A Silver Lining In Florida
The Bradenton Herald reports from Florida. “In August, the median sales price for existing homes in the Bradenton-Sarasota market was $273,500, almost $35,000 below the median home price a year earlier. But falling home prices did nothing to stop the number of existing home sales from dropping 13 percent and condo sales from slumping 7 percent, according to numbers released Tuesday by the Florida Association of Realtors.”
“The elimination of the subprime lenders has led to fewer people qualifying for loans. ‘When the market was booming, there was a lot of cheap money available to anyone who could fog a mirror,’ said Patrick McGuire, broker associate with Coldwell Banker’s Lakewood Ranch office.”
“Where there were once seminars on how to flip a home for a large profit, now more and more workshops focus on how to find and buy properties as short sales or in other stages of preforeclosure. ‘I guess in any gray cloud, there is a silver lining. In this case, if you’re a buyer, you can get a great deal,’ McGuire said.”
The Herald Tribune. “Lennar Corp., the big Miami-based home builder, has trimmed about 150 jobs in the region amid the housing slowdown. Last last month, Lennar trimmed more than 60 additional positions from its Southwest Florida division, from Naples to Manatee County, bringing it to its prehousing-boom levels of about 300.”
“‘It is already well documented that the housing market has continued to deteriorate throughout our third quarter. Heavy discounting by builders, and now the existing home market as well, has continued to drive pricing downward,’ said CEO Stuart Miller. ‘Consumer confidence in housing has remained low, while the mortgage market has continued to redefine itself, creating higher cancellation rates.’”
“The average sales price of homes delivered sank to $296,000 from $316,000 in the same period last year, mainly due to higher sales incentives.”
“The Three Fountains apartment complex on Webber Street is rapidly developing a reputation for controversy. The complex was sold to a group led by Warren Hickernell just a few months before the Sarasota real estate agent and condominium converter ran into financial trouble that ultimately resulted in eight loan defaults and two Chapter 11 bankruptcy filings.”
“Now Three Fountains is being pursued by Californian David D’Angelo, who wants to buy the complex for $6 million and immediately resell 17 of the units to a group of investors and end users at per-capita prices far outstripping the amount at which Hickernell’s deal valued them.”
“That has Sarasota appraiser Greg Haarer, hired by J.P. Morgan Chase to price two of the units, breaking the traditional code of silence between appraisers and their clients.”
“Haarer said that there is no way the property is worth what D’Angelo’s customers are willing to pay. Haarer also claims that he was pressured by lenders at Chase to boost his valuations.”
“‘I’m appraising the units at $150,000 and they’re telling me that everyone else is appraising them for $270,000 to $350,000,’ Haarer said. ‘I said, ‘$300,000, you got to be out of your stinking minds.’”
“When he turned in his appraisal, Haarer said lenders at Chase sent him valuations completed by other appraisers and told him that they needed him to bring his numbers up to the same level. To hit those numbers, Haarer said other appraisers used sales of comparable units in downtown Sarasota.”
“‘From Bee Ridge Road to Bahia Vista, which is the same neighborhood as Three Fountains, nothing is selling for $280,000,’ Haarer said. ‘But I can find you 50 comps in that stretch that are selling for $150,000.’”
“Haarer also questioned how D’Angelo has been able to line up end users so quickly. ‘There’s no sign on the property. There’s nothing on the Web,’ he said.”
“D’Angelo said that some of the units at Three Fountains are being sold to investors, but the bulk are going to end users. ‘Four are from Florida and the rest are from northern California,’ he said.”
“Grant Thrall, a University of Florida land economist and board member of the Appraisal Institute, agreed it was strange that so many buyers were coming from California. ‘Studies have been done showing that people who go into senior centers remain within their own neighborhood,’ he said. ‘They don’t move from Toledo, Ohio.’”
The Sun Sentinel. “Like many South Floridians, Sheridan Lydon is frustrated by the pillow-soft housing market. She has houses in Boca Raton and Pompano Beach but can’t sell either and now is asking less than she paid for each.”
“‘Isn’t that lovely?’ Lydon said. ‘And I’m not even the worst one. There are a lot worse off than me.’”
“Sales of existing homes in Palm Beach County declined 13 percent to 568 from 655 a year ago. The median price of $366,200 was off 5 percent from $386,000 last August. And the number of homes on the market hit a record as the inventory topped 40 months.”
“There were 33,708 homes and condos for sale at the end of August, a 10 percent increase from 30,774 a year ago, according to Illustrated Properties in Palm Beach Gardens.”
“‘That’s an all-time high,’ said Chappy Adams, president of Illustrated. ‘That’s horrible.’”
“Lydon, the woman stuck with two properties she can’t sell, paid $600,000 for her Boca Raton home last year. She’s now asking $579,000. Even after moving to Boca, she wasn’t able to unload her home in Pompano. She’s listing it for $450,000 after buying it for $479,000 and making major upgrades.”
“‘How was anyone supposed to know the market would get this bad?’ said Lydon.”
“Not everyone is cursing the market. Kellie and Scott Collins recently listed their three-bedroom home in Florida Gardens, near Lake Worth, for $269,000. A buyer stepped forward after about a week and is paying close to the asking price.”
“The Collins’ agent, Mike Kleinrichert, said sellers have to price their homes as if it were 2003 or 2004. ‘I ask my clients, ‘Do you want to list your home or do you want to sell it?’ Kleinrichert said. ‘If you price the house right, it’s going to sell.’”
The News Journal. “Home prices fell 5.4 percent on average in Volusia and Flagler counties last month from a year earlier and the number of sales plunged 16 percent in the same period as the slump in the area’s housing market deepened.”
“A local broker, Maggi Hall, said she has not seen much interest among potential buyers. Sellers are refusing to lower their prices more, and buyers are trying to out-wait them, Hall said. ‘It’s almost like it’s a standoff.’”
The Times Union. “Realtors, builders, developers and others in the industry expect today’s 28th annual Realtor-Builder Tradeshow to focus on the optimistic side of the statistics.”
“‘The mood will be good. It will be upbeat and fun,’ said Mark Downing, first VP of the 2,100-member Northeast Florida Builders Association.”
“‘As we look at things, this is the bottom,’ Downing said, although ‘we still have a period of time before we are back on track.’ He said most members believe 2009 will be good, ‘but ‘08 probably is not going to be.’”
The Sun Herald. “Economic uncertainty is one of life’s few certainties. The truth is, most families teeter on a fragile tightrope, strung together paycheck to paycheck.”
“Former bank president Sandy Scribner and her fiancé came to North Port seven years ago. She’d suffered a stroke in Connecticut, leaving her 100 percent disabled. They planned to invest an $80,000 nest egg in a home and two rental properties.”
“‘It worked fine until I made a mistake and bought our second residence,’ she said.”
“Scribner paid $242,000 for a three-bedroom house on Warrior Drive in early 2005. ‘It was too small, so we bought a third before we sold the second,’ she said.”
“Scribner paid $279,000 for a three-bedroom home on Ponce De Leon Drive. She was carrying a $1,300 monthly mortgage on the Warrior house; $1,800 monthly mortgage for the Ponce De Leon home. It seemed a reasonable risk in 2005. The housing market was hot. Scribner reasoned the home would sell quickly.”
“‘That didn’t happen,’ she said. ‘What happened is the market went the way it did.’”
“The Warrior home idled unsold. All along, Scribner paid two mortgages, as well as insurance and taxes, for both. She sold the rental units. ‘I used every penny I had, along with using my credit card, to pay bills,’ she said. ‘By March of this year, I had no more money.’”
“When her husband died in May, Scribner moved in with a brother because disabilities preclude her from living alone. In July, the Warrior home finally sold — for $130,000. To avoid a similar loss on her other home, Scribner found a new mortgage.”
“‘I called Countrywide,’ she said. ‘I have a Realtor who has two buyers, but Countrywide is so messed up, they have turned around and sued me for foreclosure. I owe $220,000 on the property.’”
“Meanwhile, she’s left with mounting debt, a disability stipend, and a room in her brother’s home. ‘Now I own nothing,’ Scribner said. ‘I’m not a deadbeat. I’m a statistic of the real estate market.’”
“The Charlotte County market was down considerably from its frenetic post-Hurricane Charley pace, when anything with four walls and a roof could find a buyer. August’s 223 houses represented a 19-percent drop in volume from the 274 dwellings sold in August 2006.”
“The median price of the homes sold in August was $186,500, an 11-percent drop from the same month in 2006.”
“Locally, brokers and builders alike are hoping the market has nearly completed what most agree was an inevitable price correction. ‘Everyone is having to do what they have to do to make a living,’ said Ellen McCarthy, president of McCarthy Realty in Murdock.”
“Probably the main factor speeding the market correction is sellers finally realizing that today’s market is not the same market that followed Hurricane Charley, she added.”
“For many sellers, backing off a little on price is no great hardship, if they bought their houses in the 1990s before prices began spiking, they could still walk away from a sale with a fair profit, although certainly not as much as if they had sold at the height of the market.”
“But some sellers are getting squeezed by either losing employment, paying top dollar for a house just a few years ago, or both.”
“McCarthy noted she’s had to handle several short sales in recent months. In many cases, lenders will forgive part of the debt, provided that the hardship can be documented. ‘The banks know that the market has fallen and they can’t sell the house for what they paid for it,’ McCarthy said.”
‘WEST PALM BEACH — Dozens of people poured out of a big yellow school bus in Wednesday’s rain to protest what they said was Ocwen Financial’s predatory lending practices. The group, members of ACORN, crowded into the lobby of Ocwen’s headquarters, chanting loudly and demanding to talk to the chief executive of one of the country’s largest subprime loan servicers.’
‘Olga and Paul Gant of Broward County said they entered into a loan with Ocwen last year, but the original payment was quoted at a lower interest rate than what they found at closing: 9.8 percent, much higher than what many other borrowers pay. The Gants were able to make the monthly payments of $2,200, Paul Gant said, until Olga lost her job in April.’
‘Then the payments rose to $3,000 a month without explanation, he said. ‘All you see with Ocwen is more dollar signs,’ he said. Foreclosure is set for Oct. 11. The Gants are still seeking a loan modification on their $230,000 home.’
‘Then the payments rose to $3,000 a month without explanation, he said. ‘All you see with Ocwen is more dollar signs,’ he said. Foreclosure is set for Oct. 11. The Gants are still seeking a loan modification on their $230,000 home.’
Without explanation? Are you kidding me? The explanation was in the documents that you signed. Predatory lending? How about predatory borrowing? You took a loan that you knew you couldn’t pay back. Who’s the predator?
Also, with her job loss how do they expect the lender to give them a prime rate loan . The public is crying for blood ,when they don’t deserve it .
“Also, with her job loss how do they expect the lender to give them a prime rate loan”
I’ve always said that I want $1,000,000…a house on Palm Beach…no tax burden…and no insurance to pay. Since I know that will never happen to me, I don’t ask for it. These people are starting to ask. Still won’t happen unless there is a much bigger federal bailout than proposed.
Not with Ocwen, they have sued several time for fraud, mis allocating payments, failure to post payments (even though they cashed the checks), etc
Ocwen used to service VA loans until the gov’t fired them and fined them.
Ok not to get real radical here, but if minority communities get singled out for this type of abuse…. shouldn’t we be protesting to keep minority students in school all year long, so they can learn to read, write, and speak English and do common math problems?
“shouldn’t we be protesting to keep minority students in school all year long, so they can learn to read, write, and speak English and do common math problems?”
Personal responsibility? What a novel idea.
If we are talking about personal responsibilty - that problem extends far beyond the minority community. After all, it is the wealthiest entities asking for the handouts, which the Fed is only happy to deliver. If you want to send someone to school all year, maybe you should send the greedy bastards on Wall Street to take a few ethics courses…
“that problem extends far beyond the minority community”
I don’t necessary disagree but this article is about ACORN.
I don’t necessarily disagree but this article is about ACORN.
please, i live and work in boca raton. the education system claims to be so great here (mostly non-minority students and wealthy class community) but it no different than anyone else. it is just that the parents demand and expect more. but, there are always disciplinary issues. that is why i had to send my children to private schools. it is up to any parent to educate their kids about life, including ethics. most days, i spend one hour a day.
teaching my kids about things beyond the classroom. honestly, some minority families are not learning enough to not becoming a victim. being a “minority” didnt mean you cant find out what is going, but often times selective people take advantage of communities that they know that they are not aware of situations that will harm them. it is happening with toys being made in china. until kids got sick, who would have known about lead in toys.
‘Olga and Paul Gant of Broward County said they entered into a loan with Ocwen last year, but the original payment was quoted at a lower interest rate than what they found at closing: 9.8 percent
All the Gants had to do was not sign the documents at closing and get up and leave if the lender did not correct the issue. I realize there was so much preditory lending, but the Gants did not due their own due diligence in this matter.
Yep, “These are not the terms that we agreed to.” is not imossible to say.
“Now Three Fountains is being pursued by Californian David D’Angelo, who wants to buy the complex for $6 million and immediately resell 17 of the units to a group of investors and end users at per-capita prices far outstripping the amount at which Hickernell’s deal valued them.”
I wonder if this is the same Double Your Dating huskster I keep getting spam from in my in-box.
“Haarer also questioned how D’Angelo has been able to line up end users so quickly. ‘There’s no sign on the property. There’s nothing on the Web,’ he said.”
He’s pushing them on his unwary, well-heeled, but hopelessly clueless IT dorks, School For Scoundrels clientel.
“Haarer said that there is no way the property is worth what D’Angelo’s customers are willing to pay. Haarer also claims that he was pressured by lenders at Chase to boost his valuations.”
Hmmm, sounds like this needs to be investigated for possible criminal illegal activity on the lender side.
My thoughts exactly. However, it isn’t going to happen until the guys with FBI stenciled on the back of their jackets, walk into Chase HQ and exit 15 minutes later with a to bananas in handcuffs. I know! We can get the SEC to look into it (joke). Might be a good idea to e-mail the FBI with that quote by appraiser Haarer. I think the FBI is still straight but there is so much corruption out there now I wouldn’t bank on it.
Might be a good idea to e-mail the FBI with that quote by appraiser Haarer.
These types of matters start at the local or state level of law enforcement such as FDLE before the FBI is involved. There is no doubt in my mind it is being investigated! The hard part about this type of case is the public will hear very little or nothing at all until the investigation is completed.
I read these reports of silver linings and such and have a hard time relegating them to what I see daily. It is truly armageddon here in Florida. Keep whistlin, there are no lions and tigers and bears. Oh my!
dime, it looks like this Haarer fellow is part of your brotherhood. I give him major props for holding his own in the face of pressure to hit the numbers.
Truly Palmetto, the rats are fleeing the ship. A lot of the hoes in the appraisal business are now blacklisted as they fed the dragon.I am really surprised that I am very busy but then I dropped out a few years back and focused on commercial work as I simply could not stomach the junk I saw. I would say that most appraisers are seeing business down about 75-80% which means that things are getting back to normal.
A lot of the so called sales you are hearing about are not sales but contracts. (NAR) Of those sales only 50-60% ever close.
If you want some straight talk about the business go to APPRAISERS FORUM. There you will find a lot of disgruntled appraisers who get it and are fed up with the crap. You will also read alot about what is coming as opposed to what has occurred. Reason is simple. There is nothing going in the big end of the funnel now. Just the squeezins’ coming out. By year end blood will run in the Florida streets.
” A lot of the so called sales you are hearing about are not sales but contracts. (NAR) Of those sales only 50-60% ever close.”
I passed by a house nearby with a “Sold” sign on it, proudly displaying the name of the realtor, etc. I have a feeling that some of the sold signs should actually be “Under Contract” signs and that the closing has not occurred as yet.
I’ve seen that “Blood will run in the streets” phrase many times over the last 18 months on this blog. It’s always forecast to be just a few months away.
There will be no cataclysmic event. Just a continued slow erosion in prices, sales and optimism, regular reports of layoffs and increasing unemployment, occasional builder bankruptcies, more FB foreclosures-just a steady drip, drip, drip, until the excess is completely wrung out.
California took over 5 years in the early 90’s for home prices to recover and that’s without all this creative financing. It will be a slow drip for a long, long time to come. Option ARM recast starts 09-10. CA is in for one heck of a ride.
Was there an internet in 1990?
Where’d one get reliable information back then?
Things will happen much quicker than you think…
I think the forclosures are at tramatic enough levels now to say “blood in the streets”.
That woman that had a stroke… hell at least you’re alive and semifunctional.
Don’t get too comfortable, Bill. One of these times someone will cry “wolf!” and you’ll feel a hot breath on your neck.
Aladin, there was an internet … but there wasn’t a World Wide Web, at least outside of CERN, until 1993.
We did have bulletin boards (dial-in), Usenet, and services like Prodigy, but the information and level of discussion there was generally pretty low.
Users of The Well, of course, think their BB was some sort of Shangri-La. Since it’s long gone, and only a few of the people who were there are still around (some of them have died!), I place their claims in the “unverifiable” pile along with Yeti sightings.
Mighty rarified air up there in the Himalayas.
Was there an internet in 1990?
Where’d one get reliable information back then?
Dan Rather?
“I think the forclosures are at tramatic enough levels now to say “blood in the streets”.”
Well, if that’s your definition of blood in the streets, then so be it. My definition is something akin to the ‘68 riots after MLK’s asassination (sp?).
dimedropped: A lot of the hoes in the appraisal business
jarring! dimedropped I like your posts.
I will second that observation. It just continues to get worse and worse in my neighborhood, about 20-25% of the homes in the development (of about 1000) are for sale; prices are all over the board (high price of 1.5M, same model down the street also on the market for 800K) and nothing is moving. The foreclosures are starting in my neighborhood as well, we have ~3-5 that are at some stage of the foreclosure process. I anticipate that will increase drastically as this thing really gets rolling though.
We have another few years to get back to normal in this market, that’s for sure. And, as I have said many times in the past, I FULLY expect that will not find a bottom until we are at 50% of peak valuation for homes, and even lower for condos.
Oh, a little update. My ex-LL just sold the condo I used to live in. 800 SQ/ft in CityPlace WPB, orig asking price 280K (and yes, there were comps to support that price), selling price 180K (and they overpaid, almost definately).
On another note, anyone think that FL can enter a depression without the rest of the country following?
Remember, the Fed and the government only aknowledge a “recession” when we are already IN a recession. You will NEVER hear a government or Fed official say, “We are in a recession,” until a recession has started.
And by the time we hear them say “recession”, we’ll most likely already be in the “Greater Depression”.
Hey, Ben, even the president of KBH Homes sounds like he is finally aboard the housing bubble ship, and it doesn’t sound like a “soft landing”. Every real estate expert over the last 2 years should be stripped of they degrees and sent back to school
KBH, , ) , said that the housing market’s deterioration “accelerated dramatically” in August, with traffic count, traffic quality and sales conversion rates on average hitting their lowest levels of the current downturn. “The continued tightening of lending standards and rising foreclosures only exacerbate the problem,” he added.
what development do you live in?
Welcome to George Bush’s ‘ownership society’.
Here’s an idiot that thinks that homeownership makes good citizens, rather than the converse:
Good Citizens will generally buy houses, in a responsible manner.
Giving away houses doesn’t make people owners.
That’s one speech we won’t hear again, thank God.
Florida did indeed have a depression without inviting the rest of the country - it was the Real Estate Crash of 1926.
just prior to the crash, prices were probably greater for property in Miami than they were now for comparable real estate…. with no need to adjust for inflation! this had been building up over perhaps 5 years, but prices kept speculating upwards until nothing was affordable for anyone - even the well-to-do. all the gains that were made on paper ultimately collapsed like a house of cards in the summer of 1926, and then a hurricane devastated Miami shortly thereafter.
When the Great Depression did hit all of the United States, Florida hardly noticed, since it had been in a profound depression for 3 years already.
it’s happened before, there is probably isn’t any reason that it couldn’t happen again.
There is a silver lining, but that’s not silver, it is mercury.
Asbestos lining…
The silver lining is prices are falling big time.
“Meanwhile, she’s left with mounting debt, a disability stipend, and a room in her brother’s home. ‘Now I own nothing,’ Scribner said. ‘I’m not a deadbeat. I’m a statistic of the real estate market.’”
No, sorry honey, you are a deadbeat. Not that you shouldn’t be, given your situation, it’s the first smart thing that you have done in a few years (walking away from the homes). However, you are, indeed, a deadbeat debtor.
I really like the line about her being a “statistic of the housing market market”. The only people who are statistics of this market are those of us who have been priced out and unable to buy because idiots like you had 3!!! homes. Come on; what in the he** were you thinking? I don’t want to hear any of these idiot FBs telling me how they are being “taken advantage of” or “victims of” the housing market. You were speculating!! Speculation, by defenition, involves a RISK. That you were too stupid to see it does not make you a victim, it makes you an idiot.
Well said. She was a greedy idiot.
I’m sorry for this woman’s medical problems, but she claims to be a former bank president. She’ can’t claim financial ignorance. By definition, she gambled on housing appreciation to make money.
As a business venture, it was a failure. Case closed. If it had all worked out, she wouldn’t be volunteering to share her profits with anyone. But she would be happy to share her losses.
Exactly. I feel bad about the physical condition, but not the financial one. If housing was still going up, you wouldn’t hear a peep from these folks.
Me too. Maybe there is more to her story but she was a bank president and only had an $80,000 nest egg?
With only $80K she must have been an ‘honest’ bank president.
These stories are becoming progressively more Dickensian. Before this is over people might well be living out of their cars, and even then we’ll still hear Alan Greenspan saying that the chances of a recession are only one in three.
I worked with guys in the airlines who lived out of cars because they had to move with their jobs in the 1990-1 recession. They had marketable skills and were financially responsible enough to keep their families safe back home too.
Unskilled money shufflers should experience the same fate - only for much longer.
Check out the long term parking next time you are at LAX…count the number of campers & mobile homes…
Why will people be living in cars when they can rent a place for less (often far less) than the mortgage payment they were making prior to their foreclosure? On a monthly cash-flow basis, most foreclosed FBs will come out ahead.
Because they still won’t be able to afford rent while the IRS is docking their pay for the income tax owed on their short-sale.
Hey didn’t you hear, if they can hold on for awhile longer, forgiveness of their 1099 induced debt-forgivenss taxes is a “done deal.”
Does this mean they can keep the Harley, BMW, boat, and plasm TV’s, without having to sell them to pay tax on a 1099? If so, I think there will be a flood of jingle mail, once that bill passes.
Snake charmer: Dickensian as in Charles Dickens remember how Oliver Twist started out - the mother of the family told the father “speculate”
“I really like the line about her being a “statistic of the housing market market.”
I’m a statistic of the housing market and the mortgage collapse. You don’t hear me making claims like this lady. I bought with clear knowledge of the market. My neighborhood went well into the $300’s at peak and I bought at 2003 prices at the end of 2006. Who could have imagined that we’d be dropping below that? I didn’t! But that’s not anyone’s fault but mine. Personal responsibility people!!
On the other side of the coin, I didn’t finance more than I could afford. I made a nice down payment. I’m still fine!
Bad Andy,
I am seeing $200,000 to $300,000 price differences in my old neighborhood in Wellington. Most of the comps that actually sale are 250,000 off a asking price for similar homes. What gives? Are they stubborn or banks not allowing short sales? You usually have a good handle on the market what do you think?
“What gives?”
Stubborn more than anything else. The same house in my neighborhood will list from $160K to $325K for the same house. The ones listed in the 160’s and 170’s sell quickly and the rest sit and sit. Buying at $221,000…this doesn’t make me feel great.
Foreclosures are being listed at as high as 40% off loan amount. One example is a house with a $250,000 loan amount and an asking price of $155,000. It is only still on the market because the house needs work.
It’s because a bank would rather take a short sale than a 40% haircut that I say stuborn sellers are the real problem.
Thanks, it looks like they are going to stay in the cockpit all they way to the ground.
“it looks like they are going to stay in the cockpit all they way to the ground.”
The captain always goes down with his ship.
I think we all have compassion for the problems Scribner faced after having a stroke. That would be terrible … BUT it did not preclude her from making bad decisions with her money.
The media is going to have a field day parading sad examples of the housing bust, trying to drum up support for a bailout. It is important that we (collectively - people that do not believe in a bailout) point out the stories of other people that faced similar tragedy and did not invest greedily in housing.
HOUSE PURCHASES AND PERSONAL TRAGEDY ARE NOT RELATED.
HOUSE PURCHASES AND BAD DECISIONS ARE!
“Meanwhile, she’s left with mounting debt, a disability stipend, and a room in her brother’s home. ‘Now I own nothing,’ Scribner said. ‘I’m not a deadbeat. I’m a statistic of the real estate market.’”
“They planned to invest an $80,000 nest egg in a home and two rental properties.”
Since when does living on a fixed disability income and a nest egg of $80K qualify one to purchase a home and two rental properties. Nest egg? I’d say that $80K was no more than a contingency fund for unforeseen future expenses. Victim hell!!
It can work in the right local market conditions. Make the rental proerties two $80K condos or townhomes in a working class neighborhood with a low crime rate and schools that aren’t utterly terrible. Put 20% down there, and you’ve got a realistic chance of being cashflow positive on them.
Then you’ve got enough left after that for 20% down on a 200K house. It’s not going to be huge, but you can get something nice enough in a rural area of Florida for that price.
Let me get this straight. She had $80k and she was disabled with a stroke. What in the h*ll was she doing investing in RE. If you had a stroke and couldn’t work to make your house payments that’s a whole other story. No sympathy here.
If you can’t swing a hammer, paint and patch sheet-rock, do basic plumbing and wire an outlet..you have no business owning rental properties.
‘I guess in any gray cloud, there is a silver lining. In this case, if you’re a buyer, you can get a great deal,’ McGuire said.”
The only great deal you will get is if you wait until the end of 2008 and more like 2009 and on. The only great deals right now are for the seller who is trapped in their overvalued home if they find a buyer who has not got a clue on what is happening in the market.
“Former bank president Sandy Scribner and her fiancé came to North Port seven years ago. She’d suffered a stroke in Connecticut, leaving her 100 percent disabled. They planned to invest an $80,000 nest egg in a home and two rental properties.”
WTF? All the former bank Presidents I know are worth $50MM -$100MM
most older bank executives are from small community banks/thrifts that didn’t get the pay that the bozos at the megacorps get now. I have an uncle who is a retired bank executive, and I know that he probably has more money stashed away than anyone else I know, but he lives well below the average lifestyle. He is also an old cracker who drives a beat up old truck, and spends all his time with quarter horses and cows. It is interesting to talk to him about the banks now, and listen to him tell of the greed and incompetence in how they are run.
Indeed. My stepfather is also a retired banker and the description of your uncle matches him perfectly. The word frugal doesn’t do him justice.
There are a few very important words in this post and if you think about them you’ll understand what happened. Those words are “100 Percent Disabled” (She’s not much to dance with), “Bank President” (She’s not 25 years old), “$80,000″ (She might not have much money, but she does have some), and the really big tip off — “Fiance” (Somebody found something about her that they really loved)! Fiance saw a way to make some quick cash.
Funny, isn’t it, that she’s living in her brother’s basement? Where is fiance? Oh yes baby, you’re a victim all right but not of the market!
“‘How was anyone supposed to know the market would get this bad?’ said Lydon.”
WE knew and if Lydon had used some common sense, she would have known, too. I just can’t understand these people who say they didn’t see it coming, especially if you’ve live in Florida for any length of time. It was just completely unsustainable, based on traditional wages and the general low paying economy here. Liar, liar pants on fire.
Nobody KNEW that the market was going to get this bad. Everybody should have worried that it MIGHT. Certainly on this blog we thought it pretty likely.
“Economic uncertainty is one of life’s few certainties”
Amen to that statement. Everytime I read the word “uncertain” regarding investment or financial matters I cringe. Anyone with an iota of life experience should know that financial predictibility is NEVER certain. Sure, over time, many things have reliable patterns, things regress to the mean but I don’t know of any financial or asset category that has ever achieved anything amounting to “certainty” for much more than a brief period of time.
In fact, its probably more profitable to bet AGAINST something that has achieved “certainty” in some regard. Witness the “real estate always goes up” mantra that preceded this current debacle.
When its generally understood you “can’t lose”, sadly, you are most likely CERTAIN to lose. Since the notion of “paradox” isn’t being taught much these days I’m confident (but not certain) debacles like this mess will continue to emerge.
“Since the notion of “paradox” isn’t being taught much these days I’m confident (but not certain) debacles like this mess will continue to emerge.”
Hear, hear! And I am shocked that a company like JP Morgan/Chase would encourage an appraiser to “hit the numbers” based on comps NOT in the neighborhood of the property.
At the risk of sounding like John McLaughlin, I ask you, jag: What in God’s name has happened to sound banking principles? You are one of our bankers here. What have you seen that has caused this sort of thing? Is it because banks can sell the loan on down the road and escape liability?
Corruption. Pure and simple corruption.
Yes, corruption, Mike, but to what end, is what I’m trying to figure out. What interest can a bank have in fixing the appraisal? I can understand a broker doing it, in order to get a fat commission. But a direct lender doing it just doesn’t make sense, unless they want to sink their own company.
If they don’t compete with Country Wide, they don’t make money. Simple as that. In an inflationary environment even a banker will start to question their own sanity in making responsible loans if it seems like they’re missing out on the action and could go out of business (albeit in the short-run) if they don’t try to compete with AHM and Country Wide. If you ever did Lending Tree a few years ago the regualr banks always looked like they had the ‘worst’ offer, even though it was the most responsible offer.
I can see that, but given what has happened to Countrywide and AHM, I would think banks would now be comfortable reverting to responsible lending. Although, trends are interesting. Carried in a certain direction by inertial forces, until someone or something acts to reverse the trend, and even then, I guess it is like trying to steer the Titanic away from the iceberg. Even though the wheel has been turned all the way over in the opposite direction, it takes a while for the ship to respond and correct course. Hence, ship meets iceberg anyway.
My guess is the bank managers bonus is based on production .Taking comps from outside a project when you have comps on like property or closer property is a big no no in appraisal theory .
Also ,in the past people on average would move every 7 to 10 years and a number of people stay forever in a home . Why is it that the MSM and real estate reporters think that people needing to seel within 1 to 2 years is normal ? Since when are you assurred a profit in that short of time on real estate . If some investigation was done ,I think they would find that many of these properties that are going into default had short term ownership . In old time lending cycles you would have to bring money to the table if you moved to soon after a purchase ,so why does it commond a public bail out now .? Now all of a sudden the short term investor is a victim .
sell not seel
“Is it because banks can sell the loan down the road and escape liability?”
That’s as good a reason as any. Bankers don’t take great risks (knowingly). They move slowly, in a herd, and (like government bureaucrats) they don’t like to “stick out”. However, if they see someone else making a pile of money many will happily mimic them. That’s why these kinds of “innovations” often get out of hand.
Subprime, like many things, works fine at one level and horrendously at another. Banks jumped in and, with the added benefit of being able to off load the risk, they certainly weren’t going to be out done by their competition. Each bank, probably relatively rationally, thought the risks of what THEY were doing wasn’t problematic. Unfortunately, as the business mushroomed and they’d built out their staffs to capture the business, they had to reach further and further out on the risk scale to justify their investments. Of course, for a while, the rewards were extraordinary and bankers (like just about every organization I’ve ever known) don’t really want to look that closely at huge profit centers because they probably (unconciously) KNOW they’ll find something objectionable/corrupt going on and because they benefit from the success just as much. Having been scorched at one point in my career for questioning a “hero” who was minting money (and later lost the bank 100 million because of the problem I pointed out) I have direct experience with the process.
“Sound banking principles” is something that is tough to live up to in a high expectation corporate enviroment. People expect 20% returns because someone, somewhere (for the moment) may be getting that outcome (either legit or not). So the temptation/pressure is always there to jump in.
This isn’t a phenomena unique to bankers, no? Its human. Its hard for all of us not to mimic a “success” we see others achieve. Blinded by the potential outcome we can’t adequately see the fundamentals involved in the entity…..sound familiar?
The brighter the outcome shines the harder it is to see, much less understand, the fundamentals in their full perspective.
Unfortunately, the speed of today’s technology, the massive sums involved, the over confidence in computer modeling and high expectations combine to make for (apparently) pretty explosive debacles when the music stops.
Bankers haven’t changed. Humans haven’t changed. However, performance expectations and magnitudes of impact (good and bad) have and I don’t think people or organizations have a good perspective on this…yet.
“‘I called Countrywide,’ she said. ‘I have a Realtor who has two buyers, but Countrywide is so messed up, they have turned around and sued me for foreclosure. I owe $220,000 on the property.’”
While I agree Countrywide is screwed up, that has nothing to do with sueing her. You owe them money lady.
What’s amazing about her story is that she knew she was paying a lot for a little and is shocked, shocked when it turns out that she … owns a little.
‘I guess in any gray cloud, there is a silver lining. In this case, if you’re a buyer, you can get a great deal,’
Your great deal could easily turn into a falling knife, particularly if the economy slides into a recession. Given that demand is already virtually on life support against the backdrop of a strong labor market, imagine what it would look like if lots of folks doubted their future employment prospects.
“Your great deal could easily turn into a falling knife, particularly if the economy slides into a recession.”
I have cuts all over my hands! I don’t think this market will even stop at 2003 or 2002 prices. $160K in my neighborhood is already late 2001 priced and it isn’t just one or two homes listed that way.
In 1998 you could buy for $129,900. For the 1600 square feet that you get, that’s a bargain. Will we see that price again? I think maybe.
Prof Bear,
Considering income is flat to down from 2000 the prices should only be able to support the yr 2000 prices.
Its probably lower than that since construction, finance and real estate jobs support a substantial part of that.
Don’t forget the effect of 2.6m vacant (empty) houses on creating downward pressure on home prices, either. It is very expensive to own vacant homes, with the ongoing need to burn through carrying costs while deciding whether to (a) let them decay to the ground, (b) pay to maintain a home with no owner-occupant responsible for maintenance thereof, or (c) cut (the price) and run.
From Bloomberg.com:
‘Sept. 27 (Bloomberg) — Fannie Mae Chief Executive Officer Daniel Mudd, whose government-chartered company is the largest provider of money for U.S. mortgages, said the housing slump will last beyond next year, dragging down home prices and increasing credit losses.
‘The market won’t hit a bottom “until the end of ‘08 and then we have some period of time to work our way back up again,” Mudd said today in an interview in Washington.’
So there you have it: bottom in 08 according to FM, which, as we all know, is run by wizards.
“‘I called Countrywide,’ she said. ‘I have a Realtor who has two buyers, but Countrywide is so messed up, they have turned around and sued me for foreclosure. I owe $220,000 on the property.’”
I can’t believe the stupidity, and the nerve of this woman who took several very risky bets and feels *entitled* to get rich quick.
That’s the sad truth about the housing run-up. Prices were run up by people who had NOTHING to lose! If you had any money in the bank you wouldn’t be trying to flip condos.
These free-wheeling loans essentially let people with play money (like from a Monopoly game set) establish the price at homes. People who wanted to use real money to purchase, or who had to pay property taxes based on crazy valuations, were unfairly screwed. (But Hillary doesn’t want to help those people!)
“People who wanted to use real money to purchase, or who had to pay property taxes based on crazy valuations, were unfairly screwed. (But Hillary doesn’t want to help those people!)”
Hillary’s constituency consists of large corps, financial and otherwise, based in NY. Hence, she voted for “bankruptcy” reform, of which Citicorp is a major beneficiary. However, in this she is not so different from many politicians, so I can’t say this sort of thing is limited to Hillary. Besides, I’m so disgusted with both political parties and sick to death of their manueverings, polarization, back door dealings, corruption, name calling, posturing, etc.
The decadent Senators of Rome were pikers by comparison to our CONgress.
Isn’t it great, this election we will get a choice of Rudi and Hillary. Either way it’s gonna be another 4-8 years of war, expanding deficits, inflation, and hand-outs for the irresponsible. Bill Clinton and Ronald Reagan look like free-market libertarians and holy men compared to this pair of big government hacks.
Oh, really? Have you read Juvenal?
We ain’t seen nothin’ yet.
Yep, they had nothing to lose getting in and they’ll have little incentive to stay in, no?
Its obvious more marginal buyers came into this market than at any time in history. They aren’t going to “tough it out” since they only got in when it was incredibly easy and “obvious” that it was a “no lose” proposition.
Are people who are clearly losing, who thought they were clear winners, going to bother trying to “work” out a loan? Unless these people are a new breed of humans, I think you can’t bet they’ll (continue to) walk in massive numbers.
“The Collins’ agent, Mike Kleinrichert, said sellers have to price their homes as if it were 2003 or 2004.
They need to price the homes back to 2001 to 2002 levels. Anything after that year is bubble pricing and is totally distorted!
I was raised in Florida Gardens. Trust me, there is no 3 bedroom there worth 150,000 besides 269,000. Most houses were built in the 50’s to 70’s. The three bedrooms were mostly built in the 50’s and are the size of most master bedrooms today.
I agree with the 2001 pricing.
Florida real estate is being hit with the perfect storm. Save our homes has driven away most out of state property owners. Speculation was rampant in ‘05 and ‘06. Builders have over developed and the insurance rates are unaffordable. Yes, if a recession is coming, Florida will lead the way.
Let me add another factor. The real estate industry itself is a major part of the economy in Florida. With real estate sick, the effects on the economy will be disproportionately bad. I also don’t think the statistics catch what is really going on. Many people in real estate are not employees, they are contractors. When they don’t have work, they don’t show up as unemployed.
Local governments in Florida are also unusually corrupt, with policiticians and connected lawyers and businessmen pleading guilty on a regular basis to crimes. Plus, add in the hurricanes (which really are not that bad to deal with, really just bad PR and bad for insurance costs, especially compared to what could happen in an earthquake), and you have a mega meltdown taking place in Florida.
In about two years, when prices are down another 25% to 50%, if you have a job in Florida that pays well (or a good retirement plan), you will be back to living like a king, like in the good old days, before these REIC scum messed things up.
Here is a good indicator of what is going on - boat sales and prices. Worse than housing at the moment. Trust to sell a 10 year old or more boat - down at least 40% from pricing two years ago.
WHat’s your issue with “Save Our Homes”? Are you saying that new property taxes are so high (because existing owners get a discount), that out-of-state buyers are discouraged.
Unfortunately, “Save Our Homes” (as I understand it) is necessary. Otherwise Granny will be forced to give up her paid-for home because funny money is being pumped into the neighborhood causing property “values” (and property taxes!) to rise. Same thing with CA Prop 13. If they didn’t have it, little old ladies in Sunnyvale would have had to move in 1999 when dirty-dotcom-dollars made Eichlers “worth” $1Million or in 2005 when *anyone* could get $1M financing.
I’m currently having my lawyer try to get the property tax assessment of some land I own in Orange County FL lowered. (This land, 20 acres, was bought for very little pre-bubble). No land anywhere near it has sold in the past three years, and nearby houses are forclosing (or have been listed in MLS for over a year!). Yet Orange County, FL, somehow thinks it’s worth *more* this year than it was last year.
As an aside, it’s very interesting to track the prices of large lots, 60 acres or more in Orange or Lake county. No bubble there! Why? Because there’s never been financing available for this type of property. Builders can self-finance or get a bridge loan. Individuals basically would need cash to buy non-farm land like that. So with no easy money, there was no bubble! Prices simply tracked inflation over the past 40 year or so.
If you want to give a tax break to a “little old lady,” then give the tax break to *her*, not to the house she’s living in. This was the critical mistake with Prop. 13. Since the property carried the tax limit, a person who got rich but never moved was taxed at a far, far, lower rate than a poor person who relocated (job, empty nest, etc.)
Why not cap prop tax on one’s in-state homestead at a percentage of previous year’s income? Out of state owners get no break. No break for investment and vacation homes. And you can carry that benefit with you from home to home within the state, not locking you into a too-big home or a home away from your job.
if it weren’t for “save our homes”, a lot of people just couldn’t afford to stay in thier houses, even at yesteryear prices. taxes and insurance are a bitch in most of FL - as many out-of-state bubble buyers have found out.
even fiscally sane folks with traditional mortgages are getting swallowed up by taxes and insurance. combined with flat incomes for most occupations in the state and the rise in real world inflation for everyday things like gas and food, Florida is no bargain.
Interestingly, Florida did away with that wacky “Intangible Tax” which probably kept a lot of productive Americans from wanting to move to Florida
http://dor.myflorida.com/dor/taxes/ippt.html
(It was basically a tax on bank accounts!)
Now that price declines are undeniable, serious price drops are starting. I caution anyone thinking about buying here. Even with these price declines, houses are still overvalued at least 40% in most major markets. Some people may argue that there is no way prices go down that much, but I would ask those same people to be honest with themselves and ask how accurate they were about prices on the way up?
Prices will go down far more than most of us think is possible. Even the bears will be wrong.
Got rental?
Prices can over-correct downword when you have to much supply ,and foreclosures add to supply as well as overbuilding . Add that the speculator needs to dump and certain areas can crash hard .
Although so long as Fannie and Freddie provide a bottom to credit availability, monthly cost to purchase is unlikely to stay below monthly cost to rent. ‘Course in Fla, the oversupply of housing means that the monthly rental cost can go quite low indeed.
Fannie and Freddie do essentially the opposite of their “mission.” So does the mortgage interest deduction (which was created for Roosevelt’s mortgage industry pals).
Incidently, why do today’s smaller households “need” such large homes? I have no use for more than 1000sqft (cracker shack size).
The cracker shacks that used to rent for $30/week may not have had central air, but they were obviously build better than McMansions because they’ve survived 85 years of hurricanes, insects, and human occupants.
Also, I went to a site which will estimate building costs. Stuff like indoor plumbing and electrical wiring that won’t burn the house down is not prohibitively expensive!
So enough with this ‘houses must cost more b/c of modern amenities’ crap!
If that were true, then rental apartments would cost more to build and I would be paying WAYYYYY more for a roof over my head.
My apt has indoor plumbing (hot AND cold water), basic appliances (replaced within the last ten years), electric heat and A/C … yet I only pay $390/mo.
The “indoor plumbing” argument is bogus!
I’d bet if you didn’t care about the stability of your landlord who may foreclose on your property, you can probably rent for very little in Central florida. Get someone who only worries about “howmuchamonth” who can pay the mortgage with your rent + his credit cards for a couple of months! Of course, you’ll only have the place for a month or so (though if you sign a lease, any new buyer may have to honor it!)
Do I hear Capitulation? Look for Nov 15 as start of “throw in the towel”….Crash of the real estate prices.
You guys have to catch Cramer on CNBC:
http://www.cnbc.com/id/15840232?video=533257614&play=1
Some of his comments: The NAR has been saying “Now is a good time to buy” for three more years than they have existed.
The NAR doesn’t just have egg on their face, but a whole Denny’s Grand Slam and a Four Stack.
You’ve got to see it.
NAR=Fluffers
Catch a Falling Knife Inc. :
http://money.cnn.com/2007/09/24/real_estate/vultures_circling/index.htm
“NEW YORK (CNNMoney.com) — Real estate investor Matthew Martinez is the point man for a private equity group that plans to invest $200 million in Florida condo developments.
But recent forecasts show many housing markets in the Sunshine State are looking at double-digit drops in home prices. What is he thinking?
“The smart money is thinking about buying there right now,” says Martinez. “It may be six to 12 months early, but it’s a good time to be searching for deals.”"
“He’s looking for 15 percent or higher discounts off previous condo prices to make his purchases viable. He then plans to convert the apartments back into rental units.”
Any bagholder in Miami or FLL should find this idiot fast
Nice to see so many neophyte wannabe vulture investors about to become shorn sheep. My money seems to be even smarter then theirs since it is staying in the bank.
“Realtors, builders, developers and others in the industry expect today’s 28th annual Realtor-Builder Tradeshow to focus on the optimistic side of the statistics.”
“Aren’t we heading toward that iceberg?” asked one of the people at the Titantic deck party.
“Nothing to worry about, ’cause the ship’s gonna miss it,” said another person at the party, drink in hand.
“It doesn’t matter if we hit that iceberg. This ship is unsinkable!”
“The elimination of the subprime lenders has led to fewer people qualifying for loans. ‘When the market was booming, there was a lot of cheap money available to anyone who could fog a mirror,’ said Patrick McGuire, broker associate with Coldwell Banker’s Lakewood Ranch office.”
Back in the boom days - there were all kinds of noted experts suggesting immigration, baby boomers, empty nesters, little green men from Mars and other factors driving the demand for housing - NOT easy credit.
and of course, back during the boom, they weren’t making any more land!!
And don’t forget female nesting inst incs. Suzan researched this.
Did anyone see this video from CNBC…wow, it appears Cramer’s been reading Ben’s blog
http://tinyurl.com/3b6shx
He went to the Pravda card….
Wonder where he got that one?
Excellent, the Ass. of Realtors took a major spanking. They wanted a retraction and then the hard numbers came out making them look like total fools. Classic.
“A local broker, Maggi Hall, said she has not seen much interest among potential buyers. Sellers are refusing to lower their prices more, and buyers are trying to out-wait them, Hall said. ‘It’s almost like it’s a standoff.’”
Golly, Maggi–it’s almost like you’re rather stupid.
I particularly like the “now is a buyer’s market” comparison with NASDAQ as it went down from 5000 to 1500.
“Where there were once seminars on how to flip a home for a large profit, now more and more workshops focus on how to find and buy properties as short sales or in other stages of preforeclosure. ‘I guess in any gray cloud, there is a silver lining. In this case, if you’re a buyer, you can get a great deal,’ McGuire said.”
i hope the rest of the dumbskull people sitting on the fence buy into this crap, so that this correction will speed up. the only people making money on this are the ones collecting admission for these workshops! lol
Let me guess the name of his firm…
Omerta Appraisers, inc.
“That has Sarasota appraiser Greg Haarer, hired by J.P. Morgan Chase to price two of the units, breaking the traditional code of silence between appraisers and their clients.”
the seasonal residents or out-of-state buyers don’t start trickling into the area until late fall or early winter.
We’ll see by the end of the year how that’s working for everyone.
In addition to bargains, the area does have two other things working in its favor as snowbird season approaches.
I think they’re going to find that snowbirds are going to sit on the sidelines with the exhorbitant prices. Plus many snowbirds are in the same housing predicament as everyone in FL. A lot of snowbirds will no longer be retiring and they won’t leave the area where they live because they still need their jobs to pay the bills. Instead of 3 months in the sun, it’ll be one week on the beach and then back to work, if they can even afford a vacation.
And when the snow birds see their tax bills this November, you will see a lot more boomer’s retreating from here then moving in.
I’m a boomer and ready to retire, but it won’t be FL. Taxes and insurance, not home prices, are the reason. The 800 lb. gorilla is Save our homes. Who thought up this travesty of legislation? Billionaires with $60,000 tax breaks? Identical homes with vastly different property taxes? Florida’s real estate bust will outlast the rest of the nation. Changes are needed.
Tech Central Daily had a short interview about the good things that come from bubbles. It’s one optomistic way of looking at this huge mess once it is over in a couple of years…
“We’re at the stage right now where clearly the housing credit bubble has popped. We are seeing bankruptcies and foreclosures, Congressional investigations, casting of blame, all of which you typically see after a bubble bursts. And right when the bubble pops, when it’s darkest, that’s precisely when it is hardest to see the upside….
A lot of the housing that was built, even if it gets foreclosed on, will not be torn down. People will move in at lower prices….”
http://www.tcsdaily.com/article.aspx?id=092507C