On The Cusp Of A New Direction In Florida
The Florida realtors have the October sales out. “The pace of home sales in Florida continued to slow in October. A total of 12,773 existing single-family homes sold statewide last month, a decrease of 22 percent from the 16,407 homes sold during the previous October, according to the Florida Association of Realtors.”
“Looking to Florida’s existing condominium market, sales of existing condos also decreased in October, with a total of 3,440 condos sold statewide compared to 5,001 in October 2005 for a 31 percent decrease, according to FAR.”
“‘Inventory levels appear to be stabilizing and sales prices also are leveling,’ says Dorine Longhini, president of the Realtor Association of Greater Fort Lauderdale. ‘This is good for buyers, who have more options in the market, while the biggest impact has been on speculative buyers.’”
“‘I see evidence that the real estate market is on the rise,’ says Jerry Mabus, president of the Realtors Association of St. Lucie and broker associate in Port St. Lucie. ‘We’re on the cusp of growth in a new direction.’”
The Baker County Press. “Baker County residents who believe the area is growing too fast can relax a bit. The real estate and housing slump that began nationwide during the summer is clearly obvious here as 2006 draws to a close. The balloon that was a frenzied re-sale and new home market the past two years has burst, and property priced at ‘old’ levels sits unsold.”
“‘The way the market is now, sellers are having to come down on prices, it’s no longer their market,’ observes Wayne Combs of a Macclenny real estate company.”
“So, what do we know? The bubble has burst, no one disputes that as November draws to a close. If you were a seller and wanted in on the feeding frenzy, that was 2005 and half of 2006, you’ve missed the boat.”
The Miami Herald. “The two-acre parking lot next to the Bank of America Tower in downtown Miami rode the building boom to the top. Today, there is no construction on the site. The deals have collapsed, the buyers are locked in a court fight, and the original owners have the property back up for sale.”
“‘There is a lot out there for sale,’ said Adam Greenberg, president of BayBridge Real Estate in Miami. ‘But a lot don’t make sense because they come with designs that are very expensive to build or with condo sales contracts that are below market.’”
“There are 22,254 condo units under construction in Miami, according to the city’s planning department. That’s compared to 15,525 total units that went up since 1995.”
“Meanwhile, 29,558 condos have been approved by city commissioners for construction, and developers have proposed another 30,674 units that city planners are reviewing. These number say nothing of the building in other towns across Miami-Dade and Broward counties.”
“You’ve heard the pitches for home mortgages that just about anyone could get: 100 percent financing! No closing costs! One percent interest! A lot of South Floridians did indeed rush into these unconventional mortgages in search of a bargain. Now some are finding themselves trapped by monthly payments that are about to soar, even as the real estate market slumps.”
“Cynthia Cariseo is struggling to make interest-only payments on an option adjustable-rate mortgage for the Dania Beach town house she bought last year. Cariseo said her broker cited an interest rate of 3.4 percent, but didn’t tell her it applied only if she made a minimum monthly payment. The actual rate: 8.4 percent. And if she wants to refinance, she gets hit with an early payoff penalty of nearly $8,000.”
“Cariseo put her vacation home in Mexico on sale last week, hoping to raise enough to pay off the mortgage. ‘I am stuck,’ Cariseo said. ‘My payments have gone up three or four times. I know I’m not the only one, but that doesn’t make me feel any better.’”
“In 2006 alone, more than 15 percent of new home loans in South Florida were what is known as ‘payment-option adjustable-rate.’ The real hikes are likely to arrive en masse by next summer, when payments go up for more people.”
“”People will avoid foreclosure at whatever cost because it ruins your credit,’ said Ana Valenti-Brisuela, a South Miami real estate broker who also does financial planning. ‘But some, especially those who bought at the peak of the market last year, are going to sell for $50,000 or $100,000 less than they bought for in order to save their credit.’”
“Julio Escobar, who lives in North Miami Beach, said he didn’t know what he was getting into when he took out an option ARM. When he refinanced again into a fixed-rate loan in September, his payment had risen to $1,300 and, to his astonishment, his balance was $211,000.”
“‘I was throwing money away,’ Julio said. ‘The broker we did the deal with didn’t really explain all that, or maybe it was a mistake on both sides.’”
Here are the breakouts for single family and condominiums. Lots of double digit negatives.
Related links:
‘By region of the country, median prices were down the most in the South, a drop of 7 percent followed by declines of 5.2 percent in the Northeast and 1.2 percent in the Midwest. Lereah said the big price decline in the South could represent not only sellers adjusting their asking prices but also a changing mix of sales with lower-priced areas of the South such as Texas seeing an increase in sales while high-priced areas such as the Washington, D.C., area and Florida still suffering sales declines.’
‘ The number of Florida visitors fell by 516,000 in the third quarter, confirming fears that a hangover from last year’s unprecedented season of hurricanes would afflict the state’s $62 billion tourism industry.’
Sort of OT but if I was stuck with a Florida property I think I would Heloc the hell out of it while I could still get inflated appraisals, get ride of the cash and then wait for the forclosure notice.
Unfortunately, I don’t think your the first person to think of that.
I’m sure I’m not, but that’s what is really amazing about the lending standards still being so loose. As it stands an FB who is going to get his credit rating trashed anyway can in effect still get his 05 dream selling price.
If you saw the forclosure coming you could get a heloc and use the money to buy a smaller home you could afford. Your credit would get trashed but you would still have a house in the end.
That’s what I’m thinking and I’m amazed that the supposed smart / big money guys haven’t closed the money spigots to keep the dumb money trapped in the mcmansion.
Attempting to sell the McMansion you can’t afford and downsizing into a smaller home would also look good to the Bankruptcy courts. It shows you were atleast trying to manage your debt. From what I understand the equity in the new small house would be protected so long as you live in it.
“The number of Florida visitors fell by 516,000 in the third quarter, confirming fears that a hangover from last year’s unprecedented season of hurricanes would afflict the state’s $62 billion tourism industry.”
Or is consumer spending dropping now that you can’t refi into lower payments?
“Or is consumer spending dropping now that you can’t refi into lower payments?”
Good question.
I believe there is so much mortgage fraud going on with houses be appraised for more than they are being sold for, so the buyer actually walks away from the closing table with money instead of bringing money to the table. I don’t believe these selling price numbers that are being fed to us by the NAR are any more accurate than the NAR’s assessment of the housing market.
Real quick. Bernanke summary
Bernanke
11/28/2006 12:52 PM EST
From the prepared text, which sounds to me like a “steady as she goes” approach from the Fed chairman, i.e. the Fed remains ‘data dependent’ with a slight bias toward tightening:
– “The deceleration in economic activity currently under way appears to be taking place roughly along the lines envisioned in the Federal Reserve’s July report.
– Outside of the housing and motor vehicle sectors, economic activity has, on balance, been expanding at a solid pace. Perhaps the clearest evidence of this broader economic strength comes from the labor market.
– The indicators in hand suggest that real GDP growth this quarter is likely to be in the same general range that it was in the second and third quarters.
– A reasonable projection is that economic growth will be modestly below trend in the near term but that, over the course of the coming year, it will return to a rate that is roughly in line with the growth rate of the economy’s underlying productive capacity.
– Looking forward, core inflation seems likely to moderate gradually over the next year or so. Some of the factors that pushed up core inflation in the recent past–in particular, energy prices and shelter costs–appear likely to be more neutral in the coming year, and inflation expectations remain contained…the risks to the [inflation] forecast seem primarily to the upside.”
Position: a little hawkish but nothing that should give dollar bears anything to really worry about
That’s one way to read it. Personally I think it sounds like an “Oh my god things are so more awful than we thought they’d be, but we need to sound like we’re on top of things” approach.
Let’s look at some quotes:
[1] “Outside of housing and motor vehicle sectors, economic activity has, on balance, been expanding”
…. LOL. That might sound like just two sectors but those two sectors constitute an overwhelmingly massive portion of individual spending. And since when do we get to subtract inconvenient sectors in order to achieve positive metrics? And he cites labor?! Pshh. Wage growth is stagnant. Just watch what happens to consumer spending in an environment of flat wages and increasing prices.
[2] “Real GDP growth this quarter is likely to be in the same general range that it was in the second and third quarters”.
LFMAO! Real GDP was 2.6% (ANNUALIZED!) Nothing else needs to be said about that absurd comment.
[3] “economic growth will… over the course of the coming year… return to a rate that is roughly in line with the growth rate of the economy’s underlying productive capacity”.
Oh the spin. I’m dizzy. First off — the only reason we don’t have massive inflation (in the face of our ever expanding money supply) is because of globalization and cheap overseas labor markets. We’re neck deep in cheap asian imports which have drowned out any future hope of our own domestic manufacturing viability. And now Bernanke is citing our overpriced and dormant “capacity” as an indicator of future growth? LOL. Yah… right… our overcapacity is a gooood thing. Okaaay. [The only way our manufacturers are coming back to life is if the dollar gets much, much cheaper -- and the American worker gets much, much poorer. Oh, right... maybe that's the plan.]
Position: The dollar is currently taking a nosedive and will continue to do so because wealthy investors are moving dollars out of the US at a blinding speed. The only thing that will *really* screw America is if all the little people follow suit. We need to tell them everything’s going to be ok… while the rug gets pulled out from under them.
My personal position: Invest in Asia (or just buy FXI if you don’t know much about Asian stocks). Buy Gold. Buy Silver. Buy a basket of foreign currency CD’s.
The sh*t is flying towards the fan at 100 miles per hour.
sohonyc. Great Post! Absolutly 100% right on.
“[The only way our manufacturers are coming back to life is if the dollar gets much, much cheaper — and the American worker gets much, much poorer. Oh, right… maybe that’s the plan.]”
I believe this is the plan. And time is running short.
Great post. I have an OT questions, tho…
what makes you think that China (FXI, etc.) is going to continue being the shizznit?
Seriously, I’m askin’….
That’s a huge question that I think everyone’s tossing around and I hear answers on both sides of the fence. The issue hinges on “how dependent is China’s economy on the American consumer?”. Or more importantly: “If the American consumer vanishes in cloud of debt and a tanking-dollar, why wouldn’t China go down the tubes also?”
I spend lots of time in China (mostly HK) and I’ll say two things:
1) China’s middle class is growing faster than anyone can imagine. They are insatiable consumers. Anyone who thinks that China is going to need US consumers to keep the growth-engine going is suffering from delusions of economic importance. Sure, in the near-term, a total wipe out of US consumption would hit China pretty hard. But that’s not going to happen anyway. Our consumption will slow (quicker than most people think) and it will be replaced by Chinese consumption (which is already on fire). That’s how America grew. It was the growth of the US middle class (ie: domestic consumption) that was responsible for a huge amount of American economic growth.
2) The Chinese want it bad. People work 10-12 hour days regularly. They’re smart. They’re educated. And they’re burning with desire. We’re fat. Decreasingly educated and relatively lazy compared to them.
The components of FXI (the Xinhua top 25 stocks) are a mix of telecom, banking, insurance and energy. Those sectors are going to go up, up, up — with or without the American consumer.
The reality is that a tanking dollar is going to hit the whole world. The question is: Who’s going to keep growing anyway?
So do your own DD, but I feel pretty good about FXI.
Yes, the Chinese banking system and equity markets have a long way to go towards better regulation and security. But so do ours, which are wrapped in a bunch of mythology about stability and consumer & investor protection.
My 2 cents for what they’re worth…
Uighurs. Tibet. A rootless, growing army of the unemployed and discontented (100 million at last count). Rising frictions with Taiwan. Rising unrest in the countryside and among urban workers. Massive corruption by the ruling class.
Invest in China? No thanks.
Google “Wolfensohn China”….. The first five posts refer to an interview w/him ref the dominance of China/India in world markets beginning in about an hour an a half
Soho — ditto — great post. Thanks.
“‘Inventory levels appear to be stabilizing and sales prices also are leveling,’ says Dorine Longhini, president of the Realtor Association of Greater Fort Lauderdale. ‘This is good for buyers, who have more options in the market, while the biggest impact has been on speculative buyers.’”
Reminds me of what the Captain of the Titanic said as the ship rested on the ocean floor, ” we seem to be leveling of here!”
I wonder why nobody bothered asking that bimbo why the Ft. L/Broward County foreclosures are through the roof.
Comment by txchick57
2006-11-28 10:21:56
I wonder why nobody bothered asking that bimbo why the Ft. L/Broward County foreclosures are through the roof
Between the builders and realtors there are alot of national and local advertising dollars at stake… The increase in the amount of print advertising of real estate here in FL since the end of this spring has been ludicrous and would be a definite hit to the even the local rags income stream if they actually asked the “tough” questions.
Or when the patient dies, and the doctor now labels him in stable condition!
Of course, some sellers with lots up for sale are just staying put. For the moment, land prices are holding steady, observers say. That is prompting some owners with staying power to just hold on and let the market to shake out if the right offer doesn’t come along.
Caveiro said the betting is that well-designed and well-located projects will keep interest.
”We think construction costs will come down and expect insurance to get under control,” Greenberg said. “So we are telling a lot of our clients to sit tight.”
nada..land prices will just collapse.
I just looked at the Orlando numbers: 5% median price increase yoy? Bullsh*t! Not only have asking prices dropped, but in some cases to the tune of 10% or more. With each press release put out by the Florida Association of Realtors, I’m more and more convinced they’re seriously doctoring the numbers.
As a further illustration, check out the condo numbers for Daytona Beach:
http://media.living.net/statistics/statisticsfull.htm
The reported median sales price was $170,000 in Sept. 2006 and $237,500 in Oct. 2006.
Haven’t you been paying attention?
When median prices *decrease*, it just means that the mix of housing has shifted towards the low end. It doesn’t mean that a house has lost value!
When median prices *increase*, it means that there has been a long-term shift in fundamentals, because of baby boomers and because they aren’t making any more land.
To think that upward and downward movement in prices are due to the same mechanism is just sheer lunacy.
“The broker we did the deal with didn’t really explain all that, or maybe it was a mistake on both sides.’”
Its been my experience that very few brokers could actually explain the option arm even if they tried. I have a hard time just getting them to understand how and what is negative ammoritization.
Yeah MDM, I have a doctor friend who needs me to explain the process everytime I mention shorting something. He just can’t seem to grasp the concept.
I can clearly remember my mortgage guy extolling ARMs as a way to lower my monthly payment. No sense in giving this guy a mini-economics lesson on the foolishness of ARMs. He wouldn’t have understood what I was saying
Instead, I stuck to my guns and insisted on 30-year fixed mortgage. And that is what I have.
Good for you.
A lot of those mortgage brokers (who get commisions) play dumb in order to make the sale!
Most of them probably don’t play dumb….they just are dumb. People are payment buyers, after all.
My mortgage guy did fall into the “dumb” category. In fact, I’ve warned NUMEROUS people never to do business with him or his employer.
What does it really take to become a Realtor/lender?
Need to be personable and have a fake smile for website/calendar/business card/marketing materials.
Need to be able to lie through your teeth, or at least repeat what senior people tell you if you’re too dumb to realize you’re lying.
Need to pass a test equivalent to an 7th grade arithmetic exam (What’s 3% of $200K?).
Many car salesmen don’t know the difference between rear wheel drive and front wheel drive. Why should loan salesmen know how an ARM works?
“7th grade arithmetic exam (What’s 3% of $200K?)”
Back in the good old days, this was 6th or 7th grade material. Nowadays you learn it at community college.
I had a long conversation about a year ago with a mortgage broker, the boyfriend of a friend’s daughter. He was trying hard to sell these 1.9% and 2.9% teaser-rate ARM mortgages, with the usual comment that “it’s great for your cash flow”, and as for pitfalls, “hey, if the rate goes up, just refinance!”.
There was no way to even debate with him the impracticality of refinancing if rates went north and home prices went south, but that was the least of the worries. He couldn’t tell me what index the floating rates would be based on. He said there was no negative amortization, though on further questioning, it seemed that he didn’t even know what that was. He claimed that there were no upfront fees or no early payment penalty (!), though he seemed confused *and* evasive about these fees perhaps being tacked on the loan balance.
Throughout it all, he was spouting a lot of acronyms and rubbish/platitudes that he’d obviously been taught at hard-sell-mortgage-broker school. Yet when I asked him what COFI or LIBOR are, he has no idea, but he throws those terms in his pitch with abandon and sounds impressive to people who know even less, I guess. His father-in-law-to-be, not the sharpest financial cookie, said “isn’t he a bright boy?”,and all I could say is that “yes, he has a future in front of him”. Not with my money, and probably not in the mortgage field, either, the way things are going.
(Last I saw him, by the way, he was very subdued and not really wanting to discuss the mortgage field much. Interesting.)
That is too funny. Whatever happened to I don’t know but i’ll get back to you. I find that goes a long way. Bull$hit never floats LOL.
MICRO- Been in the biz ten years and i still use that expression. I dont know everything and am not afraid to ask someone for the right answer. So many sales people feel as though they will lose the sale by not being able to authoritatively answer every question so they jus tthrow out B.S…..What they dont realize is that by demonstrating your honesty to a customer when you dont know the answer, you gain their trust. Once you have their trust, the selling is over.
Brokers get a higher commission from option ARMS, so naturally they try to steer people into them. Never attribute to stupidity that which can adaquetely be explained by venality.
“‘’People will avoid foreclosure at whatever cost because it ruins your credit,’ said Ana Valenti-Brisuela, a South Miami real estate broker who also does financial planning. ‘But some, especially those who bought at the peak of the market last year, are going to sell for $50,000 or $100,000 less than they bought for in order to save their credit.’”
Credit?? What credit? The people that are facing foreclosure due to retarded loans and their own backassward ways of looking at affordability don’t have any credit to save anyway. Just ask Julio and that chick trying to sell her home in Mexico…dollars to donuts neither one of them have any kind of respectable credit score.
The greed that is being foreclosed has roots in easy loan money..
‘But some, especially those who bought at the peak of the market last year, are going to sell for $50,000 or $100,000 less than they bought for in order to save their credit.’”
And lose the down payment??? What down payment!!!!
“are going to sell for $50,000 or $100,000 less than they bought for in order to save their credit.’”
Ageed. To some extent this statement may be true. But I believe people will sell to get out from under the payment! Credit score be dammed! Shelter (a cheaper one) and food come first!
“Ana Valenti-Brisuela, a South Miami real estate broker who also does financial planning.”
I bet you can get great financial advice from someone who is the the equivalent of a used-car salesperson…
Looks like Julio was sick of throwing away his money on rent, that he would just rather throw it away on owning. now he is stuck with the liability of this albatross hanging around his neck that he can’t get rid off.
It was a refi - not a purchase. He just had to have that 15k which he probably doesn’t even know where he spent it.
So add the 15 he refi’d for to the 10 or so he didn’t make in interest, and he made a nice little mess for himself. No wonder durable purchases fell.
Either you throw money away renting the house OR renting the money. He is doing a little of both b/c the house he bought with the money he rented is decreasing in value.
No Julio, there was no mistake. You were screwed and still don’t know who did it. It’s your broker, my friend.
‘The median price of an existing single-family home in Palm Beach County declined 12 percent in October, to $365,600 from $416,500 in October 2005, the Florida Association of Realtors said today. In the Treasure Coast, the median price of an existing single-family home fell 8 percent, to $242,400 from $263,500 in October 2005.’
‘The priced and number of houses sold in Lee County in October were down from the previous month, according to statistics released today by the Florida Association of Realtors. The median price of an existing home sold with the help of a Realtor was $249,200 in October, down 4.7 percent from $261,400 in September. A comparison from October 2005 for Lee County was not available due to a computer glitch that apparently overestimated those values, said Marla Martin, communications manager for the association.’
In other words, the price is down so much that they don’t want you to know.
Just wait a couple more months. The peak in the Fort Myers-Cape Coral area came in Dec. 05, I think, at $322,000. That puts it down about 25 percent since peak right now. We could be at over 30 percent year-over-year come Dec.
“‘The median price of an existing single-family home in Palm Beach County declined 12 percent in October,”
OK, so now even a 20% down buyer is underwater. 12% decline + 6% commission + 2 % closing costs = negative equity.
I whipped up a pretty lengthy analysis since I live in this area. Here’s how I see things in this report …
First, as the FAR points out, the year-over-year change in Southeast Florida doesn’t look too bad in October because we had Wilma a year ago. That led to a 44% YOY decline in sales in Fort Lauderdale in October 2005 vs. October 2004, for example, with like declines in Miami and West Palm Beach. The STATE saw only a 5% drop that same month (10/2005). Clearly, you could say the hurricane had an impact on closings.
This past month, sales in Fort Lauderdale, Miami, and West Palm Beach actually rose or declined just slightly from 10/2005 levels. But the STATE saw a much bigger 22% drop (using single family homes), with declines spread geographically throughout north and central Florida. So it seems to me that the broad trend remains weak, once you strip out the hurricane impact.
Second, the pricing data doesn’t look so good across the state, or in our area. Median single-family home prices dropped 12% year-over-year, for instance, in the West Palm Beach-Boca Raton metro area, with declines popping up also in Fort Lauderdale (-5%) and Miami (-3%). Again, this may be skewed by the hurricane to some degree. But in the case of prices, these numbers are also consistent with what we’ve seen in recent months – first, a deceleration in the rate of price increases, and now actual declines.
So what about inventory? Well, there’s a website run by the real estate brokerage firm Illustrated Properties up here. It shows the number of properties for sale in its database. The link is here: http://www.ipre.com/trendg/images/palsld.PNG You can see that inventory took a pretty big dive from September – down 9.6%. But the key question is this: Are we really working through inventory? Or are sellers just giving up and pulling their listings to wait out the holidays, then re-list in time for the proverbial spring selling season. I’d be more encouraged on that front if sales shot up along with the decline in inventory. Since they didn’t, it may just be a seasonal thing.
If you’re an optimist, you could say things aren’t getting much worse. If you’re a pessimist, you could say: “Sure, but the numbers still stink.” I’ll go back to what I’ve been saying for a long time: Real estate downturns are long, drawn-out affairs measured in quarters and years, not weeks and months. We have tons of inventory to work through. To stem the slow bleed in prices, we’ll need that to come down substantially. That, in turn, will require even lower interest rates, the restoration of buyer confidence and ongoing strength in the employment market. Can the stars align just right for the housing market? We’ll see. But my expectation is that 2007 will prove to be another weak year for sales and prices, and we’ll likely see mortgage delinquencies and foreclosures continue to rise.
http://interestrateroundup.blogspot.com
Nice piece of work, and much appreciated.
2007…Real Estate’s ‘Year of Fear’.
“Clearly, you could say the hurricane had an impact on closings.”
___________________________________________________
You aren’t kidding.
Florida insurance companies WILL NOT write binders on ANY property if there is a TD or a named storm in the Carribbean basin.
Very astute of you to point that little tid-bit out to the rest of the blog.
Good point Mike. I live on the Treasure Coast (Vero) and do not see any signs of significant inventory reduction. Local sales are posted in the Sunday edition of our paper and this past Sunday showed maybe ten or twelve sales, including vacant land / lots. Condos are listed separately and there were even fewer sold. That has been status quo for a while here. If anything, sellers are taking their homes off the market.
And, even w/ a 7% reduction in YOY price, now at 221k, the median price is still much to high for the average income in our area. People simply cannot afford to move up; even if they get more money for their own house, they can only make a lateral move and will pay higher taxes and insurance. My neighbor is seeing this first hand, his house has been on the market now for 11 months. Started at 589k and is now down to 469k, but nobody is even looking at it.
kbo, Any idea how vacant land is holding up price wise in your area, particularly beach front? Thanks
I have been keeping an eye on 5 acre tracts mostly. Prior to 2003 a 5 acre tract here in Vero went from 75k -100k; since then they skyrocketed along w/ everything else and went as high as 350k. Of course, now there are many new developments that are made up exclusively 5 acre tracts
and they are just sitting w/ no homes. Excessive supply and no demand. Prices are dropping; I have recently seen a few listings in the 175k - 225k range. But that is still way to high. My guess is that by mid year 2007 there will be a fairly significant reduction. I walked away from ten acres in 2000 that was listed for 139k. My wife and I offered 120k and seller would not come down.
“A comparison from October 2005 for Lee County was not available due to a computer glitch that apparently overestimated those values, said Marla Martin, communications manager for the association.”
Now that is funny ! Doesn’t anyone see the irony in letting the RE associations manage the data ? How ludicrous. And isn’t it interesting that they haven’t managed to find a way to calculate the value of the kickbacks into their numbers, or into the mortgage value as well, for that matter. You have to remember that the numbers quoted in these stats don’t include the value of the free trips, upgrades, new cars, assumed payments and outright cash paid to the buyers behind the scenes !
Even with the kickbacks, the median price in Ft. Myers - Cape Coral MSA is down by 44% (see http://tinyurl.com/yfakz8 ) year-on-year.
“The median price of an existing single-family home in Palm Beach County declined 12 percent in October, to $365,600 from $416,500 in October 2005, the Florida Association of Realtors said today.”
Lets run some numbers. That is $50,900 PER single family home.
According to this http://en.wikipedia.org/wiki/Palm_Beach_County,_Florida
this county has 474,175 households. Interestingly it also lists that there are 556,428 housing units ! The median income for a household was $45,602 ! Per capital income is $28,801 !
Anyway… 474,000 households x a loss of $50,900 per household is 24 billion dollars ! That is a lot of cash and I don’t think we are anywhere near the bottom yet, not with that level of per capita income.
I got plagurized !
Read the comment written at 16:07 here
http://www.rgemonitor.com/blog/roubini/159887
http://www.rgemonitor.com/blog/roubini/159887
It states:
Now that is funny! National Association of Realtors economist David Lereah claims that pending existing home sales are rising so that means the Housing market has fully recovered. Doesn’t anyone see the irony in letting the Real Estate associations manage the data? How ludicrous. And isn’t it interesting that they haven’t managed to find a way to calculate the value of the kickbacks into their numbers, or into the mortgage value as well, for that matter. You have to remember that the numbers quoted in these stats don’t include the value of the free trips, upgrades, new cars, assumed payments and outright cash paid to the buyers behind the scenes! LOL.
“‘I see evidence that the real estate market is on the rise,’ says Jerry Mabus, president of the Realtors Association of St. Lucie and broker associate in Port St. Lucie. ‘We’re on the cusp of growth in a new direction.’”
So less than dire news means a “growth” spurt or does “growth in a new direction” imply something I’m too dopey to understand?
I mean, I’m not an NAR member, am I?
Reminds me of that Korean War quote during the battle at Inchon:
Surrounded by Chinese infantry, a general was questioned that his current strategy looked like a retreat. His comment was ‘Retreat hell! We’re just fighting in the opposite direction.’
Good one…LOL
“Retreat? Hell, we’re not retreating. We are just advancing in a different direction!” - Gen. Smith, the 1st US Marine Division commander, Dec. 4, 1950.
I think you are reffering to the Battle of the Chosen Resevor in which the marines had to fight their way out of encirclement to the coast. Inchon is the site of the Mc Arthur landings that helped smash the N. Koreans. Few if any Chinese there. Your idea was good though.
The new direction is down.
“‘I see evidence that the real estate market is on the rise,’ says Jerry Mabus, president of the Realtors Association of St. Lucie and broker associate in Port St. Lucie. ‘We’re on the cusp of growth in a new direction.”
This guy sounds like some kind of total and complete corporate Quisling…
Subkommander Dred
Isn’t it interesting how so many people need to sell within 1 to 2 years of purchasing a property . I would call it speculation rather than home ownership, yet these sellers expect gains in that short of time . What a joke .
I know of a couple who bought a house less than three years ago. And, wouldn’t ya know it, they already need to sell. Reason: They bought a house in what (they hope) will be a better neighborhood.
OTOH, I know the neighborhood where they’ve bought that house. It isn’t nirvana over there either.
Tony Crescenzi Blog
Bernanke Walks the Hawk
By Tony Crescenzi
RealMoney.com Contributor
11/28/2006 1:27 PM EST
URL: http://www.thestreet.com/p/rmoney/tcrescenziblog/10324657.html
Fed Chairman Ben Bernanke sounded characteristically hawkish in his speech before the Italian American Foundation moments ago, continuing a strategy begun in earnest in September when Fed Vice Chairman Don Kohn signaled to the markets that its expectation for a near-term interest rate cut was wrongheaded.
Bernanke’s speech today was airtight, with the chairman leaving virtually no room for investors to conclude that the Fed is contemplating an interest rate cut. Ostensibly, the Fed’s strategy is to lock in gains that it has made on inflation and inflation expectations. The Fed is taking no chances.
Bernanke’s comments are consistent with what the markets are already priced for; chiefly, that the Fed will not act on interest rates for six months. Moreover, with the inflation rate falling, the real fed funds rate (the fed funds rate minus inflation) is rising, meaning that Fed policy is getting tighter.
The markets are priced for this tightening of policy via the inverted yield curve, the inverted spread between Treasuries and the fed funds rate, and the TIPS market.
Many are perplexed as to why it is that the Fed has left so little room for speculation about an interest rate cut despite both the slowing in the economy and the lowering of the inflation rate and inflation expectations.
Again, the main reason seems to be that the Fed wants to guard the gains that it has made on the inflation front and gain credibility for the promulgation of the Bernanke era. In addition, the Fed need not signal an interest rate cut. Rate cuts are “good” news and needn’t be signaled in the same way as interest rate hikes must be. The Fed can deliver its cuts either by surprise or on short notice.
Moreover, if the Fed were to signal its interest rate cuts too soon, financial conditions would loosen perhaps too much, too soon. Stock prices would rise, bond yields would fall, the dollar would fall, credit spreads would tighten, and bank lending standards would loosen.
All of these conditions would be conducive to stronger growth, something that the economy does not yet need because a small buildup of economic slack is needed to fully wring inflation from the system.
““‘’People will avoid foreclosure at whatever cost because it ruins your credit,’ said Ana Valenti-Brisuela, a South Miami real estate broker who also does financial planning.”
Bullsh!t. In the last few years, how many illegals have been squeezed into subprime mortgages? They won’t give a hoot about their credit. They’ll just leave the keys on the kitchen counter and hitch a ride back home.
Rather than ask a rhetorical question, it would be nice if you could justify that one with facts.
Don’t forget the Russian mafia and Eastern European gypsy types who are behind a lot of the mortage fraud, and couldn’t care less about being foreclosed on once they’ve got the bank’s money.
“There are 22,254 condo units under construction in Miami, according to the city’s planning department. That’s compared to 15,525 total units that went up since 1995.”
To anyone in the Miami area: is this number legit? If so, HOLY $HIT!!! Anyone wanting to buy a condo is an absolute fool if they do so now. Upon completion, I would bet that the vast majority of these units do not reach close of escrow. On top of all this, if the units are currently being built then the developer most likely bought materials recently when they were at sky-high price levels. Will they even be able to recover those costs? Finally, I am starting to smell blood in the water. With such a large number being built, I would assume these are high-rise buildings? Is that type of lifestyle really in high demand there, or is this just a bubble phenomenon where people will buy anything because they all know it can only go up and they will be RICH!
Yes the number is legit or perhaps even a bit low.
My guess is that these Luxury 400sf lots will be low income housing in the future-no one else will touch them.
Most are being built (in highrise form in the downtown Miami area which suffers from horrific traffic, few actual shops including grocery stores)
There are already poor quality building defects rearing their ugly heads and we didn’t even have a big wind this year!
Its gonna be tough times for The CIty of Miami soon.
PS our theme song is “It’s a Third World after all”
I take issue with those who think that foreclosures are going to rise to depression levels and that “dumb” money is buying the dips in MBS.
How do YOU really know that foreclosures are going to increase above the threshold that is modeled in the various tranches? The people who model this stuff aren’t stupid — given the current macro-economic outlook there is very little chance that foreclosures will increase to a level which would wipe out leveraged credit.
This housing slowdown is unique in that it is not caused by a below normal demand - in fact demand is still above historical trend - it’s just low compared to the last 1-2 years. The problem is due to a supply glut, which none of us really know whether it is caused by stressed sellers or greedy folks trying to cash out for max $.
You need a major recession - and hence - much higher interest rates to cause housing to crash.
Would a “major recession” lead to “much higher interest rates”?
I’d think a recession would lead to lower rates….as well as lower demand for borrowing. What’s interesting about this decline, particularly in the Boston area, is that there isn’t any huge increase in inventory. Sure, there’s been a lot of “luxury” condos put up but, in the total scheme of things, not all that much additional supply over the last few years. Yet SFH cannot be sold.
No, what drove the general market ludicrously higher were cheap loans made available to everyone. The reason why the real estate market HAS TO CORRECT from this level is because every speculator who could access money and bought has already done so. Consequently, there are no additional buyers left (but for the few who can actually afford and qualify under tightening rules). No additional buyers, no additional demand, no additional sales, so a gap in supply will remain if not enlarge as the necessary psychology to leverage oneself (an assumption of firm if not rising prices) evaporates.
Whether we have a recession or not, even if rates decline, there won’t be enough “greater fools” available to bridge the gap until the economics of home ownership fall back in line with historical trends. Certainly a hedgefund analyst should understand that markets always “regress to the mean”.
Well, if there is “no buyers left”, then who is still buying? The sales in Miami are very strong, maybe 10% off 2005 levels. So, there is plenty of buyers - and we will see in the Spring whether the inventory jumps up (as some on this blog suggest( or stabilizes at the present levels.
Definitely, there is lots of sales, and anything in Miami priced 5% below end-2005 peak seem to move rather fast (especially SFH and townhomes in good neighbourhoods)
What mind altering drugs are you taking?
huh…
look at sales in Pinecrest & Gables - all reasonably priced sfh gets snapped fast. Of course, most sellers are still pricing things 10-15% above peak - and their stuff stays on the market.
What I can’t understand is why we’re not calling a spade a spade here — the housing market is, in a sense, already having a “mini-crash.” I mean, we’re seeing the biggest YOY percentage declines in prices in U.S. recorded history — the kind we didn’t even get in the midst of the terrible early 80s recession. The amount of supply for sale in the condo market has shot up 45% YOY, while sales have fallen. We have the biggest glut of new and existing homes for sale in U.S. history (that’s total number of properties, of course, not “months supply at current sales pace” and yes, the peak I’m referring to was in July — we’re down a smidge since then). And to top it all off, we have the rate of housing starts plunging by 30%+ from its peak … in less than a year. If this isn’t a mini-crash, or at least a strong housing market recession, I don’t know what is.
Will it take much higher interest rates and/or a serious recession to send credit losses much higher? I don’t think so. The fact is, housing is incredibly unaffordable even at these low (by historical standards) interest rates. I actually ran the numbers and posted on my blog recently about how prices are so sky-high, the monthly payment on a median-priced home today is HIGHER today than it was in the early 1980s, when 30-year mortgage rates were at 18%. That just goes to show how out of whack prices are with reality.
The bottom line: We (meaning, the Fed) massively overstimulated demand in housing with extraordinarily low, negative interest rates. We overbuilt. We overbought. And we threw lending standards completely out the window. We gave more money to more potential deadbeats than ever before. The fallout, even without a serious recession, will likely be substantial over time. And yes, I believe credit risk buyers are definitely underestimating how many borrowers are going to fall by the wayside even if all we have is subpar economic growth vs. a full blown recession. Just my two cents, of course.
http://interestrateroundup.blogspot.com
“The bottom line: We (meaning, the Fed) massively overstimulated demand in housing with extraordinarily low, negative interest rates. We overbuilt. We overbought. And we threw lending standards completely out the window. We gave more money to more potential deadbeats than ever before. The fallout, even without a serious recession, will likely be substantial over time. And yes, I believe credit risk buyers are definitely underestimating how many borrowers are going to fall by the wayside even if all we have is subpar economic growth vs. a full blown recession.”
I have bet the farm on that being true.
How do YOU really know that foreclosures are going to increase above the threshold that is modeled in the various tranches? The people who model this stuff aren’t stupid — given the current macro-economic outlook there is very little chance that foreclosures will increase to a level which would wipe out leveraged credit.
http://www.sjsu.edu/faculty/watkins/ltcm.htm
Um, yeah…remember the collapse of Long Term Capital Management LTCM that almost caused a blowout of the global financial system in 1998? They had two Nobel prizewinning economists on staff, and a “brilliant” computer model to guide their forecasting and investment decisions — didn’t work out so well for them, did it. Your optimism is sadly misplaced.
The people who model this stuff aren’t stupid…
Yeah, yeah! Like them Black-Scholes guys at LTCM. Hey… wait a minute…
‘We’re on the cusp of growth in a new direction.’”
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Yeah, DOWN! I find it humourous to see all the RE SPIN gettin SPUN but find it sad to see that virtually no reporters ever question these idiotic statements from the RE Associations.
http://www.miami.com/mld/miamiherald/news/state/16114498.htm?source=rss&channel=miamiherald_state
Colorado Congressman and anti-immigration leader Tom Tancredo called Miami a “Third World country” — the undisputed truth, but his candor won’t win him any friends among the local realtors.