‘A Dearth Of Homes Has Turned To Glut’ In Florida
A flurry of reports on Florida’s housing bubble. ” The number of home and condo sales declined steeply across South Florida in January compared with January 2005. The number of existing homes sold in January was the fewest in one month since February 1997 in Palm Beach County. In Broward, the January sales were the fewest in a month since the Realtors group started compiling housing data in 1994.”
“Median prices also are flat or falling. In January, they dropped below $400,000 in Palm Beach County for the first time since July, indicating sellers no longer are getting huge windfalls.”
“Yanet and Yasit Sanchez want to move into a bigger condo or a single-family home. Yanet wants to let the market cool even more. ‘I want to wait a few more months for homeowners to really get desperate,’ said Yanet. ‘I feel like I’m going to get a better deal in the second half of the year. I feel that once a house sits on the market awhile, the owner will say, `OK. Let’s work out a price.’”
“At a Thursday meeting of the Sarasota Association of Realtors, veteran broker Candy Swick held her own informal poll, asking the roughly 300 in attendance to raise their hands if they thought prices were still going up. No hands.” “Then, raise your hands if you think prices are remaining the same. No hands. ‘Then I asked them if they believed prices were adjusting downward. It would be accurate to say 99 percent of the hands went up,’ Swick said. Welcome to the new reality of residential real estate in Southwest Florida, where a dearth of homes for sale has turned to glut.”
“On the surface, the latest report from the Florida Association of Realtors would have you believe that prices in the Sarasota-Bradenton market appear to be hanging in there at a median of $353,500, a stellar 23 percent above a year ago. But there is a lag time built into that system, as Swick points out. ‘I would say the price lag is at least a quarter to six months behind,’ she said.”
“In the Sarasota-Bradenton market, agents closed just 511 transactions in January, down 48 percent from 976 a year earlier, the FAR reported this week. ‘Forty-eight percent, that is shocking,’ said Jack McCabe. Almost half the market is gone. And the reason is the speculative investors have quit acquiring properties and have moved to disposition mode.’”
“Asked if a downturn would force banks to re-evaluate lending practices, spokespeople for companies like AmSouth, SunTrust and Wachovia issued statements along the lines of ‘we’ve always been conservative and remain so.’”
“But below the surface bubbles a fear banks could lose their collective shirts on bum condo deals. Bank executives talk about driving past dark windows in newly opened towers that were supposedly sold out.”
“Mainline banks shunning many condo projects usually spot red flags: Projects in which investors grab too many units. Projects that allow buyers to assign apartments to new owners before closing. Projects by inexperienced developers who have never tasted the downside of a market.”
“Susan Brown, vice president of real estate finance, said a typical warning sign is ‘when you start seeing end users buying three, four or five units’ in one development.” “Trump Tower Tampa began selling its proposed 192 condos about 13 months ago, but hasn’t announced who will provide the estimated $200-million loan. Not one of five Tampa area banks surveyed for the story said it’s financing Trump’s project. Some worried the condos are too expensive. Others questioned the smallish 11/2-acre Hillsborough River lot expected to carry the 600-foot skyscraper.”
“Despite the celebrity gleam of Trump’s name, not all bankers drool at the thought of handing money to a brash-talking tycoon whohas had his fill of bankruptcies. ‘There’s some allure to having your name attached to that project. But for our own reasons, that’s one that we passed on,’ Owen LaFave said of Trump Tower, echoing other lenders. ‘I don’t know of any new projects we’re looking at,’ LaFave said.”
Thanks to the readers who sent in these links. Here are some more stats on Florida:
‘Brevard was one of five Florida metropolitan areas where median prices fell by at least $10,000 from December to January. The others were:
# Fort Myers/Cape Coral: $322,300 in December; $287,200 in January; down 10.9 percent.
# Fort Walton Beach: $242,100 in December; $225,500 in January; down 6.9 percent.
# Pensacola: $170,700 in December; $158,100 in January; down 7.4 percent.
# West Palm Beach/Boca Raton: $408,200 in December; $393,700 in January; down 3.6 percent.
Of course, there never was a ‘dearth’ of homes anywhere, and I plan to remind the press of their folly everyday.
“Susan Brown, vice president of real estate finance, said a typical warning sign is ‘when you start seeing end users buying three, four or five units’ in one development.”
Ahem, an ‘end user’ does not buy 5 condos. Best to use the proper term, Susan: Flipper.
The only ‘dearth’ I could see was the one created by artificial demand.
There was a 16 page article in the az republic today about the cooling re market. I glanced through it and basically a lot of the stuff you guys have been talking about. Nothing really stood out to me as breaking news to report. Some stories of fools who got caught in the hype and having a hard time selling.Some say they have had no buyers come to even look. Must be very boring open houses. I think one big reason for the drop off in buyers here is the extreme price increases. If someone is going to bail out of california, as a lot of people did, the price difference has to be worth the move. I just think the higher prices have made people look away and go elsewhere.
I have a sign twirler in the neighborhood up at engle homes who is quite the character. I honk at him and wave and he is always into his job waving back like we are best of buds. I think things are getting real lean there.
Looks like that isn’t the only place it’s happening:
http://washingtondc.craigslist.org/rfs/139141666.html
The seller seems to have some serious PITI problems.
Maybe he does or dosen’t. We don’t know his cost/carrying cost. Certainly whoever buys these places will have serious negative.
What ever happened to the “staying power” we heard so much about.
He probably is negative or panicked; or both.
“I need to unload these properties because I’m a total fool and in way over my head. They are guaranteed losing propositions, but since I’m not a charity you can’t get a tax write-off. If you choose not to put my nuts in a vise and buy them at asking price, you will be doing so strictly for the benefit of your immortal soul.”
Pure, unadulterated insanity.
Ahh, yes. Some data giving listed price AND rental income:
“11432 Washington Plaza West, Reston, VA 20190
2 bedroom 1 bath condo
tenant pays $1400/month currently on month to month lease
Asking $300k, Value — $330k
Condo fee — $848/month includes all utilities ”
TRANSLATION: Assuming utilities broken out would be $248/mo, net rental income after condo fee is $800, or $9600 per year. Using rough cash flow rule of thumb of 10x annual rents = sales price, true value when bought for cash flow purposes only = $96,000. Offered at $300,000, it should meet that mark after a 65-70% fall.
14484 Turin Lane, Centreville, VA 20121 — Condo
3 bedroom, 1.5 bathroom townhome, COMPLETELY remodeled
Tenant pays $1000/month through Jan. 2007
Asking $300k, Value — $330k
HOA fee is $233/month, includes some utilities
TRANSLATION: Assuming “some utilities” broken out would be $133/mo, net rental income after condo fee is $900, or $10,800 per year. 10x annual rent = $108,000. Offered at $300,000, it should meet that mark after a 60-65% fall.
Of course, neither of these calculations takes into effect either (1) the tendency for prices to overcorrect in a bad downturn; or (2) the possibility that rents, too, will fall as a result of a 60-70% correction and the related impacts on the economy, as well as the dramatically higher supply of rental properties during a down market cycle.
Have PITI on the seller…
Does it seem peculliar to anyone besides me to see Rancho Santa Fe homes listed on San Diego Craig’s list (2BR/2BA @ $985K list price)?
http://sandiego.craigslist.org/rfs/139096213.html
P.S. “SERIOUS INQUIRIES ONLY PLEASE & ABSOLUTELY NO SCAM ARTISTS ! ! ! ”
(By implication, the poster is no scam artist…)
The Fairfax property tax site is down, but Zillow found this:
date bought ask
9/14/05 $255k $270k Warrenton
9/9/05 $230k $225 Manassas
4/20/05 $307k $355k Reston (lakeshore)
More Manassas info:
09/09/05 $230,000
02/15/05 $176,800
01/12/05 $170,000
Time to start a Trump death watch again.
“The only thing necessary for the triumph of evil is for good men to do nothing.” - Edmund Burke (1729-1797)
Another great writeup. I think the most significant quote of the 2006 will turn out to be one of the variations on:
I’ve seen this quote so many times from Realtors and presidents of home builders in the last week that I’ve put together a catalog.
Let me ask anyone this question: what would your market and your business look like fi 30-50% of your buyers stopped buying?
Dead
Downsizing…
50% off!!!
It would look like my business had reached a “plateau”…
(From the The Princess Bride: “You keep using that word. I doonah think it means what you think it means”)
“‘Then I asked them if they believed prices were adjusting downward. It would be accurate to say 99 percent of the hands went up,’ Swick said.”
I take back all the nasty things I have ever written here about lying realtors. At least they are honest with one another in closed-door meetings!
“On the surface, the latest report from the Florida Association of Realtors would have you believe that prices in the Sarasota-Bradenton market appear to be hanging in there at a median of $353,500, a stellar 23 percent above a year ago. But there is a lag time built into that system, as Swick points out. ‘I would say the price lag is at least a quarter to six months behind,’ she said.”
We would agree!!!
Funny how the Fed prides itself on its ability to drive while looking through the rear-view mirror, while this local group of Realtors (TM) sees the folly of doing so…
How to Lose One Hundred Thousand Dollars
Looking through the NoVA inventory yesterday, I came across two nearly identical homes in Lovettsville (a very rural town about 70 mi from DC), both listed at $555,000. They were smallish, vinyl-sided tract homes on 1/4 acre lots. On further investigation, I found that both are owned by the same couple, a Cathy and Andrew Boyd. County tax records indicate that one was purchased nine months ago for $529K and the other was purchased six months ago for $574K. So the current combined asking price is nearly equal to the combined purchase price: about $1.1 million. Both listings say that the homes have never been lived in. I would guess that Cathy and Andrew paid $10K in closing costs for each home. When they finally sell, Realtor fees @ 6% come to $67K, so we’re up to $87K in buying and selling costs. Now let’s look at the carrying costs. The two loans (assuming interest-only @ 5%) would be approx. $2200 and $2400/mo, respectively. Add another $500 per unit for taxes, interest, maintenance, etc, and the total carrying cost for both units since time of purchase comes to $42,000. So if Cathy and Andrew sold both units today at the current listing price, they’d be out roughly $128K. However, these homes have been on the market for a long time and they were previously priced at $585K and $575K, according to a Google search, so they’ve knocked $50K off the combined price with apparently no takers. It’s reasonable to assume that some further price cuts may be in the making, and at least a few more months of carrying costs as well. If this couple doesn’t go into foreclosure, it’s not hard to see how they could be $200K in the hole by the time they unload these albatrosses. It’s a painful lesson to learn about the power of leverage, and one they don’t seem to teach in all of the Get Rich in Real Estate pulp fiction currently on the bookshelves.
http://www.realtor.com/Prop/1052217368
Nice to watch greedy flippers squirm. Whoever sold them those homes must be living it up right now in the Bahamas.
I forsee some serious marital discord ahead. It is usually one spouse or the other that drives these “investments”. At least that is how it works in my house.
Divorce as a growth industry?
Here’s the punchline, bottom: according to zillow.com, prices in the little podunk town of Lovettsville are still going through the roof. It didn’t have a record for the two homes this couple bought, but here’s a 650sf 1br home on a half acre that is “valued” at $400K and has gone up $8,400 in one week!!!. Tell the flippers not to despair — prices are still going up regardless of what buyers are willing to pay!
When we were looking at homes in 1994, a decent rambler on 1/2 acre in the heart of Fairfax was $150K. We had entry-level salaries - combined 44K and ended up buying a slightly cheaper 3 bed 2 bath brick townhouse at $133K. Could two entry-level salaries buy that home in Lovettsville? Good grief.
Yeah, but the, uh, TAX deductions should, uh, help out, no?
“Trump Tower Tampa began selling its proposed 192 condos about 13 months ago, but hasn’t announced who will provide the estimated $200-million loan. Not one of five Tampa area banks surveyed for the story said it’s financing Trump’s project.”
Sounds as though bankers are beginning to suspect The Donald’s guano might stink as badly as that of the other fowl. None of them want to end up with their hands smelling like duck scat.
“Despite the celebrity gleam of Trump’s name, not all bankers drool at the thought of handing money to a brash-talking tycoon who has had his fill of bankruptcies.”
In light of this, we need to reconsider exactly what species of fowl The Donald represents: Is he a duck, or an albatross?
“Others questioned the smallish 11/2-acre Hillsborough River lot expected to carry the 600-foot skyscraper.”
Some bubble-head questioned whether it makes sense to put 600-foot skyscrapers into the path of future Cat-5 hurricanes…
Oh, Ben, this Florida stuff is just porn to me! Do me baby! LOL
Good one–
…mmmm, I just love it when a housing market goes down on me….
What size unit do you have for sale
Couldn’t resist that one.
It’s only a two story, but it’s really WIDE.
“Trump Tower”
Is that a “High Rise”?
At this point it’s definately a highly inflated asset.
You mean a doublewide?
after rising to unbelievable heights it is now deflating but watch out for the spring bounce.tx chic needs a date.
Txchic, I hear those “doublewide’s” break too easily. Especially in the face of a Cat 5 hurricane :-).
Nicolas P. Retsinas, of the Harvard Joint Center for Housing Studies, has weighed in on the question of whether housing prices are falling:
‘For the past five years, everyone connected with housing – owners, would-be owners, Realtors, builders and analysts – has fixated on “the bubble.” How high will prices soar? When will prices moderate? Will the bubble burst? A Google news search tabulated over 650 “housing-bubble” citations in January.
Yet the term “bubble” was always a misnomer. So long as demand, fueled by new households (undergirded by immigration), remains high, and supply, curtailed by restrictive zoning regulations, remains low, prices in growing regions will not collapse. Indeed, in some regions of the country (such as parts of the Midwest), prices never soared. And today, in the “hot” cities of the Northeast and West Coast, prices have started to stabilize and homes are remaining longer on the market.’
There you have it from Hahvard, folks — prices are stabilizing, returning to normal, not falling. I am sure that particularly applies to the “growing” markets in MA and FL as well.
LARRY SUMMERS, THEY NEED YOU AT HARVARD!
http://www.signonsandiego.com/uniontrib/20060305/news_1h05nick.html
These academics should be required to read Merrill Lynch & Co.’s reports before commenting on the real world…
“The demographic story behind the housing market boom, as we always thought, was a giant hoax,” wrote Merrill Lynch & Co.’s North American Economist, David Rosenberg, in a recent report.
http://www.signonsandiego.com/news/business/20051111-1315-wall&main.html
The Harvard Center you mention is funded by RE interests.
Their previous anti-bubble diatribe was de-bunked rather thoroughly here.
Their data set stopped in 2003.
Funding was from RE interests.
Columbia Profs took them to task in a letter to the editor battle. I think the Columba Profs won the battle of ideas of bubble or no.
Check the archives.
Thanks — but note that our friends at the SD Union Tribune are clearly oblivious to the debunking you mentioned, because Retsinas’ article appeared in today’s Sunday Homes section!
Yes it is a new article from a tainted and not very accurate research outlet.
I was just reminding readers of Harvard’s Joint center on Housing’s credibility.
The title of the Sun Sentinel article is “Best time to buy a home might be now”.
Oh really, and not in 1 year when I’ll be able to buy it for 100k less?
A few years down the road I look forward to buying one of those never-lived-in FL beachfront condos for pennies on the dollar from some bankrupt builder of flipper. OT, but how is the fishing near Naples?
These bankers knew the buyers were flippers. Yet, the kept funding these projects because they put the blinders on and convinced themselves that this time it was different.
Well, this time it really is different - because, this time I’m afraid we are headed for the biggest financial collapse this country has ever seen. There are too many forces lined up now aside from real estate that this really is the perfect economic storm.
rudekarl,
I agree, the lenders just got greedy and hope that uncle sucker will bail them out. One of the reasons I keep doing this blog is to keep reminding folks of points like that.
This is important, since such a bailout would disproportionately affect those of us who didn’t buy into this craze. There aren’t many things I’d go to Washington to protest, but a bailout of these huge financial institutions is one of them.
But below the surface bubbles a fear banks could lose their collective shirts on bum condo deals. Bank executives talk about driving past dark windows in newly opened towers that were supposedly sold out.”
hehehe…The ‘89/’90 Bust Redeux…Those who forget history are doomed to repeat it.
Seems I heard onces that a bankers memory span lasts about 10 years.
We’re just a little bit past due….
Wow, finally an article that tells it like it is..for the most part. I have been getting irritated by all the local articles in Sarasota quoting the perma-bull Realtors but I think the last nail is starting to be hammered into the coffin. Even the Realtor’s are starting to accept the downtown and it was only a short 2 weeks ago they were exlaiming “The boomers are coming!! The boomers are coming!!” Now that these types of articles are hitting the press, I see it getting painful quickly…..
Interesting article from today’s Orlando Sentinel:
Apartment-to-condo conversions move at frenzied pace
It amazes me how bullish these articles still are, despite all of the data to the contrary.
Having lived in central Florida for many years before leaving several years ago, I can tell you Tampa and Orlando are always two steps behind South Florida. Additionally the apartments in Orlando and Tampa any fool who buys these units will be stuck paying very high assessments, as most of the apartments were very poorly built to begin with and the have never been properly maintained. Apartment owners who are selling have finally found all the fools they need to buy their dumps and fix them. Within the next five years they will be buying them back for pennies on the dollar and reconverting them to apartments.
Could it be insurance rates will bring it all to an end in South Florida:
Tim O’Brien, of Fort Lauderdale said the cost of insuring his dream home is giving him nightmares.
O’Brien, 42, had paid about $2,800 for hurricane insurance on the home that he spent nearly two years remodeling.
When he got his renewal this year from Citizens, his premium nearly doubled. He now pays $5,400. And it could rise even more, if Citizens gets to raise premiums in his neighborhood by 67.2 percent.
That means he could pay another $3,628 for windstorm insurance, bringing his total to more than $9,000 just for hurricane coverage — which doesn’t include what he’ll pay for flood, fire and theft protection.
http://www.sun-sentinel.com/business/local/sfl-zcitizens04mar04,0,3587559.story?track=mostemailedlink
Here in Palm Beach county in Boynton Beach I have something for you all. An apartment complex (formerly called Gateway Club) is being converted to condos……It is now called orchard lakes condo community…now on the sign the word “condo” is gone and it is being converted back to apartments with one of those people holding a sign on the street saying “NOW LEASING”……very interesting….
I’m in Boynton, is that near Congress Ave/Gateway??
Yes it is…corner of Lawrence and Gateway…….down the street from Target
Tarragon just had their grand opening at the Via Lugano apartments condo conversion. Gateway Blvd. just west of Congress Ave. near Target. $180’s to $300’s. They paid $74 million for the place, which works out to about $240k per unit. There are 360 apartments in there. I’ll be surprised if they sell any.
Anyone have any information on St. Andrews at Boynton Beach…it is near Park Vista High School in western Boynton Beach……I know they went condo and was wondering if they sold out or are still trying to sell….
There are ads on Craigslist for closeouts in St. Anderews where the developer is promising to pay your first year’s mortgage and HOA fees…
And the increased (Fixed Costs) of owning that house will have a imeadiate downward effect on its value…Many people pay cash for a retirment home so the price is only part of the analysis..The fixed (and ever increasing) costs i.e. taxes, insurance etc., can never be retired so significant increases in those costs surely will effect value….
In my (Florida panhandle) Sunday paper there is an ad for a “Neighborhood Open House”. Six homes for sale in one beach neighborhood all being shown together for your convenience.
probably all owned by same flipper, now caught with his/her pants down in a Cat 5 hurricane
instead of flipper, how about flopper.
http://www.sun-sentinel.com/business/local/sfl-zhomes05mar05,0,6592908.story?coll=sfla-sports-panthers&track=mostemailedlink
The small violin is playing the sympathy song for the poor FL people having insurance increases. It is kind of like, DUH, you live in Hurricane Alley, and should shoulder that cost on your own. The GOVT can’t do it (or shouldn’t).
I went out this weekend to open houses. I found three of the exact same house in our subdivision. 4/3/3. 1st by a guy who waited 15months for the house and is listing at 325K, second by realtor’s brother at 335k and than one being finished by the builder, priced to sell at 262K with ALL upgrades due the original buyer backing out. I had poor real estate agents offering ‘intangibles’ if they could rep me. Only one oblivious rep from KB told me the market would heat back up. One more year and I told my wife we could have the gate 400k home for about 300K. God bless America and forgive me for my schadenfreude.