“Speculators Scrambling To Adjust” In Florida
The Herald Tribune reports from Florida. “New home construction, the linchpin of this North Port’s spending plans, has slowed to a comparative standstill and even optimists say these doldrums are far from over. The massive drop in home building, which started in April, has left everyone from City Hall staffers to spec home buyers scrambling to adjust.”
“Impact fees, used to pay for capital projects such as road widenings and new parks, account for $28 million of this year’s budget. To collect that much money would take about 3,900 houses and 50 large commercial projects. The city is nowhere near that pace so far, being on track to issue about 1,000 home permits this budget year.”
“‘Whether we did (cut) enough or not remains to be seen,’ said City Manager Steven Crowell.”
“The real estate downturn has been a disappointment beyond City Hall. Rich Deeds, who lives in Pennsylvania, jumped into the North Port spec housing market right before this year’s precipitous drop. Now he’s sitting on two new houses in the city.”
“He tried to sell one on eBay this month but didn’t get a single bid. Now he’s spending $4,500 on Florida mortgages every month. ‘I expected a leveling out,’ he said. ‘I didn’t expect it to take a plunge.’”
The St Petersburg Times. “‘We were actually crazy,’ said broker Dan Richard. ‘It seemed like it was almost out of control, people flipping houses. It’s much slower now.’”
“That, of course, is the big story of 2006, the slowing of the housing market, though by some accounts those terms don’t begin to describe it. ‘This thing has almost collapsed,’ Per Berglund, a senior economist with Moody’s Economy.com said.”
“The most telling statistic documenting this reversal is the number of permits the county’s Development Department issued for construction of new homes. That dropped from 4,185 in 2005, a record high, to 2,765 through Dec. 19 of this year, with a much more pronounced decline in recent months.”
“But people in the business of building and selling homes don’t need to see those numbers to know how things have changed. They can tell by the way they go about their jobs.”
“As the pace of building slackened in late 2005, builders had an easier time finding materials and workers to complete jobs. Then, toward the end of 2006, said Mark Vallery, owner of Vallery Custom Homes of Clermont, subcontractors’ prices began to drop substantially because they needed work.”
“‘Basically, they don’t have anything to do, as opposed to two years ago when we had to beg them and offer them bonuses to get any work done,’ said Valler.”
“The reduced labor costs mean that, finally, the prices of homes have started to drop. The least expensive houses he sells in Southern Hills, called cottages, have recently been repriced at $298,900, down from $350,000. Vallery, whose sales in 2006 dropped 70 percent from 2005, said he has reduced the prices of other homes in the golf course development by a full 20 percent.”
“‘You hear some people say, ‘My neighbor sold his for this much a year and a half ago, and I have the exact same house,’ said Richard, who said sales in his offices declined 30 percent this year. ‘We have to tell them, well, that was a year and a half ago. … That’s not working anymore.’”
The Miami Herald. “The squeeze on South Florida renters might ease because more rentals are coming onto the market. With condo sales slow, some condo investors are putting their units up for rent instead. And others who converted their rentals into condos in the hope of quick gains are deciding to convert them back.”
“While the size of this ’shadow market’ of inventory is hard to gauge, it is having an impact.”
“‘The shadow market has definitely affected the rental market. Whereas a year and a half ago the market was really tight, now you find an abundance of rental property,’ said Jay Massirman, a former vice chairman at commercial brokerage CB Richard Ellis.”
“‘Six months ago a renter could not find a concession anywhere. Now you can find a half-month or month offered for free in some places,’ said Kevin Judd, VP of Apartment Realty Advisors in Boca Raton.”
“Alan Ojeda, among the few developers to build an apartment rental tower in South Florida in recent years, said fully two-thirds of rentals converted into condos are now going right back in the rental market. ‘It is going back as rental supply, but under a different owner,’ he said.”
“Some 4,000 apartments set to be converted to condos have already reverted back to rentals, according to McCabe Research & Consulting, who has long predicted a meltdown in the condo market. The company only tracks market rate apartments of 100 units or more.”
“Earlier this year Pembroke Cove, a rental community in Pembroke Pines, was set to be sold as condos. Now the 302-unit complex is renting again.”
“Raul Nobili, VP of a small Miami Gardens company that owns a handful of Miami-Dade rental complexes, explains the change: ‘I used to get three calls a week from buyers wanting to buy the apartments and turn them into condos. Now I get two calls a week and they ask if we are interested in buying other rental buildings.’”
“The new condos are spinning off rentals as well. Roughly 10 percent of the units at Neo Vertika, a recently-completed 443-unit condo along the Miami River, are for rent. With thousands of condos under construction across South Florida, the number of new rentals could quickly rise.”
‘ PORT ST. LUCIE — Vivian Bredes loves her home here, where she has spent half the year since 1989. But after seeing her neighbors’ tax bills, she might uproot herself. Bredes paid $3,199 in property taxes this year on her 1,300-square-foot Camelot Gardens condo. A neighbor who has the same size condo, but has a homestead exemption, paid $905.’
‘Bredes said, ‘If they continue to increase my taxes 16, 20 percent — no, I won’t stay. I’ll just sell. … While the taxes are high, it’s the principle, the unfairness of it all, that will drive me away.’
‘A new report by a consultant to the Ocala/Marion County Economic Development Corp. suggests Marion County strayed - however inadvertently - and is likely to soon pay the price. ‘The new home construction industry, which has caused a significant increase in local tax revenue, property values, and construction employment, will begin to slow significantly and will likely decline.’
‘Marion County will not be immune to the latest bust in the real estate, construction industry. The community should prepare itself for a decline of 50 percent in new construction value from the 2006 level over the next two years, an overall decline in property values of 10 percent, and a decline of sales tax revenue of 5 percent.’
‘What Fruth calls a ‘feeding frenzy’ saw property values jump 20 percent and more every year during that time. It doesn’t take an economist to recognize that putting all our eggs in one economic basket is not the wisest way to economic stability. Now that we’re caught in the burst of the housing bubble, we should consider a lesson learned.’
From Florida to California, the speculators Land of Milk and Honey ..is drying up FAST !
Prediction: within a month we are going to see articles about Florida sinking into a sharp recession and questions about where else it is spreading or if it is regional
I think that is true. In the past, Florida has been able to weather local booms and busts through tourism and the snowbird factor. But not now. Many of the mom and pop motels have been driven out of business by development/taxes/insurance. Beaches have become crowded and nasty. On the west coast, red tide has soured a certain segment of the tourism industry. After all, who wants to lose a lung just for a little sunshine. Not to mention the oil drilling soon to take place 200 miles offshore. Violent crime is up and people know it. And of course, we have nothing to replace it, no real industries to speak of, except maybe for a little agri-business. Oh, yeah, and phosphate mining.
You are exactly right about the Hotel/motel scene here on the West Coast. I will fill you in on the details locally in the Local Postings when it comes up.
I’d like to hear about this. I’ll be watching for that thread. I’ve heard a little bit about it, like the mom and pop hotel/motels suing Pinellas County for inflated values. The shoe that needs to drop here is the local government recognition of this BUST.
No way. That is right when the rich snowbird buyers are coming to save the day. Wow, that was close!
Nope. You will have instead of that, massive propaganda from the official media, saying how things are great and fantastic and how prosperity is just over the corner. Why should anybody stop lying ? Lying is good for the folks at Golman Sach and JP Morgan and company. It’s the only way in the first place they created the mess. And I am sure that It’s the only way to go from them to get out the mess. Anyways it’s you the stupid taxpayer and elector, who will be footing the bill of the next mega mega real estate bust bailout.
I think we will see massive propaganda, but I don’t think it will work. No taxpayer bailouts.
Seriously, Marc, there’s literally no taxpayer money to accomplish those bailouts. And propaganda only goes so far, because if it continued to work, we wouldn’t be seeing the bust we’re seeing. When propaganda hits reality, reality wins.
The short sightedness and stupidity of these various local governments is truly mind-blowing. First, by unrestrained development, which screws up communities to no end. One thing not reported in the larger news outlets are the many smaller changes to a community, like traffic patterns.
Secondly, the greed and inept handling of monies collected via taxes and impact fees. Where does that money go? Because it certainly isn’t being used to improve this area. Do local governments tighten their belts like the rest of us when the money dries up. NO! They become more rabid in looking for ways to keep up the income stream. I’m sure the money’s all spent. And for what? Wait until Florida has another wet season. The local road and neighborhood flooding will be massive.
teaching illeglas to habla ingles
classes of 2 to4 on one at my HS- guess who’s buying?
Palmetto, Im sure once we look in to this, we will find that these local governments have put aside a nice percentage of there take
for their rainy day fund….
Do local governments tighten their belts like the rest of us when the money dries up. NO!
The city I live and work in has been on a feeding frenzy for the last five years. They’ve added an army of new employees that will be very hard to get rid of. They’ve added new programs and invented new work for all those new people. All of this requires an on-going commitment of funding, rather than just being one time spending. Rather than repairing existing infrastructure like streets and water-sewers they’ve been spending big on park improvements and pedestrian paths. As tax revenues and impact fees begin to decline, staganate, or inflate away, they’re going to be in trouble. I’m waiting for the excuses come next budget year.
” Rather than repairing existing infrastructure like streets and water-sewers”
Right you are. After local flooding, people are wading in doody.
While Miami’s “published” rents are high and realtors still lead with their B.S. about the market being redhot, the fact is condo owners are desperate and cutting each other’s throats to get a tenant.
I see it in my building and hear about it from friends and associates. The wall of lies is crumbling so I tell other bubble sitters to demand concessions from a landlord. If the condo owner/debtor won’t negotiate thats fine. There are a couple thousand other condo owners panicing and trying to stop the financial hemoraging.
If they wo’t take your money tell them the next guy will. Somebody is going to get a tenant today…but they are going to have earn it.
You’ve summed up my attitude as a renter. I won’t go for huge amounts of money up front (my rule is first month’s rent and a damage deposit not to exceed $1K) and won’t agree to any other BS such as realtors coming in or listing the place for sale while I”m there. I’ve been told to buzz off and that’s fine . . . there’s 10 of them for every one of me.
wonder if anyone has a rough formula
county taxes = if constrution off 30%
impact fees are county gold- 5k per lot and up in my county
the pigs always spend all the money
There was a lot of waiving and shaving of impact fees around here during the boom. Developers got up on their hind legs and pressured the country commission. Now, as the boom turns to bust, back come the impact fees with a vengeance. Arse-backwards, of course.
“‘The shadow market has definitely affected the rental market. Whereas a year and a half ago the market was really tight, now you find an abundance of rental property,’ said Jay Massirman, a former vice chairman at commercial brokerage CB Richard Ellis.”
“‘Six months ago a renter could not find a concession anywhere. Now you can find a half-month or month offered for free in some places,’ said Kevin Judd, VP of Apartment Realty Advisors in Boca Raton.”
Is there anybody here still calling for rents to rise?
my mom rents in Venice 1400 sq ft for $1200 all inclusive, place sold for 350k$$$
BLS can bs about inflation forever and then convert to home sales if they get pressed by rising rents
Let’s assume you wanted to finance that property and pay the same amount. Assume 20% down and a 30 year fixed. Assume $300 of that $1200 is taxes and insurance.
It’s equivalent to a .99% interest rate on the $280,000 borrowed. Yes, less than a percent! What lender would ever offer such a deal? No wonder renting is cheaper.
In Florida, $300/mo ($3,600/yr) is nowhere near enough to cover taxes and insurance on a place that’s fairly valued for sale at $350K. That makes renting even more of a no-brainer.
Note to self: Write letter to landlord asking for a 20% reduction in rent.
“Neal has conducted research of his own and expects the decline to last until the first quarter of 2008. From there, he expects another boom to last from 2009 to 2012 and attributes it to the number of baby boomers who will retire and flock to Florida.”
Of course he does!! None of these goons could even see a slowdown a year ago and now they are predicting another “boom”. Back during the summer, there was a local article quoting Pat Neal as saying the local market had bottomed out since he sold 2 houses in a weekend. Kinda like Bob Toll calling a bottom since he got two contracts in one of his communities in DC in a span of a month, up from 1 the prior month. These guys are on another planet. I still don’t think FL will be recovered from this bust in 2012, yet alone be at the tail end of another boom…..
I do not expect Florida to ever recover from this. Interestingly, I saw a news report recently about increasing numbers of people choosing to retire overseas–several of the interviewees expressly panned Florida as being too expensive and too crowded. I also saw something online that ranked Florida as one of the world’s ten most overrated tourism destinations due to its utterly sterile and tacky overdevelopment. Without a steady flow of tourists and retirees, our state is ruined. And for what?
The spoof of the “Night Before Christmas” on this blog is hysterical. If we have annual awards here (best post, best parody, best rant, etc.), that should get one. Bravo to the writer, and Merry Christmas to all.
It is, however, still the case that UK people (especially those living around London, you think you’re in a bubble . . .) regard Florida RE as extremely cheap.
I, too, think that Florida won’t recover from this. At least, not easily. Tourism is the one underlying fundamental that it had and that’s pretty much been trashed.
“…‘I expected a leveling out,’ he said. ‘I didn’t expect it to take a plunge.’”
Haaha…Haaha. ROTFLMAO! I guess that’s what you get when you listen to the REIC shills and don’t do your own research. Well deserved, of course.
The $4.5k a month probably isn’t including taxes, insurance, etc. A few thousand of these GF’s could really shake up Florida.
From the Herald Tribune story:
“Neal has conducted research of his own and expects the decline to last until the first quarter of 2008. From there, he expects another boom to last from 2009 to 2012 and attributes it to the number of baby boomers who will retire and flock to Florida.”
I’m a boomer
I’ve retired
I’ve got money
I don’t know where Neal is getting his info but personally I say “F*#k Florida”. I ain’t retiring to a hot, humid, high tax, high insurance, high cost hell hole……
Me and my money will go someplace decent. I don’t know where yet but it damn sure won’t be The Sunshine State.
Good luck Neal and all the folks who are banking on folks like me.
Yeah, the boomer myth will be like Bigfoot. Every time a boomer is sighted in the future, search parties will get together and search the Everglades, following footprints that fade into the muck.
I’m a boomer, bought my house cash in Napa Valley in 1995 with a super-lowball offer. Prop 13 is keeping my PT at bay. No worries here, so count me out of the FL migration numbers too. I can’t wait to start lowballing the floppers again in 2010.
I was thinking about FL at one point. Off the table now thanks to all the info provided by the folks on this blog.
“Permits … dropped from 4,185 in 2005, a record high, to 2,765 through Dec. 19 of this year, with a much more pronounced decline in recent months.”
First there was Spring hope that thawed. Then Spring turned to a Summer fizzle and Summer brought a darkening Fall. Now, it’s cold again and the RE market is full of Wintery apprehension.
It is the winter of our discontent.
Bredes said, ‘If they continue to increase my taxes 16, 20 percent — no, I won’t stay. I’ll just sell. …
To whom may I ask? And why should they pay the outrageous taxes?
Check out the LA times article today on FBs in Mammoth Lakes California it is pure gold.
http://www.latimes.com/business/la-re-mammoth24dec24,1,6404138.story
Bredes, you know the drill. Cash-out refi, pay the taxes and then treat yourself to a new BMW. RE only goes up. DL told me so.
http://money.cnn.com/popups/2006/moneymag/ontrack_dreamhome/2.html
“n the end, spend no more than 2 1/2 times your income on a home. For a down payment, it’s best to come up with at least 20%. Make a smaller down payment, and most lenders will require you to have private mortgage insurance (PMI), which adds a minimum 0.5% of the loan amount to your mortgage payments, about $1,000 more a year on a $200,000 principal.”
WTF!!! I mean it and I repeat WTF??? Even CNN is now saying the fundamentals imply a price for a house cannot be more than, say… 120k.
Even for a smuck earning 100k, it would cap the price at 250k max.
Stupidity +Greed = Florida Today
“Neal has conducted research of his own and expects the decline to last until the first quarter of 2008. From there, he expects another boom to last from 2009 to 2012 and attributes it to the number of baby boomers who will retire and flock to Florida.”
That’s funny, his research wasn’t good enough to predict this down turn (bubble pop) why should he think it’s good enough to call when the market will strengthen.
Markets tend to be very efficient in the long term. If there is going to be a herd of baby boomers heading to Fla. it’s most likely already priced into the market. Sort of like buying a stock when they release record earning and wondering why it goes down. Neal may be able to sell homes in the future, but not at a 50% profit level they he did in 2005. I know a person that bought a home from him for 900K (includes all the upgrades) in 2005 and now Neal is trying to sell the same house at 650K (base price).
Homes back in the rust belt are starting to look pretty cheap. Global warming is starting to make the winters up there more tolerable.
“Global warming is starting to make the winters up there more tolerable.”
Not only is it starting to make the winters in certain areas more tolerable, it’s starting to make the shorter, milder winters preferable to months and months of agonizing, expensive (energy-wise) heat and humidity preferable. I’m giving it serious thought. The only thing that keeps me holding on is, if indeed the Gulf Stream does a flip to handle global warming, then the winters will be even worse in those areas in the long run. It’s one of the scenarios that has been speculated on. Short term, warmer climes further north. Long term, colder. I think it is nature’s way of combatting global warming in the long run. Probably the planet has some built in fail safes we don’t even recognize, including epidemics to thin out the population that threatens the life of the planet.
” including epidemics to thin out the population that threatens the life of the planet. ”
It is a certainty…We can build our castles in the sky ,but eventually reality makes us build them on bedrock. In our arrogance we think we are invincable,and it will happen to the other guy..
“The only thing that keeps me holding on is, if indeed the Gulf Stream does a flip to handle global warming, then the winters will be even worse in those areas in the long run.”
Here’s the way some not-yet-desperate flippers are thinking right now, “The only thing that keeps me holding on and feeding this alligator is that if indeed the return of 20% annual appreciation is just around the corner, then this investment will pay off big time in the long run.”
Both scenarios are possible, but both are extremely unlikely.
At 61, I have changed my plans. Instead of retiring from NYC to Ormond Beach FL; I am splitting my time between FL and Boulder Colorado. Too hot for too much of the year and too expensive.
I live in Ormond Bch…..ICI Home Builders is the major company located there….Rumor has it, that they have 450 completed homes just sitting, waiting for some SNOWBIRD to come buy one, for $225/ sq ft….Most ICI homes are $300k to $500K
In Plantation Bay, where the ICI owners live, it kinda looks like a neutron bomb hit there…..unfinished homes sitting across from completed $450K, homes….
TRULY A PICTURE OUT OF TWILIGHT ZONE!!!