Buyer’s Remorse Causing Problems In Florida
The New York Times reports on Florida. “In a sign that the real estate slowdown has hit even the most desirable locations, the developer converting the Savoy Hotel in the South Beach section of Miami into multimillion dollar Fendi-designed condominiums and condo hotels may be facing foreclosure. ‘You have a situation where you have one of the most beautiful locations in Miami right on the beach. You have an amazing architect. You have an amazing designer,’ said Seth Semilof, a former broker. ‘This is the first of many that’s going to go down.’”
“The vice chairman at Prudential Douglas Elliman, Dolly Lenz, was hired to market the apartments. Ms. Lenz said that the project fell apart because the developers could not get enough money from banks to finance the construction. ‘The banks just felt that the whole Miami market was an issue to start,’ she said. ‘I introduced them to every bank on the planet. They couldn’t get financing.’”
The Wall Street Journal. “Problems are emerging as some buyers who signed contracts to buy new condos two to three years ago, when construction was just starting, seek ways to back out as they encounter trouble getting financing in the suddenly dicey mortgage market.”
“Falling prices are forcing appraisals down, so banks aren’t willing to lend the full amounts that people committed to in the sales contract.”
“‘Closings that are scheduled to take place are not taking place,’ says Marvin Moss, a North Miami Beach real-estate attorney. He is suing several developers to help clients get out of contracts.”
“Miami added 4,549 condo units in 2006 and 3,276 so far this year. Another 7,985 will be delivered by the end of the year, with another 8,260 slated for 2008 to 2011, for a grand total of 24,070 news units between 2006 and 2011.”
“Buyer’s remorse is causing problems for some developers. Cindy Cicala plunked down a 10% deposit on a $370,000 two-bedroom condo in a new project in Tampa, Fla., in August 2004, a time when investors were elbowing each other aside to sign contracts. Her unit was to be finished by August 2006, making it one of the first high-rise residences to be built in the city’s reviving downtown.”
“But in April, 2005, the developer asked for an extension. ‘It was just one delay after another,’ says Ms. Cicala, a residential-mortgage broker. She decided she didn’t want to close on the condo, claiming the developer hadn’t held up its end of the contract.”
“Ms. Cicala says she asked for her deposit back but hasn’t received it, so she sued under a federal law that guarantees condos must be delivered within two years unless the developer can prove certain extenuating circumstances.”
“Her attorney, Harry Lee Coe IV, says Ms. Cicala and other clients ‘are seeing their investing potential has dwindled, and they are now no longer at the front of the pack — and you don’t want to be in the middle of the pack in a bad or down market.’”
“In a sign of how widespread the condo frenzy was among lenders, developer Farbod Zohouri’s financing sources ranged from tiny local banks to Lehman Brothers, which lent him $180 million for two Orlando condo-conversion projects that flopped.”
“Several commercial banks lent him money for five projects, despite his relatively small operation and spotty track record, which included a settlement with the federal government on mortgage-kickback allegations.”
“Zohouri says he is ‘an honest person’ who is working hard to get his investors’ money back. He says because of possible legal actions, he can’t explain exactly what went wrong.”
The Street.com. “The developers of Jade Ocean, a luxury high-rise condo near Miami Beach set to be completed in 2009, claim they’ve already sold 98% of the building’s units.”
“Of course, the reality is that this ‘pre-construction sales’ number at Jade Ocean carries little meaning. It’s a phrase that previously impressed people but carries little meaning in present-day Miami, which is increasingly looking like the Netherlands in the aftermath of the Tulip Craze more than 300 years ago.”
“Buyers will walk away from their 20%-down deposits because of rapidly falling prices and a huge inventory overhang that will only get worse in the market, several industry experts say.”
“South Florida real estate agent Mike Morgan estimates that condo flippers have made up 90% of the buyers at the projects Corus has lent to in Miami. ‘These flippers are now under water in most Corus buildings based on what they paid and where the market is today,’ he says. ‘But the market is getting worse.’”
“‘I don’t know anyone that is loaning on these condos to investors,’ Morgan says. ‘If it is not your primary [residence] , you have a problem. I am predicting condos in less-desirable areas will sell for 25 cents on the dollar.’”
The Herald Tribune. “Some Southwest Florida builders are seeing a better year than 2006. ‘We’re actually seeing good increase over last year,’ said Lee Wetherington. ‘The only caveat is that last year was probably the slowest year we’ve ever had.’”
“‘Prices are 20 to 25 percent less than they were a year ago,’ Wetherington said. ‘We’re also getting a lot of help from our suppliers and subcontractors. Their prices are also coming down.’”
“The price of new homes is now substantially less than the price of existing homes — at least 20 percent lower, Wetherington said.”
“‘I had one client who saw a house for $1.75 million. But when he came to us, he realized we could build the same model for $1.25 million,’ Wetherington said. ‘Guess what? He signed a contract.’”
“‘Some national builders will leave the area; other builders will shut down,’ Wetherington said. ‘I don’t expect any real upturn until 2009, and we won’t return to normalcy until 2010. I haven’t seen anything like this since the oil embargo in the 1970s.’”
“Sun-soaked Southwest Florida is largely considered an enclave of wealth. But the last year of suffering in the real estate market has slowly percolated to nearly every industry in the region.”
“Tina Stebner is a college-educated former British Petroleum account executive who came to Sarasota from Chicago three years ago. She bought a home two years ago, at the height of the real estate boom.”
“When she lost her job at BP, she began temping. But even those sporadic jobs ‘ran out’ in the past year. In July, after looking for work unsuccessfully for months, she landed a sales job in Venice. But two weeks ago, she was let go because of ‘economic uncertainty.’”
“‘I was brought up to believe that you go to school, get a college degree and that you buy a house, it’s the smartest investment you will ever make,’ Stebner said.”
“Meanwhile, the back rooms of area pawnshops are filling up with saws, drills and other tools and equipment pawned by displaced workers in the construction trades. ‘We’re being swamped, to the point that we’ve pretty much stopped taking it,’ said James Sewell, co-owner of Goldcoast Pawn & Jewelry in Sarasota. ‘It’s gotten really bad in the last four to five months.’”
“Sewell said many of the former construction workers tell him they are leaving the Sunshine State. The unemployment situation combined with rising taxes and property insurance premiums has made Southwest Florida unlivable for many, Sewell said. ‘It’s gotten to be like California, but without the wages.’”
From Florida Today. “A national economist told representatives of the housing industry Thursday not to count on a sales turnaround in the Sunshine State for at least 18 months.”
“‘Are things going to turn around next year? No,’ said Ted Jones, chief economist with one of the nation’s largest title companies. ‘We’re going to have another 18 months of ugly coming out of this subprime mess’”
The St Petersburg Times. “Jones, a prognosticator often cited by Realtors’ groups, told agents that rashly approved mortgages, the worst of which he dubbed ‘time-bomb loans,’ would help keep the Florida housing market hobbled until 2009.”
“‘If you think it’s bad now, you haven’t heard the end of this,’ Jones said to audible groans from Realtors who’d enjoyed earlier pep talks from the likes of Gov. Charlie Crist.”
“Jones blamed a get-rich-quick ethos that drew gamblers into the housing market and encouraged bankers to make risky loans on the assumption the good times would roll forever. ‘What is the difference between flipping real estate in Florida and playing craps in Vegas?’ Jones said. ‘You get free drinks in Vegas.’”
“Jones described prospective home buyers as buzzards circling fresh highway roadkill, waiting for prices to fall further. He urged Realtors to speed up the process by confronting sellers with the reality of a glut that’s left 41,000 homes on the market in the Tampa Bay area alone.”
“‘We’ve got to sober up sellers,’ Jones said. ‘I don’t care what you paid for it.’”
The Sun Sentinel. “For those with a mortgage who want to refinance…it can be done, but not if your property’s value has fallen off a cliff.”
“‘Banks haven’t stopped lending money to people, they’ve just made it more practical on both sides,’ said Casey Casperson, a senior loan officer in Palm Beach Gardens. ‘Now they’re making borrowers prove they can pay it back.’”
“During the housing boom, lenders didn’t require that of borrowers. As unbelievable as that sounds, let’s give money to people without checking to see if they have a job or looking at their pay stub, it was the way the subprime market worked.”
“What happened a few weeks ago was investors who bought those mortgages from lenders simply stopped buying. Now that no one is willing to take on the riskiest mortgages, lenders say they’ve raised their standards.”
“At Wachovia, those 5 percent down payment mortgages with no verification are gone. If you want a loan that does not require proof of income, you must put 20 percent down. And you’ll need a higher credit score than in the past for any high loan-to-value mortgage, a spokesman for SunTrust said.”
“It’s similar for borrowers with credit that’s not good — 20 percent down payments are being required.”
“Jonathan Klein, general manager of Associates Home Mortgage in Boca Raton, was recently working on a $480,000 mortgage for a home near Loxahatchee, in western Palm Beach County, a few weeks ago. The buyer was making a 25 percent down payment and the interest rate was to be 7 percent.”
“The day the loan was scheduled to close ‘was the day when the market completely collapsed,’ he said.”
“In a matter of two hours, the interest rate rose to 8 percent and the borrower had to pay 5 points, for an extra cost of $17,000 on the loan, to prevent the deal from falling through.”
Old Jones: Kool Aid for all
New Jones: Drinks on the house
“Jones blamed a get-rich-quick ethos that drew gamblers into the housing market and encouraged bankers to make risky loans on the assumption the good times would roll forever. ‘What is the difference between flipping real estate in Florida and playing craps in Vegas?’ Jones said. ‘You get free drinks in Vegas.’”
The good times would roll forever. It reminds me of the dotcom ponzi scheme. How soon they forget.
“Jones described prospective home buyers as buzzards circling fresh highway roadkill, waiting for prices to fall further.
…Definitely a true friend of the bottomfisherman!
roadkill = realtors, lenders, etc.
I have no problem being described as a buzzard waiting for the right time to go for the roadkill. That is the economy we’re about to see.
Mr. Jones, thank you for standing in the middle of the road and yelling at us. Bummer you didn’t see the start of the cannonball run behind you. I count a hundred sports cars, dozens of 18 wheelers (their own category), and a thousand Harleys barreling down the road. Keep ranting…
Got popcorn?
Neil
“Jones described prospective home buyers as buzzards circling fresh highway roadkill, waiting for prices to fall further.”
REAL buzzards wait until it’s free. Squatting- the next wave of homeownership.
Buzzard seems a bit pejorative. But I like the bird analogy. So I’ll consider my self a majestic condor (glorified vulture), circling over zips and census-designated areas aloft on thermals (hot air provided courtesy of the NAR and their ilk).
However, I suppose that when I finally descend to purchase a house, I will pick the bones clean, and reveal my inner carrion crow. I’ll be coming home to roost, if you will. This is so ripe with puns.
In the meantime I’ve been sticking to Neil’s popcorn. Also avoiding that raw rice thrown at weddings, my understanding is that it’ll blow-up my stomach (crop?) faster than a resetting 2/28.
“‘Closings that are scheduled to take place are not taking place,’ says Marvin Moss, a North Miami Beach real-estate attorney. He is suing several developers to help clients get out of contracts.”
I wonder how many of these places were sold to realtors and mortgage lenders. We have seen many examples that these two groups were big in the flipper arena. I also wonder how many of these people are no longer realtors and mortgage lenders? There have been thousands and thousands of layoffs because of this downturn.
I wonder why articles haven’t been done on the realtors, lenders and appraisers who now find themselves in financial trouble due to adjusting their own lifestyle to the “housing bubble?” I have a friend of mine whose husband is an accountant who has realtor clients who are losing their houses, leased cars and lifestyles..
Oooooh! Tell me more! Tell me about the crying and stuff!
Wow, you’re sadistic LOL!
Bring on all the juicy stories of the repo men, ugly divorces, riches to rags, sobbing, crying, BK, jumping from buildings, etc, etc. I want hear it all!
Instead of “Flip this house” maybe “Eviction day”
“Eviction day” would be for one network…
But I want to see “Repo man, the suburb edition” going after all the Hummers, Bentleys, BMW’s, Jag’s, etc.
In fact, the Repo man should show up on Eviction day and interview them: “Was the Massarati worth losing your home?”
Bwaaa haa haa!
Not to mention the #1 reason for divorce is financial distress.
Get this on the air!
Got popcorn? Lots and lots of popcorn?
Neil
Hey Neil..there is absoultly NOTHING wrong with a low milage used red massarati fully equipped with a fresh young blonde
“Repo man, the suburb edition”
That actually would be a great show. Better than the bounty hunter, IMHO…
“Tell me lies, sweet little lies…”
You’re here and you SURE know what the score is Olympiagal
Hear hear!! How ’bout some details???
Hmm, I would really like a late model ‘Benz with a turbo diesel engine. Let me know.
Roidy
“The price of new homes is now substantially less than the price of existing homes — at least 20 percent lower, Wetherington said.”
Decisions, decisions. Would I rather buy an overpriced used home which is already falling apart, or a cheaper new one whose mania-era construction suggests a high likelihood of hidden defects and early maintenance problems?
Angry Homeowners Take to the Web
As homebuilders struggle and houses get harder to sell, builder-bashing gripe sites are grabbing more attention and more traffic
http://www.msnbc.msn.com/id/20161229/
Wetherington’s homes/communities were my wife’s favorites, but we didn’t want to pay his prices at the time. So even he has had to drop prices by 25%. Betcha the existing homeowners aren’t happy.
Bwaaa haa ha.
You don’t know how many times I’ve drawn the supply/demand price/unit chart for coworkers and yet people still don’t get it.
Many thanks to all the housing bloggers who have posted so much good information out there.
Got popcorn?
Neil
‘Banks haven’t stopped lending money to people, they’ve just made it more practical on both sides.’ Sounds much better than “Sorry, you’re screwed.”
Given that homes almost everywhere are likely to fall 20% or more in value, that 20% down payment vaporizes as equity — In case anyone thought the 20%-down idea was hype.
Don’t feel sorry for them. Big national homebuilders are in it for the money and the more corners they can cut the better their bottom line. You think they’re going around to see if any of the construction is faulty. They’re too busy boosting the price of stock. I would NEVER buy from a big national builder.
Here’s some sobering statistics on the ARM resets coming over the next 12-18 months. Wow!
http://tinyurl.com/35l4g5
There are some provocative ideas expressed on this link. For instance,
“History tells us it’s usually foolhardy to doubt the power of the Fed to bail out financial markets, once the Fed starts a cycle of lowering interest rates. But the Fed is not all-powerful. The subprime/credit crisis is probably causing a lot of collateral damage in the multitrillion-dollar over-the-counter derivatives market. It’s not like the Fed can immediately wipe the slate clean on every bad derivative trade made by hedge funds and banks. Much of the damage has already been done, no matter how the Fed responds. So this Fed easing cycle may be very different from prior ones.”
Good point. Reminds we of George Soros vs. Bank of England.
See : Black monday in
http://en.wikipedia.org/wiki/George_Soros
“On Black Wednesday (September 16, 1992), Soros became immediately famous when he sold short more than $10 billion worth of pounds, profiting from the Bank of England’s reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency.
Finally, the Bank of England was forced to withdraw the currency out of the European Exchange Rate Mechanism and to devalue the pound sterling, and Soros earned an estimated US$ 1.1 billion in the process. He was dubbed “the man who broke the Bank of England.”
Sometimes a flood cannot be stopped.
Good point. Reminds we of George Soros vs. Bank of England.
See : Black monday in
http://en.wikipedia.org/wiki/George_Soros
“On Black Wednesday (September 16, 1992), Soros became immediately famous when he sold short more than $10 billion worth of pounds, profiting from the Bank of England’s reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency.
Finally, the Bank of England was forced to withdraw the currency out of the European Exchange Rate Mechanism and to devalue the pound sterling, and Soros earned an estimated US$ 1.1 billion in the process. He was dubbed “the man who broke the Bank of England.”
Sometimes a flood cannot be stopped.
“Don’t fight the Fed” does have a solid basis and a legacy of pain for savers. With the huge debt levels in today’s macroeconomy and all the leverage, cutting the Fed funds rate will be huge, monumental. Generally don’t want to be leaning too far on the bearish side. The derivatives market is a black box, a magic hat which will produce the desired result regardless.
Question- what happens when the fed discount rate falls below the interest rate of treasuries? THAT would be interesting… “Hmm, I think I’ll give all my MBS over as collateral, borrow upteen billion and invest it all in treasuries. Of course, I’ll still keep the revenue from the MBS.” It’s the mother of all arbitrage opportunities…
Look like the peak of resets comes just in time for the spring ‘buying season.” Neil, I’m ready for the popcorn..
Don’t worry, after two fizzled spring selling seasons, I’m sure this will be the year. Oh yea… Why the statistics show people have money in hand ready to make that down payment! (What do you mean the baby boomers are a bifurcated saving generation? You mean some will have cash but many won’t and they already own far more 2nd homes than the income/savings statistics show they should…)
Oh, we need to come up with a new term for “spring buying season.”
I believe 2008 will be the year without a spring (buying season). . By that… no spring selling season, weak summer… basically low flat sales for the year. Notice I’m not saying no sales… Now, I’m exaggerating a little. May will sell more homes than February. But not by its normal huge multiple.
Got popcorn?
Neil
“Of course, the reality is that this ‘pre-construction sales’ number at Jade Ocean carries little meaning. It’s a phrase that previously impressed people …
- This reminds me of the poor slob that bought a condo in Mexico because Donald Trumps name was attached to it. He said, ‘If Trumps involved - it has to be a great deal’!
“‘Are things going to turn around next year? No,’ said Ted Jones, chief economist with one of the nation’s largest title companies. ‘We’re going to have another 18 months of ugly coming out of this subprime mess’”
“‘We’ve got to sober up sellers,’ Jones said. ‘I don’t care what you paid for it.’”
Ben - do you have a relative named Ted?
He sure sounds like a guy in the industry who actually gets it (though I wouldn’t necessarily count on improvement in 2009).
‘I don’t care what you paid for it.’
And the scam has come full circle. Just last year they were still telling the world that RE was the best investment one could ever make - now they just want the money to start moving around again at any cost. Bookmark that quote in case there’s ever another bubble.
Someone take that quote and broadcast it in times square.
‘I don’t care what you paid for it.’
Nor does the market. The market is what your home will sell for. Its at the start of a buyer’s market which means only the best values trade hands.
Man… while reading this thread two more popped up (Google desktop… love it!).
Got popcorn?
Neil
Heck, 2 months ago that were angry that buyers were looking at sales history…. What it sold for 4 years ago is irrelivant.
Now they are mad that sellers are looking at price history!
“I’ve been doing this 35 years. To me, this is normal,” Riley said. “The past five years was abnormal. I enjoyed it. But it was abnormal.”
I wish I could get the real estate veterans in my area to admit this.
Most have only been in the biz for 5 years, so they really buy into the “real estate always goes up” platitude…
Rin: You are so unpatriotic even thinking that. Shame on you.
Repeat after me.
1. They are not making any more land.
2. Buy now or be priced out of the market.
3. Now is a good time to buy or sell.
4. This is a soufle not a bubble.
5. Interest rates are an historic low.
6. Four legs good, two legs bad.
7. The (pick one or more: Chinese, Brits, French, Russians, Venezuelans, Lichten-f’ing-steinians) are going to be buying tons of U.S. property, considerably adding to demand.
Although lenders and investors will get hosed, the condos in Downtown San Diego and NYC will sell or rent if offered at a reasonable price. So some “luxury” buildings will become upper middle class college graduate areas, and other “luxury” buildings will become middle class housing. That’s good news.
Not sure about Florida though. Perhaps we can house the nation’s homeless there?
I don’t think they would like the mosquitos and humidity. Homeless people prefer California’s nice weather. LA’s Skid Row is the place to be
Not sure about Florida though. Perhaps we can house the nation’s homeless there?
I thought you already did.
House the homeless? It would victimize them even more. They would become oxymorons.
Look at this YOUTUBE vid.
All I can say is WOW!
And Dodd, Schumer, and Clinton want to bail these guys out.
*shaking head*
Oops forgot the link!
http://www.youtube.com/watch?v=yjm4GaP8fmU
Emergency sale folks!
http://condosaleinflorida.com/
“‘Prices are 20 to 25 percent less than they were a year ago,’ Wetherington said. ‘We’re also getting a lot of help from our suppliers and subcontractors. Their prices are also coming down.’”
“The price of new homes is now substantially less than the price of existing homes — at least 20 percent lower, Wetherington said.”
“‘I had one client who saw a house for $1.75 million. But when he came to us, he realized we could build the same model for $1.25 million,’ Wetherington said. ‘Guess what? He signed a contract.’”
If these guys can keep this up, this will further hasten the decrease in home prices.
Why buy used?
Why buy a used 2005 Toyota Camry when you can buy a 2008 for 25% less?
I agree with that 100%. That is why when we moved I first took a look at a bunch of resales then the new homes. I realized that I could have a better home built for $150K less, choose my lot and the way I needed the home built. Would never buy used when new is better, cheaper and has warranties…
annette….how do you know your home was built better than one from 15 years ago? Did you watch over your house while it was built? If it was built by a developer using ‘imported’ labor, good luck!
Sorry that is where you are wrong! Not only did I have the home built but I hired a MY OWN home inspector. I had everthing from the framing, to the roof inspected throughout the WHOLE process and the report sent directly to the builder and would not close until all the items on MY CHECKLIST were taken care of. So unlike my neighbors who have had issues with their homes.. I have had none!
In my community in Bradenton FL, there is one builder left that cannot close out the place. It looks like he is having a hard time coming to fruition they need to lower the dang prices more. Resales have been selling 25% lower than new construction. I guess that explains why they haven’t sold any houses since last year…..
All this talk about how many percent prices are lower than a year ago doesn’t sit well with me. If normal prices were discounted, that is a true discount. But those weren’t normal prices. So there is no discount. Rather, inflated only 300% past normal rather than the 400% 2-3 years earlier sounds more like it, and how I read it. It is much like the retailer that offers 1/2 off, after doubling the price and not telling anyone, and the buyers buys because he thinks the price is 1/2 off. The 2X price increase and the 1/2 off cancel each other out. And to me, these housing price reductions are only cancelling out artificial prices increases and are not true discounts and no one is saving money who buys today. Things haven’t returned to normal until a professional can buy a starter house for 4X 1 years salary, his own, not including the wife’s. IMHO Then and only then can someone start to calculate real discounts relative to a sane market price. Insane prices in a bubble market are not true market prices, to me.
“Tina Stebner is a college-educated former British Petroleum account executive who came to Sarasota from Chicago three years ago. She bought a home two years ago, at the height of the real estate boom.”
“When she lost her job at BP, she began temping. But even those sporadic jobs ‘ran out’ in the past year. In July, after looking for work unsuccessfully for months, she landed a sales job in Venice. But two weeks ago, she was let go because of ‘economic uncertainty.’”
“‘I was brought up to believe that you go to school, get a college degree and that you buy a house, it’s the smartest investment you will ever make,’ Stebner said.”
I remember arguing with people about this. My grandparents and parents kept preaching, you need to get a house. It is the best investment you can ever make. Tina is getting an education all right, not the college one either. Don’t trust everything you hear. Question everything.
Tina is stuck in the rat race.
My grandparents and parents kept preaching, you need to get a house. It is the best investment you can ever make.
A house has always been a mediocre investment.
The reasons why the previous generations thought it was a good investment is because: (i) they don’t understand the difference between real and nominal returns, (ii) they lived through the inflation of the 1970s, (iii) their house was one of the only times that they actually saved money (via their principle payments), and (iv) they benefited from the current run-up in prices.
Today’s buyers face the following: (i) inflation remains low,* real prices are declining, and thus, nominal returns are negative, (ii) it looks like inflation might remain low**, (iii) exotic mortgages no longer require people to pay off the principle, and (iv) a run up in prices harms people who bought after the run up.
*-I know it is unpopular to say inflation is low among some people on this board.
**-It appears that people misinterpreted Bernanke’s helicopter statement. In retrospect, Bernanke’s point may have been that deflation was easy to fix, so he did not fear it. Now, it does Bernanke does appear to fear liquidity crises. However, a liquidity crisis is not the same as deflation, and the policy instruments used to address each are not necessarily the same.
*-I know it is unpopular to say inflation is low among some people on this board.
It’s not that its “Unpopular”, it’s just not true.
Inflation in prices is the result of inflation in the money supply, of which there has been ample.
The original intent of measuring “inflation” with a Consumer Price Index was probably a valid way to determine how much monetary policy was impacting consumers. It was a “basket of goods”. That basket has changed over the years to delete things that cost more, substitute products and use “hedonics” to say that you are getting more for your money.
This is all political manuevering. As we have pointed out in the past, a 1913 dollar is now worth 0.04 dollars. A loaf of bread used to cost 0.05, now it is nearly $2.00. Why?
Because the Fed is able to print an endless supply of dollars to give to borrowers to go out and “buy up” America’s production and assets, causing price inflation and falling wages. It is why 60% of American assets are owned by 2% of the people. They got the “early money” and bought at the lower price. It takes a while for the new money to filter through the system and create a supply/demand imbalance.
Bernanke IS inflating the money supply. The $100 Billion or so he “loaned out” on new credit will add new money to the system, which will effect prices. Even thought the system “froze up” because gamblers welched on their bets, they are increasing the available supply of credit/money.
He is essentially bailing out the Banks/Hedge Fund/Wallstreet crowd that gourged themselves on the free money policies of the FED.
His actions will only make matters worse. The expansion needs to end in a contraction, but the market players would lose their bets.
My money is losing value everyday.
Tell me that story about “low inflation” again. I need a good enema.
I am not saying that their is no inflation. Of course there is. Bernanke is a inflation targeter, which means that he wants about 2% inflation per year. However, 2% inflation per year is a whole lot less than it was in the 1970s.* Furthermore, 2% inflation is not going to bail out the flippers and stretchers.
High inflation or a government bail out are the only things
*-I personally have talked to people at the BLS (who put the inflation figures together) about hedonic adjustments. The current hedonic adjustments are limited to only a small fraction of the goods in the “basket.” Furthermore, the hedonic adjustments can lead to higher inflation if the quality of the product considered is reduced. In the end, without the hedonic adjustments, the inflation rate would not be substantially different from the current inflation figures.
“‘I was brought up to believe that you go to school, get a college degree and that you buy a house, it’s the smartest investment you will ever make,’ Stebner said.”
I was brought up to learn to think for myself; to analyse, research and be cautious about financial matters; to examine the motives and self-interest of ‘authorities’, to be skeptical of the powerful, be it government or corporations; and to not blindly accept simplistic slogans like, “go to college and buy a house”.
You had very good parents! Make sure you tell them…
slightly off topic: i watch the San Diego downtown condo market carefully. for several months now, the lowest price unit available was $239,000. today a ’short sale’ studio is offered at $199,000. i think this could be a very important event, the San Diego downtown market is officially crashing! let the panic begin.
“The vice chairman at Prudential Douglas Elliman, Dolly Lenz, was hired to market the apartments. Ms. Lenz said that the project fell apart because the developers could not get enough money from banks to finance the construction. ‘The banks just felt that the whole Miami market was an issue to start,’ she said. ‘I introduced them to every bank on the planet. They couldn’t get financing.’”
Dolly
Hello, it’s Hairy
Well, Hello Losing
It’s so nice to be turned down all day long
No banks care, Dolly
I can tell, it’s sheer folly
You’re still knowin’, this will soon be blowin’
Good & Strong
for the band’s playin’
The governor’s praying
One of the oldest tunes I know, from way back when
Bridge that gap, fellas
Find me a bank to tap, fellas
Dolly’ll never go away again
From the Herald Tribune article, all I can say is WOW.
Meanwhile, the back rooms of area pawnshops are filling up with saws, drills and other tools and equipment pawned by displaced workers in the construction trades.
“We’re being swamped, to the point that we’ve pretty much stopped taking it,” said James Sewell, co-owner of Goldcoast Pawn & Jewelry on Clark Road in Sarasota. “It’s gotten really bad in the last four to five months.”
Sewell said many of the former construction workers tell him they are leaving the Sunshine State.
“They’re going to that Tennessee, North Carolina and Kentucky corridor — they are calling it the ‘New Florida,’” he said.
The unemployment situation combined with rising taxes and property insurance premiums has made Southwest Florida unlivable for many, Sewell said.
“It’s gotten to be like California, but without the wages.”
“They’re going to that Tennessee, North Carolina and Kentucky corridor — they are calling it the ‘New Florida,’” he said.
I had a visual of a swarm of locusts traveling from one area of the country to another, devouring the countryside and leaving McMansions in their wake.
My father told me of the days in the 1930s when a train would pull into town, slow down, and hordes of men would jump off, going door to door - ” will work for food.”
Scary thought.
Trust me in Florida..very few have McMansions..too high taxes and insurance to go that way….a McMansion house will run you $10-29K for insurance..who cares about affording the mortgage payment when the takes and insurance will can be $50K a year alone!
Great quote from the WSJ article linked in Ben’s excerpt:
‘”More of the iceberg is being revealed, but we haven’t seen it all yet,” says Norman Radow, an Atlanta real-estate investor who works with lenders to rescue distressed condo complexes.’
I encourage everyone to read the whole piece, it explains what is coming next in condoland, and the crazy financing made foreclosure inevitable for may of these projects. It’s going to be a great time for renters in some of these developments after the smoke clears.
Do you have the link landlord ??
Sorry…I got it above….
“Who are managing all the funds?” Mr. Radow asks. “Where did all the real-estate experts come from?”
History shows that the funds were not managed and the RE experts came from Suzanne’s research. RE only goes up!
The St. Pete Times article referenced the new motto of the NAR-”Get Pumped”. That’s pure genius that I’m sure many on this blog will appreciate.
The pressure to monetize this mess will be enormous.
The FB’s got pumped and dumped
This is definitely worth a read and talks about Real Estate Fool’s Gold in Miami.
A woman put down 93k on a condo that has lost 100 grand of it’s value. She is now suing to get her deposit back.
http://abcnews.go.com/Nightline/Story?id=3362215&page=2
“In a matter of two hours, the interest rate rose to 8 percent and the borrower had to pay 5 points, for an extra cost of $17,000 on the loan, to prevent the deal from falling through.”
If I were that buyer in S. Fla, I’d have told the seller to eat both costs or I was walking away. And would have done so.
3 deals feel out of bed this week for us due to spike in jumbo rates
“$480,000 mortgage for a home near Loxahatchee” You have no idea how far we are from the bottom when people are paying that much for anything in Loxahatchee. Five years ago $200,000 would be a mansion there. We are talking real swampland with kids riding ATV down the dirt streets!! It will take 15 years for her to get recoup the loss.
First problem..”Being a buyer in Florida!”
The Florida motto should be, “Don’t Buy, Rent!”
Anyone who is buying in the Florida real estate market right now is nuts..FL and CA are the two worst areas for real estate…I would only rent until the smoke clears.. and right now its a major forest fire with no end in sight…
You haven’t seen Vegas or Pheonix.
Sacremento is pretty close but those guys… whoa… 5cents on the dollar before its through.
Reminds me of Sam Kineson… You live in a fu*king Desert!!!!
That should have been this bagholder’s cue to walk from the deal.
Excellent collection of links. That comment describing our state as California but “without the wages” is a classic. And has anyone else noticed that all the condo purchasers in Tampa’s allegedly “revitalizing” downtown are associated with the real estate industry?
Just in driving around certain Tampa neighborhoods this week, the desperation was palpable–in some parts of Hyde Park, it seemed like every fourth house was for sale.
““Zohouri says he is ‘an honest person’ who is working hard to get his investors’ money back. He says because of possible legal actions, he can’t explain exactly what went wrong.”
I guess there could be a few legal actions to “I stole the money”. LOL.
I hope they do a bailout. Bail out everyone. This way I can buy a massive house I cannot afford and pay nothing and wait for daddy to come to the rescue.
I imagine I won’t be alone, and many more people that already have mortgages will join me.
How stupid are these people?
A semi-intelligent attorney I work with is closing on a condo in Dallas next week. I’ve told her on multiple occassions that if the news, my rants, etc. are enough to convince her to continue renting for a while, that she should visit this site.
There’s no talking this bonehead out of this decision. Just goes to show you that no matter what is being said in the media and elsewhere, there are still idiots out there that want to jump in and destroy their financial futures.
The best part is that he brother and dad bought a condo conversion in Palm Beach a couple years ago and I overheard her talking with another co-worker about how they think that that pig has doubled in value in 4 years. This is a country full of complete morons. Oh, and I was only kidding about her being semi-intelligent; there’s nothing going on inside her skull.
I play tennis so I get to visit some of the very affluent country clubs in the East Bay (Alamo, Blackhawk, etc.). I was at one this week, where the cute 20 - 30 something wives walked on the court with their little blonde ponytails and told us they were ‘tennis wives’, they dont’ work they play tennis all day. (My team? We are working moms and grandmothers). Anyways, while I was playing my match one of the husbands was on the balcony above us and I heard him telling his buddy that he was in the mortgage business and things were really tight, and he wasn’t making any money now. I wonder how much longer blondie will be playing tennis during the day? Having learned MUCH from this blog, I laughed to myself and thought ‘Hmmmm, and I’ll bet they are upside down on their mortgage, too!!’ LOL
“Blonde tennis wife” will bail……..
What is the difference between flipping real estate in Florida and playAng craps in Vegas?’ Jones said. ‘You get free drinks in Vegas.’”
and in Vegas (or any other casino), some people actually walk out ahead. May not be many but there is a chance. Florida flipping is now a 100% guaranteed loss, and no booze to drown your sorrows.
but the Super Bowl is only 5 months away. Surely things will be better by then, and all of the fools will be willing to buy up all this excess inventory. And, then again, maybe the Robin Williams genie is going to be flying out of the back end of Mickey Mouse on the “I’m going to Disneyland” commercial.
I am one of those Californians waiting to see FLA real estate drop 60% plus. I will be waiting to buy a condo in Miami Beach. Last I read, FLA has a 10 to 12 year inventory of condos for sale. If the new owners (banks) want to get rid of them, I suggest they have a hurricane sale and have the idiots who run the state drop the property taxes.