Florida Housing Markets See ‘Overwhelming’ Inventory
Four reports on Florida’s housing bubble. “North Port - The real estate bubble hasn’t exactly burst, said several people involved in the business, but it’s being squeezed a bit. Bunny Jones observed prices went up right after Hurricane Charley as people sought rentals. For the next year, she said, ‘it was nothing to get three offers on a house. Houses were being overpriced and moving at those prices.’”
“‘But people who bought then are now in trouble if they want to sell at the same price they paid,’ Jones said.”
“(Developer) Bill Bracken said in some respects the media created a self-fulfilling prophecy. ‘During the boom,’ Bracken said, ’some builders had investors buying up a lot of houses, and then they could not afford to pay for them. So the builders were left with a lot of product on their hands. In some ways, that helps buyers because some builders are eager to deal.’”
“(Realtor) Arthur Broslat said in North Port more than 2,500 lots are available, and only 30 sold in February (other than the Sarasota County-North Port lot auction). In South Gulf Cove, some 500 lots are available. ‘During a good week now,’ he said, ‘one of those lots might be sold. It was like someone just rang a bell in October. All of a sudden, everything came to a halt,’ Broslat observed. Last year he had a handful of listings and every one sold. ‘Now, I have a hundred and they keep coming in the office; I can’t stop them.’”
“Ted Allen said, ‘This is not just in North Port, houses aren’t selling in Boston either. If they can’t sell their homes up north, they aren’t able to come down here and buy.’” “Broslat observed that some of the area’s major builders are offering huge financial discounts and incentives. He sees banks cutting off loans to builders until they start selling the inventory they already have on the market.”
“Last week, the Pensacola Association of Realtors listed 5,642 properties for sale, a five-year high and nearly four times more than the 1,487 homes listed in March 2005. As surplus has mushroomed, selling prices slowly are beginning to drop, witnessed by the many ‘Reduced’ signs that are being added to the ‘For Sale’ signs throughout the two-county area.”
“In February, 406 homes were sold in the Pensacola area.”
“Real estate agents say the single biggest factor behind the high inventory is overpriced housing, driven largely by speculators who were hoping to capitalize on pricing jumps after Hurricane Ivan. ‘Some prices were inflated after the storm, and a lot of people saw that and wanted to cash out,’ said Robert Montgomery, a real estate broker. ‘Some prices were unrealistic, and prices are a little inflated now, but they are beginning to come down.’”
“It’s gone from sizzle to fizzle. That’s how some local analysts characterize the market for new home construction on the Treasure Coast. As homebuilders see sales slow, many large firms are spicing up their offers. The incentives are highlighted in full-color, full-page newspaper ads, but rarely discussed.”
“If the incentives are public knowledge, why won’t builders talk about them? Tod Buyers for Mercedes Homes, declined comment, saying, ‘the stuff in the media is not favorable to builders.’ Mercedes spokeswoman Joyce Wilden did not return calls for comment. Rich Brown, South Florida division manager for Maronda, did not return calls for comment. Jane Sonet, of Centex Homes Southeast Florida Division, did not return calls for comment.”
“Builders are also trying to rid themselves of a glut of inventory, Brad Hunter said, because speculators may have put deposits on homes, but backed out of contracts because of lackluster demand from end users.”
“Southwest Floridians who have homes or condominiums on the market are waiting longer for properties to sell because of the current lull in activity. Fiona Finn, broker in Fort Myers, said in mid-February she had 110 listings, compared with 20 at the same time last year. ‘There’s an overwhelming supply,’ she said. ‘It’s one of the slowest seasons I’ve ever seen.’”
“‘If you need to sell today, you need to price accordingly,’ Finn said. ‘I always tell the sellers to take the position of the buyer.’”
“In many cases, homeowners have lowered the original price more than once. Brokers cite reductions from $10,000 to $150,000. ‘Two-thirds of my listings have had to make price reductions to match the market,’ Judy Ramage said.”
“If the price is too high, owners should be willing to reduce or wait. Some listings expire, evident in the 111 that expired in Lee County on Feb. 16. ‘If you’re not getting any showings, there’s only one problem,’ broker Denny Grimes said, ‘and that’s price. They need to get realistic and quit getting greedy.”
They need to get realistic and quit getting greedy. Sez the realtor
But wait! We have some big moneeee “investors” right here on this blog who say that trying to get 100% more than you paid a year or two ago isn’t greedy! It’s just the market!
This is better entertainment than the Conan O’Brien show!
Hi Txchick57, your up early . I wonder if Im going to get attacked for saying the word greedy today .
The people who attack you for using that word will be serving you hamburgers in the coming years. Don’t sweat it.
realahores will be up selling. “would you like that super-sized sir’ ?
Yeah super size it, just like the uber mansion I bought from you at auction for 40 cents on the dollar. And give me a coke while you’re at it.
That’s funny! I thought of our posts yesterday when I read the realtor use the word “greedy”.
The point is that people need to sell their homes at current market value, if they want to sell it. The market is moving down, so if the comp was $600K in October, they should list it for $580K or even $570K. However, if the seller paid $190K several years ago, he’s not being greedy to list it at $570K. That’s the market value, today. Would you sell it for less?
Maybe if I thought the market was going into a free fall real soon.
the point is listing at 600 and complaining when it is not sold- is being greedy
They are still 2 1/2 months away from hurricane season and the Florida storm surge is already rolling in …
This morning I was up just before dawn and while sipping my coffee I walked outside.
It was still, the air crisp and fresh, it promised to be another beautiful day and as I looked in the distance, waaaaay out to the horizon, still dark, I saw the outline of something…. what was that? …..but it can’t be ….. it’s impossible!….. Florida is completely flat!
I rubbed my eyes in disbelief and just then the sun shed a little more light and YES… it was true…. a fully formed mountain range of RE inventory covered the horizon.
A glorious sight to behold.
the news folks are really working the florida hurricane thing early this year. with la nina they expect as bad or worse than last year.
“They need to get realistic and quit getting greedy.”
I didn’t hear the realtors spewing that mantra a year ago. Seems they rapidly adjust to the blowing winds that puts food on their table and a fancy car in their garage.
The problem isn’t the greedy seller, it’s the greed of the buyer to turn an even bigger profit after buying into an inflated market.
How I long for the buyer who looks at the location of the property. Who says, I don’t need that big white elephant of a house to maintain. Who says that I don’t want any incentives other than a lower price; why pay a higher property tax for some cheap gimmies.Who says, I want a loan that I can afford when gas goes up, medical bills come along, vacation time rolls around, taxes go up, car repairs occur, I need furniture for the house, etc.
I am that buyer. But I cannot compete with 100% financed fools, so for now I rent…
Refine that statement a bit. You WON’T compete with 100% financed fools.
Could, but then I would have to be a fool myself to do so…
Right on …… We need to get to a owner/user driven market.
“Bunny Jones observed prices went up right after Hurricane Charley as people sought rentals. For the next year, she said, ‘it was nothing to get three offers on a house. Houses were being overpriced and moving at those prices.’”
“Real estate agents say the single biggest factor behind the high inventory is overpriced housing, driven largely by speculators who were hoping to capitalize on pricing jumps after Hurricane Ivan. ‘Some prices were inflated after the storm, and a lot of people saw that and wanted to cash out,’ said Robert Montgomery, a real estate broker. ‘Some prices were unrealistic, and prices are a little inflated now, but they are beginning to come down.’”
The above passages subtily suggest that Hurricanes Charley and Ivan may have helped spur prices higher. How does this work? Would a few more hurricanes suffice to get the South Florida prices headed back up again?
Same situation in NOLA. Much of the housing stock was damaged or destroyed, so prices there did go up after Katrina. Insurance there, if one can get it, has got to be a shocker now.
I am reading a fantastic book at the moment which provides insight to the question of how much of NOLA should be rebuilt: “The Control of Nature,” by John McPhee. The first chapter, Atchafalaya, implies a simple truth about NOLA — if a hurricane does not doom the city first, then the Mississippi river will eventually execute the coup de grace by changing course. All told, Mother Nature does not seem to look favorably on the future value of NOLA housing.
Don’t question the wisdom of the Realtor…. especially one called ‘Bunny’
Pictures of a nice boob job are dancing through my head…
I was going to riff on that too but I’ve done enough hitting below the belt already today! LOL
I stayed above the belt on that one
Question: Anyone here know which company(ies) is most highly leveraged in PMI. I will be shorting a basket of builder into the end of the qtr but I would like to investigate a short in the PMI market. Somehow I have to believe they’re vulnerable, even though the 80/10/10s have been limiting sales of PMI product…
how about BECN and some lumber yards w high pe’s and debt-they’ll get hammered ,so to speak
How about a contrarian play of playing that downside by going long consumer staples, things that people will buy no matter what. Haven’t looked at any charts on them cuz I don’t trade those as a rule but beer, tobacco, laundry detergent, cheap crappy food, ought to do great in a recession.
people aren’t going to start using more laundry detergent or tobacco in a recession. Cheap, crappy food like top ramen may get eaten more, but the profit margins on it are and will always be extremely low. Alcohol and gaming will probably be more profitable. You might want to look into the Vice Fund which invests in aerospace, defense, tobacco, alcohol, gaming and adult entertainment stocks.
I’m talking about perceived value which is a term you will hear a lot of if we have a consumer recession. This is a time tested investment theory that has worked many times. But it’s all a crapshoot.
Interesting perspective. The thing is that, until now, property values have been increasing since the PMI was instituted following the RTC mess. Many (MOST) loans and refis are set to be DEEPLY underwater. I doubt PMI has been paying much. That’s set to change in a big way. I agree that the 80/10/10s will go away and appraisals won’t be pretty going forward so PMI sales will likely go up. What I can’t reconcile is whether increased sales can do enough to offset mounting losses into the foreseeable future…
The other angle to the consumer staples strategy is that it’s a long, not short one. That way, you don’t take the risk as a non-professional investor or trader of being caught in a short squeeze. There are ways to tell when the public (dumb money ) is shorting and when that happens, those shorts are targeted. Long, if things take awhile to pan out, you can always sell calls.
Merril put out a report on March 8 that recommends exactly that.
Going long on Consumer Staples that is.
I’m guessing that the agenda is a horrific shakeout in the stock market thru the early fall and then a several year bull to resume. Look at all the private equity firms and hedge funds taking companies private. They are of course milking them now by charging gigantic and unconscionable fees but the ultimate goal will be to IPO them in a few years and walk away with another boatload of money. This very well documented thing that is happening is what makes me shake my head at people who don’t see that the money is moving from one asset class (RE) to another. It may not be huge and obvious yet but it’s happening and that’s where the next money will be made. All IMHO of course.
I also feel better going long. I was reading that the automated computer trades can kill a short investor by doing a “short squeeze”. There are too many sophisticated investors doing automated trades, so the markets don’t have a chance to fully play out any situation. The computer steps in and does the trading and the pricing changes based on the movement of prices, rather than the information about the company. And of course, there’s the timing factor. We all know homebuilders will go down, but when and how much and what if some hedge fund comes in and swoops them all up in a cat bounce?
I’m also looking for recession proof companies, but can’t find out what they are. I did a google search, but came up empty handed.
Consumer stapes, yes, but why would they do better in a recession that now? Why would you want to buy them now? Hold them if you have them already, but buy them?
What about productivity products for businesses, who try to cut costs as income slows?
Because that’s a knee jerk reaction that WS always makes to confirmation that a recession is upon us. Go to the street.com and if you can keep your breakfast down, read Cramer’s columns on that over the years.
As far as the automated or program trading, it is over 70% of NYSE volume now. That’s why I think it’s unacceptably dangerous for retail traders or investors who are not able to bail in seconds or hedge to short sell these highly charged stocks. You can buy puts on them but be aware of overpricing on those too. Program trading is my best friend as a daytrader since I can see it happening in real time and just ride along with it but it is not a good thing for the investor. I saw a good piece written recently about hedge funds being the new daytraders and I think that’s probably a good analogy. Hedgefundanalyst will disagree with me on this but there is a bubble in hedge funds too that is starting to develop a few fissures. This is a whole different area for discussion but I’d like to know about the real estate bets made in some of those funds. Unfortuantely, since their holdings are not transparent, we can’t know and bet against them very easily.
“Hedgefundanalyst will disagree with me on this but there is a bubble in hedge funds too that is starting to develop a few fissures.”
I have pointed this out to him about eighty times, but he does not get it… Thinks he is somehow protected from Bernanke’s measures to shut down the casino because he is part of the Wall Street “House”…
Re: why invest in companies that produce consumer staples. Its not really a case that they would go up particularly, its a case that they won’t go down as quickly or as far. More of a retreat to safety than increased value.
A couple of months ago I saw some guy on a business show talking up the dollar stores. DLTR, FDO, DG are the biggest ones I believe. They’re down 15% since then, so as they say he wasn’t wrong he was just early. They’re on my list of long candidates for the time when we’re starting to wonder if we’re in a recession rather than wondering whether the bubble has burst. Way too early to be long IMO.
BigLots (BLI) looks good. Wonder why. I shop there ALL the time.
i wouldn’t go short on the pmi companies, i’d be long if anything. they have been out of favor for a long time, replaced by 80/20’s or self insured lending. they also have a lot of outs on all of the guarantees for the subprime paper, as they will not cover a loan that has “material misrepresentation” involved. pmi coverage will be back in vogue, along with bell bottoms and harvest gold applicances. imho
I agree with you. The obvious plays rarely work.
Anything having to do with combating terrorism is getting hot: Tracking software, identity software, testing products, etc. Let’s face it, any government that will spend $5,000 on a hammer will spend a ton to protect against terrorists.
well the argument you are making is that PMI companies have “not been used” so volume is set to go back up. but:
1 - there will not be so many new mortgages anymore so that takes volume back down doesn’t it?
2 - in 2002 and in 1998 the PMI stocks got crushed
3 - in the early 1990’s they had to do a “new” book of business.
4 - doesn’t the quality of the isurance and the claims far far far outweigh any positives from volume?
I’m posting my plans to short PMI over on Keith’s housing bubble blog. Bottom line — I think that’s the one to short, but it just broke a multi-year all-time triple-top high on Friday in the aftermath of the WLS market manipulation, so it’s another two weeks before I even look at it again as a short candidate.
Speaking of inventory flooding the market, San Diego has an increase about twice a day anymore, according to ziprealty. Are realtors informing their San Diego clients that inventory always goes up (drip, drip, drip…)?
This morning:
ziprealty = 17,980 (set to surpass 18,000 this afternoon)
San Diego Real Estate Central = 19,908 (just shy of 20,000!)
Can anyone explain the 2K discrepency?
Speaking of inventory gluts, check out this tidbit from a marketwatch.com article on Bernanke’s speech tomorrow…
“New home sales are projected to fall about 2% to a seasonally adjusted annual rate of 1.21 million in February from 1.23 million in January, according to a survey of economists conducted by MarketWatch. The data will be reported on Friday at 10 a.m. Eastern.”
http://tinyurl.com/lrage
Now please correct me if my memory fails, but I thought Ben recently posted here that the builders are building at more than a 2m annual rate. That leaves an excess supply of 800,000 new homes for the market to absorb, added to the current record-high level of existing inventory. Please explain why the homebuilder stocks do not immediately crash? Are investors that stupid to not see this train wreck about to happen?
Correction: More accurately, the rate of new home construction is currently something like 800,000 per year in excess of the rate of new home sales. But to me, this still looks a lot like a flood of new home inventory…
They’re not making any more land. Just buy a house before you’re priced out forever.
Following up on my above point, here is the Reuter’s article from last week about the rate of new home construction:
http://tinyurl.com/m9sef
“Housing starts slowed in February to a 2.12 million unit annual rate, a 7.9 percent drop from January, government data showed on Thursday.”
2.12 - 1.21 = 0.91 (910,000 excess of the rate of housing starts over new home sales). Do we really have that many immigrants moving into the US to close this gap?
There’s a difference between new home starts and new home sales, but yeah I wouldn’t think that there could be a 50% difference. Now that I think about it, it’s impossible for that to be an ongoing differential — a yearly difference of 600K would mean that there are 50K homes being built but not sold every single month.
That is precisely my point — the imbalance is unsustainable, and portends a hard landing.
anyone have comparison 2006 to 1989-
direction has been established, rate and depth are the question
“How fast — and how far — will prices fall?
Area real estate agents and a national economist say Pensacola’s housing prices are heading for a decline, but it won’t be as fast or as far as some buyers might want.
Historically, when a housing market is overvalued, prices drop by half the degree of increase, said Richard DeKaser, chief economist for National City Corp., a Cleveland-based financial firm that does national housing analysis.
In the Pensacola metropolitan area, which includes Escambia and Santa Rosa counties, median prices are about 32 percent too high.
That means buyers could expect home prices to drop by 16 percent.
The decrease, DeKaser said, happens very gradually, usually over about three years.” From Pensacola News Journal
Is this what happened in 89?
They have no way of knowing how fast or far it will happen. Mean reversion is a fact of life that will happen no matter how many self interested people wish it were not so.
In fact, the more outrageous a bubble is or deviation from the mean, the more likely it is to overshoot to the downside on the other end, especially when massive amounts of people and their psychoses are involved. What was the true value of JDSU? $400 a share or $1.32?
I think we’re still in the denial phase like in the 2000 Nasdaq bubble when CSCO dropped to $50 and recovered in March 2000. The denial phase lasts 3-6 months letting the “smart money” and institutions exit the bubble, then the real “House of Pain” begins… in October 2000 CSCO went under the $50 watermark for good and kept dropping straight down to $5.
Exactly viz my earlier comment that the spot in summer 2000 which was a vicious short squeeze off the Apr/May lows convinced a number of people that the correction was over and prices had come down enough. That was the real killer, not the first leg down.
I dont really blame the buyers or sellers so much for this bubble. The biggest culprets I believe are the lenders who are facilitating this mess. You see it every time there is an up market. Only after the boom ends do you see the fraud, waste, lack of regulation or out and out theft.
That said, I was a realtor in South Florida from 1989-1991. Times were not good and it was hard to sell a house. I think a return to that will be a shock to alot of the people counting on a continuously booming RE market for thier living, I think this thing could get alot worse than even we on this blog realize. The thing that was not present 15 years ago were the crazy prices and extreme leverage in the system that we have now. Prices were relatively low, most owners lived in the homes and if they did not sell it was no big deal for most it was an inconvenience, now if thing start to go down and homes dont sell, well, you know.
I blame the buyers and lenders for this mess. The easy and cheap credit enabled buyers to speculate on housing. Buyers are basically in control of prices. No one put a gun to anyone’s head forcing them to buy a $700k fixer-upper or $600k dot-condo.
Sellers were just acting in their own self interest and selling their houses for whatever the market would bear.
People really do need to be protected from themselves and their baser or lower chakra instincts or drives. That has been proven over and over again throughout history. If you don’t regulate this stuff, you as a smarter and more prudent person will end up paying for it and the people who screwed up will walk away and do it again.
And you didn’t have the foreigners participating in the numbers you do now, and the what I still find almost unbelieveable tactic of courting illegal aliens and bending every safeguard and regulation possible to get them into places to make the numbers. Can anyone see a parallel between this and booking “revenues” which never existed and never will exist (Enron)?
what happened in Florida?
New Era … Recession proof … Permanently High Plateau …
Where have we heard this before?
“People really do need to be protected from themselves and their baser or lower chakra instincts or drives”
This is basically my point, thanks txchick for boiling it down for me. The reason I dont blame the buyers and sellers so much it that it is hard to resist what seems like “free money” with no chance to lose which is what alot of these people see it as. If you think about it the people that have made money in the last few years were mainly people with less education, intellegence etc. In essence they made money in spite of themselves, of course we all know in the long run this can not last.
Read about O.C. economoy swimming upstream
The Big Orange Index is up again, but some measures suggest troubled waters in the local economy..
“Yet you cannot overlook the fact that the number of local bankruptcies, late property taxes, defaulted mortgages and foreclosures all rose in the past year.”
It’s an interesting discussion: who’s to blame? Loose lending, but where do the lenders get their money? Investors buy the deeds of trust, the right to the income stream from the securitized products. Investors in FNM expect their profits to keep going up, so even FNM gets into the MBS game. Basically, it’s just investors who have lowered their risk premium, coupled with some creative people in the financial markets. This is free market activity.
It makes you wonder about the so-called “smart money”. If they were so smart, they would have sold out their positions by now, right? I wouldn’t want to own any MBS. I sold Fannie Mae when it was still at $75, I think Sept 04 (don’t remember the date), because I’d read of their accounting problems, and read Warren Buffet’s warnings. Why isn’t everyone else selling them, too?
Most Americans don’t understand the loans they get. You don’t even need to understand too much math to graduate from high school. And the high school exit exam is drawing huge protests - “You can’t possibly keep my kids from getting a diploma just because they can’t multiply fractions”. That’s the mentality of the bell-shaped number of people, probably 75% of us. Only a few people like and understand the math behind these loans.
Courtesy of: http://homebuying.about.com
I have a temporary mortgage. What do you mean temporary? Until they foreclose.
Realtor: first you folks tell me what you can afford, then we’ll have a good laugh and go on from there.
The dream of the older generation was to pay off a mortgage. The dream of today’s young families is to get one.
There is no longer a need for the neutron bomb. We already have something that destroys people and leaves buildings intact. It’s called a mortgage.
If you think no one cares you’re alive, miss a couple of house payments.
My buyers went through debt consolidation. Now they have only one bill they won’t pay.
I bought a two story house. One story before I bought, and another after.
This country is great. It’s the only place where you can borrow money for a downpayment, get a 1st and 2nd
mortgage and call yourself a homeowner.
Home is where the mortgage is.
Housebroke–What you are after buying a house.
This house has every new convenience except low payments.
My buyers want a new home on the outskirts—of their income, that is.
The house has a wall to wall carpet and back to wall payment.
I like this one -
“The sellers told me their house was near the water. It was in the basement.”
“They have no way of knowing how fast or far it will happen. Mean reversion is a fact of life that will happen no matter how many self interested people wish it were not so.
“In fact, the more outrageous a bubble is or deviation from the mean, the more likely it is to overshoot to the downside on the other end, especially when massive amounts of people and their psychoses are involved. What was the true value of JDSU? $400 a share or $1.32?”
Another great comment, txchick, as are most of yours. Galbraith, Grantham, Buffett, all insist on mean reversion and even overshooting mean reversion. Anyone who hasn’t read Galbraith’s A Short History of Financial Euphoria should do so immediately, it is enormously entertaining and enlightening. Buffett is waiting for buying opportunities due to “the hangover equal to the binge” and it looks like we’re just waking up from the wild party.
I drove thru downtown Miami’s Brickell ave last night hoping to take some pics of the condos buildings for Ben’s photo page. They didn’t quite come out as well as I had hoped, because there was not enough light, but, boy was it amazing to see that the buildings really are dark! Many many buildings with just a few lights here and there. One new building had One light lit in the whole building. This was at 830 on a saturday night!! Most interesting to me was the Four Seasons hotel and condo building, the one that is suing because they don’t want to pay the inflated taxes on the unsold units-said to be 43% of the building. Judging from the darkness I bet the only lights were from the hotel’s floors.