Don’t Need A PhD To See Floridas’ Housing Bubble
The News Press reports on the bursting Florida housing bubble. “Lee County’s housing market is slowing after years of robust growth, and the worst may be yet to come as homes already being built flood the market. Every day, more than 400 houses go on the market, but only about a hundred are sold, according to real estate broker Denny Grimes. About 300 owners per day are reducing their sales prices.”
“While prices haven’t fallen much, unsold houses are piling up and ‘the inventory will get worse before it gets better,’ said Grimes.”
“In December, 617 homes sold of 6,662 for sale. That’s compared to January 2005, when about half the 2,906 homes on the market actually sold. Sales prices in the past three months of the year headed down from $358,560 to $307,184; list prices, what owners are asking for their houses, fell only slightly.”
“Unincorporated Lee County saw 17,833 single-family homes permitted last year, an increase of 46 percent. As those houses hit the market, they will depress the market even more, he said.”
“Things are no better around the country. The inventory of homes for sale was 2.8 million at the end of December, compared to 2.2 million a year earlier.”
“Where prices have risen dramatically, he said, ‘”there’s sort of an overshoot taking place’ as sellers price homes far over what the market would bear even a few months ago. ‘In some cases, if they want to sell soon, they might have to reduce their price significantly,’ McIlwain said.”
“Some are already doing that in Lee County. Aaron and Leatrice Lebowitz put their home up for sale more than two months ago for $399,000 and have since come down to $375,000. They’ve had two real estate brokers, but nobody has even looked at the house. ‘We’re debating what we’ll do next; we haven’t reached any definite conclusions,’ Lebowitz said. ‘Apparently the whole atmosphere has changed.’ Lebowitz, 76, said they’re trying to sell so they can move into something easier to maintain. ‘We can’t keep up the property the way it should be done,’” he said.’
“Their agent, Jeanette McMullen, said there’s nothing wrong with the three-bedroom, two-bath house. “It’s got a great floor plan, recently painted, carpet and tile floor throughout,’ she said. ‘It’s on a good size lot on the corner. It’s still an attractive place to live.’ The problem, McMullen said, is that ‘there’s a lot of sellers and few buyers. Buyers have more choices than ever before.’”
“In Estero, Kathy O’Regan’s two-story house with golf course and lake views in a gated community has been for sale for nearly three quiet months. ‘We expected it to pick up in January,’ said O’Regan, 34. ‘We haven’t seen that. We thought we’d sell within 60 days.’ She blames the slow response on the increased number of homes on the market, specifically within her Stoneybrook community.”
“When no offers came, they dropped the price to $515,000 on Dec. 1, $499,000 on Jan. 9 and finally to $484,900 on Jan. 27. O’Regan said her family wants to relocate closer to work but is willing to wait for a buyer at the current price. It’s all about your expectations, she said. ‘In reality, it might be less, but it’s still good. You’re still making a profit.”
“One expert recently told a Fort Myers real estate symposium things could be worse. Orlando-based economist Hank Fishkind (said) that Miami is likely to get a harsher version of whatever happens because of overbuilding in the condominium market. ‘I’m going over to Miami, and I have to talk about the condo market,’ he told the conference. ‘I’m going to put my wetsuit on’ in anticipation of a flood of dismay over the bad news. He warned, a correction is coming. ‘I don’t think you need a Ph.D. to figure this out,’ he said. ‘Of course there’s a housing bubble in Florida.’”
Thanks to the readers who sent this in!
“… O’Regan said her family wants to relocate closer to work but is willing to wait for a buyer at the current price. It’s all about your expectations, she said. ‘In reality, it might be less, but it’s still good. You’re still making a profit.”
Yeah, just leave it at the current price and it may never sell. By the time these folks unload this place, the profit she’s talking about will be gone. I’ve driven by this development and there is plenty of land and they continue building over here. It’s on the east side of I75 and they will be competing with the builders and a whole host of other folks for buyers in a less than ideal location. Good luck.
Some aspects of the bubble may actually be easier to see with a PhD
“Every day, more than 400 houses go on the market, but only about a hundred are sold, according to real estate broker Denny Grimes. About 300 owners per day are reducing their sales prices.”
Does anyone have the comparable figures for SD so far this year?
I can say that so far this year (since Jan 1, 2006), the number of new homes listed in Greater SD is 16,295 - 13,916 = 2,379 in 35 days, or 2,379 / 35 = 68 new homes / day, net (Thx ziprealty).
The basic identity for housing market turnover is
Net New Listings = Gross New Listings - Number Sold -
Number Delisted = 2,379.
Does anyone have the data on Number Sold, Net New Listings, or Number Delisted? (Any two is enough to back out the third).
Ben,
I have made a movie that I think would be of interest.
http://www.grapheine.com/bombaytv/play_uk.php?id=679421
I think you should have a starring role.
The current topic was FL’s housing bubble. Do we really have to revert to CA stats on each and EVERY one?! Not everyone who reads and follows this blog lives in CA.
test
Amber,
I understand staying on topic, but I don’t mind seeing statistics from the other bubble areas. They just keep proving to me that this time the bubble is not a “regional” thing (based on jobs, population, land, etc.) but more of a mania. The CA numbers are kind of important as it’s one of the biggest baddest bubbles.
In 1997 I was attending a holiday function for a small non-profit organization here in VA and a 30-something couple was there. I was 20-something at the time and clueless about real estate “investing”. The topic of where they were from (CA) came up and the first thing the woman said was how devastating the property value plummet was. It was rather incongruous with the evening’s chatter, so obviously it had really influenced them. I am glad to have had that experience, as it’s making sense now that this is happening and what the effects might be on people.
And also, getstucco’s posts are some of my favorites.
OK Ben, I worked you into a starring role. It involves you trying to rescue an upside-down family in Bakersfield.
http://www.grapheine.com/bombaytv/play_uk.php?id=679512
“Every day, more than 400 houses go on the market, but only about a hundred are sold…”
If that rate held for just one month, 9,000 units would be added to inventory. In some of the higher priced market here in east central Florida, almost nothing at all is closing. There is occasional talk about “sales,” but I think that record numbers of contracts are falling through, because of tighter financing requirements (and not THAT much tighter) or buyers’ cold feet. Can’t imagine the debacle when the normal Spring inventory comes to market.
Lou -
LMAO! That was great
we have the tendency to circle the country 2 or 3 times with each post.
boys will be boys
Ben,
I took a ride around the neighborhoods close to downtown Dallas today and was struck by the number of For Sale signs. I also noticed quite a few For Sale by Owner and For Sale by Agent signs. A lot of these were concentrated in and around the Uptown neighborhood which has seen a lot of townhouse construction. Most of these were built by Centex (Cityhomes). They were typically sold before completed, and their prices increased exponentially as each project sold out. Now, a huge number of these folks are dumping these on the market at one time.
I’ve also noticed that a lot of homes are initially being priced higher than I remember comparable homes priced just a short time ago. It’s like people are in denial about missing the boat and/or have taken out a HELOC and need a whole lot more to get out of the house. Off of lower Greenville Avenue, a lot of people borrowed to update their shacks with granite, etc., and they’ll be waking up to the reality that home prices don’t always continue to go up.
I think it’s going to be a real mess in Dallas, and yet, the building continues.
rudekarl,
Yeah, and near lower Greenville might mean picking up beer cans every morning.
lou minatti,
that almost made me pee in my pants.
I routinely count the number of homes for sale and for lease along an upscale residential street that I drive through on my daily trip to work (in West University for those who know Houston). In over ten years I’ve never seen more than 10 homes for sale or 2 for lease along this street. Today I counted 6 homes for sale and 6 others for lease. Many of the homes for lease are older generation homes. This is an area where older homes are routinely torn out to build larger new homes. I guess that the builders are no longer buying and these homes are owned by investors that are trying to lease them instead. I’m not sure they are going to have much luck - the ones that are listed with the local MLS are being offered for lease at $3000-5000/month.
Ben,
You forgot to include this
“Steve George, president of KB Homes’ Fort Myers division, said he expects a leveling off this year, but “we’re bullish on this market.”
“There’ll always be corrections,” he said. “Anything can happen but we feel the demographics of people moving here for the weather, the amenities, the baby boomers retiring will keep this market strong for the next 10 years.”
An estimated 76 million baby boomers will reach retirement age in the next 10 years, and one in five is expected to move to Florida.”
Baby boomers will save Florida! Maybe 1 in 5 expected to move to Florida when average house price was about 150k, but definitely not now.
Lou, can you make a movie about baby boomers saving Florida speculators?
The condo market will be hit harder then single family houses as the bubble continues to pop due to the higher percentage of investors who bought there.
I keep on reading about how the condo market in Miami is going to implode, but have yet to see the evidence. I see a lot of condos coming up in downtown and other areas including Coconut Grove (10 min south of downtown miami : where I live). At least the asking prices dont seem to be coming down. In fact, there are atleast 3-4 new buildings coming up in my area and most of them seem to be “sold”.
There are a couple of townhouses on sale in Coconut Grove (3 bedroom 2300 sql ft) and the asking price is mid 700 range. Asking prices are going up. I know of a few owners who sense that the housing market has peaked and are putting their house up for sale to see if they get someone to pay their asking price. The owners are selling not because they have to, not because they want to move somewhere else, but to profit. If they dont get the asking price, they will continue to live there and not sell. I personally dont understand that mindset, but I am sure many people are doing that in this market. To me a home is a place to live…not a stock ticker.
The one difference I have noticed in Coconut Grove is that the for sale signs on townhouses are on for months now instead of weeks like in 2004.
I am hearing conflicting info on south beach condos. A realtor friend tells me that sales have stalled…not many buyers out there. Others tell me that prices for 800K+ condos are being discounted by 100K or more in some cases.
miamitownhome…..
give it a few months.. right now we see some nominal reduction..the biggies are on the way….50% reduction, easy.
amber whitney Said:
The current topic was FL’s housing bubble. Do we really have to revert to CA stats on each and EVERY one?! Not everyone who reads and follows this blog lives in CA.
Trouble is, the blog format doesn’t fit Ben’s format as it has evolved. What is needed is a permanent “Current Events” thread for folks to post their latest spoofs, breaking news, etc. TheHousingBubble[2|blog] has become a water cooler for all sorts of discussions. Something like a message board would be a more appropriate model than a blog format at this point. You’ll see this proposed in the “suggestions” thread.
Now that Ben has more control over his format, I hope to see the topics become more organized. But you’ll always see people posting “stream of conciousness” missives on the topmost thread - it’s just the nature of people and the format as it is conceived today.
“Anything can happen but we feel the demographics of people moving here for the weather, the amenities, the baby boomers retiring will keep this market strong for the next 10 years.”
That is utter bs. The babyboomers cant afford to live in south florida anymore. Healthcare, Insurance, energy, etc are super expensive. Also senior citizens dont like to evacuate 3-4 times a year in hurricane season. If you dont have relatives close by, the cost of airline tickets, hotel, etc can add up during the evacuation period.
Also, Citizens Insurance (state insurance created after Hurricane Andrew) will probably not cover houses worth over a million dollars. The way prices have been going up, there will be a lot of million dollar homes in south florida and if you cant insure them for a reasonable rate…..who knows what will happen. I know people who can afford to make large insurance payments, but wont make them on principal. Most of them have cut back on their insurance coverage to just cover the structure and not the items inside such as TV, Microwave, etc. Home/Condo owners are being squeezed and are making sacrifices in other areas of life to maintain the status quo.
On the subject of Florida Real Estate, I really like the west coast of FLA. I’m waiting for an opportunity to buy on the coast outside of Tampa / St.Pete when it’s cheap enough that I don’t care enough to pay for disaster insurance. I’m thinking of a beach shack on one of those barrier islands. Like around Reddington Beach, Clearwater, etc. I like that area, and it should be quite cheap when the insurance rates are normalized.
Great place to be in February - April. I’d settle for 100 feet of beachfront with a motorhome hookup for when I’m there, and drive away when the hurricane season hits. Maybe park the MoHo in storage someplace near Orlando and fly out until the next safe season.
I don’t know how long I’ll have to wait until people see FLA for what it is: a winter beach spot that you stay well away from in the Summer and early Fall.
But that’s just me, of course
miamitownhouseowner said:
Also, Citizens Insurance (state insurance created after Hurricane Andrew) will probably not cover houses worth over a million dollars. The way prices have been going up, there will be a lot of million dollar homes in south florida and if you cant insure them for a reasonable rate…..who knows what will happen. I know people who can afford to make large insurance payments, but wont make them on principal. Most of them have cut back on their insurance coverage to just cover the structure and not the items inside such as TV, Microwave, etc. Home/Condo owners are being squeezed and are making sacrifices in other areas of life to maintain the status quo.
I don’t get the part about wanting to live in FLA full time. It’s a vacation destination during the Winter months, nothing more. Have you ever walked around Disney World and noticed the density of lightning rods on the structures? Have you noticed the bugs, humidity, and heat during the summer? FLA is a hell-hole for half of the year, just as Vegas is intolerable during the summer, but worse due to the destructive weather. Not to mention the drive-thru liquor stores and… well don’t get me started.
Oops - first problem with Wordpress: No way to preview comments - and no way to edit. I left off a closing italics tag in my last comment.
sm,
I’ll look into that.
“The current topic was FL’s housing bubble. Do we really have to revert to CA stats on each and EVERY one?! Not everyone who reads and follows this blog lives in CA. ”
NO, We don’t always have to talk about California… but I will post anyway, because I think it is relavent to the “Big Picture” of the Housing Bubble Crisis.
For instance, I am getting sick and tired of hearing from the realtor camp about “R.E. values holding their value because babyboomers are starting to retire and they want to live in our ___________(fill in the blank/any coastal or sunny city) We have incredible weather, blah, blah, blah”
What a cockamany “me too” bull$#*t mentality these real estate dorks have!!! Seasoned bloggers, or at least seasoned lurkers have scoured all the available blog sites (Ben’s is by far my favorite… just to be a brown-noser tonight:)
MY POINT IS: Seems like ALL california, Florida, Arizona, Las Vegas realtor associations are touting our areas as “recession proof/bubble proof” because of all the babyboomers who will descend on these precious cities.
NOT!!!!! Do they really think the pasty white old folks will actually be able to sell their $175k home back in some MidWest city and purchase a retirement home (or second home) in any one of these states?
Let’s see, grandpa + grandma are going to sell their 2000 sq ft home in Omaha for $175k and then purchase a 1200 sq ft. crackerbox $h*t-house on the wrong side of the tracks in Santa Barbara for over a $1mil?
Actually I think all RE markets are connected, as CA/MA/NY/NJ speculators are all over the places.
Several markets are already down 10 to 30% and if they want to sell their homes, they have to bring cash to the table and the only way they can get that kind of money is through selling properties in other markets where their investments are still profitable.
A little OT, but I am sure many posters here will enjoy the photos in this Boston Globe article, “Cooling real estate market pulls welcome mat for new agents
“, featuring a former Boston real estate agent who had to go back to his former job cutting fish on the Boston Fish Pier. This is happening, people…
“After earning less than $20,000 during his six months as a full-time agent, Dulock is back shivering before dawn each weekday on the Boston Fish Pier. Instead of showing houses, he’s balancing the books at Sunny’s Seafood, shaving the scales off 4-pound striped bass, or handling packs of Vietnamese black tiger shrimp. Like many latecomers to the state’s now-fizzling real estate boom, his climb up the property ladder was brief.”
“finally to $484,900 on Jan. 27. O’Regan said her family wants to relocate closer to work but is willing to wait for a buyer at the current price. It’s all about your expectations, she said. ‘In reality, it might be less, but it’s still good. You’re still making a profit.”
Haha, they are still counting their paper equity as profit =)
legal_immigrant…
VERY interesting article, and not at all surprising.
BayQT~
The current topic was FL’s housing bubble. Do we really have to revert to CA stats on each and EVERY one?! Not everyone who reads and follows this blog lives in CA.
———————————————————————————–
I think it is a good idea to compare the rest of the universe to its center whenever possible (and the center is not in NYC).
# goleta Says:
February 5th, 2006 at 9:22 pm
Actually I think all RE markets are connected, as CA/MA/NY/NJ speculators are all over the places.
Several markets are already down 10 to 30% and if they want to sell their homes, they have to bring cash to the table and the only way they can get that kind of money is through selling properties in other markets where their investments are still profitable.
———————————————————————
I second you. I suspect Amber is a troll who would rather not have cross-country comparisons mess up her “comps.”
sm_landlord Says:
February 5th, 2006 at 7:54 pm
Trouble is, the blog format doesn’t fit Ben’s format as it has evolved. What is needed is a permanent “Current Events” thread for folks to post their latest spoofs, breaking news, etc.
———————————————————————
This would be a useful feature, as it would serve as a repository of breaking news and ongoing source of potential future topics. It might also help prevent the ruffling of Amber’s feathers.
Baby-Boomers…
I know a lot of baby boomers, my parents & all their freinds are leaving South Florida as they retire, headed north to the Carolinas, Atlanta, Tallahassee, & Ocala.
In Atlanta there are so many baby-boomers who left Florida they call them “Half-Backers”. Pretty much anyone over 25-30 in South Florida came from New York, New Jersey or the Midwest, now they are moving “half way back” to Atlanta.
sm_landlord Says:
I don’t get the part about wanting to live in FLA full time. It’s a vacation destination during the Winter months, nothing more. Have you ever walked around Disney World and noticed the density of lightning rods on the structures? Have you noticed the bugs, humidity, and heat during the summer? FLA is a hell-hole for half of the year.
————————-
I could not disagree with you more. I live in Miami and like it more than Santa Monica (CA), Milwaukee, Chicago and Seattle. I have spent time in many other cities.
I am a first generation immigrant and feel at home in Miami. I dont feel like a minority here. Also, there are so many things to do here no matter what day of the week it is.
Summer heat and humidity can be a problem if you work outdoors. Most people are indoors when the heat is at its worst in the afternoon. I can ride my motorcycle and keep the top open on my convertible 12 months a year…cant beat that.
My brother on the other hand hates Miami. He comes down to visit me twice a year and cant wait to leave.
An estimated 76 million baby boomers will reach retirement age in the next 10 years, and one in five is expected to move to Florida.”
Baby boomers will save Florida! Maybe 1 in 5 expected to move to Florida when average house price was about 150k, but definitely not now.
Exactly! The whole idea was to sell the house in Boston for $800K, buy a condo in Florida for $200K, and live off the profit. Now that the Florida condo is $700K and the Boston house is on it’s way to $600K, it no longer makes sense financially. When you consider the number of boomers with little or no retirement savings, it’s hard to see how they can make they can make the numbers work.
By the way, I was in S FL over the weekend. Large condo towers with very few lights on around 7 PM, and many more under construction. Cranes everywhere.
Well, my 2 cents - I despise message board formats. Anything but that.
OT, but must share this - 100 year mortgages are here!
http://newyork.craigslist.org/brk/rfs/131333236.html
Seems to be from builders desperate to unload — what do you all think?
off italics (I hope)
Well, I put in the off html code and it didn’t work. I tried!
“On the subject of Florida Real Estate, I really like the west coast of FLA. I’m waiting for an opportunity to buy on the coast outside of Tampa / St.Pete when it’s cheap enough that I don’t care enough to pay for disaster insurance. I’m thinking of a beach shack on one of those barrier islands. Like around Reddington Beach, Clearwater, etc. I like that area, and it should be quite cheap when the insurance rates are normalized.
Great place to be in February - April. I’d settle for 100 feet of beachfront with a motorhome hookup for when I’m there, and drive away when the hurricane season hits. Maybe park the MoHo in storage someplace near Orlando and fly out until the next safe season.
I don’t know how long I’ll have to wait until people see FLA for what it is: a winter beach spot that you stay well away from in the Summer and early Fall.
But that’s just me, of course”
I hope this is a joke. A hundred feet of beach property on or off the West Coast of Florida, if any still existed, would cost you well over a million dollars, and today the State won’t let you park your motorhome on a beach. Even if there is a huge real estate crash, it won’t be cheap in the areas you mention, because they are crammed with New Yorkers, Ohioans, and Pennsylvanians. Besides, what you call barrier island really aren’t. They’re just glorified sandbars.
Incidentally, how do you plan to drive a motorhome to and from a “barrier island?” There are no bridges to any of them.
I live in Florida year round, and it isn’t the paradise so many people think. Actually, it’s quite awful most of the time because of the heat, humidity, overpopulation, trashy building standards, poor zoning, and failing infrastructure. The politicians, however, have actively encouraged the housing bubble here because it has inflated tax revenues (and, hence, their own bank accounts). Florida’s state, county, and local governments function as welfare employers, hiring incompetent boobs who cannot find jobs elsewhere, and this requires an enormous and constantly expanding source of income.
I would love to know how many Florida politicians have real-estate related investments and are actually enriching themselves by selling the rest of us out. When a politician describes himself or herself as “pro-growth,” this means he or she is a shill for developers.
From the January 30, 2006 Daily Business Review:
>>>>>>>>>>>
[In Miami, a] once-ubiquitous animal that is now extinct is the weedy lot party with klieg lights, velvet ropes and scantily clad women on swings for a sales launch.
At this time last year, two or three parties per week were the norm, and invitations to events at the hottest projects became as difficult to find as a pair of Madonna concert tickets during White Party.
Overnight lines at sales centers also are a thing of the past, said Brad Capas, senior director for multifamily transactions at Cushman & Wakefield in Fort Lauderdale.
“It was in the news almost weekly. They were camped out. They were lining up literally around the street to buy units,” he said. “Those lines don’t exist any longer. Very rarely do you hear about such an excited opening.”
Capas said part of the reason for the receding excitement is a shrinking pool of speculative investors. Their newfound caution and tightening consumer lending rules have slowed sales. Developers, in turn, have found their projects coming under more scrutiny from lenders.
Diane Lieberman, principal of Miami Beach-based South Beach Investment, sees the slowdown as she scrolls her computer screen every day. A year ago, she had four times as many sales as listings. Now she’s got twice as many listings as sales.
She’s also getting more calls from people interested in renting rather than buying and has assigned a staffer to handle luxury rentals only.
Mic check one two. Testing the comment system, nice new blog.
attempting to end the italics…
and by the way, I appreciate the much more organized manner of comment presentation with Wordpress. Now if they just had preview…
Anton Says:
I live in Florida year round, and it isn’t the paradise so many people think. Actually, it’s quite awful most of the time because of the heat, humidity, overpopulation, trashy building standards, poor zoning, and failing infrastructure. The politicians, however, have actively encouraged the housing bubble here because it has inflated tax revenues (and, hence, their own bank accounts). Florida’s state, county, and local governments function as welfare employers, hiring incompetent boobs who cannot find jobs elsewhere, and this requires an enormous and constantly expanding source of income.
After living there for a year I couldn’t agree more with all of your observations. The only thing I would add is I’ve never been ripped of on more basic stuff than when I lived there. Everything from rental agreements to consumer ripoffs will go against the average consumer….it’s hard to imagine a more rigged game than south Florida.
Boy, I couldn’t agree more with the last few comments on living in South Florida. I relocated here last summer with a job transfer from California and it SUCKS. I plan to retire early from my job (at financial cost to myself) just to get out of here. It has actually become amusing to read the Miami “Enquirer” (Herald) with all the stories of people ripping each other off (usually businessmen or city officials). Things that you took for granted in SoCal like laws being enforced, zoning, honest advertising, etc. are non-existent here. Weather…you must be hard up to think this is good weather. Hot and humid…or hurricane season…or overcast with rain and wind (yes I admit, if you come from the North, the winter here is ok). I trust NO one here and am scared to death driving (three claims to my USAA auto policy since August, and I NEVER had a claim in the previous 22 years). As they say, the best thing about South Florida is that it’s only a 3 to 4 hour drive North to visit the United States.
As a recent SoCal transplant now living in Miami, I agree on a lot of South Florida’s downsides. While some parts around here in Miami are beautiful, I’d say that’s about 5% or less of the landmass. The rest is a concrete jungle, baby. And Tommy D., you are so right about the zoning, etc. My biggest concern here is the traffic — takes me 25+ minutes to go 4 miles to my gym, not in rush hour! Population density is immense; viable freeways/infrastructure are anemic, yet they just keep on popping out the 800sf condos one on top of the other. Hard to see how they’re going to sustain that.
I love the realtor’s quote in the above article:
“Their agent, Jeanette McMullen, said there’s nothing wrong with the three-bedroom, two-bath house. “It’s got a great floor plan, recently painted, carpet and tile floor throughout,’ she said. ‘It’s on a good size lot on the corner. It’s still an attractive place to live.’ The problem, McMullen said, is that ‘there’s a lot of sellers and few buyers. Buyers have more choices than ever before.’”
Yeah, Jeanette, in a free-market economy, when there are a lot of sellers and few buyers, we call that “the law of supply and demand”, and news flash, that means the prices are too high.