“On The Sidelines To See Just How Low Low Is”: Florida
The Herald Tribune reports from Florida. “Associate Realtor Rick Greene traded e-mail messages last week with staff writer Michael Braga about the current reality in the real estate and insurance industries in Southwest Florida.”
“Q: What has been happening to real estate sales and prices over the past six months? What has been driving these trends? A: Over the last few years, there was quite an abundance of press attention to the rising real estate prices, and speculation as to when that ‘bubble’ would burst. The media has focused on that decline and speculated as to how low the market could go.”
“‘In enabling a self-fulfilling prophecy, those who read the papers, in depending on that viewpoint, have decided to remain on the sidelines to see just how low low is.’”
“Q: When are we going to climb out of this trough? A:Unfortunately for the sellers, because of the glut of properties on the market, prices may continue to be at their current lows for some time.’”
“‘However, this is a good time for buyers, prices are down to 2003 and 2004 levels, and some buyers are desperate to unload properties that are camouflaged by the sheer numbers in competition. The early bird gets the worm. If the media got behind that idea, the marketplace would see some quick changes upward.’”
The Sun Sentinel. “Every year at this time, the South Florida Sun-Sentinel polls real estate industry professionals who are experts in different segments of the local real estate market. Here are their responses:”
“David Levin, a real estate industry consultant based in Delray Beach: ‘People with a vested interest in promoting real estate transactions will use anything they can to claim that ‘now’ is a good time to buy and/or sell. Despite this, sales volume for 2007 will remain at current levels. As sellers and buyers continue their ‘Mexican Standoff,’ prices will erode approximately 5 to 10 percent further.’”
“‘Inventory levels will increase before backing down in the latter part of the year as disenchanted sellers take properties from the market and buyers selectively buy properties that actually meet investment criteria or can be carried by income.’”
“David Dweck, a real estate agent in Coral Springs: “The resale market will hit bottom in 2007, and it will remain a buyers’ and renters’ market. Foreclosures will continue to increase to perhaps record levels from Miami-Dade through Port St. Lucie. Many real estate agents and title companies will be history since the party is over. Finally, investors will be in a great position to buy at prices significantly below market.’”
The Palm Beach Post. “The existing-home sales report for November from the Florida Association of Realtors comes out Thursday and real estate watchers will be, well, watching to see if prices continue to tumble.”
“For an early look, here’s what Illustrated Properties’ evaluation of local MLS sales for the month shows. The inventory of homes on the market rose to more than 22,000, down from August’s peak of nearly 29,000, but still in record territory. By comparison, there were half as many homes on the market a year ago, IPRE says.”
“Sales remained in the basement last month with 628 closings, the lowest level in more than a year.”
“Yes, home prices are falling, but there’s a not-so-thin line between making an offer that reflects this reality and insulting the seller. ‘We are amazed at some of the crazy (low) offers people put through on homes that have been marketed at a reasonable price,’ says Realtor Randy Bianchi in West Palm Beach. ‘It almost becomes insulting,’ he says.”
“Actually, Bianchi is too polite to say that some offers are insulting.”
“Case in point: Bianchi has a condo in West Palm Beach listed for $170,000, a reasonable asking price, he says, for an end unit with many upgrades and a great view. The last two sales (within the past 45 days, he points out, not last year) were for that much or more.”
“‘We got an offer of $145,000 with 95 percent LTV (loan-to-value),’ he says. ‘Come on! If it were cash, I might understand. But financed? I think buyers are assuming that all sellers overprice homes, or they’re not listening to their agents or nobody is doing their homework.’”
“Or all three.”
“Yes, home prices are falling, but there’s a not-so-thin line between making an offer that reflects this reality and insulting the seller. ‘We are amazed at some of the crazy (low) offers people put through on homes that have been marketed at a reasonable price,’ says Realtor Randy Bianchi in West Palm Beach. ‘It almost becomes insulting,’ he says.”
I don’t understand this whole mentality of “insulting the seller.” If an offer is too low, either reject or counter it. No emotion needed. It’s just business.
On the other hand, were buyers insulted last year when they had to send a resume and beg sellers to buy their overpriced POS? Were buyers insulted when they had to feed squirrels as a condition of the sale?
I agree 100% with bottomfisherman. I wasn’t insulted when a seller wanted $$ more for a property than it was worth. It should be more “insulting” to a seller if their property sits on the market for more than 6 months.
very well put
I think this concept of “not insulting the seller” is just another tool the RE agents use to extract higher offers. It may be effective in a strong market but not in a weak market where it only keeps potential buyers from starting negotiations.
Somehow it must be less insulting to the seller when one potential buyer after another walk through the home and no one makes an offer.
‘However, this is a good time for buyers, prices are down to 2003 and 2004 levels, and some buyers are desperate to unload properties that are camouflaged by the sheer numbers in competition. The early bird gets the worm. If the media got behind that idea, the marketplace would see some quick changes upward.’
Since when are realtors supposed to rally prices up? What ever happened to just facilitating the deal? Over the past two years we hear them lament publiclly the lack of affordable housing, yet interviews like this show their blatant efforts to distort the market via the press, etc.
Now consider this non-realtor viewpoint; which is more rational?
‘David Levin, a real estate industry consultant based in Delray Beach: ‘Inventory levels will increase before backing down in the latter part of the year as disenchanted sellers take properties from the market and buyers selectively buy properties that actually meet investment criteria or can be carried by income.’
and then the “screaming spring” begins. people see all the houses for sale just like theirs and scream. people see all the comps on a home just like theirs and scream.
Well said Ben . The fact that the NAR/realtors exceeded their normal role and became market prediction cheerleaders ,that the main stream media was so willing to interview without counter opinions, kept the party going .It’s disgusting .
One does notice, though, that the PB county inventory has shrunk from FOUR years’ supply to THREE years’ supply, quite a drop. Of course, the effect could be seasonal (holidays), for all I know. Will be very interesting to follow these figures Jan-Feb.
Makes you wonder how many of these agents are themselves in speculative properties up to their butts. Ltos of ‘em bought lots of condos in Florida.
“…. says Realtor Randy Bianchi in West Palm Beach. ‘It almost becomes insulting,’ he says.”
‘Insulting’ sellers with lowball offers? Who, me???
*looks around guiltily*
~Misstrial
I don’t understand this whole mentality of “insulting the seller.” If an offer is too low, either reject or counter it. No emotion needed. It’s just business.
I think it is an unspoken rule of ‘pay it forward.’
What was really insulting and vulgar was early 2005 when everybody was acting like Donald Trump. “Everyone was a real estate genius, gloating, so smug….” Well…., TOUGH S*%T…..! I just hope that a lesson was learned by these amature speculators, but from the look of it and all the whining and bitdhing their doing they’ll probably get caught up in the next bubble and have their asses handed to them again…. I predict that we’ll see a Chia Pet asset bubble or something just as stupid….
I love your blog handle, pal! Is there an organization for economista non grata? (If there is, I assume the late, great J K Galbraith was a charter member…)
to introduce roubini, kudlow showed grinch footage the other day!
Tye entire concept of insulting the seller is dependent upon the seller being the boss, the standard, the know it all on prices.
What? Not want to pay the seller’s price that reflects a double in a year? How insulting.
Yeah, alot of real estate specs getting caught.
What’s this absurd concept of “insulting the seller”? In my experience if a seller can’t shrug off a lowball bid then it usually means that seller is actually scared his/her selling price may be unattainable. The lowball bid isn’t insulting, but it may be upsetting.
Right, what’s 3% of $145k? Not bad for a few days work.
If I ever get back into the home purchase market again, I fully intend to go out of my way to insult as many sellers, lenders and Realtors as time permits…
Rule of thumb when buying a car: If you’re not on the verge of being thrown off the car lot, you’re offering too much.
“I fully intend to go out of my way to insult as many sellers, lenders and Realtors as time permits…”
you’re realtor huh, did you graduate high school?
what career did you fail at before you decided you had to become a realtor?
The fact that homes are stagnating long enough for “insult” offers to come in should tell sellers all they really need to know.
I love the comment that if the media would only get behind the “buyers’ market” early bird getting screwed stuff, the market would turn around. Forget about the fact that folks earning the median income can’t afford a median priced home.
Once again, it’s the media’s fault that the pyramid scheme is crashing down.
Is these are all low-ball offers then where are all the non-insulting offers?
“If these are all low-ball offers then where are all the non-insulting offers?”
Well put!!!
It depends on whether you really want the house or not. Even in a down market there will be some nice houses, ones that you might want to live in without having to dump lots of money into them. If you offer too low, the seller may be emotionally “upset” and dig their heels in, thus less likely to want to meet you somewhere in the middle.
On the other hand, if you are just making offers to desperate sellers until one “bites”, there is no reason to worry about insulting them.
“Q: When are we going to climb out of this trough? A:Unfortunately for the sellers, because of the glut of properties on the market, prices may continue to be at their current lows for some time.’”
I see — prices have reached a permamently low plateau, just after we heard the announcement that prices were falling…
Premonitions of a bubble on the verge of popping do not ruffle those who are bullish on real estate. In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely. “South Florida,” he said, “is working off of a totally new economic model than any of us have ever experienced in the past.”
Merry Christmas Ron!
I will never tire of this wonderful quote. Everybody I know in Florida ate this stuff up. Buy now Karl or you’ll be priced out forever. Hey, what’s that big, swirling mass of clouds out there in the ocean? Never mind, got to get back to my primary occupation of flipping condos. Man, this is hard work.
I especially love the “foreigners” rationale. The US has always had so-called foreigners moving here and ultimately buying property. Nothing really different.
Yeah, it’s called 8 huge hurricanes in succession, with fear of more 4 and 5’s coming.
Better hurry up and buy now in South Florida - the land of the “new economic model” - before you are priced out forever!
Let’s see, the $500k condo closet appreciating at 20% a year means that if you do not buy your closet now then you are looking at $1.24 million in 5 years, $3.1 million in ten years, $7.7 million in 15 years, $19.2 million in 20 years.
If your heirs inherit your closet 30 years from now then they will get an asset worth $119 million.
You could make a significant impact to your future family tree half a century from now. By then your closet will be worth over $4.5 billion. More than enough for all of your great grandchildren to simply travel around the world, first class all the way, without ever having to work a single day in their lives!
Hurry, hurry, hurry!!!!
“Case in point: Bianchi has a condo in West Palm Beach listed for $170,000, a reasonable asking price, he says, for an end unit with many upgrades and a great view. The last two sales (within the past 45 days, he points out, not last year) were for that much or more.”
“‘We got an offer of $145,000 with 95 percent LTV (loan-to-value),’ he says. ‘Come on!
170,000 - 145,000 = 25,000 discount, not even 15% of the listing price. Asking for a 14% discount is insulting?
170,000 - 145,000 = 25,000 discount, not even 15% of the listing price. Asking for a 14% discount is insulting?
How much was this condo going for in 1995, before the bubble/mania started? $ 50K? At 145K they are still paying way too much. I find, after 50% RE price increases per year, the notion that prices dropped only 3% last year an utter nonsense. Take all the incentives and give away’s out then you will see the real prices.
The buyers should finally smarten up and start offering 30% of the asking prices, without taking any give awa’ys. This would really screw the comps. This would be a true market price.
To say that RE market is stabilizing is to assume the status quo on the labor front. How many people will construction/real estate/mortgage financing complex lay off once the starts of the new homes go to 700K(down from 2.1 million) units per annum, and sales of the existing house go to 2.5 million (down from 7.5 million) per year? 3-4 million directly? How about spin-off layoffs once Home Depot’s of this world start shutting down the stores. We didn’t even scratch the surface.
The key to the economy’s performance is consumer liquidity, which is currently at the historical low. Translation, 90% of US households are broke (with 9 days of living expenses in their chequing accounts) and living from pay cheque to pay cheque. What will 3-4 million lost jobs do to the economy?
“To say that RE market is stabilizing is to assume the status quo on the labor front. How many people will construction/real estate/mortgage financing complex lay off once the starts of the new homes go to 700K(down from 2.1 million) units per annum”
I’m not certain that new home sales will ultimately drop to 700K, but I certainly agree with your main point. Yet, nobody in the economic mainstream will fully discuss it — real estate layoffs.
Seems pretty obvious, no? Starts and permits down to 2002 levels, when 600K fewer construction workers were needed. Factor in realtors, title insurance folks, retail … total layoffs should reach 2 million or more in the next 12 months. Where do this displaced workers go? Some will go back south of the border, taking what’s left of their spending power with them and leaving behind the keys to their over-leveraged houses.
Seems to me like a huge hit. With manufacturing losing jobs, how much longer can the retail economy absorb the blow?
who gives a crap that the seller is going to borrow 95%. I bet this Jackass probably has more option arms than an octopus. Whats he afraid of. He should be thanking his higher power(probably satan) that anyone is even interested.
Thank you jtcc for making me laugh.
“‘In enabling a self-fulfilling prophecy, those who read the papers, in depending on that viewpoint, have decided to remain on the sidelines to see just how low low is.’”
Does how low low is depend on what the definition of is is?
“Yes, home prices are falling, but there’s a not-so-thin line between making an offer that reflects this reality and insulting the seller. ‘We are amazed at some of the crazy (low) offers people put through on homes that have been marketed at a reasonable price,’ says Realtor Randy Bianchi in West Palm Beach. ‘It almost becomes insulting,’ he says.”
Truly amazing. You can see how the brokers believe they know the market. You recall how the past couple of years it was “You better hurry up and put in a bid at 20-30k above the asking price, because the baby-boomers are buying up everything and prices will keep escalating and you will be priced out forever!”
Now, here we are in a declining market. They believe the gains are permanent and guaranteed, not a new market direction.
Why isn’t he saying to the seller, “look, the market is falling and you had better come back with a counter-offer 20-30k lower than the offer, just to keep the buyer interested……………..otherwise, you may be stuck here forever!”
What makes them think they set the market price. The bids ARE the market setting the prices. When an acceptance is reached, the NEW price is the market price.
Prices have doubled in 5 years on speculation. A similar drop, based on FUNDAMENTALS is probably in order. Get used to it.
Desperate sellers and their real estate agents - like two staggering drunks, leaning on each other to stay propped up.
“‘It almost becomes insulting,’ he says.”
Notice the new word in the agents’ lexicon: “almost.”
We’re getting there.
Excellent.
Yes, I believe we are in a new market direction based on the housing index, the unconstitutional fed flops, job loss overseas including service industry not just mfg., new layoffs in USA, lower tax revenues, higher fed budget and a few more fiscal mischief makers — like maxed out credit, a topping even declining market, many specs stuck, …
The new market direction is down.
Tokyo RE went down 85% over a 14 year period. At the top, nobody said it could happen. ha!
You sure do understand markets. Agree, the bids are the market setting the prices. The arrogance of the broker to Announce with authority that the asking prices are reasonable. Guess not. And after all, the price is an “ask” only, not “price fix”.
Love your comment that they think the gains are guaranteed, permanent.
I for one am glad to see this market change direction. The gloating has been vulgar. And why is it that when housing doubles it’s not called inflation?
All these people who predict 2007 as the bottom. Even if that were true, that doesn’t mean that prices will take an immediate spike back up. Even when things bottomed pricewise in 1993 or so, it took a long time to rise again.
The wishful thinking, we’ve hit bottom crap is hilarious. The Dallas market alone won’t hit bottom until all of the new high-rise condos get completed and sit empty for a decade. After that, it’s anybody’s guess. And Dallas wasn’t even part of the bubble according to all the real estate “experts”. By the way, I was in Tampa last weekend, and that Trump Tower hasn’t moved since my last visit in July. That thing isn’t getting built.
I waled by that Trump lot in late August and told my friends the same thing: “No way that gets built.”
The people behind it say construction will start in January. They’ve been saying this for what, two years now?
Did you read the barf-fest in the Morning Snooze yesterday about the “Search for Significance” by such legendary shysters as Craig Hall? If Craig wants significance, perhaps he should pay back all the folks he stiffed in 1989 - 1994
Yeah, all of a sudden Craig Hall is a real estate genius. I still remember all of the folks he stiffed - this guy is such a fraud, and yet, the Morning News has had numerous articles over the last few months touting his investing acumen. What a complete crook. I’ll have to look up the article.
Frank McKinney, Delray Beach-based developer of ultra-luxury homes: “2007 promises record sales of trophy properties, bucking the trend of the macro real estate market. Ultra high-end properties are defined as having a value in excess of $10 million. These properties represent lifetime achievement awards for those who can afford them, and more will be able to. The ultra-wealthy class of buyer is growing at an alarming rate. By the end of 2007, there will 22 percent added to the rolls of those with a net worth over $50 million.”
I love this guy ! He is so with the now crack pipe and all.
This is why I love the movie Citizen Kane so much. All of these Xanadus will turn their owners into miserable old shut-ins. Money can buy isolation but it certainly can’t buy happiness.
This is a lifetime achievement, not a POS conda in a cespool.
http://www.ranchland.com/store/ppreview83.php
This has been listed for years! Now if you really had 10 million would you retire on this ranch for 3 mill and live off the rest or is all this condo crap a financial ponzifest?
A bottom in ‘07 ? Not in the Chicago area. New condos in Lake county IL are just starting to display for sale / rent with a massive oversupply of units. The rehabber / teardown lunacy is still winding down. The smucks are still building away into an empty market for $1M homes in Northbrook. We sold Mom’s place in June ‘05 to a rehabber and he just finished construction. The empty place is now FSBO (can’t afford a Realtor !) Adding to the 10x supply of inventory (ho ho ho!) All of this will take years IMHO to correct, and prices are still WAY too high 400 - 500 K for a 60 year old POS 2B/1B in Northbrook ?
But but….Bob…. It’s Northbrook!
why does it make a difference to realtor bianchi if it’s at 95 perecnt LTV offer vs. an all cash offer? why would he consider one but not the other???
Agree. Its cash to the seller either way.
“Clean” offers are very appealing to certain types of sellers - people who need to sell quickly, estates who just want to liquidate, etc. Those sellers will sometimes take a lower price if the offer is submitted without any sort of contingency (home sale contingency, inspection, financing, etc.) just so they don’t have to spend any more time deailing with the property.
The situation described above involved a 95% LTV - not exactly a strong buyer. A cash buyer with no inspection contingency, no home sale contingency and a short escrow period might have gotten more a closer look.
he bid something like 15% below asking, he’s a strong buyer to me. he probably is a blog reader and bid 3X his or her income. probably a young couple or a single person who makes about $48,000/year X 3=$144,000.
I like it.
I agree re the clean deal, because the contract is not subject to financing, which the buyer could easily torpedo. I plan to make an offer for all-cash with just one contingency: an inspection. Personally, I’d never buy real estate, other than raw land, without an inspection.
Nobody can predict tops or bottoms.
p.s. posting from my Treo for the first time. It works!!!
07′ is a long way above bottom here in Florida. Try 09′!
all of my offers will be justified by reversion to the mean. 1997 prices + 3.5% annual growth rate.
I agree with this, and add the argument that Salinasron presents below, and I think we are left with the sensible argument for the “low ball” offer.
The current asking prices are still insulting, the closings are still based on the GF principle, and the “low ball” bids are what can be considered forward looking, approaching reality, and currently still not low enough.
Just curious. Is 3.5% a historical norm? Is that in real or nominal terms? I usually use about 5% when figuring what to pay, so 3.5% will be a sort of Christmas gift.
-
In the book Irrational Exuberance, Robert Shiller says that inflation adjusted U.S. home prices increased 0.4% per year from 1890–2004, and 0.7% per year from 1940–2004.
figures after the 40 you had boomers and starting in 50’s you had subsidies up the ying yang-ending w the community bankin bill
Gekko — ditto — that is exactly my formula, to the extent possible (as in, some places are newer subdivisions with nothing older than 2000).
-
but you can still calc it with a comparable from 1997.
I know that some of you remember those California sellers who wear demanding that prospective buyers write essays about why they deserved to own the house. Or, how about the seller who insisted that the new buyer feed the squirrels in the yard?
Screw the sellers. Next year, they’ll be dreaming of ANYONE making an offer to buy their house.
Who cares if it’s a 95% LTV? It’s a sale.
ESSAY IN 2007
Dear Seller,
I am interested in buying your house. To show me that you really want me to buy it you will have to do 5 things.
1 Cut the asking price in half
2 Hold the paper at 5% for 30 years no balloon
3 Continue to do the yard work for the next 100 years
4 Buy me a car(I know you already offered just thought id remind ya)
5 Cut my toenails monthly
It might help to remember that tomorrow’s sellers that you all are ready to insult are yesterday’s buyers that had to agree to keeping the property a squirrel ranch. They’ve been used and abused.
But all is fair in love and war, as well as business.
Paul
I think buyers are assuming that all sellers overprice homes, or they’re not listening to their agents or nobody is doing their homework.’”
How about: buyers know the sellers homes are overpriced, they know not to listen to any agents, and they have done their homework and that’s why they aren’t buying and if the do the offers are not ‘low’ but sensible and within their means.
I think the “big thing” for 2007 will be selling crack pipes. All these RE clowns will need one.
I think a buyer can determine what they think the market will settle at with a discount bid in a declining market . After all ,even some experts are claiming that in bubble areas we will see 5 to 10% down
in prices in 2007 . If you want a buyers to take the POS off your hands than you have to expect a falling market will be priced in to the offer .
I think the agent is really pushing to get more low ball offers. Drive the perception of the market as down, so prices do come down and transactions (and commission)
go up. Many have said on this blog that RE agents would be the biggest proponents of falling prices.
You have a point about driving the market down to fast just to get sales by the RE agents . I don’t now why any sellers would trust anything the REIC said at this point . The fact that the NAR is saying that the market has hit bottom will keep some sellers from going lower also .
2007 will be the year of the excess inventory RE market ,along with less qualified buyers . You tell me what that will do to prices .
The last thing a Realtor is, is an expert on real estate. They analyze very little and spend most of their time and effort in marketing. When i talk to any one of them they are so far behind the curve it is amazing. Did they see this inevitable meltdown. NOPE! Did they save their money knowing the end was around the corner? NOPE! Do they believe the blood has just begun to run? NOPE! Do they think the spring will bring revitalized sales activity? YEP! On what do they base their assumptions? Historical data, but this time is different don’t ya know.
“…Finally, investors will be in a great position to buy at prices significantly below market.’”
Meaning, what, sellers will be willing to forego the opportunity of selling at market price, and in fact will willingly sell at significantly below market price providing the buyer is an investor?
I guess Mister Dweck meant, “significantly below last year’s market.”
good catch … like there is wholesale and retail RE
I dont think 2003 prices are bottom. I think bottom is more like 2001 prices. Look at the charts and observe where the trend lines began to leave the long term trends and head for the sky. Either way, bottom is not there in Florida and has quite a way to go before it arrives. gordo nyc
You’re right that prices began to skyrocket in 2001, Gordo. However, where’s the downturn from the last run-up (which was pretty toppy in 2001 — at least in So Cal)?
IMHO, 2001 was the top of the normal RE cycle (before the credit bubble hit and took prices even higher). We still need to go down from there.
Don’t forget that our economy is very weak (too much debt), jobs are not stable, retirement and healthcare benefits are becoming less likely, etc. We need to save more and devote even less $$ to housing than we have in decades. Also, the Boomers will likely be SELLING assets, not buying them, as they have over the past few decades. This would lead to even lower prices.
We need to wait this thing out, as the bottom could very well be further down than many can imagine.
Just a thought!
I’ve just thought about potential consequences of this gigantic RE bubble. There seem to be two options for the monetary authorities ahead of us.
a) Let the bubble disinflate regardless, and even risking a Great-Depression style economic downturn
b) Counter the RE bubble disinflation by monetary injections into the economy of unprecedented proportions
Given the current political situation I have no doubt that option b) will be selected. I think the FED/ federal government has the will and ability to montetize many of the losses of this RE bubble. We all know that the RE downturn is potentially much more deflationary than the stock market bubble because of the much higher leverage involved and the fact many more marginal households are affected. These marginal households will then no longer be able and/or willing to borrow after the RE crash than stock speculators were in 2001. There is a real recipe for disaster this time around. However, I do not think we’ll see a monumental deflation like 29/32 in 2007-2010 despite the RE crash. No doubt RE prices will go down and foreclosures will spike beyond anything we’ve seen past the Great Depression. However, in 2007 and the following years the authorities will buy up a lot of foreclosures and bad RE loans and thereby allowing an “orderly” retreat of prices while inflating one more bubble, probably in raw materials. This will be like the S&L crisis mop-up, but in much, much greater proportions. The subsequent economic recovery will be even weaker than even the current one, but will suspend the great coming deflationary depression for some more years, and into the 2010s. The consequences of these actions will be an enormous increase in the monetary base - with hidden M3 and also largely hidden from the CPI. There is no doubt in my mind that M3 is purposefully hidden and that rents are the biggest part of the CPI - rents will not raise due to the overbuilding. This will give the montetary authorities a lot of leverage to inject liquidity and hide some effects of the RE crash without creating openly visible hyper inflation.
Therefore, I believe RE prices will retreat until 2010 in an “orderly” fashion of not more than 3% per year nominally. At the same time the loss of real monetary value will be far greater, but not visible in the CPI. Bond/cash holders will be screwed in 2007/8 as well. It’s a difficult investment situation. On top of everything, salaries will continue not to raise with real inflation, resulting in continued loss of purchasing power. However, this will be one more time overcompensated by raising consumer debt and result in one more bubble. After 2010 at some point the consumer will be tapped out and resulting in a Great Depression - style deflationary depression. I just don’t think it will happen “this time around” already.
One more (more or less) “soft landing” and “recovery” ahead, folks. - That’s my idea.
Merry Christmas,
AZ Joe
M3, now hidden by the private banksters known as The Federal Reserve, has been re constituted by financials and it’s continuing straight upward. The supply of money is skyrocketing. Meanwhile, trust in the USD internationally is dontinuing down, and over 48 nations have announced they are divesting themselves of dollar reserves, and Iran, et al are trading oil for Euros, not dollars, which is what So Damn Insane did just before he was toppled. So the dollar is drooling and no longer sought …. trouble either way. Big trouble.
all offers to buy should be made on the assumption that the seller is carrying 2 mortgages and is desperate. Reading this blog has convinced me that is very often the case so play the percentages. Many of those sellers are tossing and turning all night.
At what prices will Florida homes and condos really be worth buying? Given how much more you have to pay for insurance, and given the property tax rates (up to 2% of selling price, but then capped if you live in it), you end up paying an awful lot for that sunshine.
Actually the property tax rates are up to 3% of the selling price or the guestimated value, which ever is higher.
Three percent?!! What county? The couple who bought our house in Manatee County will start at approx 1.9% of selling price. Someone I know who bought this year in Volusia County will start at about 1.8% of selling price. Where is it three percent?
It will be 4 or 5 % when the properties fall to actual value
Hillsborough and Pinellas. We have something like 28 different property tax rates in Hillsborough. Talk about unconstitutional . . .
And sweating a lot to boot..just isnt worth it anymore..where I lived they just had a shooting at the mall (Boynton Beach)..my only interest or concern is that my daughter still lives there…NEVER will I move back there..I lived there for 20yrs…enough for me////
Mr. Bianchi should have taken the $145, in a couple of months it will be sold at about that price or less.(wow, then he really will be insulted). I wish I knew where this condo is..I am familiar with WPB, and if its where I think it is, well…my sister bought the same kinda setup…corner unit, water view and in 2000 paid $80k..
We’re in Florida this week & the “view” is worse than we thought. Dozens of similar houses at 3x their late-90’s price. Many vacant, some for several months. One nearby listing is for “immediate possission” at ~10% below the others & may screw up the comps once it closes. Maybe that will be the beginning, at least in this neighborhood, of reality impinging on the fantasy? Looks to me like all these ~2 -2.5Ku square foot houses 25 miles outside of Orlando are “worth” $400K but tax rates show sellers paid $150 -$180 & the rental comps are $1650 (implying ~$200K price for a positive cash flow).
“View From Florida (Part I),” is now published at:
http://www.viewfromsiliconvalley.com/id288.html
Stay tuned for “part deux” later this week.