ,but not like this ,not unearned ,not a speculation game by the masses .
Here’s how to get that house for ONLY $500.00!!!!!
http://philadelphia.craigslist.org/rfs/235229512.html
It has also caused a lot of trailer trash to move into the neighborhood. P.S. Not all people who live in trailers are trailer trash.
I just love to see builders keep on manufacturing those stucco boxes! Imagine how cheap they will be on the market by the end of next year. They will be trying to gives hopmes away when the stauration point is 2 homes for everyone one of us!
This is slightly OT. I looked at the foreclosure.com website. Usually, there are pre-foreclosure lists and foreclosure lists. Is it my imagination or have the actual FULL PRICE foreclosure listings really increased in areas like Santa Barabara, Ca. The reason I ask, is because these properties are listed at full (ridiculous) prices which means, I assume, that there is little or no hope for the person owning these properties to get out of the hole. Anyone care to enlighten me?
I love to see them keep building. The downward pressure on existing homeowners grows even bigger.
Sorry, had to post.
Quotable
“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
You need to have this placed on a sign in PB (ground zero), for future generations!
As a commercial bankruptcy lawyer in Florida I can tell you that the game is just getting started. If the spring is anything like last spring - you can expect a localized depression in this state.
cyrtostachys — it would be great if you could update us with specifics occasionally, either here or at Ben’s foreclosure blog, The Foreclosure Report (link in the right sidebar).
Its very difficult to be specific without risking violating attorney client privilege and professional responsibility rules requiring confidentiality of information. What I can say generally is that whereas between 2002-2004 I spent 75%+ of my time on internet related cases, now 85%+ of my time is spent on real estate related cases.
You said it.
ben, why don’t you call your blog the florida housing bubble blog. enough with florida already. it’s dead. move on to another state. puh- lease.
Don’t worry man. Ben covers it all. If you’re looking for a distraction from Florida, may I point you to Massachusetts (my state) for a little entertainment?
“Foreclosure filings surging in state”
http://www.boston.com/business/articles/2006/11/15/foreclosure_filings_surging_in_state/
Check out this scary spreadsheet. Pay attention to the percent change 2004-2006 column. Holy crap:
http://www.boston.com/business/special/foreclosures/index.html
Things are worse in Florida than any other state right now. I guess you don’t get that?
Florida is unravelling faster than AZ, CA, NOVA and the Northeast. Still, everyone is in trouble.
Sfist,
If you aren’t interested in reading about the Florida real estate bust, then don’t. I skip over his writings on Phoenix, DC, New York, CA,……Thanks to Ben, I don’t have to search every paper in Florida as well as national publications. I get all the info I need. Thanks Ben!
Plus I counted more posts on the state of CA than FL. Why doesn’t Ben just call it the California Bubble Blog. I’m sick of Clownifornians : )
Looking back on this story, it is SCARY how many GF’s there were. I posted this on my blog back in February of 2006. The story ran in December of 05.
I encourage you to read it, but before you do, make certain you are not drinking or chewing as you will spit out everything in your mouth on your computer.
What a difference a year makes.
http://www.palmbeachpost.com/news/content/local_news/epaper/2005/12/18/a17a_boom_preretiree_1218.html
Wow, could people really have been so stupid only 1 year ago?
Buy now, retire later?
Should you purchase a retirement home years before you plan to move in? These folks have. Here’s why
By Aime Dunstan
“Does it really make financial sense? Experts disagree, but for Linda Ward-Willis and other pre-retirees, it’s a no-brainer. “I see the prices of (homes in 55+ communities) going through the roof,” says the real estate agent from Lake Worth. Ward-Willis, 49, intends to buy a home next year to use for her own retirement seven years from now. Her reasoning is simple: “A place that costs $200,000 today might be worth $400,000 in six years.”
Oh, OK. There’s the explanation. No Brain.
Valerie Fuchs and Lawrence Moran bought unit 7100, a $179,000 retirement condo in 2004 10 years before retirement, so they could profit from ‘appreciation’.
According to Palm Beach county records, not content with one rapidly depreciating unit, they purchased unit 6040 in July 2006 for $340,000.00.
Good going, Valerie and Lawrence.
Hernando and Pasco counties are getting wacked. There is no industry other than housing and services for retirees. My motorcycle club went down to Tarpon Springs several weeks ago. The thing that really supprised us was not all the homes for sale, but all the cars along the roadways with “for sale” cards in the windows. Many looked like new!
“Despite the disruption to the economy that storms cause, they are good in one way: When they’re big or numerous as they were in 2004 and 2005, they spur massive rebuilding, which leads to higher sales tax collections and more employment.”
Only the MSM could call storm damage “good” in any sense. This looks like the absolutely perfect example of the Broken Window Fallacy in economics.
http://en.wikipedia.org/wiki/Broken_window_fallacy
Storm damage is a zero sum gain, with just as many losers as winners.
“Castellina…3,100 to 6,070 square feet of space. The bigger homes will include granite countertops, six-burner gas cooktops and outdoor ’summer’ kitchens.”
I guess the 3,000 s.f. shacks get formica, an electric range and a Weber. At least you’ll be able to borrow a cup of sugar without going outside.
Even commit adultery without either partner going outside! (picture it)
LOL.
just wanted to say thanks Ben, I really mean it!! I think I would have lost me sanity by now but the info you post gives hope to many of us renters. That is all I have to say, Thanks, really from a Miami renter..