“Sacred Cow” A Casualty Of The Housing Bubble
The TC Palm reports from Florida. “New vacant homes in St. Lucie County reached record levels during the fourth quarter of 2006, while the construction of new homes dropped 50 percent in Martin and Indian River counties, a quarterly housing report showed Thursday.”
“The report by Metrostudy stated that at the current rate of buyer demand it would take nine months before 1,229 unoccupied homes built last year in St. Lucie County would be absorbed by the market. The supply is the highest ever recorded for the county.”
“‘In our analysis, we see a continuing trend of sales occurring only at the low and high ends of the price spectrum,’ said (broker) Sally Daley in Vero Beach. ‘In January for example, no barrier island homes were sold between $600 to $2.3 Million, yet this price bracket represents a whopping 58 percent of inventory for sale on the island.’”
“A falloff in (Port St. Lucie) property value increases has forced city officials to scramble to balance the budget. Three years of record property tax values threw off city officials’ revenue projections. Officials also were surprised by a substantial drop in building fees because of the cooling housing market.”
“As a result, City Hall will face departmental cutbacks and trim costs to keep the budget balanced. ‘This is the first time in a decade we have seen this amount of cutbacks,’ Office of Management & Budget Director David Pollard said. ‘We didn’t expect it (the housing market) to slow down this much.’”
The Herald Tribune. “Coast Bank is unlikely to fail, but with the potential for an FDIC-induced discount-price sale, it could become the first banking casualty of the housing bubble, says a well known Miami banking analyst.”
“Independent analyst Ken Thomas believes that it was likely the federal agency that encouraged the bank’s Bradenton-based parent, Coast Financial Holdings Inc., to hire investment banking firm Sandler O’Neill & Partners to explore options.”
“‘The FDIC does not want its first failure in years, so they likely encouraged the board to hire Sandler O’Neill who, as we speak, probably has many banks doing due diligence,’ Thomas said.”
“Coast may face a loss of $20 million to $30 million, a major hit on its ‘already thin’ capital of $51 million, Thomas said.”
“Coast made 482 loans on Southwest Florida properties whose owners were building homes with CCI. Most were for less than $250,000, not the kind of loan to require board review.”
“But local bankers say the fact that all the borrowers were dealing with a single builder should have raised red flags long ago. ‘That’s where somebody dropped the ball,’ said a long-time Sarasota banker. ‘Somebody didn’t put two and two together.’”
“The house of cards that Neil Mohamad Husani and Michael Tringali built during the height of the real estate boom has finally been flattened. Husani left the country in March after the FBI launched an investigation into the presentation of false documents to at least two banks.”
“One of the properties that changed hands is a parcel on Tamiami Trail in the heart of downtown Sarasota where Tringali, Husani and a third partner, Robert Martin, had planned to build a $125 million condo tower.”
“‘Mike and I lost our asses. We lost a ton of money,’ said Martin. ‘That’s what happens.’”
The News Journal. “The Emerald Shores hotel has postponed plans to sell its 82 rooms as condominium units, hotel representatives confirmed.”
“Henry Perfilio, an agent with the Condo Hotel Center in North Miami, said units at the property were removed from the condo hotel market earlier this month. A hotel manager said the owners, an investment group based in Charleston, S.C., have put their conversion plan on hold until next year.”
“The hotel had announced last April that its units would be available for purchase by individuals at $170,000 each.”
The Venice Gondolier. “Wednesday was the deadline for members of Venice Area Board of Realtors Inc. to pay their dues. Of 919 members, 699 renewed, according to VABR Executive VP Marlene Merkle.”
“That’s a 25-percent drop in membership. ‘We had 143 Realtors resign, and another 76 are in limbo,’ Merkle said. She estimates half the real estate salespeople in Florida don’t belong to their local board of Realtors.”
“Still, anecdotal evidence shows a significant number of those selling real estate are getting out of the business. One Englewood realty firm went from 10 employees down to one within six months last summer. ‘I think a lot of people who were in it to sell one or two houses a year, or were trying to make a quick buck. They are the ones leaving, for the most part,’ Merkle said.”
The Tampa Tribune. “A Brandon mortgage broker and his longtime friend face felony charges stemming from allegations he defrauded dozens of elderly residents and corporate lenders out of more than $408,000.”
“Authorities arrested Michael W. Danish on Thursday morning at his home. He remained at Orient Road Jail late Thursday with bail set at $500,000. Investigators said that between 2002 and 2004, Danish bilked more than 40 victims with the help of Donna Whitlock, a Tampa title agent.”
“Investigators said Danish targeted elderly, naive borrowers. He filled out loan papers supplied by Whitlock, who notarized loan documents without the borrowers present, investigators said.”
“Joseph Wilson, a financial crimes investigator with the Florida Office of Financial Regulation, said Whitlock told him she knew the practice was illegal but Danish asked her for a favor. It was ‘common business practice for people you know,’ Wilson said she told him.”
“If convicted, Danish and Whitlock each face up to 65 years in prison and $825,000 in fines.”
The Sun Times. “Because this housing ‘fiasco’ has now begun to take the forefront as possibly the single largest factor in the future of the U.S. economy, it is time for the real estate community to take action to save themselves as well as the economy as a whole.”
“Recently, we spoke with a salesperson from one of the major developments right down the road from Marco Island, on the 951 corridor. He indicated that their projected sales for 2007 were down nearly 80 percent, that’s right, 80 percent!”
“Compounding this statistic is that these numbers were ‘projected’ sales. This reveals the lack of confidence from the developers who, with their own assets at stake, must take a more realistic approach to what really lies ahead as opposed to the ‘Pollyanna’ forecasts by those with no financial liabilities to go with their sometimes unrealistic projections and promises.”
“Perhaps if there were more liability for ‘promises made vs. promises kept’ in this particular industry, we might actually see a quicker resolution to what appears to be a protracted and prolonged recovery from the ‘hangover’ from ‘too much, too soon.’”
“Nobody has all of the answers, but sometimes simple ‘horse sense’ can carry a great deal of weight. One idea to help stem the flow of negative pressure on the economy could very well be as simple as (apologies to the ’sacred cow’) lowering the prices as opposed to thinking that we can outlast the markets by maintaining artificial and unsustainable prices from the markets peak of over two years ago.”
““‘The FDIC does not want its first failure in years, so they likely encouraged the board to hire Sandler O’Neill who, as we speak, probably has many banks doing due diligence,’ Thomas said.”
Uh-oh….
Yes, Yes, Yes. Someone has been reading this blog. Finally someone in MSM says, Lower Prices!
Long time readers will recall Hague was calling this a bubble early in 2005.
That makes him smarter than me. I called (too early) it in 2002!
In any event, he is actually right. There are places with overbuilding, and there are places with declining economies. But for other places, like the Northeast and West Coast, the price is the problem. Cut the price and people can afford homes, transactions occur, the labor force can grow and the economy can expand.
Count me as another one who heard about the bubble back in ‘02.
me 3…hahaha.
I have been renting now for a while. I miss my home that I sold but I think I would miss the money I made from it more…hehehee! Laughing all the way to the bank!!!
Many economists seemed to have noticed something strange going on with home prices back in 2002. But pointing out an inflating bubble long before its demise runs the risk of “stopped-clock forecast” accusations. Small wonder the Fed only acknowledges bubbles in their aftermath. (Of course, the Fed would have many other issues to face if they openly acknowledged bubbles in progress…).
I called it in 2003. I almost bought a house for 180 that year, but its value had already increased by about 50% in less than 5 years.
It probably peaked just short of 300K, now maybe 270 or so. No regrets though, at the time I really didn’t have the income to comfortably afford a 180K house.
I was first, I called it in 1998.
I called it in 2003. I don’t know where that puts me on the “bubble smart scale”. At anyrate, anyone who saw it before it happened was actually paying attention and thinking for themselves.
As a Real Estate Broker, Business Broker, Mortgage Broker and Real Estate Investor with over 30 years in the market all I can tell you is Real Estate is cyclical, this is the forth and worst “bubble” I’ve ever seen and we are approaching the best opportunity most of us will ever see to make money in Real Estate.
This is a great blog and the comments are great! It’s fun to talk about how insane and stupid people are but there is money to be made. I think it will bottom out end of 07, 1st of 08, at the earliest and the market will be stagnent for 2 to 5 years after that. Study your local market and come up with a buy strategy. The tough call right now is when to buy. I have my own theories but there are a lot of smart people talking about what happens after the bubble.
2007 will be the most fun us “chicken littles” can have with our clothes on. This train wreck will be fun to watch, think about making money down the road.
I was real early calling it in late 2002. I didnt know that the Fed would lower rates to 1% and that the banks would open flood gates letting anyone who applied get approved for a loan. This was the key. Marginal borrowers with no skin in the game, allowed to borrower hundreds of thousands of dollars, then just cross their fingers. Many won for a couple of years, but now the music has stopped. In fact, around here, it stopped in late 2004, started up again in spring 2005, bounced around a bit, and hit a wall a began to fall in summer of 2006. This situation left manny people stranded, with nothing but crossed fingers. Sorry, maybe next cycle.
I see negative RESALE prices in my general market area for the next 2-3 years, after that, 2 more years of stability and bouncing around. When the dust settles, declines of 20% from peak will be the norm, with some markets experiencing less (10-15%) and others more
(30-45%). Bottom in 2009, give or take a few quarters. The key is to find a neighborhood you like and study it. Look at all the activity over a 12 month time period, including the expired and withdrawn listings. Look at closed sales, call the agents to see if any concessions were given. Then, most importantly, look at public records to see how the purchases were financed. If you see 100% financing across the board, like we have now, then it is not time to buy yet. If you start to see buyers come in with 10-20%, this would be a signal of REAL demand and relative stability. When we reach bottom, it will be because banks quit giving money away, so the people who ran up prices will no longer be able to buy. It’s those buyers with cash and good credit who will determine when the market deserves to appreciate year over year (legitimately). I predict his will happen in (my) market in 2009.
O.C., Good info. This is what I mean about smart people.
I’ll second that, good thinking OC
Count me in for early 2002. My company relocated at that time (Jan ‘02) from Emeryville, CA to Dublin, CA and what I saw when I started looking at the housing market was a jaw-dropper. For Dublin, it was all wrong. That’s when I started going on the internet to find something, anything that could explain what was happening. First stop, patrick.net…then I found Ben’s blog in early ‘05, which had minimal traffic at that time. And look at how much the blog has grown since then.
Wonderful job, Ben!
BayQT~
I will add one tidbit - the bottom will likely be followed by several years’ stagnation, as noted above. Watch your local rental market - it will very likely tighten - vacancies will drop and and rents will rise - just before sales prices begin to rise again. Happy Hunting!
DC: good points. The price of real estate is determined by “median income/interest rate/median rents”.
Also there is a theory that the median price of a home should be 2.5 to 3 times the median household income. This has some merit.
The rental rate should be plus/minus 10% of what you could buy the house for. The theory being that renters rent because their credit does not allow them to buy, but if their credit was good, their income would allow them to qualify.
Also, I am working on the theory that real estate historically will appreciate at 3% per year, compounded, asjusted for inflation. So far, the 3% theory is proving out.
Go back to a “normal” year and figure what, if the market had “normal” appreciation, a specific property would be worth today. In my market (Central Florida) I am using 1998 thru 2001 as “normal”.
These are my theory’s. Feedback would be appreciated.
mhmosieur@yahoo.com
“In my market (Central Florida) I am using 1998 thru 2001 as “normal”.”
Mike — I’m in your area and would use about the same benchmark, cinching it up a bit to 1998-2000. But in a drop as hard and painful as we might experience, IMO the bottom could easily overshoot 1998 (then add back inflation).
Also, I am working on the theory that real estate historically will appreciate at 3% per year, compounded, asjusted for inflation. So far, the 3% theory is proving out.
This clearly cannot be true over a long period of time, as it would mean that real prices for real estate would double every 24 years. This would price everyone out of the market eventually.
Chip: Good points. I think an overshoot or “bungee below the mean” is likely
Technovelist; Also a good point. The key is does the median income double every 24 years. I am researching that now.
All critiques welcome, nay invited!! mhmosieu@yahoo.com
I suspected a bubble by early 2002. My house was rising in value faster than the payments themselves. At the time I thought the market had to be within a year of peaking.
And I still think it probably was. But the reckless lending that followed, kept the market rising beyond the normal thresholds of a real estate top.
“Husani left the country in March after the FBI launched an investigation into the presentation of false documents to at least two banks.”
“‘Mike and I lost our asses. We lost a ton of money,’ said Martin. ‘That’s what happens.’”
They lost their asses while Husani gets to leave the country. Note to would-be American moguls: Beware foreign “partners” with little or no skin in the game. Husani is probably in a penthouse apartment in Dubai laughing his ass off.
“Note to would-be American moguls: Beware foreign “partners” with little or no skin in the game.”
Yeah, kind of like doing business with Nigerian letter-writers. But banks and local officials cut deals with these guys–any reason not to seek extradition for Husani?? Don’t know if Dubai does not honor American extradiction requests…but the feds will need the practice…watch the foreign mobsters who’ve been harvesting the American housing bubble start disappearing. Russians, Arabs, East Europeans, Asians, Africans…a real united nations of criminals.
I had a friend in college from Jordan. At the end of one semester he had decided to go back home, and wasn’t coming back to the states.
He celebrated by going to the mall and emptying his checkbook in one day. He probably spent about $1000 in every store.
The UAE, which includes Dubai, is a very strong political and economic friend of the U.S., but I’d bet that we do not have an extradition treaty with them. Nor any of the Gulf countries. Not a part of their (conditioned) culture.
i don’t think Mike and Martin are that stupid to let Husani get the entire markup, any body checked their offshore accounts?
make a ‘foreign’ fall guy, set him up in the overseas penthouse, and when the dust settles stateside go enjoy the party.
we live in a global village, no sense in being xenophobic.
Yeh, I have met more than a few that bought their homes in Mexico with the cash out equity,and just waiting til the ATM is dry ,and they will retire…
“we live in a global village, no sense in being xenophobic.”
No, we don’t live in global village. Laws and liability are specific as to states and citizenship thereof. Otherwise, extradicition treaties would not need to exist, nor would law enforcement agencies need to resort to diplomatic efforts to enlist the help of foreign police agencies. Whether foreign governments want to cooperate with US authorities depends on the specifics of a case the the nationality of the parties involved and what treaties may or not be in effect.
Even within the US, jurisdiction over particular offenses is often contested between states, for example.
Your “xenophobia” crack is out of line. We’re discussing tracking down criminals and the possibilities of their being held to account,
given the variables listed above.
doubt it..assets would be FROZEN.
“Nobody has all of the answers, but sometimes simple ‘horse sense’ can carry a great deal of weight. One idea to help stem the flow of negative pressure on the economy could very well be as simple as (apologies to the ’sacred cow’) lowering the prices as opposed to thinking that we can outlast the markets by maintaining artificial and unsustainable prices from the markets peak of over two years ago.”
Realtors are really hurt by sellers keeping their listings at price levels where they won’t move, as they only can make a living when homes are selling. The NAR should point this out more vigorously. Unfortunately, the market values of David Liareah’s Florida investment condos would be a casualty of this effort to help out his constituency, so I don’t think it will happen.
ohh GS, do tell, how many does he have????
“One idea to help stem the flow of negative pressure on the economy could very well be as simple as (apologies to the ’sacred cow’) lowering the prices as opposed to thinking that we can outlast the markets by maintaining artificial and unsustainable prices from the markets peak of over two years ago.”
Do you think? I challenge anyone to pull MLS listings in any market in decline and see where the houses are going CTG. They go there when people have dropped the act and priced their homes where they need to be priced. In my neighborhood, the houses priced at $280K sit and linger. A small drop to $269K, they still linger. The ones that are selling are priced at $240 or so. That’s a 14.5% discount before the negotiations even begin. So my question is why anyone would keep their home priced at $280K to begin with? They could try to wait this market out…but they’ll be waiting a while.
Neil, PASS ME SOME OF THAT POPCORN!
I saw that ridiculous price variation in my old neighborhood when we visited Sarasota last month. A 40% difference for roughly the same size house, same number of bedrooms and baths. The distribution was bimodal, with a cluster of listings at the low end and almost the same number at the high end, with nothing in between. How long can those high-end sellers remain in denial?
Furthermore, with so many houses on the market, why would a realtor take a listing that’s overpriced and has no chance of selling? My wife refused more than one unrealistic seller during her career.
“Furthermore, with so many houses on the market, why would a realtor take a listing that’s overpriced and has no chance of selling?”
Many realtors are still clueless to this crash. Some are clued in and are so hungry they are tired of dumpster diving for food and pan-handling to make the BMW and McMansion payment. They’ll take anything they can get.
Realtors(tm) have put themselves in a box.
The past 3-5 years they have been promoting RE as a great INVESTMENT. They have been proclaiming it is better than stocks. Buy now, the prices are going up 20% a year. IF you don’t buy now, you will be PRICED OUT FOREVER.
There are many, many people who bought these stories and did buy. How do you now tell these same people that the bought a pig in a poke.
“I sold you a great investment, but unfortunately the market has turned, and I know it’s costing you $2500/month to hold it, but it’s worth 20% less than what you paid”.
“You must SELL NOW OR BE LOCKED_IN FOREVER.”
“You must SELL NOW OR BE LOCKED_IN FOREVER.”
Ironic twist isn’t it?
You guys are right for the most part about Realtors ™ or Realters, whatever. Most of these people were selling jewelery in the Mall and decide to make “the big” money in Real Estate. They’re a joy to deal with, believe me. Incidentally, the memebership in NAR is expected to decline by as much as 40 to 50% this year.
David Lereah is so full of crap. I agree, tell the truth, don’t try to prop up the market with BS. Put it out there. The market is in a decline, just say it!!!
Some of the self-described “good” realtors in here attempt to defend their profession from time to time. I have the view that 90% of realtors are morally bankrupt, but would re-examine that view if the rank-and-file NAR members forced a change at the top, starting with the dismissal of Lereah, LAY, and the other thoroughly discredited public faces of the NAR. Do I think that’s going to happen? No, because it’s self-evident that DL and YAR reflect the general sleaziness of NAR members as a body. Ethical, conscientious realtors who are genuinely looking out for their clients’ interests - especially the buyer’s - are an extreme rarity, not the rule.
Sammy;
As a Real Estate Broker, I couldn’t agree more. It’s a sad state of affairs and it diminishes the whole profession.
They are hoping the seller will drop the price or some dumb sucker will come along.
Why would you lower prices when when you read that the president of the NAR says were at the bottom?…I think Learah has
done a disservice to his fellow realtors.
“Coast made 482 loans…But local bankers say the fact that all the borrowers were dealing with a single builder should have raised red flags long ago. ‘That’s where somebody dropped the ball,’ said a long-time Sarasota banker. ‘Somebody didn’t put two and two together.’”
Yeah right. Nobody dropped the ball, they put two and two together and it added up to millions. Why let fiduciary discretion get in the way when Florida real estate only skyrockets forever.
“Somebody didn’t put two and two together.”
OK, no bank officer jobs in the future for anyone who can’t pass a 6th grade arithmetic test–working with fractions and percentages. Current bank officers who can’t pass a 3rd grade arithmetic test -adding and subtracing small numbers–are protected under Florida’s No Banker Left Behind Act.
LOL.
“…at the current rate of buyer demand it would take nine months before 1,229 unoccupied homes built last year…”
I wonder if that calculation includes the assumption that zero new spec houses will be completed in the interim.
and 0 cancellations-lioke the gov stats
I was in West Palm Beach last week and was doing some house hunting in a development called Ibis. Went to three open house that were scheduled to be open for 2 hours. I went to the open houses after they had been open for an hour to an hour and a half and in all of them I was the first person to come by. One agent was basically begging me to make an offer for 10% or more than the asking price. The agents at the other houses were the same for the most part.
Later that afternoon I check out the house with the desparate agent. The house was purchased by someone already living in the development, I am 95% sure he purchased the house to flip. The purchase price of the house was $399k in Sept 05 and was purchased with an 20% down, however they have an option ARM that is probably not at over 8% and my guess is have negative amortization. Taxes are $8,000 a year, insurance is probably about $3,500, HOA is $4000. The house has been vacant so it probably is costing the person at least $50K a year in holding cost.
In south Florida there must be 1000s of investors in similar situations and I believe in the next 12 months they are either going to be desparate or foreclosed on. It is going to start getting way worse before it gets better.
Almost $16,000/year for taxes, ins, and HOA? Ouch. I had a similar priced house in CA and I’ve had been paying $4300, $700, and $1200. Plus my HOA includes 24 hour roving security, front yard landscaping and maintenance. I can thank Prop 13 and no hurricanes for the first two items.
“at least $50K a year in holding cost”
That’s how much some people make in a YEAR.
if their lucky. That is higher than median income in this country.
Wow! I live in Salt Lake, & for a 250k house I pay 1,250.00 a year in property tax and $600.00 a year in insurance. How on earth can anyone afford to live in Florida??
I have lived in Ocala, Fla since 1980. One of the great things about Fla. was that it has been reasonably inexpensive to live here. That is no longer the case, especially if you are moving here. In fact, I know a lot of people who are moving out, mainly to Tenn, S or N Carolina and N Georgia.
The median income cannot buy the median house in any Florida Market. That has to change along with property taxes and insurance or very few will be able to live here.
There are lots of nice neighborhoods in South Florida with HOA of $100/month or less. I’d also be terrified to buy into a place where they’re still building and the Builder could sell a house just like yours tomorrow for $100K less than you pay today. Sounds like you’re looking for a golf course community, there are 100’s of homes for sale in those, completed mature neighborhoods, with homes not built entirely by illegal aliens, where you can’t get screwed by a builder.
But the insurance company will screw you. The underwriting policies of many insurance companies only allow houses that are new or a couple years old. Mnay wont even do it no matter what. Anything over 10 years old ad your automatically thrown into the state run pool which is the equivalent of someone with 3 dwi’s trying to buy car insurance.
“Anything over 10 years old ad your automatically thrown into the state run pool…”
Not always the case. Right now it’s a tight market, but there are some smaller companies writing homes older than 10 years. In fact, some larger companies will take care of their existing clients when purchasing a home…depends on the company and too many other factors.
With all of the awful things that have happened in the housing market here in Florida, including taxes that are running me out, to be fair I’d like to add that the current building codes are much, much better than the codes of even ten years ago. I’m leasing in a new lux condo that is built like Fort Knox. It is very unfortunate that the owners of a huge number of re-sale homes will be screwed because of their homes’ construction quality, but I think it is a pretty sensible business decision for the insurance companies to make such a distinction.
The problem with most of these bankers is they never ever haul their fat behinds out to the field. I was encouraging these asshats to do so 2 years ago and not one called me to say, “I was in the field today and boy was I surprised.”
I do know of a couple of NY hedgefund managers who came to south Florida to check on their money for the first time in 4 years. The word is the second day of looking they needed to be diapered by their escort.
That’s what happens when people mistake data for reality. The numbers all look great, the problem is that the numbers don’t reflect reality, and so for example they go out and look at some development which is supposed to be filled with “owner-occupants” and they find it was all sold to speculators and its either empty or rented out and there is for sale signs everywhere. Suddenly all their false data based computer projections about housing demand and prices go out the window.
We have all become complacent with instant data and we assume(not on this blog)that it is accurate.
In real estate there is no substitute for boots on the ground. These automated valuation models upon which 65% of loans are made are total and complete “starting points”.
True research is based upon, inventory, supply coming online, sales velocity of existing versus new, pendings and current listing activity. Also cash equivalent adjustments should be used for true market reflection.
As a review appraiser I am basing my opinion more on inventory and sales velocity than sales. In Florida a lot of sales are bogus with cash back deals between the parties or under the table concessions. FRAUD
Over the past few months I have discovered what is apparent fraud in a full 40% of the reports I have reviewed. There are appraisers estimating the value of a property 30-40% over the contract price. Imagine in this market a value which exceeds the contract price in subdivisons which have dozens of the same house available.
I am amazed and saddened by what I see. Indictments are becoming more prevalent and a lot of people should be very worried as the FBI is active in Florida at this writing.
I was in West Palm Beach last week and was doing some house hunting in a development called Ibis. Went to three open houses that were scheduled to be open for 2 hours. I went to the open houses after they had been open for an hour to an hour and a half and in all of them I was the first person to come by. One agent was basically begging me to make an offer for 10% or more less than the asking price. The agents at the other houses were the same for the most part.
Later that afternoon I check out the house with the desparate agent. The house was purchased by someone already living in the development, I am 95% sure he purchased the house to flip. The purchase price of the house was $399k in Sept 05 and was purchased with an 20% down, however they have an option ARM that is probably not at over 8% and my guess is have negative amortization. Taxes are $8,000 a year, insurance is probably about $3,500, HOA is $4000. The house has been vacant so it probably is costing the person at least $50K a year in holding cost. The current asking price was $399,000.
In south Florida there must be 1000s of investors in similar situations and I believe in the next 12 months they are either going to be desparate or foreclosed on. It is going to start getting way worse before it gets better.
micheal f reply;
As a ‘former’ WPB resident of 20+ yrs, I can say that Ibis is a rather nice upscale community, in the Palm Beach Gardens area….There are currently nearly 27,000 houses for sale in WPB area, so I think your selection is manyed…Taxes are approx. 2.7% of purchase price, however I think your estimate of insurance is quite low…..I’d guess $5000 to $7500 would be more accurate, “IF” you can even find somebody to write you a policy…
“IF” you have got kids, you may NOT want to send them to Palm Beach Gardens high school…..My wife had worked there, and still has many friends there, and the school has the traditonal inner city school problems…..”IF”, you have the money to send your kids [?] to Benjamin, with tuition of $8000 - $16000, I think you’d find that a ‘fine’ option….Traffic on PGA, and Northlake are ‘intolerable’….About the things getting worse before they get better, I totally agree with you…..Median home price in WPB area now approx. $365,000, with median income @ $60,000..Clearly the residents cannot afford to buy their own homes they are living …..
“BUT”, like I said in 1980 or so….”As long as that sun keeps shining, people will keep moving here”"!!!!
||||NOW, I’LL ADD A CAVEAT…”"”AS LONG AS THEY CAN AFFORD IT”"”….
From the “House of Cards” article:
“Husani bought the land at Fruitville Road and Tamiami Trail — the former site of Nello’s clothing store — in January 2006 for $10.35 million.
He then sold it for $24.6 million on the same day to Sarasota Grand LLC, a limited liability company controlled by himself, Tringali and Martin.
Julian Stokes of Integra Realty Resources then appraised the land for $25 million, and the partners used that appraisal to get a $16.25 million loan from Fifth Third Bank.”
These people are bank robbers. They belong in jail. So does that other chooch whining about “loosing our asses”. No, you stole other people’s money and lost it, you dirtbag. I’ll bet he turns State’s evidence.
I wonder how soon the stock market is going to decline. As people liquidate their 401(k)’s and other vehicles to make the payments on their vacant rental “cash cows” (you know it’s happening) there are going to be a lot more shares for sale. Won’t that have downward pressure on stock prices?
interesting point, isn’t there a measure of 401K withdrawals we can watch?
That’s already happening. Look how the stock market has performed since last summer.
Wait, it’s gone UP since then? How can that be? So many of the posters here have described how bad the economy has been and continues to be.
LOL! You’re a hoot Bill! Just keep believing that the stock market is an indicator for the health of the general economy and I’m sure every move you make with your money will be right. What a maroon.
Little effect. Mutual funds will have more redemptions, but it’s not going to effect the stock market. These redemptions will be offset by the money going into 401k’s and mutual funds from automatic deductions from retirement plans in US companies. You make it sound as though a majority of the homeowners are tapping their 401k’s to make ends meet.
Hi, I’m new to this blog. I am hoping I can get some advice. We are being relocated to sunny Florida. Is anyone familiar with Sarasota? We are nervous to buy based on all that is in the papers, and the cost of homes. We were shocked to see how much a four bedroom, no yard 3000 sq foot house costs! $500-600k! We are in the $450k range. It’s disgusting what we can get for $450k!!!!
We have no choice but to move. We have spoken to a few realtors and it’s like talking to stepford wives or husbands. Everything is honky dory and selling has really picked up! Now is the time to buy! They try and pressure us to spend more than we are willing to in order to get the type of home we are used to. Looking into renting, there aren’t that many listed. I hear about all these empty houses, but why aren’t they renting them or better yet, lowering the price?????? Are things really picking up? What is a good/fair price for a 3000sq ft home?
I’ve looked all over the web for a site to help us with this move from where to live to cost…. I always end up at a realtors site! I accidentally found this site and found it very informative. Does anyone know of a site that helps people when moving that isn’t linked to a realtor? Maybe a blog???? This is a scary time to be moving to Florida!
First of please for the love of god, don’t buy, there are a ton of rentals, but not listed in anyone place, try craigslist, paper etc, (colleagues who live here already) Also check out the VRBO sites, (vacation rental by owner) a lot of them are eager for long term tenants. We transfered early this year and had the same concerns but found a house on a canal below what we planned to rent for, you just have to look.
Read a book on how to buy a house with no agent. Then call the listing agent on the houses you like at 550k and up, and tell her to write a contract for 425k or less. Better yet, rent for a while before you do this. A lot of rentals are advertised with yard signs, so you have to drive around and call, or try craigslist.org.
I’m not sure about rentals in Sarasota, but I can tell you that home prices are tanking. Here is a link to the FL Assoc of Realtors website listing median home prices. Pay particular attention to the Nov and Dec 2006 numbers:
http://media.living.net/statistics/statisticsfull.htm
Now there’s an eyeful. Tracking it from Mar 2005 thru Dec 2006 you can actually see it go from skyrocketing to sailing into the crapper. Amazing.
floridabound-do not be bashful. If you find something you like, even at 600,000, offer 450,000. The worst that can happen is they say no.
Check out “housing tracker” which will give you an idea of how the MLS is doing. Rent, rent, rent.
Floridabound, you could do a lot worse than Sarasota, it’s a nice place. I’m going to offer a different angle on your question, and say that I think anyone moving to an area they know nothing about should rent for a while in that place while they look around. I know people that would spend 3 months looking at new cars get transferred, spend a weekend looking around, buy a house. How do they know they’ve made a good choice? How will their commute be? The real estate agent will always say the local schools are great - is that true? Are you neighbors all Branch Davidians? Are they planning a new waste treatment plant in your backyard? My advice, go on VRBO.com, find a short-term rental (there are many of them). There’s virtually no chance that prices are going up in Sarasota, so take your time.
Sound advice in any environment…..Incredible advice in the current environment.
hit an auction-skip the realwhore and save a buck-watch out for the taxes and wind insurance
bradenton if you handle the drive
If you buy…then you will be bound to Florida, perhaps hogtied to a declining asset. Think…move slowly, there may be high winds next year as well…
Floridabound, Sarasota is pricey. I never give anyone specific advise, Buy don’t, buy ect. I will tell you that as a long time (26 yrs) resident and real estate investor in Florida, I don’t plan on buying anything in 2007, maybe even 2008. Take that for what it’s worth.
There is no bad advice in the above posts. Good Luck to you !!
TAKE YOUR TIME !!! Do your homework and find a nice short-term rental, and then set out to work on finding a longer term rental.
Become educated on the local market - keep on the blogs, do your own research, look at online listings and sales via realty and assessment sites (make sure any realty sites you use don’t obligate you in any way).
There are two major trends working in your favor:
1) There is soooo much more information online available to regular folks to determine what they like, can afford, and how the market is moving. Take your time and become educated on your own, before you ever start talking to a real estate agent.
2) The market is not going to be doing anything in the near term that requires that you “jump in” soon or be priced out. So, take advantage of that time to REALLY BECOME EDUCATED on what you can afford, what you like, and what’s happening in the local market. Don’t let ANYONE try to speed up your decision-making — wait until YOU understand your local market.
You’re in a great position - take advantage of it!
Thank you to all the replies! I knew this site was special. Anyway, I tried Craigslist and found some houses for rent. I would have never thought of Craigslist. We are pretty much planning on renting. There just didn’t seem to be that many rentals with four bedrooms with pool in the mls. We will be going down next weekend to look around. Hopefully we will find rent signs that aren’t in the mls.
We aren’t in a hurry to buy a home. I do want to get to know an area. We have children in elementary school so want to gear our search to family oriented communities and the right school. I want to rent where I eventually want to own. I hate to switch my childrens schools again!
The areas we’ve been told to look at are Palmer Ranch, Heritage Harbor, Grey Hawk Landing and Lakewood Ranch. Many of the coworkers live in Lakewood Ranch. They see nothing wrong with the prices. We found a house on the same street as someone we know. Their neighbors realtor sent it to us. They were asking $629k. We went to the county tax appraisers office and found the sellers paid $ 400K in 2004. When we mentioned it to the realtor and our friends, they both had the same response that real estate is hot in this area and things are starting to go up even more. It seems we need to be careful of what we say to people because everyone, even those not selling or in real estate are very sensitive to the subject.
If anyone knows if of the best schools and areas for kids, I’d love to know. All our contacts have a vested interest. They either live there or are realtors!
Thank you all! I will report what I find in Sarasota when we go looking. I’m counting down the days-7 days!
In regard to your comment: “It seems we need to be careful of what we say to people because everyone, even those not selling or in real estate are very sensitive to the subject.”
- Please be aware, if someone owns a house right now they are indeed “in real estate”. None of them want their paper profits to decrease and will always encourage the next greater fool to come along and prop up the next comp. Be carefull and listen to all the above posts. Very good advice to rent for a while.
Good luck! Let us know how it goes!
floridabound: for God’s sake, don’t listen to the f**king Realtors!!! (of which I am one, by the way)
Save yourself!!! Rent !!!! Does it make sense to you that a property goes from 400k to 629k in 2.5 years????? That’s 57% increase!!! Think !!!!!!!!
The median price is DECREASING for that area!!!
Think for yourself!!!
Floridabound,
Welcome to hell…oops…I mean The Sunshine State! You are the latest of many, many of us who have moved here and smelled something very foul in the area of real estate. Among others, here are the things you need to be aware of:
Issue #1: The published prices of homes sold by the FAR (Florida Ass. of Realtors) are MUCH LOWER than actual (i.e. the FAR says the median price in Tampa is $235K, when it is actually $290K) - it’s pretty much the same in every major metro area. There are many theories as to why they’ve been doing this for the past several years (pressure by Chambers of Commerce, shaving the peak, etc), but it seems to have coincided with the bubble.
Issue #2. You absolutely need to be aware of the “Save Our Homes” property tax system. On their own residence, people get $25K subtracted from the assessed value, and their taxes can go up by no more than 3% per year. So, not only would you be paying $229K more for that house you mentioned, you would also be paying the taxes on that extra $229K that all of your neighbors would NOT be paying. For another example: In the neighborhood that I’m renting in, the owners of our house are paying $6K a year, while the neighbors across the street (who’ve been there since the 90’s) are only paying $2K a year. So, when you buy, unless all your neighbors move in the same year you do, you will almost assuredly pay much more in property taxes than all of your neighbors .
Keep an eye out, be wise, and keep abreast of the news via these blogs. Most predict that prices are going to drop 20-30% here before prices level off (some predict even larger drops). If you buy now, you are going to be eating that drop, and pay the extra taxes to boot. Believe nothing spoken by realtors, and nothing by current owners. The truth lies here.
Jerry at Paradise Lost
(also check on my link - the Florida-based real estate bubble blog).
Sorry - bold off.
And link was incorrect - here’s the correct link:
Florida - Paradise Lost
Jerry — FYI, that link doesn’t work, either.
Floridabound—Noooo, do NOT listen to the Realtor’s in this area. I’m currenly renting in Lakewood Ranch and nothing is selling. Not sure what part you are looking at but some streets have 4-5 houses in a row for sale. There is a 2 1/2 year supply of houses on the market in Sarasota-Bradenton and I’ve been tracking the market closely since early 2005. Inventory is at an all-time high and increasing. Realtor’s here have started some ridiculous ‘Time2Buy’ campaign hoping to pull in the few greater fools that are left. Take your time and try to rent something like everyone else has said. There is probably more to rent in the 2000 sq/ft range than 3000 sq/ft. But please….do NOT beleive a word of hype you hear from the idiotic Realtor’s, they are desperate for sales here right now and would lie to their dying grandmother to get a sale. This place is a mess as far as real estate goes!
We haven’t actually been to look yet. We’ve done everything online, via phone and email. The area of Lakewood Ranch we’ve been told about is called Greenbrook. This is apparently the kid friendly section. I mentioned the other kid friendly areas on an earlier post. I went to VRBO and Craigslist…. Funny thing there were more rentals in Heritage Harbor than any other area. I guess we need to take that one off the list. How are the schools in the area? How do you think this neighborhood will handle the price drops? Are there any neighborhoods in Sarasota/Bradenton that will do better if the bottom falls???? I’m afraid of moving there and the bottom falling and then the neighborhood starts taking in low income housing, or anyone that can pay something including pedophiles and meth labs. Okay, now I’m being paranoid! But this is a very scary place to be moving my kids. I’d feel better if we were moving to Kansas! I must remember what everyone tells us, we will love living there!
The only “help” you need is time and patience. In addition, never trust “experts,” i.e. realtors, who have a vested interest in selling you something. That seems self-evident, but millions of cretins fail to grasp that truism. Forget every cliche you’ve ever heard about renting - the smart money is sitting out the cataclysm, and will look like cosmic geniuses when we move in to pick up the pieces. Most importantly, keep reading this blog - not since the Manhattan Project have so many brilliant minds been assembled in one place!
Thank you for calling me a brilliant mind.
Yes, all this seems rigt-on. Forget the cliches about renting. They’re totally false.
I too just moved to South Florida, and the best thing I did was to rent. I could have bought a home before coming and moved right in. But being ” on the ground” has been invaluable. It is worth the inconvenience of renting, and this is from a guy who HATES renting. I would have made bad decisions if I had bought right away.
You’ll learn the area better, and there is no way that prices will rise this next year. You won’t miss out.
Floridabound — Sarasota was one of the most “bubbly” areas in Florida and should be one of the most deflationary on the way down, IMO. Personal advice? Same as others — whatever you do, don’t buy right away, despite what your S.O. says. The financial pain of buying too high will be waaaay more than the pain of two moves and the related costs. In simple terms: if you rent a nice place for $2K/month on a year’s lease, your total risk of loss for the rental is about $20K (plus the move), assuming you don’t find the bargain of your dreams for 30 days and have a 30-day closing. But if you’re planning to buy for $300-400K, that $20K (max) is totally saved by any price drop of 7% or less. Bet your bippie you can negotiate more than that away. Keep your down payment in a money market account or a 90-day CD.
FWIW, ditto the advice about exploring Bradenton as an alternative place to live. Assuming you are OK with your school situation, if it matters, Bradenton usually has better prices and more affordable restaurants. There is at least one outstanding private school there. Eat once at Anna Maria Oyster Bar on the north side Cortez, just west of Wal-Mart and the water tank, and you’ll be in love with the area and the relative cost of living.
Also, I haven’t been out to Lakewood Ranch, but I think it’s pretty far outside downtown Sarasota, re daily commute and relative to Bradenton. The offset might be much lower insurance rates out there, since you’d probably be east of the Interstate. It is definitely worth checking with your insurance agent.
As others have said, you should rent for now. On top of price, there is the ongoing state insurance crisis to deal with, poor consumer advocacy laws, high taxes (no income tax means high property tax, duh!), and higher energy bills because a house costs a lot to cool in the summer.
It’s too bad you aren’t coming to Gainesville, because this is a time of year when desperate prop. mgt. co’s, emptied of renters as dropouts and early graduaters leave town, offer incentives on rent. Sarasota isn’t a college town, so you won’t have that advantage. My impression of the place is that it’s kind of sleepy (but not as sleepy as “Slow-cala”–Ocala) and the public transit agency has wonderfully off-putting name “Scat”. I guess the marketeers didn’t get out much…
I drive their old busses (Gainesville RTS–the “junkyard” of the Southeast) and they are pretty sweet. I think I’ve seen their new buses, they’re even sweeter. But to give you an idea of what the town is like, we’re talking tiny, 30′ transit buses. Big cities run 40′ and 60′ models, maybe 35’s if they have narrow turns. Even G’ville has 40’s on most routes.
A town that tiny and slow, and they want how much for a house? Come on, we’re not talking about Martha’s Vineyard here. Bubble!
Not a Gator; I’ve been in Ocala or 26 years. I’m here because it is slow-cala. It’s grown a lot but in real terms it’s still quite small. That’s a good thing.
Gainesville is not a real good example of a “normal” economy as it is scewed by the college being it’s only industry. G’ville would be 1/2 the size of Ocala, with out UF and the supporting business.
anyone have an estimate on when the commercial RE market turns ?
Widespread commercial contraction will ensue later in the process, I think. Right now, there isn’t much job loss, there isn’t much of a credit contraction, and, overall, there aren’t that many people in such dire straits that they aren’t buying their Starbucks coffee. When folks start seeing more homeless people, more unemployment lines, more day laborers standing around with nothing to do, and fewer people at the high-end happy hours, and the media begins to provide more realistic news, they might get scared and will probably clamp down on their expenses. A spending contraction will ensue, and at that point the commercial enterprises will begin to feel the pinch. After all, most of our economy is now “service-based” and if there’s nobody to “service” or they can’t afford to be “serviced” what happens?
That’s not to say that events aren’t occurring right now. Northern Virginia is losing car dealerships, furniture stores and other high-dollar consumer businesses. There are also increasing commercial vacancies above the 10,000 sq. ft. range, suggesting that the medium- sized businesses aren’t really shopping for new space or are relocating to lower-priced space. This is in existing space, mind you. There’s a lot of commercial spec. development in the works to come online in 2007. It’s massively overpriced at $40.00 per sq. ft. whereas several hundred thousand square feet of existing space is going for between $20.00 and $30.00, so whether there will be any takers is a dubious proposition at best.
I believe we will eventually be looking at lots of empty space, semi-empty malls and abandoned strip malls as they were at the end of the ’70’s and the early ’80’s. I am distinctly bearish, however, so “bear” that in mind.
Check out Page D1 (business section) Washington Post today. Hilarious article about arabs bidding up hotel prices, even in DC. $1 million per hotel room barrier has been broken. Look out below.
Why Miami is toast…
More than one-third of Miami-Dade County’s 835,000 households are supported by workers earning the minimum wage, $5.15 an hour, or less. ..
The Miami-Dade Homeless Trust calculates that someone earning the minimum wage can afford $268 a month in rent.
http://www.latimes.com/news/nationworld/nation/la-na-miami2feb02,0,506225.story?page=2&coll=la-headlines-nation
Well, they have the Super Bowl making the city a ton of money.
Not that this really alters your point much, but Florida’s minimum wage is $6.67/hour as of 1/1/2007. Previously, it was $6.15.
Sacred cows make the best hamburgers!
“Whitlock told him she knew the practice was illegal but Danish asked her for a favor. It was ‘common business practice for people you know,’ ”
Is this like drug dealers giving away free samples of crack cocaine? This is the only other example I can think of right now of illegal but common business practices.
Wow isn’t this a telling statement by Whitlock on how alot of these RE deals got funded . In my view ,there had to be a total breakdown in the check and balance systems for this degree of fraud and shady dealings to take place .
“” It was common business pratice for people you know ,”"
This statement goes back to the fact that it has to be a team effort on the part of many people for this many RE transactions to take place that were shady /inflated . This title rep. acts like doing a favor of fraud was a every day business act .
As long as the system has broken down to this degree ,I’m not interested in dealing with it . As a citizen I’m entitled to a fraud free transaction .I’m not interested in dealing with a financial investment system where prices are inflated by the crooks and where vunerable or old people are ripped off .
Maybe the industry is going to have to start informing their employees what the difference between right and wrong is and what the penalty might be . That being said , this Title Reps mommy didn’t raise her right . Also maybe employers should give employees rewards for turning in people who can’t tell the difference between right and wrong .
“As a citizen I’m entitled to a fraud free transaction.”
Wiz — great statement. “Well, everybody else was doing it” should not cut any more slack than that excuse did with our parents.
I’ve advised a nephew who is a computer whiz to consider getting into mortgage/property-tax fraud detection as a boom, but hopefully temporary, business.
Anyone else here amazed at the article about local governments finding themselves in a financial bind now that the bubble is imploding? What a shocker! This was so hard to predict!
“Three years of record property tax values threw off city officials’ revenue projections. Officials also were surprised by a substantial drop in building fees because of the cooling housing market.”
Because I frequently find myself interacting with government employees, I often wonder what their average IQ is. Let’s see, we have all these years of historic revenues, now we had a three year explosion that overflowed our coffers. Looking forward, should we budget using the historic norms, or just count on a perpetual bubble? Well we all know that real estate can only go up, so let’s just let the good times roll! What a bunch of baffons! Jesus, so many counties and cities are going to get financially hammered because the people running the show are complete dis$hits!
Sorry, had a typo. Should read:
Jesus, so many counties and cities are going to get financially hammered because the people running the show are complete dip $hits!
Nope. The same sh*t happened here in Cali during the dot.com bubble turned bust. Grey Davis thought the “livin’ the life of Riley” days would never end, but guess what? It ended with his head in a noose. And Cali in all kinds of fiscal debt.
I just don’t get it. Most people just don’t study, read up on, remember history. And now, again, we are doomed to repeat our failures and miseries. Oh well I will just keep my powder dry…cash will be king again very soon.
I hear ya. Texas has a $14B budget surplus this year. Instead of saving it for a rainy day, they are fighting over how to spend it all. When there is a budget deficit next year, the pols will be fighting over where to raise taxes. These pea-brains are pathetic.
I think that that will be one of the major stories of the year in 2008 or 2009. There will be little if any accountability in the media, of course, for the politicians who didn’t see the elephant. But there just might be some in the election booths.
” Instead of saving it for a rainy day, they are fighting over how to spend it all.”
Taxpayers should demand that it be returned.
If it’s returned, you’ll just have to pay it out later… but pay it out in a downturn. Much easier to pay now when the economy is good, than pay when you’re broke. Some very small gov’t’s do save for hard times, but that’s getting less and less common.
Chairman of Coast Bank was just admitted to the hospital with chest pains, and is taking leave from his job.
http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20070202/BREAKING06/70202015&start=1
I hope he is okay. Wouldnt want him to miss his trial.
Sounds like the Ken Lay Maneuver.
floridabound: find a nice 4 bedroom without a pool and go to sam’s club or wally world and bybone of the mushroom pools. yes, they are tacky, but the kidz’s will love it and it will only set you back around $200.00 Then sell it to the new renters when you move.