“Buyers Aren’t Buying, They’re Watching Prices Fall”
The Herald Tribune reports from Florida. “It is no surprise that Michael Tringali is being forced to sell homes, home sites and land at public auction. When the market turned, he was unable to generate enough income from his home building and real estate investment activities to cover his nearly $87 million in bank debt.”
“Now a group of Tringali’s banks are forcing Tringali to hold a public sale. The auction should provide a fascinating glimpse into how far the once high-flying Southwest Florida real estate market has fallen. For sale are four luxury homes and 12 home sites in Sarasota County; 14 newly constructed, middle-class homes in Golden Verna Estates near Myakka City; and 253 acres in the same area of Eastern Manatee County.”
“With the downturn in residential real estate sales and the logarithmic increase in unsold homes across the region, Tringali’s properties will sell for much less than at the height of the boom,’ said Martin Higgenbotham, the owner and founder of the Lakeland auction house that is handling the sale.”
“‘Every builder built too many houses and there is way too much product on the market,’ said Higgenbotham, who formed his company in 1959 and has witnessed at least five real estate market cycles. ‘Whenever you have this much supply and only so much demand, prices will fall.’”
“This is not an absolute auction, said Donald Kirkland of Higgenbotham Auctioneers. ‘It becomes a question of what level of losses they are willing to take,’ said George Huhn, a Venice real estate agent and foreclosure specialist. ‘This auction is probably a trial balloon for them.’”
“Barbara Anson, a veteran real estate agent in Myakka City, said said Tringali has been trying to sell houses at Golden Verna Estates for $400,000 to $500,000, which she believes is much too high. Anson predicts that Tringali’s 253-acre spread in East Manatee will fetch no more than $6,000 per acre.”
“That is in spite of the fact that Neil Mohamad Husani paid $12,000 per acre, for the property in August 2005, and quickly sold it to Tringali in a cashless transaction valued $7.6 million, or $30,000 per acre.”
“It is Coast Bank that is now on the hook for the property. For the bank to recoup its losses, Anson believes the property will have to be sold for $19,525 per acre. But that is impossible, she said. ‘It is agricultural land. Nothing has been done down at the county to subdivide it.’”
“That means the bank will have to take a $12,500 per acre loss on the property — a total hit of $3.1 million — if it wants to sell on auction day. ‘That’s why I don’t think it’s going to sell,’ Anson said.”
“One thing is for sure, though, Higgenbotham added: This is not going to be his company’s last auction of the year. ‘Auctioneers always get busier in a down market,’ he said. Because of the chronic oversupply of homes in Florida, local auction activity should be especially brisk in 2007.”
“The average monthly apartment rent in Sarasota, Bradenton and Venice fell by $8 in the fourth quarter of 2006, the first time the market’s rent came down in at least two years, according to a national research firm.”
“Several landlords blamed the drop on the high number of investment properties on the rental market. Lack of tenants has also played a role, as occupancy fell from 97.8 percent at the end of 2005 to 92.3 percent at the end of 2006.”
“Landlords such as Al Holmes say the market is so saturated with $1,000-and-up rentals that landlords can’t charge higher rent, he said. ‘So many investors have bought them and they can’t sell them and they put them on the rental market. In North Port they’ve got a super glut,’ Holmes said. ‘This is very typical of investors. They’re not landlords. They’ve been forced to be landlords.’”
“RealFacts’ data doesn’t account for hundreds of single-family homes that have hit the rental market in the past year. Chris Bates, a spokesman for RealFacts, said it is clear Southwest Florida’s rental market is ‘in flux.’”
“Bates said Southwest Florida’s landlords could read that statistic as a new trend: renters are sitting in apartments, watching property values and for-sale prices fall, and contemplating buying.”
“‘Looking at these numbers, I would say owners were just a little slow in figuring out that their occupancies were going down as much as they were,’ Bates said. ‘Buyers aren’t necessarily buying. They are staying in apartments and waiting.’”
“Gerri Holmes, secretary of a local landlord association, hopes that scenario doesn’t unfold in Sarasota, but anecdotal evidences suggests it is possible. ‘When we have our meetings we ask our landlords if anybody’s got vacancies. And it seems to be that everybody’s got at least two vacancies,’ she said.”
“Renting is a necessity for some investors who need money to help pay the mortgages on investment properties that won’t sell. John Stone, broker in Palmetto, told the Herald-Tribune that some newer communities in Manatee County displayed ‘a classic case that someone’s trying to help with the cash flow.’”
“‘You’ll see a ‘For Rent’ sign and a ‘For Sale’ sign on the same yard,’ Stone said.”
The St Petersburg Times. “Re/Max Advantage Realty, once a dominant real estate agency in Pasco County, abruptly shut down Tuesday. Nearly 25 affected agents did not learn of the decision until Tuesday morning.”
“There was no explanation for the closing. Rick Miller, who said he represented the owner, would only say Tuesday that the closing ‘was just a business decision.’”
“Broker Barry Grover, who is one of the Re/Max contractors now looking for a new firm, said the real estate boom brought in inexperienced agents. As the market has slowed, he said, some had problems paying their company fees, which can run about $1,500 a month.”
A letter to the editor from South Carolina. “Re Bob Coombs letter, “Insurance burden will drag down S.C.,” Jan. 13: When real estate journalists report the local real estate agents’ scary scenarios about insurance killing sales, they should do the numbers themselves, not just listen to fantasies.”
“Just 18 months ago I heard story after story from agents about pricing property. Fairly recent market evaluation told them to price a unit at say $150,000. Then someone said, ‘Let’s put $175,000 on it and see what happens, and we did and had a contract in five days.’”
“I’ve spoken to people all over the East Coast who were buying condos off the Internet at any price because someone in their office bought a condo in Myrtle Beach and quintupled their money in 12 months. Just like the stock market of a few years ago, we have enjoyed a huge speculative bubble that may not have burst, but a lot of the air went out.”
“Unfortunately the speculators have an immediate and direct impact on our finances. Speculators have run the market up to a point that the rate of return on equity is poor and more money can be made in other investments. The rate of return on equity is always the basis for evaluating an investment (not a speculation).”
“Five years ago I bought a duplex for $95,000 that generated $1,100 in rents per month. In 2006 an identical duplex sold for $177,000, and it now generates $1,300.”
“So what effect does the insurance really have on an investment property compared to the price of the investment? If we need 1 percent of the sale price per month in rents to make a property a good investment, then a $100,000 property needs $1,000 a month in rents.”
“If I double the price of that property, as has happened, I need $2,000 a month in rents. If my insurance went from $800 a year to $2,000, a $100-a-month reduction in income, it has the effect of cutting the investment value of the property from $200,000 to $190,000. But the rents only went up $200 a month, which only raised the investment value of the property to $120,000.”
“Now, what is the real problem? In the article, real estate agent Steve Tansy says they can’t make the numbers work. Steve, if they gave the insurance away, the investment value would only drop by about $20,000.”
“The numbers still would not work. Somewhere, we have to come up with $700 a month more in income, or heaven forbid, drop the price back to where it is a good investment. Insurance regulation may need some work, but don’t blame the real estate market on the greedy insurance companies.”
“After all, who made all the money in real estate in the past couple years?”
‘Offering one three-minute horror story after another, a parade of angry taxpayers told legislators Monday that Florida’s property tax system has become unbalanced and is hammering snowbirds, renters, businesses, small investors and families hoping to move within the state. Dozens of the speakers also blasted the Palm Beach County commission and local governments for using soaring property values to boost their budgets far beyond the levels of inflation and population growth.’
‘Most who addressed a panel of state legislators on the House and Senate finance and tax committees were snowbirds or commercial and rental property owners. ‘I came here to vent,’ MacNeil said. ‘I’m trying to keep my language civil, but I’m getting screwed. I apologize for the language, but it’s absolutely brutal, what’s going on here. It’s just impossible to stay here.’
‘The present system is destroying the American dream of home ownership. Families are being broken up because the children can’t afford to live in Florida,’ said Lou Medina, a Pembroke Pines retiree. ‘I will have to watch my grandkids leave Florida as they grow and seek housing.’
‘Emotions were high and the rhetoric was often sharp. ‘What you’re seeing here tonight is a South Florida version of the Boston Tea Party,’ said Harvey Silver, a Canadian with a vacation residence in Hollywood.’
‘Facing $3.3 million in construction liens, the stalled Trump Tower Tampa may have a new suitor. Condos originally sold for $700,000 to more than $6 million.’
‘Rebidding the project now raises questions about how much more it will cost developers to build the tower. Some Trump buyers have been asked to pay tens of thousands more to offset rising costs. Some paid; others dropped out. Now that most purchase agreements have been converted to hard contracts, those prices can’t be changed.’
SOH was a great idea. I saw this happening the minute I moved into FL (and found out how taxes worked here). I told people the spending was going to get totally out of control because all the voters are totally insulated from the spending.
Did anyone listen. Nope.
Does it feel good to be right? Yes, it most certainly does.
The only thing that stinks is that now suddenly, nobody wants to talk about it. Everyone told me I was nuts for not buying, and would come in with weekly ZipReality reports showing me how they “made” 10K this week on their home.
I guess I should show them the 300K haircut someone just took in my development in a bit over 18 months. That’s just the sale price difference, who knows how much it cost him to carry for that period of time.
I live in a modest house ,but to be king of the cocktail circuit you just have to say ” I rent”
wife doesn’t even bug me about upgrading anymore
And, if you’re really in the mood to get under someone’s skin, innocently ask: “How much are property taxes around here, anyways”? And - if in Florida or any other coastal area - “someone told me their insurance rates went up 30% last year - that’s not common, is it?”
Of course - if someone gets the idea you’re not sincerely ignorant about this, you’re liable to get shivved near the buffet line.
What about at Early Bird?
Mike
SOH is the only thing keeping some people in this market. Do you honestly believe that the tax rate would have dropped during the windfall years of 2001 to 2005? The only thing it would have done is drive out the owner occupied units faster and the investors would be holding a much larger bag.
The answer isn’t eliminating SOH alone. If it’s eliminated, spending caps need to be put in place. I look at the county buildings put up in the last 5 years in Palm Beach County. You’d never know that these were municipal buildings instead of high end office buildings if you didn’t look at the Palm Beach County logo plastered everywhere.
Andy,
I do agree, the spending caps need to be implemented at the government level, if at all. And I tend to agree that they do need to be in place, just to prevent situations like this from occuring.
However, with SOH removed, there would have been FAR more voter outcry against the taxes. Frankly, most people just do not care down here, as they are already capped in. If the entire public was screaming for millage rollbacks it would have been a bit different, imho.
When people do scream we get nothing. I’ve never seen more of a complete disregard for the people who vote in my life. I don’t know who’s worse…the tax and spenders or the people who continue to give them their loyalty at the polling place.
Look at what Lois has done with the money in the city. Voters screamed about how their money was being spent. Was anything done? Yup…new city hall for everyone!
I agree with you, Bad Andy. SOH was designed for just such an event as this crazy bubble, so that people wouldn’t be tossed out of their homes due to skyrocketing taxes. If things worked like Mike Fink would want them to work, with politicians being responsive to the outcries of the taxpayers, then maybe it would make sense to eliminate SOH. But as you have illustrated so well, politicians don’t listen to taxpayers and constituents anymore.
For example, look at how the insurance situation is being resolved. Yessir, Governor Charlie of the sympathetic moist brown eyes caught a break with the tornadoes in Central Florida. Totally diverted attention from the angry homeowners to the displaced homeowners. I swear, what great timing for Charlie. What a coinkydink. Almost makes you wonder if weather control might not be just in the realm of the tin foil hat. Nope, SOH is a godsend for many.
I can’t support SOH, but at the same time we can’t go back to the way it was before. Other than spending caps, I can’t think of other viable options.
I refuse to agree that anyone should give up anything that protects them from local government overspending. Can you imagine if you went to Jiffy Lube with a $10,000 car and they charged you $30 for 5 quarts of oil, then went back the next day with a $30,000 car and they charged you $90? Or you go to the dry cleaner and they charge you $2 to clean a Sears shirt, but $6 to clean one from Nordstrom? Or the Ford Dealer having vastly different labor rates depending on the value of your car? But government says, if your house goes up 100%, I need 100% more? Ridiculous.
Between shit like this and people in their 20s and 30s having bought the bullshit that advanced degrees are the road to happiness and yet wind up with massive tuition debt just to get a job with no benefits and crappy pay, man, we’re definitely headed for some sort of revolts in this country. Give it another 10 years to simmer to a boil. Add to that pissed off Iraq vets that will have lived with all kinds debilitating problems for a number of years, plus a retracted depression and housing slump.
Watch what you say SFC. Do you think Super Wal-Mart should pay the same property tax bill as Joe Homeowner in his 1,000 square foot slice of paradise? Should the doctor get paid the same as the fast food cook? You’re teetering on socialistic views.
Apples are not the same as oranges! When your property value goes up you should pay your share. At the same time, the government needs to keep their spending down so if prices do dip it’s not complete chaos.
Yeah, my analogies aren’t so great. What I meant is that for a given property, the level of goverment spending should rise with the cost of “doing business”, not the current value of the product being supported. Actually, I can’t think of any good analogy to a real business, as none run the way government is could survive.
That’s why I propose spending caps. $27 million for a building that could cost $2 million is excessive but they don’t care. Especially in Palm Beach County. Look at all of the wasted money in “Downtown” Boynton Beach.
Waiting for prices to drop before buying… SOH means that I still pay more taxes than my neighbor.
Even with a SOH rate limit cap; the base is going to be higher. Two homes, ceteras parabus, different tax amounts. Go figure.
Totally unfair to penalize new home buyers who are full time FL residents. Boomers, who are the knights in shining armor, will view this tax penalty as a reason to look elsewhere before choosing FL,
So “Save Our Homes (SOH)” is Floridian for “Prop. 13″? Otherwise, more accurately known as “Boomer property tax-burden redistribution”.
Great. Florida modeled its property tax system on one of the worst ballot initiatives ever passed in California history. Same exact homes in cookie-cutter developments, one costing $2,000/yr. in property tax (for fortunate birth-lottery residents who bought before measure was implemented), and another costing $10,000/yr. Too bad so sad for those sad, pathetic Gen-X & Yers.
But, hey, no one is “forcing” those yougsters to pay higher taxes than their fortunate-born neighbors, right? They could just choose to rent forever, leave the state, or just live in their cars, no? I mean, it’s not like shelter’s a non-discretionary expense, or anything.
“Don’t tax you, don’t tax me, tax the other guy behind the tree” (er… actually, that’s my grandson)
Clearly, parts of Florida are in absolute meltdown, living out precisely the scenario that this blog has been predicting in detail.
Here in NYC, people have barely noticed. Crappy condos are still selling out at comically inflated prices and Zillow shows my friends’ places going up and up every month. I realize real estate is always local, but come on, when are those of us who don’t live in FL or CA going to get to have any fun?
In places like NYC where speculative activity was mostly limited to the pros and where liar-loans have been less prevalent, is the bust going to pass us by? So far it seems the biggest downturns are directly correlated to the number of clowns trying to flip tract houses in the exurbs. I realize credit will tighten, that psychology will change, etc., which will affect all markets to an extent, but will that be enough? Somebody give me a pep talk here; I have no interest in moving to Sarasota.
” I have no interest in moving to Sarasota.”
If you’re in that big of a hurry, move to West Palm Beach instead.
I sold my coop studio last Sept. Today is worth 5% less. While prices are still outrageous, they are not rising, but slowly declining. When cheap money stops; prices will tumble again. Remember 1990-1991?
I’m finally seeing obvious reductions here in south jersey. Some flipper idiot had a house around the corner listed at $270k (these houses were $100K 5 years ago). He’s now down to $254 after sitting on the market for probably 8 or 9 months.
There’s another uncompleted spec house for $285k. Mind you, this is in a town with a household income of $55k. That specuflipper obviously didn’t do his homework. There’s a dilapidated POS down the street from me that sold for $150k. Needs a ton of work. Looks like a frickin’ haunted mini-mansion with a plywood facade front porch. Saw all the contents including kitchen cabinets out at the curb, so obviously another moronic flipper figures he’ll pull a personal episode of Flip-This-House and drop $70k+ into revamping it only to find no one wants to pay $250+ for a house that will cost a lot to heat, is on a crappy lot that faces two streets, both of which have a fair amount of traffic, in a neighborhood where the average household income is $55k. Can you say moron?
Fortunately, water always finds its level, and so it will go with this housing market. Of course, it takes a little sloshing around before it finally settles. Don’t get seasick while you wait.
The Trump tower fiasco is typical of Tampa. Here is a link to today’s Tampa Tribune article.
http://www.tbo.com/news/money/MGBW9U0O3YE.html
Anybody who would pay millions of dollars to live in downtown Tampa is insane. There is nothing there but a few new buildings at one end and bunch of old junky ones at the other, some trashy shops (cheap wigs and stuff), and few places to eat. There is no entertainment, there is no landscaping to speak of, there are no nice parks, the buildings are built right up to the sidewalk, traffic is terrible, the place is dirty, and it smells. At 5 PM it empties, except for the wino bars. There is nowhere to go and nothing to look at, and Trump Tower is supposed to be built on a tiny piece of land on the nasty Hillsborough River. It’s one of the ugliest downtowns in America, in one of the ugliest and dirtiest small cities, already internationally infamous for its strip joints and lap dance bars, and becoming internationally infamous for its live porno webcam sites and mass orgies, especially gay orgies, which are videotaped. The videos are sold. Every year, there is a huge S&M ball held in Tampa, and publicized everywhere with posters in store windows showing people in rubber and leather outfits with whips and chains.
Tampa has one of highest per capita venereal disease rates in the country, and no wonder. What a dump.
“Tampa has one of highest per capita venereal disease rates in the country.”
No wonder Trump feels right at home.
We are quickly approaching the point where those entities considered “too big” to fail, will be cut down, left, right and center…
The most obvious 1st casualty would have to be the Donald, and sadly, only his downfall would have any meaning to most of our citizenry, they just roll their eyes, when it comes to anybody else~
The Donald passes on his losses.
It will be the Donald getting sued left right and center that gets the public’s attention.
Joe and Jane sixpack will notice… because the economy will slow.
Got popcorn?
Neil
Correct me If I am wrong but I believe this particular property was a Trump branding deal where the investors paid Trump a fee to use the Trump name on the building.
I actually bid on Dons development in Palos Verdes. There were 5 model homes. The cabinet bid that I had for the first house was about 120k…..the bid was awarded somewhere around 92k! and they even ‘thru-in’ extra cabinets.
So far only one home has sold in 3 years and that is in the name of a business partner on Dons. Thank the Lord that I did not get caught in that mess.
I lived in RPV, about 5 miles from the Don’s houses…
RPV was nice, in a “in bed by 8 pm and everybody was around 68 years old” kinda fashion. Perhaps the finest weather anywhere, it was always 72 degrees.
It would be a fitting end to the Don, if the sinkhole-ish area, in which he bought, were to swallow him hole~
You would have been lucky to get half of your $. Trump traditionally screws his contractors using any excuse not to pay them if there is the slightest imperfection.
The Donald is hawking SueBee Honey, I swear to God. Concurrently, however, there’s a story running that honeybees are dying off in massive numbers due to some mystery ailment. I say it’s the curse of The Donald.
With the downturn in residential real estate sales and the logarithmic increase in unsold homes across the region,
There in a nutshell is the problem: misunderstanding of some pretty basic mathematics. The author meant to say that the inventory is increasing by a large amount, which is exponential. Logarithmic increases are, in fact, quite slow.
I agree with your hunch, JP — Mr. Higgenbotham’s usage of logarithmic and exponential should be inverted
Or maybe he really does mean logarithmic, where the increases are leveling off.
Look out below.
http://www.markit.com/information/affiliations/abx
Here’s the auction info. If I have the time I may try to attend.
http://www.higgenbotham.com/docs/SarasotaMulti.pdf
http://www.higgenbotham.com/auctionsbydate.asp?date=2-15-2007
It didn’t sound from the article as if this is a real auction since it referenced a statement that the land would probably not sell. In a REAL auction it would sell. Doesn’t sound like we are going to witness the real market prices from this auction either. Oh well, we have nothing but time to watch these dolts bleed to death.
“With the downturn in residential real estate sales and the logarithmic increase in unsold homes across the region, Tringali’s properties will sell for much less than at the height of the boom,’ said Martin Higgenbotham, the owner and founder of the Lakeland auction house that is handling the sale.”
Logarithmic increase? My dictionary of mathematics is missing that entry…
“‘Every builder built too many houses and there is way too much product on the market,’ said Higgenbotham, who formed his company in 1959 and has witnessed at least five real estate market cycles. ‘Whenever you have this much supply and only so much demand, prices will fall.’”
If seems as though a few old guys who have seen fifty-or-so years worth of real estate business cycles don’t buy into the soft landing theory… I wonder who will prove to have been right when we look back in 2017?
I suspect he intended a one-word way of saying that inventory is “increasing at an increasing rate.”
“There are 150 or 200 families leaving Palm Beach County a week,”
This from the Sun Sentinel. So much for the stats NAR wants us to listen to.
Can you give a link with that data.
Thanks,
http://www.sun-sentinel.com/news/local/palmbeach/sfl-penrollment13feb13,0,6607995.story?coll=sfla-news-palm
This is just the numbers that the school is estimating. I wonder how many other people are leaving that don’t have school age kids? It would be interesting to see these numbers from throughout the state.
In my business I watch people come and go from the state. The truth is the people fleeing are the families with school age children. Some of them because it’s unaffordable, but more of them trying to chase the next big market. Most can’t pass the $200K in “profit” they can make on their home and think they can repeat the results in XYZ city. The ones that kill me are the ones that packed up and left BEFORE their home sold. Now it sits on the market and they have 2 mortgage payments. Instead of breaking even they can’t stand to lose their $200K “profit.”
We’re not losing too many in other demographics. The older crowd just complains about it and they threaten to leave but don’t.
The family exodus will taper off very soon in my opinion. These people will realize their “profit” was only paper profit and they don’t stand to benefit by moving.
I’ve seen this happen. A jacka$$ I used to work with sold his 1700 sq ft $hitbox in Orlando for $280k last year, made about $130k off the deal, and proceeded to buy a 3600 sq ft, $340k house in Huntsville, AL.
You should have heard this guy before he left town, bragging about how much he made. Although it turns out that he only put 5% down on the new house and used the remainder of his gains to pay off gambling debts, but I digress. He thought he was such a real estate mogul, telling everyone they should buy as much home as they can possibly afford, using his windfall as justification.
At the end of the day, this guy is stuck in Huntsville with a wife, two young kids, and a $323k mortgage to be serviced on his $60k a year salary.
“At the end of the day, this guy is stuck in Huntsville with a wife, two young kids, and a $323k mortgage to be serviced on his $60k a year salary.”
That’s right! People complain about the cost of living and low wages in FL. I can speak to you from experience. The cost of living is not that high and wages are a lot higher than other places. We have no state income tax, low cost to register and insure vehicles, competitive sales tax, and contrary to popular belief…HERE’S THE BIG ONE…property taxes that are lower than comparable areas.
Don’t anyone chime in with, “But in Holeinwall, GA I only pay $400 per year in property taxes.” I said comparable areas. Detroit, MI 2.5% of value yearly…New York, NY 4% of value yearly (depedning on area)…Pittsburgh, PA 3.5% of value yearly…West Palm Beach, FL 2% yearly unicnorporated or 2.5 - 3% in cities.
Wait until the next major hurricane hits Florida to really see if people or businesses can afford Florida. People are moving out not because of profits from housing sales, but because there are no good paying jobs and cost of living is getting higher. As we could attest few weeks back, most of the families hit by the devastating tornadoes in Central Florida didn’t have home insurance. In my view, retiring in Florida without being able to afford or get any home insurance or subject to SOH, doesn’t make any financial sense. Some people may still believe in the myth that Baby Boomers are swimming in money, while, in reality, seventy percent of Americans live from paycheck to paycheck and another 40% don’t have health care insurance. Now, if 60% of Americans own their homes, we can assume by these revealing stats that home ownership hasn’t done anything whatsoever to improve the lives of Americans, and that Baby Boomers are a bunch of wannabes.
I state my case based on what people tell me on their way out. Let’s do some basic comparisons on housing alone shall we?
Detroit (area): Monthly output
House payment (200K): $1,180
Taxes: (200K): $483
Insurance (newer 200K home in nice suburb): $83
Total Housing Expense: $1746
West Palm Beach (Unincorporated County)
House (275K…not a McMansion): $1622
Tax: $458
Insurance: $250
Total Housing Expense: $2330
Total FL Premium? $584
Let’s say you and your spouse have $45K/year salaries (each of you). You’d pay the state of MI $3510 in income tax. You’d pay $320 more to register your cars. That’s $319 every month you’re not thowing away to the government.
What’s the FL premium now? $265 per month. Is warm weather not worth $265 per month?
Let’s add other taxes like cigarette taxes if you smoke or alcohol taxes if you drink. It suddenly gets to be almost the same.
Let’s talk jobs. There’s no job growth in MI. The Palm Beach County median income of $40K per month compares to the median income of Wayne County, MI of $31K.
I could go right down the list and do a side by side for just about any state in the union. It’s break even no matter where you go.
And while I’m ranting…there are more service jobs that are good paying in FL than anywhere else in the country. That might not be your cup of tea, but it’s the truth. If you and your spouse are making $40K each you can’t cry broke. Live within your means!
Bad Andy, your premium of $3k for a home in Florida is extremely low and very optimistic. Nobody in Florida can get that low premium for a home these days. BTW, insurance premiums are calculated according to the amount of losses spread over a pool. If the amount of losses amount to billions of dollars for a long cycle, in a state with only 18 million habitants (pool), the sky is the limit. There’s no simple solution to make insurance affordable. If losses keep increasing every hurricane season, premiums follow and insurers get out of the market.
Regarding jobs, according to the latest Department of Labor stats (highly inflated), most jobs created in Florida in the last few years were in the hospitality, construction, and retail sectors, which notoriously pay way below your salary figure of $40k and don’t offer any benefits (i.e., health care insurance). And since only 18% of Americans have a bachelor’s degree (which is becoming a high school diploma) good paying jobs are hard to come by for most people. Furthermore, the official median family income in Florida is $30k, while median home prices are $350k. Don’t forget the ever increasing amount of divorces that end up in financial crisis.
In reference to tax burden, here are the latest figures from Money magazine. As you can see, a couple of cities from Florida made the top 10 list, even ahead of Boston, NYC, NJ, and San Jose. Things are not what they appear in Finance, thus the big selling point that Florida has not state tax is totally misleading. Make no mistake, Florida is getting VERY expensive. You can check the entire study at
http://tinyurl.com/26kmmx
Federal Individual Income Tax Burden: Highest-Paying Counties and Major Metro Areas showing Avg. Tax Liability/Return and Taxes as % of AGI:
1 - Stamford - Norwalk CT $41,496 : 22.0%
2 - Naples, FL $16,849 : 17.4%
3 - San Francisco, CA $14,279 : 16.0%
4 - W. Palm Beach, FL, $11,014 : 15.1%
5 - Danbury, CT $12,324 : 15.0%
6 - Boston, MA $10,698 : 14.7%
7 - New York, NY $9,602 : 14.7%
8 - Bergen/Passaic, NJ $10,339 : 14.4%
9 - Newark, NJ $10,146 : 14.4%
10 - San Jose, CA $11,726 : 14.2%
Wow, I just read the comments on the Sun-Sentinel website on the tax article, they make “us” look downright civil, there are some very angry people.
Welcome to South Florida. Land of the pissed-off.
Not defending the insurance companies here, but if the replacement value of a given home doubles, doesn’t it make sense that insurance would go up? I know that theoretically much of the increase is in the land, but some of it must be in materials and labor. If I bought a car that was worth twice as much as my old car, I would expect my insurance to go up. Am I missing something?
You’re not missing anything. People want property values to double or triple every year with NO increase to their cost of living.
People would rather whine about their insurance rate instead of getting in touch with their agent to explore options. Some companies will have you fill out a windstorm mitigation form (you have to pay a contractor) and the price DROPS by hundreds if not over $1,000 per year. It’s much easier to complain about it than to have someone come out and certify that your home has hurricane resistant features.
–
“You’re not missing anything. People want property values to double or triple every year with NO increase to their cost of living.”
People who cheered when home prices were going up are downright morons. In the end who all benifit from rising home prices? Hopebuilders, gov’ts, few specualtors, Wall Street, …
Jas
i agree these cheerleaders cannot have their cake and eat it too
higher values comes with higher insurance rates and taxes
boo freakin hoo
What really gets me is the governor putting the state in the insurance business. These people (myself included) complain about insurance rates and “massive profits” yet they continue to live in high risk coastal locations. AND NO, 10 MILES INLAND IS NOT A HUGE DECREASE IN RISK.
Face it people! If FL were such a great place for insurance companies to do business, they would be lined up to take your money. Why is it almost impossible to find property insurance? Simple answer is because even as high as the rates are, they still aren’t high enough. A $3 billion profit does not wipe out $30 billion loss in 2 years.
You know if there were “massive profits” to be had than wouldn’t companies be trying to get INTO the FL homeowner insurance business instead of OUT OF it?
Exactly my point, Jim A. No company would ever leave the state of Florida if it was profitable. Insurers are leaving Florida because the risk is greater than the benefit. May I remind you that these companies have the best ex ante data, computer models, and actuaries in the country.
If property taxes never go up, why should insurance rates?
Why doesn’t the state government just cap insurance rates like they do property taxes in Florida? That way you would pay the same amount for as long as you own your property and the old people wouldn’t suffer.
“Why doesn’t the state government just cap insurance rates like they do property taxes in Florida?”
Why not? Charlie just put us on the hook for potentially BILLIONS of dollars by putting the state even more into the insurance business than they were already. If private business can’t make it, what makes them think the government will?
Do some research on the auto insurance crisis New Jersey had a while back. What did the state do then? What’s happening now? Good history lesson.
Something that happened in my neighborhood in South Florida makes me very wary of Citizens. During one of the hurricanes a few years ago, my roof was damaged. I called my insurance company, adjuster came out. He said “your roof is 17 years old, it needed to be replaced before the hurricane, we’re not paying for it”. Fair enough. But two of my neighbors, insured by citizens, same roof, same age, same damage. Citizens bought them a new roof, no problem. To add insult to injury, I then had to pay EXTRA on MY insurance to cover Citizen’s expenses. I know noone with a private insurance company that got a new roof, and I know noone with Citizens that did not.
Citizen’s has never had rates that were sound. Everyone else is paying for that.
As for the roof concern, it depends on the policy type. If you’re on a replacement cost policy and you can prove the damage occured directly as a result of the hurricane, you get a new roof. If it was 17 years old and leaky before the hurricane, you get nada. Many Citizen’s policies are replacement cost policies. Many private companies write that way too. If your roof wasn’t leaky to begin with, they might reopen your claim.
A cash value policy (what all insurers should write in my opinion) would say, “OK, hurricane damage to your 17 year old roof…you had 3 years left…you’ll get $1200 to replace your $8,000 roof). That’s a fair way to do business. What people are worried about is getting nothing when there’s a total loss. A policy could be drawn up (in theory) to have replacement cost in the event of a total loss and actual cash value for losses that aren’t complete. This keeps people from using their house insurance as their own personal repair and maintenence policy.
What irritates me is that the cost/risk gets spread to the rest of us that DON’T choose to live where these catastrophies occur? My insurance on homes DOUBLED the year following the most recent hurricanes. Neither home is located where hurricanes hit, unless I missed on coming off the Great Lakes. We STILL paid. If government DIDN’T step in, then people WOULDN’T BUILD in such high risk areas. Government stepping in made insurance in these areas possible and now all of us get to subsidize those that choose to take the risk. I’m seriously thinking of going bare rather than paying to replace the home ever 20 years in insurance premiums.
“What irritates me is that the cost/risk gets spread to the rest of us that DON’T choose to live where these catastrophies occur?”
I don’t know what state you live in, but prices have been sliding in MI for homeowner’s insurance. Up there you have the luxury to shop around. If you’re not happy with your rate look for another company. I can’t do that here.
Also, try not putting a car deductible on your house. Many people don’t realize they could save hundreds by switching from a $500 deductible to $1,000 and even more switching from $1,000 to $2,500.
It has nothing to do with the hurricanes. You’re NOT subsidizing those areas. Check your deductible or worst case with another carrier.
If insurance rates aren’t allowed to adjust upward to meet the insurers’ rising costs, the insurers won’t write policies. This is why price controls lead to shortages- always and everywhere. (A good current example of how price controls don’t work is the meat and sugar shortages in Venzuala following Chavez’s price controls on these items). Living in a hurricane zone, the last thing FL residents want is a lack of insurance. Price caps sound like a nice way to protect the average citizen from those greedy companies, but the road to hell is paved with good intentions…
See comment above…
We’re making different points, I think. If I were subsidizing other policy holders who live in riskier areas, I would look for a cheaper insurance carrier, possibly one that did not operate in the riskier states.
Heh, same thing happened to urban transit in the 1930’s–price controls enacted in the 1930’s, or, I should say, overly rigid price controls (a nickel a ride–forever!), led to bankrupcies in the 1960’s when revenues no longer covered fully allocated costs (ie operating AND maintenance/equipment replacement).
ha!
why not state govt just cap home prices ..that way all people wouldn’t suffer…
Time to cap government.
Cap greed.
“Gerri Holmes, secretary of a local landlord association, hopes that scenario doesn’t unfold in Sarasota, but anecdotal evidences suggests it is possible. ‘When we have our meetings we ask our landlords if anybody’s got vacancies. And it seems to be that everybody’s got at least two vacancies,’ she said.”
Increasing vacancies = lower rental cap rate. Many readers here have long commented on the gap between ownership costs and rental costs, and a rise in vacancies implies that (FL) rents will go even lower before the bubble bottoms out. How long can an owner using exotic financing shoulder the burden without at least a trickle of rental income to help cover the carrying cost?
GS — I think that second-home owners have a huge (depressing) influence on rental rates, at least on our beaches. In the 20 years that I’ve followed rents at the beach, an owner on average could never get more than 1/2 of 1% of the carrying cost except perhaps in the scuzzy places in which no one on this board would live. IT is worse, now that selling prices have gone so high. It was typical, for example, for people in their 40s and 50s to buy an oceanfront condo, to hold for their retirement years, and to subsidize it to an extent that would make a regular investor ill. Why? Because they really want to live in the place in retirement and they don’t want any other place. Not logical, but common practice.
This boom has changed that thinking a lot, because the prices got so outrageous that the annual rents have dropped as low as 1/4 of 1% of holding costs (helped along by those almost-2% property taxes). So sales have fallen off a cliff, rents have declined instead of risen, and only folks with deep pockets will be able to hold a mostly vacant unit for years and years until they finally move in.
finally a real auction- should show some current pricing- where I am it’s strickly bs un published reserve auctions
Unfortunately, according to the article “this is not an absolute auction” The alleged auctions here in FL still seem to be “fishing expeditions”.
Yep. Based on the comments regarding “floating balloons” I would expect that none of these will sell.
I don’t get it. Why does anyone even bother holding these bogus auctions?
The sellers have an absurd fantasy reserve price that will never be met, so nothing sells and everyone “wonders why”.
The problem is that sooner or later any potential buyers are going to sour on these phony auctions as a waste of their time, so even if a seller actually is realistic about pricing in a future auction, no buyers will show up because they’ve been burned so many times before wasting time in unrealistic non-auctions with ridiculously high private reserves.
In my opinion, an unpublished reserve price means it’s not really an auction. It’s a complete waste of everyone’s time.
I guess caveat emptor for auctioneering as well. If I ever try to buy a home at auction in the future, you better believe I’ll do my homework on the auction company - if they typically host such bogus auctions, I would move on.
Well I understand why FB might put a reserve price = the money they owed + the contents of the their bank account, since they CAN’T sell it for less without the permission of the banks that they have their mortgages with. But I don’t understand why the bank would have a big reserve price. They’re not accountable to anyone but shareholders and the FDIC, and the FDIC traditionally doesn’t like alot of REO stinking up the balance sheet.
The terms of this auction are disturbing. It appears that it may be a way to create higher property values without actually selling. e.g. The reserve is set at 600K (previous residences sold at 550K), then a shill bids up to 590K knowing he will not be buying. Not sure, just wary.
From the sounds of it, the main selling season in Florida is off to a really bad start. It should be interesting to see the numbers for January. I would say Florida will shoulder a nice chunk of the estimated 600,000 residential jobs that are expected to be lost this year. By summer those construction job loses, the bad selling season, a major drop in tourism and the hurricane threat will have Florida in a major economic freefall.
they got a pass on stroms last year, so this year would be bad- NC and SC’s gain
Hurricane Hugo whacked the Carolinas pretty hard back in the 1980s.
Bah, Hugo. You should hear my mom tell stories about Hurricane Fran…
We normally get a pass on hurricanes. The multiple hits a few years ago were not normal.
Don’t forget that those construction jobs are filled by millions of illegal immigrants. Accordingly, we can assume that if the amnesty for all those millions of construction workers goes through during the housing bust, a priori, those millions of “former” illegals could be eligible as welfare recipients, at the cost of taxpayers. As Borat would say: “Bery nice, yesss?”
next time profile dude,
Mohamad Husani paid $12,000 per acre, for the property in August 2005, and quickly sold it to Tringali in a cashless transaction valued $7.6 million, or $30,000 per acre.”
Who knows, Coast *may* have done their due diligence on Misters Husani and Tringali. But if not they should happily choke on the bag they will hold. It isn’t as *outstanding* as the previous Mr. Tuttle example, he of the 10x purchase, but it still smells.
In the end it will be taxpayer robbery.
I agree, for a bank to get involved in a cashless land transaction sure looks suspect. Normally banks require a 30% cash downpayment on raw land. I think someone ought to be investigated for breach of trust with their depositors, and the FDIC should be looking for fraud.
Uggh! Coast again. These guys were in all the dark places.
Coast Bank? I’d like you to meet your cellmate, Old Court Saving and Loan. I hear you’ve got a lot in common.
I love the smell of popcorn in the morning. It smells like VICTORY!
ROTFL
“If I say this market’s hit bottom, we’ve hit bottom!”
Got popcorn?
Neil
Market’s hit bottom. Everyone buy! Time to get rich quick all over again!
I’m picturing Pooh bear tumbling down the tree after HIS balloon burst. Only in this version he says “Oh bottom” every time he hits a branch on his long journey to the ground.
“Charlie don’t buy houses”
“I just wanted a foreclosure and for my sins they sent me one.”
“The longer I sit in my rental house the market gets weaker and charlie gets stronger”
That is a good one i have to admit.
I think we’re seeing more and more that Sarasota and Manatee counties are truly “ground zero” for the housing bubble. The amount of speculation and subsequent losses there is staggering. Coincidentally in my case - I may be looking to buy a house there at some point in the future, as that’s where my wife’s family is. I plan to pick up a steal in about 5 years!
Some things that stand out to me -
“That means the bank will have to take a $12,500 per acre loss on the property — a total hit of $3.1 million — if it wants to sell on auction day. ‘That’s why I don’t think it’s going to sell,’ Anson said.”
Which means that their losses will be worse years from now when they do sell, or else perhaps their grandkids can finally make a profit when the prices go back above $30k per acre in 2056. Of course inflation-adjusted it’s still a huge loss.
“Several landlords blamed the drop on the high number of investment properties on the rental market. Lack of tenants has also played a role, as occupancy fell from 97.8 percent at the end of 2005 to 92.3 percent at the end of 2006.”
Holy cow - that’s more than a *tripling* of the vacancy rate in just one year! Can you say “slums-to-be”? I’m afraid that’s what it’s going to come to in some of these neighborhoods.
Also, according to the FAR, prices in that area have fallen from about $350k to now $286k - an 18% drop from the peak in just one year, and still falling very, very fast as of the latest December stats. I would not be surprised to see a 60% total drop in that area when all is said and done - and that’s *not* in inflation-adjusted $$.
Pack,
I’ll be moving back to the Tampa area myself to be closer to family. Any ideas on what areas will hold up well and not become slums?
You didn’t direct your question to me, but by looks alone, I’ve always thought that Brandon was a slum in the making. Other than that, my theory is that recently-developed exurban areas of McMansions and uninspired tract housing far from decent jobs are likely to deteriorate–think Wesley Chapel, Citrus Park, and south Hillsborough (Valrico/Apollo Beach).
Stay away from east of 75. Closest to the coast is best - it’ll always be higher in demand and thus attractive to better owners. I don’t know Tampa itself that well, but more Bradenton and Sarasota. NW Bradenton is nice area that’s underappreciated IMO (where my in-laws live), as opposed to say SW Bradenton. Palmetto is mostly bad. Long-term though it’s always tough to say what are going to be good areas, e.g. what areas might experience significant revitalization. Short term they’re all going to be fairly bad off, though the older sections in the west won’t be as bad since they’re older areas and thus less susceptable to rampant speculation and vacancies. I’ve been tracking the inventories and there’s a very large discrepancy in the rate of increase between the east and west sides - east side is still going up like mad whereas west has been flat for a while. East is much more bubblicious and thus will fall harder. It’s the same principle as the inland empire of CA actually - the areas just outside of the desirable areas will get hurt the worst, because that’s where all the fastest growth has been occurring, both in price and numbers of new houses.
A caveat — check with you insurance office when you finally start looking. Property west of I-75 could have much higher rates, but closer to the water if you’re lucky. At any rate, you’ll want to know where the “line” is. On the east coast of central Florida, and as of the most recent changes, it is U.S.1.
Good bets: Beach Park, Hyde Park (from Swann south, not above Swann), Palma Ceia, Golf View, New Suburb Beautiful. On the west side, anything near Westshore but north of Bay-to-Bay and south of Kennedy Blvd. On the east side, almost anything south of Kennedy Blvd. I think Harbourside above downtown will turn into a slum pretty fast, since it was an industrial wasteland before they started putting up condos, and the area looks toxic (and is riddled with dangerous storage tanks). Ybor City will always be a slum.
As of now, those are very expensive neighborhoods. What do you guys think the chances are of prices coming down significantly? I’ll be in the 250-300 price range, but for now that only gets me in Wesley Chapel -ish areas. Speaking of which, I’ve been tracking Wesley, and the prices are coming down fast.
In Hillsborough County in 2000, that sum could get you something in any neighborhood other than Bayshore Boulevard, Cheval, and the area immediately adjacent to the Palma Ceia Golf & Country Club. It will be that way again, in my opinion. I can only say be patient, because that’s what I keep telling myself. There will be a “reversion to the mean,” even though it might take years.
You should be fine, once prices return to normal. Those areas are expensive, but they weren’t nearly as bad five years ago. Hyde Park became expensive in the 1980s after the television show “This Old House” became popular and everybody had to run out and get an old house to be stylish. It’s all ridiculous. I live in Hyde Park, and I’ve been laughing at suckers for a long time.
The area around and behind Palma Ceia Country Club is called Golf View, and is really one of the prettiest neighborhoods in Tampa.
To confirm two points in this article:
It was apparent in our January visit to Sarasota that it’s just the newer neighborhoods that have a blizzard of For Sale signs. Adjacent, older neighborhoods had very few signs.
Also, our friends from Bluffton, SC, near Hilton Head, have decided to buy here (near the mountains) and fear they will have a very difficult time selling their current house because potential buyers will be turned off over the insurance situation. His new policy has a 10% wind damage deductible, meaning he’d have to pay the first thirty to forty thousand dollars in any wind damage repair costs. Yikes!
“It was apparent in our January visit to Sarasota that it’s just the newer neighborhoods that have a blizzard of For Sale signs. Adjacent, older neighborhoods had very few signs.”
Good point, Bill. I far prefer an older, established neighborhood in Florida. I wouldn’t touch any of this new construction with a ten foot banana. With an older home, what you see is what you get. Some of those homes have also weathered tropical storms, even hurricanes. They have mature landscaping, etc. There’s so much fugly construction and much of it purchased by speculators.
Most of the people I know who own property in Florida are complaining about taxes, insurance, money, falling prices, and on and on. It feels soooo good to be right.
Auctions are a good way to get people to buy something that they never would have, and sometimes they pay a bit much, getting caught up in auction fever and all…
It is very common practice (totally illegal) to have shills in the bidding audience in non absolute auctions and how can you tell?
As the auction is going on, go towards the front of the room and look back at who is bidding on what and how much. When a shill or shills has bought 2 or 3 or 4 or 5 sfh’s or condos, that’ll be your clue that something is wrong in the state of Denmark.
Where to find these shills?
The last 3 rows of seating is prime shill territory~
“Who do you know that WANTS to rent a Luxury condo ???
It sounds like the ghosts of the Florida BUSTS of past…and it isn’t even Spring yet. What will the wails of RE ghosts of the Christmas 2007 sound like ? Ho ho ho
(‘The present system is destroying the American dream of home ownership. Families are being broken up because the children can’t afford to live in Florida,’ said Lou Medina, a Pembroke Pines retiree. ‘I will have to watch my grandkids leave Florida as they grow and seek housing.’)
Funny, but the young are being driven out of New York and are going TO Florida. I get a picture of young people wondering around the country and finally realizing that their generation is screwed no matter where they go.
I wonder what sort of animosity will be aimed @ Baby Boomers, ( I’m a 1961 model, original engine, high milage) by the current crop of 20-30 year olds, many of whom were spoiled by their parents, in a “let them have everything their heart’s desire” lifestyle.
When things reach bottom, I feel these kids will turn on us, ala “Clockwork Orange”
It aint gonna be pretty~
Sane, I’m a 1957 model, and I’m already seeing this anti-Boomer backlash.
And I think you’re right. It was our generation that spoiled these overly entitled 20-30s. Now we get to pay the price. Lucky us.
Let’s think about the reasons for the “backlash” shall we?
Baby boomers - demanding no changes to social security, demanding that medical coverage in retirement be covered forever, refusal to any tax increase (FL schools stick due to that), insurance increase, demanding prescription coverage, lack of 401k planning, having little wordwide job competition (vs gen y) in the job market through thier working years, vs now. I think many BB are spoiled. I can’t wait to hear the BB that lost their money in real estate due to risky investments. They ignored the rule of less risky investments as you get closer to retirement. Me? 32 years old, retirement account growing by 10k yr. I don’t expect ANY government assistance on anything by the time I retire. I don’t go on vacation, I have two cars, both are 16 years old, I rent (I know better than to buy) and will not by until some stability comes about. Common sense and accountability do not seem to be in the equation for many BB and their improperly taught children. Sorry for the rant. I know many of you BB are responsible but many are not. I can’t help but think of the “town hall meeting” during the last election on tv where so many BB were close to retiring and they only had under 50k saved. WTF?
You’re just wrong. Most Baby Boomers are still working and saving as are you. The prescription coverage is something our parents (and your grandparents) receive and we’ll probably never see. I have a good savings account, but I’ll tell you, I’d have a lot more if I didn’t have to pay all the taxes and SS that I’ve been paying since 1971. The SS has been paying to support widows, etc., and assist the older generation.
The Boomers are in the same situation as you, except that we’ve been paying longer than you. Do you think you’re situation is that much different from my 45-year-old husband? It’s not. We’re not talking about that many years between us. The government has been blowing money like crazy and wants a scapegoat.
Every year, I get a statement from Social Security, telling me how much I paid into the system and that i’ll receive $1262.00 a month, in 17 long years from now, at the earliest.
I invested wisely and luckily i’ll not be counting on the moolah to be there, unlike the vast majority of people I know in my age group, that have pinned their future on it.
To me, it will play out much like the Bonus Army, of the early 1930’s…
The way it worked then was, WW1 Vets were to get a bonus in 25 years from around 1918, and the depression rolled around and long green was pretty lean and the veterans decided they wanted their money, a lot early and set up encampments all over Washington DC, staying until the government came through with the cash.
They hung around in Hoovervilles for a few months, until MacArthur & his sidekick Eisenhower led the charge of the U.S. Army to rid DC of them. They went home to whence they came, with ZERO Dollars…
I can see the very same thing happening with my age group.
Kaylaw, the statistics do not bear you out, they are truly frightening. From a recent Ben Stein column:
“But the Baby Boom generation is pitifully unprepared for the future. The average savings for Baby Boom households is less than $50,000, not including their homes. Even including the equity in their homes, it’s not much over $100,000. And roughly half of all boomer households have either little retirement savings or none.”
Although things look bleak at the moment, I am certain that Boomers will figure this thing out. My wife and I retired early and have been spending the last 4 years paying our kids way through college. A couple more years and we will be finished with no debt . We have lived on as little as possible. We moved out of expensive LA and are currently renting. Our income is quite large by median standards but we have now found we enjoy a very low cost simple life style. Although it may not be the life they envisioned, I think Boomers will adapt and find that life is still good. The next generation will be surprised at how this all turns out.
Too true. As a 20-30 year old, I should feel privledged to pay the medicare bills for boomers. Were they to all perish, we would have no one to sermonize us with sweeping generalizations about being “spoiled” and “overly entitled”. Who could then be relied upon to give a disapproving wag of the finger?
If we are all very lucky, advancements in health care will ensure that we can enjoy their grumpy complaining and disco music well into the next millenium.
I agree. Apparently the boomers were supposed to be paying for their own social security retirement via their contributions to the trust, but they couldn’t get enough handouts and so continued to vote for politicians that promised them more than they paid in, so the politicos decided to start taking it from Gen X and Y leaving Gen X and Y no choice but to either suck it up and pay double or pass the bill along to the next generation. Maybe if Boomers had decided to vote for politicians that actually upheld the constitution (if not outright repeal of the Federal Reserve) instead of some feel-good communism-light none of this shit would have happened.
I agree with you Andy, although I doubt the current generation would have done much differently. Getting people to vote for you by bribing them with their own (and in this case, other people’s) money has probably been a successful political stance for as long as there has been politicians and voters.
Unfortunately for them, they won’t be the politically dominant group forever. I’ll have a hard time feeling bad for people who lived through one of the greatest economies in history and still didn’t save any money for retirement.
At 46, my employers and I have paid in around $150,000 to Social Security. For which they quote me $1500 a month or so. Given inflation, it’s probably about break even at this point. I’ll do my bit to support others over the next 15 or so years of peak earnings.
Unless I become unemployed…
only way to “save” ss and mediscare is ultra violence
What does that mean?
It was a clever reference to A Clockwork Orange.
(And funny)
–
Baby Doomers will doom America before they are thru! They have been in power during the Twin Bubbles. From bubble mentality they will spend their old age in bust mentality.
Yes, it will be ugly for all age groups, thanks to the Baby Doomers. Anyone read The Forth Turning?
Jas
You know…
I volunteer at our local history museum and occasionally an older gent comes in and he worked on P-38’s in Burbank for a year and a half in 1942-43, went on to be the navigator on a B-17 and flew 36 missions over Europe.
Compare this to our present war, where my contribution, like the vast majority of us, has been bubkis.
Every generation since WW2 has had an easy life, in comparison. There is plenty of blame to go around, not just Baby Boomers.
I’m a baby boomer, and I don’t feel any necessity to apologize for not contributing to the slaughter of civilians in this or any other war.
Of course, I agree that many boomers have been extremely profligate with their money, but that is a different issue.
tech:
I meant it more in the way that he (just saw him @ the barbershop an hour ago) and the generation that he was a part of, was so much more capable and sacrificed much more than our generation or gens X & Y, be it in war or suffering through the great depression, as kids~
That’s just silly. I’m a Boomer and resent that nonsense. It’s irresponible to blame the country’s situation on one group.There are plenty of people in power who are older and younger than the
boomers.
If it was a boomer who invented those GD sneakers with the wheels built-in, I say kill all the boomers.
Except me. And a couple boomer people I like.
I take exception with this. I’m 51 and have been planning my whole life for retirement w/o SS. Means testing will probably reduce my payment to zero when it happens. I will be pissed off after paying into this ponzi scheme my entire life. You post babyboom generation people better watch out for people like me with an AK 47 wanting my money back because everybody I paid it to will be dead and I will have no one else to go after.. in fact, I would be willing to take it all in one lump sum payment without any accrued interest today and opt completely out of the f**king system. I say let everyone fend for themselves just give me my money back. This shit makes me angry.
“I wonder what sort of animosity will be aimed @ Baby Boomers, ( I’m a 1961 model, original engine, high milage) by the current crop of 20-30 year olds, many of whom were spoiled by their parents, in a “let them have everything their heart’s desire” lifestyle.”
My husband and I are ‘61 versions whose children are only 8 and 10 years old. We have not chosen to give our children everything and do not wait on them hand and foot either.
Let me tell you, both of us already have some pretty negative feelings for our fellow boomers.
Lu Bauer, a Maine holistic financial adviser explains it best when she writes in Jan issue of Down East:
I’d say (people are) less money wise (than they were ten or fifteen years ago. The pressure for unwise comsumption is out of control, absolutely. Buying the new car, buying the new house. It’s not anything that looks frivolous; it’s just the expectation of what life should be like”…”Maine: the way life should be” is a car for each person who can drive, multiple television sets, kids participating in every program they want to prarticipate in-sports, enrichment activities-all of which cost money. Then there’s the clothing, the electronic things.
It’s not that they are talking massive trips to Europe or eating out all the time, it’s just the lifestyle, which is reflected to them every day in the millions of hours of televisions. Everything that you see on TV becomes the standard, and you’re not frivolous unless you go beyond what you see on TV.
DOWN EAST: Is the situation getting worse?
It’s escalating, just by the very nature of our economic system. Our economic system is based on constant growth. Everything has to be about having a growing market share, in order to keep stock values up. So the investment in advertising is a reflection of that growing.
And all of this trickles down to the individual person’s budget. You are absolutely not immune unless you become very conscious. I’ve chosen to keep myself free of that influence, but there’s a price to pay.”
A price to pay? Now that’s an understatement if I ever heard one. I know so many kids being hauled off to therapists because of the hazing like treatment they get from the out of control “rich” or should I say “poser” kids.
Other parents and increasingly coaches have started to become targets of this spoiled brat behavior as well. I’m not sure why the school and coaches are too afraid to call up their parents and tell them to do their job. The abuse some of them take is a scandal.
If those materialistic boomers along with their little hell bound darlings have to go pound (Florida bubble bust) sand….there are plenty in our age bracket that won’t be crying for them….in fact we’ll probably be wearing a big ole smirk.
Rant off
“Funny, but the young are being driven out of New York and are going TO Florida. I get a picture of young people wondering around the country and finally realizing that their generation is screwed no matter where they go.”
(I think the fact that the above article I quoted was about Maine supports your point, WTE!)
Yeah, things will get ugly, especially if you Baby Boomers keep putting freaks and warmongers in the White House, and keep spending money like crazy and leaving a huge deficit and Social Security bill for us to pay. Nevermind the environment, which looks like crap already.
“I get a picture of young people wondering around the country and finally realizing that their generation is screwed no matter where they go.”
I started down this track after college but quickly realized what was happening around me. Now, I sit still and watch everyone else around me across all generations make a complete mess of their lives.
Sometimes it is better to do nothing b/c opportunites are easier regained than losses.
Yeah, but where in Florida? Big differences in job opportunities and cost of living depending where you go in Florida. Also, young people without kids are in a different situation than young people with kids. I wouldn’t want to raise kids in Fl. The schools are awful, the kids are awful, the parents are awful … and you’ll be living in less-than-genteel poverty. But w/out kids, I’m doing just fine.
(I was raised in ‘genteel poverty’ in Massachusetts–highly educated parents, very good schools, bookish friends … and neighbors giving us clothes, toys, and sometimes food.)
“Funny, but the young are being driven out of New York and are going TO Florida. I get a picture of young people wondering around the country and finally realizing that their generation is screwed no matter where they go.”
It is always difficult starting out at least for most people, but the problems won’t be restricted to the young. Older people who haven’t established sensible money habits will have their share of the problems.
Since the Industrial Revolution got underway, increasing numbers of young people moved away from “home” in search of better lives for themselves and their own new families. The fact that gramps is upset that his kids have better opportunities elsewhere is selfish. Mine all moved away from Florida — I miss them, of course, but I’m happy for them.
As for who gets what share of the taxpayer pie, that is the essential evil of government — by coercive confiscation and redistribution of assets, it creates resentment and that will never, ever change. Better to drink a good scotch and relax than to imagine such divisions going away.
“…he was unable to generate enough income from his home building and real estate investment activities to cover his nearly $87 million in bank debt.”
Now a group of Tringali’s banks are forcing Tringali to hold a public sale.
That sure will push RE prices up in Florida.
A year back, many people in this blog thought 40-50% haircuts were a fantasy. I think most of us (me included) are seeing a real bust for the first time and did not imagined the cascading effects of the bust. I think we still have visibility upto a small distance ahead of the bust’s envelope.
Things a lot more interesting than what we’ve discussed will likely be happening by this time next year.
How is the Spring Bounce coming along, by the way?
“Spring bounce” doesn’t have any alliteration. I suggest “spring splat.”
http://www.orlandosentinel.com/business/orl-homes1307feb13,0,1041629.story?coll=orl-home-headlines
another front page story of the Orlando Sentinel
“Orlando Regional Realtor Association members recorded only 1,314 homes or condos sold in January, making it the weakest month for local agents since January 2002. The number of properties for sale in the core Orlando market rose by 1,729 to a near-record 21,266 — and at January’s slow sales pace, that was the equivalent of a 16.18-month supply.
…
Local Realtors have not seen this many months’ worth of homes on the market since February 1995, when only 649 houses sold and the 10,527 listings at the time equaled 16.22 months’ worth of inventory.
…
The total number of homes sold in January — 1,314 — was off by 31.46 percent, the biggest percentage drop since at least the end of 1994.”
———–
What was that about the market leveling off/hitting bottom in Dec?
Love the months-on-market chart. 30 days after that low point (Apr/05), I saw my BIL and told him I thought the housing market was going to tank, from everything I’d been reading (here on Ben’s Blog). He just snickered in the same dismissive way that he laughed at my suggestion of stop-losses and any notion his stocks could tank in the dotcom heyday. As a kid, I was trained that it is bad to be smug, but now that I’m 2-for-0 with a know-it-all, it’s pretty difficult not to be.
Sorry, I can’t help this one…
————-
Trading Places: Real Estate Instead of Dot-Coms, New York Times, 2005-03-25
Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that “South Florida is working off of a totally new economic model than any of us have ever experienced in the past.” He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.
“I just don’t think we have what it takes to prick the bubble,” said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90’s. “I don’t think prices are going to fall, and I don’t think they’re even going to be flat.”
God I love that one, he came out with that just as we moved here…. I would love to ask him about that totally new model today!!!!
–
“a limited supply of land” in “Floride?” LOL!
“South Florida is working off of a totally new economic model than any of us have ever experienced in the past.”
Yes! My real estate agent quoted that one back in ‘05 to try to make us jump! Glad we didn’t. Got into a much bigger house for a lot less money Dec of ‘06. Will we see our value drop? We’ll see. Put 20% down and got 20% off the asking price on top of the 15% haircut the price took from the top of the boom. I’m not worried.
“There was no explanation for the closing….”
No explanation needed. Too many agents chasing fewer and fewer transactions due to slowing demand, court house sales, and auction house sales.
In North Port they’ve got a super glut,’ Holmes said.
I like the sound of that! “Super-glut.”
“they can’t make the numbers work”
Confused why the MSM is hangin its hat on the small decline in cancellation rates for the big HB’s as some positive news pointing to a turn around….
http://tinyurl.com/ytkred
When net orders are down 38% over the year and cancellations dropped a mere 5% from 53% to 48%, wouldn’t one see that when less people are making a order you will probably have a lower cancellation rate…
Personally if I were KB Home I would rather have the 5% higher cancellation rate with 38% higher sales… but call me crazy…
This just does not sound like good news to me, and baffles me on how this can sound good to others.
“…hangin its hat on the small decline in cancellation rates for the big HB’s…”
The soft landing is a matter of religious conviction. Any shard of evidence that surfaces in the MSM only does so through the filter of the soft landing faith.
Destinsm — great point.
in your hood
are sales picking up and prices leveling or accelrating down
many old listing have cleared here in 22151 N Va
inventory constant at 42x units
I think the same thing is happening with rents in SD. Things were really tight over the summer, but now you can find some plenty of 3br houses for under $2K and you can live in either a McMansion or in a *nice* place in a beach town for $3K. Think, $3K a month to live in a newly remodeled place blocks from the beach currently valued at $2M (though I guess it’ll drop to $1M when all is said and done). The tricky part is to steer clear of FBs — I think a fair number of coastal places were bought on/remodeled on spec by contractors who are not exactly financially competent.
“The tricky part is to steer clear of FBs…”
Any thoughts on howto?
I see a lot of people here saying that 2k or 3k rentals are a deal. However, nobody discloses or pays attention to the percentage of that from gross income. I will never pay rent that’s above 20% of my gross income, and I’ve been shooting for way below that. Right now, I rent an oceanfront condo, oceanview, pool, private beach, concierge, valet, gym, tennis courts, sauna, jacuzzi, water + cable + air included, 5 miles from work, and at 18% of my gross income. The rent amount is 1/5 of the total monthly cost to buy at 450k, which makes the CAP RATE look stupid. It seems that no one is paying attention to that percentage, but are very excited by McMansions being rented for 3k (36k /year), just like the flippers and homedebtor wannabes were years back. Therefore, is 2k or 3k above or below 20% of your gross income? For instance, you would have to earn 180k / year in order to make a 3k / month (36k /year) rental make sense at 20% of gross income. Not to doubt the skills of posters here, but who makes that kind of salary in the US these days?
Strat3go,
I like your strategy. I’m about to upgrade my residence to one that is… 12% of our gross.
As to who can rent 3k/month? Good question. My brother is in such a rental, but its a corporate relocation in a forign (non-US) country paid for by the corporation. 3k rent should imply a minimum 150k income… Yes, 20% of gross is smart. Here in California there are enough who make that.
But there are far more who are faking it…
Got popcorn?
Neil
If anyone wants to know how bad things really got
in 2003-2006, just google what has to be the poster-
boy for the greatest real-estate bubble that ever was:
Neil Mohamed Husani
Such corruption is unprecedented in America. $12
million dollar bank loans for which “there is no record.”
Real estate sales for “$20 million” by banks which get
recorded for only $8 million. Millions of dollars simply
disappear. Southwest Florida is the worst of the worst.
What do you mean “banks”? I thought there was just one bank involved–Coast.
And yeah, he does put Casey’s emo whining in perspective. If anyone should be doing time in the slammer, it’s Husani.
As usual I go back to the faulty lending that took place from at least 2002-2006.
Lenders use to make sure the property would cash flow and if it didn’t the debt would count against the investors debt .What is this bullsh-t about people figuring the cash flow after the fact . Did speculators think they could just raise the rents to cover their short term investment that went bad?
The market in Florida and many other places is a joke . Builders were marketing to speculators and the special sub-prime lenders were allowing a high percentage of speculators to buy out entire projects with out any regard to the property cash-flowing . A good % of those loans were liar low down loans anyway .
Hey ,when you have major TV shows about the money you can make if you flip a house, it will pull in the get rich quick sheep .
Lenders aren’t suppose to make loans based on real estate going up ,but rather the borrowers ability to pay or cash flow a long term debt .The world has gone mad .
“‘Every builder built too many houses and there is way too much product on the market,’ said Higgenbotham, who formed his company in 1959 and has witnessed at least five real estate market cycles. ‘Whenever you have this much supply and only so much demand, prices will fall.’”
I thought learning occurred after the 3rd repetition?
The view from gainesville:
Summit House. Originally a condo, but one investor bought most of the units. Decided to sell last year. Originally offered in the “low 100’s”, now advertised in the paper for 55K-66K (unrenov–renovated).
The Grove. If I’m not tripping, they wanted 110 or 120K for these condo conversions. Look like late 80’s, stylist exterior, underneath nice trees, quiet-looking, would have been built condos if they were a little bigger. Okay, this week they cut down a bunch of trees (I guess to make people notice the units) and put up signs “Low 80’s” “Paid HOA for a year” “0% down, $0 closing costs”. Lame… any chance of me buying was destroyed with the trees, and you can bet that suicide financing will bring down that neighborhood (vs. having renters for neighbors who actually have to qualify and pay!).
In G’ville it’s SOP for renters to prove 3x rent income, credit check, possibly criminal background check, first month’s rent and deposit around half of rent … but the worse your credit, the more they demand up front. And I want to live next to people who put $0.00 down? Right…
LaMancha. Cheesy small apts near campus, went condo, tra la la; now two of the units are in foreclosure (foreclosure.com) and they haven’t even sold all of them yet. Losers.
Good points. Who wants to live next to people who are over their heads in debt with the foreclosures driving down the prices in the near future .Who wants to buy in a project where 70% of the buyers are low down loan speculators holding on for dear life ?
Some people we know are closing today on a home they purchased in PGA Village. They moved there two months ago and refused to be renters for any length of time. They said “we know all about the housing bubble”.
They paid 375,000 on a home that I believe was priced at 450,000.
I feel kind of sick for them but yet, they seemed to think they knew what they were doing.
Did they get a deal or did they screw themselves?
They plan on staying longterm, they put down 113,000.
I think they will be kissing at least half of that down payment away before this all plays out.
What do you think?
SKB
PGA Village is pretty high end stuff in Port St. Lucie. There never was a true market for that kind of house in St. Lucie in my opinion. Just Speculation. Prices for single family homes start at $300K and go up as high as $850K. Most of the houses that would fall in the $450K range CAN be picked up RIGHT NOW in the $300 -$350K. If you pull MLS you’ll see prices everywhere. You know supply and demand are out of whack when the same house is priced from $300K to $475K depending on the seller.
Bottom line is I think you’re right on the kissing at least 1/2 of the down payment goodbye in the near-term. In the very long-term I don’t think they have anything to worry about. Eventually prices will come back around. Could it be in 10 years? 15? 20? I don’t know.
Unless the hurricanes keep hammering Florida for years. If that high possibility happens (that’s why insurance companies got out of the market), they could have a 350k home that that loses equity because of pricey or non existent insurance.
Insurance companies started leaving the market in 1992. They left because “a” big one vs. “the” big one hit. You’re crazy to believe that this is anything more than a cycle. Don’t fool yourself into thinking insurance companies leaving is a recent thing.
Everything is a cycle, but the question is how long this cycle will last and how costly it will be. According to my course of Risk Management & Insurance at some reputable B School, the risk is too great to insure Floridians. Sure, you can get the state’s Citizens insurance, but the pool is underfunded and if a costly hurricane hits, tax increases will be inevitable to pay for losses. Just to give you an idea how bad it’s, there’s a donut shop franchise in SoFlo that will have to transfer insurance hikes to the price of donuts and coffee, because it’s eating the bottom line. The owner is thinking about closing shop and moving out to another state.
Here’s an update from one of the more infamous Tampa Bay flippers of 2006. Remember Jill Jackson? Bought 10 homes for $1.8 million in 2006 in shall we say, less desireable areas of Tampa, all on a $24,000 per year salary. Here’s a refresher: http://www.sptimes.com/2006/06/11/Tampabay/With_no_money__she_s_.shtml
Well, I’m combing upcoming foreclosure dates, and guess who’s on the docket three times over the next month? Here’s one that really takes the cake. One of the homes she bought from Rehabber’s Superstore, who are mentioned in the article, will be sold in March. The property was purchased by Rehabbers on 2/06 for $93,100. They then sold it one month later to Jill Jackson for $195,000. Equifirst gave her $195,000 to finance the purchase. Les pendens commenced about four months later, a first payment default. I wonder what her cut of the $102,000 Rehabbers gave her for this? There is a one month gap between sales and a supposedly well trained underwriter okayed a loan where the value appreciated 210%, on a stated income loan, with no money down from the borrower? I hope it’s not my 401k money they are funding this crap with.
“I hope it’s not my 401k money they are funding this crap with.”
Probably is. A lot of banks in a lot of funds. Other funds put it in real estate loans directly or indirectly. Back when subprime was 10% while everyone else got 6% there was enough extra money to cover the risk. Now with subprime going 6.25 while everyone else gets 5.85 there’s not enough premium to cover the risk. Good luck to everyone!
I love the Rehabber’s Superstore jingle, “Don’t let those other guys steal your house!”
On second look, the $195k property sells today. I was also wrong stating this was a first payment default. She did make one payment then went to foreclosure. How nice of her to share some of that Rehabber money.
Still early enough to make the originator eat the toxic waste loan that the wrote her.
“Buyers aren’t necessarily buying. They are staying in apartments and waiting.”
You got THAT right.
We’ve been waiting so long, in fact, that we’ve gotten quite used to it. pRACTICE MAKES PERFECT. Besides, we don’t NEED to buy. Unlike sellers who NEED to sell.
NOW that the whole Ponzi Scheme that is real estate is starting to crack at the seams and unravel, I’d venture to say buyers are not only simply ‘waiting’… we are GLEEFULLY waiting.
Yo Neil, pass the popcorn ..this is gettin’ GOOD.
we are GLEEFULLY waiting.
With malecious grins upon our face.
Got popcorn?
Neil
“Insurance regulation may need some work, but don’t blame the real estate market on the greedy insurance companies.
After all, who made all the money in real estate in the past couple years?”
I like that, don’t blame the insurance company for real estate crash.
But she should have finished it to be totally truthfull as in “We only rip people off when they try to make an insurance claim”
Have you all forgotten about the national debt? 9 trillion dollars! That is 3 1/2 stacks of one dollar bills, from the surface of the Earth to the surface of the moon. What happens when we have to pay that back? Kiss the future money goodbye!