“A Clear Sign Of A Struggling Market” In Florida
The Pensacola News Journal reports from Florida. “Kay Ford and her husband are rolling the dice for high stakes Saturday. The Birmingham couple will be on Perdido Key, fingers crossed, hoping they made the right decision to put their two condominiums on the ‘absolute’ auction block.”
“‘They’ve been on and off the market so many times, we just thought we’d go with an auction,’ Kay Ford said.”
“The Fords actually are auctioning three properties, but their Atlantis penthouse overlooking the Gulf of Mexico, and their condo in Legacy Key on Old River, will be absolute. Their third property, also on Perdido Key, also will be auctioned, but with an owner’s reserve that sets a minimum bidding price.”
“(Auctioneer) William Bone believes an increasing number of resort properties will be going to auction in tough condo markets, like the one gripping many Florida coastal communities. Longtime Perdido Key Realtor Brenda Beumer agrees, saying that absolute auctions are a clear sign of a struggling market.”
“‘Absolute auctions are extremely symptomatic of a flat market,’ said Beumer.”
“The condo market on Perdido Key is in a slump, and Beumer said she is starting to see some signs, such as absolute auctions, that owners are willing to bail out of properties at any price.”
“‘When people got their tax bills this year, they began to realize that they can’t afford to hold on to these properties unless something changes,’ Beumer said.”
“Perdido Key Realtor Debi Freed said absolute auctions are fairly rare, and when she does see them, they often involve owners desperate to sell their property.”
“The Fords say that’s not the case with their condos. They own several investment properties along the Gulf Coast, including Destin and Orange Beach. They decided it was time to reduce their holdings and hope their luck holds out.”
The St Petersburg Times. “Dreary times call for desperate measures. That’s why 50 Florida property owners are willing to take an unusual gamble at the Seminole Hard Rock Hotel & Casino on Saturday.”
“Everything from $130,000 condominiums to commercial lots to multimillion-dollar mansions will be for sale to the highest bidders, many of whom will be competing inside a 400-seat casino ballroom at the All In Mega Auction. If all goes as planned, homeowners who have struggled to sell their houses for months will watch them go within six minutes.”
“‘We’ve basically created a new medium of bringing sellers and buyers together, making it kind of like a shopping mall for properties,’ said Jay Bailey, who is running Saturday’s auction. ‘It just doesn’t make sense to put a sign in the yard anymore.’”
“Angelique Lochridge has been trying to sell her parents’ Valrico home for seven months. ‘We’d be happy to just sell it for what we owe at this point,’ Lochridge said. ‘It would be a huge, huge relief to get rid of it.’”
The Herald Tribune. “Sarasota and Manatee home builders have entered 124 residences in the annual Parade of Homes, which begins today. And, despite the cooling of the housing market following the peak of two years ago, only about 20 percent of the models are holdovers from last year.”
“One change from years past: the builders haven’t had to struggle to complete their models on schedule for the event, said Larry Anderson, VP of the Home Builders Association of Sarasota County. That might be because of the cooling of the housing market. Sarasota County single-family building permits fell from 6,039 in 2005 to 3,369 last year.”
“‘Is the glass half-full or half-empty?’ he asked. ‘Compared to last year, obviously we are down. But compared to prior years, we really are in a comparative market to 2003. We would prefer to keep it at this rate and not get into that overheated market. I don’t think that serves anyone very well.’”
‘Shares in building supplier PGT Inc. slid Thursday as investors digested a wider fourth-quarter loss caused by the continuing slump in the housing market. Reporting after the markets closed, North Venice, Fla.-based PGT said results were hurt by continued deterioration in new construction projects, which limits demand for windows and doors.’
‘Previous boom markets such as California, Florida and Nevada have eroded at a quicker pace than the overall market. ‘The fall-off in PGT’s sales has been at a pace faster than that of the Florida housing market, a trend which could continue in coming quarters,’ said Deutsche Bank. Deutsche Bank downgraded the stock of company, which makes Winguard windows and doors, saying ‘it could be some time before its growth trajectory becomes apparent to investors again.’
‘Rising interest rates and bigger loans are fueling the resurgence of mortgage insurance, said Ann Doak, a lender at Countrywide Home Loans in Daytona Beach. Over the past few years, many buyers have avoided mortgage insurance premiums by arranging a piggyback loan. Now, with interest rates creeping higher, piggybacks are not as advantageous as they once were.’
‘As the rates go up, the better product for the buyer financially sometimes ends up being just one mortgage with insurance,’ Doak said. She said a ‘high percentage’ of recent mortgage closings in the area, but not a majority, have included mortgage insurance.’
‘Charles Kovaleski, president of Attorneys’ Title, said alert homeowners sometimes can escape mortgage insurance after a few years by finding a way to get their mortgage balance below the 80 percent ratio. The easiest, almost painless way, he said, is to buy in a neighborhood where prices are climbing rapidly. But with Florida prices flattening in recent months, that strategy may no longer work.’
I doubt PMI providers are going to do any loans with cash back mortgage fraud, overstated appraisals, stated income liar loans or sub 650 FICO’s. These providers have a lot of historical experience.
…and thus ends the SubPrime party.
Brilliant comment, Paladin.
“Kay Ford and her husband are rolling the dice for high stakes Saturday.”
Is this a repeat of an earlier article, or is ‘rolling the dice’ the going metaphor for selling by auction?
Regardless, it is completely unclear to me how selling by auction is much more a roll of the dice than an MLS sale into a market correction using an above-market wishing price? In fact, I believe the latter strategy is much more of a roll of the dice than sale by absolute auction under current market conditions, given the question of whether the magnitude 9.0+ earthquake in the subprime lending sector last week will generate a tsunami…
They already rolled the dice. They lost. WTF are they doing back in a casino.
“They both are such unique properties,” Kay Ford said.”
Ever heard of a seller who DOES NOT say this?
It’s only fitting the auction is held in a casino. I think it’s funny.
If auctions are such a roll of the dice compared to MLS sales, I wonder why bank REO departments prefer to quickly unload their properties by auction sale during a market downturn, rather than troll indefinitely for top dollar on the MLS like all the clueless mom-and-pop home sellers do? Would banks deliberately employ a strategy which resulted in a lower payoff?
Banks are not in the real estate business. They want the cash now and will take a discount to unload REO properties ASAP.
You must have missed my question, so I will repeat it:
“Would banks deliberately employ a strategy which resulted in a lower payoff?”
GetStucco,
Jim the realtor at bubbleinfo shows an example of a house held by a lender that is trolled on the MLS. We have many, many examples like that here in Northern VA. It boggles the mind. I drove by a decrepit one yesterday. It’s listed at way over market value and vacant as the day is long. It’s been listed for nearly a year, and is held by a local bank here in Northern VA.
That’s strange. The bank couldn’t wait to unload the foreclosure we bought. They took our low-ball offer but it had to be non-contingent, and settlement by the end of the month. They even paid for the owners title insurance policy, without our asking. We never thought of it until a few days before settlement and were prepared to pay for the policy at settlement.
I believe that a bank that effectively holds onto a property by listing it at an unreasonable price is the exception, not the rule.
An ‘abolute’ auction’ is viewed as a ‘roll of the dice gamble because the owner is commiting to sell at the highest bid.. Whatever that bid price might be.
The gamble is in the audience. Suppose you are unlucky that day and no one in attendance wants your property. Eventually someone submits a low-ball bid; and you are obligated to sell at that price. That’s a real gamble.
If you have a reserve, you can decline to sell until your minimum price is bid.
Or you can decline to sell until your property has ridden the downturn all the way to the basement.
Exactly, the auctions present no obligation to the sellers to accept the offer/bid!
The sellers pay the professional autioneers to hype up the sale in order to ramp up interest and attendance. Then they hope some brain dead buyer will get roped in. As far as I’m concerned , it’s rigged against the buyers.
the results for this auction should be very interesting. they will set the “present price environment” for the area/RE type. needless to say this owner and all other owners in the area are affected.
Auction results mean absolutely nothing. Buyer remorse, not qualifying for a loan, appraisal below price can lead to 50% cancellations, but you won’t know this for another 60 days after the auction results. There is much more competition in MLS if the property is priced right.
“Auction results mean absolutely nothing.”
Are you saying that MLS listings that never sell are more informative?
“‘We’d be happy to just sell it for what we owe at this point,’ Lochridge said. ‘It would be a huge, huge relief to get rid of it.’”
You and a couple million other people are saying the same thing: happy to sell for what we owe. However, buyers are not happy to pay what you owe for the same reasons you no longer want to own.
Good point.
Effectively they are saying that the house is worth less to them than what they paid, and they’d rather get their money back than keep the house.
“‘We’d be happy to just sell it for what we owe at this point,’ Lochridge said. ‘It would be a huge, huge relief to get rid of it.’”
I guess they can euphemistically call their imminent losses a “huge, huge relief premium”
“owners are willing to bail out of properties at any price.” “When people got their tax bills this year, they began to realize that they can’t afford to hold on to these properties unless something changes” “Dreary times call for desperate measures.” “We’d be happy to just sell it for what we owe at this point”
But how can that be? The super bowl is over, the spring buying season is here and RE has bottomed out. It must be the fault of MSM! Gotta love how fast panic sets. I’d like to be a fly on the wall around some of the country clubs.
Yeah. As a result of an inequitable tax system, it looks like speculators, flippers, and vacation home owners are going to take prices down as they exit Florida’s market. Long term residents might be insulated from higher taxes as a result of SOH but they are not insulated from falling home prices. If you are a resident of Florida and looking to buy — speculator, flipper, and vacation homes are probably good targets. It does not mean these sellers are all willing and able to lower the price, however.
The taxes really are ridiculous. I cant figure out why they dont just raise all property taxes 3% annually. Taxes and insurance are approaching a monthly nut close to the fair market rent on nonhomestead properties. That just cant be good for the economy.
Response from the local authorities (WPB, in this case) about what is going to happen if property taxes are lowered:
http://www.palmbeachpost.com/localnews/content/local_news/epaper/2007/02/24/s1a_PB_PROP_TAX_0224.html
Basically, we are going to have to fire everyone, and the whole city is going to go to pot because we will no longer have our 40% YOY increases in taxes.
I wish I got a 40% raise every year.
WTF happened to all the money from the past 5 years? I just cannot believe, between the tax windfall, and the permitting fees, that they can already be crying poor!
Actually, this is predictable and was experienced after the oil bust. But think about it; since when did local governments behave with common sense? Remember the FL quote about how ‘growing’ was the quickest way to ‘progress’? These are the same people that fast tracked all the planning, plotting, etc, because there are a ‘thousand people a day moving to Florida’ and every city wants a bigger slice.
‘If by hurt you mean that local governments are going to reevaluate their budgets, then everyone is going to be hurt,’ said Rep. Stan Mayfield, vice chairman of the House Policy and Budget Committee. Mayfield would be willing to consider changes to how cities and counties could grow, but property owners need tax relief, he said.’
‘Some communities have had these tremendous value increases and resisted … keeping a responsible (tax) rate,’ Mayfield said.’
Ben,
Of course, your totally correct. I used to work for a local govt, and tried to tell them over and over that this was a windfall, and not to adjust their spending based on these numbers. They were just as caught up in the BS as the NAR (everyone wants to live here, WPB is the new Miami of FL, we are going to have 50K condos online in the next 10 years, blah, blah). It was amazing to me that nobody could see what was actually happening.
I lived downtown in WPB (in the condo district) and I saw every day as I walked home the 100’s of condo units with the lights off every single night. Some entire buildings (610 Clematis, for the locals) were dark; it looked like they were totally empty. And the building continued.
Snowbirds bought all those condos. They are seasonal residents who have more money then they can spend… Blah, blah, blah…
Do retirees really want to live in the downtown/club/bar district in a 2nd tier city that has a crime problem? I felt unsafe walking those streets at times, and I am a 29 YO 245lb “meathead” bodybuilder. Come on, your telling me that all these rich retirees are willing to deal with this on a day to day basis? Just to live next to the trendy nightclubs (where they could never get in anyway, much like Miami, these clubs are “selective” with there admission, or used to be anyway)? It never made any sense to me, and apparently, I would have to say, we (as a group) were all right.
It didn’t make sense.
You’re a meathead bodybuilder in WPB and you’ve never heard or or been to Haulover?
In high school we use to jump off the Haulover bridge. I think now people will be doing it for different reasons.
Hehehe
I’ve lived in Delray Beach for a long time. Delray is a nice town and I really like it, but I can tell you that there’s absolutely no improvement in services or infrastructure as a result of all that extra revenue. We do have a fancy new library, but it has very few new books, just the stuff they moved from the old library. No new parks, maybe one small new recreational facility. A1A North of Linton is rough enough to qualify as a street in downtown Detroit. All of us would love to know where the money went. I doubt that they’ll have the balls to claim poverty in front of the voters of Delray.
‘All of us would love to know where the money went.’
Subsidizing the development, IMO. I still contend that typical house building doesn’t pay for itself. That there is now no money to run on is more proof that the housing was put up on spec.
“Subsidizing the development, IMO.”
That is exactly what they are doing here in Jacksonville. In some instances, the city’s housing authrity is subsidizing down-payments and financing terms. In the long run, the city is betting on generating future revenue streams from the new home owners.
” I still contend that typical house building doesn’t pay for itself. That there is now no money to run on is more proof that the housing was put up on spec.”
Right on! I was on the equivalent of a city council for about 10 years. Commercial sometimes pays for itself (although roads, etc. add costs), but residential never does. It might not be true in Florida, but in most places homes add kids and kids require schools, teachers, administrators, buses, etc.
In one of the local South Florida papers a year or so ago, they showed that, on a $500,000 new house there’s $70,000 in fees and taxes on the property and building. I was shocked by that number, wondered if it was incorrect. If the $70K isn’t enough, that’s really scary.
Think of it in terms of a multi-threaded app. Earlier threads are generating minimal cash flows while the more recent threads are generating maximum cash flows. However, most of the planned spending was based foolishly on the latter threads. IOW, the syntax is clear and clean but the city’s logic is flawed; the app is going to work but the results will always be wrong.
I hope you are not too surprised by the city’s whining because I expect the scenario to play out similarly with many other local and state governments across the country.
You’ll always hear the same thing from government officials. The most common tactic is to talk about reductions in police and fire protection. If that doesn’t work they’ll talk about reductions in education or services for children. Nobody cares about rotting water and sewer lines. The fact of the matter is all governments can cut spending and increase efficiency if they wanted to. I see the waste in my little piece of local government. Do the math and multipy that waste by 23,000 local governments. Double it to account for waste in state governments. Double it again for the fed gov waste, and you’re looking at some real money that could be used for a productive purpose. If they would give me the axe, I’d cut employee costs in my town by 20% right now and use the money to fix the potholes.
The same thing happened to California with the dotcom boom. They got billions in income taxes from all the dotcoms and telecoms during the 1990’s and blew every cent of it. Now they are up to their eyeballs in debt and are passing it along to the future generations thru bonds. Even in the midst of the RE boom, California is still heavily in debt. The future is ominous for these wreckless citizens and governments that cannot control their impulses.
Well said. Looked at national savings rates recently (not even considering bankrupt governments)? Ours is on a parallel with Botswanna. Italy 10-11%, France 14% +/- If you factor in the drunken spending spree all levels of government have done in our name? ($25000 federal, from $2000 to $8000 -Mass- you win! - for every man woman and child in the country), the only way out is hyperinflation like Germany between the wars.
And as my Dad says “So how did that work out?”
I guess I’m a little bit confused. In Washington state property tax is set by levies at local district/city/county/state levels. Property valuations are a system of apportioning the taxes collected. If property values rise the taxed amount doesn’t rise with it, the mill rate decreases. The theory is that property tax collections are not driven by property values and are revenue neutral. For example, if all property values rise 25% taxes do not rise 25%, but actually drop 25% at the mill rate. If a single property rises 30% and another rises 10%, the property with the greater increase pays a greater proportion of the tax, but the total taxaction stays the same. Is this different in Florida? Are property taxes just a straight percentage of property value, irrespective of tax rates?
SteveH, in Florida in you’re not homesteaded, if you’re house doubles, the mill rate stays the same, so your taxes double. Then, the local politicians are shocked! astounded! amazed! that since they did nothing, now they have a lot more money to waste. My friend tells me that New Jersey is the same way, although they screw over 100% on the people, not just the non-residents.
In theory - that’s how it’s supposed to work. Here in Texas, the local councils set the spending and then the rate is set based on that spending (i.e., to generate enough revenue). So, if spending is going up 3% a year and the tax base goes up 10%, then the tax rate will go down 7% (just as you imply). It’s always that way in Texas.
HA!
No, it isn’t. Instead, the spending level will just happen to come in at 10% higher. We now have beautiful parks, muni buildings, fire houses, streets…the list goes on, where I live. Not to mention civil servants making a ton.
“Everything from $130,000 condominiums to commercial lots to multimillion-dollar mansions will be for sale to the highest bidders, many of whom will be competing inside a 400-seat casino ballroom at the All In Mega Auction.
We are going to do the same thing here in So Cal -except we are having the auctions in Bali Fitness centers.
it would be great to pick up a coastal prop in san diego. im jealous this article is in florida and not in del mar, ca. going back to sleep to dream.
Country club dues are the first thing not to get paid. You might be lonely. On the other hand, flies are attracted to dead things, so the metaphor might be appropriate. These people don’t even realize they are already dead.
There’s that Bone guy again. The one I nicknamed “Sucka”. As in, if you don’t like the price being bid on your con-dough, suck a bone.
“Everything from $130,000 condominiums to commercial lots to multimillion-dollar mansions will be for sale to the highest bidders, many of whom will be competing inside a 400-seat casino ballroom at the All In Mega Auction. If all goes as planned, homeowners who have struggled to sell their houses for months will watch them go within six minutes.”
Great idea ! a room full of shill bidders hoping to bid it up and bale out the FB’s . BEER ME !!
At these absolute auctions, can the owner still bid to buy it back, paying the auctioneer’s commission? What happens if the FB’s condo sells absolute for under what he owes and he can not/will not come up with the cash to transfer title?
I can see these absolute auctions getting really messy when they go to close, with a livid FB being put in the position of having to bring non-existent cash to the table, and the low ball purchaser (future FB) gloating:-)
I question how many cash bidders are looking for $150k condos in a declining market. Aren’t the parameters of absolute auction that you make payment and take it home the same day.
With subprime lenders dropping like flys, refis way down and the suckers trapped long from the top. Who are the bidders? I could see this kind of auction working at the bottom but now anyone with a huge cash portfolio has been waiting for the bottom to fall out of this market and is unlikely to bid more than $0.25 on the dollar.
I’m sure that they have fine print allowing the sellers a way out, if they don’t like their “absolute” bid. Otherwise, the FBs will not be stuck with non-performance lawsuits, when their banks prevent them from short-selling their properties.
whoops: “will not be” >> “will be”
The St Petersburg Times. “Dreary times call for desperate measures. That’s why 50 Florida property owners are willing to take an unusual gamble at the Seminole Hard Rock Hotel & Casino on Saturday.”
The mere FACT that this RE auction is being held at a casino SHOULD have even the Village Idiot’s Mind screaming “Red Alert -Todays Real Estate is GAMBLING”
a similarly humorous locale would be the shearing room on a sheep farm.
for those of darker vision, pick your slaughterhouse.
Sorry if this was posted.
Weighing restraints on loans
http://tinyurl.com/2c8666
“Another proposal, pushed by the Center for Responsible Lending, is for regulators to impose a flat “ability to repay” standard for all sub-prime loans.”
Here’s a wild and crazy idea: Apply that standard to all loans.
“Here’s a wild and crazy idea: Apply that standard to all loans.”
Get with it, man. We were told here just a couple of months ago by one of the posters that we are in a new paradigm - and that the old concept of being capable of paying back a loan is “old school”.
Well, I taught my kid math and reading using “old school” methods, and the results were not bad.
“Angelique Lochridge has been trying to sell her parents’ Valrico home for seven months. ‘We’d be happy to just sell it for what we owe at this point,’ Lochridge said. ‘It would be a huge, huge relief to get rid of it.’”
Feb 2007: First signs of desperation. Of course, Angelica this party is just getting started.
Don’t worry, you still have Panic, Capitulation, Despondency and Depression to get thru in the next 12 months. By then, we should be approaching the bottom, the buyers will come back out and you can right a big check to off load your parents albatross.
Maybe you can explain to Angelique that “short sales” are her neighbor’s MLS listed houses that are being sold BELOW what they own the bank. She is praying for a bid at what she owes the bank, and her neighbors are asking the bank to take less than what they owe. Stupid peole keep doing stupid.
…we really are in a comparative market to 2003
Do others agree with this statement?
If that builder really beleived that he would roll back his prices to 03 levels also.
Sarasota-Manatee also didn’t have a 2 1/2 year supply of stucco boxes on the market in 2003. This place in an absolute housing disaster right now and inventory is starting to shoot up yet again……and still very few buyers.
In a way. True house values are certainly no greater than 2003, maybe even closer to 2000. And I define true house values as the price that will sell a house in one month - not 2 years.
My experience with the absolute auction is that little but benthic matter attends. These are the “shark fund” types and no more than 50 cents on the lowest dollar will be tendered. These guys have a simple formula.
Try to estimate the stabilized bottom. Then estimate 65% if that figure and bid 50% of that number. My guess is they will take a number in the 1999 time frame and then do their calculations.
In this market the absolute auction is really Russian Roulette with an automatic. Get it over quick is the way to go.
Hey I learned a new word today. Benthic. Thanks dimedropped.
This formula sounds like the one car dealers must use when I try to trade something in!
Meant to be “Benthink?”
Hoo-wee, those hurricanes really make people prosper in Florida. Cost-of-living keeps getting cheaper and cheaper there:
Miami Herald; 02/24/07: “Extreme poverty on rise in the state
Food lines are growing as census data show that more Floridians are falling into extreme poverty.”
“The crowds — and the increasing demand for food — reflect a growing number of people across the state pushed into severe poverty, with income levels at or below half of the federal poverty line. Their numbers increased from 859,888 in 2000 to 943,670 in 2005, a 9.7 percent rise, according to new census data.
Over those years, Broward’s number of severely poor grew from 77,942 to 82,327; Palm Beach County’s increased from 57,855 to 63,327. Miami-Dade County had a slight decrease, from 161,301 to 158,593.
However, Miami-Dade’s 6.8 percent deep-poverty rate was among the highest in the state. The numbers suggest that the region’s rising cost of living is not just squeezing the middle class and the working poor, but pushing the poorest further under the radar.
”We hear of professional people leaving Miami because of the high cost of living all the time,” said Daniella Levine, executive director of the Human Services Coalition. “But for the very poor, there’s not a lot of options.”
It’s happening despite a record-low unemployment rate, 3.5 percent.”
“At Stop Hunger, meal distributions have doubled to half a million meals a month in the last five years. The center also distributes food to 82 neighboring churches.
”We see more and more people . . . but our supplies have been cut considerably,” said Malcolm Gabriel, Stop Hunger’s executive director for programs. “There’s just a growing sense of desperation.””
About taxes in Florida. Here in central Florida. property Taxes are about 2.27 % . Speculators Drove up Raw land Appraisals 1000% Plus since 04. Thing all these fools Didn’t realize is Taxes went Up 1000% Plus as the Mill rate is the same. Those that are Now holding Multiple lots are going to go Bankrupt because they can’t pay the taxes on their ” Investment” . Some Land has already dropped in price 70% since last year. But Guess what? Taxes are still at the Inflated rates.
Oh and by the way, Impact Fees went up 600% Plus Also. So if You justly want to put a trailer on Your Property Here’s they way it’s changed in the last 3 years. here are some Averages. for a Crappy Lot and a tiny Trailer.
2004 2007
Lot $ 3,000 Lot $40,000
Small Double Wide $29,000 39,000
Impact Fees 2,200 10,800
Water Hook up 600 5,861
Co 300 300
——— ———–
Property Value $ 34,800 $ 95,961
Homestead exp $25,000 25,000
————————————————————————
Tax value $ 9,800 $75,961
Yearly Taxes $265 $2,178
almost 1000% increase in taxes in 3 Years! Note this is on a small trailer and does not include llocal city taxes for Schools, Fire , Impact, etc.
The City I live in now wants to add $1,400 Impact for Parks for the New People because they say they don’t have the money to pay for it! Amazing! 1000% raise and their Broke!
Then every Year the County takes back the property and Sells it. Then Nailing the New Property owner For Taxes on Much more then they paid for the land.
Wash, Repeat, Rinse.
And the Florida swamp land Scam Continues Again!