‘The Boom Days Are Past’ In Florida
More reports on Floridas housing bubble. “Don’t tell (Palm Beach developer) Steve Kelton about trouble in the bubble, the housing bubble, that is. ‘When the media harps on the bubble bursting and how bad the market is, that causes a Mexican standoff,’ said Kelton. ‘Developers aren’t selling for less, because they can’t,’ he says, ‘but people reading the newspapers are thinking, ‘Oh, developers are going to drop prices soon,’ so they don’t buy.’”
“Kelton is partner in a new three-building townhouse development in Delray. ‘The townhouses don’t concern me,’ Kelton said of the sales potential. ‘Now, if you were talking to me about high-rises…’”
“The reasons for the drop in home sales, according to real estate agents: Residents are staying put to avoid paying ever-increasing housing taxes and insurance costs, and many are downsizing or moving north to find a better value. Some people, such as West Kendall resident Adriana Ayala-Diaz, are waiting for prices to dip.”
“‘If not, I’m moving either to Orlando or North Carolina,’ she said. ‘The prices were ridiculous,’ she said. The shift in the market is slowly showing. Tenzer Realty figures show: In the West Kendall area, they sold 136 single family homes in the first three months of this year, a 20 percent drop from the same time frame last year.”
And the Sun Herald has the second part of this series. “Real estate agents, builders, investors and lenders all seem to agree that realty prices are leveling out in North Port. The boom days of last summer are past. The round table participants concurred that sellers need to forget the exorbitant sales prices of last year and focus on more realistic prices.”
“(Realtor) Arthur Broslat offered, ‘We’ll get this market going again as soon as people’s expectations become realistic. People are expecting too much from the sale of their homes. They tell me, ‘I could have sold it last July for that amount,’ but I tell them that was last July, and you missed it.’”
“Ted Allen said that builders find North Port a good place to invest. ‘As Chair of the Planning & Zoning Committee, it seems like all we are doing is approving new homes. Big developers like DiVosta and Centex are overwhelming the market.’ He said a lot of people want to buy in North Port, but they are having trouble selling their present homes.”
“(Developer) Tony Linton added that given the number of properties available now, investors have time to wait for the slow time to pass. ‘But homeowners who have to sell now will have to readjust their expectations.’”
“One nagging issue is the job market. ‘How can you staff Wal-Mart when the people making $9 an hour could never afford to buy a house here?’ asked Broslat. ‘Unless we get better jobs here, we’ll end up selling real estate to each other and suing each other. And working at Wal-Mart and delivering pizzas.’”
‘I could have sold it last July for that amount,’ but I tell them that was last July, and you missed it’
The ‘it’ this realtor is referring to can only be the peak of the housing bubble.
“One nagging issue is the job market. ‘How can you staff Wal-Mart when the people making $9 an hour could never afford to buy a house here?’ asked Broslat. ‘Unless we get better jobs here, we’ll end up selling real estate to each other and suing each other. And working at Wal-Mart and delivering pizzas.’”
True-er words have rarely been spoken. This is a great summary of what is wrong with our economy today.
Simmssays…
AmericanInventorSpot.com
Yep. Key West is having a tough problem staffing jobs that would have applicants lining down the street for in other locations. Due to the high housing cost and remote location.
I knew it was the “media” causing all this bubble hysteria!
I guess it’s OK when the “media” reports on booming home prices and readers get all excited and buy/buy/buy…but when they report on slowing sales and sagging prices, it’s the fault of that damn liberal, anti-capitalist media.
What part of the “real estate cycle” don’t these realtors understand?
An OT but interesting look at goods deflation in the UK:
Going cheap
“TVs and DVD players cost 45% less, in real terms, than they did a decade ago; in the same period, the price of computers has fallen by 93%. High street prices have never been so low, but what kind of consumers do we become when we can buy a handbag for £3 - and then chuck it away? Andy Beckett on how the bargain boom changed the way Britain shops”
We’ll what about all those retiring baby-boomers, immigrants & young professionals? Were’nt they supposed to be buying buying buying right about now?
The reality behind housing is its all about Price Price Price.
Does not matter how great the local is, if people can’t afford it, they wont buy it. Places like Sarasota, Naples, Ft Myers and well just about every where South of Ocala where great places to re-locate. They were cheap and warm…. now people are priced out, they can live were its warm and be house poor or they can live where its a little less warm (Carolinas, Georgia, Alabama, Texas, & even the Fl Panhandle) and pay 1/3 in housing, insurence and home owners taxes & fees.
Have you been to the FL Panhandle lately???? It is not much different than the places you are speaking of in South FL…
Yeah, here in Panama City prices are still high as a cat’s back and nothing is selling. Even so, they’re still building everywhere you look. I expect things will get very ugly here before it’s over.
Ancillary services have always been the backbone of a viable community and the bane to run-away housing costs.Arizona will be interesting to watch; all the retirees headed that way without regard to services such as hospitals, elder care, etc. How far out of the city have they bought and how are they going to get around when they can’t drive anymore? Housing prices are also forcing those in the medical community out of some of these areas. They only ones that can afford are public servants (police, fire, etc) they keep getting outrageous raises because of public fears….
Never mind hospitals, elder care, etc. How about water?
The truth is that Walmart’s ordinary employees will never be able to purchase a detached house that rises above the starter level. Some people in the modern economy cant earn enough to buy houses. There is no shame in that, but the market must offer modest rentals to these folks. Wasnt this what municipal planning was supposed to be about?
I always wonder about this point as a So Cal resident. I must live here due to my career, however I look around at some people with a family making just the median wage and I ask myself why these people would not move to a more affordable area and give thier family a decent life rather than struggle to live in an over crowded, dirty, under serviced and over priced place with bad schools for thier kids. Thats another point, I dont have kids, but short of being extremely wealthy, I would not want to raise children in this environment. Maybe this tough life style will be the norm if things dont normalize. I remember when I was growing up 20 years ago in the Northeast, some people moved to Florida for the affordable living, thats no longer an option.
“Kelton is partner in a new three-building townhouse development in Delray. ‘The townhouses don’t concern me,’ Kelton said of the sales potential. ‘Now, if you were talking to me about high-rises…’”
the recent spin: “okay okay, condos are f’ed, but houses and townhouses are safe.”
this guy’s saying the same thing in his quest for $150k:
http://washingtondc.craigslist.org/rfs/143400995.html
Why would anyone want to buy now if the market is going to correct to be more in line with regional rental values ? Even if it takes 5 years to correct one would be holding a declining asset. Why would lenders want to lend on a declining asset ? Because the market got so heated , wouldn’t a sharp correction need to occur soon , rather than a long drawn out affair ? Will not the lenders of the last two years have to admit they made a grave mistake in endorsing a false real estate boom ?
what? they can’t?
That was an eye-catcher. Recall the St. Joe CEO saying that unlike most developers who paid retail prices for land with borrowed money, his firm wasn’t a ‘prisoner’ to the high costs? I think that’s exactly what this guy is saying; they locked in and now must get the high price or face default.
I think he mis-spoke. (heh heh heh) He probably meant that “they won’t“. What does he think Centex has been doing putting on these little firesales across the country? Granted, the sales are for a short time and then they go back to the old price, but they are attempting to move product. Sure *we* know they aren’t losing that much or at all at this point, but the potential homedebtor feels he’s getting a break and is signing up. This dude is full of it.
BayQT~
What he ment was “HE CAN”T” because he entered at the top….If the big builders get aggressive on pricing or terms (low interest rates) he is toast…Hello bank forclosure…..
Absolutely! HE can’t. He’ll learn the hard way.
BayQT~
Fed talking head says they might have screwed up saying RE wouldn’t go down and that RE is a downside risk to economic growth. Ooops . . . lol
It’s also funny how everyone says housing cannot go down and how there can never be another depression in this country. The minute you start hearing that, it’s time to worry.
Housing prices will drop and they will be the first domino that will cause a chain reaction of change in this country.
US Gov’t debt, rising defaults, dollar crisis…. negative savings rate, social security troubles, healthcare… and it looks nasty.
Its not just walmart employees & pizza drivers that are priced out down here. Its middle income workers too… in Naples they are debating building condos above the parking lots in schools for teachers to live in.
There is an idea floating around to increase permitting for trailor parks so nurses, firefighters, and police officers can afford homes.
Unfortunately many cities are struggling to fill these positions, why live in a trailor or teacher slum in Florida when you can buy a nice home in Atlanta, Dallas, Houston, Charleston or just about anywhere else in the South East????
“There is an idea floating around to increase permitting for trailor parks so nurses, firefighters, and police officers can afford homes”
This is really sad. Anybody who works fulltime should be able to afford to buy or rent something better then a trailer to live in.
March 12, 2006 comment by Mark Watterson on Sarasota Springs Utah real estate….”Area Market Conditions:Stay tuned. It looks like the biggest mistake you can make in our current market conditions is not be in the market.With current conditions Investors will be paying market or higher (prices)depending on the area, with discounts to market becoming harder and harder to find as the market continues to heat up.”
Just keep mov’in further, and further, and further away from everything and then bid up the prices for the next useful idiot !
“One nagging issue is the job market. ‘How can you staff Wal-Mart when the people making $9 an hour could never afford to buy a house here?’ asked Broslat. ‘Unless we get better jobs here, we’ll end up selling real estate to each other and suing each other. And working at Wal-Mart and delivering pizzas.’”
Ditto for the rest of the USA economy. Luckily for us, the Asian economies have agreed to satisfy our manufactured good demand in exchange for $800b+ worth of electronic fiat money…
Slightly off topic but:
Buffet predicts steep decline in the dollar over the next few years.
“I think over time the dollar is going to weaken. I have no idea whether it will be this year or five years from now,” he told reporters after ringing the opening bell at the New York Stock Exchange”
This scares me because the natural outcome of falling dollar and resulting higher inflation is to hold on to expensive physical assetts to ride out inflation. Clearly, holding onto “money” in the bank is the wrong strategy. Are we all wrong then? Should we be buying large amounts of physical property (gold, houses etc.) and debt in this scenario. Your thoughts!
Tellall, I have copncerns about this also. Thus while I sold last summer & rent now, I do have a precious metals position. The problem with real estate is all the debt, waaaay too much leverage which I don’t think the sheeple are going to be able to carry with their incomes. Ya just can’t have a spike in prices that looks like a French curve on the charts without a huge correction. It doesn’t matter if it’s Google, the nasdaq or real estate.
If real estate has the price correction we all expect, I may want to buy sooner rather than later as the Fed will surely open the flood gates of money even more & lower interest rates. That is when the US$ will truly tank & precious metals will soar. As to the timing? Follow Ben’s board, many smart people here.
I think lowering the interest rates one more time to salvage a real estate downturn will not save this market. One thing that has kept this market going is the anticipation of higher prices. The outlook on the potential upside will be not all that enticing to make people jump onto this bandwagon again. Since by then the newspapers will be full of gloom and sob stories of people financially ruined by the market downturn, once such stories become front page news this market is toast for a long time. Like the stock market is now when compared to the 1998-1999 times. The economic landscape will more or less resemble a continous pattern of small upside followed by a larger downside and so on. Thus we are going to be seeing times of diminishing returns from all classes of investments especially stocks and real estate. What it will teach is to stop pimping houses to one another and do some good old hardwork and live within our means. In short crushing levels of deflation in some asset classes and galloping levels of inflation in some classes. A radical realignment in what we currently think as expensive and affordable. Consider: 8$ oil per gallon and relatively cheaper electronics. Well this is just my opinion.
Lower interest rates will only accelerate the outflow of foreign investment. I don’t remember the exact number but wasn’t the dollar depreciated from 200yen/dollar to 100 yen/dollar in the 80’s? The dollar is going to depreciate at least as much this time. The only US assets that are worth keeping are companies that make most of their money overseas wit good profit margins.
I’ve been thinking about opening an overseas bank account too, The interest rates with foreign banks are mostly lower, but even 0% interest rate still beats keeping the money in the US with 10% interest rate if the dollar dalls 50%!
Then what you guys are all pointing to a period of deflation..reduced money supply as asset prices drop and debt laden consumers are unable to sell and stable or decreasing wages (real wages have not gone up in 4 yrs).
My econ 101 taught me that in times of deflation cash was king. Maybe, then we all are correct in holding on to our cash.
Here is an example of what is coming to South Florida. In 1992 I bought in Juno Beach. (Palm Beach County) I bought at auction a very nice Townhouse for 162K, the retail was 235K. I sold it for break even in 1997 & was luckly to do so. This was a very nice development which I enjoyed living in.
This time the bubble is much worse & the debt nothing short of crazy………..standby for the hard landing.
Chris
I agree. I have been in Florida since 1980.
Every 10 years or so it seems like realtors band together and spread this rumor that “we are running out of land” and it drives people into this buying frenzy, people decend on the state buying up homes and condos by the dozen and selling them to wave after wave of speculators each less experienced, less educated and more foolish than the last. Then all the suddent the music stops, inventory skyrockets and the last, and dumbest, wave of speculators is left holding the bag.
One thing for certian Florida is not running out of land, its a massive state. It would take you 9 hours to drive from Florida City in South Dade County to Jacksonville, then after than you have another hour before you hit Georgia… And thats just one coast, then you have the west coast, same distance, and the panhandle which from Perry to Pensacola would easily take 4 hours to drive. Don’t forget all that land in between. As far as land owned by the federal and state governments, well since the state government is pretty much owned by developers nothing is off limits.
…but they keep telling us “It’s different this time”.
I’m curious. Does anyone know if it is possible for condo conversions (or any highrise project) that don’t sell will revert to being available as rentals? Or will developers let their buildings stand empty rather than do that? If city planners see that they are losing people needed for essential services (police, medical, teachers, etc), will they be able to influence those developers at all?
BayQT~
Ive posted on one Florida conversion that quietly reverted to renting, and one new condo tower that switched to rentals in Miami.
Wow! Ok…I missed that one. But it’s good to know that it is happening. Can you direct me to that topic/thread? Thanks Ben.
BayQT~
The new condo tower going rental was psoted last week and the conversion story was the week before. Both were in Florida. We added a search function for this blog in the sidebar. That’s the best I can do, sorry.
Ok…thanks Ben. I’ll see what I can find through the search.
BayQT~
The condo conversion that went back to apartments was in Boynton Beach. (Palm Beach County)
The market will dictate….The developers will decide to rent the remaining unsold units rather than discount to heavily thereby avoiding law suits from early entrants in the developement that paid prices the developer cannot currently achive…
The developer also may wait for re-sales from current owners to set the “price bar” lower and then start releasing product at the new bar again attemting to aviod litigation…….
High rise developers in Atlanta are beginning to rent their units through their own realty companies, although most have been sold to end-users already. Big condo glut swelling with every crane going up…
For many years I rented from the developer of a high-end condo building in NYC. I got to know one of the partners pretty well. He told me that they had never intended to put the building in their portfolio of rental apt buildings but had finished it just as the Re market tanked. A few units were tenant owned but 75 % were owned and rented out by the developer. They kept them all until it recently became more profitable to sell them. I should add that the developer was a large multigenerational private partnership that had pretty deep pockets.
WTF. How can you staff the tech companies in San Diego when the people making $30 an hour could never afford to buy a house here.
By the way, people at walmart make a heck of a lot less than 9 bucks an hour.
‘Developers aren’t selling for less, because they can’t,’ he says, ‘but people reading the newspapers are thinking, ‘Oh, developers are going to drop prices soon,’ so they don’t buy.’”
Bullsh*t… The big developers buy material in bulk. Haven’t you noticed how all new developments are using the same siding on every house? Most of them here in NJ stick with the same color on every house as well.
It’s all profit for developers.
Yep, my reading of a couple of financial reports of the homebuilders here and there is that they have a 30-40% profit on their home-building.
Thus when they are running a 15-20% reduction, that’s not cutting 15-20% off their profits, that’s cutting 50% off their profits.
Before the time real estate prices are down 30-35% from the top, we’ll hear serious talk about homebuilders consolidating or considering BK. Might take a couple of years for it to get to that point of course.
Take a look at Tolls latest numbers. I think they said 10%.
Re: Builder can’t sell at lower prices?
Tell that to Centex last months when they had up to 200k off sales.
they build at roughly $100/sq.ft., or less so they have plenty of room to move,…just don’t want to……Yet !
—
So I guess it’s official now ,they aren’t homes anymore,but investment vehicles. Tell my broker I want to liquidate my holdings…..What do you mean nothing’s moving?? All the talking heads said real estate never goes down! Overseas have stopped buying dollars ,and gas is over $3/gal. …but no inflation so everythings OK.
said Kelton: ‘Developers aren’t selling for less, because they can’t,’.
What a load of bull#$% .
There is development .5m from my place.
At the start prices were in high 200, now for
the same house its high 400. And it’s the same
for whole area.
Developers have so much gravy in the price that
they can drop 50% and still be very profitable.
I have heard anecdotally and through experience, land prices have gotten out of control and developers are having a hard time getting new projects to pro forma. On the other hand, land that was “banked” is pure gravy, but every tract developed needs a new one in the pipeline.
Richmond American is offering 3 years at 3.625% interest-only financing here in Northern VA. Phew.
RIGHT ON….I have been suggesting this was going to happen for sometime now….HOW in the world can a small builder OR a resale owner compete with this offer ?? THEY CAN’T !!!
When the Elephants dance, the mice get crushed…..
“Real estate agents, builders, investors and lenders all seem to agree that realty prices are leveling out in North Port. The boom days of last summer are past. The round table participants concurred that sellers need to forget the exorbitant sales prices of last year and focus on more realistic prices.”
I AM HEARING THE SAME BUZZ HERE IN SANTA BARBARA.
Sounds like the Bird Flu Epidemic Scare is going to quickly be replaced by a NATIONWIDE HOUSING GLUT EPIDEMIC, (and the ensuing ramifications…)
“Some people, such as West Kendall resident Adriana Ayala-Diaz, 34, are waiting for prices to dip.
”If not, I’m moving either to Orlando or North Carolina,” she said.”
Homes in Orlando are not much off from Miami now that S. Florida and NY speculators have moved in. Good luck finding a high paying job in Orlando - Disney character isn’t going to pay the bills on your $500k 3/2 McMansion.
—Bear Stearns and Lehman rode the U.S. housing boom from 2000 to 2005 as the top two underwriters of new mortgage securities,…..
no wonder there profits last quarter were off the charts? where is hedgefund who argued innocently about financial sector’s avoidance (largely) of this..
derivatives/mbs/cds/ will magnify losses and fed is helpless.
and outsourcing continues with a vehemence.
obviously, world will look very different 2-3 yrd from now.
He’s a good guy but he’s talking his book
http://www.itulip.com/pastcommentaries.htm#Hedge_Funds_Still_in_the_Dark
we’ll end up selling real estate to each other and suing each other. And working at Wal-Mart and delivering pizzas.’”
Sounds like a new paradigm for the American Dream.
Don’t tell (Palm Beach developer) Steve Kelton about trouble in the bubble, the housing bubble, that is. ‘When the media harps on the bubble bursting and how bad the market is, that causes a Mexican standoff,’ said Kelton. ‘Developers aren’t selling for less, because they can’t,’ he says
Luke: I won’t fail you. I’m not afraid.
Yoda: You will be. You will be.
Ouch - email received over the weekend from a friend of mine who is a Realtor in the Florida Keys:
My weekend was horrific. Lost both deals. Yup, just like that.
I hate this business.
Problem with both deals : seller refusing to budge on prices and concessions (inspection time, etc). Sellers are clueless - buyers have the power now. Sellers feel entitled to their enormous gains and plan to hold out… Whoops… Hurricaine season coming.
By the way, my friend has had numerous contracts fall through since August 05. She is living off of her credit cards. And the cycle continues…