Florida Downturn “Came Out Of Nowhere”
The Wall Street Journal reports from Florida. “Plenty of investors, who purchased homes to rent or flip, continued to buy and sell through the height of the boom. One of them was Marjorie Dresner. The Canadian native believed that Naples would long be an attractive market. A prolific investor, she purchased dozens of houses in recent years, many of them with a partner. One of them cost her $1.7 million.”
“But it’s increasingly evident that investors and speculators here and elsewhere played a greater role than previously thought in pumping up the real-estate bubble, especially near the end of the run.”
“In late October, Ms. Dresner tried auctioning off 28 of her properties, but some bids were as much as 40 percent lower than what she paid. One three-bedroom ranch house she purchased in July 2005 in the middle-class Lake Park neighborhood fetched a high bid of $400,000; Ms. Dresner and a partner paid $690,000 for the house, according to county records.”
“Ms. Dresner won’t talk much about her investment experience, but prefers to focus on the positive. ‘I did very well in the beginning,’ she says. ‘I look at the overall picture. You don’t just look at one year.’”
“Economists cite individual investors for pushing prices up excessively and lenders for lowering their credit standards. ‘The thing that sent us into a contraction was that house prices were getting high and affordability was aggravated by investor speculation,’ says David Lereah, chief economist at the National Association of Realtors.”
“Some of the buyers who placed bids on Ms. Dresner’s houses at the auction in October were other investors. One of them was Jerry Krecicki Jr. ‘It’s all about timing,’ says Mr. Krecicki, a local real-estate investor and real-estate agent who believes the market will rebound.”
“Mr. Krecicki says he met Ms. Dresner a few months after he sold her his home in Lake Park in September 2004 for $435,000, more than double what he paid for it. After that deal, Mr. Krecicki served as her real-estate agent on multiple sales in Lake Park.”
“Mr. Krecicki says he went to the auction out of curiosity and jumped into the bidding when he saw the low prices. ‘After about two hours, a house came up for bid that I knew very well,’ Mr. Krecicki recounted. They put up the highest bid, which was $275,000. It was the same house Mr. Krecicki and a partner sold to Ms. Dresner for $435,000. Given the huge price drop, ‘it would have been stupidity’ not to bid, Mr. Krecicki says.”
“Many of the sales from the auction haven’t closed yet. In many cases the top bids on Ms. Dresner’s homes weren’t high enough to pay off her lenders in full, says auctioneer Paul Drake. Ms. Dresner says she never bought a home for more than its appraised value. ‘The sellers can ask whatever, but it’s up to the banks in how they appraise it,’ she says. ‘I never overpaid for anything.’”
“In the past month, both Countrywide Home Loans Inc. and the Bank of New York filed court papers in Collier County Circuit Court in Florida saying they are seeking to force a foreclosure sale on two properties owned by Ms. Dresner.”
“Mr. Krecicki and a partner still own about a dozen homes that they are renting out. He says they have cash reserves to cover homes where expenses exceed the rental income. He says he feels badly that Ms. Dresner has had trouble selling her properties. ‘This market downturn came out of nowhere, like a snowstorm,’ he says. ‘It surprised everybody, especially the people making mortgage payments.’”
The Naples News. “Naples real estate is in the national news — again. The Wall Street Journal published a story about a ’slump in chic Naples,’ noting that home prices have dropped and the number of unsold homes have swelled as frenzied investors have scrambled to get rid of their properties.”
“Word about the story spread quickly among real estate agents, brokers, builders, and developers on Monday. Some say it will only hurt the market, while others say it may actually help the market by bringing attention to Naples.”
“‘You know the old adage, ‘I don’t care what you say about me, just spell my name right,’ said Ross McIntosh, a Naples-based real estate broker. He said the story could actually rekindle interest in the market if buyers get the impression that prices have plunged or there are bargains to be had in Naples.”
“‘We don’t want the speculators back,’ McIntosh said. ‘But this kind of news may attract real buyers. So how is that bad for business?’”
“Realtor Bob Brewer received several calls from clients in New York, New Jersey and other Northern states about the story. ‘They wanted to know what was going on,’ he said. ‘Their comments were, ‘Are they still printing that garbage?’ He said he is working with 15 to 20 buyers who can’t find what they’re looking for, though there’s a 16-month supply of homes on the market.”
“Michele Harrison, president of the Collier Building Industry Association, said the worst has passed, as other local, state and national headlines have acknowledged the market has started to turn. ‘If I were in the market to purchase this is the time I would be looking,’ she said. ‘Right now.’”
From TC Palm. “In the cooled-down housing market, some Port St. Lucie builders are complaining about the city’s longstanding policy to require all property owners to pay an ‘availability charge’ for trash pick-up on vacant houses.”
“Having to pay $70.50 every three months for trash service at every house he doesn’t sell won’t help, said Pyramid Development VP Aleksin Szwed. ‘It’s not a pro-business environment for builders,’ Szwed said. ‘(But) that might be something they want to do. They’ve had too much building, maybe.’”
“Metrostudy, a company that tracks housing, reported 1,059 completed but unoccupied homes in St. Lucie County at the end of September. In 2005, there were 492 homes completed, but empty.”
“The housing market is causing a ‘predicament’ for builders, Mayor Patricia Christensen said, but the city is unlikely to change the trash bill policy because it would make garbage collection too difficult. ‘They have to pick everything up,’ Christensen said. ‘If they had to go down a list and say, ‘Wait! That house hasn’t paid. Leave the pile,’ (then) we’d have piles everywhere.’”
‘The Clearwater boat retailer said it probably lost 20 to 25 cents per share in the quarter ended Dec. 31, far more than expected and easily its worst effort since going public in 1998. It also slashed its 2007 earnings forecast. Chief executive William McGill blamed the limp U.S. housing market and other uncontrollable factors for causing worried consumers to delay big-ticket purchases, including boats.’
‘MarineMax is the best in the industry,’ said Conder. ‘If MarineMax is finding conditions challenging, the rest of the industry has to find it even more so.’
‘Michele Harrison, president of the Collier Building Industry Association, said the worst has passed, as other local, state and national headlines have acknowledged the market has started to turn.’
This would make a good weekend topic. I have seen it mentioned in more than one place how the ‘headlines’ are saying markets have ‘turned.’ Whatever happened to reporting on something after it happens?
‘headlines’ are saying markets have ‘turned.’
Yeah, its funny how the REIC can now say the market tanked “unexpectedly” and for (apparently) no discernable reason….yet now they “know” the market has “turned”.
So real estate “experts” didn’t forsee the first turn, still don’t know or acknowledge what CAUSED the “correction” but now they know the market has bottomed…..but can’t (or won’t) explain the factors that have changed which lead them to this conclusion.
So they can’t or won’t explain the downturn and can’t or won’t explain why an upturn is occuring and they are “experts”.
I don’t know about you but I always believe “experts” who can’t explain the fundamentals of their profession. I’m a buyer!
Bob is selling his boat to cover this year’s tax bill. However, he is still going to be a couple hundred bucks short if the sale is sucessful. Ben — I think there was also a boat bubble
Uncle Bill!!!
I’m hope he was getting prepared for the slowdown. Oh boy. Normally he is a very conservative type guy.
Its funny to watch all the people connected to the industry note all the bad signs. Then declare a bottom or turning point based on marginally decreasing levels of bad news (rate of decline has slowed slightly). Then advise that its a great time to buy.
Thanks, no. I’d rather not wreck my finances this year.
Whatever happened to reporting on something after it happens?
They’re reporting the turnaround before it happens in a valiant attempt to make it so.
That’s what I’m seeing too. Everything was all hunky-dory until now — and now they are announcing a turnaround. A turnaround from what? They never acknowledged a downturn!
This is too funny!!
Definitely would make a good weekend topic, Ben!
I’m hearing the “bottom is in” NAR line all over the place. Even heard a couple of acquaintances bought recently because they are looking for “investments” and the market is about to pick up.
Do they know something we don’t?
Interesting long term thought about Florida property values from Merrill Lynch. What happens when Fidel and Raoul are gone from Cuba. Do a million Cubans move back to Cuba? Or, If you can buy a property on the beach for 1/3 of Florida’s prices, what would you do? Interesting long term perspective.
Cuba has even more of a hurricane problem than Florida. A house on the beach in Cuba might not be the brightest idea, however, the way things have been going, I’m sure there will be plenty of takers. Wonder how the insurance would work there?
I’m cuban-american and very much doubt more than 1% will move back to cuba. The reason people are so eager to leave cuba is that living in cuba sucks.
But don’t you think Cuba after Castro could turn into an updated version of Cuba before Castro, in the sense that it was a playground for wealthy, decadent Americans and for criminal groups like the Mafia? Or have I been watching too much Godfather?
A lot of latin american nations are fun places to party, doesn’t mean they are great places for the people who lived there. All that stuff breeds corruption. My dad created thriving business both in cuba and the u.s., he thought it was a lot better here because you don’t get worked over with a pipe by hired goons as often.
Great comment, redfish.
Yes, in fact I recall a news item a month or so ago, when some thought that Castro might be dead, where Florida was bracing for an influx of Cubans eager to escape post-Castro instability. I seem to recall Senator Martinez cautioning the Cuban people to stay put until everything was sorted out. Easy for him to say, he made it to the US and is sitting pretty.
What if living in Cuba doesn’t suck anymore?
It will still suck relative to living in the US. There has never been a latin american nation with a stable, non-corrupt government and probably never will be.
cuba was relatively ok before castro….it will surely relieve the pressure on sofla..Especially as the distance is less than 100 miles!
cities like little havana/hialeah may see pop decrease.
So all the Cubans moved to Miami and now it sucks, too. Can’t quite put my finger on the common denominator….
Hey, watch it. Miami sucks because of all the Yankees, not the Cubans.
Oh, this is a new one.
So who have been running the city/county councils in the last 20 years?
I thought most of the Anglo northern retirees have abandoned Miami-Dade for Broward and PBC.
I have thought about that as well. My guess is they head back to Cuba, unless they have true roots here like kids in school, decent jobs, etc. I would look for many to head back to Cuba. Just a gut feeling, no hard evidence.
Many of them have been here since the 1960s. They DO have roots and family here. The second group came over in the 1980s. After living here for 30 to 50 years — I think a lot of them are here for good. However, I do believe a lot of them will bring family members over who weren’t able to come earlier.
My observation is that the reverse is true - it’s more likely that there will be an increase in the influx of Cubans. Most Cubans like it here, and have established significant ties. And they’re not all in Miami - many are in areas like NYC as well.
Unless the US changes the “dry foot” rule that is likely to be true, the US had many advantages, it is orderly, stable and offers relatively high wages.
“the US had many advantages, it is orderly, stable and offers relatively high wages.”
redfish, not sure if your use of the word “had” is deliberate or a slip. The US seems to be a whole lot less stable and orderly than it was even five years ago. Or perhaps it just seems less orderly and stable here in Florida.
I always thought that rule was odd but actually makes sense. When I was down on the west coast of FL last week there was a boatload of 33 Cubans that landed on Longboat key, of all places. They went there since the east coast (much shorter route) is so thoroughly patrolled.
I would welcome anyone to the U.S. that is willing to risk their life in such a way to get here. At one time I think I read stats that generally about 50% of Cubans die trying to get here. It’s unfortunate that if they get intercepted before making landfall then they are sent back, but if that rule were changed then it would open up the floodgates of smugglers which would probably cause too many other problems.
The USA is becoming over populated. There is a clear relationship between the population a nation and its living standard. Examples Canada, New Zealand, Australia, and the USA. We should institute a policy of very tight immigration control and tax incentives to encourage smaller families. Send them back. Don’t be short term kind and cruel to future Americans.
Patriotic Bear, you are part of the “problem.” It would help everybody else if you would move to Canada. USA is a melting pot. Deal with it.
Melting pot?… .Melting pot assumes an assimilation
to the home culture. The recent waves of immigration have established their country in ours. Don’t or won’t spreak the language or respect our laws…but they sure do take advantage of every service available,and draining the access to quality of life with traffic,crime ,and lower wages for all. I assume that is the plan however. With waves of new consumers they can fill all those empty houses.Great for them, bad for us.
PB you’re saying Canada etc. have a higher standard of living than the U.S.? That’s news to me. Got a link to data showing that “clear relationship”?
I think standard of living is much more correlated with economic policies, available natural resources, and general social behaviors than it is with population and immigration policies. The fact that we are a melting pot IMO is a huge advantage, at least in most respects.
The native population of the U.S. is stable at 2.1 births per woman, whereas all of Europe is in decline (~1.6 bpw). The population of the U.S. as a whole is increasing slowly due to immigration, but that cannot be said of most European countries.
Immigrants DO assimilate into (and change) American culture. The average immigrant will learn English well enough to get by, their children will be fully bilingual and their grandchildren will speak only English.
According to IQ and the Wealth of Nations, the most important factor is IQ. Economic/government policy is secondary. Natural resources are secondary(e.g. Japan). The authors found that bad policy can temporarily override high IQ, but good policy can NOT make up for a population of low IQ.
My above reply was in response to packman, who opines that immigration/population policies are not as important as natural resources or social/economic policy. In the long run, the DNA policies (aka immigration) will rule.
Jimmy B you are misinformed. Canada is ethnically diverse, but maintains a strict immigration policy–one which many Americans would not be able to meet. Because the Canadians maintain border security, there is some semblance of order on the northern border.
In the south, there is no immigration policy,the border is totally vulnerable, and 10-20 million illegal aliens have simply invaded the country.
Maintaining the security of the border and enforcing immigration law is a matter of Constitutional right.
Your “melting pot” crack is clumsy straw man.
But if Cuba is no longer a Communist nation, will the US change the “dry foot” rule?
They should, it is a relic of the cold war and unfair to people in other impoverished nations.
Unfair? The US does not owe “people in other impoverished nations” anything, let alone guaranteed citizenship.
What you owe other people and how you chose to treat them are two different things. I don’t owe total strangers anything, but I try to treat them in a humane and kind manner.
“I don’t owe total strangers anything, but I try to treat them in a humane and kind manner.”
How I treat total strangers also has something to do with their attitudes and intentions towards me. A total stranger coming at me with a gun or knife or intention to defraud in some way is an enemy worthy of the treatment given to enemies. A total stranger with friendly overtures and intentions gets humane and kind treatment.
UnRealtor said:
‘Unfair? The US does not owe “people in other impoverished nations” anything, let alone guaranteed citizenship.’
I believe redfish was suggesting that it is unfair that Cubans enjoy almost automatic U.S. residency if they make it here, whereas other impoverished Latin American countries do not.
I imagine we will get a wave of Iraqi immigrants here soon. It’s just a matter of time. Do we owe them? Well, you can ask yourselves that…
so that’s who’s going to buy up all those south Florida condos!
When Fidel and Raoul are gone, we are going to discover a huge amount of oil in the area between Florida and Cuba. The oil companies and USG will have greased the new Cuban government for partnerships and divvy up the drilling rights/areas, and the Cuban economy will take off like a rocket. As a secondary consideration (the money ALWAYS comes first), Cuba then will become the political/physical buffer between the U.S. and Venezuela.
Chip, I had read somewhere that China had been negotiating with Cuba for oil exploration in the area between US and Cuba.
Palmetto — likely true, but they are negotiating with dead men walking. Even if they worked something out, deals are made, deals are broken. Look at Belarus, Russia and the EU. My money is on the major oil companies, Wall Street and politicians from the U.S. and Cuba to shunt aside all challengers.
‘I never overpaid for anything.’
It’s different here.
She’s just undersmart. Her box of stupid runneth over.
Yeah she did everything by the book that she got for paying $5k to attend a RE investor training seminar.
This lady has one of the all time great bubble quotes, IMO. I read that article in yesterday’s Journal and almost fell over laughing. If we just multiply this brilliant investor by the thousands, imagine how much worse things have to get in FL before they get better.
on average, how many people have 28 homes? I wish I knew how many homes the average investor had.
This, IMO, is one of the most important questions facing the downslope side of the bubble. I suspect the number of investers who owned over 20 SFRs will astound on the upside, once it finally comes to light…
Wonder if any meida, mainstream or otherwise did any investigation as to the fortune of those neophyte investors that armed with the “RE seminar” knowledge went forth and exercised their new found acumen. I think in the long run we should be grateful for these GF investors, without which RE would never drop faster. 28 homes now what was she thinking?
Ms. Dresner says she never bought a home for more than its appraised value. ‘The sellers can ask whatever, but it’s up to the banks in how they appraise it,’ she says. ‘I never overpaid for anything.’”
Yeah, I’m sure all those appraisals were on the up-and-up. It’s such an honest industry, you know.
Florida Downturn “Came Out Of Nowhere”
Uh no, it didn’t come out of nowhere. Anyone with 2 functioning brain cells could see what was going on in FL was going to collapse. It was just a question of when.
“Economists cite individual investors for pushing prices up excessively and lenders for lowering their credit standards. ‘The thing that sent us into a contraction was that house prices were getting high and affordability was aggravated by investor speculation,’ says David Lereah, chief economist at the National Association of Realtors.”
Wrtie down the time and date!!! DL has actually said something truthful. Investors, lax lending and affordability have directly lead to the ongoing bust in FL. I can only imagine how painful it was for him to say that. So much for the so called “fundamentals” he has raved about. If DL tells it like it is, it must be pretty bad and unavoidable at this point. No lipstick for this pig!
Came out of nowhere
This comment sounds eerily familiar to many comments heard after Katrina. You saw the big storm headed your way yet it came out of nowhere.
Seriously in 6 years I saw the price of buildable lots go from 3,000 to 100,000. Now I am no rocket scientist but that is around 3000%
Out of nowhere…..Really
What?? You mean this wasn’t sustainable, fundamental economic forces at work? Population growth? Income growth? Consumer smarts?
DL never cried foul on the way up, it’s disgusting he’s doing so now, when so many are looking at the biggest financial fiasco of their lives.
at least Lereah owns Florida condos! that’ll show him fundamentals. he might have even mortgaged, sadly, his own home. remember his equity quote?
“he might have even mortgaged, sadly, his own home..”
Nothing sad about that. Seeing Lareah twisting in the wind might save untold numbers of his disciples from doing the same. I am assuming Lareah is well compensated for his ruinous advice,so he will be fine.
If you think Florida is bad for Hurricanes try Cuba as they all seem to cross that island somewhere along the path.
Yep, in fact, Cuba is considered sort of a buffer zone for hurricanes headed toward Florida. The weather forecasters are always hopeful about hurricanes weakening over Cuba on their way to Florida.
You know the old adage, ‘I don’t care what you say about me, just spell my name right,’ said Ross McIntosh, a Naples-based real estate broker. He said the story could actually rekindle interest in the market if buyers get the impression that prices have plunged or there are bargains to be had in Naples.”
Ok, so the buyers I sold to at highter prices are hosed, but that is ok as long as I still make money from the “new” bargain hunters… classic…
” Leave the pile,’ (then) we’d have piles everywhere.’”
Perhaps a portent of the future of empty Florida housing inventory?
Well, if taxes can’t be paid because there are so many unpaid tax liens what do you expect towns to do? Just keep on spending money for nothing? The flood of dollars and dreams will turn into nickels and dimes soon as citizens start nitpicking over every penny spent by their local governments.
Last night during the football game we called one of our best friends in Florida (who is a Gator fan) and were laughing about the game. I then made a comment that the rest of the US was letting Florida win to help soften the blow of high insurance cost and taxes that Floridians were paying. My friend didn’t laugh much at that joke. You know its getting bad when the average person in Florida can’t joke about it anymore. The average Joe is starting to see the dirty, ugly truth that is written on the wall. The party is over and nobody is laughing.
You learn not to say anything, the old saw about not discussing religion, money, sex in polite company now includes real estate down here.
“You learn not to say anything, the old saw about not discussing religion, money, sex in polite company now includes real estate down here.”
And yet when prices were going up you went to a party and thats all everyone talked about, their latest flip, how much money they were making, their renos, etc. It was RE, RE, RE. Blah, blah, blah.
And if you suggest, even suggested that the market was over priced, they thought you were eccentric !
Ha ! Funny that 30% losses finally get them to shut up and then they don’t want to talk about it anymore.
Boy is that the truth. I am amazed at the sour looks I get when discussing the current state of affairs here. A good friend of mine and I were talking very lightheartedly about life until I brought up the coming “red tide” of real estate. She is a big environmentalist and hates developers. I told her to relax as development in Florida was going to tank in the next year or so, expecting her to be very pleased.
She said, ” well I think you are wrong and my house is not going to be a part of any downturn.” She lives on the beach.
I said, “Oh and I suppose it is different where you live?” I know I am a smartass. Anyway she was very cool toward me after that. Oh well! Funny how an environmentalist can see a global warming trend and not an economic one.
Real estate is becoming a taboo subject in many circles. Folks shrugged off the silly idea of a bubble and bought the RE propaganda because it was comfortable. Now the truth is getting closer to their own doorstep and J6pack is thinking maybe we aren’t different here; maybe sales won’t pop back in the spring; maybe my house value is seriously falling. Soon it will not only be a taboo subject but will also one that causes that “deer in the headlights” look when we say utter the words real estate?
Welcome to the club. About one year ago, I mentioned to my next door neighbor (who is a widow and living alone in a 3 bedroom house now her kids have grown up) that prices were going to drop soon. She laughed and said she, “Didn’t think so.” Now they have dropped. Not by much ($650,000 now around $600,000) but not many people are rushing to buy. Lots of For Sale up everywhere - and staying up. Now, when I see her, she’s polite but I can feel the coolness.
Here’s the irony. She bought her house in 1964 for $34,000. I suppose - if she sold - she figures a $500,000 profit isn’t enough. The greed I see around me is amazing.
NIMBY, Not in my back yard, maybe we need a new acronmyn, MEWD, My equity won’t drop….
My
Over
Valued
Estimated
Tax-assessment
Offers
Vitual
Equity
Riches
Guaranteed
Eternally…………………
of insanity………or MOVE-to-Verge of insanity.
Funny how an environmentalist can see a global warming trend and not an economic one.
that’s a coffee-on-monitor-spitter
Wow, this lady has BOTH subjects matters screwed; she believes in man-induced global warming AND a continuing real estate boom. I’m beginning to think that man-induced global warming is a myth just like “there’s no more land left.”
No doubt, there IS global warming but I’m sure most, if not all, of this has to do with modern technology collecting temperature data, or with oceanic cycles, or magnetic field cycles, or sun cycles, etc. Anyways, this is open for debate.
Point is, individuals tend to think that we are in control of our economy and environment, when the truth is, the masses of nature dictate our economy and environment.
Respectfully, the overwhelming majority of people who do not believe in global warming caused by increased carbon dioxide emissions live in the United States. They are led by a small group of influential people who are too stoned on their own greed and/or evangelical religion to listen to science.
I do agree with your economic points, though. It would not surprise me if the Federal Reserve’s inability to control our economy becomes evident within the next couple of years.
Funny how this big enviornmentalist and development hater has no problem with the developer who destroyed the pristine section of the planet on the beach that she now lives in. It was ok when i did it but you are not going to build another house on this beach. She sounds like a real DB
DB?
I’m guessing dumb beyatch
Environmentalists are typically incredible hypocrites. That is my experience, anyway. And I am glad they are there….
“The average Joe is starting to see the dirty, ugly truth that is written on the wall.”
Yep, from the sounds of it Florida is screwed six ways from Sunday. Basically everything that state had going for it has been destroyed in the past 5 years. The insurance problem isn’t likely to go away, and hopefully they will get some tax relief, but a return to affordable living costs will cause many tears to be shed.
“a return to affordable living costs will cause many tears to be shed.”
Like the song lyric “many a tear has to fall, but it’s all, in the game”.
How Florida will solve some of it’s problems. Sales tax. Sales tax. Sales tax and more sales tax.
And payroll tax.
‘This market downturn came out of nowhere, like a snowstorm,’ he says. ‘It surprised everybody, especially the people making mortgage payments.’”
Ya think! LOL
No Floridian makes that analogy. And is there any industry in Naples other than catering to obscenely rich people?
I am going to be there soon for a wedding and look forward to driving around.
I live in Port Saint Lucie. Probably more like 2,000 unoccupied houses, would be more if not for an avalanche of renters.
About taxes/insurance, it really isn’t that bad. I pay $1,600 yearly on a $250k home for full replacement. Taxes are $3,800 yearly, but that is a steal compared to the 6% of income in addition to property taxes that I paid in Georgia.
Ron, that’s VERY interesting. Nice to hear a different perspective on Florida taxes and insurance. Who is your carrier? Because that insurance price sounds like a steal.
Ron — no offense, but you did not disclose when you purchased your home and that you have homestead and Save Our Homes in effect. A house anywhere in Florida that is SOLD for $250,000 will generate at least $3,500 a year in property tax and a tax that low would be in a redneck county in the armpit. It’s “not bad” for you because you got here early enough, so to speak. Good for you, but the debate is about future growth — influx — which means purchasing a property and paying taxes on it as assessed at that time. Your having dodged the bullet is no predictor of anything for someone moving into, or relocating within, Florida.
“Mr. Krecicki says he went to the auction out of curiosity”
Baloney, he knew full well prices had tanked and he could buy back his previously overpriced property for pennies on the dollar. Ms. Dresner you were a sheep just waiting to be shorn by this sleazeball.
I’m sure the reporter picked up on this as well. Then he says he feels bad!
Sleazeball is right. Any guess if this could cost him his government granted license?
Realtors/brokers should be required to do the same disclosures as financial advisors/stock brokers. Using his realtors licence to see a commodity he owns to a client at an inflated price just so he could purchase it back later at the lower market price (plus commision) would be a crime in any other market.
reading that I felt odd. it was almost like she got played by him. he was bidding on property he sold her and it sounded like him and his friend were bid rigging. I bet the realtor is probably leveraged to the max anyways, he’ll probably lose all the money he made as a realtor in investment properties.
–
“Ms. Dresner says she never bought a home for more than its appraised value. ‘The sellers can ask whatever, but it’s up to the banks in how they appraise it,’ she says. ‘I never overpaid for anything.’”
This woman is a horror and perfectly fits the bill of a sucker. or, is it suckeress?
Jas
As best I remember, in followup articles about her story last Fall, she scurried around and cash-out re-fi’d many of the properties immediately before the auction, screwing the possibility of good sales because the mortgage balances became so much higher than any likely bids. Believe the auctioning folks were highly pissed off about the non-disclosure of that little detail. Since she is Canadian, the lenders might have to spend more to recover their money, if the can.
I never overpaid for a new car myself. They just always depreciated in value.
It cracks me up how a RE agent sold Ms Dresner a POS than became her agent and sold her more inflated properties . The RE agents know a sucker when they see one . It’s a outrage that the same RE agent than goes to buy the same piece of sh-ts at auction looking for a deal .
First I question if these are fraud deals . What better cover for fraud than to make it look like the buyer is a dolt . Who were the mortgage people and appraisers crooks that gave this dolt all these loans on property that didn’t cash flow?
I think that lending institutions should start looking at these multiple property buyers in 2005-2006 as part of a big scheme to unload properties with cash backs instead of looking at them like dumb investors . I’m sure there are alot of dumb investor bagholders, but I contend that alot of fraud started taking place when the creeps knew the party was over .
By the way ,old time lending standards would never allow a refinance on a property that soon from purchase of property . Old time lenders would want to make sure the loan was “seasoned ‘ before lending more money . In other words prior lenders would of made sure the borrower was a good pay before lending more money .
Talk about a complete disregard for lending standards. I’m guessing this Dresner lady wasn’t exactly flush with cash to begin with, so what bank in their right mind would allow a single person to buy 28 houses in just a couple of years? I know there are people who own dozens of homes, but they were acquired over DECADES and at prices that made sense for investing. (i.e. paid positive cash flow each month) Obviously these properties would be alligators when purchased at these prices, so why was no one asking how she would service all the debt? And who in their right mind would buy up the MBS that includes this crap? I already know the answer to my last question, but this article was a perfect example of how far things have gotten out of hand.
Looks like Schiller has it right (so far). He said some time ago that it’s a matter of mass psychology and when the downturn happens it will be very quick.
I’ve got to buy Schiller’s book. Correct me if I’m wrong, he predicted this first.
Neil
Nah. It’s been predicted early and often by many. The thing about bubbles is, they typically last longer, and prices go higher, than any thinking person deems possible. That’s just they way it works.
There’s a fun article on Jim Rogers’ website from April, 2002, entitled “Unreal Estate.” In it he says, “if your house is worth more than you would be willing to pay, think about selling.” And that was three years before the peak!
You are correct, Dr. Schiller was shrilling about the housing market a long time ago, immediately after he was proven correct about some of his stock-market predictions.
The book “Irrational Exuberance: Part 2″ is good, but it’s a lengthy read and only vaugely interesting if you like data and economics. Otherwise, just read the book reviews on Amazon because you will soon be bored.
Mr. Krecicki and a partner still own about a dozen homes that they are renting out. He says they have cash reserves to cover homes where expenses exceed the rental income.
Its amazing to see how many “investors” are subsidizing their tenants. In austin, we are seeing droves of out of state invesotrs buying (and renting out) $300+ propoerties. The rental market for properties above $2000 a month is very very thin. Yet, this seems to be where so many “investors” have put thier money. I can only imagine a couple of 20 year old college students living in a 4 bedroom house with a pool. It sure beats what I had when I was 20.
I see these idiots putting up newly built “investment” houses for rent in Collin County for 2500 - 5000 a month. It’s very humorous. As if anyone who could pay 5000 a month wouldn’t be living large in Highland Park on an I/O arm.
Those speculators (not investors) are making the erroneous assumption that what was popular then will be popular in the future. I’ve spoken with many people who automatically assume a McMansion will have higher price appreciation relative to a smaller house. They always seem to forget what happens to many tract subdivisions 10-20 years down the road (one step above section 8 housing) and don’t even realize the many wild cards: interest rates and especially energy costs. Smaller, efficient homes are the future, not McMansion monstrocities in the suburbs.
I see the smaller houses as being more popular in the future too — especially among baby boomers. I also see inner-city condos (in good cities) as being popular.
There is a high-rise senior center at the edge of Chinatown in Los Angeles. It has no room for parking and the rooms must be small — like hotel rooms — yet I think these seniors are really lucky to be living there. They only have to go down to street level and walk out the front door and they are surrounded by shops, restaurants, grocery stores, doctors, etc. The train station is a few blocks away. If I were older, I would love to live in a place like that!
Another subprime lender bites the dust?
Popular emails notices
‘This market downturn came out of nowhere, like a snowstorm,’ he says. ‘It surprised everybody, especially the people making mortgage payments.’”
Well, everyone on here tried to warn you but you just laughed in our aces and said this time is different.
Faces
“Aces” could work — we held ‘em all.
‘This market downturn came out of nowhere, like a snowstorm,’ he says. ‘It surprised everybody, especially the people making mortgage payments.’”
Well, everyone on here tried to warn you but you just laughed in our faces and said this time is different.
That’s why people have to qualify for the loans they go on ,or the lack of cash flow on a rental must be accounted for against the borrowers debt . A downturn can come out of nowhere and all you have at that point is the borrowers ability to pay on a monthly basis .Lending was based on fraud on the loan applications and the notion that real estate always goes up .
From the WSJ article, the realtor Krecicki’s relationship with Ms Dresner the “investor” is interesting.
First, he sells her a house months after buying it for twice what he paid. (That’s the deal where he met her.)
Then, he buys her house at auction for half what she paid.
“Marjorie was on the top of my list to call” — I’ll bet she was.
The only thing that changed throughout theese transactions on this house, was the $200,000 deduction from the bank account of Marjorie the “investor.”
A fool and his money…
The transactions went something like this:
1) Realtor buys for $400K.
2) Sells to “Investor” for $600K.
3) Realtor buys back house at auction for $400K.
4) Greater Fool/”investor” is $200K poorer.
Does anybody think that these transactions might be fraud and the RE agent and his sucker might be in on it together ? I certainly do . The so-called investor bought many properties in a short time using the same agent , than she refinanced cash out of same properties, and than she puts them up for auction and same RE agent shows up at auction .
If I was the lender I would investigate this investor and her RE agent .
She does seem a bit “cavalier” about things, doesn’t she?
One would imagine someone who buys 20 homes is pretty down and dirty serious about what they are doing…..
Dresner sounds awfully “oh well” about a disaster……I would too if I never intended to do anything with the properties (and my pockets were already lined).
Heckuva business model!
A fool and his money…
“A fool and his money are soon parted. A fool and other peoples’ money are even sooner parted.”
OPM. That’s a “Richdad” thing. All this OPM aka leverage is what is ruining the housing market. It’s almost foolish to look at these folks as being an aberation when so many others have been doing the same thing.
We’re going to have to build bigger prisons to hold them all.
“Economists cite individual investors for pushing prices up excessively and lenders for lowering their credit standards. ‘The thing that sent us into a contraction was that house prices were getting high and affordability was aggravated by investor speculation,’ says David Lereah, chief economist at the National Association of Realtors.”
Wasn’t this the guy that wrote 2 books claiming something like real estate never goes down and that there is no bubble: “Why the Real Estate Boom Will Not Bust - And How You Can Profit from It: How to Build Wealth in Today’s Expanding Real Estate Market” by David Lereah (Paperback - Feb 21, 2006). Both were aimed at investors/speculators and now he’s taking aim at investors for popping the bubble? Mr. Pot meet Mr. Kettle.
Apologies to all the other great Bubble Areas of the USA, but FLA wins hand-down in its proliferation of REIC shady characters and sleazoids. I give you:
Mr. Krecicki, a local real-estate investor and real-estate agent who believes the market will rebound.”
“Mr. Krecicki says he met Ms. Dresner a few months after he sold her his home for more than double what he paid
Ability to spot a “mark” who will provide source of future profit: CHECK
Mr. Krecicki says he went to the auction out of curiosity
Knowing how to play innocent after setting up the mark: CHECK
Mr. Krecicki and a partner still own about a dozen homes that they are renting out. He says they have cash reserves to cover homes where expenses exceed the rental income.
Claims not to be concerned over RE portfolio of cash flow negative properties:
CHECK
Why do so many of these operators inhabit FLA?
Phillygal — I posted a reply, to your land-prices question of last week, very late that night. Were you able to read it?
Yes, I did see it…tx!
If land prices in my area sufficiently decrease, I too am considering building. But that’s only because I happen to be acquainted with two or three honest builders who construct a quality product.
The REALLY nice part is that commodities prices are dropping a lot and virtually all of the building materials will cost substantially less than a year or two ago. Add in cheaper labor and tighter profit margins and I think we can save a lot by building.
Came out of nowhere. Huh?
I used to live in South Florida. Left in 2005. I read this blog occasionally back then. When I got word that I was going to get laid off I put my house on the market and sold in a few days for 225K more than I paid for it. I’m no financial genious, but I saw things were going to get bad. Even if I hadn’t lost my job, my salary wasn’t going up, but all of my costs were. Every year my insurance went up another $1000 or so a year, gas prices jumped, after the hurricances the utiltity companies wanted more money. Even if I had wanted, I couldn’t take the money from the sale of the house and get into something cheaper that was livable because of the whole Save Our Homes. It doesn’t take a rocket science to see that it was going to end badly. It will probably end a whole lot worse than anybody even expects.
I’ve got a couple of friends back there who are talking about selling and moving to the Carolinas. They get pissed when I tell them they are too late. One bought in 2004, not sure when the other one bought. I feel sorry for them and the average Joe in Florida, but I have nothing but contempt to all those people who created this mess from the feds down to the flippers and realtors because there’s no way any of us are going to escape the ripples from all the problems caused when all this finally plays out.
“Even if I hadn’t lost my job, my salary wasn’t going up, but all of my costs were.”
I think this is the situation a good number of the population finds itself in, and yet they don’t seem too concerned about it. I guess they won’t be until all their credit cards are declined for being maxed out. I think it was someone on this blog that made the analogy of the nation being like Slim Pickens riding that A-bomb in Dr. Strangelove. Very fitting.
“I think it was someone on this blog that made the analogy of the nation being like Slim Pickens riding that A-bomb in Dr. Strangelove. Very fitting.”
AMEN, Brothah!
“my salary wasn’t going up, but all of my costs were.”
How many here who have “owned” for years now have dared to run the numbers recently for renting vs. owning ? I have and it isn’t a pretty future for “ownership” at this rate.
I live in a rental house in Miami Shores. I estimate I’m saving about 1300-1500 dollars a month(well compared to LL costs). LL is paying about 3200 for a 3/2 purchased in 05 @ 470K. I”m paying 1740.
Granted if I bought a comparable house today I could get it for less that 470K so that would change the numbers.
But you’re still paying just more than half his carrying costs. The price would have to hit $200K or lower to make it worth buying, IMHO.
I own. My PITI is right abou the same as rent. 3/2/2 pool for 1200. I do have other costs such as an impending roof replacement. The tax benefits do it for me and also building equity is nice( i am talking about real equity through paydown and normal expected longterm appreciation).
Also at some point rents will rise. I am not talking about this year but overtime.
This is the traditional “buy a home” model. You eventually get equity and appreciation and it pays off that way. You are able to ride out the ups and downs of the real estate market because you have equity. Unfortunately, the last fews years have been focused on untraditional ways of making money on homes.
STOP THE PRESS: WE TURN AWAY FROM YOUR REGULARLY SCHEDULED PROGRAM TO BRING YOU THIS IMPORTANT ANNOUNCEMENTl
EGGO WAFFLES HAS JUST COME OUT WITH A NEW FLAVOR. IT IS CALLED “FLIP-FLOP’. LOOK FOR IT IN YOUR GROCER’S FREEZER. Now back to your regularly scheduled news about flip flops in Florida.
Anyone have thoughts on the fact that this Wall Street Journal article appeared on Page 1?
Perhaps a few years from now, people will say (incorrectly) of this unfolding bust: “It all fell apart after that damn Wall Street Journal article.”
No need to blame WSJ…it’s all that got-dam Mike’s fault.
THANKS FOR TALKING THE MARKET DOWN, MIKE…not!
“Mr. Krecicki and a partner still own about a dozen homes that they are renting out. He says they have cash reserves to cover homes where expenses exceed the rental income. He says he feels badly that Ms. Dresner has had trouble selling her properties. ‘This market downturn came out of nowhere, like a snowstorm,’ he says. ‘It surprised everybody, especially the people making mortgage payments.’”
It came right out of the history book, you cretin!
http://en.wikipedia.org/wiki/Florida_land_boom_of_the_1920%27s
The only acceptable outcome for this bubble for me in FL is that I can afford a house with insurance and taxes for a payment equal to rent plus car payment. That way i’ll keep old cars which I can fix. I dont know if Ill move of not, Im a renter, so I wont make a big chunk of money from this bubble like that other guy telling his story. I dont know if I should ride out, or move to a cheaper place, maybe GA, TX, NC, or SC. Im not sure, maybe Ill ride it out, and study to get a masters then in 2-3yrs Ill look into buying, one thing is for certain, I like my ride to be a good one if I cant repair (you cant when you rent a condo), and I like going out, so I dont want buying a house to mean Ill be strugguling to go out with my wife, but with old cars I can deal with, If I have a garage.
I am amazed at how realtors and other real estate “experts” remained in denial during the start of the market down turn. This was not a sudden phenomenon, as pointed out by the so called experts in this article. This drop was a long time coming. The up trend was simply not sustainable, especially with income not keeping pace with housing prices. This was even magnified by the homebuilders and condo developers joining the hysteria by building “spec” homes. The concept here was “we will build and the buyers will come.” These builders over built in most areas, without sound business principles. The home builders that are publicly traded companies have paid for it over the past 18-monts in their stock prices, and prices will drop even further. Many of these public homebuilders saw their stock prices go back up in recent months due to positive [buy signals] announced by big banks and brokerage houses. These positive announcements by banks like BofA, Wachovia Securities, and Lehman Brothers are all self-serving given that they are all exposed to the real estate market in many ways – they are lenders themselves; they are buying mortgages from other lenders; they are lenders to homebuilders and condo developers; plus many other exposures. No positive twist by those having a vested interest in the market turn around can/will change this market for the better. We are in a Real Estate BUST, and this will continue through 2009. Keep in mind that we still have 60K to 70K condos due to come online in the Miami area in ‘07 and ‘08. A lot of these were purchased by speculators/flippers, which had no prior experience in real estate investing. I call these “dumb money” investors. “Smart Money” has left real estate for the time being until things stabilize. Do a Google search on Tom Barrack, who is considered “The World’s Best Real Estate Investor.”
Many of these condos will end up in foreclosure, thus placing additional burden on the lenders — BofA, Wachovia, Countrywide, and many B-C Lenders — Argent, New Century, NovaStar, etc…
I have been buying and selling real estate in the S. Florida area since 1989 — just before the 1st Gulf War. I held properties for 10-years with negligable increases in value over that period. From 2001 to 2004 I experienced over 300% increase in most of my holdings, some having no mortgages on them. I bought a couple properties in the big run up period, but for the most part stayed away from the hysteria. Many said I missed out on the biggest boom. For the most part, I would agree. I did, but the bust will be provide even bigger buying opportunities. I do not expect prices to return to where we were in 2001, because we (S. Florida) were under valued to begin with. I do expect, however, significant down turn for the next 2-3 years. We are starting to see these SIGNIFICANT price drops in the Miami/Ft. Lauderdale area. For instance, we just saw a listing in the Davie area go from $1.9MM to $1.4MM over the past 10-months, and ended up closing for $1.175MM. The seller, who never lived in the home, paid $1.2MM for the property 12-months prior. In this case, the seller had a significant loss, given Taxes, Insurance, Carrying, and Closing Costs. There are many more properties like this on the market today.
As for this David Lereah guy, he is the biggest “flip flopper” on the real estate market. I know he is supposed be positive on the market, but he also needs to be realistic. We are in a down-turn, and will be for a while. This is probably his soundest quote on the market, and he is still not saying we are in a “bust.” He is saying we are in a “contraction.”
David Lereah quote — “Economists cite individual investors for pushing prices up excessively and lenders for lowering their credit standards. ‘The thing that sent us into a contraction was that house prices were getting high and affordability was aggravated by investor speculation,’ says David Lereah, chief economist at the National Association of Realtors.”
I agree with Lereah’s quote. But I would include realtors as a cause for this current situation. I attended several seminars where realtors were encouraging investors to buy properties above appraised values because with appreciation the properties would soon exceed the purchase prices. Many of these “investors” are now in some stage of foreclosure. These recommendations were simply irresponsible. How soon we forget the Stock Market bubble where Brokerage firms were telling investors to buy the high-flying stock that had no fundamentals and/or revenues. Most of the brokerage firms are still paying for these irresponsible recommendations in class-action suites. I strongly believe we will see similar law suites in the real estate market, and rightfully so.
In closing, I believe real estate is the greatest investment for our money. What other investment opportunity affords you the leverage of putting only 5-20% down with a 3-5% annual return on your invest on average (historically). Plus you can live in the invest or rent it out. There is no other investment like REAL ESTATE, but we must be smart about it. Happy New Year and Smart Investing!!!
Best Regards,
Triune
There was never really an “upturn.” Real Estate Mags were saying that Florida (Jacksonville) Real Estate was “doubling.” Yeh, right, when houses were selling for $15K. A group of RE Investors led by a man named [blocked] bought up all the cheap houses, dumped $5K into each one, just enough to get the “condemned” status off, then resold them for $30K to more Investors who rehabbed them and resold them to other Investors for $60K to be rented out. All these goings on, made the market look as if it kept doubling, when in fact the “real” market (normal housing in normal blue and white collar neighborhoods) was doing nothing. Now all those old ratholes in the “Historic District” have been fixed and rented, but the neighborhoods are still ratholes, with pimping on corners, drug dealers, gang wars, drive by shootings, children who are out of control, etc. Very few of those houses were sold to anyone who actually wanted to own a home there. With the city’s “programs” some are taking the risk that MAYBE in the future sometime, the neighborhoods will actually get cleaned up. And in the meantime, they are at least collecting rent.