Speculators “Bemoaning Their Fate” In Florida
The TC Palm reports from Florida. “Affordable housing, welcome to Vero Beach. Centex Corp., is offering new single-family homes in the VeroLago subdivision starting at $158,990. The three-bedroom, two-bathroom home was first offered at $218,000 in November.”
“Don Santos, past president of the Treasure Coast Builders Association, said the new price points will certainly attract more traffic into the model homes, which could translate into buyers. ‘I think in today’s market, price is the determining factor on whether or not someone buys a home or not,’ Santos said. ‘I think they’ve realized that they if they want to continue selling homes, they have to come down in prices.’”
“(Broker) Sally Daley in Vero Beach agreed, but questioned if flippers and speculators who bought during the boom years will also be willing to lower their prices. ‘Only time will tell as both investors and developers have shown a willingness to offer both incentives and aggressive pricing to sell their properties,’ Daley said. ‘There are a ton of investor-owned properties currently on the market that are direct competition for new developments like this.’”
“Helene Caseltine, development director at the Indian River County Chamber of Commerce who has pushed for more work force housing in Vero Beach sees the pricing as a positive. ‘I think it’s a step in the right direction,’ Caseltine said. ‘I think it’s great, but I hope it’s just the beginning.’”
The Herald Tribune. “The idea of buying houses in Southwest Florida with no money down and making tens of thousands of dollars by selling them before construction was even done obviously appealed to a lot of investors nationwide.”
“Hundreds of investors from California to New Jersey jumped at the opportunity to sign contracts with St. Petersburg-based Construction Compliance Inc. and Enchanted Homes and Advantage Builders of America in Fort Myers. But with the real estate market in general retreat, CCI is now in deep trouble.”
“Advantage’s customers are not satisfied. They say Advantage did not begin building their homes as planned, and officials at the Fort Myers company have been unreachable.”
“Bruce Steifman of Old Bethpage, N.Y., found out about Enchanted Homes from a representative of Seashore, a company that made a presentation to his Long Island real estate investment club. For a reservation fee of $12,000, Seashore representatives promised to handle everything about Steifman’s investment.”
“The problem, Steifman said, is that when he contracted with Seashore and Enchanted in early 2006, it looked like the real estate market in Southwest Florida was still strong. ‘Most investors took $12,000 out of their pockets and expected to make $50,000,’ Steifman said. ‘They figured they would never have to close. But now, because the market has turned, there’s an abundance of inventory and houses are not worth what they were.’”
“‘I’m caught in it, too, but I don’t think anyone misrepresented anything,’ he added.”
“Both Seashore and Enchanted met their obligations, Steifman said. The only company that the New York investor is worried about is Coast Financial Holdings, the Bradenton-based holding company of Coast Bank. ‘I’m just going to pay off my loan to Coast and get some sort of creative financing,’ Steifman said.”
“‘My house got finished,’ said Craig Rymal, a Bluffton, S.C.-based home builder, who contracted with Enchanted to build two houses in Cape Coral. Like other Enchanted investors, Rymal was hoping to sell his houses at a profit, but he is prepared to rent them for a while. ‘The market is just as slow up here in South Carolina.’”
The Sun Times. “It was late November in 2005, and Dan and his wife saw what they thought would make a good holiday gift to themselves within a year or so. They picked out a condo they liked, that seemed like it would return a handsome profit in short order.” “After running the numbers over and over for the next few weeks, they convinced themselves that they had made the right decision. So they bought three more virtually identical condos in the same location.”
“I was telling Dan’s tale to Connie, my friend and a real estate investor. ‘Once you convince yourself that you have made the right decision,’ said Connie, ‘it is natural to try to multiply that.’”
“In one condo association I studied, at least four couples made the same move that Dan and his wife did. They each bought four condos. Others bought three of the same; still others bought two of the same. Now there are 48 of those you-can’t-miss-with-these condos on the market at the same time.”
“I have a good friend and client who is an astute investor. His name is Red. ‘Most people run into a problem because they buy one piece in one market. If the market goes sour, or it happens to be a questionable buy, they get hurt,’ said Red. Maintenance costs, interest on the mortgage, taxes, lawyer’s fees and real estate commissions start eating quickly into the hoped-for profit, Red said: ‘Soon these investors have a loss on the books and are bemoaning their fate.’”
“‘With two partners, I bought two pre-construction homes in Lee County. We were supposed to close this month and decided that the market had declined so badly we would be better to walk away from our down payment than to hang tough and maybe have a bigger loss down the road,’ Red said.”
“What’s Red’s opinion of the Naples market now? ‘This is a fabulous time to buy in Naples, because the forecasts for continued growth are positive and the prices are low,’ Red said.”
‘Stephanie Sherman, human resources director for West Boca Medical Center, wants to hire and retain ‘top talent,’ she says, but her task is overwhelming. ‘We’re finding it a huge challenge,’ Sherman said Tuesday.’
‘There is no affordable housing in West Boca,’ Sherman said. ‘And our number one turnover issue is not money - it’s people moving to North Carolina and Georgia.’
‘Boland isn’t the only businessperson in Tampa unimpressed by the Donald’s invitation. The invitations are generating plenty of buzz in business circles, with many people reporting they’ve received one (or, in some cases, two or more), but few people actually planning on attending the event. ‘I just didn’t feel that it was going to be relevant to my career,’ said Ben Lee.’
‘The Trump name caught my eye, but when I found it was Donald Trump Jr., I wasn’t really interested,’ he said. ‘I just don’t know what insight or experience he was going to be able to provide me. I don’t think the real estate market is the right place for novices right now,’ Lee said.’
And when they come back after realizing what they’ve done it will not be such an issue. I can understand the complaining about prices, taxes and insurance…but to move to underpopulated areas in still cold weather climates isn’t the answer. The housing market is correcting itself. On $50K per year these folks can afford $150K on housing. If we’re looking at a 2 income family at $100K per year, they can afford $300K in housing.
Even in “prestigious” West Boca you can buy in at $300K now…in a community you may actually want to live in. If people live within their means instead of buying the McMansions we wouldn’t have GA/NC flight. That single person making $50K per year could put themselves in a 1 bedroom Condo for $145K - $165K right now. That’s within the affordable range. If they sit tight and rent for a bit at $850/month that number could continue to go down. We had a long ride to the top, but now with the change in prices these HR managers shouldn’t have too much left to worry about.
A single person making $50K a year, with say a $300 monthly car payment and $100 in other monthly payments, would not qualify for a non-suicide loan on a $150K condo when you figure in Boca taxes, insurance, and maintenance fees.
50K per year less taxes amounts to a monthly check in the neighborhood of $3,200. Take away a $300 car payment, $175 maintenence fee and that leaves $2,725 to everything else.
A mortgage payment with 20% down is $711.76. In West Boca, taxes would amount to $2400 yearly if homesteaded, or about $200 monthly. Now we’re looking at a total mortgage payment of $911.76 with no silly negative am or interest only games. That leaves $1800 in the budget. Let’s assume now that this person is really responsible and saves 10% of their take home pay ($320 monthly) and we still have $1480 to pay all of the other bills. Am I the only one who thinks that’s such a bad way to live? Less than 45% to debt!!!!
20% down. OK that should narrow your field to like I dunno … 1% of current looky lous … yes its exactly what the market needs. However good luck getting banks to insist on it, cos that will shrink the pool faster than anything and precipitate a crash overnight.
Cool.
Cow_tipping.
Well because insurance is high, I was assuming $400 in maintenance and taxes, so that only leaves about $1,250. Figure $150/month in electricity, $50 cable, $100 phone/cellphone/internet access, $100 car insurance, $150 as their share of health insurance, $100 gas. So now they’re down to $600, or $20/day for food, entertainment, dates, clothing, car maintenance, travel, doctor/pharmacy co-pays, vacations, etc. It’s not enough.
We’ll try this reply again. I beg to differ. A mortgage on $150K condo with 20% down is $711.96. Taxes in West Boca on this unit would be around $2,400 yearly or $200 per month. Assocation dues are in the $175 range. These dues usually include insurance coverage for the outside. Coverage for the inside is very inexpensive. That means on a take home income of $3,200 monthly only 1/3 of it is spent on total housing expense. Throw in that $300 car payment and we’re still nowhere near 45% debt load.
This assumes people are responsible. I put 20% down on my house. I don’t hold any credit card debt. If more people were on my track we wouldn’t have had a bubble to begin with.
The only way this single person couldn’t afford that condo is if they had $50K in credit card debt, $40K in student loans and decided a responsible first new car would be a Navigator.
Sorry, Andy. After having just come back from a week in Sarasota, where we lived from 2002 to 2005, my wife and I agreed that Florida doesn’t look so great any more. Too many pastel stucco boxes jammed together on small lots in completely flat developments, often enclosed by 10-foot stucco-covered walls. Ugh.
We’ve got open spaces here, a short winter, and a long spring and fall. This year, the daffodils are about to bloom in our front yard. With the earth apparently entering one of its natural warming cycles (OK, human-caused if you like), who needs to live in Florida?
Nothing could be finer than to be in Carolina in the morrrning.
“but to move to underpopulated areas in still cold weather climates isn’t the answer”
These people are moving to Atlanta and Charlotte and Raleigh/Durham, etc.
I’d hardly call Atlanta “cold”, or “underpopulated”, especially since Atlanta is more populated than Boca.
In the end, many people have a hard time making $50k in SoFl. The jobs aren’t as good there as they are elsewhere. People simply realize they can move to Atlanta and have a bigger house for cheaper, and a job that pays more.
I’d rather live in Atlanta over SoFl anyday.
(But I live in cold underpopulated Minneapolis! So I’m crazy anyway!)
as for making $50k a year. sure you can do it. and sure you can buy a 1 BR condo in SoFl. But why? why not just rent?
SoFl USED to have one major draw: it was cheap. It no longer has that draw.
Hence, now people are moving to other places that are cheap.
Sorry, don’t believe the SoFl hype, much of it was fantasy built upon the “desirabilty” factor, when it was really about “cheap retirement” factor. It priced itself out.
I beg to differ again. I handle people going in and out of the state all of the time. They go to the next “big boom town.” That’s not Atlanta. I’m not saying S.FL is paradise, but I can think of a lot worse places to live.
S. FL compared to Detroit, MI cost of living is similar. Where wouldyou rather live?
My sister went to college with DJT2. She thought he was cute, but that may have just been the dollar signs in her eyes.
when I found it was Donald Trump Jr., I wasn’t really interested,’ he said. ‘I just don’t know what insight or experience he was going to be able to provide me.
How about “If you want to be rich and famous and get gorgeous babes without having any talent, you have to have an even richer father”.
Goes for both Sr. and Jr.
Bemoaning is a lovely word. When enough bemoaners get together do they become wailers or does it create a dirge?
Beamoaners? They ululate. Lugubriously.
“For a reservation fee of $12,000, Seashore representatives promised to handle everything about Steifman’s investment.”
Let me get this straight, you PAID someone to SELL you something they were going to glady sell you anyway and still make money on their normal fees ? Geez, now that’s investing genius !
The article references two different “real estate investment clubs.” Has anyone here ever participated in something like that?
These guys’ club should be called “a confederacy of dunces.”
There were no openings in the local “lottery tickets, your guaranteed path to riches” club, so they started this one.
Enchanted Homes, you gotta give the guy credit that came up with that name and sold people on it though. I would have thought people would laugh in your face if tried to sell them a place in something called the Enchanted Homes Development. Greed has no taste, or sense of humor, I guess.
“a confederacy of dunces.”
LOL, that is classic. A good description of how I’ve always viewed these “investment clubs.” A circle-jerk of Joe 6 Packs all telling each other how their ideas are no brainers!
“I have a good friend and client who is an astute investor. His name is Red.”
….
“What’s Red’s opinion of the Naples market now? ‘This is a fabulous time to buy in Naples, because the forecasts for continued growth are positive and the prices are low,’ Red said.”
Very astute analysis!
Yeah, and I’ll bet he just happens to own a POS that he’ll sell to you. Astute indeed!
Red sounds like a singular moron. Or maybe a realtor, not that the two are distinguishable at times.
Red is a liar.
“‘With two partners, I bought two pre-construction homes in Lee County. We were supposed to close this month and decided that the market had declined so badly we would be better to walk away from our down payment than to hang tough and maybe have a bigger loss down the road,’ Red said.”
He bailed on his deposits. Do what he suggests YOU do, or do as he does with his own money?
What an A$$w#^e! Why do they publish quotes from such dirtbags?
Ben, I hope you are giving yourself hazard pay for wading through this festering tripe.
NAR Dictionary
Astute: adj. Having or showing gullibility, especially with respect to one’s own finances.
I am an astute investor. My name is Earl.
http://www.nbc.com/My_Name_Is_Earl/
Astute? I thought that’s what happens when you’ve eaten too many beans.
“It was late November in 2005, and Dan and his wife saw what they thought would make a good holiday gift to themselves within a year or so. They picked out a condo they liked, that seemed like it would return a handsome profit in short order.”
What is wrong with these people? There is no shame in just living a simple life, within your means. Take my wife and I as an example. We do okay but we try to live well below what we can afford. That means we give each other simple and affordable gifts. This year, for my birthday, my wife gave me a new shirt and a piece of beaver. Unfortunately, they were both too big. Don’t worry. I was able to return the shirt.
These people could learn a lot from us simple folk in New York City.
This year, for my birthday, my wife gave me a new shirt and a piece of beaver. Unfortunately, they were both too big. Don’t worry. I was able to return the shirt.
Classic!!
From what I’ve heard, you can return the wife too. First talk to the manufacturer, and let us know what their return policy is in cases like this.
So, what do you want for your next birthday?
NYCityBoy ….I wouldn’t think that your represent the average New Yorker ,would you ?
Midwestern transplant.
You are so in deep sh*t when your wife reads this…;)
I am sorry, but simple life, isn’t that TV show. Yea we want to live like the simple life people.
Cool.
Cow_tipping.
You know when someone is talking through their @#$%# that they have something to hide…
test
“(Broker) Sally Daley in Vero Beach agreed, but questioned if flippers and speculators who bought during the boom years will also be willing to lower their prices. ‘Only time will tell as both investors and developers have shown a willingness to offer both incentives and aggressive pricing to sell their properties,’ Daley said. ‘There are a ton of investor-owned properties currently on the market that are direct competition for new developments like this.’”
An amazing amount of stupidity crammed into a few short sentences.
First, flippers and speculators who bought late will be forced to lower their prices and sell because they don’t have the cashflow to have any staying power.
Second, she contradicts herself in the next sentence by saying “investors and developers have shown a willingness to offer both incentives and aggressive pricing to sell their properties.” Of course they have, they have no choice.
Third, “‘There are a ton of investor-owned properties currently on the market that are direct competition for new developments like this.’” So what is she saying here? Sounds like the reason they lowered prices dramatically is to get sales, and it also sounds like the reason prices will continue to fall.
‘There are a ton of investor-owned properties currently on the market that are direct competition for new developments like this.’”
Except they paid full price you Real Estate Twit and won’t be able to lower their prices so how exactly is it they are competition ?
Well, they are motivated sellers. Whether it be through loss of equity (for those few that have any), short sale, or foreclosure, these properties will make it on the the market.
Race to the bottom.
Mo Money, that’s exactly what I wondered as well. How can a builder be your competition if he has cushion in his margins? The speculator however, is f’d six ways from Sunday because their profitability relied solely upon eternal price escalation. These realtors are so amazingly stupid! Put a realtor and a speculator together and you get a real life Tweedle Dee and Tweedle Dumb.
One other comment about “Red” the “astute investor.”
Unless Red is willing to open his books and let us audit his P&L, nobody knows if he’s astute or up to his ass in debt and just bullshitting (most of them are). I wish I had a nickel for every time I was told about some boy wonder in the stock trading area. Always giving advice, selling a system, etc., but of course, nobody ever saw his statements or P&L. I’ve always believed that people who really are astute keep their mouths shut. It’s bad luck/karma to shoot off about what a stud you are anyway, it invites disaster.
“that people who really are astute keep their mouths shut”
I think you can pretty much take it to the bank that there is an inverse relationship between how much people brag and how well they do over time.
Its just like the “rich” people you see. Often as not, those flaunting their “wealth” are up to their eyeballs in debt. The really rich I’ve known and met where 90% quiet about their wealth, how they made it, how they invested it.
About 99% of those who flaunted it that I’ve known either never really had it or blew it in fairly short order.
It must be something about human nature. If you’ve got it, you don’t need to brag. If you don’t (and you’re insecure) you have to resort to “showing” people what you’ve “got” and “proving” how smart you are to others.
I have to agree with you on this one. The few “very wealthy” people I know, could care less about showing it, and don’t even talk about their money. They drive decent vehicles, and live in decent homes, but blend into the crowd. On the other hand, there are many more “posers” throwing around plastic, driving their Beemers, and looking the part, but it’s all a facade. Time will have it’s way with them.
“What’s Red’s opinion of the Naples market now? ‘This is a fabulous time to buy in Naples, because the forecasts for continued growth are positive and the prices are low,’ Red said.”
News flash for ya Red, prices in Naples are not low. In fact, it has been regarded as one of the most over-valued areas in the entire USA (no offense to California). The correction there will be long and steep. Also, if the affordable housing issue isn’t solved in Florida the growth rates will not be so positive.
ole Red should go ahead and put down a couple more deposits…
“I was telling Dan’s tale to Connie, my friend and a real estate investor. ‘Once you convince yourself that you have made the right decision,’ said Connie, ‘it is natural to try to multiply that.’”
Multiplying huge lossses. I love it when people double-down or more in a hurry. Going to end very badly for a lot of GFs…
Have you ever sat at a blackjack table and watch someone double their bet with each loss? I watched a guy lose 9 consecutive hands one night. I thought he was going to cry.
Ah, the Martingale system. Too bad he had to learn the hard way it doesn’t work.
As the dealer was trying really hard to keep a straight face.
Blaise Pascal suggested the system the 17. century I think. It would work if you could increase your bet indefinetly, but the casinos set an upper limit to any bet to keep it from working too many times against them.
I had to give the guy credit for some major balls. As I recall, we were sitting at a $2 table (which you can’t even find anymore) in the Horseshoe. His last bet was for something like $2000 after a night of $2 betting. I sat out the last couple of hands as I didn’t want to impact his cards. He seemed a bit detached from the risk he was taking; I guess he had real faith in the system (a lot like today’s FB’s). The look of shock when he lost that last hand was indelible.
Wait a minute: 10 + 20 + 40 +80 + 160 + 320 + 640 + 1280 + 2560 = $5110. You mean that this person plunked down $2560 on a single hand of blackjack ???
Wouldn’t it be $2048?
Yes to both.
That guy should take a course in statistics. On any given hand in blackjack your chance of losing is, say, 51%. Even if you’ve lost 7 straight hands, your chance of losing the next hand is still 51%. While the chances of losing 8 straight hands are small before you play the first hand, if you’ve already lost 7 hands the chance of losing the next hand is pretty high.
I tell you what’s really amazing. While on a cruise last December, the ship’s casino offered a blackjack tournament. The rules seemed somewhat unusual. It was $20.00 to enter, you got $2,000.00 in chips and seven hands to get the most you could. Simple, right? I was in the first round, and got dealt a series of hands that were simply great. I was up to about $4800 by the end of the sixth hand. Not bad, I though. More than doubled the money.
At that point I asked the dealer “what do you usually need to get into the finals?” He said “Oh, about five or six thousand.” I said “Okay.” Thought to myself, need to get more. Looked at the other players, they all were on their last thousand except for one fella who had $2,500. I though, well, these folks won’t beat me, so I bet conservatively, $1,500, to either get into the finals or at least stay ahead of them. Dealer got blackjack.
When I came back later that night to check the scores, the top five players all had over $12,000.00 - in seven hands of blackjack, starting at $2,000.00!
I thought “This is incredible. The people who blindly threw their cash into the pot, left it there and hoped for the best are going to the finals! It’s pure luck, no skill!”
There’s a lesson there, somewhere, I think.
Stunning, isn’t it? I’d venture that virtually none of these people would take $10,000 to the roulette table, but they think nothing of throwing many times that at condos that are a dime a dozen simply because “everyone else is doing it.”
Newsflash: If “everyone’s doing it”, it’s not worth much at all.
“Everyone is doing it.”
I heard those words about neg-am ARMS when looking for a condo 3 years ago. Now buildings that were sold out then are entirely for sale or rent now. Just like I imagined it would be.
Too many people bowed to peer pressure during this bubble. Didn’t they learn anything from the Just Say No campaign? A friend was congratulated by coworkers this week on NOT buying. She’s been a lot more relaxed since it happened. It’s strange to me that people put the blinders on their financial future to fit into the crowd.
It’s called a greed driven mania. The outcome was a huge bubble that DL still refuses to admit exists.
“A friend was congratulated by co-workers this week for NOT buying.”
That’s great! can’t wait for that to get more common.
wow, I thought Red was a pretty smart guy until…….
“What’s Red’s opinion of the Naples market now? ‘This is a fabulous time to buy in Naples, because the forecasts for continued growth are positive and the prices are low,’ Red said.”
Oh, so close……Geez
Translation:
Once you imagine yourself making a few dollars on a simple condo you get greedy and commit yourself to “buying” up all the units that you possibly can…..like a gluttonous pig alone at the trough…hoping to sell your “investment” at a grossly inflated price to some idiot before the condo is even finished.
This unwinding of the Housing Mart is taking place much faster that most bloggers here could have imagined.
California Translation: Once you unburden yourself of the harsh chains of reality, and lactose, everything is possible….
Hey, someone please turn up that Enya!
A classic pyramid scheme. Hurry up. I’m doing presentations all over the coutry and only the first few lucky ones can get in. Who was running this scam?
“Bruce Steifman of Old Bethpage, N.Y., found out about Enchanted Homes from a representative of Seashore, a company that made a presentation to his Long Island real estate investment club.”
Bruce needs to stop and think things through more often. Seriously, if someone has such a great investment opportunity, why would they be going around pitching it to strangers thousands of miles away? The only answer can be that the “ooportunity” is in fact a big steaming pile that locals wouldn’t touch with a ten foot pole.
“if someone has such a great investment opportunity”
Exactly. If you’ve got a “sure thing” you’d borrow every cent you could get your hands on (as quietly as you could) and keep every penny of profit for yourself.
Its amazing how many people don’t get this inherent contradiction.
“I know something’s going up yet I’m happy to “share” the golden opportunity with a complete stranger”.
They must be young….because if you lived through the downturn of 1990 you would know better than to bet like that.
“‘Most investors took $12,000 out of their pockets and expected to make $50,000,’ Steifman said. ‘They figured they would never have to close.”
You are at an investor club meeting. Someone makes a presentation for club members to buy into a subdivision many states away, in a market you really know nothing about. You see an investor next to you buying a house in the development. The investor next to him is buying one also. And the one next to him is buying three. And the one next to him is buying two, and is on the phone to his brother, telling his brother to buy two.
Yes, I can see how someone can expect to make $50,000 on a $12,000 investment like this.
Tech stock bubble, but with houses…
I wonder if, when this all plays out, people will have less or more tech stock wealth than say in 1996. We have a lot of early retired folks here in S. Oregon who rode the tech bubble, then jumped on the housing bubble and retired wealthy for essentially doing nothing except having good timing.
I wonder if the folks like these Florida losers who stayed at the table will lose enough of that tech money to remove some of that phony wealth from the economy. I guess it boils down to the number of winners vs. the number of losers in the two bubbles. I know all first time buyers past 2004 were losers, but I wonder how many of the techies will be brought back to what their meager savings and salaries can buy?
Mr. Fester: you may have replied to this before, but what part of S. OR are you in? Jackson County? What is your forecast for that region’s economy? I have relatives up there and every time I visit I become more convinced they are looking at some tough times.
This is a great observation Mr. Fester. I was thinking about this last night. The number of people loosing 100K+ during this bust, will far out-number those that lost during the dotcom bust. The amount of wealth destruction this time around, will make the stock market bust, look like a picnic.
What amazes me is that these numbnuts thought they were the only ones on the roll. A fool knows that he is not the only fool. Maybe not. The old saying holds true, “never underestimate the stupidity of people in large groups.”
http://www.despair.com/idiocy.html
“Enchanted Homes?!” Jeez, the name alone would make me wary of buying. How about a blog for other possible names? Let’s start off with some boom names:
“Rose Colored Glasses Homes”.
“Everlasting Sunset Homes.”
“Live Forever Homes.”
“Flipper Paradise Homes”.
“Money Machine Condos”
Then some new names for the bust:
“Well And Truley F* Homes”.
“Up Sh*t Creek Homes”.
“KoolAid Homes”.
“Reset Hell Condos”.
Scorched Earth Estates
Implosion Meadows
Dead Woody
Bendover Gardens
Bodie
Foreclosure Landing
Fraud Estates
Charade Towers
Ponzi Place
Sellers’ Bluff
Bidding Downs
“Lakeside Meadows”
aka ‘the sand pit down by the old Monsanto plant…’
In lending cycles prior to 2000 ,lenders did not like making more than one loan to a investor in one project . I know of a Loan manager that got fired for making more than one loan in one project to a investor ,yet in this lending cycle speculators were able to buy many units from the same lender in the same project ,( the builders “special lenders’).
It’s pretty clear why it would be risky to extend that much credit to one investor . Also ,think about how that investor was keeping end-users from buying ,but I believe builders were building to sell to flippers and investors .I don’t think a buyer that wanted to move into one of these project thought they would end up surrounded by vacant houses and a bunch of for sale signs .
You can see what the risk is when to many short term speculators buy into one project .First ,speculators always let their investment properties go first if they run into trouble (that’s why investors were always required to put a bigger down payment and pay a higher rates .) Second , a bunch of vacant houses increases the crime rate ,as well as creates a excess supply of houses that need to be sold if the market doesn’t keep going up .
Projects that had these high number of speculators (sometimes 60% to 70% ),have the greatest potential to crash in price . This is especially true if the gambler didn’t even qualify for a long term loan or the rents would never cash flow the property . Course alot of these investors somehow got in on liar low down loans where they were claiming they would owner-occupy .
I just want to say that 9 times out of 10 its real clear in underwriting when someone is really a investor verses owner-occupant buyer ,so it was a matter of the faulty lending .
Right on point. Also, in the past, lenders would require a letter from the borrowers stating they were moving (say the purchase was in a nother state). This would help to ensure that the property was indeed owner-occupied.
Faulty lending…. Underwriters looked the other way, lowered their standards as was given to then by the banks. etc. Goal just get the money [loans] out. No surprise now. The public still doesn”t get it, “print as much money as possible and loan it to whoever will sign for it”. Mortgage broker retired for many years now as I watch with horror as our financial house collapses.
When did you first start realizing this market was unusual/whacky Jerry? It’s interesting to hear the impressions of people who have a long history in the lending business.
$159K in Vero Beach? That is truly fantastic, I am tempted. Honest Injun, I am not even being sarcastic. So I must ask all of you to slap me back into sanity. I should await the builder’s incentives.
That’s a 27% haircut, 159 vs. 219. What are rents like? If you offer $149 it would support rent of about $900-1000.
Centex Corp., is offering new single-family homes in the VeroLago subdivision starting at $158,990. The three-bedroom, two-bathroom home was first offered at $218,000 in November.”
Bet you can get 10K or 15K in “upgrades” with that too. The builders are bringing out the bare knuckle punching now. The “investors” are stuck with their “investments” till the next cycle. Nothing says “it’s over” like $58,000 haircuts.
The local NAR rep doesn’t sound too excited…
“When asked whether VeroLago’s new prices would encourage more buyers into the market, Karen Hall, president of the Realtors Association of Indian River County, said she had no comment.”
Call me when they put on the brass knuckles.
It’s not over yet… they will get cheaper
… esp if they are building faster then they are selling still.
100X Rent is $1499.
You could maybe rent it for $ 900-1000.
BUT…..Remember property taxes. Remember insurance. Remember HOA fees. Remember to cut the grass.
Remember that you lose money when it sits vacant…you lose money when a renter-turned-tweaker punches out the drywall….you lose money when you evict a single Mom turned stripper / pornstar who won’t pay the rent…..you lose money when a bunch of Mexicans steal your heat pump in broad daylight in a mostly empty, For Sale neighborhood….
Renting out houses here in Florida ain’t easy. Especially when you are thousands of miles away and there are already tens of thousands of other homes competing for decent tenants..
Ha. One of my neighbors here in the Northeast had a FL rental home. During a vacant stretch someone stole his palm trees.
Missing palm trees…no worries.
Now had they robbed the pink flamingoes, that would have been COLD.
“…someone stole his palm trees.”
That happens a lot, unfortunately, if they are expensive palms like sagos. It can be a scourge in an unguarded new subdivision.
“Now had they robbed the pink flamingoes, that would have been COLD.”
Especially since the last company making those pink plastic flamingoes has ceased production of that item.
Many of us have commented about the builders leading the market down. Personally, I thought it would take much longer, but these dramatic drops are great to see.
Hang on Cowboy….Keep your pistol tucked away behind that belt….
Houses like this in Port St. Lucie, Vero, Ft. Pierce, etc were going for 100-125K back in 2000-03. I look for the prices to fall back to those levels.
Also, beware of shoddy Mexican craftsmanship in these cardboard houses of stucco mud; they were built for speculators and flippers….they were never built for occupancy.
Keep your bullets in your pistol and wait at least another year. You should be able to find something nice, made of cinderblock, and in a mature neighborhood with good infrastructure by then.
I agree Les Pendens.
The houses are small and are on lots the size of a postage stamp. The house on the thread works out to be $118/square foot which is too high. I am looking for a price about half that post bubble.
Forgot to add the link to the Centex ad
http://www.centexhomes.com/N45927.asp
Pcola,
Are you wanting to buy in Pensacola, or somewhere else? Here in Pensacola, the local realtors act like $100/square foot is a great deal. Of course, it may be a great deal for the seller and realtor, but not necessarily for the buyer.
I may think about buying in Pensacola again if I can buy at 2002 or earlier prices. Right now I’m sitting tight unless something comes along that I want to throw a low-ball offer after.
I am looking to buy in Pensacola but also am considering Gulf Breeze and Destin.
You are right about the $100 per sq. foot price but I believe this price is way too much. Looking through the http://www.escpa.org website substantial houses on 0.5 acre lots in Gaberonne and Birnam Woods were selling for less than a $100 per sq. foot five years ago and now any POS on 0.2 acre sells for $125.
The house I grew up in Pensacola, which was in a good solid neighborhood but not “rich”, sold for $84,000 in 1984. It sold again in 1994 for 89,000. Appreciation of approximately 6% over ten years. I cannot accept that housing prices in P’cola have doubled in the last five. Its ridiculous!
dennisd,
Here is a perfect example of the screwed up pricing in Pensacola taken from http://www.pensacolamls.com:
MLS# 311840
Price $885,000
Size 3,800 sqf
Bayfront
The above house is located on the bay within walking distance of the Pensacola Country Club. The funny thing is in the description of the listing the house is offered as a lease for $2,400 per month or $28,800 annualized.
A buyer with 20% down would have the following ownership costs:
Interest on mortgage at 6.5% $46,020
Property tax at 2% after exemption $17,200
Insurance at 1% (probably under est.) $8,850
Total annual cost of ownership not taking into account maintenance or other incidental costs would be $72,250 vs. annual lease of $28,800. Crazy!
“You should be able to find something nice, made of cinderblock…”
Yup. Personally, I would not consider a stick house here in Central Florida. There is not enough cost differential from block.
I checked it out, it’s is 1,348 Square Feet, single garage, two bath, three bedrooms, one living room with nothing special about it. In my opinion this is the first attempt of many more down the line.
This is nothing close to what 150,000+ could get you pre-bubble.
SKB
‘Stephanie Sherman, human resources director for West Boca Medical Center, wants to hire and retain ‘top talent,’ she says, but her task is overwhelming. ‘We’re finding it a huge challenge,’ Sherman said Tuesday.’
‘There is no affordable housing in West Boca,’ Sherman said. ‘And our number one turnover issue is not money - it’s people moving to North Carolina and Georgia.’
I’m doing a seperate post on this as its important. Big companies are looking into moves. Due to the inertia in the market, it doesn’t matter what home prices do after they have decided to move/relocate.
This is happening in Florida, DC, California, and multiple other bubble markets. We’re talking movements of tens of thousands. People note that prices are dropping and talk like $300k is affordable. It is, for a 6 figure salary. Now what about the other 50% of America? Guess what, most companies need to hire large quantities of employees who earn the median or less.
So what do the companies do? They quickly discover its cheapest to move. There one issue is how to complete projects already on the books *this year*. If that is to transfer projects or staff (even divisions), then they will do so.
I’m seeing issues where projects here that require pretty low headcounts (500 to 1,000) are having to look into relocating due to 30% shortfalls in head count. Yes, 70% of the employees will have to move, this year, due to 30% shortfalls.
Thanks,
Neil
What does UHAUL say?
The Uhaul index shows outflow From California, Florida, DC…
Inflow to Austin TX, Spokane WA, and auite a few others.
We’re still in the window where companies can declare moves for this summer. Due to the national abundance of commercial space… it should be petty easy to move people quickly.
Not to mention eveyry time I turn around I read about another fortune 500 company building an oversized campus in a non-bubble market… It has me go hmmm…
Got popcorn?
Neil
I look forward to your post, I am concerned about the diversity of employment here.
While I agree with the bulk of what you say, corporations still have the tax issues to consider too.
It was interesting that last year my sister was working for a firm in Portland, OR and the company chose to relocate to Phoenix. She lost her job because she refused to relocate. I thought she should have sold out in Portland and taken the relocation package, rent and put the savings in the bank. Instead, she’ll ended up in a new job with less salary and will end up selling her property for what she paid or less.
Staying in Portland vs. moving to Phoenix is a no-brainer. Phoenix is absolutely dreadful during the summer. To be couped up indoors, a slave to the air conditioner, is awful. A friend of mine had his air conditioner go out, and had to move his family into a hotel for 3 days. I lived there for two years. The worst two summers of my life.
I remember flying to Phoenix from Tampa one summer, thinking that Arizona wouldn’t be so bad because it’s “dry heat.” Was I ever wrong on that one.
“This is happening in Florida, DC, California, and multiple other bubble markets. ”
I think this is overlooked far too often. All these bay area dip$hits bragging about how much their house is worth do not realize that this can effectively kill a local job market over time. It is incredibly short-sighted to wish for ever-appreciating housing prices. What will all these techies do when their 6 figure salary moves to Nevada, AZ, or the south? Believe me, bay area corporations are concerned about the high cost of housing, and to me this indicates that they have considered relocating.
Check out home prices in/around any city in Alabama, Georgia, South Carolina, North Carolina or Tennessee. The auto industry was the first to catch this wave. Other manufacturers are following suit. Soon even service companies will do the same. And you cannot believe how much open, unused land there is in those states.
Florida, California, New England, Upper Midwest- all toast.
http://money.cnn.com/2007/01/30/pf/rightthing.moneymag/index.htm?cnn=yes
How the middle class dug its own grave… blame it on you want but 90% of the people will be irresponsible with credit.
At least he is renting!!! And of course that article projects renting as bad. But for the rest he is no different from your average FB as he would have brought an overpriced POS if he could…
Financial democracy, or the fact those FBs won’t be bailed by people who are responsible, is impossible when they are as numerous as rabbits.
‘Welcome to Big Reds Crystal 8 Ball Foreclosue Sale down here in the Speculator Capital of the World.” (W*T#F? Strike up that Dumb drumroll and RELEASE those frigging balloons and Banners Dammed you Louie)
‘No MONEY you say…Good ..You DON’T NEED any ! ” “Here at Big Reds Florida RE Clean, Spin and out to Dry Factory..We do IT all FOR you.”
“No RE Smarts…Good..You DON’T NEED any !” “Here at Big Reds Florida Clean, Spin and out to Dry Factory ..We do IT all FOR you”
“No Credit, Equity ot Job…Good.. You DON’T NEED any !” ” Here at Big Reds Florida RE Clean, Spin and out to Dry Factory..WE DO IT ALL for YOU !”
“Naples.. NAPLES you SAY ??? Have WE GOT Some HOT DEALS for YOU just waiting to be SCOOPED UP by the happy little sand bucket and shovel FOR YOU !!!”
This 5 STAR dog and pony Clown ACT just gets Better and Better…MORE POPCORN over HERE Please !!!
Now..Now..Now !!! Louie..Louie…Release the Midgets….Midgets SELL houses !!!!!
too fun downtown LA condo advertisement paying the blog freight!
““Bruce Steifman of Old Bethpage, N.Y., found out about Enchanted Homes from a representative of Seashore, a company that made a presentation to his Long Island real estate investment club.
For a reservation fee of $12,000, But now, because the market has turned, there’s an abundance of inventory and houses are not worth what they were.’”
“‘I’m caught in it, too, but I don’t think anyone misrepresented anything,’ he added.”
I think that it is safe to say that Bruce has a forgiving heart….which is nice because Valentines Day is approaching.
It’s nice to see someone admitting responsibility for their decisions without blaming someone or something else. That’s rare these days. Mr. Steifman seems like a stand-up guy.
Who’s in the process of bending over…
AND TAKING IT
‘Most investors took $12,000 out of their pockets and expected to make $50,000,’ Steifman said. ‘They figured they would never have to close’
I find several things astonishing about Mr Steifman and his contemporaries. It’s clear that in his thought process the house itself was irrelevant. Was it well-built, did it have nice features, and a nice location? Who cares. Not only did he never intend to live in it, he never intended to even close on the property. In essence, he was investing in single family housing futures.
The next astonishing thing, although by now it doesn’t astonish any of the veterans of this blog, is that he thought it was in the bag that he could buy this house and before it was even built he could sell it for $50K more. The words “Ponzi scheme” and “greater fool” never occurred to him. Human stupidity and the ability to repeat stupid actions over and over and over really are limitless.
Right, if these were real deals, the principles would use their own money or borrow it. And they wouldn’t let anyone know so they could do even more, not solicite novices from other states.
it’s not astonishing.
I watched time and time again as people did EXACTLY that (put contract for house and flip before built for huge profit) for YEARS in many markets across the nation.
Many people watched it SUCCESSFULLY work for 2-3 years, and they ended up the GFs.
Of course it’s a ponzi scheme, but it worked for so long people thought it was “normal” and believed the hype.
“he was investing in single family housing futures.”
You couldn’t have painted a clearer picture of events that were moving the housing market.
Agreed — very well-phrased.
“(Broker) Sally Daley in Vero Beach agreed, but questioned if flippers and speculators who bought during the boom years will also be willing to lower their prices.
Willing’s got nothin’ to do with it Sally.
MUNNY: That’s right … I’ve killed women and children. Killed just about everything that walks or crawls at one time or another. And I’m here to kill you, Little Bill, for what you did to Ned.
LITTLE BILL: I don’t deserve this … to die like this. I was building a house!
MUNNY: Deserve’s got nothin’ to do with it.
“I think in todays market, price is the determining factor on whether someone buys a home or not”. - Don Santos, past Pres. Treasure Coast Builders Assoc.
Wow!! Someone in the industry finally said it out loud, to the press.