Housing Rebound Proves Elusive
Bloomberg reports on Florida. “Scott and Kerry Bingham put down a deposit three weeks ago on a new $321,000 house at Heritage Bay, a development set on a golf course about seven miles from the ocean in Naples, Florida. Two days later, they abandoned the deal. Like other prospective new-home purchasers, they were nervous about falling home prices across the country and the prospect their new property could tumble in value.”
“We don’t want to buy if prices are going down,’ said Scott Bingham. ‘At this point, we’re in a holding mode. If we wait, we might be able to get closer to the ocean and get a better deal.’”
“For some, such as Toll Brothers, the lackluster spring market is a surprise. CEO Robert Toll told investors three months ago the market may be poised to rebound. It didn’t happen.”
“‘We’re all a little more disappointed than we were two weeks ago,’ Toll said Feb. 22 on a conference call, responding to questions about February sales. ‘We didn’t have anywhere near the bump up that we usually see.’”
“When the Binghams started their search a year ago in Sarasota, Florida, they were disappointed. That market was full of overpriced houses, said Scott Bingham. They moved their search to Naples, two hours south, and found things weren’t much better.”
“‘I’d say about 70 percent of the homes aren’t priced competitively to sell at this time,’ Bingham said. ‘I don’t want to be the guy who pays too much and then watches the value of my real estate fall through the floor.’”
“As 2007 began, the housing rebound proved elusive. U.S. new- home sales fell in January by the most in 13 years, the Commerce Department said last week. The annualized rate dropped to 937,000, lower than any economist had forecast in a Bloomberg survey and down from the 1.12 million pace in December.”
“The time a completed home stood empty before being sold reached a record 4.8 months, the highest in almost seven years.”
“‘Some people are waiting on the sidelines trying to time the market and buy at the absolute bottom, just like the people who tried to time the top perfectly,’ said Tom Doyle, a real estate agent in Naples.”
“Homebuyers seeking clues about the pace of the recovery should look to buyers like the Binghams. They say they’re in no hurry to sign a contract to buy a home. ‘Prices are going to drop, but it could be nine months before they drop to a level that makes us comfortable about buying,’ said Scott Bingham.”
The Bradenton Herald. “A Cape Coral homebuilder is planning to step in and complete some of the hundreds of homes that were left unfinished in the wake of the Construction Compliance Inc. and Coast Bank loan debacle.”
“In all, 482 borrowers of Bradenton-based Coast Bank were left in limbo after CCI’s announcement. The bank determined about half of those homes amounted to empty lots at the time CCI ran into trouble.”
“‘I talked to Coast and Coast wants to help them (investors) out any way they can,’ said Tom Gillespie, owner of Enchanted Homes. ‘I think they’re taking the steps to do whatever they can do to help these investors finish their projects.’”
“Zanuel Johnson, an account executive at a Tampa mortgage company, said he closed in June on a home in Cape Coral being built by Enchanted Homes. The deal was brokered through Tampa-based American Mortgage Link, a broker involved in many of the CCI home loans.”
“Johnson claims he was promised a 10 percent return on the sale of the home without having to take ownership. Instead, Johnson maintains, he now is obligated through a Coast Bank loan to pay $430,000 for the home, a price he says was inflated by those involved in the investment scheme.”
“‘They told me it was an investment program for people with good credit and assets,’ Johnson said. ‘They would use my credit to build a home and I would get a 10 percent return, because I would never take possession or move into the home.’”
“Johnson said the home is mostly finished but he doubts he’ll be able to sell it and accuses Enchanted Homes and American Mortgage Link of inflating the price. ‘There’s no way they could sell that house for $430,000. They have one listed for $349,900, two houses down from me,’ Johnson said.”
“Gillespie blamed investors for not being more shrewd and failing to consider future risk. ‘If they felt there was crookery or trickery or problems, none of them would have done it,’ Gillespie said. ‘Let’s face it, if the market had stayed strong, we wouldn’t even be talking today.’”
“‘It wasn’t a guarantee. It was an investment. Now that the market hasn’t gone the way everybody thought it was, now they want to come say someone’s done something crooked,’ he said.”
The Herald Tribune. “A subsidiary of Orion Bank has bought a 289-acre tract near Lakewood Ranch that formerly belonged to Michael Tringali for $14.3 million, the exact amount Tringali owed the bank.”
“But the Dog Kennel Road property, which the bank was foreclosing on, is worth far less than what Orion’s Fruitville Acquisition LLC said it paid, and the Naples-based bank will soon have to take a multimillion-dollar hit to its earnings.”
“The reason the property became so overvalued can be traced back to a November 2005 appraisal done by Julian Stokes. Stokes, who has completed at least three faulty appraisals involving properties bought by Tringali, omitted the fact that Tringali’s former partner, Neil Mohamad Husani, bought the land for $8.93 million on Dec. 30, 2004. Husani then sold it to Tringali the next day in a cashless transaction for $18.2 million.”
“‘The appraiser is key to these transactions,’ said Jack McCabe, a real estate industry analyst based in Deerfield Beach. ‘Nothing can happen unless an appraiser comes up with an overinflated price.’”
“‘The reason banks ask appraisers for a three-year sales record is to verify whether rapid transfers have occurred at rapidly escalating prices,’ said Dennis Black, (a) Port Charlotte appraisal instructor. ‘Those standards date back to the end of the savings & loan crisis of the 1980s, and are meant to stem the kind of daisy-chain real estate deals that occurred in the years preceding the crisis.’”
The Tampa Tribune. “Hundreds of Tampa employees of beleaguered subprime lender Fremont Investment & Loan are on paid leave and waiting on a telephone call today to find out whether they still have a job.”
“The company is expected to announce whether it will sell or liquidate the division today, spokesman Dan Hilley said. ‘Employees were told to go home on paid leave indefinitely,’ Hilley said. Among the Tampa employees are loan originators, appraisers and review appraisers.”
“Monday’s staff announcement came after a cease-and-desist order issued last week from the Federal Deposit Insurance Corp. telling Fremont not to write any more subprime loans, according to Hilley and a statement released from Fremont.”
“‘The FDIC obviously went in and found a lot of things they didn’t like,’ said Chris Wolfe, an analyst with Fitch Ratings.”
“Fremont isn’t the only subprime lender in trouble now, and Wolfe said others likely will follow Fremont’s lead. During the recent boom years of the housing market, the list of the nation’s subprime lenders grew, and now that the market is slowing, there is too much competition, Wolfe said.”
“‘It’s like musical chairs,’ he said. ‘Somebody’s got to go.’”
“Too many subprime lenders were lax on lending requirements and too many buyers jumped into unsuitable loans, Wolfe said. ‘The quality of loans deteriorated rapidly in 2006.’”
“Employees of the company’s residential division could find out today they still have job but now work for a new employer, Hilley said. That may be unlikely because numerous other subprime lenders also are looking for buyers.”
“‘I think it’s going to be difficult to find a buyer for a reasonable price,’ Wolfe said. ‘It’s basically a distressed sale at this point. Nobody’s going to give them what it’s probably worth.’”
Bingham said. ‘I don’t want to be the guy who pays too much and then watches the value of my real estate fall through the floor.’”
This kind of sniffle is contagious.
“‘They told me it was an investment program for people with good credit and assets,’ Johnson said. ‘They would use my credit to build a home and I would get a 10 percent return, because I would never take possession or move into the home.’”
10% for doing nothing? How does someone this stupid manage to get his shoes tied before noon?
Think penny loafers.
Nah, too difficult.
Once again, if anyone can do something with little or no effort, it isn’t worth much.
And he is a r.e. expert/professional.
LMAO
He put no cash into the investment, which really means his expected return should have been 10% of nothing! Of course what he expected was 10% of the price of the house and I guess his investment was allowing his credit to be used. What a bunch of morons. This was a huge specultive venture with limited upside potential but huge down side risk.
‘I talked to Coast and Coast wants to help them (investors) out any way they can’
Meaning, if the buildings are finished maybe we can make them go through with the sale and share the loss.
Does that phony transaction by any chance get the property off the bank’s books at the end of a reporting period?
Ultimately, the bank will take a charge according to the article. It looks like Stokes might also face some charges.
Hey! It’s a buyers market for subprime originators.
“Nobody’s going to give them what it [Fremont Investment] ’s probably worth.”
– Nope, that’s not the problem. The problem is, nobody’s going to give them much more than it’s worth, and it’s possibly worth Zero or less, considering liabilities connected with buybacks, etc.
“For some, such as Toll Brothers, the lackluster spring market is a surprise. CEO Robert Toll told investors three months ago the market may be poised to rebound. It didn’t happen.”
NO!!! What do you mean no Spring bounce? NAR and the new home builder CEO’s all told me there would be a Spring bounce. They couldn’t have lied to me. What will become of my Centex stock?
Well of course for Centex there’s always the $362 Million they got selling the commercial side to Balfour Beatty last month. (Although on reading the announcement the actual net amount paid over looks like it was less than half that.)
Something really smells fishy to me about that deal. I’m wondering if there may have been a liquidity issue at Centex, with BB picking up a profitable little titbit simply by having IMMEDIATE finance available.
“I’m wondering if there may have been a liquidity issue at Centex…”
Nothing to wonder about. With all of the contracts signed in boom time going up in smoke there has to be a cash flow problem. Even as big as they are, Centex has a big target on their backs as a casualty of this bust.
I’m so sick of these crack-smokin’ liars. The market doubles in price in a couple of years, then goes down about 7% so far. What in the crap makes them think there’s going to be a rebound when prices have yet to fall significantly? Of course, I don’t believe they really believe their lies, but hey, anything to keep that stock price up.
But the ***Dog Kennel*** Road property,
which the bank was foreclosing on, is worth far less than what it paid, and the Naples-based bank will soon have to take a multimillion-dollar hit to its earnings.”
In the future, folks who previously went BK, NOD, NOT etc will simply say that they ‘DK” …. ‘Dog Kenneled.’
I loved that road name too. Maybe the builders with idle workers should promote dog kennels as the next investment area. Own your dog’s home outright! Prices so low you don’t even need a mortgage! No vulnerability to subprime credit implosion, because no financial institution is currently making loans on SDH (single-dog homes). Your dog’s home will appreciate at 10% per year as the canine population increases, and dog in search of fresher meat are sneaking across the border from Mexico. Enhance the value of your doghouse with a granite dish-platform and flip that house to a doggie-boomer. Attend my seminar, only $99, to learn where the next hot doghouse areas are.
Hey - an “SDH” would still be a better deal than a condo-hotel, at least !!!
“‘The appraiser is key to these transactions,’ said Jack McCabe, a real estate industry analyst based in Deerfield Beach. ‘Nothing can happen unless an appraiser comes up with an overinflated price.’”
No hold on a second, between 2000 and 2005 prices in many areas doubled and trippled. Obviously Appraisals must have been based on some formula to compensaate for the rapid escalation in values, so one could argue all appraisals are flawed or none.
Obviously a house is worth what someone is willing to pay, or more acurately what a lender is willing to loan, so waw the whole bubble in part created by this appraisal+10% mentality on the part of appraisers pressured by lenders? Was the whole market manipulated by mortgage companies to this degree? Perhaps, but what I saw was classic bubble mania all around and fraudelent appraisals were only one part of a complex puzzle. I would personally look to lenders for most of the responsibility for what happened and who can really blame those cute sheeple?
“Obviously a house is worth what someone is willing to pay…”
That’s the most true statement of the day. You can’t blame the mortgage companies or the appraisers entirely. There’s plenty of blame to go around, but I place it squarely on the bagholder investors. If a house was worth $150K last year why would you drop $300K on it this year?
The banks were crazy to loan $0 down with closing credits to investors. Appraisers were simply viewing supply and demand to come up with prices. Some inflated by orders ($$$$) from the bank. Most simply tried to keep up with the out of control prices…especially in the Florida market.
Bad Andy ….No I don’t believe a house is worth what someone is willing to pay . You have to be a buyer that isn’t under duress , is willing and able to pay ,and it has to be a arms length transaction . If a buyer is purchasing from the standpoint of relying on faulty information or false information /premises ,they aren’t a “able” or informed buyer .If a buyer can’t qualify for the loan long term they are not a “able” buyer and the price they payed was obtained based on false premises . If a buyer believed there was a shortage of land or houses or they bought based on panic buying (”get in now before your priced out forever”), than they bought under duress . If a speculator bought based on a belief that in spite of buying a property that didn’t cash flow they would make money ,they were not a informed buyer . If a buyer buys only because they get a 100k cash back ,this wasn’t a arms length transaction .So market value is not simply defined by what a buyer is willing to pay .
Since the RE market has been a hyped up fake market based on false inflormation , unqualified speculators and sub-prime borrowers, or crooks getting cash back ,it was false market value ,or at least not stable market value .
“Since the RE market has been a hyped up fake market based on false inflormation , unqualified speculators and sub-prime borrowers, or crooks getting cash back ,it was false market value ,or at least not stable market value.”
What you’re saying is buyers in the boom aren’t responsible for their own decisions. So the dot-com bubble was the same problem? It was greed…plain and simple. The only people I can even begin to feel sorry for are the buyers who bought their homes to live in out of fear. As much as 60% of the total market does not fit this criteria according to NAR…which I don’t find to be a reliable source. If I were estimating, I’d say 85% of homes purchased in Palm Beach County in 2004 and 2005 were investor purchases.
I deal with people every day who have multiple properties who have very low incomes. These are the people who bought out of greed with the thought that prices were never going to drop and they could just flip to the next flipper. They drove the market and market value. Frankly if there wasn’t another flipper willing to pay $350K for the home purchased 30 days ago for $250K, the market value wouldn’t have been $350K. Since there was another flipper, that became the new market value.
I’d be happy to have some of my econ students debate this with you.
The only people I can even begin to feel sorry for are the buyers who bought their homes to live in out of fear.
And why would you feel sorry for them? There was a point where I believed the “buy now or be priced out forever” and yet my fear of never being able to own didn’t force me into something I knew was way over my head.
“And why would you feel sorry for them?”
I said begin to feel sorry for. Anyone who places money into an asset that isn’t liquid without putting the proper research into that decision is an idiot. Those who bought at the peak took advice from their fathers’ generation who told them real estate doesn’t go down. They shouldn’t be faulted for bad advice.
Yes, they should be faulted for listening to stupid advice. Because what SHOULD have been at the very least assumed (by everyone) after the age old statement, “Real Estate never goes down!” was “Nor does it ever go up like it has the past couple of years!” This astronomical appreciation was plainly obvious bright red flags! How couldn’t even the simplest of minds not see that THIS WAS NOT NORMAL?!
My point is just that market value can be a false market value if the buyers do not meet the requirements of a “willing and able borrower ” arms length transaction ,without any false factors like liar loans ,cash backs ,or duress buying ,or buying based on false information or a belief in false information .
I agree with you that so many of the sales were based on greed/fear and speculation , but those buyers weren’t qualified and they were not informed buyers .
In prior lending cycles , lenders always use to have borrowers who would overpay because they were stupid or crooked ,but the bank would cut the loan back because the bank would not believe in the market value that those buyers were willing to pay .
So , I’m just saying that what a buyer is willing to pay is not really a true market value established . If you have many willing, informed , able buyers ,not operating under duress or false premises buying ,than you might have a true market demand that would establish a stable market value .
“Yes, they should be faulted for listening to stupid advice.”
First timers can’t be faulted for listening to stupid advice. It’s the stuff their parents and grandparents spewed to them. They are the ones I’m in the pity boat with. Who can you trust for advice if not your parents and grandparents?
At 20 or 21 someone’s knowledge base is not where it needs to be to reasearch market trends by themselves. When their parents and the real estate agent and the mortgage broker all gave them the same bad advice the fault can only partially be put on the buyer themselves.
Bad Andy - also, the appraiser is required to report any sales of the “subject property” within three years prior to the date of the appraisal value. In this instance, the appraiser ommitted this information. If it was a deliberate ommision, then i think it was more than the appraiser just going along with the market. At that point, it slips into negligence/fraud.
“If it was a deliberate ommision”
IF???? It was a special order just like I make at my breakfast restaurant. Made just the way I like it!! ($$$$)
Obviously a house is worth what someone is willing to pay…”
true if someone is paying CASH-if the buyer needs a loan then the rules are different.
Right, nowadays a house is worth what someone is willing to OWE, and that quantity can deflate more rapidly than what someone would’ve been willing to PAY (which was always lower).
In this instance, however, Stokes signed off on property values that doubled within a day. Here are two examples:
Husani bought the property from three owners for $10.35 million and sold it on the same day to Sarasota Grand Central, a limited liability company made up of Husani, Tringali and Robert Martin, for $24.6 million.
Stokes submitted his appraisal of the Dog Kennel Road property to Orion Bank 11 months after Husani and Tringali completed their purchases. Given that time lag, appraisal experts interviewed by the Herald-Tribune expressed surprise that Stokes did not mention the fact that the land was first bought by Husani for $8.93 million and then sold to Tringali a day later for $18.2 million.
“…expressed surprise that Stokes did not mention the fact that the land was first bought by Husani for $8.93 million and then sold to Tringali a day later for $18.2 million. ”
Shouldn’t have come as a surprise. This is one of those cases where the appraiser took orders ($$$$) from someone. In 99 of 100 cases the appraiser isn’t this issue. This is that 1 case. I should have been more clear about that earlier.
As has been blogged about here previously, appraisal fraud, coerced appraisals, made-to-order appraisals (whatever) are a big issue. They are the safety valve for buyers and lenders. If they are skewed in favor of anyone in the middle (RE agents, loan borkers) the systems is broken and will not work.
I think 99 of 100 is a really low number. Maybe 10 out of 100 intentionally inflating the prices and >50% either mislead or fudging the numbers a little.
Every step of the process got broken during the run up.
No way I would defend Stokes if he did misrepresent the value but many times there are three values on this type of transaction, a raw land value, a retail value of the lots and a discounted bulk value.
A responsible appraiser would do all three approaches but would define which is which clearly. At times lenders choose which is the value they will lend on. In many cases it is the discounted or bulk value if the development loan is predicated on such.
Based upon the Coast model I would bet they loaned on the retail without discounting. Hell, 24% appreciation per year will quickly cover your tracks.
A prudent lender would lend on a percentage of the discounted value.This approach is the retail value of the lots, less costs, discounted to a present worth based upon sales velocity and the time value of money. At the time Stokes did his appraisal there were some pretty wild absorption rates and sales prices on lots.
I am not defending him but I know that the assumptions that some banks and borrowers request can be very interesting in hindsight. Keep in mind that in the S&L crisis there was a commercial appraisal behind every loan. The market conditions were in fact a result of the lenders activity not the appraisers’.
The appraisers job is to report on the market and not to make statements that it is an idiotic environment and won’t last. If that were allowed we would all call the market folly in every report for the past few years. Trust me we knew it wouldn’t last. By we, I mean those of us who have been around and seen what creative financing can do to a market.
There is a way to change all of this and I suspect it is coming back and that is to make an adjustment to each sale called a “cash equivallency adjustment.” It is basically a discount of the financing to present worth, cash basis, based upon typical lending standards. Had this been employed over the past 5 years ,as it was in the past, we would not be here today.
“The appraisers job is to report on the market and not to make statements that it is an idiotic environment and won’t last.”
Well said. Nothing a little order from the lender or seller ($$$$) wouldn’t fix though.
BA- In 35 years I never have been offered a bribe. I have had them try to manipulate me but in the end I just lost the job which was fine with me.
We have two things in this business, your opinion and your honor. Give up either and you are done.
“We have two things in this business, your opinion and your honor. Give up either and you are done.”
That’s true…and if you have your honor you likely won’t be offered a bribe. Once you step off that ledge, you’re likely to be offered a lot of orders ($$$). You see, I don’t really like the word “bribe.”
The deal wasn’t a arms length transaction and when you have that much of a increase in that short amount of time the appraiser/underwriter has a big red flag there .
Also lenders should of came down on these double escrow deals that were taking place that inflated the prices within days of the last sale .
“Enchanted Homes” ????……that should have been a tipoff in itself
May years ago when I worked with a bank, there was special division to deal with non performing assets, they had particular procedures and time frames in which to dispose of property, does anyone know what the “standards” are? how often to cut the price/have an absolute auction etc? Could some banks will be asked to throttle the number of properties they introduce in a particular time? we all know there will be flood of them, how will they be managed?
Depends on whether they’re allowed to do it themselves or there’s gubbmint intervention (such as the RTC)
Were these properties publicly advertised last time around OR were financial institutions too ashamed to announce their bagholder status?
There were lists you could get and of course people tried to make money from that by reselling them. With the internet this time, you can expect that to multiply exponentially. Lots of parasites. I see it already on Craigslist in Dallas, lists of HUD homes (but there’s no bubble in Dallas!)
txchick57:
I’ve already seen this advertized on t.v. up in New Hampshire.
A guy is claiming to be able to show ‘investors’ how to flip foreclosures.
Sick.
There are already lists from Freddie and Fannie and you can access these online, but they’re close to the top of the food chain, so their lists aren’t huge… yet. Most of the subprimes, like IndyMac don’t have consolidated lists AFAIK. They place through local brokers. This process will be significantly delayed, however, by bankruptcies, cash crunches, etc.
Fannie’s site: http://www.mortgagecontent.net/reoSearchApplication/fanniemae/reoSearch.jsp
Countrywide site: http://www.countrywide.com/purchase/f_reo.asp
Indymac Broker site: http://reo.indymacbank.com/reo.ext/presentation/startup.aspx
The RTC is direly needed in Florida. Although perhaps the people in that REIC aren’t ready for that enema…
Got popcorn?
Neil
It would probably be done according to the bagholding institutions internally designed policies and the volume of defaulted loans. I also agree with txchick’s statement above.
In addition, I believe loan servicers have to follow predertimined government guidelines in managing HUD delinquencies.
I think dimedropped is in the thick of this issue right now. He had a good post yesterday on HUD. Much of the govmint is outsourced these days, but I think we’re seeing that outsourcing government is a really bad idea.
how about getting rid of HUD and all the gov agencies that helped bring us this mess?
I’ve been in “Special Assets” too, back in the early ’90’s. If the bank is out of market . . . they will hire a specialist in the area to pay bills, clean, repair, manage and dispose of assets/OREO property. (Good way to make some money over the next couple of years IMO - also you would get first crack at a good distressed property) Also, they must get a new appraisal when they take a property back, so appraisers should be busy for awhile. Final decision made by the lender as to listing price, what price they accept, etc. Disconnect usually happens when local market tanks and lender doesn’t grasp the market conditions . . . can be frustrating for a bottom feeder.
Local bank will keep the process in house. What will happen short term is that local lenders will move properties quicker and the out of area banks will sit on them hanging on to hope. As their inventory increases, only then will they fire sale them out. It could be the end of the year or 2008 before that happens.
So far there are still investors willing to step forward to snap up the properties . . . around here, they are getting 25% discounts from what I hear. At some point the investors will have all they want and the prices will fall some more.
good point, I wonder how long it will take? My best memory of the Savings and Loan situation is that the meltdown was well underway by the time the regulators stepped in.
Correct and we haven’t even come close to that yet.
Right, I had to laugh at the comment by an RE agent in Ben’s post, about people staying on the sidelines and trying to time “the absolute bottom” — as if we were anywhere near the abs bot.
It was a puddle.
I like this quote “Some people are waiting on the sidelines trying to time the market and buy at the absolute bottom.” WRONG, we are just starting down the hill, the bottom is a long ways away, and I suspect a growing number of people are starting to understand this. The implication that we are just oh so close to the bottom is hilarious
“The implication that we are just oh so close to the bottom is hilarious.”
I would agree to a certain extent. After the Spring fails to produce a bounce, however, sellers could get agressive. If we see 50% price cuts in the next 6-8 months that will be the bottom. You’ll then have cautious home buyers put thier toes back in the market…and also some late in the game investors. Time will tell, but I see this as the scenario in FL. Especially in the South Florida and Southwest Florida market.
WSJ reported a 36 pct Feb. yoy increase in inventory in 18 major metropolitan markets. Also, the article’s interactive graphic indicate roughly 30 pct of the properties in these markets are touting ‘price reductions.’ Miami has 36.5 according to the article.
“Also, the article’s interactive graphic indicate roughly 30 pct of the properties in these markets are touting ‘price reductions.”
Very few are showing “real” price reductions. If you’re priced at a bubble market value of $300K and you drop to $289,900…it’s NOT going to sell.
Take that same bubble value of $300K and drop it to $200K and watch it fly…even if $200K isn’t the bottom of the crash landing price, there are still buyers in the market. Once that $200K price starts to weigh on comps, the others in the neighborhood will drop like flies. Some will pull their listing and others will bring the price down. That’s how you will see bottom in 6-8 months. Will it happen? My guess is yes in Florida…no for the rest of the country. Time will tell.
Very few are showing “real” price reductions. If you’re priced at a bubble market value of $300K and you drop to $289,900…it’s NOT going to sell.
A couple I know is trying to sell their old house (they bought a new house before selling the old one). The original price was $599,900. After two price drops, it’s now at $590,000.
Amazingly, it hasn’t sold yet.
The original price was $599,900. After two price drops, it’s now at $590,000.
Sorry, my mistake. I meant it’s now at $599,000. Yes, you read that correctly. The two price drops have totaled a staggering $900, or a 0.15% price cut.
“Amazingly, it hasn’t sold yet. ”
Imagine that. Try $299,900 and see what happens.
Wow. two price reductions totaling a incredible 1.6% reduction and no one has pounced on it? I’d guess that the smart money wants to but 2-3% below market to make a real killing.
I noticed a 2BR 1BA cosmeticized POS in Morro Bay (house has no water view) that sat on the mkt for a year at $475K, was de-listed for a couple of months, then came back on at $455K. The owner (an individual, not a bank) will be surprised how little attention that attracts.
you better say 16 to 18 months. people dont talk about the poor folks who brought homes way above their salaries. they are going to become long term apartment renters outside of florida, because no one is quite ready to adjust. if the state goes for the sales tax increase, people will start buying online or heading for the georgia state line. people need to bite the bullet and admit that their homes are not that valuable. it was air money. taxes and insurance has created the perfect storm and no investor can get back to florida for a long time. the 10% increase in value of homes will not occur for 6 to 8 years. with no buyers left, alot of people are holding bags of ****
“you better say 16 to 18 months…”
As I said earlier, that’s probably the case in most parts. People have more room in FL to drop prices…at least most of them do. The rapid decline will bring lower market values to bring buyers off the sidelines and some late to the game investors into the market. We won’t see any kind of price increases to speak of for many years…but we will see a bottom before most of the rest of the country. Just my opinion. Time will tell.
Bottom?
How can you reach the bottom when builders are continuing to fill the pool. We have 70,000 properties on the market in the Orlando MSA and the builders are topping out a house every 10 minutes. Forget the bottom, we will be lucky to touch our toes and hold our breath on tippy toe for several years.
Bouncing for life and pray there is no undertoe.
undertow
“How can you reach the bottom when builders are continuing to fill the pool.”
Builders build at $50 per square foot and sell at $125. They have a ton of margin. They have a lot of room to offload houses at a steep discount.
You have to remember that homes going up today are in communities planned in 2004 and 2005. You can’t blame the builder for wanting to continue to ride the gravy train.
Back to the original point. There are still buyers. Even when the builders continue to fill the pool, it just will bring prices on existing homes down that much faster. As sellers become either frustrated or realistic homes go off the market and a sense of a normal market returns. These builders aren’t lining up any new projects for 2008 and 2009 right now. Time heals all wounds…and 6-8 months may be enough time in this market for us to see bottom. Make no mistake about my prediction…we won’t see values go up (at least not more than 1-3%) for 5 to 7 years. It would be crazy to expect a market that has dropped 50% to keep falling. If we don’t see that 50% number in 6-8 months and instead see it in 2 or 3 years then I was wrong. What we won’t see is a decline in the 80% neighborhood.
i think it is going to be worse. with arm’s, insurance and taxes. the cost of a home is alot different than in the past. to maintain a house is much more expensive now and if south florida goes into a true hurricane cycle like the 1920’s to the 1950’s, it will create great stress on the infrastructure. south miami dade never really recovered from andrew. before andrew, most of south miami dade was going to be built out. even today, some of the lowest prices in housing are in south miami dade (region wise). a cat 4 or 5 in the center of south florida?
“‘Some people are waiting on the sidelines trying to time the market and buy at the absolute bottom, just like the people who tried to time the top perfectly,’ said Tom Doyle, a real estate agent in Naples.”
We sold in Spring, 2005. I had a strong feeling it was a top, in spite of everyone thinking me insane and a “gambler”. Anyone can do due diligence (with the help of this blog) and also with a little local research get a pretty good grasp of local market conditions as well as macroeconomic conditions (sub-prime lending for one).
Market timing is not impossible. People often judge stocks by their P/E. I can judge real estate by the same measure (just one measure of good “value”).
“We sold in Spring, 2005.”
Good timing on your part. This is one that couln’t have been called by normal economics. If that were the case, we would have topped off in 2003 after everything was 50% above 2001 prices. The sheep kept on buying. Now we have a mess on our hands.
TxChick,
Are you going short again this afternoon?
No, not yet. Want to see how option expiration plays out.
Instead, Johnson maintains, he now is obligated through a Coast Bank loan to pay $430,000 for the home, a price he says was inflated by those involved in the investment scheme.”
Notice that Johnson had no trouble with an inflated price when he thought he was going to get a 10% return. I think this would be a good time to invest in violin manufacturing since there are so many “feel sorry for me” stories.
HA! Check this out!
http://bigpicture.typepad.com/comments/2007/03/quote_of_the_da.html
Hmmm… Do you think he’s senile?
Housing rebound very simple example>
You own a house for 400k you list the home for 519k and take a 499k offer house sold rebound is here.
You list the same 400k house for 619k and you die a slow death, and the rebound falls flat on its face?
“Oh NO Toto..If you chase after the Florida Free Money…A House MIGHT Fall on YOU !
One rational/non-fraudulent explanation for the appraisal is: the property was subject to a purchase option for $10 million (expiring at year end), but the property was worth something closer to $20 million by that time. A buyer/development partnership was found for the property (and to provide the $10 million ) and the two transactions occurred back-to-back. An option exercise could explain a scenario like this (doubt it in this case).
This Coast Bank contruction of homes on individual lots deal was just a scheme to avoid the normal requirements a builder would have on a project of that size . Normally you would not have the same builder on all lots and normally you would not have the same bank giving a credit line of 300k to buyers to fund requirements for downpayments on constructin loans on individual lots .
It seems like the crooks have figured out that it’s easy to get investors to invest 10k in a deal if they think that’s all they will be liable for ,especially if you promise a 40k return in a short time .
Builders selling out entire projects to investors with the idea of double escrowing the sale to a new flipper or dumb buyer is also a way to insure financing of a project in spite of the buyers not really being able buyers . It’s all about meeting the requirements of construction financing without really having a true able long term buyer . Look how Donald Trump was selling his friends and family condos in a project just to meet the requirements of the bank for pre-sales before the bank would fund the construction loan . Why are lenders not checking for purchases being a arms length transaction or that the units are really owner-occupied rather than quick turn investors ?
We don’t call it a housing bubble for nothing. A lot of buyers, sellers, lenders, and regulators suspended disbelief. Sellers are probably the only group where the condition still persists. They’ll come around soon, however.
Hi. Lurking here a while. Good blog. Re Coast Bank and CCI (builder):
This story is not just about greedy spec buyers getting burned by a turn in the market and defaulting on their obligations to the bank. Much more sordid than that….apparently, the builder, as part of packaging the entire deal for a buyer, arranged a construction loan with Coast. Builder then drew down on the loan/credit line over the course of several months or a year or so. Quite normal for construction finance. But no one - not the buyer, and not the bank, bothered to check whether or not the work was being done - no confirmation of milestones, no one looking at the job site, nothing. To me it’s amazing that the buyers wouldn’t have bothered to take a trip or two to make sure something was happening on their lot, and just as amazing that the bank would allow the line of credit to be drawn on without specific authorization or confirmation from the borrower. On top of all of this, CCI apparently stiffed many of its subcontractors for what little work had been done. So not only have the loan credit lines been drawn down substantially, if there is a structure moving towards completion, it’s now probably lousy with mechanic’s liens for unpaid for work or supplies. And it’s not just a loan here or there - Coast has 482 loans for homes supposed to be built by CCI. I forget how much of a percentage of CCI’s overall portfolio this accounted for, but it’s at least 20%, if not a lot more. This is all reported heavily in the Sarasota and Bradenton local papers (for Sarasota, go to http://www.heraldtribune.com). In my opinion, in this case there is probably a lot of responsibility on the part of the bank. I haven’t seen the loan documents, but I would be very surprised if they could just disburse funds without the borrower’s/buyer’s approval. In fact, from what some of the articles were saying, it’s a statutory requirement.
BTW, shortly after this scandal broke, Coast fired the manager of it’s construction loan department, and also one of the top producers in that department, who just happened to be the wife of the manager.
This almost reads like a novel - honestly, it would be a great feat of creative writing for someone to make this up.
LEND decided to fall off the cliff at 10:45 today… dont see any news yet…
Down about 9%
http://www.marketwatch.com/quotes/lend?sid=1370604
did bob komikazi break up w trump
he’s pitching deflation now
not real good for high end condo sales ,is it ?
rumor that LEND is the next shoe to drop. Stock just dumped a couple of bucks.
“For some, such as Toll Brothers, the lackluster spring market is a surprise. CEO Robert Toll told investors three months ago the market may be poised to rebound. It didn’t happen.”
“‘We’re all a little more disappointed than we were two weeks ago,’ Toll said Feb. 22 on a conference call, responding to questions about February sales. ‘We didn’t have anywhere near the bump up that we usually see.’”
********************************
Toll sure was dumping SHARES though.
PUMP AND DUMP CONTINUES.
If you want to see dumping, take a look at the insider sales at Countrywide. Mozilo has sold around $38 million in the last two months. Looking at the past two years, total insider sales have been around $585 million and total insider purchases have been around $73,000. No, that’s not a typo.
http://www.secform4.com/insider-trading/25191.htm
““Scott and Kerry Bingham put down a deposit three weeks ago on a new $321,000 house at Heritage Bay, a development set on a golf course about seven miles from the ocean in Naples, Florida. “
Personally I would avoid a development which had the name “Heritage Bay” when the place is seven miles from the ocean. I would figure if they are going to lie about the name of the development, then what else are they going to lie about.
Yeah, I think of Royal Palm Beach. Isn’t that about 1/2 hr west of WPB?
“Yeah, I think of Royal Palm Beach. Isn’t that about 1/2 hr west of WPB?”
10 miles from West Palm Beach. Could be 1/2 hour in traffic. Who am I kidding? Could be 2 hours in traffic. It used to be the less expensive western suburb.
Heritage Bay, soon to be available cheap on E-Bay. Original buyers will be in the Sick-Bay, when they realize they’ve thrown their money a-way.
Seven miles? They must be planning on the effects of global warming. “Purchase this fabulous future beach-front property today!”