Florida Lawmakers Ignore ‘Quiet Little Secret’
The press in Florida reports on the confusion surrounding the housing bubble. “A key House committee on Tuesday advanced a package of new programs, new spending and new mandates for local governments to address a housing crunch driving workers from the costliest corners of Florida. Palm Beach County’s affordable housing talk grew teeth Tuesday, with county commissioners agreeing to force developers to limit some new home prices.”
“‘The builders are going to hate it. The realtors are going to hate it. Too bad,’ Commissioner Warren Newell said. ‘We have to do what’s right for the community.’”
“Florida lawmakers are scrambling to find an election-year fix to a law that was designed to help save people from skyrocketing property taxes but has instead made many of them financial prisoners in their own homes. Across the state, Floridians are finding that they can’t afford to move into a new home because of rising prices and property taxes, a legacy of the red-hot real-estate market and the unintended consequence of a constitutional amendment called Save Our Homes.”
The answers are there to see. “Bucking the condo-conversion trend of the past few years, a California investment firm that paid $27.57 million for a 376-unit apartment complex in North Miami plans to maintain it as a rental community.”
And a letter to the editor sees through the fog. “Everyone knows that housing prices are out of sync with reality. It’s the quiet little secret no one wants to talk about. I have been watching the real estate market for over three years nowby going to realtor.com. I have been putting in the same numbers for over two years. They are a single family home between $300K and $400K in Boca Raton. Last year at this time, there were only about 95 houses for sale; as of this writing, there are 237 houses for sale. That number has climbed every week since December.”
“There are a total of 5,039 properties for sale in Boca Raton alone, this is almost 2.5 times the number of houses that were on the market a year ago. What does this tell you? It tells you the investors are starting to bail out of the market, it tells you buyers do not want to buy in a market that is going down. It tells you home prices are out of kilter. Who in their right mind is going to spend $400,000 on a house with 1,500 square feet under air with a carport? Taxes alone are at least $6,000 a year and insurance is another $5,000 a year. You can move up the coast and get a new home for $250,000.”
“The reason the bubble is popping: Interest rates are going to keep going up. Those interest-only loans are coming home to roost and people cannot afford them anymore.” “Insurance rates will only keep going up, taxes will only keep going up. Investors cannot make a profit anymore.”
“My advice to people selling their homes and who really want to sell their homes: Lower your price so that you are the lowest-priced home with the same square footage in your area. You will be rewarded by selling your home quicker and those people who kept their prices high will kick themselves when they have to sell for lower than your selling price.”
TOO LITTLE. TOO LATE.
The Miami report didn’t spell it out, but the apartment staying as a rental was almost certainly a planned conversion. Why else would a California investment firm have bought it and why else would it be newsworthy?
The Palm Beach council is a riot. They were going to put a halt to all construction last week or so. The letter writer is right; the housing mania is a ‘little secret’ that local governments can’t even bring themselves to acknowledge.
The Miami report didn’t spell it out, but the apartment staying as a rental was almost certainly a planned conversion. Why else would a California investment firm have bought it and why else would it be newsworthy?
I totally agree with you, Ben. This is the kind of news I was looking for. It just seemed outrageous that with all the handwriting that’s on the wall that none of the builders saw they were removing housing possibilities from folk who WANT to rent. Not all of their relatives are rolling in cash…with the crazy building and conversions going on, they are methodically pricing out their children, friends and many people they know. I wouldn’t be surprised if someone’s Granny pulled their ear on this mess. LOL!
And, of course, the dear lawmakers. Well, they have to find a way to make their constituents happy, so there you have it…someone got to them, too….fix the property taxes.
BayQT~
I have a brilliant Dutch suggestion for the Fl lawmakers:
1. first remove most of the rental properties from the market by selling them to the people who are renting - at the top of the bubble and with huge government subsidy, of course. Homeowners and developers love it, they get top money for their rental properties. Voters love it too, they can finally afford a home thanks to a huge discount from the government!
2. then demolish all what is left because it is ‘out of date’ (and give the owners huge subsidies for doing this, of course). As local government you can make far more money by building luxury homes and apartments. This creates a rental shortage that drives up prices of remaining rental units and for other homes (you have to live somewhere). Bingo for the remaining landlords (usually former government agencies over here).
3. because of the resulting house price bubble office space gets totally unaffordable as well and many business have to relocate or shut down (not much money left if you don’t work in RE/mortgage sector). So now you can propose to convert all this empty office space (we have 35-40% vacancy here) to ‘cheap’ rental housing, again with huge government subsidies. The best time to do this is just before the elections, voters love plans like this (the bill comes after the elections).
I think in a few years we will see new brilliant subsidy plans to convert the totally unaffordable luxury homes to affordable business units or something similar
It appears that the numbers should work as an investment rental property. At $80,000/unit with 20%down at todays rate 6.375 commercial 10 year balloon/25 yr amortization with 75% occupancy it cash flows at 633/month rental and becomes a cash cow at $750/month. I based taxes on 1% sales price - not familiar with Florida Commercial taxes, but if taxes are 2% add another $75 to cost and break even. It still cashes out. If it were in the midwest I would buy it for rental. I could always convert to a condo later.
Nor is the RE complicit press here in South Florida inclined to tell us what’s going on. The public has to go to this blog or read letters to the editor to get a notion about exploding inventory.
The Palm Beach council is a riot. They were going to put a halt to all construction last week or so. The letter writer is right; the housing mania is a ‘little secret’ that local governments can’t even bring themselves to acknowledge.
Oh so now it’s a mania? First it was a bubble, now it’s a mania…when are you bubble heads gonna tell it like it is?
But I thought hurricanes were supportive of higher housing prices? Just look at what KBH plans to charge for new housing that it will build in NOLA:
- $130-140K for an “affordably priced” home
- $280-450K for a “market priced” home
“KB HOME/Shaw Louisiana LLC Announces Plans for New Construction of over 70 Homes in New Orleans’ Historic Garden District
Last Update: 4:38 PM ET Mar 21, 2006″
http://tinyurl.com/eluel
That was a good editorial to read, I am surprised that the newspaper printed it, there are sure to be outcries from local residents in FL who bought in late once they read it. But, the truth hurts sometimes.
I was talking to my girlfriend yesterday about all of the imbalances that this bubble has created and how many just choose to look the other way. That strategy is sad, the fact that this has gone on so long now is also sad. It is undeniable by any stretch of the imagination that we have just gone through the biggest credit induced bubble of all time. My guess is that the FED knows this and will attempt to mitigate the downside by slashing rates again when things get dicey. This FED no longer “takes away the punch bowl”, now they just try to give the recipients aspirin in the morning, I think this is a very flawed strategy.
Do you suppose that some poster to this blog wrote the letter and tipped Ben off on its publication?
Also, there are plenty of crank letters to the editor in newspapers, so the paper had cover in case they got called on it. My feeling is that some of the editorial staff feels similarly, but doesnt want to go public yet.
Does this sound like communism to anybody?
Yes. What’s more, it is unnecessary — the market would do just fine to lower home prices if all these affordable housing programs and other govt subsidies which goose prices ever higher were simply phased out…
totally agree; the problem is that the voters think exactly the opposite. They fully believe what politicians tell them: that without these programs they would never be able to afford their own home (obviously, people would be forced to live according to their means, which would be bad for all those that are now passing their housing bills to the taxpayer).
You mean the proletariat throwing off their chains, putting the capitalists and landowners against the wall, and instituting communal ownership of the means of production?
No, can’t say I see that happening here.
Well, you know that to many people in this country, communism simply means “anything that Rush Limbaugh disapproves of.”
Ditto!
No, it sounds like fascism. They aren’t saying the government will now own everything, they’re just screwing with the market with subsidies and regulations to the point where it’s completely distorted.
No.
What it does sound like is a government-regulated market economy, which is perfectly consistent with the rest of the US economy. What else do you call a system in which the government provides truly enormous financial incentives to select industries in the form of tax breaks while at the same time relieving those companies from the natural consequences of their actions (limited corporate liability)?
Nope, it’s just putting a stop to attempted rape.
He’s protecting them (although they might not see that today). If they build something closer to what the market can actually bear, there won’t be so many vacant buildings left to leave them in red ink.
You vill live here and you vill like it.
Sounds like a variation on what they do in areas like DC, which is require new projects to include some low-income housing units.
You may want to read Marx and find out what communism is before calling something that. It may also help some to read what “liberal” and “egalitarian” mean in the dictionary as well.
“Who in their right mind is going to spend $400,000 on a house with 1,500 square feet under air with a carport?”
Somebody who thinks they will be able to sell within five years at a profit over $100,000? Certainly not anyone who plans to stick around and pay off the debt…
A key House committee on Tuesday advanced a package of new programs, new spending and new mandates for local governments to address a housing crunch driving workers from the costliest corners of Florida.
been there, done that … they can look at the Netherlands for solutions to make housing affordable for everyone while prices remain sky high. We already got three new proposed subsidies just in 2006 to help people who cannot afford to buy get on the property ladder. Obviously someone has to pay the bill, but that is part of the little secret.
And wow $ 130K homes, that sounds spectacular over here … the cheapest starter homes they can build here (according to local government) are now 195.000 euro (that’s $ 235.000). I estimate that about 75% of this price is profit for local government and the builders.
Clever policy that — grease the palms of the local builders who can help with political fund raising, under the guise of helping poor folks afford the outlandish housing prices. Let the middle class and higher pay the off-the-books tax in the form of high purchase prices.
Someone ought to tip off the US policymakers to that strategy!
and the funny thing is, there is nothing new about it. I know from property developers in South America that it works basically the same way there - just without all the paperwork and complicated tax stuff that we have here in Europe.
Aspiring local politicians ask RE developers for a hefty election fee and promise them nice contracts in return. Because of the promises they have to raise taxes when elected - which always has to be paid by the middle class (because the poor and the rich don’t pay any taxes). Developers who failed to support a new politician don’t get any contracts approved and will be out of business soon. But apparently this solution is too simple for the Dutch burocrats ;(
Ha! In the Monterey, CA area you could easily spend around $700K to $800K for a 50 year old 1,200 square foot cottage with street parking! Both markets may be due for serious corrections, but people will accept almost any sort of ‘value’–as long as they can afford the payments.
“My advice to people selling their homes and who really want to sell their homes: Lower your price so that you are the lowest-priced home with the same square footage in your area. You will be rewarded by selling your home quicker and those people who kept their prices high will kick themselves when they have to sell for lower than your selling price.”
Simmssays…
AmericanInventorSpot.com
This seems to happen every 10-15 years in Florida (especially south florida). Someone runs around spreading this rumor that “FLORIDA IS RUNNING OUT OF LAND, BUY NOW OR YOUR FOREVER PRICED OUT”
A speculator frenzy then starts. Some say 30-40% of homes were being bought buy investors… its probably a lot higher since many investors were buying multiple homes and paying cash.
Prices are run up and then speculators run for the exits, leaving a trail of “for sale”, “just reduced” and “motivated seller” signs on their way out. There is a period of about 6-12 months of denial and then the real reductions start. Investors turn desperate and unload properties, especially condos. It usually takes 5-10 years to pick up again.
There have been 5 major down turns, two of them resulting from crashes in Florida RE prices. 1928, 1950’s, 1960’s, early 1979 and the early 1990’s.
Wow, every 10 years . I guess that’s how long it takes people to forget .
Do you have the years the CA market crashed in the 20th century? I am wondering how well they line up with the FL crash years (not to suggest there is any such thing as a national housing market or anything like that…)
It might be a sun belt market cycle , or maybe a sun spots cycle…..Just kidding
Sunspot / solar cycles are approximately every 11 years.
By the way…
Maybe this will work….
http://tinyurl.com/jkgnm
i think CA had a down turn in the 1980’s and then again in the 1990s but i dont know before that.
Florida was in bad shape in the late 80’s early 90’s especially commercial RE. Empty plazas every where. It was not uncommon to see a strip mall on every corner and only 2-3 store fronts open.
Coral Springs even had an entire mall that was empty for 20 years until they finally turned it into a charter school in in 99′.
Over the past 4-5 years they have been demolishing a lot of empty strip malls and building condos and town homes in their place in South East Florida.
The really sad thing about Florida is the eminent domain laws. They can take property and turn it over to developers who “will improve the area”.
A lot of businesses, homes and restarants that have been on the beach side for 30-40 years or longer are being demolished and replaced with “dark towers” or condos almost entirely owned by speculators. We go from once popular beach side places to empty condo towers.
I leased prime office space in Boca Raton in the early 90’s and they gave me 2 years free on the 5 year term. The price per sq. ft was half that other tenants paid jst two years earlier in 89.
The condo market was a joke. You could not give away a condo in the late 80’s early 90’s. The RTC owned hundreds if not thousands of condo’s that snowbirds and investors walked away from.
Cycles do repeat. I firmly believe we will return to 2001-2002 prices which are around 30% lower than what we have now or around $150/ sq ft. vs. the current $250 / sq. ft peak. If you look at dataquick, there are sales already under $200. Patience is a virtue.
I thought FL is a red state and republicans don’t do things like this.
I guess people in FL are getting the worst of both worlds now.
Florida is either or. its about a 50/50 split. Right now leaning more towards the blue. The majority of the hispanic populations are republicans (they hate Fidel Castro, and other former dictators and so did Reagan and the other republicans), the panhandle is republican (thats the red-neck riveria) but most lower, middle income and even some wealthy blacks, whites, and asians are democrats. Also most of your senior citizens are democrats.
Gives us a 50/50 split, thats why we screwed up the elections in 2000.
and to think. All it took was dropping a bowling ball on their heads to figure this out . We have been posting this on Ben’s blog for many months.
Using taxes to social engineer is always bad. So you want property taxes to rise at a fixed rate unless you move? This is what happens- people won’t move because they will take a hit. Big surprise.
FL, along with AZ, I think are going to be the first big problem areas.
“I thought FL is a red state and republicans don’t do things like this.
I guess people in FL are getting the worst of both worlds now.”
Check out TX another red state if you think FL is bad. RE taxes are 3% and you pay a 50% tax on rental cars at Bush International Airport. Yes GWB was governor there for six years.. Tax cuts at the federal level become tax hikes at the local and state level it seems..
Just took my son to school. A house that has been on the market since last Nov. has a new addendum to the realty sign: “NEW PRICE”. When it first appeared on the market the addendum to the sign read “REDUCED PRICE”. I guess there were no takers and this is the new mantra.
or they can paint the house and say “new color!”
if they paint the house, they say “newly renovated” and ask another $90k.
I have the same thing happening in my neighborhood (Dublin, CA). A house that had been on the market for several weeks finally had an open house last weekend. I guess they didn’t have any takers either because they’ve added a couple of “addendums” to their For Sale sign…1 says “VIEW”, the other says “REMODELED”.
How funny….
BayQT~
Leave it to politicians to take a bad situation and make it worse.
Here in Mazzholeland, the politico’s solve the affordability problem via lotteries for mandated builder project set-asides.
The new American paradigm…Housing by chance.
Thanks, Easy Al.
Santa Barbara does that crap too, totally ridiculous.
“This seems to happen every 10-15 years in Florida (especially south florida). Someone runs around spreading this rumor that “FLORIDA IS RUNNING OUT OF LAND, BUY NOW OR YOUR FOREVER PRICED OUT””
Yes minicycle might last that long. However the only mania even in the same league with this one was the mid 1920’s mania. Prices were always still affordable during prior land rushes in the 60’s and 80’s. I would lookduring the 90’s at prices people had paid in the 1987-1988 peak and say what the hell were people thinking. Now it is magnfied by a factor of 10. What were these people thinking will be the question asked by many all over again in a few years..
Your correct, its the same mania that took the state in 1928. Buy now we’re running out of land… if you don’t buy now you will be priced out. Waves of speculators decend on the state like a hoard of locusts and then leave even faster than they came in… each more ignorant and stupid than the last.
Fueled again by I/O financing, no less… No wonder I call myself “GetStucco”!
Yeah actually before the great depression there were all kinds of financing options you could choose from to “bet the farm”. People took out these loans and invested in stocks. Then 1929 came around and the farms were foreclosed on.
One result of the Great Depression was more standardized lending practices and the good old standard 15 & 30 year mortgage.
“Yeah actually before the great crash there were all kinds of financing options you could choose from to “bet your retirement”. People took out these loans and invested in RE. Then 2006 came around and the homes were foreclosed on.”
“One result of the Great Crash was more standardized lending practices and the good old standard 15 & 30 year mortgage.”
What they don’t realize is that the cheap housing is already in place. In a few years they won’t be able to give those crapper box houses away. I can see the headlines now: “Pay the property taxes utilities, and insurance and we’ll give you a house!” They still won’t find enough takers.
Has every body seen the new Century 21 ad on TV where the wife and female realtor browbeat the husband into over extending himself to but a new house. Then they make it look like the American dream-terrible ad.
Have you noticed realtors are now targeting buyers now ? this summer they were targeting sellers.
I turned to my wife and thanked her for her rationality after that commercial
Thank God my wife sees the mania unfolding…
ditto…..my wife, even with her limited economic skills can really make a prospective buyer stop and take notice.
Husbands everywhere must shudder at that ad. Madison Avenue loves a fumbling Dad figure.
(waiting for DH to chime in here about how glad he is that his wife is sensible about this subject….)
My husband and I have been talking a lot about this stuff (we read and post on the same blogs) and luckily we’re 100% in agreement about what constitutes “affordability” and when will be the right time for us to buy. Neither of us wants to buy an overpriced house, let alone take out a risky mortgage to do it. It’s been clear to both of us for some time that house prices are seriously out of whack. How could this be “a secret”?
My wife helps form the “we” in “We Rent!”
You have facial hair?
Apart from also being brunette, I bear absolutely no resemblance to Freddie Mercury.
Do you guys notice when you’re out and about how people are? To me they seem sad even thou they drive their hummer and have their mansion to go home to. IMO, they’re more irritable and I see more aggression on the roads. When I go to Costco or Sam’s people just buy necessities…very few impulse items. I’ll sit there having my hot dog and watch the baskets go by. I enjoy watching people and baskets and it says THEY’RE BROKE!!!!
definately, living in Orlando, prices are high, a lot of people i know who bought this summer are now strapped into a 300K home making 35-55K a year. No cable, old furniture left over from college, cheap beer and they never go out anymore. Anything to save a dime.
OTOH I can’t leave Costco without at least one impulse purchase. I love that store. Last weekend, I bought 50 jars of this delicious green chile salsa. The clerk thought I was nuts.
you are nuts!!! 50 jars, costco size !!!! You are NUTS!!!
My apologies, but could’nt resist….
I can’t leave costco without spending $200 to $400, very few impulse buys.
Ditto. Doesn’t that annoy you? It does me. I can never get out of that store under 3 figures and the impulse buys are usually a book or a piece of clothing.
don’t you wonder what goes through their minds? do they know they’re debt slaves? do they think everything’s gonna work out because liareah says so? do they realize they made a huge mistake by taking out a heloc and buying that tummy tuck and jet skiis? has depression set in?
has despair set in?
do they need ambien at night?
I am a Florida appraiser and we are in homes everyday. Lately we have been comparing notes in the office and there is clearly a frantic feeling in the air. When we go into homes now the occupants follow us room to room and show is every little thing they have done. “See, my wife relined the shelves!” Then as we are about to go we get the ” well, what do you think it is worth?”, Then a day later the call comes. What is my house worth and am I going to get the loan?
It is sad and it is also right. The sooner we get this whippin over the better.
Jack,
Thanks for the insider’s perspective. It’s good to know people are finally starting to wake up.
I was driving back from Osceola county last week and passed a field of perhaps 100 acres. On the post in the middle of the filed was sign stating that the heavy equipment auction was 1 month away. There were 100’s of bulldozers, cranes etc. The last time I saw this field full of equipment was 1988.
I had a meeting with my banker yesterday and he told me that several bank customers were in the land clearing and engineering business and that several reported being told to stop work and get their equipment off the land by national builders. They were told that the builders had stopped their development applications and were shutting the sites down.
The appraisal business is off at least 50% and decline is expected to continue until the ARM refi wave sometime this summer. The surprise will be the decline in value relative to last time they were appraised.
Lenders are really really going over appraisals. In many cases they are blacklisting bogus appraisers. Sadly, there are a bunch of them.
“My advice to people selling their homes and who really want to sell their homes: Lower your price so that you are the lowest-priced home with the same square footage in your area. You will be rewarded by selling your home quicker and those people who kept their prices high will kick themselves when they have to sell for lower than your selling price.”
Exactly.
Not only is there no affordable housing to buy, there are no apartments to rent in decent neighborhoods. And if there are rentals they are 30-50% higher than just a year ago. Wages are low here, predominately service based economy and no place for these folks to live.
My neighbors rent went up 36 percent. They both work and have decided they have been priced out of both purchasing and rentals. They are moving to NC. She called numerous other complexes and could not find an apartment to rent for less-can’t say that I blame them for leaving.
Any similar stories out there?
I was wondering about what was going on with rentals. We have some potential interest in our home but they need quick move in. When we called our target town, no rentals! Unless I want to go back to what I call the metal box w/coin-op laundry. So its either that or now I’m buying in at the top. Yikes….makes a girl want to stay where she is and hold on tight.
It’s like the bubble-fever extends to new land-lords, i.e. “don’t they know how much my mortage is? Why aren’t they renting this?”
What I saw a lot of here in Santa Barbara when I was looking for a rental were tons of overpriced duplex-conversions (i.e. extensions in the backyard, converted garages, etc). Most were fairly new buyers trying to offset their gigantic mortgages. The older owners almost always had much better deals.
The rental homes in my neighborhood (single family, low crime, good schools) that were going for $850-$950/month about 2 1/2 years ago are now renting in the $1250-$1400 range. The two bedroom townhouse that was in the $550-$600 range then is now going for $900/month. Fair market price to buy the single family house would be about $275K. Fair market on the townhome (decent neighborhood, low crime, good schools) would be about $135K.
So middle market isn’t that great right now, but entry level housing shouldn’t see that much of a dip because they’re not all that far from a point where a long term investor could get a good ROI.
I hear the problem is rising property taxes on non-owner occupied homes and rising insurance rates. While the state allows home owners to keep the same property taxes, the property tax on rentals is whatever they want it to be. Since property taxes are passed through to renters, rents are going up.
Until you get a big renter revolt and rent control, nothing will change.
Why would rent go up that much in Orlando? What happened to the supply? Condo conversions? Hurricane damage?
I left Fort Lauderdale due to the high cost of renting. I had moved to South Florida and had what amounted to a new career with a lot of promise. The math wasn’t adding up in terms of where I could live and rent however. I ended up in one of the more dangerous areas of Ft. Lauderdale. There are thousands of teacher positions open due to this and county and city government jobs which would normally be solid jobs are a revolving door of vacancies. I continue to read the Sun-Sentinel online and it’s stunning. People getting shot in corner gas stations for nothing, stories about idiocy on the roads and it’s one of the most dismal looking places I’ve ever seen. Little or no character or even sense of what city begins or ends where.Finally, who wants to deal with the upcoming decade (or longer) of neighborhood threatening hurricanes. Culturally, Florida is way behind a number of other places in the country despite the rampant amount of money.
You nailed it. I’m currently living (stuck) in South Florida after a job transfer out of San Diego. The only way my wife and I cope is through our personal motto “We are just visiting”. I plan to prematurely quit my job next year (at a substantial financial cost) just to get the heck out of here. Reading the Miami Herald each day is like a tabloid with all the corruption, murders, horrific accidents (almost daily someone runs over someone in a cross walk). The thing that amazes us most is that people here seem to take it in stride. If they are native Floridians they think it is normal (they have nothing to compare it to) and for the others, they think it is better than condititions in Haiti, Dom Rep, Venezuela, Panama… There is a culture here of not obeying and little enforcement of the basic laws which escalates into more severe problems.
Read about The Second Great Depression: Starting 2007, Ending 2020 .
“The exuberance resulting from the overheated stock market of the 90s caused consumers to stop saving and go into debt. Then, the dramatic drop in mortgage rates enabled people to refinance their homes and go even further into debt. People are no longer living on what they can afford; instead they are living the lifestyle they think they deserve, costs be damned!”
What happened to the one that was scheduled for 1990? (My guess: Postponed by 17 years of Greenspan puts?)
Getstucco, did you watch 60 minutes? The article was on global warming and how the government changed the article so we (the people) would see nothing really wrong, when actually there is alot wrong.
Anyway, if the govt is going to lie about global warming why would they tell the people that we will be going through an economic crisis?
Melody, I saw it. The details were worse than you describe them. The White House had a lawyer (not a scientist) whose job was to edit scientific reports prepared by government agencies in such a way as to make it appear that global warming had not been established, and that oil consumption could not be linked it climate changes. This creature was a former oil corporation lawyer, and when he left the White House last year he went to work for one of the huge oil corporations.
Lying and manipulation scientific data to appease Big Oil and other money interests is appalling. These people are without scruples or conscience, and they’re making out like bandits.
I was trying to go easy but yes, it made me sick
they have to lie about global warming, because otherwise people realise that in some years all the Dutch mortgages will be under water - and that would kill one of the greatest housing bubbles for good
You all should see some of the proposals out there for counties with super high home prices here in Florida.
Naples wants to build condos for teachers ontop of school parking lots, other areas want to increase permitting for trailor parks so middle income folks can afford to have a home, they get crazier and crazier.
Politicians and developers don’t get it.
Teachers, Nurses, Police officers, professionals, middle income folks don’t want to live in trailors, condo-conversions or teacher slums. They want homes with garages and yards for the kids… If they can’t have that here they head north.
Simple solution: Pay them more.
It should happen but it won’t. Florida governemt was always a good ol’ boy network, the bubba system. A lot of backroom deals and wink wink nod agreements that would land politicians in jail in most other states.
Thanks to recent immigrations from Cuba, South and Central America, we added a whole new demension of corruption and back room agreements that caused revolutions in other nations imported in from South & Central America.
Simpler solution - lower home prices. Teacher salaries can be a controversial issue - many in my area make over 6 figures. IMO that should be more than enough to buy a home. Now let’s talk about raising MY salary as I don’t come close to what the teachers are bringing home.
How do you lower home prices? The government can’t just decree that all homes are now 20% less expensive. However, if the concern is that a city cannot hire teachers or other municipal workers because they can’t afford to live near their jobs, then the only thing that will work is to pay them more.
Sorry, if you work in the private sector, the government also cannot decree that your employer pay you more. But you could move to a lower cost city!
We don’t have to lower home prices, they will probably drop naturally due to lack of demand. We are already seeing a serious drop in sales in most Florida markets.
If the trend continues they will have no choice but to lower prices… they can’t hold out forever, eventually they will have to or be forced to sell at a lower price.
right now we have a ton of houses for sale but no one can afford them, and banks are no longer willing to take the risk of financing people who can’t afford them.
Yeah, what ’s the CEO to worker income ratio these days? Ya want to talk about why the average guy is overleveraged. Like when they cancelled my h’s insurance w/60 day notice. Cost us $1350/month. That cuts deep!
over 6 figures! My husband teaches in the San Diego Unified School District and even after he completes his Masters he will be making about half of that.
Yup, in the county’s priciest area of San Dieguito (La Jolla, Del Mar), teachers top out in the mid 70’s. This is after 30+ years of teaching and a master’s/doctorate.
“eastcoaster” is either speaking of professors (and not teachers), or full of it.
Myself? I teach in Chula - can’t stand snobs.
What school do you work at?
Yep. Used to work for LA Unified (don’t flame me)
and teachers topped-out in the $50K range. It’s probably a bit higher now, but not much.
BTW, if anyone thinks teaching is such an easy job, PLEASE try it for a year before you start spewing ignorant rantings. (Not that anyone’s done it here in this thread; but the teaching profession is really misunderstood by outsiders, and bloggers often like to rant about how they are soooo overpaid.)
Florida’s property tax set-up cannot possibly be constitutional. In Hillsborough County, there are more than thirty different property tax rates, depending upon where one lives, not the value of the property. The value of the property (its selling price) is used to calculate the tax debt, according to the area tax rate. Where I live, the rate is 2.5% , so that the annual tax on a $400,000.00 property (not much these days) is $10,000.00 (ten thousand dollars). Someone living in a $400,000.00 house across town may pay less than a third as much. Why?
There should be a flat property tax. It should not be based on the full selling price of a property, but only on a percentage (in New Mexico it’s 33.3 percent). The property value should not rise according to market fads, but be based on the sales price or actual value, whichever is LOWER. If a repossessed house that sold for million dollars last year sells for a hundred thousand next year, this is the figure that should be used as a starting point.
If everybody paid the same tax rate (certainly no more than 1%), nobody would be overwhelmed with outrageous taxes. However, property owners (especially those who now pay little or no property taxes) would be much more inclined to pay attention, and to complain when politicians tried to take more from them.
Our $25,000.00 homestead exemption is fifty years old. To be comparable today, it would have to be raised to a million. It’s just a joke that saves most residents almost nothing.
Many children who are left homes by deceased parents cannot afford to keep them because the taxes are re-appraised based on the alleged current market value of these properties. If the house were purchased in the ’50s or ’60s for $20,000.00 and is now alleged to be worth a million (very common here), taxes can jump from a thousand dollars a year to fifty thousand dollars a year. How many people can pay this?
Who are these politicians who think that the property really belongs to them, and that home owners are just renting it? These are the same goons who encouraged the housing bubble, because it so enriched them and their associates. All the cities and counties that couldn’t hand out building permits fast enough to developers to build in inappropriate areas at absurd prices are going to have to figure out some other way of paying their bills. Might I suggest firing about 3/4 of their useless employees?
Many children who are left homes by deceased parents cannot afford to keep them because the taxes are re-appraised based on the alleged current market value of these properties. If the house were purchased in the ’50s or ’60s for $20,000.00 and is now alleged to be worth a million (very common here), taxes can jump from a thousand dollars a year to fifty thousand dollars a year. How many people can pay this?
Why shouldn’t someone who owns a million dollar home pay their fair share of property taxes? Just because they don’t have a job, but instead inherited the expensive house from the parents, are you saying that they are different from people who bought the million dollar home themselves?
If someone has a million dollar home but doesn’t earn enough income to pay taxes, then they can 1) get a job, 2) sell the house, 3) get a reverse mortgage.
I have no sympathy for income-poor people who inherit their wealth in the form of a house. If they inherited their wealth in the form of cash, I suspect that no one would have any trouble taxing them on that inheritance.
This really irks me. Inheritance is one of the most obviouls to make the playing field UNLEVEL. Take two people who are identical in abilities, and the one with the wealthy parents will do so much better in terms of income, education, etc. In fact, almost nothing will predict your lot in life better than your parents’ lot in life. Why should we give breaks to wealth dynasties?
Sure, the whole reason Teddy Roosevelt instituted the estate tax in the first place is that he thought a permanent aristocracy was un-American (even though he himself was the beneficiary of a wealthy family). Today’s politicians obviously disagree.
What a ridiculous comment. Did you not notice the sentence about the house originally costing twenty thousand dollars? The so called million dollar current value is a fantasy caused by the housing bubble. But, the person who inherits will be expected to pay fifty thousand dollars a year just to keep the house his parents owned (and which only cost twenty thousand dollars).
What is wrong with you? You sound as if you hate anybody who has something you don’t.
Your assumption that somebody who inherits a “million dollar” house can afford to pay such taxes or can go get a job is utterly stupid. How many full-time workers do you know who could afford fifty thousand dollars in property taxes every year? Fair share? Get serious. This is infinitely more than a fair share.
The people who move to Florida and buy property and don’t pay property taxes: those are the ones you should be yelling at.
“This really irks me. Inheritance is one of the most obviouls to make the playing field UNLEVEL. Take two people who are identical in abilities, and the one with the wealthy parents will do so much better in terms of income, education, etc. In fact, almost nothing will predict your lot in life better than your parents’ lot in life. Why should we give breaks to wealth dynasties?”
Again, you are making a false assumption if you think that somebody leaving an alleged million dollar house is automatically wealthy. Shacks in Tampa now sell for a million dollars. When people who live in shacks die and leave their shacks to their children, their children are expected to pay property taxes based on the current market value, not the actual price at which the parents bought the house. The current market value is a product of the real estate bubble and speculators. It has no basis in reality. So, because speculators have driven prices into space, ordinary people have to eat it?
Your hatred of people you perceive to have money may be the reason you don’t have any. There is no such thing as a level playing field. What about people who are born beautiful vs. those born ugly? Shall we insist all the beautiful people get fat and have surgery to look worse so ugly people can feel better? I remember when midgets were called midgets and dwarves were called dwarves, but dwarves complained, saying that midget was an insulting term. It actually was not. The problem was that midget implied a little person with normal proportions, while dwarf implied with shorter legs, larger head, etc. So the PC enginners, goaded by dwarves, got the word “midget,” banned by most newspapers and other media and replaced with “dwarf.” All little people in the US are now classifed as “dwarves,” or in the UK as “Persons of Restricted Growth.” What a level playing field!
People should not have to sell the homes they grew up in to feed the money cravings of demented politicians. The wealth dynasties you imagine are for the most part IMAGINARY.
There is no state inheritance tax in Florida.
if you feel bad about inheriting a million dollar home, you can always donate it to charity
Why should children who inherit be *special* in Florida? In every state I know of where property taxes are locked in by whatever proposition, when the original owners die, the house is revalued. Do you believe the house should be valued at $20K for thousands of years if they keep it in the family? That is NOT the way the USA functions.
You asked what is wrong with Peter, but I’d have to ask: What is wrong with you?
Property ownership and recurring taxation are inconsistent ideas: you never truly own property so long as taxes are assessed against it every year and you must pay those taxes or lose the property. You are essentially renting the property from the government or paying off the government in the form of protection money to prevent seizure. Either way, you are no longer the real owner of your property. As long as you accept government taxation on real property and on your own personal labor, you have forfeited true ownership of both.
Hey, ownership is just a convenient social convention, there’s nothing particularly absolute about it. It doesn’t exist outside of the law that creates it.
Totally agree with you on this!!!!
In California, I support Prop 13, but I would much prefer NO property taxes. IMO, we ought to have a progressive, flat income tax with NO deductions or credits (except, perhaps for charities as donations might potentially off-set costs to the government to support certain causes).
We should only be taxed ONCE — on income.
I also don’t know why people support estate taxes. If parents own something and pass it on to their heirs, why should their children have to pay taxes on something that already belongs to the family???? My stuff = my kids’ stuff. No one should have the right to tax my family just because ownership of assets moved from one member to another.
If people cannot afford the taxes on a certain home, they are living beyond their means - it’s as simple as that. If you cannot afford it, move to a cheaper area or a cheaper home.
I’ll keep that in mind on July 4th.
Have you forgotten why this country broke from England in the first place?
Most people who pay their property taxes in Hillsborough County are not living beyond their means; they are being taxed beyond their means to pay the salaries and retirements of mostly unnecessary city, county, and state government employees.
More than 32,000 property owners in Hillsborough County cannot pay their property taxes this year:
http://www.foreclosure.com/search.html?st=fl&cno=057&z=&tab=t
Who do you think benefits? How about the investors who buy their tax liens, charge huge interest, and gain ownership of their properties if they can’t pay? How many of the legislators who make tax laws do you suppose engage in this activity? What better way to get properties you want than to tax the owners out of it? This is especially true of those who inherit modest (but wildly over-valued) properties.
The Florida tax code is fundamentally unfair. It hurts ordinary people, but benefits huge corporations and very wealthy investors who can buy tax liens, and keeps government empoyees happy. It needs to be radically changed, and government needs to start living within ITS means.
Florida refuses to have a state income tax, so most taxes are raised by property taxes. Florida businesses don’t want a state income tax because they would have to pay workers more. Florida workers don’t want a state income tax.
People down there need to make up their minds what they want. You can’t be a cheap tax state and support a luxury lifestyle — and a luxury lifestyle includes living in overpriced homes.
Anton,
I grew up in Florida. I know two families who have lived there since the early 1940s (or before) who probably own millions of acres of land in Florida. One family owned tons of agricultural land that stretched all the way from Lakeland to the edge of the Disney World property. (I hear they have turned part of it into a housing development.) The other family owns land all over the state including 50K acres outside of Orlando. As you can imagine, both of these families are worth millions of dollars.
Anything that you would propose that would include freezing property values at a certain set date would benefit these families enormously — more than it would ever benefit you. Do you think that would be fair? After all, they were there before you, and they are just ordinary families too. (Ordinary but lucky, I would have to say.)
The whole state of Florida needs to revamp their entire tax system so it is fairer for everyone, not just the middle class.
Well said, nhz. I simply don’t understand you concern, Anton; if anything, varying tax rates just points to the need to evaluate local tax laws before purchasing. As for inheritance, why shouldn’t the property tax be assessed using the present market value of the home? I agree with peterbob: the new owners should pay the same amount in taxes, regardless of whether the property was inherited or purchased.
One thing to keep in mind is that this madness is transitory. Yes, it’s terrible that people can’t pay their property taxes, but too many of these situations will only mean that property prices will plummet.
The bubble hurts: now, in the past, and certainly in the future.
If we did it the way Anton wants, the house my father was born in would still be considered a $125 house since that is all his mother paid for it — and the thousands of acres of land surrounding it.
That isn’t what I said. What I said is that there are more than thirty DIFFERENT tax rates in one country, and that there needs to be one rate that applies to everyone. If this were done, and EVERYONE had to pay 1% or% or whatever on the sales price of their property or its estimated value, whichever were less, the tax rate would be fair. As it is, some people pay five times as much as others for properties with exactly the same alleged value in the same city in the same county.
Also, the current “market value” doesn’t mean anything. This fluctuates so absurdly, who could keep up with it?
Florida doesn’t need an income tax. Cities and counties and the state need to stop throwing money away. As I said, there are WAY too many civil “servants” here using up WAY too much money on themselves. The governments here actively encouraged the housing bubble and have milked it for billions in new taxes. Bubbles of this magnitude don’t just happen; they are created and illegally abetted. Had existing, ORDINARY zoning laws been enforced, ninety percent of the new condo and townhouse construction in Florida could never have gotten off the ground.
I meant COUNTY
All you need to do is incorporate a state income tax in Florida so those earning the highest amounts of money pay their fair share and you don’t have to rely on sticking it all on the shoulders of homeowners. Here is an example of the current inequity in Florida, say I have a low income ($50K), but am frugal and save for 20 years for my dream home and pay $500k right now in Broward county (2.2% prop tax), my tax hit in Florida would be about $11K. Now my neighbor who makes $125K a year and had the money to buy his house 5 years ago for $200K only pays around $4K. Identical homes, his income is more than twice mine, and under the Florida tax system his tax bill is less than half. This just isn’t right. Now the state is working to further protect those who already have it made with the proposed legislation to let prior owners carry their low tax rate if they move into a more expensive home. Why do you think so many highly paid pro-athletes move to Florida…the inequitable tax system that favors those with high incomes.
Read about The Bankruptcy of The United States.
“This has been going on for over eighty years without the “informed knowledge” of the American people, without a voice protesting loud enough. Now it’s easy to grasp why America is fundamentally bankrupt.
Why don’t more people own their properties outright?
Why are 90% of Americans mortgaged to the hilt and have little or no assets after all debts and liabilities have been paid? Why does it feel like you are working harder and harder and getting less and less?”
As far as property taxes, insurence and other expenses, Florida is really getting ready to stick it to second home owners and investors by slapping them with higher taxes and allowing insurence companies to charge them much higher rates for a second home or investment home.
Florida realized recently that out of town investors and speculators are not registered voters. By nailing them with higher fees they appease the insurence gods with out screwing the Florida voters.
When all the investors and second home owners try to sell and all home prices go down, they’ll have screwed the voters anyway, just not so obviously. Any tax is destructive.
Not really I lived in Florida for many years and it was always a relief come March or April when “they” all went home and we took back our Florida. Many people I know in Florida would love for things to go back to the way they were before this boom.
Its already happening. Investors are unloading homes right now. Check out some of the listings, inventories have risen 200-500% in some markets from last year.
My inventory data of the last 9 months… NW FL
Realtor.com
Destin Niceville Crestview Nav.+GB
25-Jun 1124 158 309 1881
25-Jul 1179 173 362 1943
25-Aug 1323 224 445 2050
25-Sep 1445 286 533 2489
25-Oct 1555 298 601 2868
25-Nov 1569 324 640 2943
25-Dec 1541 329 682 3056
25-Jan 1623 366 730 3359
25-Feb 1759 394 839 3726
25-Mar 1952 414 981 4098
Inventory Change 173.67% 262.03% 317.48% 217.86%
I really need to figure out how to post a chart on this blog
My aunt lives in Destin, and is asking for information on the housing bubble there. Can you provide some links? Thanks.
I have THE BEST story about a conversation I overheard last night at a Subway in West Hollywood next to the Beverly Center. Two flipper “partners” going over the numbers for a flip that obviously went bust and just sweating about it. It was AWESOME. The guy is talking about all the other houses he has in the area, saying ‘i don’t know what i’m gonna do’. I wish I had time to post the whole conversation - I will later.
Let me tell you - It’s really happening!
c’mon, c’mon…………let’s hear it!
Here you go,
So, I stopped at Subway last night after work to have a sandwich. I walk in, and right away I notice two guys at the corner table going over some paperwork. One is a bald, meat head looking guy in his 30’s, the other an older Mexican fellow (please excuse the racial idicators, merely for visualization only). The bald guy is frantically shaking his leg and biting his lip, while the other guy sits looking unsatisfied with his arms crossed, slumped in the chair.
My first thought was, “ah, someone is trying to sell someone a mortgage”. The guy was talking very loudly, so it was not hard to listen in :
” Right here, here are all the figures….$20,000, from my own pocket. Here’s $93,500…..from my home equity line. Here’s $2500 on the Home Depot card, here’s $3000 on the American Express, here’s $6000 paid to labor, here’s a payment to the Equity line, here’s $2500 I gave you before you went to Mexico for those 2 weeks. The figures are all here. (turns the page), here it is again. (goes over similiar figures.)
This repeated several times, all with the guy reading the figures looking shocked and nervous, and the other guy angry :
“I don’t have a dime in my pocket after this project. I know you worked hard, but I put a lot into this project too. Every since November, I’ve put a lot into this. (goes back into figures) “Okay, okay, here it is again….$20,000 out of MY OWN POCKET, $93,500 from my equity line of credit, ….” (rinse, wash, repeat)
I finally get my sandwich and sit down next to them.
“I’m telling you, I don’t have a dime in my pocket, the transactions are all here. We were 50/50 partners, if you made $40,000, I should have $20,000 in my pocket
(other guy) “I dont have any money”.
“I don’t have a dime in my pocket after this project”. (furiously shaking his leg)
He keeps going over the figures, again and again. I am almost finished with my sandwich, then I hear :
“I don’t know what I’m going to do, I didn’t make a dime off of this project. I’ve got 2 houses over there (points toward West Hollywood), I’ve got that house on Stanley, I think I can rent it out. (pauses, bites lip, shakes leg furiously….. turns page, begins going over the figures again).
This continued, I went out to my car, called up a fellow housing bear (whose brother owns over 20 properties in San Diego w. Option ARMs (renters pay the MINIMUM payments)). As I backed up and left, he was still buried in his spreadsheets, reading the transactions to the other guy.
I WISH I had it on tape, it was classic. I thought that all of you would appreciate it. I so badly wanted to mutter ‘the real estate market is dead’, as I left - but I couldn’t get myself to do it.
great story, Thanks.
No doubt it will soon to be repeated in large numbers, with a different cast of characters in similar situations.
Good thing you kept your comments to yourself. You never know when an irrate flipper/f@ucked borrower loses it and shoots someone over a comment like that. I guarantee before the years is out, we will have a least a couple stories (nationally) over a FB shooting up something (mortgage office, realtor office, etc.).
waiting in LA - we will look forward to your posting of the two floppers in the Beverly Hills Mall. That would be great to have a recording, and then watch their faces when they realize everyone knows they are BROKE.
Bravo.. I could not have said it better.
Actually,
Your information on the Florida Homestead exemption is not correct. It was $5000 for most of it’s existence and was modified to the current $25,000 about 20 years ago.
Twenty years ago typical houses in Florida with 1200 sq ft were selling in the $30-$50k range, so the deduction was quite substantial.
My parents bought their 1200 sf home in Tampa in 1960 for $11,500. By 1975, you could buy a WATERFRONT 2000 sf home in the area for about 35,000. By 1985, those were around 175k.
This just shows how things have gotten really out of hand over the past 5-10 years. The exemption should be increased but the PRICE of housing is way too high, based on long term projections….
Thank you Alan Greenspan and the moronic Federal Reserve Ponzi scheme providing CHEAP CHEAP money to debtors and imbalancing the entire economic landscape of the United States, and by extension, the world……………
I was just using any figure (50 years) to indicate something that’s been around a very long time, and desperately needs updating. Homestead exemption today is a joke.
A month or so ago, somebody posted a letter here concerning a real estate agent in Tampa who said nobody ever asked what the taxes would be if he bought a property, but only what a current owner was paying. People, especially those from other states, often don’t realize one has nothing to do with the other. By law, realtors are supposed to tell them and have them sign a document stating they know what the new taxes will be, but obviously realtors ARE NOT telling them. Therefore, they must be faking a lot of signatures.
Property taxes are outrageous. One flat percentage rate for every property owner, including every church and other alleged charity that owns real estate, is long overdue.
If anyone just took even a few minutes to do some research before they bought a house, they would find out (at least in Illinois) that taxes will increase based on your new assessment which is the sales price that you paid. I don’t like taxes, but to me it is just another reason not to over pay for a house. It’s the biggest purchase in your life - maybe you should do a little research. DUH
Many children who are left homes by deceased parents cannot afford to keep them because the taxes are re-appraised based on the alleged current market value of these properties. If the house were purchased in the ’50s or ’60s for $20,000.00 and is now alleged to be worth a million (very common here), taxes can jump from a thousand dollars a year to fifty thousand dollars a year. How many people can pay this?
One of the differences/”advantages” of Prop 13 here in California is that as long as the property is passed along (inherited) to family, they are protected from current market value property price madness. However, when they (those who inherited at the Prop 13 tax level) sell, whether family or others, the new owner automatically pays taxes on the price purchased.
Mary
I think people are still relatively well of in Florida. In several (most?) EU countries you have to sell the inherited property anyway because of a 15-60% inheritance tax. The property is always reassessed at current market value. If you want, you can take out a mortgage on the home to pay the tax office of course … So, property taxes are the least problem to worry about …
Unfortunately, this does not apply to the very wealthy because they can use special stricks (like estate trusts) in most countries to evade the inheritance taxes.