March 1, 2006

A ‘Mini-Bloodbath’ For Florida Speculators

Some reports on Floridas housing bubble. “The median price of an existing home sold in Palm Beach County in January fell to $393,700, well below the November peak of $421,500 and the first time the typical home has sold for less than $400,000 since July. Meantime, sales volumes plunged as buyers, wary that prices will keep falling and a better deal could be around the corner, waited out the slowdown.”

“The number of sales in Palm Beach County plummeted 39 percent compared with a year ago. ‘Palm Beach County has a mini-blood bath going,’ said David Dweck, a Boca Raton real estate agent and investor. Sales volumes also fell in the Treasure Coast, dropping 44 percent compared with a year ago.”

“Shrinking prices have proven painful for some sellers. Bob Graeve, an agent in Palm Beach Gardens, remembers a seller signing a contract to pay $615,000 for a Gardens home last year. The lender agreed to finance that amount, but the deal fell through, and the house now is on the market for $525,000.”

“The mushrooming number of homes for sale reflects buyers’ newfound caution, said Heidi Cole, managing director of Corcoran Real Estate in Palm Beach. ‘There was so much bubble talk that people got scared,’ Cole said. ‘A lot of buyers are sitting on the sideline waiting to see if prices are going to fall.’”

“South Florida’s five-year housing boom is over. The number of home sales fell 36 percent in Broward to 552, the fewest used homes sold in the county in one month since the Orlando-based state Realtors group started tracking home sales and prices in 1994. In Miami-Dade, home sales in January dropped 28 percent from a year ago.”

“The real estate slowdown also has spread to the once-frenetic condominium market. The state Realtors association Tuesday reported monthly condo sales for the first time. Existing condo sales for January dropped 21 percent in Broward and 13 percent in Miami-Dade, compared with the same period last year.”

“Sales and price appreciation also is declining in Palm Beach County. The number of existing homes changing hands in January fell 39 percent to 586, the fewest houses sold in the county for one month since February 1997. Palm Beach County’s median price for January was $393,700, up just 9 percent over January 2005 and down from December.”

“Prices and the number of sales for existing single-family homes in Lee County fell sharply in January as the inventory of unsold houses soared. The median sales price was $287,200, down 10.9 percent from December’s $322,300. Sales declined 30.7 percent from 1,084 to 751.”

“Fort Myers-based real estate broker Denny Grimes said, ‘The inventory’s still climbing. There are more than 11,000 houses on the market, triple what it was at the low point in the second quarter of last year.’”

“Naples home sales plunged 31 percent in January 2006 compared with January 2005, while condominium sales dropped 41 percent in those same months. Inventory is up more than 400 percent, Brad Inman said. ‘Tell them the sky is NOT falling,’ said Jo Carter, president of the Naples Area Board of Realtors. Also, Carter said statistics can be easily manipulated. ‘I hate statistics. They can be so deceiving,’ Carter said. ‘We live in paradise,’ she said.”

“Buyers like Sharon Raymond who just sold her condo in Davie don’t have to rush to buy the first home they can afford. The 47-year-old school secretary plans to take her time, something she wouldn’t have been able to do last year. ‘You had to make an offer at that moment and give them exactly what they were asking for,’ she said. ‘But now homes aren’t selling nearly as quickly as before. A couple of places have lowered their prices since I’ve been looking. I’m taking that as a good sign.”

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Comment by Ben Jones
2006-03-01 06:08:29

Thanks to the readers who sent in these links.

Comment by txchick57
2006-03-01 06:09:59

Stop it Ben! LOL. You’ve got me so enthralled with this now I’m ignoring my trades! Premarket used to be where I made all my money, now I spend it reading this blog!

Burn Florida! To the ground.

Comment by arizonadude
2006-03-01 06:15:26

Will be interesting to see if the hurricane season runs a bunch of people out of town again. I just couldn’t like with all the chaos down there. Isn’t oj shacking up somewhere down there too?

Comment by crash1
2006-03-01 06:19:38

I quit my job to be a full-time blog reader.

Comment by arizonadude
2006-03-01 06:25:56

How are you paying the bills?

Comment by Pata Nahin
2006-03-01 08:04:43



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Comment by chilidoggg
2006-03-01 06:49:29

I quit sleeping to read these blogs.

Comment by Arwen U.
2006-03-01 06:23:42


Got to focus! I am trying hard not to let Ben’s blog interfere with trading, but it’s not working.

‘There was so much bubble talk that people got scared,’ Cole said. ‘A lot of buyers are sitting on the sideline waiting to see if prices are going to fall.’”

This is the key to the whole bubble. Something becomes a bubble/mania due to market psychology. Robert Shiller’s wife is a clinical psychologist and he admits to being influenced by her in his market theories.

Comment by GetStucco
2006-03-01 07:01:12

Interestingly, many economists I know are married to psychologists; there must be some symbiosis there.

Comment by Arwen U.
2006-03-01 07:07:57

Well, economics being a “dismal science” and all, likely they need a psychologist in the house to make them feel better. Or, likely it’s that economists are downright crazy. I know my economics teacher Cora Lee was . . . (Just adding some more white noise to the blog today)

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Comment by peterbob
2006-03-01 08:35:00

Every psychology professor I know says that mostly crazy people go to grad school in psychology because they are “trying to work out some issues in their personal life.”

That said, I still mostly hang out with them because they’re almost as much fun as economists!

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Comment by AL
2006-03-01 08:16:13

Hummm,,, could this be the same way RE Agents spoke about home values only go up and you need to buy right now of you never will be able to…LOL ,,, sheepie follow the latest news..

Comment by GetStucco
2006-03-01 06:55:59

Something tells me they are more likely to drown than burn, especially after hurricane season revs up again come June 1…

Comment by Left LA Behind
2006-03-01 07:21:59

Couldn’t happen to a more deserving place.

Comment by Housegeek
2006-03-01 06:16:54

Ben sorry for the OT post, but –fyi –Nysar numbers are late again…

Comment by flat
2006-03-01 06:29:11

in 1990-1995 FL kept going up 2-4 % a year
this may be the first time prices go down since the 20’s bubble and depression

Comment by goose_egg
2006-03-01 06:29:32

I have a humble request –

I’m glad to see everyone so eager to participate, but could we try to boost the signal:noise ratio here a little bit? Pretty please?

Comment by bottomfisherman
2006-03-01 06:55:08

No trolling

Comment by GetStucco
2006-03-01 07:01:46

Why are you reducing it?

Comment by Arwen U.
2006-03-01 06:29:42

Anecdote from Northern Virginia,

I noticed a dozen or so homes I’ve “saved” at were taken off the market this morning. (I guess March 1 marked a milestone to delist - in order to relist?). I noticed the inventory numbers that were climbing yesterday in various counties dipped this morning. I’ve also seen new listings come on this morning, and I wonder how quickly the numbers will start to build.

Happy March, everyone.

Comment by turnoutthelights
2006-03-01 07:13:39

Noticed that too. 1st and 15th in my area, listings drop then begin the re-list process. By the next marker, we’re at new high for inventory. Weekly increase running about 10% per week for the last 8 months. Real steady, and reaching serious levels.

Comment by lunarpark
2006-03-01 09:05:16

Same thing here in the Bay Area/CA. Almost always happens around the 1st of the month. Listings will most likely shoot up over the next few days.

Comment by Greg
2006-03-01 06:31:00

I find it outrageous that the Palm Beach Post would publish this quote from Dweck: “When the dust settles, there’ll still be 10 percent to 12 percent annual appreciation.” If, as Dweck asserts, there is a “mini-blood bath going” then how can anyone continue to project 10-12% appreciation? The reporter doesn’t even bother to challenge or corroborate Dweck’s projection.

Is this what passes for journalism in the Post? I suppose you can’t have too high an expectation for the Palm Beach Post, since it features Anna Nicole Smith’s Supreme Court trial on the front cover…

Comment by realestateblues
2006-03-01 06:31:53

Most emailed stories in Fort Lauderdale newspaper Sun-Sentinel.

(last 24 hours)
1. The boom is gone: Home sales fall 36% in Broward
2. S. Fla. home sales market continues to cool
3. Sellers be patient; buyer’s market returns

Comment by txchick57
2006-03-01 06:42:10

Can you imagine how someone must be feeling reading this right now if they bought into the lunacy of the past three years there, especially using suicide loans? It must be kind of like being trapped in a car underwater.

Comment by bottomfisherman
2006-03-01 06:53:35

1. Stop music.
2. Scramble for chair
3. Hope you don’t get left out. ;-)

Silence is Golden

Comment by Betamax
2006-03-01 09:12:26

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Comment by David
2006-03-01 06:50:26

The speculators are bailing. Prices are falling. The housing boom in Florida is over. The masses are increasingly recognizing this. The fat lady has sung.

Bubble Meter Blog

Comment by Betamax
2006-03-01 09:11:42

remember to close your italics

Comment by crispy&cole
2006-03-01 06:50:29

Wednesday, March 1, 2006
Home inventories rise; optimism sags

The Orange County Register
A slowdown in homebuying continued through January in Orange County, causing inventories of unsold homes to rise

It would take 8.9 months to sell all the homes on the market in January, the California Association of Realtors reported.

The last time it took longer was November 1998, when the supply of homes hit 9.1 months


Sounds like a “balanced market”

Comment by GetStucco
2006-03-01 06:55:13

Speaking of balance (or return thereto), the HomeBoy stock prices are plunging once again today on the opening bell, despite rising headline stock market indexes.

I wonder how far these would fall if the PPT (or whoever else is willing to stand in front of moving freight trains) would stop intervening…

Comment by bottomfisherman
2006-03-01 06:50:34

Mark Pateman, a real estate attorney and agent in West Palm Beach, said South Florida sellers can get their asking prices — if they’re willing to wait nine to 12 months. At the same time, a buyer who intends to live in the property rather than flip it as an investment shouldn’t procrastinate, he said.

“If you’re a user, it’s never a good idea to wait,” Pateman said. “Always buy now. You’ll almost always make money in the long run. If you’re an investor, now may not be the best time to buy a condo.”

Ok Mark, I will stop procrastinating and start buying right now. I know you have a new SL, beachfront mcmansion and yacht to pay for. I’ll do my best to help you out.

Comment by LALawyer
2006-03-01 08:59:48

Legal malpractice. If this guy were telling this to his clients, he would probably get disbarred.

Comment by GetStucco
2006-03-01 06:59:09

This is really great — a newspaper reporting that buyers are staying away for fear of catching a falling knife. I predict newspapers in other bubble markets will soon be reporting the same, or else face the risk of ridicule if they ignore such an obvious fact…

Comment by GetStucco
2006-03-01 07:00:01

Oops — that quote thingee did not work the way I thought…

Such is life.

Comment by cereal
2006-03-01 07:41:38

stucco -

$5.00 fine!!


Comment by Penina
2006-03-01 07:57:22

I sent a “letter to the editor” of the Sun Sentinel yesterday (see below) and just got a call from them checking the spelling of my name because they are considering it for publication.

My feelings on the matter are a lot stronger then I indicated in the letter but I figured that I’d have to tone it down a bit to stand a chance of publication.
Sellers be patient; buyer’s market returns
by Robyn Friedman, Special to the Sun-Sentinel
Posted February 27 2006

In the article yesterday the headline reads: “buyer’s market returns”. That suggests it’s a good time to buy.

The housing market has slowed, inventories are way up, sales are way down, prices are flat….. that’s called a “stalled market”, and will likely be recognized as “the peak” once we gain a little hindsight. The next likely phase (already starting) is price reductions and purchase incentives.

Real estate values don’t change on a dime like stocks sometimes do. It’s more like turning a big ship around.

Since price increases have stalled there is absolutely no urgency left to “get in before it’s too late”. Buyers would be wise to wait and see if prices will in fact decline, rather than buying into a falling market.

Although the leverage of buyers is increasing at the moment, a “buyers market” is NOT at or near “the peak”, but rather at or near “the bottom”.

Your readers would be well served with this distinction.

I also question your advice for sellers to “be patient”. There is growing consensus that substantial price declines are in order. Watching inventory rise around you and the value of your asset decline as you remain “patient” may not be a desirable strategy.


Comment by CharlesM
2006-03-01 08:15:53

That’s an excellent letter.

It’s amazing that so many people need to be educated about such basic things like a buyers’ market being near the bottom, not the top!

Comment by Penina
2006-03-01 08:53:08

Yes, it’s especially astounding that we apparently need to educate the professional “expert” journalists.

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Comment by Penina
2006-03-01 09:25:08

Actually, to be honest, I strongly suspect that many of these “expert” journalists have long ago had their “journalism ideals” washed away by unbridled greed and are now self-serving “real-estate players”.

Comment by crispy&cole
2006-03-01 06:59:15

William Lyon says markets slowing

Quarterly profit rises, but home-price outlook bearish

This softening in the company’s markets is continuing into 2006 as the company’s orders have declined for the first eight weeks of 2006 by 31% over the comparable period in 2005,” the company said, adding that inventories are rising as well.

Comment by BigDaddy63
2006-03-01 07:15:38

Everyday the local papers are hammering home the fact that the bubble has burst. It is finally starting to take effect on the perception of buyers.

I keep thinking of that jerk in Liberty CIty that won’t sell for a 50% profit in 2 years. BWHAHAHA….

Comment by bottomfisherman
2006-03-01 07:29:51

IMO, they have calculated the addtional revenue they would receive by selling more newspapers by reporting the burst and it is greater than the amount of RE advertsiing revenue they would loose and/or have already lost.

Comment by bottomfisherman
2006-03-01 07:23:29

Comment by rudekarl
2006-03-01 07:30:40

One recent buyer of a house in Fort Myers said that even with the recent slowdown, this market still seems strong.

“It seemed like a fast-growing market, and also it turned over rather quickly too,” said Abby Shearer, who is moving to Fort Myers from Lancaster, Pa., with her husband, Ryan, and closed on a house this week. “If you saw a good house, it seemed like it wasn’t on the market that long.”

But Shearer said she also noticed that “there’s definitely a lot of homes for sale right now.”

My mom’s lived there for 20 years, and as a long-time homeowner in Fort Myers, she doesn’t think the housing market “seems very strong.” I imagine if these people moved there for a better paying job or to be close to family and plan to stay there for a while, they might end up OK buying now. If I were moving to SW FL, I would have rented for a couple of years to see where the market ends up going. My mom commented to me that she was astonished at the number of houses for sale in Fort Myers.

Comment by auger-inn
2006-03-01 10:35:02

I just got back from a drive down McGregor Blvd in Ft Myers. In the distance of about 5 miles I counted 3 major construction projects underway. One was for single family homes that looked to be in the 2500-3000sqft range, looked like at least 75 houses maybe many more as it was difficult to judge the size from the main street. The other two were multifamily townhome type projects. One was massive (actually just off McGregor on San Carlos) and they only had about three buildings up (probably 25 units) but the clearing could easily fit several hundred of these units. The other was at least a hundred units. None of these were occupied as far as I could tell. Several signs up for “pre-construction” condo sales. I don’t know if they were for the projects mentioned.
This is going to get VERY ugly in a few months.

Comment by Arwen U.
2006-03-01 07:47:41

Off topic - but this guy wrote a letter to the editor today in my local paper. His property tax assessment went from $240,500 to $498,500 in four years - and he lives in a 30-year old house in a flood plain. Maddening.

Comment by peterbob
2006-03-01 08:47:00

Absolutely NO sympathy for this clown or others in his shoes. He has just sat back and watched his property skyrocket in value. He should pay taxes on the current value of the property.

One issue I see coming up in the future: When prices fall, and if property was assessed at the “peak,” will we see a lot more people calling for property to get reassessed? (of course, on the way up, people are less interested in paying their fair share of taxes).

Comment by Derek H
2006-03-01 09:08:14

Before you judge this “clown”, how do you know that he is not a victim of the bubble? Just because his home has been reassessed from 4 years ago. Maybe he’s a retiree that’s been living there for 20 years. It would suck to buy a place with decent property taxes and get reassessed because of the bubble. That’s why they passed Prop. 13 in CA a long time ago.

Comment by peterbob
2006-03-01 09:55:46

No body wants to pay taxes. There’s nothing I can say about that.

But I can tell you that if we are going to tax property, then we should do it fairly. There is absolutely NO reason why a new buyers should pay multiples in tax more than his neighbor who moved in a few decades earlier. Prop 13 has created awful incentives for retirees to hang on to large homes and forced young people to move further away. It should be repealed. And if this guy is going to enjoy the benefits of rising property prices (read more wealth for him) then he should pay more taxes.

If this guy is a poor retiree with low income (in which case he would be in a minority, because retirees have lower rates of poverty than the general population) then you could assess tax liens on his house that would become payable when he sold or bequethed the house. That’s fair.

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Comment by Nicholas Weaver
2006-03-01 12:04:52

OTOH, without Prop 13, you had people forced to sell because of paper gains being taxed.

I believe prop 13 is evil, vile, market distorting, and 100% necessary. People SHOULD be taxed on real gains. But paper gains from a bubble?

Comment by Derek H
2006-03-01 13:57:57

If someone buys a house in 1980 with 1980 dollars, on a 1980 income, then retires, I think he should reasonably be able to expect to pay 1980 taxes. I agree with Nicholas — people should be taxed on real gains, not paper ones.

And what’s up with “Prop 13 has created awful incentives for retirees to hang on to large homes and forced young people to move further away.” Sorry, that’s life. Do you propose taxing people to re-distribute wealth? If I bought a Mustang back in ‘67 and it’s now worth $20,000, should I be taxed more on it solely for the purpose of forcing me to sell it to some young guy who didn’t have a crack at it back in ‘67?

Comment by alsoarlington
2006-03-01 19:10:06

why on earth should one neighbor pay 3 or 4 times more in tax then another with virtually the same house. they enjoy the same services etc from city/state. that’s bullshit and you know it. if people are taxed fairly then taxes would not have to rise so quickly causing new buyers to shoulder more and more of the burden. and it does encourage old farts to stay far longer then they should while everyone else has to pay for their care.

Comment by Derek H
2006-03-01 20:05:08

With the lion’s share of property tax revenue going to schools, I wouldn’t say they enjoy the “same services.” And think about it, if governments spent within their means (i.e., at a constant percentage of inflation-adjusted revenue), then the old farts on average would pay more or less the same amount of tax over his lifetime as the newer guy, adjusted for inflation of course, since housing on the long curve barely outpaces inflation.

Comment by Tom
2006-03-01 08:43:01

Jo Carter, president of the Naples Area Board of Realtors. Also, Carter said statistics can be easily manipulated. ‘I hate statistics. They can be so deceiving,’ Carter said. ‘We live in paradise,’ she said.”

YEAH, we live in paradise. I don’t like looking at numbers. Facts can be deceiving while your local realtor is not. Listen to your Realtors, they know what they’re talking about. There is no need to Panic, buy buy buy! Real Estate never goes down. We live in paradise. Don’t pay attention to the facts.

This has been a public service announcement from the Naples Association of Realtors.

Comment by txchick57
2006-03-01 10:28:06

It’s okay to manipulate statistics if it supports your world view and pockebook though, right Jo?

Comment by Tom
2006-03-01 11:36:26

I think Jo lives in Sacramento and is trying to rent houses out in FL ;)

Comment by Derek H
2006-03-01 09:04:34

“Naples home sales plunged 31 percent. . .condominium sales dropped 41 percent. . .Inventory is up more than 400 percent. BUT: ‘Tell them the sky is NOT falling,’ said Jo Carter. Also, Carter said statistics can be easily manipulated. ‘I hate statistics. They can be so deceiving,’ Carter said. ‘We live in paradise,’ she said.”

Yeah, I bet you didn’t hate statistics when they favored your little game. Remember “Baghdad Bob?” The guy was having news conferences touting Iraq’s “victory” while U.S. tanks are driving by in the background.

Comment by Tom
2006-03-01 09:08:33

Turning Italics off, sorry.

Comment by Mike_in_FL
2006-03-01 09:18:05

HAHAHAHA. They hate the statistics now that they’re showing an absolute implosion in market activity (there is really no other way to characterize a 31% plunge in overall sales and 41% plunge in condos; let’s call a spade a spade). But when it was all “baby boomers will make FL houses all worth $2 million by 2010″ it wasn’t a problem. What a joke!

Comment by lato1394
2006-03-01 10:05:25

I think we need to take a good hard look at who a lot of sellers are. These realtors who are trying their best to convince people to buy are probably the same people trying their hardest to sell their investment properties.

As far as baby-boomers saving the day… well its now March, I thought the spring buying season started after the superbowl?
No right its been post-poned until after Easter, all the baby-boomers who signed the contracts to move to Florida should start arriving Spring/Summer 2006 so all these speculators who are holding out can wait it out a little while longer.

I don’t know about you, but mortgage payments, insurence, hoa fees and taxes all add up. 2500-4000 in payments each month on that investment mcmansion or luxury condo in Palm Beach, they can’t hold out forever. Now imagine the poor suckers who bought half a dozen condos at a half million a peice?

Comment by mrgynch
2006-03-01 10:15:53

I visited the condo (2/2, 750sq/ft, 2 blocks from beach, $800) that I rented for 8 years in Vero Beach; I moved to Lake Mary, Fl., 12/1/05. My old neighbors commented on how slow things are. For instance, 4 of 10 units are looking for renters now, including the one I rented; the owner is asking $1200 for a yearly. Never in the 8 years that I rented were there any units vacant this time of year. The 3 month (Jan-March) seasonal rental rate was around $2500 per month.

About 5 years ago the units sold for around 120k. All the units are identical, all built 30 years ago. The last unit sold for $270k, 9/1/05. A realtor bought one of the units in early 2004. Soon after his purchase, he sent a letter to all the owners saying that he was offered 300k and he turned it down.

His action brings to mind OTC boiler rooms, you know, the bucket shops that create a market among their network, jam the price higher, sell out their position, close shop, and then do it again under a different company name.

Also, my girlfriend and I visited a neighborhood called Saxon ?something? in DeBarry last week, one of her coworkers lives there. Saxon has about 200 sfh. Somewhere between 15 and 20% of the units are for sale or for rent, many homes appear vacant without any signs, and the builders have a number under construction.

The Bubble is wide and deep.

Comment by Jim M
2006-03-01 11:14:27

So glad I got out of Palm Beach County this fall. The couple that bought my place are so screwed.

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