“It’s A Bust”: Florida
The Star Banner reports from Florida. “At the start of 2006, realtors, builders and county officials extolled Marion County’s white-hot housing market. But as the year drew to a close, there was an ominous forecast that the local home building boom was headed for a bust.”
“A report released earlier this month by a consultant hired by the Ocala/Marion County Economic Development Corp., said the county’s construction levels would drop by 50 percent during the next two years and tumble back to 2001 numbers. ‘Real buyers just aren’t out there to justify the construction,’ said Policom President William Fruth. ‘[Previous] construction levels just aren’t sustainable.’”
“After the building frenzy of the last few years, contractors and Realtors found themselves in a market flooded with inventory. ‘There are quite a few incentives being offered, now that we have more inventory here,’ Wilbur Van Wyck, president of the Ocala/Marion County Association of Realtors said. ‘Negotiability is back.’”
“‘I don’t question the 50 percent [construction decrease],’ said County Commission Chairman Stan McClain, a local home builder. ‘[Other builders] are telling me their numbers are way off, too. It’s a bust.’”
The Bradenton Herald. “Developers of the SevenShores condominium project on Perico Island have dropped starting prices on their units by about $60,000. But representatives of St. Joe Co., the company building the 13 condominium buildings on 353 acres fronting the Intracoastal Waterway, deny the reduction in price has anything to do with concerns about a slowing condominium and housing market.”
“The lower prices resulted from a dip in construction materials, they maintain. ‘We have adjusted our prices and that price adjustment was due to our ability to work with our (general contractor) and subcontractors, and they experienced price reductions,’ said Joe Romanowski, sales and project manager for the Seven Shores development.”
“When St. Joe first announced prices for SevenShores in May, units started in the $700,000s. A few months later, Romanowski amended the prices to the low $600,000s. Those units now are being offered for $534,900.”
“‘Those (construction) bids came in lower and we were then able to recapture that $500,000 price-point that we wanted to have in the first place,’ Romanowski said. ‘That re-pricing was not due to softness in the market.’”
“Ken Simonson, chief economist for The Associated General Contractors of America, said the decline for the period was a modest 0.2 percent, compared to a year-over-year increase of 6.5 percent for construction materials.”
“But even with reduced unit prices, the developers of SevenShores have only received commitments on nine of 40 units in the project’s first building. St. Joe has been accepting contracts for about seven months. ‘Nine of our most expensive units,’ Jerry Ray is quick to add.”
The Herald Tribune. “State Sen. Mike Bennett’s decision to back off buying the Two Rivers mobile home park on the banks of the Braden River has come as a relief to park residents. As to why he decided to abandon his purchase of Two Rivers, Bennett said he simply could not make the numbers work. So he walked away without losing any money.”
“‘Everything is kind of quiet,’ said Lois Brown, who has lived in the park for seven years. ‘They say the park is not for sale any more, and I think we’ll be all right until condos start booming again.’”
‘Jobless rates rose
slightly in Palm Beach County and the Treasure Coast in November, and state officials blamed an influx of new job seekers and ‘weakness in residential construction.’
‘ A U.S. census
report released Friday shows that the boom for the Sunshine State has slowed, with Florida growing only 1.8 percent in 2006 after back-to-back years of adding more than 2 percent to the population.’
‘Wary of the rising
risk of hurricanes, Allstate Corp. has added coastal regions of North and South Carolina, Alabama, Maryland and Virginia to the growing list of areas nationwide where it is cutting back homeowners insurance coverage.’
‘Gov.-elect Charlie
Crist has reiterated his support for federal insurance reform legislation that could ease the insurance crisis in Florida.’
‘Wary of the rising risk of hurricanes, Allstate Corp. has added coastal regions of North and South Carolina, Alabama, Maryland and Virginia to the growing list of areas nationwide where it is cutting back homeowners insurance coverage.’
Our dependence on insurance has become a double edge sword. On one side we want to “feel” safe, and on the other insurance may cause us to take risks we would not otherwise take. Like living in places where hurricanes or earthquakes etc are likely. Insurance is now built into the mortgage system and is absolutely broken. It is possible that areas such as this cannot support the kind of high prices which make insurance necessary to begin with.
‘Gov.-elect Charlie
Crist has reiterated his support for federal insurance reform legislation that could ease the insurance crisis in Florida.’
“…on the other insurance may cause us to take risks we would not otherwise take.”
Agreed! Nothing like a subsidy wealth transfer from all Federal taxpayers to help encourage granny to settle down in the path of the next Katrina, is there?
Get Stucco, and what about the gazillionaires who settle in Malibu in the path of wildfires, have their houses burned every ten years and the taxpayer bail out their insurers? Needless to say, then the process starts all over again…
Huh? Urban legend at best.
And there are the Mississippi floodplain “river rats” in the Mid-West who played this game with FEMA for years and years — inundated by a so-called “50-year flood” once every 10 years, only to rebuild in the path of the next disaster.
The town of Vallmeyer, IL is an interesting exception to this cycle of stupidity. There was a famous image replayed endlessly in the national TV network news in Summer 1993 of a barn getting washed away by a wave of Mississippi flood water — that was in Vallmeyer. In a small victory for taxpayers, the townspeople and rationality, the whole town picked up and relocated on a bluff above the old town, out of reach of any potential future flood.
http://www.conradol.com/valmeyer.html
I wanted to purchase in Florida a few years ago. Specifically Venice, Fl and I was shocked what they were asking for small houses on the so called island of venice. You couldnt find anything under 500,000 and if so it was a dump.
Well I was down there in November and for sale signs were plentiful. What I thought was very ammusing is that written on the for sale signs by hand was the price in big bold numbers, $350,000 pool home. What they wont tell you is that these homes are in the FEMA flood zone, ouch. Flood insurance in this area is exploding, to well over $2000.00 a year.
Bob, how is it up there in Rhode Island? Haven’t been there in years, but I have fond memories of Charlestown. I’ve been hearing reports that it is very cheap to rent up there and if I were to relocate from Florida, I’d definitely consider Rhode Island. I loved its coastal areas.
http://www.projo.com/business/content/BZ_FORRENT20_12-21-06_343GFLE.2294395.html
They are still building/converting like crazy. No jobs, and they now have New Urbanist corruption (in the form of historic tax credits) that make me yearn for the old style in your face Buddy kind
Couldn’t link unless I’m a member, but I get the idea. What the hell happened to Rhode Island? I thought it was one of the pleasantest places I’ve ever visited. It used to be the jewelry capital of the country. Nice shoreline, nice countryside. Interesting towns and cities. I know what you mean about the corruption, though. Rhode Island has always had a little of that Mafia style thing going on here and there.
When Buddy became an acceptable substitute for politician by the residents of Prov, we knew it was the beginning of the end for RI.
Does Burlingame State Park still exist? I guess I could google it, but since I’m on the blog….LOVED that place. Misquamacut, East Beach at Quanichatogue (my spelling’s probably way off, but you get the idea). Was a lot of fun, back in the day.
The handwritten signs are a trip here in Sarasota-Bradenton. Pull up to any intersection and there is a plethora of ‘For Sale’ by owner signs written on a box lid with other signs reading “Will pay cash for your house now!!”. Just yesterday I saw a sign that read “Gorguess 3B/R for sale”. Gorguess???? LMAO….
Flic
C’mon, be fair. Just because a lot of the illegal immigrants who got mortgages cannot speak english (let alone write in english) there’s no need to laugh at their spelling ability. And you have to be careful what you post in these “politically correct” times. You might get a letter from the ACLU.
english deserves to be “English.” Isn’t it still our national firsrst language? -
“Immigrants” don’t have a monopoly on misspellings. This board is proof of that, from time to time.
Muzt be zpanish wird ?
A hell of a lot more than that. Try $10,000.
“It’s a bust.”
Not yet. The bust starts next year.
I don’t know. How many business’ could take a 50% hit?
Now would be a great time to close down a mortgage boiler room and head off to the Caymans with all that loot– before the buyback demands start hitting from all those dud loans.
It’s already the case.
Its definately a business bust.
As I look at the LA times and see “record unemplyment” I wonder just how many “contractors” aren’t having a merry Christmas.
Well see.
Neil
Hmm… What L.A Times we talkin about? Apparently everythings rosy.
http://tinyurl.com/y6cyd3
I give up…as someone here once said… I’m off to the peppermint tree forest to play with the unicorns.
Merry Christmas…
Oh,
The Times was rosy… reality isn’t.
Neil
The people from the media have orders. By the way you are winning in Irak and everything is just going fine. See ! That wasn’t bad. Be positive. After all, the people on Wall Street paid themselves 36 billion in bonuses for their good work selling more paper. Everything is just going fine at Golman Sachs. Mister Rubin and Paulson are having just a great time. You are just jealous.
I have visions of a Disneyland parade. Everyone cheering happy and then the sweepers / shovels arrive. Only to have the spectacular done for another group, another time.
“”"way, deny the reduction in price has anything to do with concerns about a slowing condominium and housing market.”
“The lower prices resulted from a dip in construction materials, they maintain. ‘We have adjusted our prices and that price adjustment was due to our ability to work with our (general contractor) and subcontractors, “”"”
LMAO, it has nothing to do with a fall off in demand. These guys crack me up, I’m sorry that had to be one of funniest statements I’ve seen so far.
Let’s see, we determine that the correct market price point for our product is 500, but final costing forces us 40% over that to 700, but hey we come out with the product anyway. As predicted by our demand curve there is less demand than at 500, and we are going to get killed. Then miraculously new costing comes in and saves our butt so we can re-price to our original target price point and all will be well. It sure does say a lot about his project management and marketing skills. If I was a shareholder I would be running for the exit!
“‘Those (construction) bids came in lower and we were then able to recapture that $500,000 price-point that we wanted to have in the first place,’ Romanowski said. ‘That re-pricing was not due to softness in the market.’”
And to what does he attribute the lower construction bids and material costs? It certainly coundn’t be a drop in demand for such things due to a softening housing market…
“The lower prices resulted from a dip in construction materials, they maintain. ‘We have adjusted our prices and that price adjustment was due to our ability to work with our (general contractor) and subcontractors,”
Does anybody actually believe it when developers say such things? I’ve known a lot of developers and I can’t remember any of them charging less than the market would bare.
A few years ago I recall hearing simillarly unbelievable claims explaining why the 1 bedroom condos in downtown San Diego were a “smart investment” at $700 - $1200 sq ft.
Believe me, if that FL developer could still get $600k + that’s what he would be charging. I suppose next he’ll be claiming he’s Santa Clause…LOL!
Ben,
I’ve had a unique insight into this bubble for a number of reasons. First, I used to be a daytrader and after the bust, I wanted to understand its dynamics. What causes a bubble? Its very simple actually, the herd mentality. Herds will jump off a cliff when they act irrationally in one direction.
Secondly, my dad is a bit of a radical and has been for the majority of my adult life, I’m now 40. Hes been talking about an overall market bubble since the 80’s. After years of trying to understand it, he now focuses most of the blame on the depegging of the dollar from gold back in the 70’s. Without the peg, the government has been able to create vasts amount of paper money (liquidity if you will). Without this liquidity we wouldnt have made it through the 80’s without a depression.
The million dollar question is can we escape this time? I have my doubts, since the majority of people are in over their heads in debt. When people can no longer borrow because they are not credit worthy, there will be a liquidity crisis. When money stops flowing, liquidity dries up. I believe John Templeton has this bust pegged. However, before the crisis begins and we see deflation, we will see hyperinflation from fuel, food and other costs of living.
When people become so squeezed that they can no longer pay their bills, which I believe is just starting to happen now, we will probably see an enormous crash in spending.
P.S. I cant wait to see the retail numbers in January. Although, I dont think they will be that bad, I suspect they will be off from last years numbers and this will be the last big christmas in a long time to come.
Yes, I believe this holiday season is the last orgy before a period of austerity.
It’s not looking good for the retailers.
This is from http://money.cnn.com/2006/12/22/news/economy/Christmas_countdown/index.htm?postversion=2006122216
“So with plenty of procrastinators in the picture, industry watchers say retailers need a blockbuster weekend in order to reach holiday revenue and profit targets.”
That sounds like optimist speak for we’re screwed.
This one is also interesting
http://www.foxnews.com/story/0,2933,238384,00.html
Charity donations down 11% thss year
Giving is down. Why does that not surprise me? When jobs are outsourced, offshored, H1Bed and just downright eliminated, what do you expect? I hate to sound like a curmudgeon, but sometimes the “gimme-gimme” folks just don’t get it. They make it sound like people are being scrooges, but they are so used to running charities, they don’t have a clue as to what is happening to the average folks who support those charities.
Bah-humbug.
That old saying, “charity begins at home.” Or was that in your home?
We are already screwed by taxes everywhere and they expect us to subsidize their CEOs with lavish lifestyle.
At my work they had a 50% matching policy… and they outright told us we could choose ONE specific charity or even group to give to… and that the 150% would be 110-120% because of “administrative costs”.
I would much rather go in person to that group and give them cash. Also most charities use Enronesque type accounting to hid the fact it is close to 50% of your gift that is swallowed up in overhead costs…
No the S.O.B. in question all work at Golman Sachs and all the bunch have had one great year! The paper shufflers are really having a great time. Ask Mister Paulson and Mister Rubin. They never have problems.
“‘Real buyers just aren’t out there to justify the construction,’ said Policom President William Fruth.”
Exactly — specluators are licking their wounds and everyone that wanted to buy already bought. What’s more, the number of qualified buyers floating around out there has shrunk.
On the other hand, pent-up supply is building and sellers are rapidly becoming familiar with its painful consequences. I expect a deluge of inventory in Spring accompanied by real price cuts and less mumbo jumbo incentives.
It’s sell or close up shop time for some sellers. They are overextended. Some are hoping Spring will be better but are preparing for the worst. Guess what? The worst is coming.
I am insulated financially from the Florida bust, but, I do live in a region plagued by crime in GOOD times. I am a little worried about what the future will bring for safety and security in Florida.
Also, tell the contractors and builders not to worry, we all get paid in sunshine!
OT: I forgot to mention that the other day I called up my bank and paid off my auto loan. I’m not rich, or even well-off, but I had enough cash around and I thought, “what the heck, one less thing to worry about.” I now have ZERO liability.
Anyway, the banker had to ask someone else to do the transaction because she “hadn’t done a payoff in a while.”
AMAZING.
Great comments, Muggy, and congratulations. You are probably better off than many people who consider themselves “well-off”. Anyway, I know what you mean about being concerned for one’s safety and security in Florida. When one lives modestly, sometimes one lives with questionable neighbors. I know that situation can just as easily happen in a high end community, but less likely. I was living in a low priced apartment complex until I found a real gem of a place in a quiet fourplex. It was painful. Cops were around all the time handling domestic disturbances, etc.
Living modestly does indeed have its downside. It is tough to explain away those gunshot sounds one sometimes hears at night to your kids.
LOL, GS. No gunshots at that apartment complex. But, when I live in South Florida, on the Hollywood/Ft. Lauderdale border (now considered part of Dania, but not when I lived there), our next door neighbor was robbed at gunpoint one night. That’s when we left and moved to this side of the state. Not a minute too soon, I might add.
I wish I was joking about the gunshot sounds, but I was referring to actual life experience.
[Romanowski said], “…re-pricing was not due to softness in the market.”
Who is this guy kidding. Gimme a no-spin break. The writing is on the wall. There is going to be a bloodbath in Florida’s RE industry. 2006 was the inflection point. Now, the industry is hanging off a cliff and supply is going to tip it over.
Especially since St Joe has exited the business and is selling off the last of the inventory.
And their stock still closed above $53 yesterday with a forward P/E over 85. All of that swampland is just so valuable.
“‘Those (construction) bids came in lower and we were then able to recapture that $500,000 price-point that we wanted to have in the first place,’ Romanowski said. ‘That re-pricing was not due to softness in the market.’”
This is classic. So if the market was as hot as it was before, they still would have ‘re-priced’, even if they could get $800,000 for the units? Not likely.
“…re-pricing was not due to softness in the market.”
That bullet in my skull was not due to the firing of a gun.
These are not the droids you’re looking for. Move along, move along.
rob
2006 has seen many qualified contestants, but with only a week to go Romanowski has suddenly established himself as a front-runner candidate for the Annual Joe Izuzu Award.
Joe Izuzu…my hero!
2006 has seen many qualified contestants, but with only a week to go Romanowski has suddenly established himself as a front-runner candidate for the Annual Joe Izuzu Award.
That is a truly wicked funny comment.
Business people always take excess profit off the table……..don’t they?
The price isn’t what the market will bear but what you think it should be and always in line with X% of profit margin. Can’t make more than X, no?
Romanowski must believe everyone is as stupid as he is.
Florida — 2006 was the last chance for managed exits. In 2007, like a wild pack of wolves, everyone will be reacting to each others market moves. As a result, 2007 will bring unmanageable market chaos to Florida’s RE industry.
Palmetto,
I love Rhode Island, its a great state and has some extremely beautiful beaches. However, the rent is not cheap unless you want an apartment. We rent a house for $1600.00 a month. There are very few houses for rent here, which aggravates me to no end. I need a house because we run a business from our home. Its just a modest 1200 sq ft ranch in a good city.
Rhode Island does have its downfalls like a 7% sales tax and many towns have really high car taxes, so the standard of living probably isnt as good as many states. However, there are high paying jobs, and some great little rural towns still exist.
We have a 7% sales tax, no state income tax, though. I’m thinking of checking out the area come spring. I’d like to be able to sit on the grass again without having a ton of fire ants crawling up my posterior.
Wait a minute, your name rings a bell. You aren’t by any chance related to the Carpenter Beach folks, are you? We used to drive by there on our way from Charlestown to Narragansett. All those little cottages by the sea.
7.75% sales tax here, going up to 8.25% next week. 7% is not bad.
“”"I am insulated financially from the Florida bust, but, I do live in a region plagued by crime in GOOD times.”"
Muggy, nobody is immune or insulated to any bust whether its financially or otherwise. It all effects us in some degree, whether it means a loss of jobs which could effect you by losing your own job or your business as your customers lose theirs.
Although, you might be out of debt, you couldnt afford to stay out of work for a long period of time. If your retired and drawing a pension look what just happened to the pensions of the airline pilots.
We are all connected and the pain will effect us all.
“We are all connected and the pain will effect us all.”
“nobody is immune or insulated to any bust whether its financially or otherwise. It all effects us in some degree, whether it means a loss of jobs which could effect you by losing your own job or your business as your customers lose theirs.”
Well said Bob Carpenter of Rhode Island,
My thoughts for the coming year:
Cause and effect in American economics: 2007 and beyond
“Irrational exuberance” precedes: “Rational emaciation”
Subject: Financial behavior of the masses (individuals)
One of the goals:
Anticipate
5. to nullify, prevent, or forestall by taking countermeasures in advance:
3. to perform (an action) before another has had time to act.
emaciated [iˈmeisieitid] adjective
[Origin: 1640–50;
add:
Emaciated: adjective
Origin: 1640–50;
one more try without the htlm tag:
Emaciated: adjective
Origin: 1640–50; L émaciātus, wasted away, equiv. to é- e- + maciātus, ptp. of maciāre to produce leanness (maci(és) leanness + -ātus -ate1)
emaciated: in CancerWEB’s On-line Medical Dictionary
Kernerman English Multilingual Dictionary (Beta Version) - Cite This Source
emaciated [iˈmeisieitid] adjective
having become very thin (through illness, starvation etc)
substitute credit for flesh (although it could lead some to actually become emaciated)
Arabic: نَحيل، هَزيل
Chinese (Simplified): 憔悴的
Chinese (Traditional): 憔悴的
Czech: vyhublý, vyzáblý
Danish: udmarvet; underernæret
Dutch: uitgemergeld
Estonian: kurtunud
Finnish: riutunut
French: amaigri
German: abgezehrt
Greek: αποστεωμένος, σκελετωμένος
Hungarian: girhes
Icelandic: horaðr
Indonesian: kurus
Italian: emaciato
Japanese: やせ衰えた
Korean: 쇠약한, 여윈
Latvian: novājināts; novājējis
Lithuanian: sunykęs, išsekęs
Norwegian: radmager, uttært
Polish: wychudzony
Portuguese (Brazil): emaciado
Portuguese (Portugal): macilento
Romanian: slăbit
Russian: изнурённый;истощённый
Slovak: vychudnutý
Yes , I agree with you . That’s the bitch in all this .Real estate is a “conditional sale ” ,which means its subject to being able to finance the purchase and pay taxes/insurance on the purchase . For some reason the lenders of America thought they could supercede that old condition and make RE a unconditional sale .
The people who could qualify were in competition with speculators and unqualified people . Faulty lending was the reason for prices skyrocketing .
In spite of the cause of the bubble ,the media is reporting as if it’s just a little housing slump in which the worst is behind us .How about the people in pension funds that are going to get hosed coming up,(when foreclosures hit ), who didn’t even know they were investing in “F “paper .
What a trick to get people to buy based on teaser rates that adjust up quickly to 8 or 9 % interest ,( way above the market rate ).
Unqualified buyers ,in the old days of lending, had to put 25 to 40% down and also pay a higher rate and fees .The statement to the unquaified was you take the risk with your own money ,not the bank or investor .
“But even with reduced unit prices, the developers of SevenShores have only received commitments on nine of 40 units in the project’s first building. St. Joe has been accepting contracts for about seven months. ‘Nine of our most expensive units,’ Jerry Ray is quick to add.”
“You are a real dickhead,” NYCityBoy was quick to add back to Jerry Ray. “You have 22.5% of your development sold and you are getting cocky? Why is that? I can see the fear in your eyes. I can smell it permeating from your skin. What’s it like to know that you’ve helped to kill an industry?” Mr. Ray stood for a moment, silently, and then tears began to flow from his eyes.
That is how they should be interviewing these jerks.
‘Nine of our most expensive units,’ Jerry Ray is quick to add.”
That is, nine of the suckers paid the full price before we reduced it.
Right. Nine commitments = Nine future cancellations.
That’s 22.5% of the FIRST building! There are 12 more scheduled for a total of 686 units. At a rate of 9 sales in the first 7 months it will take over 44 years to sell out!! I can imagine Jerry Ray sitting on the steps of the sales office whittling away while looking at the one half-finished building in the middle of a 353 acre coastal swamp.
Someone please enlighten me as to the origin of the quote or quote-fragment ” …they will live in tent-cities and Hondas…” when referring to the priced-out masses? I damn near roll around on the floor, peeing myself whenever I get this mental image- filthy, nomadic renters with makeshift weapons like something out of a Mad Max film. Does anyone know who originated it?
I guess I just don’t get “it”. WTF, is so funny about that? Maybe it’s time to pop in
the old classic- The grapes of Wrath. I mean, sheesh… Christmas and all around the corner yet you derive pleasure from the thought of families struggling to survive?? Come on man, get a hold of yourself!
“Doesn’t anyone know what christmas is all about!”…Charlie Brown to the gang.
Christmas has become a joke.The meaning has been lost in all this consumerism cr@p. I’m waiting for it to be all over with personally.Can’t wait till the first of the year.Kids are so spoiled these days by clueless parents with deep pockets.Most of them won’t work either.
“…yet you derive pleasure from the thought of families struggling to survive??”
No, if you actually read my post you will see that this mental image of WE ‘priced-out, bitter renters’ living this type of existance makes me laugh like a freaking hyena. My impression/recollection (may be mistaken) was that the context of the quote was, we who chose not to buy in the frenzy would be forever priced out because real estate would only go up in value, forever. We ‘bubbleheads’ and ‘chicken littles’ would miss the boat entirely if we didn’t buy a McMansion by mid 2006 and would be forced to live in tent cities and Hondas… Now, back on topic. Does anyone know where this came from and what the context/entirety of the post was?
These days, outright admission there is a real estate “bust” seems to be increasingly supplanting the “there is no bursting bubble” disclaimer in MSM reports. This is probably a good time to review the technical distinction between a real estate bear market ( 14% contraction). The 2003 IMF report “When Bubbles Burst” is invaluable for comparing the situation at hand to past real estate busts in other times and places:
“To qualify as a bust, a housing price contraction
had to exceed 14 percent, compared with
37 percent for equities. Housing price busts
were slightly less frequent than equity price
crashes. In 14 countries with real residential
housing prices between 1970:Q1 and 2002:Q3,
20 housing price crashes were recorded (compared
with 25 equity price crashes). This corresponds
to roughly one bust a country every 20
years. Most housing price busts clustered around
1980–82 and 1989–92, while equity price busts
were more evenly distributed across time (see
Appendix 2.1).
Housing price crashes differ from equity price
busts also in three other important dimensions.
First, the price corrections during housing price
busts averaged 30 percent, reflecting the lower
volatility of housing prices and the lower liquidity
in housing markets. Second, housing price crashes
lasted about four years, about 1 1/2 years
longer than equity price busts. Third, the association
between booms and busts was stronger for
housing than for equity prices. The implied
probability of a housing price boom being followed
by a bust in the sample is about 40 percent.
Housing and equity price busts have,
however, one important feature in common.
During the 1970s to the 1990s, they generally
coincided or overlapped with recessions.
In financial history, price busts were sometimes
not confined to one asset class or one
country, which is not surprising given asset price
linkages. Within countries, linkages between
equity and housing prices are of great importance,
as rising equity wealth during a boom is
likely to raise demand for housing and thus
housing prices, and vice versa. Comparing the
timing of crashes across the two asset classes in
the sample suggests that half of all housing price
busts overlapped, at least partly, with equity price
crashes, while only one-third of all equity price
busts overlapped with housing price busts
(Figure 2.1). Hence, joint equity and housing
price busts are even less frequent than busts in
either asset class.
With cross-border financial integration and
trade linkages, asset price dynamics also have an
international dimension. Does this mean that
asset price busts are synchronized across countries?
Comparing the timing of equity price bust
periods suggests that many of them were indeed
synchronized, especially in times of recessions,
which themselves were typically synchronized as
well (Figure 2.2). The synchronization of equity
price busts in 1973–74, a time when some of the
deepest postwar recessions in industrial countries
were also recorded, is particularly striking.”
While reading this report, it is most important to
bear in mind that “it is different this time.”
(Caution: .pdf file)
http://tinyurl.com/yxk8u9
” real estate bear market ( 14% contraction).”
This part of my post was cut off (my bad — improper inequality sign usage).
What I meant to say is:
“real estate bear market (less than 14% contraction) and real estate bust (greater than 14% contraction).”
GS — nice find — interesting. Thx.
‘That re-pricing was not due to softness in the market.’
‘Nuff said.
“…a time when some of the
deepest postwar recessions in industrial countries
were also recorded, is particularly striking.”
While reading this report, it is most important to
bear in mind that “it is different this time.”
Ghost’s from Christmas’s past:
As Jimmy Buffett say’s: Vampires, Mummy’s and the Holy Ghost…these are the things that I fear the most…no aliens, psychopaths or M-TV hosts scares me like…Vampires, Mummy’s and the Holy Ghost.
When economic survival uses the language of war:
domino theory, financial contagion, collateral damage (as referred to the destruction of civilians and their
Property)
‘Gov.-elect Charlie
Crist has reiterated his support for federal insurance reform legislation that could ease the insurance crisis in Florida.’
I live in the Sarasota/Bradenton area and recently canceled my home insurance because I was livid at the thought of having to subsidize Citizens insurance policy holders. Given that, I’d have to be a huge hypocrite if I agreed with Crist and thought the rest of the USA should subsidize insurance for Florida. It really seems to be the policy down here to look for someone else to pay your bills. We put outrageous taxes on rental cars because only the tourists pay them, we only allow a homestead tax exemption for people that are residents (read voters) and now we want the rest of the Country to pay our insurance bills.
What’s next, ask Ohio to pay into a fund to shore up our beaches. Maybe the Nevada taxpayers would like to build some new schools for us. Hell, why should Florida residents have to pay federal income tax at all. Doesn’t the federal Government understand we have hurricanes here.
If Florida residents need a bailout on hurricane insurance, the residents in the northern cold weather parts of the US need help with heating bills. Currently, low income people up north can apply to the Citizen’s Energy Corp (run by a Kennedy) to get discounted heating oil from Venezula! Other up north people just keep their thermostats low (62 - 65) and wear lots of layers. So where should the subsidies begin and end, hurricane insurance for FL, earthquake insurance for CA, heating bills for the north? We all pay a price to live where we do.
“Citizen’s Energy Corp (run by a Kennedy) to get discounted heating oil from Venezula!”
This is not a taxpayer-funded program. And if Chavez wants to help elderly folks in MA stay warm, why do you care if it doesn’t cost you a penny?
I care because if the US taxpayer is going to buy the arguement that Florida residents should get help with subsidized hurricane insurance, then northern US residents should get subsidized heating fuel help. I think it’s crazy that poor US residents have to count on a third world country to help them stay warm. Why should only certain parts of the country (i.e. Florida) get help with the cost of living where they do?
You think that’s crazy? What about the US depending on a poor third world country to lend it money just so it can keep going? (guess which one).
As least the US doesn’t have to pay Chavez back!
“I think it’s crazy that poor US residents have to count on a third world country to help them stay warm.”
With foreclosures rising, and FBs everywhere, the number of impoverished Americans is certain to rise. We should be grateful to Chavez, and happy to accept aid from any country willing to provide same. A nation of indebted, soon to be beggers, can’t be choosers.
“And if Chavez wants to help elderly folks in MA stay warm, why do you care if it doesn’t cost you a penny?” I thought this blog was against the “well is doesn’t affect me, so I don’t care” attitude that exists in this country? How can you not see the dangers associated with a very powerful U.S. Sentor unequitably helping his district by accepting what amounts to bribes from a dangerous, anti-American, socialist dictator?
“How can you not see the dangers associated with a very powerful U.S. Sentor…”
Sen. Ted Kennedy is not involved in this charity. Before you start making assumptions, do a google search. And if Chavez wants to make some easy points by providing heat for elderly Mass. residents, again, why do you care? It’s not your nickle. Would you prefer they suffer in the freezing winter to suit your feelings? I’m guessing you are not willing to write a personal check to keep the old folks warm.
As for the “it doesn’t affect me, so I don’t care” attitude–presumably you are not a elderly person who can’t afford to pay high heating costs–so I guess that explains why you don’t care if they have heat or not. We should be grateful that anyone, foreign or not, is willing to donate funds to America’s poor. As a debtor nation, we are going to continue looking for handouts in the future–we might learn to be gracious about it. In the past, when we had a few pennies to spare, wasn’t our beef that the foreign poor never appreciated our gifts to them?
“So where should the subsidies begin and end…”
With charities. Period.
“The lower prices resulted from a dip in construction materials, they maintain. ‘We have adjusted our prices and that price adjustment was due to our ability to work with our (general contractor) and subcontractors, and they experienced price reductions,’ said Joe Romanowski, sales and project manager for the Seven Shores development.”
So good old Joe is talking to his boss.
Boss: Joe, what price will the market bear for these condo’s?
Joe: oh, I’d say about $720K.
Boss: that’s great news because we were able to get some savings on construction costs and we can sell them now in the $500’s and still make money. I can’t see why our company should pocket the difference when we could pass it on to our customers. In fact some of our shareholders were complaining to me just the other day that we made too much money last year.
Joe: that’s a great Idea boss, would it be ok if I gave away some free appliances too.
Boss: why not, It’s Christmas time.
Can anyone explain how St. Joe is acting on behalf of its shareholder’s interests? If you are to take this clown at face value, he is stating they can sell these places at a HIGHER rate than they are asking? But they have decided to be nice as their costs go down? As a shareholder I want companies to reduce cost and increase prices of goods sold, not reduce prices because demand is there, but cost is going down. As a shareholder I would be livid, he is either an imbecile or is lying.
i live in Ft. Lauderdale and recenly tried an experiment. i placed 20 signs on each of the 10 nearby intersections of my home touting “lowest priced 4 bedroom in town”. tons of calls came in (most were just neighbors calling out of curiosity). anyways, three weeks later when i checked the MLS, i noticed the top 10 lowest priced homes in my neighborhood dropped their asking price by 15% on average. i took the signs now and the sellers are now stuck advertising 15% less. HAHAHAHAAHa i love this sheep mentality. flippers are shaking in their boots.
Good idea… Midnight runs to place signs in areas I want to buy… Hmm… Only a panicy market would respond to such a tactic… We’re almost in panic. Maybe Ft. Lauderdale already is in panic… but not SoCal. We’ll see.
I’m getting a bit tired of waiting… I’m starting to think about encouraging my company to move rather than fighting it.
Neil
Neil — hang in there. We’re only in the second inning.
AND we’re ahead.
I inquired about the SevenShores development last May, as I frequently visit nearby Anna Maria Island and wanted to know the cheapest offering. I was shocked to learn that the smallest 2 bedroom units were priced over $700k. Adjacent to this development, you can buy a 3 bedroom ‘patio home’ for less than $500k. (The price range was $150k to $260k for these patio homes four years ago.) Frankly, it makes more sense to buy a recently marked down resale condo on Anna Maria Island (which has beautiful Gulf and Bay beaches) than to pay for new construction on Perico Island in Bradenton.
I care because if the US taxpayer is going to buy the arguement that Florida residents should get help with subsidized hurricane insurance, then northern US residents should get subsidized heating fuel help. I think it’s crazy that poor US residents have to count on a third world country to help them stay warm. Why should only certain parts of the country (i.e. Florida) get help with the cost of living where they do?
I have the solution. Move to FL and your low income friends will be warm, and they’ll also be subsidized. Problem solved.
Any else I can help you with today?