“The Problem Is A Dramatic Over-Supply”: Florida
The Herald Tribune reports from Florida. “Not many developments here can boast the views of the massive SevenShores condominium project planned for land straddled by Anna Maria Sound and Perico Bayou. Thirteen condo towers will eventually rise above the mangroves lining the encircling shoreline. The plan is to sell the luxury homes for as much as $1 million. If only they could find buyers more quickly.”
“Now well into a housing downturn, the developer has sold only nine condos since opening its sales office in May. Low-end prices were set at just under $700,000 when SevenShores’ sales office opened in May. Those units now start at $534,000.”
“Economist Hank Fishkind said he expects new condo sales in the area to suffer for at least the next two years. The problem is a ‘dramatic over-supply,’ probably the worst in 25 years, he said. ‘Anything currently in pre-sales will be long-delayed,’ Fishkind said. ‘You’re not going to see construction anytime soon.’”
“Also within the city limits of Bradenton, Tidewater Preserve will offer 993 units on both sides of Interstate 75 on the south shore of the Manatee River. A sales office has been open for nearly a year, but the project developer, WCI Communities, won’t say how many homes have been reserved or sold.”
“Spokesman Steve Zenker would only say, ‘The market environment has certainly been more difficult than it was a year, year and a half ago.’”
“Development giant Lennar Corp has found a way to sell condos in a saturated market: offer maintenance-free living on the cheap. Stoneywood Cove’s town houses, most of which are priced in the $190,000s, defy the dimensions of typical affordable housing. One model is a three-bedroom, two-and-a-half-bath town house with more than 1,200 square feet. Another is a 1,436-square-foot, two-bedroom model.”
“Lennar is able to offer the units at low cost because of the development’s lack of perks. The basic living conditions keep Stoneywood’s homeowner dues below $200 per month. ‘We are basically offering a price point that is unheard of in this market right now,’ said Levent Yamuk, a Lennar new home consultant.”
“Market forces may have encouraged Lennar to set Stoneywood’s prices low. (A) Web site listed a staggering 865 condos on the Venice market in early December. But only 27 of those were 1,200-square-feet or bigger with a price tag between $170,000 and $210,000. All 27 were resales, and most were more than 15 years old.”
“Many of Stoneybrook’s rows of identical single-family houses sit dormant while construction at Stoneywood is brisk. The pace of sales at Stoneywood is also a stark contrast to Stoneybrook, where ‘for sale’ signs seem to outnumber Christmas decorations.”
“Stoneybrook at Venice, a 998-home master-planned community, was expected to be a haven for professionals and families when its $300,000 to $400,000 homes went on sale in 2004.”
“But it was investors, not families, who sensed the new hot address. Many of those investors are now saddled with a property that won’t flip in a neighborhood that is still going up. Some have turned to renting just to help pay the mortgage.”
“Lennar division president, Rob Allegra, didn’t think he was building a rental community in 2004 when buyers had to win a special lottery just to purchase a home in Stoneybrook. But Allegra conceded the renters are helping keep the lights around Stoneycreek Boulevard turned on.”
“‘The last thing you want in a community is a bunch of vacant homes,’ he said, ‘or homes that nobody buys.’”
“While investors are slashing prices elsewhere in Stoneybrook, Lennar representatives said they expect Stoneywood’s prices to climb in the coming months. Stoneywood’s affordability reflects Lennar’s philosophy in a chilled housing market, said Gordon Greenfield, Lennar markering director.”
“Some Realtors believe lowering prices is a sign of lack of confidence in a product, but Greenfield said he believes the reverse is true.”
“‘We’re doing very, very well, but prices are reduced,’ Greenfield said. ‘Prices were going up 40 percent last year, and that’s not sustainable. And now we’re seeing prices correcting to a reasonable market rate.’”
For those interested in the commercial market:
‘We have all seen residential property values take a nosedive lately. But why haven’t commercial property values done the same? When commercial income property values increase, the cap rate or the ‘buyers yield’ for the same cash flow stream is lowered. We saw cap rates reach their lowest levels in the past 30 years between 2003 and the first quarter of 2006.’
And the RE fraud tales continue to flow out of Florida:
‘On their wedding day, Lee and Rebecca Womack turned off their cell phones so they wouldn’t hear the creditors calling. Months before, the Tennessee couple who had never owned a home purchased 12 dilapidated rental properties in central Tampa, sight unseen.’
‘Blinded by what they saw as an opportunity to make a lot of money, the pair ignored signs of trouble and entered into one risky deal after another - with the guidance of a felon. ‘We see now that we made big mistakes,’ Rebecca Womack said, standing in one of the vacant rental homes. It has been burglarized three times and the mortgage is two months late. ‘Now our financial lives are ruined.’
‘Now, nine months after the first purchase, the homes are about to go into foreclosure, family members aren’t speaking and a mortgage company might go out of business. The couple’s situation is not isolated. As Florida’s real estate boom turns bust, investors and industry professionals are finding themselves tangled in deals gone awry.’
‘Everyone is in this mess together and will have to pay the price,’ attorney Ivan Lenoir said. ‘But in terms of culpability, the buck stops with the mortgage company and the title company. They have professional licenses.’ Everyone - the mortgage company that set up the loans, the title company that closed the transactions and the couple - is blaming someone else.’
‘We just want out,’ Rebecca Womack said. ‘I don’t care about making money anymore. If we could get out of this, we could start over. But I don’t think that’s going to happen.’
How stupid is it to buy property unseen! Why are so many people blinded by greed. I have no sympathy for these folks - they get what they deserve.
What does concern me is what the cost is down the road. At some point there will be a federal buyout - and what will that cost be for all of us who did not particapate in this foolishness?
The Fed Govt doesn’t have the money for any kind of “buyout”. We are now spending billions on a foolish war, there is no leftover funds to bail out fools like the Womacks.
Last time we have a massive downturn, the government wasn’t able to provide a bail-out, but at least it made some jobs-creating projects that produced some monuments that we still appreciate today, e.g. Golden Gate Bridge, Hoover Dam, various national park lodges.
When was the last time that the US government built something that we as a nation could be proud of?
When was the last time that the US government built something that we as a nation could be proud of?
The space shuttle, the space station, the internet…
ring a bell?
Don’t worry. The stupid Chineese and Japaneese will lend you the money eyes closed. They don’t know what to do with all the money your stupid FED prints and throw at them. Nice racket this paper money thing.
1926 revisited
Iran has dumped the use of the $US… Bloomberg says “might” but every other media outlet is now comfirming it’s a done deal.
http://www.bloomberg.com/apps/news?pid=20601082&sid=a616zL9v6It0&refer=canada
The american economy is pretty much toast, and the US is too weak economically and militarily to invade Iran like it did with Irak when Saddham decided to stop using $ US for Euros back in 2002…
Iran is digging in with the best russian missiles and the secret promise of Putin that he will use the 20,000 nuclear warheads of Russia against any potential american threat.
Bush and Cheney, let me see you use your bright intelligence to wrestle this…
Not biting this time.
I’ll bite. We could easily (as wars go) defeat Iran militarily. We have the technology, experience, and economic potential to defeat anyone on the planet if we had to. The political will and understanding of the reality of war are there though.
Sorry, the political will and … NOT there.
No need for war. Since their major customer is China, why don’t they just cut out the middle man and price in Yuan?
Neil
We could easily (as wars go) defeat Iran militarily.
Fortune favors the defenders.
Remember how the Iranians cleared mine fields in the Iraq-Iran war? 13 year old boys & girls holding hands walking in front of tanks with the keys to Heaven around their neck.
I don’t care about making money anymore.
That’s easy to say after she’s lost everything…. Oh, you don’t care about making money anymore? Well, then, since you’re such a generous person we’ll forget everything. Right!
And why is she blaming anyone except herself?
Her statement that you quote is indicative of someone who has just given up. She is probably up all night pondering the financial losses and the screwing up of their future retirement. How many of these folks are out there?
How can she make any money to begin with if she’s probably $1 million in the hole to begin with?
Bring back the debtor’s prison!!! Or a forced military service to pay back any debts due!
Now that’s an Idea! Then we really would have the “army of Genghis Khan”. If any or our nation’s enemies stepped out of line we could threaten to unleash an army of pissed off, and broke hooligans. They would descend like equity locusts and destroy our enemy’s economy leaving them broke and in debt up to their eyeballs.
LOL
THE 5 STAGES OF CURRENT REAL ESTATE SPECULATOR/SELLER GRIEF:
1. Denial and Isolation:
“No, not me, this can’t be happening to me. RE never goes down, my neighborhood/area/city is different. There’s a shortage of land, the boomers are coming, David Lereah said so himself”
2. Anger:
“Why me? How dare you do this to me?! (either referring to a god, the buyer, a real estate broker, or themselves) I will not lower my price, I will hold out and get the price I deserve.”
3. Bargaining:
“OK.. so the housing market has stalled a bit, no big deal, it’ll be a soft landing and prices will soon start going back up… I’ll throw in a plasma tv, or I’ll just rent it out.”
4. Depression:
“I’m F@cked!! I’m going to loose my home(s), my retirement, and my black Hummer/Navigator/Jetski? I can’t bare to face going through this or putting my family through this. My god, what have I done… Mommy I’m scared!”
5. Acceptance:
“I don’t care anymore, I’m ready for whatever/foreclosure/bankruptcy, here are the keys, just take the damned House/
6. Re-nesting:
“Um… Mom and Dad… remember that bedroom I used to use? Is it still available?”
I read the article on the Womacks, it was good Sunday entertainment. Note that they bought from an ex-con relative. Also note these people, with essentially mediocre income, were able to buy about a million dollars worth of property. So far, this story gets my vote for the most over-the-top Florida bubble story.
‘I don’t care about making money anymore.’
Don’t worry honey. You won’t.
“Lennar is able to offer the units at low cost because of the development’s lack of perks. The basic living conditions keep Stoneywood’s homeowner dues below $200 per month. ‘We are basically offering a price point that is unheard of in this market right now,’ said Levent Yamuk, a Lennar new home consultant.”
“Market forces may have encouraged Lennar to set Stoneywood’s prices low. (A) Web site listed a staggering 865 condos on the Venice market in early December. But only 27 of those were 1,200-square-feet or bigger with a price tag between $170,000 and $210,000. All 27 were resales, and most were more than 15 years old.”
These sound like poorly made junk. Anyone know different? To think, 5 years ago $210k was a decent home in Florida (off of the water). Now its a so-so no ammenity condo.
But this also emphasizes the builders will adapt to new price points… This isn’t over yet folks…
Neil
But how much longer will they build? Even they cannot continue to cut prices.
Good question. But at some point land, lumber, and labor will be cheap enough to undercut this market. This is going to be an exclamation point as to why not to chase the market down.
And builder layoffs haven’t really begun yet. Most of these “layoffs” are actually independent contractors that won’t show up in the statistics. Well, unless you’re tracking reatail sales…
Neil
I wonder how many construction workers are illegals? They certainly won’t show up in any form of statistic.It would be really interesting to see immigration show up at a construction site. Nothing against the workers as they do bust their @ss.
Um, all of them?
WAman - “Even they cannot continue to cut prices.”
Not sure I’d agree with that. With the exception of copper and a couple of other components, most building supplies, notably lumber and concrete, have been coming down in price. Labor is coming down, or will, simply because a huge number of construction workers are becoming unemployed and many of those will relocate to get work. Land prices are dropping because land produces no returns while it is held. Finally, builders will cut waaay into the sometimes huge profit margins they enjoyed in recent years. They want to remain in business, if possible and to keep their best subs fed and loyal. Some builders will, I believe, build houses for close to zero profit just to stay in the game and to keep their subs and discount pricing levels.
Yeah, it’s ONLY $200 a month.
Yes, and that $200/month has to be added in to your property taxes, your mortgage and your insurance. It all adds up. I would hate to own a property with “homeowner” dues. I would rather rent in the same facility.
It is always mindboggling to me how the average person here thinks they “own” a property. Heck in Russia if you don’t have political or social connections, one day you will have a knock on the door with a police officer saying you’re expropriated, or a guy in a suit show up saying “sell your place for $5 or else…”.
Already expropriation for “economic” benefits is legal in the US and soon, as the economy crumbles and the legal system becomes corrupt to the bone, it will be easy for you to get that house on the beach with the right amount of connections
Gee, what a concept — a home that actually pencils out better than renting. I never understood why people were willing to pay astronomical taxes and association fees on a place they “owned”. Isn’t the whole idea to eventually be ahead on your equity or even (shock) pay it off, so you aren’t saddled with a huge burden when you’re 70?
$200 a month until the units are sold out! I’ll bet there is no cap in the HOA literature.
SalinasRon — good point. Many new condos in Florida have artificially low HOA fees. The gringos think that that is what they will pay. Nope. Those fees often don’t include things like a sinking fund for capital replacement, future or on-site maintenance, etc. and if it is a coastal zone, who knows what the insurance portion will be. If I were buying a pre-sold-out condo, I’d budget for double the quoted monthly condo fees.
I am surpised that the appraiser didn’t get any blame… Stories are really getting worse I have noticed over the last 3 months..
The Mass market is much worse off then people are reporting. I would like to get something down FL but I am like everyone else I am waiting til the Sh!t hits the fan first.
“Also within the city limits of Bradenton, Tidewater Preserve will offer 993 units on both sides of Interstate 75 on the south shore of the Manatee River. Buildings there will range from single-story ones to 10-story condominium towers.
Single-family houses now for sale start at about $455,000. The first of the condo towers will offer units ranging from $740,000 to about $2.2 million.”
I drive by this “Tidewater Preserve” all the time. Bulldoze and pave over nature and then call it “Preserve”??? The backward and upside down insanity and logic of it all never seizes to amaze me.
Yes, it straddles the I-75, IT STRADDLES the freeway that connects Miami to Detroit. 6 lanes of massive traffic! How could anybody pay between 0.45 and 2.2 mil. to live behind a sound wall next to the freeway.
Somebody wake me up and tell me I’m having a nightmare!
“I drive by this ‘Tidewater Preserve’ all the time. Bulldoze and pave over nature and then call it ‘Preserve’???”
Great point.
A new record high disparity in UHaul rates. The one-way rental price for a 26 foot truck for pickup on January 3: Raleigh to Sarasota $500, Sarasota to Raleigh $1997. It looks like we’re not the only ones who have decided that “Happiness is Florida in your rear view mirror.”
uhaul, plano, tx to corona, ca =719.00
uhaul, corona, ca to plano, tx =3,595.00
I wonder if it will be ‘free’ to drive a uhaul into CA or FL anytime soon. Haven’t people here posted it was in 1994 to drive into CA - that year 360,000 people out migrated from CA. watch for it in 2008 i predict.
Tinfoil — I won’t laugh at your idea — something close to it might yet happen. In the 80’s, friends of ours here in Florida would drive rental cars back to their state of origin with totally free use of the car and additional payment to offset the cost of their return home. Now I’d imagine the computerized systems using trucks, and rate structures, have eliminated that possibility. But it’s pretty tough to stack a lot of 26′ trucks on anything but a train car.
It will be interesting to watch this market and see if any ads begin airing in ‘07 touting really cheap trucks to these states.
Holy cow… a 5X factor for the U-haul index?!? I thought Bill’s 4X example was bad…
I did a blog on this a while back (not the first, just to record it):
http://recomments.blogspot.com/2006/08/uhaul-index-job-flow-directionality.html#links
So I decided to revisit it. Ugly, really ugly:
http://recomments.blogspot.com/
California is definately losing jobs.
Neil
Everywhere is losing jobs. Excluding McJobs that is!
Josh
One way 26′ Penske truck rental:
Houston, TX to Orlando, FL: $548
Orlando, FL to Houston, TX: $2,969
Oh, Florida has it worse than CA…
But my blog is California.
Ha. Does the $719 include the hallucinogens you will need to endure life in Plano TX after leaving Corona CA?
Have you ever been to Corona?
It’s a lot like Texas, except multiply housing costs by 5+.
In So Cal, there’s Corona, Del Mar, and Corona Del Mar, both of the Del Mar’s being by the ocean of course. I wonder if anyone ever confused the 3 and accidentally spent their summer vacation in Corona, 40 miles or so inland? Damn that Priceline.com!
The cost is primarily based on the fact that Raleigh (I live there) experiences a huge influx of transplants, not so much that Sarasota is crashing. Look at other ratios (x to Ral vs. Ral to x) to get a better indicator. 4x ratio is pretty high, however.
While the triangle area sales are slowing down, the fact that houses here cost as little as 150 for single family doesn’t leave much wiggle room. Now, the 500K McMansions near RTP and Chapel Hill are another story…
Uhh, no. Sorry. Sarasota is crashing. I live there.
Sarasota is toast.
Burnt black.
Taste like Charcoal.
Watching the news Sunday morning - showed the story of 5 murdered people in Kansas - which included 3 children (thoughts of a murder suicide are mentioned ) then I noticed a compelling image as police taped off the house for investigation - a For Sale sign hung outside the front lawn - could this be the true tradegy of the housing bubble gone bad - those up to their necks in debt and so frightened and bewildered that the only solution in their minds is too resort to such horrific actions - We reap what we sow -
Tada!
http://energybulletin.net/image/uploads/23259/MScan9.png
Marc,
Have you ever been to Russia? If not, you owe yourself a trip there.
He probably doesn’t have a passeport like George W. Bush.
Humm where’s that Russia? Near Irak or Nicaragua ?
I speculated on this very subject a couple of months ago on this blog. I’m no prophet, but it only makes sense that we’re going to see more of this extreme behavior as some feel there’s no other way out of their problems, just a couple of day traders went on their rampages back a couple of years ago.
“Lennar division president, Rob Allegra, didn’t think he was building a rental community in 2004 when buyers had to win a special lottery just to purchase a home in Stoneybrook. But Allegra conceded the renters are helping keep the lights around Stoneycreek Boulevard turned on.”
The owners need to get out now. They will not be able to sell those properties with just a few touch-ups after renting them out for several years - or longer. The properties are going to need a lot of work if they are ultimately going to be sold - landscaping, kitchen remodel, bath remodel, carpet, etc. I’ve managed rentals in a down market. I was an apt manager in New Orleans during the mid 1980’s oil bust. We rented to anyone we could get, and the renters were decent enough for the most part. Still, we didn’t have enough occupancy and money to keep the place up, and the owner finally lost the apt house. Note: it was not just the local economy that did him in since he did like to drink a lot. Oh well. The owner neglected the place a lot. Anway, these investers are going to lose money on: declining market value of residential housing, curency inflation, wear and tear on the rental itself, rental income not adequately serving the monthly expenses, and the updates/remodel/”perks” it will take to ultimately sell the property when the market actually does come back. The “come back” is not in a few months either IMHO. This will bleed the owners dry, and it will not take long to do it.
Wow.
Roidy
The bigger problem is financing. Where I live, about half the “owners” are flippers renting out their units (and we’re among the renters). Makes it pretty dang hard for a potential buyer to get legitimate financing from a bank. (A lot of them don’t want to lend to renter-infested condos.) So if you want to buy you’ll end up with the crooked loan sharks, which will perpetuate future foreclosures and on and on. It’s like a pot whose contents never settle but keep stirring and stirring–revolving-door tenant after revolving-door tenant.
Yeah, I imagine once you have a renter in there you can’t claim it as owner occed. Now commercial lending rates and standards will kick in. These used to be stricter but who knows now.
These used to be stricter
They will be again. The return of the risk premium is nigh.
They remain much stricter, with more oversight at several levels. Originators don’t offer crap loans, securitisers won’t take them, and B-piece buyers will kick them out of CMBS.
In commercial real estate the numbers do have to work out and be plausable. No pay option loans here.
Just talked to a guy in the cabinet business. No Christmas bonus for employees this year - first time no bonus in 14 years. I asked him the reason just to see what he would say: No business. Needless to say I was not surprised.
Ouch… I feel for the hard workers who are going to suffer in this downturn. But after all the flips… I hope he socked away his prior bonuses. Its going to be a dry few years…
Neil
Also, local pawn shops are exploding with inventory: mostly tools.
I’d buy if they weren’t priced so high for crappy used tooling at a pawnbroker.
Hmmm… I wonder what the trend on ebay is for power tools? Usually much better deals.
Neil
One other thing: A local manufacturing plant owned by GE that makes sealants (caulk) has been in limp mode for the last few months. When I asked the plant manager how they look after the new year, I was expecting the usual hopeful denial response. Instead, I got the truth: ‘Worse’ was all she could say.
All you have to do in order to get the “owner-occupied” loan is sign a piece of paper stating that it is your intention to reside in the property.
You can change your mind the next day and have a 30 year fixed note at 6% on a “rental” property. You haven’t done anything illegal and you don’t have to deal with commercial loans.
Incidentally, it is my belief that because of this little fact, the true “flipper” inventory is understated big time.
master-planned community
Realtor code for “the houses and the rules and restrictions strongly resemble something produced under communism, but at capitalist prices.”
You got that right.
I found a 5.86 X multiple. Am I the new winner?
UHaul quote:
Naples, FL to Nashville, TN $2,267
Nashville, TN to Naples, FL $387