This Is The Other Side Of The Boom
The Wilmington Star reports from North Carolina. “A rising number of people in Brunswick County risk losing their homes to foreclosure, according to statistics from the N.C. Administrative Office of the Courts. So far this year, the repossession man is knocking more frequently, especially in Brunswick, which has had almost a third of last year’s total in just the first fifth of 2007.”
“‘It had been a long time since we saw anything close to the water,” said (realtor) Pam Wooddell, who has had several repossessed listings in Oak Island as well as on New Hanover beaches.”
“She recently represented a foreclosed home three blocks from the ocean in Kure Beach. The owners had started it on the market for $789,000 with no takers. The bank listed it for $300,000 less, she said. It closes this week at close to that price.”
“What she finds disturbing is how many of the properties facing foreclosure were bought just last year, raising the possibility of predatory lending.”
“‘It certainly would appear that perhaps some loan fraud or predatory lending went on and got people into houses perhaps they shouldn’t be in,’ she said.”
“In boom years, distressed property owners could count on a quick sale or refinancing to bail them out before the lender started foreclosure. ‘That’s simply not happening now,’ said agent Clinton Howlett who specializes in foreclosed properties, adding that even oceanfront properties have gone through foreclosure without being bought by an investor, a sign of how slow some beach markets have become.”
The Sun Sentinel from Florida. “South Florida has has a higher rate of loans to borrowers with shaky credit than the national average. Meanwhile, the troubles of New Century Financial Corp., the nation’s second-largest subprime lender, have affected local offices of one of its subsidiaries.”
“Home 123 Mortgage, which has offices in North Palm Beach, Boca Raton and Plantation, has stopped funding existing loans and accepting new business, as has New Century.”
“Subprime lending has a much bigger share of the South Florida market than the nationwide average of 14.7 percent of all mortgage loans outstanding at the end of 2006.”
“In Broward County, 18.4 percent of mortgages are ’subprime,’ while Palm Beach County has 13.3 percent of its mortgages in that category, according to First American LoanPerformance, a San Francisco-based mortgage data company. Miami-Dade has the biggest share of subprime mortgages in the region, 23 percent.”
“Christopher Cagan, director of research for First American CoreLogic, expects South Florida to be hit hard by foreclosures because prices rose quickly, causing people to stretch to buy expensive homes using ‘teaser-rate’ financing.”
“‘Two years ago, the rules were gone and everything was perfect,’ Cagan said. ‘This is the other side of the boom.’”
The St Petersburg Times. “So long, paycheck. Citing growing woes of its subprime mortgage unit, Fremont Investment & Loan told several hundred Tampa employees Monday it will lay them off May 18.”
“Fremont’s troubles are also taking a toll on the local employment scene. Tampa is one of its residential mortgage division’s four regional hubs, and hopes that the staff here would keep their jobs under a new acquirer have faded.”
The News Journal. “As a real estate slowdown began tightening its grip on the local economy last summer, average wages in Flagler County dropped below $29,000, a 9.2 percent slide from the mid-2005 level, the state reported Monday.”
“Flagler County, heavily dependent on housing construction and sales for its livelihood, serves as a coal miner’s canary for Volusia County, said Rick Michael, Volusia’s director of economic development.”
“‘Flagler’s economy is so based on housing that we watch the Flagler market as a pre-warning of the Volusia market,’ Michael said.”
“Michael estimated Volusia’s work force of 254,000 has shed about 5,000 jobs. Unemployment, which had been hovering around 7,300 last year, rose to about 9,200. ‘We were surprised by the loss of 400 to 500 jobs in business and professional services,’ Michael said. ‘We had been growing in that area every month.’”
“Flagler’s construction industry has lost about 150 jobs, slipping below 2,000, said Sharon Warriner, spokesman for the Workforce Development Board of Flagler and Volusia. More significant, she said, was a ‘huge’ cutback in Flagler’s real estate and mortgage industry, shrinking from nearly 2,000 workers in September 2005 to 532 the following summer.”
The Orlando Sentinel. “More than 15,000 condo-hotel rooms could flood Central Florida during the next several years in one of the biggest, and possibly riskiest, building booms ever to sweep the region’s lodging industry.”
“‘If all these rooms are built, the Orlando market would have the greatest concentration of condo hotels in the country,’ said Jack McCabe, a Deerfield Beach real-estate consultant. ‘The investment potential of these things is really in question. What kind of appreciation, or depreciation, will we see on these units? No one knows.’”
“Condo-hotel developers walk a fine line when they market their projects, often to the high end. Because the units are condominiums, security laws prohibit sellers from marketing them as business investments — for good reason. Hotel-room rates and occupancy levels can fluctuate, making a rate of return hard to forecast.”
“Rob Risman, an attorney from Cleveland who specializes in real-estate development, bought a unit at Mona Lisa at Celebration, a condo hotel being built near Walt Disney World.”
“‘Condo hotels are a lifestyle purchase,’ Risman said. ‘I really don’t look at it as an investment. It is a second home that we don’t need to decorate, and they take care of everything.’”
“Risman said buyers need to understand that condo hotels will only work if the hotel is viable. ‘At the end of the day, I don’t think anything will work as an investment if it doesn’t work as a good hotel,’ Risman said.”
“Condo hotels have been around for several decades, but they only recently gained mainstream status. According to Smith Travel Research, one in 10 hotel rooms being planned or built in the United States is a condominium.”
“Orlando has 15,518 of the rooms in the development pipeline, second only to Las Vegas, which has 30,032. More condo hotels are planned for Florida than any other state.”
“Some proposed projects, including The Blue Rose and Palazzo del Lago are megaresorts, each with more than 1,000 units. And the cost of those units is high. At The Blue Rose, prices start at more than $300,000.”
“Blue Rose developer Camilo Aguirre said sales have gone well since the project was announced a year ago, but he acknowledged things are getting tougher. ‘The market isn’t what it was two years ago or even a year ago,’ Aguirre said.”
“A slowing real-estate market might delay or scuttle some condo-hotel plans. But market experts say the condo-hotel market has other limitations, including an uncertain resale market and management issues that could complicate ownership.”
“‘From the investors side, there are a lot of other places to put your money,’ said Scott Smith, vice president of PKF Consulting in Atlanta. ‘It is risky. You have to wonder how deep the market is.’”
“Bill Haberman, a partner in the company developing Mona Lisa at Celebration, said the number of people willing to pay several hundred thousand dollars for a hotel room is limited, but he said the model works for some. He had a word of caution for anyone hoping to defray ownership costs with room-rental income.”
“‘If this is done properly, it works out as a better version of a vacation rental for some people,’ Haberman said. ‘But other people want to go beyond that. They hope that these things will make a lot of money.’ Haberman said buyers shouldn’t count on that.”
‘In South Florida, it was another record tourist season, and the $4 billion-a-year hotel industry is building dozens of new properties. In the Florida Keys, the Cheeca Lodge couldn’t find enough local employees. Skyrocketing housing prices chased away most of the blue-collar workers, so the Cheeca and other hotels went overseas to staff the busy tourist season.’
‘We get them from Jamaica, Bulgaria, Romania, Russia, Slovakia, the Czech Republic,’ says Jerry Broz, general manager at Cheeca Lodge.’
“Skyrocketing housing prices chased away most of the blue-collar workers, so the Cheeca and other hotels went overseas to staff the busy tourist season.”
As somebody mentioned yesterday, this thing should have been nipped in the bud immediately once there was evidence of hyperinflation in home prices. Instead, those in charge chose a path of ignorance. Now, we’ve got companies hiring from out of this country to replace Americans who are fleeing states across this country in hopes of finding somewhere affordable to live and raise a family. It’s a sad state of affairs. I wonder where these visa workers are staying. Probably at the lodges they maintain.
If it is anything like southern California, one janitor probably bought a house and has 20 others paying rent (under the table, of course).
You hear about that fire we just had in NYC that killed 9 people. Two big immigrant families living in one unsafe house.
Think 4 workers per bed room.
Ironic how we have families in all the larger metroploitan areas stacking 2 to 3 deep per house, all while millions of homes currently sit vacant.
I know a Mexican who rents out those Home Depot sheds to tenants, has a few of them in his backyard. Made one communal shower head in the middle of the yard. Gets gross because bugs come and fly over the shower area.
Yeah, why don’t they all move here:
http://news.yahoo.com/s/nm/20070319/ts_nm/usa_subprime_detroit_dc
That Mexican story is not a common place thing, mind you, I don’t want to give that impression.
“Gets gross because bugs come and fly over the shower area.”…….but don’t bother to land.
“I wonder where these visa workers are staying. Probably at the lodges they maintain.”
Probably in over crowded homes and apartments, this is illegal but because the people who hire them control the local economy the local government will ignore it. That is until either some disaster occurs, 10 dying in a home fire or if the local developers and government put together a “low income” housing project where the taxpayer gets to pay to subsidize the businesses who employ these workers and which are lowering the taxpayers local wage rate.
Actually Good Morning America did a piece on the foreign workers at Cheeca. The Lodge actually bought up small SFHs for their worker housing.
And if the Katrina rebuilding is any indication, those poor SOBs working at the Hotels are probably getting fleeced to the point they’re barely making any money.
Tennesse Ernie Ford
Some people say a man is made outta mud
A poor man’s made outta muscle and blood
Muscle and blood and skin and bones
A mind that’s a-weak and a back that’s strong
You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store
I was born one mornin’ when the sun didn’t shine
I picked up my shovel and I walked to the mine
I loaded sixteen tons of number nine coal
And the straw boss said “Well, a-bless my soul”
You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store
I was born one mornin’, it was drizzlin’ rain
Fightin’ and trouble are my middle name
I was raised in the canebrake* by an ol’ mama lion
Cain’t no-a high-toned woman make me walk the line
You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store
If you see me comin’, better step aside
A lotta men didn’t, a lotta men died
One fist of iron, the other of steel
If the right one don’t a-get you, then the left one will
You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store
I really wonder when we start getting paid in company scrip…only good at the company store…and need to live in hovels provided by the company.
It has happened here before….it is rapidly re-approaching.
Back in early 90s, my sil used to sometimes work at Cheeca for extra spending money. She said the Bush family were often guests there. She’d watch some family’s kids for a weekend and sometimes end up with like $300. Back in the early 90s! I believe a double occ room went for about about $250ish back then…I checked during one of my brother’s Christmas parties.
That particular brother lived in the Upper Keys for 13 years. Another bro was in Key West for about 2. The truth about the Keys from my humble perspective was that the division between rich and poor was a pretty wide gap before the real estate run up. I can only imagine what it’s like down there now.
I had my bachelor party in Key West. Hotel staff are not the only workers transported en masse to the Keys from Russia, Slovakia, and the Czech Republic.
I used to get the Russian bride offers in my email.
“‘It certainly would appear that perhaps some loan fraud or predatory lending went on and got people into houses perhaps they shouldn’t be in,’ she said.”
“In boom years, distressed property owners could count on a quick sale or refinancing to bail them out before the lender started foreclosure.
- Distressed owners should never of counted on a ‘Quick Sale’ as a bail out! WTF!
- If you did not have cash reserves to carry you for at least a few months you should never of thought of a home purchase.
But, but, everyone was doing it so it had to be okay…
I get so tired of hearing about the “boom years”. People act like they were the norm rather than the exception. 5 or so years of unprecedented appreciation is not normal. Why’s that so hard to grasp?
It is amazing how people today “best-case” every plan they make. Hey, I believe in optimism, but blind optimism is just another name for stupidity. What ever happened to hope for the best, plan for the worst, and gamble with only what you can afford to lose, or don’t gamble at all. But then we wouldn’t have these fantastic bubbles if all played by those rules.
It is amazing how people today “best-case” every plan they make.
Well said.
Especially as we are headed into uncharted financial waters…
“It is amazing how people today “best-case” every plan they make.”
Gahhhd! You’re so negative.
Pessimism is Un-American - it’s just not part of the American pysche.
I’m not the least bit pessimistic…
I’m strictly a realist.
Is that what we’re calling it these days? Predatory lending?
Some morons pay through the nose for a property they can’t afford. Lie and cheat on the mortgage app. Demand bogus appraisals to make the numbers work.
Then blame the inevitable crack up on: predatory lending!
Be an American. Stand up proud and say: “Hey I got three years in a beach house I couldn’t possibly afford, before they finally figured me out. Want to buy some stainless steel appliances? Restaurant quality, never used!”
“‘Two years ago, the rules were gone and everything was perfect,’ Cagan said. ‘This is the other side of the boom.’”
He didn’t just say that did he? Those pesky rules!
And if the dam breaks open many years too soon
And if there is no room upon the hill
And if your head explodes with dark forebodings too
I’ll see you on the other side of the boom.
Good one! Dark side of the Boom!
Condo-Hotels are Florida’s new swamp land scam.
Condo-hotels are a “lifestyle” purchase all right.
A period of debt servitude, followed by a lifetime of crushing debt repayment. Man, I hope I can get that lifestyle one of these days.
I have absolutely no idea what people are thinking buying these things up. For the cost of these rooms, you can stay all over the world in the best hotels for the next 10 years!
I’ve often thought the same about $150k rv’s?
What wrong with a hotel room, instead?
“What wrong with a hotel room, instead?”
Bedbugs.
It’s a growing problem in hotels and apartment buildings.
But with a condo-tel you are the landlord for the bedbugs.
That’s what gets me. $300k+ for a hotel room? Plus association/maintenance fees? $150k would get you a nice townhome/condo (with a kitchen and bedrooms), and adding paid housekeeper would be far cheaper than these condotels. You could stay in one of the suites at Disney’s Grand Floridian for a year for less than owning that condotel.
“For the cost of these rooms,”
IMO I think that it’s more like for the cost of insurance, taxes, and interest, leave the principle out of the equation.
Condo hotels are the best scam out there — for the developer, it combines the ability to make big money on the sale AND management component. And, I’ll bet there is some kind of extra 1% bull—- “transfer fee” to the developer/mananger whenever these get re-sold. Basically, these guys are up-scaling the timeshare scam, with fewer owners and moving parts to deal with.
When I get beyond the indignation/disgust I have over condo-hotels — I am just in love the sheer scammy audacity of CONdo-hotels. Best scam out there that doesn’t start with “Dear Friend — I am the nephew of the recently-disceased Dir. of Petroleum Resources for the nation of Nigeria …..”
Ah,
The Nigerian Letter…
Saw my first one, about 15 years ago, so crude, almost laughable.
Around $500 Million has been squandered by westerners, trying to “claim” their rightful percentage of $58 Million or $22 Million, over and over again.
“Around $500 million has been squandered by westerners …”
Five-hundred million dollars. That a lot of tuition to pay. Hope these people got the lesson.
I doubt there is a transfer fee on most of them, but you are forgetting a large part of the condo-tel component. You are the one that pays to furnish it - and you are required to purchase exactly what the management chooses. Oh, and the management decides how often to remodel (and since it’s not a financial hit for them…).
But that’s not the best part! The reason these are popping up everywhere is because the developer and the hotel operator have almost zero skin in the game, ever! Yet they can sit back and collect their management fees for as long as the hotel runs.
“What kind of appreciation, or depreciation, will we see on these units? No one knows.” said Jack McCabe
I’m not sure how much depreciation you’ll see Jack but I’m gonna rule out appreciation, kay?
-The Shadow
Does anyone know first-hand of a case in which someone profited from the ownership (not flipping) of a condotel room? The only time I’ve witnessed a purchase that almost made sense was when a professional-investor friend in Thailand purchased a primo unit directly on the ocean at a giveaway price, during Thailand’s last big bust. But he bought it only for his personal use and never assumed he’d be able to make it pay for itself by having it rented out.
What a nice report from North Carolina. What is important to point out is how many “vacation” homes have been bought by flippers trying to make a quick profit.
Until recently, vacation homes were a niche market for the upper 5%. On vacation, most of us stayed in hotels, or if you wanted an upgrade a condo. However, in recent years, there has been a huge boom in second home construction. It seemed like the market had no saturation point. What is also funny is how many of these places were also touted as investment properties – even though the prices were so high that they could not cash flow under any circumstance.
With reports such as this and others from Colorado, Hawaii, and other states, it must be questioned how many of these homes were really second homes? Was a lot of this demand purely from rampant speculation. I have seen a similar trend in Colorado. All of a sudden, the MLS sites for places such as Crested Butte are being flooded with land, condos, and homes.
NC will probably be the #1 state for interstate inward migration
FL is a no go
My parents bought a lot on Oak Island in the late 70’s…. sold it when they divorced. Wonder what it would have gone for today?
I haven’t been to that area in decades (my grandparents used to live in Southport), but I don’t recall it as being so resort-y like Myrtle Beach or places in Florida. After all those hurricanes, lucky anything’s still standing, really.
I’ll Roger that! Scores of people cashed in on the insane appreciation of their own home by HELOC’ing it, and buying another as a second home and an “investment”. If pressed on the matter, I am sure most would admit they wanted to capture the appreciation as it seemed like a no brainer. The thing is, many, many more got burned than didn’t. If money were that quick and easy, everyone would be rich. Of course, many tried, but were now seeing what is happening to most of them.
“Until recently, vacation homes were a niche market for the upper 5%.”
I don’t know, Roger H. I suppose it depends on your definition of vacation home. In the early 70s, in NH, it seemed like every family who’s Dad was a professional in our town had some cabin or house on some lake in the White Mountains or ME.
Now the difference was it wasn’t custom decorated and with all the brass tacks of the downstate house. In the spring, you probably had to turn the water heater on and get the water/toilet running again (if it hadn’t exploded). The floors were freezing cold. Sometimes the fireplace was the only heat source and the furniture was definitely hand me down or yard sale.
When you went there it was about fishing, swimming, waterskiing or having fun with the neighbors. You truly did commune with the outdoors….not admire the view behind great panes of glass while your lobster was being served.
That being said my husband’s grandmother furnished her summer place in the Adirondacks with Stickley. This generation enjoys making fun of that since the environment just about destroyed some very nice furniture. But,it does go to show you….nothing new under the sun.
“When you went there it was about fishing, swimming, waterskiing or having fun with the neighbors. You truly did commune with the outdoors….not admire the view behind great panes of glass while your lobster was being served.”
Great post CarrieAnn. I find the current state of many of these vacation areas loathsome. During the 70’s, when I was a child, Lake Tahoe was a charming little place with small cabins on the lake, and motels which common families could afford. Now, that is completely gone. Replaced, by things such as the 80/50 Private Residence Club at Northstar. Luxury villas sporting Tibetan rugs, slab granite, high speed internet and sub zero refrigerators, fully stocked with your favorite food and drinks. There are private chefs, spas, and gyms, and everything else under the sun. Elevators shuttle you to your own private gondola, where your freshly tuned ski equipment awaits. Also included are the private ski boats, the Hummers, or if you prefer, private car service. Sure, you pay for it, $2900 per square foot in this case, but it is disgusting in my opinion. This is only a small, yet sickening example of the uber wealthy pricing out the locals who appreciate and respect the area the most. They talk about growth management and environmentalism, then propose putting in more private piers for the filthy gas guzzling, exhaust belching monster yachts of the uber rich. I don’t call this progress.
Sorry, rant off.
I call it America for the foreseeable future.
If I believed you to be right, I would leave the country. Fortunately, I think you’re dead wrong. It’s just America over the past 15 years or so. The pain ahead is going to provide ample opportunity for sweeping changes. Soak the rich is the theme I like.
The other problem how cabin areas are being destroyed for the Middle class is the taxes. Typically many of these places have been in the family for several generations, and the taxes were minimal since the services were minimal. Now that many of these places are worth big bucks, the taxes are skyrocketing as well. So a family that used it as a summer-only cabin now face a nut of 12-15k per year in taxes. Hence they are forced to sell to some guy who tears it down and puts a monster-home there instead. And goes there maybe 4 weekends a year. Yes the family who sold got some money, but there goes the tradition.
And they will probably “invest” the money and lose it anyway.
Yeah, Sad, you are so right. Next the Asians will be owning those homes.
I remember when the Japanese were showing up en masse at Waterville Valley and Loon Mt (NH) ski resorts in the 80s.
In video clips it appears Europeans are mostly the ones being served on the beaches of Indonesia are right now. I suppose turn-about will only be fair play.
Yeah, but they are a great investment because they go up 20% a year. Don’t think income think capital gains.
“She recently represented a foreclosed home three blocks from the ocean in Kure Beach. The owners had started it on the market for $789,000 with no takers. The bank listed it for $300,000 less, she said. It closes this week at close to that price.”
That’s quite a hair cut ! But that’s still $500K for a vacation home !
Foreclosures and banks are going to hammer the housing market. Yesterday it was reported that auctions in Detroit yielded very low house prices. Today we read it again.
Whereas FBs will sit on a house forever trying to minimize their losses with the bank’s money, the banks won’t. They go on the market and they move them at whatever price the market will bare. Its going to put tremendous pressure on comps !
Question: do selling prices from foreclosures and auctions make it into the NAR numbers and comps ? What about FSBO ?
If the bank/owner uses a realtor to sell foreclosed property, it probably makes it into NAR numbers. Yes, it affects comps but then again appraisers have proven to be unreliable during this mania.
Banks will be the biggest part of the bust. 50% haircuts for everyone!
a buddy had his biz in a Bank buiulding in the early 90’s- they never even sent him a bill for rent- too busy jumping off buildings
in N VA where money is printed by BIG GOV
It makes it into the comps slowly. Mostly by draining away the qualified buyers. Like it or not, we will have a healthy foreclosure flipping market soon where buyers buy the foreclosure, fix it up, and sell it quick.
Note: This is the good type of flipper. They add value. I loved it when I read people are ripping out the bamboo floors (they stain easy) and cabinet less sinks (where do you put the towels/tolet paper in a house sans linin closet?).
Judging by the numbers, the foreclosures will be the market starting in August 2007 through about May 2008.
Got popcorn?
Neil
Our current home was a foreclosure. Here’s what is possible if you have patience and some luck: $69 a square foot for an immediately liveable home on a golf course lot in a gated community on the shores of a large lake. There was an urgent need for a new kitchen and new flooring, plus a not-so-urgent need for an upgraded master bath. Everything else was minor catch-up work, due to several years of neglect (it was a frequently-vacant rental). I’m sure others have done even better.
Our low-ball offer was accepted by the bank because there were no contingencies (we paid for a home inspection before making the offer) and we were prepared to settle by the end of the current month.
The bank was so happy to get rid of it they even paid for the owner’s title insurance policy. I guess they didn’t want us coming after them if there’s any title dispute down the road.
FBs who must sell now are in major trouble. If you absolutely must buy a home in the next year or two and find something you like that’s not already in foreclosure, you’ll be better off waiting until you can buy it from the bank.
Patience is the key to successful homeownership.
“Whereas FBs will sit on a house forever trying to minimize their losses with the bank’s money, the banks won’t. They go on the market and they move them at whatever price the market will bare. Its going to put tremendous pressure on comps !”
This is why the mess will spread FAR beyond subprime lending problems. Lower comps due to foreclosures impact every homeowner. And for everyone else who is mortgaged to the gills with little equity, it puts more homeowners underwater on their mortgage. Spiral continues.
“[E]ven oceanfront properties have gone through foreclosure without being bought by an investor…”
More evidence that it’s difficult to hedge within a market during a mania. You can’t hedge in a golf course community. You can’t hedge with oceanfront property. It’s not different everywhere.
Good point - up until now, most newspaper articles were indicating how the upper end was immune from the latest real estate problems.
In my mind, it would stand to reason that the top end would fall every bit as fast as the bottom, if not faster. After all, wealthy people didn’t get there by foolishly frittering away money.
“In my mind, it would stand to reason that the top end would fall every bit as fast as the bottom, if not faster.”
True to a certain extent. What’s not is the ultra high end. An $8 million oceanfront home on Palm Beach in 2001 is a $10 million oceanfront home today. That’s what you would expect in a normal market.
Buffet predicted that the high end would take the hit the worst.
That $10 mill ocean front home will drop in price. Yes, I know people who own those properties but would never sell. I also know people that if they dropped to $5 to $6M would pick up one quick.
Considering how many of the new uber wealthy made their money off real estate… I’m thinking quite a few remained with too much leverage in the marget. We’ll see…
I just love all the $2.5 to $4.5M “homes” going up in my area. LOVE IT! Oh, I don’t want one. But some of the people I compete with will stretch and get one at a discount.
Got popcorn?
Neil
You bet Neil - I good buddy of mine made a TON of cash off real estate in the past 4 year (about $4 million). Guess where it was all reinvested? Back into real estate.
I will give hime some credit - he “diversified” into 50/50 commercial/residential. I still think he stands to lose $2 million in the next two years.
BTW - the I’m having Kettlecorn today.
“…good buddy of mine made a TON of cash off real estate in the past 4 year (about $4 million). Guess where it was all reinvested? Back into real estate.”
I think time will show most people did the same as him. Like the compulsive gambler, they didn’t know when to “fold ‘em”. Few said “enough”, many said “more”.
“predatory lending” ?
here comes the left
save me from myself
bad banks
bad capitalists
How about “predatory borrowing” with “liars loans” instead?
Predatory pricing.
“‘It certainly would appear that perhaps some loan fraud or predatory lending went on and got people into houses perhaps they shouldn’t be in,’ she said.”
YA THINK!
Geez
I’ll see you on the dark side of the boom….?
I think Bernake is rewriting lyrics to ‘Brain Damage’, but this one is still good:
“Remembering games and daisy chains and laughs,
Got to keep the loonies on the path….”
For the wannabes:
Big man, pig man, ha ha charade you are.
You well heeled big wheel, ha ha charade you are.
Hey Bantering, kind of off topic, but have you seen this comment on the RGJ? I posted it kind of late last night on a different thread. Wonder how to dig up some info on this guy and figure out exactly what happened - he signed his name after the comment. He talks about finding his name on blogs after the fact, although it’s not entirely clear what he means. Here’s the link: http://talk.rgj.com/viewtopic.php?t=15554
I think the sentiments here might finally gradually be changing.
An excerpt: “What happens when you didn’t know then and then you later find your name on blogs? Hey, the Reno Realtor introduced us you claim, to the whole scheme. We didn’t know it was mortgage fraud, you claim. This Reno Realtor told us what to do, what to say, that he would manage the Reno properties and we would make a fortune in a very short time, you claim. We didn’t know until later when the Reno Realtor sold us out. His broker was just as big a crook as them. They are State of Nevada licensed. They were supposed to be protecting us, you now claim. How come this Reno Realtor succussfully used many to just drive the Reno home values up, telling everyone he had multiple offers when he didn’t, until the lie became the truth, got sellers to cancel listings and then he got both sides telling his sellers and buyers he was saving them money. How come this Reno Realtor was allowed to manage other’s Reno properties with no Nevada Management Permit? Then this Reno Realtor sold out at the peak of the market he had created leaving the rest of us holding only the smoke of rapidly evaporating equity. “
While it’s a little hard to understand, I think he’s saying that a realtor and broker in the area encouraged people to lie about their investment homes being occupied as primary residences. Then, due to an investigation by the FBI, they could quite possibly come to find out their name is out their in print as someone who is part of a conspiracy to defraud the banks via the fraudulent loan docs. I think he is speaking somewhat hypothetically, while using real life examples of a specific realtor and mortgage broker. It doesn’t sound like he, personally, was involved. Since he is using his real name, maybe Zaba search or something will provide an e-mail address. Or, more likely, he reads blog posts and you can send a shout out to him to get the skinny!
Come in here dear boy, have a cigar
You’re gonna go far
And if we tell you the name of the game boy
We call it ridin’ the gravy train.
Hey, NHZ. Are you out there? Any insights on this?
Vacation Homes Boom in Spain May Bust as Banks Recoil
March 20 (Bloomberg) — Vacation home prices in Spain, a leading indicator of Europe’s property market, may face a slump that’s worse than the real estate decline in the U.S., based on the loan terms banks are imposing on developers.
Once again, my thanks to all the great folks on this blog who offered me support and advice yesterday in my quest to find a place to rent. And to mariner, who came forth with the offer of one of their places as a rental, my sincerest thanks.
As much as we know the bubble is going bust, it is important to remember that this realization has not sunk in with the majority of people. Although many of us here are pro-rental for the duration of this debacle, renting does kind of suck due to the instability of it. I had a great rental and was patting myself on the back and bingo! one of the other tenants blew it for the rest of the residents by starting a fire. We can pride ourselves on our prudence and wisdom, but no one is immune from the stupid actions of some of our neighbors.
Was that the fire in Tampa Palms? Sucks to hear that Palmetto. I often worry about that being in an apartment as well, especially with some of the screwball neighbors I have.
Palmetto — sorry to hear about the fire. Hope you find an even nicer place and that your possessions weren’t damaged. I just returned from a 3+ week trip abroad and no a single person with whom I talked had a clue about the imploding market here. When I left, I think Implode-O-Meter was at 17, now it is at 41. And prices in Central Florida just continue to drop, from what I can tell by a quick review.
Hey, Chip and Moman, good to see you guys on the blog again. I was just thinking about you both and wondering where you were. Thanks for your thoughts.
The fire was in the SouthShore area. There were actually four, count ‘em, FOUR fires in the area that night, and this is not that big of an area. My building was one of them. I was OK and some of my stuff was salvageable. Thank God for renter’s insurance. So as many of the Florida posters know, I’m in temporary digs and looking.
The point I want to make, though, is that it is a little premature for us to get all warm and fuzzy about declining rental rates, because in some areas, that’s just not the case, like where I live. In fact, rental rates have gone up around here, either because of so much high end stuff that was built or because investors and landlords “have to get” a certain amount to cover their mortage, taxes and insurance. Most of the stuff around here was built for families. The stuff for singletons and couples is practically non-existent, or luxury high end for “playahs”. Or subsidized housing for guest workers. The middle income earners are truly being squeezed.
I’ve often thought the same about $150k rv’s?
What wrong with a hotel room, instead?
My wife wanted to try an RV on our last vacation and after a bit of research and thought I came to the same conclusion. We were just going to rent one but still. RV parking lots (can’t hardly call them camp grounds anymore) are mostly in seedy areas on the edges of towns. You can’t drive them around and park in any normal city which is why you see people towing their regular cars behind. And you are stuck taking your vacations in locations that you can drive to.
Personally I’d much rather load the kids up in the mini-van and take off for some destination that has good beds, good showers, and a nice pool. Or else cash in some frequent flyer miles for a flight to somplace warm with good beaches.
I’ve never figured out how anyone can make any sort of vacation condo/time share/RV make any sort of financial sense compared to just hitting the road with a credit card every now and then when its vacation time.
I’m totally down with the RV. I would take that sucker and go skiing, moutain biking, rock climbing, etc. Totally away from the traffic and cities (go hide for a week/weekend from the cities and traffic.). Too bad my rent is totally stupid (and I’m trying to do it cheap), otherwise, I would have the money to buy one.
We car camp a bit and for around $500, you can get a big tent, blow up mattresses, stove, sleeping bags, etc.
The lost art of car camping~
My inlaws have a 5th wheel, and pull the stuffing out of that thing. Retired, they are constantly going off to visit family all over the country. The even did a 5 month road trip to Alaska (from FLA).
I use it on weekends (when it’s around) for overnight dawn patrol surf trips.
My wife and I sold all of our RE in 04 (I retired), bought a motor home and have been traveling the country with our 3 yo and two golden retrievers ever since. I can tell you that we average about $800/month for camping fees (that includes the utilities, except wireless broadband, cell phones and satellite tv). Since we choose to stay in one or two areas over the winter and only get “on the road” spring thru fall, it varies quite a bit. Our winter fees are about $600/month and the traveling months get up over 1k at times, depending where we stay. 30/night seems to be a normal charge with the “good sams” discount. I get about 7-7.5 mpg (diesel pusher, pulling a jeep) so it does use some fuel. We spent last week in Napa doing the spa thing and are currently in the Yosemite area (although it is raining today so not much to see). It’s not for everyone but it works for us. As a side note, I agree that it isn’t for folks who like to be in the downtown area of cities. It is most useful for those folks who like the outdoors (hiking/biking, etc) and traveling.
My wife and I are going to go on a road trip this summer and do some car camping. We also do backpacking in the wilderness, and are scheduled to do the John Muir Trail hike in August (~220 miles from Yosemite to Mt. Whitney, about 21 days away from running water, civilization, non-dehydrated food, foreclosures, dishonest appraisers, and so forth).
It’s the most honest place in our country.
Be really honest. Leave your cell phone home.
Cell phones work from mountain peaks and passes, but most unreliable, almost anyplace else.
I never take a phone.
I day-hiked Mt. Whitney a few years ago. I went too fast up the “99 switchbacks” to Trail Crest, lost control of my breathing, and ended up with a stupendous altitude headache. I did summit, but I think I needed about ten rest breaks over the last 500 meters.
I’ve been on top of Whitney, maybe a dozen times over the years…
It’s a breeding ground for altitude sickness, especially on the eastern side.
I lived in an RV for free for a year after the firestorm in 2003 that claimed my place in San Diego.
RVs are labelled “not good for permanent usage” for legal reasons but they are fully operational as mini houses… and you do away with real estate taxes, rent or mortgage.
200,000 + people live in San Diego for free or almost… and that is starting to stir up the jealousy of debt slaves oops! Homeowners.
Bogus claims of visual degradation and parking use are now setting the stage for sweeping ordinances and a sort of persecution…
I mean how bad can a 150k+ RV look like? Probably better than that run down shed you screwed up ARM homeowner have to stare at every day in your friggin backyard!
Don’t worry, I don’t have a cell phone so I won’t be brining one!
Also, we’re doing the JMT from Yosemite to Whitney, so we’ll have adapted to the altitude by the time we reach Whitney.
I’ve never been to Whitney nor Yosemite (although my wife has been to Yosemite many times as a child). We have done a few two-night hikes and one 7-day hike in the High Sierras, but more in the middle of the JMT (near Bishop, CA). This 21-day hike will be our longest by far, so we’re both excited and looking forward to the adventure.
Scott,
You picked an excellent year to be in The Sierra, as there will be little snowpack this year, and things will be totally accessible…
I’d assume you’ll resupply @ Red’s Meadow for your JMT venture?
A great walk, and one to consider also doing, is The High Sierra Trail, east to west, being the best way to go. I’ve walked on this trail, for perhaps a total of 2,000 or so miles, the past 20 years~
From Crescent Meadow, to Whitney Portal, there is a total elevation gain/loss of about 20,000 feet, in your 71 mile sojurn, slicing through the best The High Sierra has to offer, with Kern Hot Springs conveniently in the middle of the trip…
beach homes off- and that’s w no hurricanes in 06
anyone know how far in miles you have to be from the caost to avoid heavy insurance ?
It depends more on elevation above sea level than distance from the coast.
If you know how to read FIRMs (Flood Insurance Rate Maps) it is not difficult to determine the insurance rate for a particular property.
tx -otherwise mysterious
FL has a pool so everyone is fckd ,together
We have friends moving here from Bluffton, SC (near Hilton Head). The reason is storm worries, which is the same reason we left Sarasota in 2005. His new insurance policy has a 10% deductible for wind damage from a named storm.
There is rampant overbuilding going on in that area right now. He says there are about 20 For Sale signs among the 150 or so homes in his community and figures it will take at least a year for it to sell. Fortunately he owns the home outright.
BTW, unlike his, many of the new homes we saw there are stick-built with gable-end roofs. No apparent effort to make them wind-resistant. No wonder the insurance companies want to limit their exposure.
FEMA still underestimates flood risk on the coast via FIRMs, that is why the insurance companies are fleeing the coasts.
Hmm, underestimating risk, where have I heard that before?
Optimism has no place in risk management!
Flat — in east central Florida, the line appears to be US 1. So, to avoid the neavy insurance premiums, you can forget having a home with water access to the ocean, or a riverfront or oceanfront house or condo. I’d imagine that monthly condo fees there will be rising regularly, as insurance premiums rise.
Things are getting chilly here in Vegas for the housing market. When I moved into my rental house in Summerlin 4 months ago in a cul de sac of 12 homes 3 homes were vacant(2 I think were foreclosed on) and 4 had 4-sale signs in front of them. Just me and a few other homes really have people living in them. Last week the fifth 4-sale sign went up(by the way none of the other 4 have sold, I have never even seen any agents showing the homes), now there are 5 homes for sale in a cul de sac of 12 homes and 4 are right in a row. It is kind of eery, it is starting to remind me of what I heard Texas was like in the late 80’s.
thanks for the tidbit. I’m going to send a friend to this blog just to read your post. (He wants to buy in the OC… thankfully he’s listening and has agreed not to buy until I say its “ok.”)
Side topic,
Its nice to know some of my friends and relatives will survive this mess.
I think I’ve now talked 6 people out of buying.
Got popcorn?
Neil
My favorite joke from the oil patch days in Texas, in the mid 80’s:
If you buy a toaster, they’ll give you a savings and loan…
That sounds like the Summerlin cul-de-sac where I and six others rented a house for a weekend this past January, although it probably describes any of those freaky culs-de-sac in Summerlin. There were several lockboxes on the street, and only one other house showed signs of habitation.
Also, apparently, although we had found the place through a vacation rental outfit, it was apparently an unauthorized/illicit rental. We got a visit from the City Code Inspector who said there had been a complaint from the neighbors. The inspector guy said that the owner isn’t supposed to be renting the place out (deed restrictions or something), and that this particular neighbor submits a lot of complaints all the time.
The neighbor’s complaint itself was BS; we were there for a hockey tournament, so we weren’t even AT the house very much, and when we were, we were exhausted and kept our noise and beer inside.
Later, the neighbor himself stopped by with some BS about having received some mail for [owner's name], and was he there? He waved some junk mail at us and tried to peek in. Nosy b-stard. Get a better hobby, or just accept the fact that your entire street is in foreclosure.
Re Los Angeles, did Ben post this one?
http://www.latimes.com/business/la-re-market18mar18,1,5891324.story?coll=la-headlines-business
lainvestorgirl, I actually wrote a snippy letter to Ms. Wedner: Ms. Wedner,
I just wanted to alert you to the fact that you forgot to place the “paid advertisement
(of the RE industry)” above your “article” today. Had it been a real
newsaper article, where a reporter actually investigates a story, you might have
noted that in the previous housing drop in the Nineties that the median also rose
just before the fall. Why? The bottom erodes first, while more eligible buyers are
still out buying, thus pushing up the median. Further, with the shrinking sample
size, the median becomes less and less useful in gauging changes in home value.
But hey, it’s a lot easier to just jot down the drivel Leslie Appletom-Young
feeds you, isn’t it?
Sincerely,
Anyway, she responded with this: The ’90s recession you mention does not resemble this downturn, in which, by
the way, prices still are higher in most SoCal counties than they were a year ago.
During that dark period, the aerospace industry left town, leaving thousands of
workers w/out incomes, and they lost their homes. Builders had overbuilt and were
stuck with tons of unsold inventory. THat is not the scenario this time, not even
close, thank goodness. Every economist I talk to (nationwide and widely acknowledged
as the best in their fields–not just Ms. Appleton-YOung) believes this down-cycle
is normal—corrections always follow huge run-ups—and that so far it nowhere
resembles the ’90s crash. But everyone is closely watching what impact the subprime-lending
debacle will have on the area’s inventory and prices this spring.
Her response made me realize that she has no idea what’s about to happen.
LOL. Reminds me of a RE agent I had dinner with three nights ago. Up until March, she was insisting there was no bubble, there was just a lot of demand, etc., etc., now she’s singing a different song and saying she knew this would happen all along.
bloomberg
guy from moody said if Re comes off 2. 5 % then were screwed
guess we’re screwed bad cuase it’s off 10 % in my book (nominal)
“The News Journal. “As a real estate slowdown began tightening its grip on the local economy last summer, average wages in Flagler County dropped below $29,000, a 9.2 percent slide from the mid-2005 level, the state reported Monday.”
And the next truth in this downward spiral rears its ugly head.
Yes, I thought that was a really large drop and a super-surprise to the people there. The “‘huge’ cutback in Flagler’s real estate and mortgage industry, shrinking from nearly 2,000 workers in September 2005 to 532 the following summer” in one year also surprised even me. So much, so fast. Let’s git ‘er done.
“…average wages in Flagler County dropped below $29,000, a 9.2 percent slide from the mid-2005 level, the state reported Monday.”
I think I’ve heard estimates that 40% of private sector employment since 2001 is RE related - construction, RE agents, mortgage brokers, appraisers, etc.
I’m SO relieved the implosion is limited to subprime borrowers. I wonder how long it will take for lower employment numbers to spread to all the other RE dependent markets.
love the sight, wife and i called it at the top and sold our DC home Oct 05 and have been reniting on sidelines since.
For the most part the I find the comments on this blog astute and the advice sound.
I must say though, that I am sometimes appalled by the nativist if not downright rascist discussions regarding hispanics.
Today is one of those days and I just note that the immigrant bashing is off topic and for me extremely off putting. It is meanspririted and gives ammo to the folks bashing bubbleheads
The main issue for me with illegal immigration is that it drives US population up. Isn’t the main cause of pollution, over crowding, crime, invironmental degradation and shortages of raw materials to many people? You can get more efficient at housing and consumption of resources per capita but if the numbers of our people go up our living standard will eventually fall.
The rise in home prices compared to average income since 1973 represents a huge decline in the standard of living of the USA.
Its over population driven.
Our swimming pool is full. People against illegals fear balkanization of the nation and avoidance of the nation becoming a poor third world country. Many nations take action to maintain their standards and limit population The US is stupid in not joining them.
Your standard of living is being stolen from the top.
J Pennington Wentworth III shiny pink republican banker is stealing it. He is just giving you the dirty brown Mexican illegal and scary brown Muslim to hate while he does it.
Oh don’t forget the gays, you would think that America was in danger of having rich people taxed by brown gay Mexican Muslims if you look at what our “leaders” have spent the last 6 years doing.
Republicans “Turning America into a third world country 1 day at a time”
They had every lever of power for 6 years….what happenend? Tax cuts for the wealthy, including corporations (those that could be bothered to stay) War (hey double dip, we will give them more money at the same time we cut their taxes), and lets hate on the gays.
This is republican America, if they cant offshore your job they will import somebody to work at slave labor wages.
How is that working for everybody?
“I must say though, that I am sometimes appalled by the nativist if not downright rascist discussions regarding hispanics.”
Couldn’t agree more. Well-put.
Check out the building permits chart in this article…
http://www.marketwatch.com/news/story/housing-starts-bounce-back-9/story.aspx?guid=%7BB5D5642B%2DFAF6%2D4CDE%2DAEE7%2D5CB3C09E6E5D%7D
Shows building permits have plummeted in the past 13 months back to the same levels seen in 1998-99…
Swampscam. Hmm.. That’s a keeper.
“Swampscam”
Wasn’t that a movie in the 80’s about people being duped out of their 80’s excess $$$ and buying non-buildable land in FL? If not, it’s a good name for people in the 00’s being duped out of their excess consumerism $$$ buying “hotel condos.”
Nothing on imdb.
http://www.imdb.com/find?s=all&q=swampscam
Bad joke…just a bad joke.
LOL
Response to Ben F:
I second your comments re Hispanic bashing. I have posted previously that those kinds of racist comments could “creep” into this valid, mostly postively enlightening discussion, in a manner that would discredit all involved here.
Money, its a crime.
Share it fairly but dont take a slice of my pie.
Money, so they say
Is the root of all evil today.
But if you ask for a raise its no surprise that theyre
Giving none away.