There’s Trouble In The Florida Housing Bubble
The Florida press is reacting to the February sales numbers. “Both buyers and sellers are struggling to adjust to the new reality that the boom days are gone. The median price for existing single-family homes in Miami-Dade dropped to $368,700, from $376,300 in January, the third consecutive month of price declines.”
“In Miami-Dade, the number of homes on the market increased from 8,811 in June to more than 20,000 in February. Broward’s jump has been even more dramatic: leaping from roughly 7,000 homes in June to more than 22,000 last month.”
“The typical price of a house in Palm Beach County dipped for the third month in a row as the housing market continued its return to reality. The median price for an existing single-family home sold in February was $391,000, well below November’s peak of $421,500.”
“The overall market, once untethered by gravity, now is weighed down by rising numbers of homes for sale and cautious buyers. ‘We’re not in a bust; we’re in the middle of a correction,’ said Douglas Rill, a longtime broker in West Palm Beach. ‘That frenzied 2005 market is over. This is the new norm,’ Rill said.”
“Investors, flippers and second-home buyers largely have disappeared from the market as soaring prices make it impossible to rent out a home at a profit, said Jim Sahnger in Sewall’s Point. ‘It’s more difficult for investors to make sense of the market,’ Sahnger said. ‘People are looking at $3,000 a month to own the property, and they can only rent it for $1,800 to $1,900.’”
“Throughout the Volusia-Flagler real estate market, people did a lot more looking than buying during February, with sales of existing homes dropping to 24 percent fewer than a year earlier. Antonio Jimenez today will conduct his fourth open house in six weeks, hoping to attract at least one solid offer on a newly built $459,000 beachside home.”
“‘I’ve had three people propose leases with options to buy, but I don’t want to rent,’ said Jimenez, who lives in Chicago. ‘I want a firm offer to buy.’ But only three or four people attended each of his first open houses and his last one drew only two people. ‘People ask me ‘Will I come down on my price?’ Sure, I’ll come down, but bring me an offer first,’ he said.”
“The median price of a Collier County house sold with the help of a realtor was $492,300, down 1 percent compared to $498,400 in February 2005. Bruce Babcock in Naples said Collier’s market is definitely in a downturn. ‘There’s still a lot more listings than there were six months ago and they’re not moving. The buyers are being cautious, they’re kind of waiting on the sidelines. I’m encouraging offers, but they’re still of the belief prices will come down and if they wait, they’ll be able to get the properties at a lower price.’ Meanwhile, he said, ‘There are plenty of price decreases, some of them two or three times’ over the past two or three months.”
“In Lee County, there’s been ‘a little more activity’ recently as buyers go after houses that have had deep price cuts, said Michael Schneider-Christians, based in Cape Coral. ‘The sellers are coming down and some people are realizing those are good prices.’ One of his clients, Carolyn Reynolds, sold her Cape house recently for $299,000, down from her original asking price of $365,000.”
“‘I was extremely relieved because I’d already bought another house outside the area and I was sweating it out,’ said Reynolds, a retired Allstate Insurance employee. ‘We put it on the market in late December and not one person came to look at it for three months,’ she said, but after cutting the price to $299,000, ‘from last Friday I showed it to three different prospective buyers and the third one bought it.’”
“The median single-family home price in the Fort Pierce-Port St. Lucie area fell in February to $248,400. That was $13,500 less than the January average of $261,500 and $15,000 below the December average of $263,300. Martin County had 2,224 homes for sale in January versus 935 a year earlier, (broker) Stephen Dutcher said. ‘The MLS had 93 homes sold, but in 2005 that was almost double at 161.’”
“Higher prices have increased the inventory of unsold homes, said Brad Hunter, who follows housing trends on the Treasure Coast and South Florida. As a result, owners have to drop prices if they want to sell their properties. ‘I think there’s also a psychology behind this. Buyers think that since there are a lot of good deals now, if you hold out the deals may get better later,’ he said.”
“‘Prices will go down further,’ said (broker) Deborah Ray in Fort Pierce. ‘I think people need to be very concerned about this downward trend. (Broker) Dave DeWitt in St. Lucie County, agreed. ‘I think we’ll see slower sales for the next couple of years,’ DeWitt said. Prices have reached the point that the person with an average income can’t afford to buy a home, he said. ‘When people bought their homes two years ago, they didn’t expect to get a property tax bill of $5,000 to $6,000,’ DeWitt said. ‘You combine that with higher insurance rates and that makes it impossible to buy a home.’”
“There’s trouble in the bubble. After three years of rapidly inflating real estate, loose credit and dicey financing, the number of court filings notifying Palm Beach County property owners they are facing foreclosure is rising.”
“‘You are going to start seeing a lot of squirming and shaking now,’ said David Levin, a Delray Beach real estate consultant. In Palm Beach County, the troubled properties run the gamut, from a $1.3 million loan on a home assessed at $590,000, to a modest home equity loan with a hefty price tag: 12.2 percent.”
“Martin County filings include a pair of million-dollar homes. Of those Martin and Palm Beach county filings that identify the kind of home loan, roughly half are some form of adjustable-rate mortgage, or ARM.”
“Some of those high-risk buyers have either counted on more income or on ‘flipping’ the property to another buyer for more money before a higher rate kicked in. But as prices have come down, would-be flippers are finding themselves stuck with those homes.” “‘We have been looking at some numbers as well, and we are extremely concerned,’ said Michael Flagg, a spokesman with the Washington-based Center for Responsible Lending. ‘Our guess is that this is only the small wedge compared to what happens if interest rates go up.’”
“‘If they (investors) get stuck, I am not going to feel very sorry for them,’ said Muriel Siebert. Some mortgages do not even require proof of income. ‘If you can fog a mirror, you can probably get money,’ said Levin, the Delray consultant.”
“Such willingness to lend can add up to trouble for a borrower. Take the Wellington couple who faced foreclosure on a $425,000 mortgage in 2003. According to court records, the couple took out a $1.3 million mortgage with another lender. The original foreclosure threat went away, but last month the new lender filed its own notice to foreclose and collect on the newer, much larger debt.”
Thanks to the readers who sent in these links. Here is some news on hurricane insurance in Florida. ‘The 2005 deficit for Citizens Property Insurance will likely be at least 50 percent higher than originally estimated, surpassing $1.7 billion.’
People will just stop carrying it and assume that Uncle Sam will bail them out just like they did with Katrina.
Good luck with that. You lose you house, keep paying the mortgage and get a trailer in your yard to live in.
People are underestimating the impact the insurance costs are going to have on the housing market. Imagine not being renewed and thrown into the state run pool, thus doubling your premiums.
This is going to cause alot of people to reconsider ownership
I am correct in those that live East of I-95 will get hit the hardest? Those out west (RPB, Wellington) might not be so bad. I’d hate to own an oceanfront condo and be in the state pool. Ouch.
I’ve got a Gulf front condo in Naples. Don’t know what my personal policy increase will be. Currently, I have wind, flood, and regular. It is 3k per year from Citizen’s (the high-risk pool). Bear in mind that this just covers rebuilding the INTERIOR of my unit. I pay for the building coverage separately in my condo fee.
I am not complaining because the insurance is worth it to me. The problem is those that opt out and don’t insure. The rest of us pay to bail these people out.
Do you ever get tired of congratulating yourself? Who cares what you own?
YOU seem to care quite a bit (?).
And I don’t think we have seen anything yet. Last year’s Hurricane’s finally started people thinking about the craziness of living in a hurricane zone. But add another bad year–which is what is predicted–and I think you will really see people bailing out of RE in SW and SE Florida in a big way. Especially, all those Canadian and European snowbirds who are just too old to put up with this kind of mighty frightening weather.
Maybe they should set up a system like California’s earthquake insurance? Huge premiums and 10% deductibles.
Don’t forget: That’s the price for living in paradise.
You sir, are correct.
I have a close friend that had his roof blow off his beautiful lakefront home here in Lake Wales, FL during Hurricane Charley, two years ago. The contents of the home ( antiques, vintage guitars, personal effects ) were completely destroyed.
He got his “assistance from the government”. He, his wife, and his 12 year old daughter live in a 24ft camper/trailer on the property. That trailer has three windows and is 10ft wide. His wife and daughter sleep in the “bedroom” and he sleeps on the diningroom table/couch.
Try going from a beautiful lakefront 2800 ft2 home to a 240ft2 3-window camper with your wife and daughter. Try it for two years. Every night when he gets home from work he eats his TV dinner and looks across the yard at what used to be his dream home.
Almost two years has gone by and still he can’t start construction. He is still fighting with Citizens ( state insurer ) over the rebuilding.
Sorry to hear that. MANY of my friends have extensive hurricane damage. There are hundreds of people still NOT whole from the 2004 hurricanes, much less the 2005 ones. WIth the season approaching in less than two months, people will be stressed and tested to the limits. I can say that I refuse again to live 3 weeks without electricity, water, phone, or available gas. The wait time for tiles, screens, aluminum, and other building supllies is well over a year!
Why do people feel the Republicans will bail them out?
Aren’t they the party of personal responsibility?
Whenever doom and gloom and national debt is talked about, I hear at least one person say ‘the government won’t let that happen’.
The WSJ had an article about rising insurance premiums yesterday. The hurricane fear factor has resulted in upwardly gyrating premiums from Texas to New England. Somehow the WSJ forgot to mention in their writeup that home valuations should decrease to reflect the capitalized cost of higher insurance premiums, or in some cases, the complete unwillingness of insurers to offer further coverage.
Some economists would argue there is a “missing markets” problem in the latter case but I would disagree; there is simply a risk preference on the part of some homeowners to gamble with Mother Nature and the government’s willingness to provide taxpayer-funded bailouts, rather than to pay actuarially fair premiums to private insurers in the hurricane zone.
http://www.post-gazette.com/pg/06082/675468.stm
“Both buyers and sellers are struggling to adjust to the new reality that the boom days are gone.”
Someone might enlighten me on how the buyers are struggling to adjust.
“‘We put it on the market in late December and not one person came to look at it for three months,’ she said, but after cutting the price to $299,000, ‘from last Friday I showed it to three different prospective buyers and the third one bought it.’” I can hear this buyer calling all their friends saying “Wow, we got is $66,000 below market value; we just made $66,000 in equity overnight.”
“Both buyers and sellers are struggling…”
One of the more awkward attempts by the media to describe the bust in non-inflammatory terms.
we have information galore here on the blogs. so we can have some fun with this whole thing. but lots of “buyers” are still trying to figure out what’s going on. they don’t know about $2trillion resets, heloc problems, china problems, japan central rates and other info we take for granted. i can see them struggling a little: should i buy now or wait? is 5% a good reduction? etc..
True. True. DCB’s and tiny flashes of life in a series of jerks to the bottom. Wonder when the real notions of ‘crap, maybe this really is a bubble’ will finally dawn on the masses. I would guess whan the first large-scale uptick in yields hit. Ain’t happened yet, but it’s coming.
The struggel now for buyers might be trying to figure out when is the right time to buy, whether you are overpaying, etc.
“After three years of rapidly inflating real estate, loose credit and dicey financing, the number of court filings notifying Palm Beach County property owners they are facing foreclosure is rising.”
I post this on another thread but it warrents repeating here:
State Exemptions Aren’t Available to Recent State Residents
Under the old bankruptcy law, the personal property debtors were allowed to keep in Chapter 7 bankruptcy was determined by the laws of the state where they lived (as long as they lived there for at least three months). Under the new law, you must live in a state for at least two years prior to filing in order to use that state’s exemption laws. Otherwise, you must use the exemptions available in the state where you used to live. Similar rules apply to homestead exemptions, which determine how much equity in a home you can keep when filing for Chapter 7 bankruptcy. However, to use your new state’s homestead exemption, you must live there for at least 40 months.
Because exemption amounts vary widely from state to state, these new residency requirements could make a big difference in the amount of property you get to hold on to. For example, if you recently moved from California to Nevada and you have a fairly valuable car, you might want to wait to file for Chapter 7: Once you’ve been in Nevada for two years, you can claim its $15,000 exemption for motor vehicles. If you have to use California’s exemptions, you can keep only $2,300 worth of equity…………..
While this may sound benevolent, a much closer look at the practical effect of this provision reveals the crafty peeling of the debtor’s rights. The 180 day requirement is to provide the credit counseling agency the opportunity to work out payment plans with creditors. However, during this same period of time the creditor is not restrained from collection efforts. For example, Margaret is a homeowner in Jacksonville, Florida and is six months behind on her mortgage. As a rule, credit counseling agencies only work with credit card companies and have little or no training with dealing with mortgage companies.
After receiving foreclosure papers, Margaret goes to see her attorney to file for bankruptcy and is told that she must first seek credit counseling before filing for bankruptcy protection. Meanwhile, the foreclosure proceeds on schedule and a sale date is set 120 days later. However, Margaret still has not completed her 180 day requirement. What will happen to Margaret’s home? That’s right! The home will be sold and she cannot stop the sale by filing bankruptcy.
True… but only if she doesn’t fall below the threshold requirements for filing BK.
I have read that 90% of the BK attorneys were reporting their clients have been uneffected by the new law because they fall below the income qualification threshold and can proceed to a chapter 7 as they always did.
The middle class earner who is above the threshold is who would likely be most effected by the scenario you’ve outlined, and, in the coming years, could be quite a lot of people.
This should have the effect of speeding up the foreclosure process, bringing the house of cards down faster than otherwise.
Sounds like the new BK Law will curb some abuse. “Serial Filers” previously could file, dismiss, refile, dimiss, refile etc. The house I live in is an example. It took the Lender 3 years to finally be able to complete the foreclosure. This costs all of us via higher interest rates to cover the added cost.
P.S. GO GEORGE MASON!!!!!!!!!!
Yes and CONgress passed this law…Who is looking out for the the average Joe? The poor of the poor in New Orleans (N.O.)were shipped out of their home area to several other states..like cattle. Govt. spends $150,000 per resident (now not living there)to rebuild N.O. without fixing the levy! Who runs this government, not blue blooded americans.. (.) More like Kruscheff’s commies.”We will bury you from within”!
“‘We’re not in a bust; we’re in the middle of a correction,’ said Douglas Rill, a longtime broker in West Palm Beach. ‘That frenzied 2005 market is over. This is the new norm,’ Rill said.”
Perhaps the new norm is a bust?
this is barely the beginning of the correction. the players (spring rush of inventory) are now just starting to take the field.
“ladies and gentlemen, please rise for the national anthem”
The bust will only be evident to this guy and his ilk after the correction has finished bottoming out…
Just a quick comment, since I know the Doug Rill connection. He owns 3 Century 21 offices in the West Palm Beach area and runs a real estate school that has churned out hundreds of new licensees in the past few years. No way he will mention bubbles or declines, it immediately impacts his business.
Here’s what I would like to know-
1. How many FL properties are owned by individual investors (not snowbirds)
2. How many are vacant? How many are rented?
3. What is the average negative cash flow?
4. How many new homes are going to be built near term?
With this info we could more accurately predict what is going to happen. Not saying I (or anyone) would ever get these numbers, but what we’re really waiting for in FL (and AZ) is for the flippers (oops “investors”) to run out of patience (or cash) and dump their properties. Not until that happens will we get the drop everyone expects.
Just when you think these people(buyers,sellers and lenders) cant get anymore assinine, this 1.3 million dollar loan takes the cake,,for now that is.
As an exercise, if you know any flippers that are over extended, ask them “what if prices go down rather than up”. That is one of the big problems here, alot of people will not be able to answer this question. Can you imagine any business with billions of dollars at risk that does not have any room for error if every thing doesnt work out perfectly. Remember, nothing is a problem until it happens! So when prices do go down alot of people will be screwed and the only answer will be foreclosure. This could get very ugly.
Does anyone know what percentage of property is owned by “flippers”? I would not include “investors” in this number as most of us are long=term and prudent.
That may be a tough one to figure out since a lot of flippers consider themselves investors.
BayQT~
Spin Doctors at work.
This quote is priceless.
‘We’re not in a bust; we’re in the middle of a correction,’ said Douglas Rill, a longtime broker in West Palm Beach.
What happened to the Super Bowl rally? Ohhh they meant Super Bowl 2007?!?!?!
How about Super Bowl 2012?
“‘Prices will go down further,’ said (broker) Deborah Ray in Fort Pierce. ‘I think people need to be very concerned about this downward trend. (Broker) Dave DeWitt in St. Lucie County, agreed. ‘I think we’ll see slower sales for the next couple of years,’ DeWitt said. Prices have reached the point that the person with an average income can’t afford to buy a home, he said. ‘When people bought their homes two years ago, they didn’t expect to get a property tax bill of $5,000 to $6,000,’ DeWitt said. ‘You combine that with higher insurance rates and that makes it impossible to buy a home.’”
Wow!! My hats off to two RE people who said something truthful. Then again, even a broken watch is right twice a day.
Very witty.
Thank you. Been saving that one for just the right moment. It’s all about timing.
Good one!
Remember these Pearls of Wisdom from last year. They seem to sound even more ridiculous today:
“South Florida,” he said, ”is working off of a totally new economic model than any of us have ever experienced in the past” according to a realtor who predicted that a land shortage will support higher prices indefinitely.”
- New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
Also from that same article:
I just don’t think we have what it takes to prick the bubble… I don’t think prices are going to fall, and I don’t think they’re even going to be flat. “- Diane C. Swonk, chief economist at Mesirow Financial in Chicago, New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
“Real Estate Instead of Dot-Coms, 3/25/05″
The most accurate information in that article turned out to have been hiding in plain view, right there in the title!
Who are these “chief economist” jackasses who get away with saying such things? (e.g., won’t “even be flat…”)
She sounds like Abby Cohen all over again, if not Henry Blodget.
I ask again - who are these jackasses?
Because I can do a better job for their employer and clients’ and I’ll only ask to be paid half as much.
Unbelievable.
Jack–
Would you accept payment for propagating lies? I personally would find this distasteful…
GS - You’re right.
I wouldn’t be able to do so.
Latest reports show home prices falling - Action Economics
Print | | Disable live quotes By Leslie Wines
Last Update: 12:56 PM ET Mar 24, 2006
NEW YORK (MarketWatch) - This week’s releases of the new and existing home sales reports for February sent conflicting signals as to whether sales are rising or falling, but both show that home prices are declining, Action Economics noted. On Thursday data showed an unexpected 5.2% gain in new home sales last month, while the February existing home sales report, released Friday, showed a 10.5% drop in monthly sales to the lowest rate since May, 2003. “However, the weakness in price data in the two reports was unambiguous,” Action Economics said. “Both showed a similar pattern of price restraint relative to normal seasonal patterns. We are now seeing a significant downside price adjustment that is offsetting the counter-seasonal strength in the fourth quarter.”
The media are at risk of hastening the transition from the denial stage into the anger stage. Watch out for road-rage when you are commuting (I almost was run off the road by angry condo flippers twice yesterday…).
“Investors, flippers and second-home buyers largely have disappeared from the market as soaring prices make it impossible to rent out a home at a profit, said Jim Sahnger in Sewall’s Point.
They haven’t left the market — they’ve moved from the buy-side to the sell-side of the market. It’s an important distinction.
‘It’s more difficult for investors to make sense of the market,’ Sahnger said. ‘People are looking at $3,000 a month to own the property, and they can only rent it for $1,800 to $1,900.’
This is difficult to make sense of? My seven-year-old could make sense of this. It’s a bad investment.
Just saw a house for sale the other day with a sale price of $500k with a rent sign next to it for $1800/month…
Crazy…
Same thing here in NoVA — house was in the $700K range, up for rent for $2500. Two signs (rent and sale) were up for nine months. I think they finally rented it.
Same in Jersey.
New Townhome for sale for $489,000 ($8500 in property taxes, 2100 in HOA Fees).
Also listed for rent at $1,995
grim
Northern NJ Real Estate Bubble
This won’t work for them. Renters won’t move into a house that is also for sale, why move into a house that may sell soon and you have to move out. Also renters want a professional land lord who knows how to maintain the property not some flipper who is trying to get out with his skin. When I moved to my present rental I always asked if the home was also for sale, then checked the MLS to be sure. Lots of lies being told out there
That’s why people should read a lease before they sign it. Especially if it has been typed up by some flipper.
There’s lots of places in SF renting = $2000/month and to buy would run you $700,000 - and sometimes more.
“Buyers think that since there are a lot of good deals now, if you hold out the deals may get better later”
6-12 months ago this would have been;
“Buyers think that since there are so few good deals now, if you hold out you will miss your chance and be priced out forever”
The herd has officially changed direction.
RentinginNJ,
Good observation! You have no idea how long I’ve waited for this “shift” in sentiment!
A question comes to mind: as RE tanks, realtors, brokers and escrow agents are shown the door; overall RE-related workforce plummets, leading at a time of exploding inventory to massive overload of housing stock to be managed by fewer and fewer people. Lower service and cherry-picking will quickly become the norm, as the agent/seller/buyer dynamic is sent packing. Comments?
Throughout S. Fl. the # of “FOR SALE” signs are exploding. The office talk has changed from everyone buying their 2nd or 3rd property and making a killing to how do I sell, or I am going to get killed.
The mood has changed from denial to fear. Next comes the panic. If the spring season does not bail these people out, the bottom will fall out as the resets start to hit.
This is unfolding rapidly.
AWESOME! Reap what you sow!
You are right about the “For Sale” signs. They are multiplying. Where do all of these sellers think they are going to go? Are they going to stay and rent or leave all together? Who wants to move to a place where appearently everyone else wants to leave. I agree if there is no spring rally things could go downhill in a hurry here, especially with the crazy financing schemes. The “X-Factor” is hurricane season. If Florida gets wacked again, we could see chaos.
Actually, a good hurricane strike would probably keep prices higher for longer. It reduces the supply of houses, and the reconstruction causes a shortage of materials that drives up material prices. I saw it in central Florida neighborhoods that were under construction when Charley, Frances, and Jeane hit. Right after the storms, many of the houses under construction increased $50k in price because of material shortages and people looking for a home to replace theirs damaged in the storms.
spring season bailout?
how about an endless supply of houses on parade with no body even kicking the tires. i’m beginning to accelerate my time-table for certain markets to go into full self-destruct mode
Agree about the For Sale signs multiplying like bunnies. In Naples, which is really due for a crash, I know people who are trying to sell more than one property. They are classic speculators. This was the scheme that was going to make them rich beyond their wildest dreams. All it took was to buy and hold real estate. They had the same phrases we have heard so often–Florida RE does not go down, There’s no room left to build–that sort of bunk. A guy I know admitted recently that he should have sold six months ago and has now has missed the market. Still, he is not lowering his price. Still got his condo listed at $950,000 even though he bought it for $700,000 two years ago. Now that the “season” is ending in Naples, there will be fewer buyers for all this product on the market. Then just wait til the next hurricane season.
My mother called me from Naples this morning. Told me an article in the Paper said prices have dropped 45% I told her “sales” have dropped that much - prices 1%YOY, so far. The oldsters are panicking!.
I read the same article without any surprise as I used to live in Naples a few years back and even then it was ridiculous.
‘It’s more difficult for investors to make sense of the market,’ Sahnger said. ‘People are looking at $3,000 a month to own the property, and they can only rent it for $1,800 to $1,900.’”
Gee, guess it didn’t matter when prices were skyrocketing. All of a sudden, fundamentals matter again. Funny how that happens.
“‘I’ve had three people propose leases with options to buy, but I don’t want to rent,’ said Jimenez, who lives in Chicago. ‘I want a firm offer to buy.’”
Well, I want a pony. But it ain’t happening. No way, Jose. This out-of-towner just learned about life on the flip side of a bubble.
As someone who lived/worked thru the SF dot-com bubble, I now how easy it is to get seduced by insanely rocketing prices and valuations. It’s hard to step back and convince yourself, “This doesn’t make sense.” But that’s America in the late empire stage. Booms/busts 24/7. It’s how our econ sys works at this point. Just don’t get on the wrong side of the trade.
“Late Empire Stage.” I like it! One last mega-transfer of wealth to them that already has!
great term…so evocative!
Agreed so far.
Hmmm.
The dotcom and RE bubbles are Parts 1 and 2 of the same bubble. The dotcommers moved to RE and Greenspan’s low interest rates allowed abnormal price growth.
It does not suggest a “late empire” stage. Bubbles appear every generation, from the tulip craze hundreds of years ago, to the 1920s, to alternative energy in the 1970s-1980s, etc. Rather, bubbles develop when a large group believes in a false cause-effect (or supply-demand) relationship. Easy money does make a bubble larger, and that has been symptomatic of the economy for the last 10 years.
I actually agree with what the real estate yahoos were saying, a lot of people will be priced out forever. For instance, if you were being foreclosed on in 2003 on a 425k morgage, somehow escaped it and then took out a 1.3 million morgage later on and now you’re being foreclosed on again, chances are you’re going to be on the hook for awhile for that 1.3 million. When lending standards normalize you won’t be able to qualify with a used car lot to buy a ten year old Hyundai being sold at a price lower than what it would take the lot to ship it to the junkyard.
So, a number of people will be priced out forever, from a certain point of view (channelling Obi-Wan here).
By the way, why didn’t a few people with good careers, thinking skills, and motivation sit down and think “If I’m priced out forever then who the hell will be these buyers who are pricing me out?” Doesn’t being “priced out forever” have to have the premise that there are all these buyers who are wealthier than you? If you’re a Wal-Mart greeter that’s one thing, but there are plenty of people with good careers (engineers, CPAs, attorneys, etc) that sucked in by that crap.
Totally Agree With You. My sister and her husband both are in SF Bay area and Engineers in the IT field. Could not convince them in Nov 2005 (There was little dip in price, still neart THE peak) to NOT buy in this market.
Together they make Between 175k-190K , so they pay good amount of Income Tax.
And the benefit of Income Tax write Off if they own , that is what they saw.
I live in S.Calfornia, and they agreed to there is a Bubble in S. California, however there is none in San Mateo County, as there is NO new development, no new land , only so few Property on the market. ( The last part ALL TRUE, but was True even 4 Years back! )
Well, they bought a condo 1700Sq Ft for $580K.
Financially they will be ok, due to income, and because they will not move for the next 5 years. And may be their property will not go down in value as much…..still was it a good move?
They gave in at the last moment for fear of being priced out.
I think that is the whole point people are missing out on who have recently bought. Even those who got in fairly early and have seen some places around theirs sell for double of what they paid, believe that these ‘gains’ are real. I know several friends who bought places last year: a condo for 160k, a house for 200k, and another for 180k. All of these are relatively good prices but the point is they couldn’t sell today if they wanted to!
Even people like my friends who can afford the payments on these houses might not be able to afford to saty in them for 5, 6 who knows 7 years until they can sell for what they paid for it.
rent2home -
They could likely rent that condo for less than half the monthly mortgage payment. No taxes, no maintenance (Do they have kids? How stable are their jobs?)
If they had any patience, they would likely have done better by waiting at least a few years.
But hey, I can’t judge the satisfaction/security they (must?) feel in owning.
When people around here (SF) talk about “dragging” demand into the present or recent past “from the future” - they are talking about your sister and brother-in-law.
“This week’s releases of the new and existing home sales reports for February sent conflicting signals as to whether sales are rising or falling”
I find the publishing of these articles back to back interesting. Thursday’s report caused the yield on the 10 yr bond to go up, Friday’s caused it to go down. IMHO the fed’s do not want the yield on the 10 yr note to go up and I suspect that we will soon be treated to more news reports on the ‘market top’, the ’soft market’, a ‘flat market’, etc to condition the public into buying in moderation but not panicing into a housing bubble rout. All bets are off when we look back at the numbers in September. This is one Big Genie that can’t be put back into the bottle so let’s start getting the public ready for the Senate hearings on those BIG BAD LENDING BOYS cramming those creative mortgages down the publics throat.
“Investors, flippers and second-home buyers” Oh My!
“Investors, flippers and second-home buyers” Oh My!
You left out the subprime slice of demand, but I guess it would not have fit in with your verse…
Ok my blogger buddies…. I want to design and order some bumper stickers. Are you guys willing to participate? I will design, send in approved design, order and mail out the stickers. Naturally I will need to be paid for them. A guesstimate would be 65 dollars for 50 stickers which is mimimal and shipping. I remember one saying friends don’t let friends buy houses.
Anyway, I think these stickers would be a good way to “get the word out”.
What do you think?
I love the idea! Of course, it may be too late–that is, I suspect people already realise that the bubble has burst. It may just seem like we are rubbing it in.
I certainly don’t mind “rubbing it in”. All the renter crap I’ve heard warrants it.
Reserve One for me Please!
Let us get suggestions for the Slogans posted here.
How about:
“I’m rightside up. Are you?”
Got equity?
Sorry for stealing from somebody else, but I can’t resist:
“We Rent!”
Got condos?
Not underwater.
This car is not HELOCked.
Did the housing bubble pop yet?
(Shows picture of guy nervously looking out from under his bed…)
Buy low, rent high (maybe too esoteric, that?)
Feeling flipped out?
Or, “Did Your Flip Flop?”
Sell high rent low.
Don’t blame me, I rent.
Don’t blame me I’m debt free.
Ben’s Army - thehousingbubbleblog.com
Bitter renter
Melody,
I know this sounds bad, but I’d be worried about having someone key my car/slash tires, etc. I’m not kidding. As we all know, people are VERY emotional about their home “equity.”
Therefore, we should get have something which would get the message without being “in your face.”
Like: “Ben Jones for President”
That way, they can Google Ben and find us here.
If you don’t want to put it on your car, put it on a realtor’s car.
Melody — you always have good ideas, like the party
This is a great one, too — revenge of the renters and the level-headed.
That is, yours is a great one, too.
Who the hell makes a loan this big to a customer who can’t pay a third that amount? Lenders have gone completely insane. Good luck collecting on that “newer, much larger debt”. They’ve probably spent half of it servicing their “older, much smaller debt”.
Why did AL Green Allow this to happen? How can someone without monthly income, without showing how he/she can continue to pay for it, given out $1.3million loan? Most probbably the rent would NOT cover the payment, so what is left is the personal income.
How a Credit score iof 700 indicates ability to pay $1.3million.
I know perosonally a sales guy in best Buy owning 4 property, worth $2million. He sold his first house for $20OK profit and since then over 3 years able to build his real estate empire. The wife used to do a $15/hours job, now she quit and drives a new BMW.
There will be successes and failures, just like in the dot.com era. The pigs will get slaughtered.
I am seeing conflicting information on the housing market in the area of miami where I live. In coconut grove, a 3000 sq ft towhnouse just sold for $820K.
On the other hand, I am seeing serious price drops for condos in south beach. Lot of ads I have seen show $100K-200K off the “going” rate. Even with the discount, they prices are still very high and lets not forget the $1K+ HOA fees.
I personally would like to buy a condo in portifino towers in South Beach, but the prices there are not going down. Have been told that most of the people who own condos there are “old money” and the chances of prices going down there are slim to none.
Miamitownhouseowner:
The prices at Portofino have not dropped yet only because the owner’s pockets are deep enough that they can wait and hope. Watching a similar building in Fort Lauderdale. When the prices start dropping in earnest, they too will lower theirs. They didn’t make their wealth by “being stupid”. Besides, about 30% of the total units there are currently for sale. Realtors consider anything over 10% of total units for sale as being a red flag. Good luck!
that’s so scary…30% of total units for sale?! in a condo tower? If there are people actually living in them I wouldn’t want to have to ride the elevators; it might get really ugly…
Amber:
Thx. I will keep my eyes on Portifino Towers and the prices for condos there.
I checked other condos in the area including Brickell and most of them have 20-30% of condos for sale. I am not counting the new construction on Brickell.
Good luck to you as well with your FLL condo.
I’ve been watching the development in Palm Beach County where I sold a place this summer in. 20% of the houses in the development are listed on realtor.com and two people have an identical houses that I sold listed for 80K more than I got and from what I see, I was the first and only seller to get 400K for a house in this neighborhood.
How can somebody justify asking 80K more than an identical comp in 6 months especially when I’m seeing stuff on the market there for more than 6 months?
Those people are in denial or really stupid (or both). I have a friend who is trying to sell a townhome in Palm Beach Gardens. She has cut her price from $320K to $269. There are 2 other places that are listed for $274K. The last comp was about $300K. They all keep undercutting each other hoping to get a buyer. The selling price (IMO) will be $250K. There will be your new ceiling, $50K lower than just 4-5 months ago. The race to the bottom is underway.
Here’s an interesting quote from TheStreet.com.
“Meredith Whitney, Executive Director for CIBC World Markets estimates that 10% of the US population could experience severe credit stress, particularly with the rise in short-term interest rates.
Also note this comment from the conference, “In addition, today [DM: 3/23/06] marks the 636th day since the FDIC last provided assistance to a failed or failing bank–the longest such streak in the history of the Corporation.”
Things look really nice in the rearview mirror for the banking industry. Profits are high, and losses are few, even if reserves against losses have dwindled. Looking forward, the place to be extra careful are the places that have taken down subprime mortgage loan risk. At minimum, lenders aren’t getting compensated for the risk. At maximum, their solvency could be threatened.”
The couple that got the $1.3M loan should have taken the money and skipped the country. I think some lender was really stupid. My 4 yr old could figure out that $1800 is less than $3000 (might simplify - show her, would you rather have 3 or 1 pieces of candy (same kind), and she will take the 3. Thinking in this country has gone out of style.
Bumper sticker.
Those that understand interest EARN IT.
Those that don’t, pay it. Are you upsidedown?
When I come back to CA, I stay with some friends from my church here. Their children are grown. They never made huge money. But they did the right things, paid off their house, and lived within their means. Now they HAVE a paid off house (in Bay area) and enough money to meet their needs, which are modest. They have peace of mind. Priceless.
until the earthquake hits
Hurricanes or no, I would still like to live in SW Florida if the prices would come down. I grew up in Houston and New Orleans and sat thru a couple of Cat 4/5 hurricanes (Camille for one when I was a kid). They suck but life goes on and I love the ocean and warm water down there.