‘What Goes Up, Must Come Down’ In Florida
Florida is struggling with it’s housing market. “Florida lawmakers, desperately seeking a fix to the state’s troubled homeowners insurance market, could force the wealthy to pay more for coverage by kicking thousands of them out of Citizens Property Insurance Corp., the high-risk insurer of last resort. An estimated 6,750 homes would be kicked out of Citizens if the $1 million cap becomes law, cutting the troubled insurer’s exposure by about $16.7 billion.”
“In Palm Beach County, nearly 1,703 homes worth at least $1 million would be affected, more than any other county.”
“John Pinson, a real estate broker in Palm Beach, said people buying an expensive home as an investment don’t want to pour a lot of money into insurance and taxes, both of which are skyrocketing here. ‘Insurance is one of the number one things people look at today, especially in the upper-end market,’ he said. ‘They’re interested in the cost to carry, the taxes and insurance and electricity.’”
“While sellers of existing homes have previously paid buyers’ closing costs and broker bonuses to drum up interest, they’re taking the incentives game to another level now that South Florida’s five-year housing boom has ended. ‘You have to do something to stand out in this market,’ said Brian Boles, an agent for in Boca Raton.”
“February’s used-home sales were down by more than 20 percent in Palm Beach, Broward and Miami-Dade counties. With the number of listings skyrocketing across the region, sellers simply can’t stick for-sale signs in their front yards and expect the homes to attract interest, agents say. Although the perks are getting attention, some agents think they are unnecessary, even in a slow market. They say the best incentive to buying is a fair price.”
“‘I don’t think sellers have to offer the moon,’ said Inez Fleming, a Delray Beach agent. ‘People will buy it if it’s properly priced.’”
“Holly Schiller, an investor in Weston, has tried to sell a three-bedroom townhouse under construction near Fort Lauderdale beach for about six months. Schiller first dropped the price by $41,000 to $599,000, then decided about two weeks ago to make it even more interesting. Schiller said she doesn’t mind forfeiting more than $5,000 in profit, if it results in a sale. ‘There are a lot of listings right now,’ she said. ‘I want my property to stand out from the masses.’”
“Schiller’s agent, Rob Rose of Fort Lauderdale, said her furniture credit is not a bad idea. But he generally discourages clients from offering perks. ‘If a house doesn’t have a dining room or a fourth bedroom, offering a cruise isn’t going to make up for that,’ Rose said. ‘Honestly, it’s all about price.’”
“The Florida real estate market is definitely showing signs of getting back to normal. One area where that is becoming more evident is pricing, which has so far been almost unshakable bedrock in Southwest Florida’s real estate market.”
“‘We have started to see decreases in prices now,” said Jim Petche, broker in Punta Gorda Isles. The 40 or so real estate agents at his office have to submit a form whenever a client is extending a listing or changing a price. ‘I will tell you of all those forms that come across my desk, I can’t think of the last time I saw a price increase on one of those forms. They are all price decreases.’”
“Terry Hart and his brothers have been trying to sell an extensively remodeled home on Hope Street near Sarasota’s Riverview High School for about a month now, with no bites. ‘We haven’t had an offer on it,’ Hart said. ‘But there’s what, 6,500 homes for sale in Sarasota County?’”
“How far sellers will have to go is still a matter of considerable debate. ‘What goes up must come down,’ said (broker) Al Deering. Like Petche, he expects fairly widespread price declines to start showing up in the regional market soon. ‘The areas with the biggest increases will now see the biggest decreases,’ Deering said.”
Thanks to the readers who sent in these links.
I don’t see any evience of the bubble bursting here in Tampa-St. Petersburg, and prices are still outrageous here and south through Sarasota. Do you suppose this is because so many wealthy New Yorkers keep pouring in and buying everything in sight, with no regard to quality or actual value? A realtor I spoke with said most do not take out mortgages, but pay cash. Unfortunately, they’ve driven prices sky high, hurting everybody else. It’s sort of like rude, flashy Americans moving to Mexico so they can live in opulence on $25,000 a year. New Yorkers can get more for their buck here, but at what cost to to the locals? Apparently, they don’t care. “Yankee go home,” rings as loud here as is does in many countries around the world,” but here it is more historically defined.
Meanwhile, developers are building huge subdivisions. mowing down thousands of acres of trees, killing who knows how many animals, while more and more of these projects are sitting near-empty. People who move here need to inquire about building materials, because many structures are built or partially built of partical board, then sprayed with stucco. This particel board does not hold up when it gets wet, and cannot withstand hurricane force winds, but nothing is done to prohibit its use. Entire apartment complexes are built of this junk, some with plastic siding stapled on, others sprayed with stucco, which develops seams between the sheets of particle board. Sometimes concrete block is used on the first floor and particle board on the second. There are any number of variations on this theme.
Townhouses going up down the street from me seem to be stalling, possibly while the builder tries to get more money to keep going. They start in the high 400s, but flippers are already trying to unload them for a million, even though one can still get one for under 500k. If you use the ‘bubble’ around here, people look at you as if you uttered the f-word.
Don’t even get me started on cheap crappy construction. That’s an aspect of this nonsense that doesn’t get much play yet becomes a huge issue later when the bubble bursts.
In San Diego in the early 90s, there was quite the cottage industry amoung plaintiff lawyers in residential construction litigation. A quick look at the legal help wanted ads there would suggest another boom in that business starting. That may be one way the trapped FB’s try to get out of their obligations.
Just finished Rick Joy’s book, very interesting..expensive too build though.
Joy, et al are for the architecture patrons for whom money is no object. I wish I were in that category, being a huge architecture buff.
His architecture can justify 500,00 to 3.5 for cost without people freaking out.
In NoVA, some of the homes that were built just 5-7 years ago are starting to deteriorate, especially the exterior wood trim. Developers put one coat of cheap paint on it and now the wood is starting to rot. And the vinyl siding they use here is just a bit thicker than saran wrap, so it buckles after a few months.
Home Depot and Lowes might do well if people have to buy crap to fix the shoddy construction they got in the first place.
That’s IF they can afford it.
” They start in the high 400s, but flippers are already trying to unload them for a million, even though one can still get one for under 500K.”
Im thinking this 1 million dollar listing must be a shill/builder listing thats false to make people think they are getting a good price at 1/2 the amount . If the 1 mil is a real listing from a flipper ,( and its not a penthouse best unit type thing ), it shows how crazy the expectations are of the flipper. Flippers must think that everybody else in the world is a fool.
I never thought of that. The ad, on craigslist.org, says that the unit will include a large screen plasma television.
These are very weird townhouses. Four stories, with what appears to be one small room (the size of a single car garage) per floor. They are being built behind a grocery store and on a heavy traffic side street with no setback. Some of the exteriors are absolutely beautiful (very designer), but others look goofy with fake? bricks glued to their facades. The developer is calling the townhouses the Brownstones of Soho. Soho is actually South Howard Avenue, the busy street I mentioned. In Tampa, everything is like like: copied from somewhere else, from fake “lofts” built as lofts, to fake everything else.
In another direction down the street from me, there are some very expensive three story townhouses. One has had a realtor’s sign “sale pending” for months now, and I wonder if that’s part of the same trick: to make people things are going better than they are.
South Howard yet another area Tampa could have done right, but since Tampa has no concept of what right is, it ended up a mess just like everything else in that hellhole of a city.
Here! Here! I happy to know somebody else sees through the illusion.
Hyde Park Village should have been a great place, but the locals didn’t support it. YBOR City was nothing 15 years ago, instead of making it into a place with side walk cafes, they made it into the wild wild west. The mall at Harbour Island the locals didn’t support it. Build International Plaza when a Tampa Bay Center maybe two miles away went out of business, International Plaza will eventualy be filled with Dollar Stores like the rest of Tampa. Put in a Walmart Superstore and people in Tampa feel right at home!
We have similar townhouses built (and still building in Dublin, CA). I took a builder friend of mine to one of the open houses a couple of years ago, and the first thing he mentioned ( which I didn’t even think of) is that the a lot of the square footage is taken up in the stairs of these 3 and 4 level townhouses. That doesn’t leave much “living” room on each level. In fact, that was exactly the case. When you look at each room with a realistic eye, you notice that you can’t all of the common furniture in those rooms….usually no room for a bed, 2 night stands, dresser and chest…no room for sofa, chair, coffee table, end tables, maybe entertainment unit…etc. You have to visualize your OWN stuff in these rooms to really make a smart decision. I don’t think a lot of people do that.
BayQT~
I guess it’s called tower living. My cats like to run, so the bigger the floor, the better. I want a REAL loft with lots of space on one floor, and maybe a smaller space above for sleeping. Won’t find it it Tampa, where nothing is real.
As for Ybor city, it should have been restored as an ethic neighborhood, not turned into a bunch of trashy bars and silly “art” gallaries. I see that a former cigar factory is going to be turned into yet another “art” factory. This has been tried time and again, without success, but the fools keep repeating the same mistakes.
International Mall is jammed with people, but I never actually see anybody buying anything. The prices are absurd ($400 for torn jeans). One worker said that kids with their parents’ credit cards do buy the thousand dollar miniskirts, but nobody else seems to be able to afford to.
Hyde Park Village is a shame. And now sumebody has bought the theater to knock down and replace with, you guessed it, CONDOS. As if that thing being built behind the theater isn’t horrifying enough. The last Village owners hiked the rents so high, all the stores bailed out.
Habour Island. Well, the name says it all. What a dump. The most pretentious address in all of Tampa, and most liable to be destroyed if a hurricane ever hits.
Downtown St. Petersburg is definitely a billion times nincer than downtown Tampa, but it has a few dreary buildings, and the rest of St. Petersburg is hideous beyond comprehension, while Tampa does have some beautiful, albeit horribly cramped, neighborhoods. Tampa streets are so narrow, they seem to have been built for horses, and the tiny lots that people build giant houses on are hilarious.
Yes, the Cigar Factories are yet another example of how they cannot get it right, these beautiful old buildings which should have been the lofts of Tampa have been left to fall apart.
Inventory in Tampa has risen from 3980 on 01/07/20006 to 5433 today, that is almost a 40% increase in less than three months.
But, prices aren’t coming down, are they?
They will.
Terribly OT, but my jaw dropped today reading this NYT piece under the description “borrowing”:
By SUSAN FERRARO
Published: March 26, 2006
WITH three children and large extended families, Alisha and Sudhir Karandikar thought that their 1,800-square-foot house in San Jose, Calif., was too small. “For holidays, we really need a formal dining room,” Mrs. Karandikar, 35, said.
The solution took them well beyond an addition; they are building a 3,200-square-foot house from the old structure, with dining and family rooms, six bedrooms, three baths and a new kitchen, roof, facade, heating and plumbing. “It’s like a tear-down, but we’re still sleeping in it,” Mrs. Karandikar said by telephone as workers clattered around her.
To finance the project, the Karandikars — she is a full-time real estate agent, and he is a high school math teacher and also an agent, part time — got a $450,000 construction loan from First Horizon, a home loan lender, which also took over the couple’s existing mortgage. When the house is done, the total loan will be $1.2 million.
Interest on the final loan, to be closed when the house is finished, will be “a half point or a point over the going rate at the time,” said Mr. Karandikar, who estimates monthly loan payments of $6,650. “We will do an interest-only mortgage for five years,” he said, “but it will be refinanced into a traditional 30-year fixed-rate mortgage before five years.”
Of the loan package, Mrs. Karandikar said that $30,000 was a bank origination fee and that $70,000 was for interest during construction. The bank fee was high, she said, because of the size and duration of the loan, and they had to establish a $100,000 cash reserve to pay upfront for items to be reimbursed later from the loan.
http://www.nytimes.com/2006/03/26/business/yourmoney/26loans.html
Why in the world the Times would be showcasing this irresponsibility is reprehensible to me. Add that to their Sunday RE front page urging bachelors to buy expensive apts, and it’s almost criminal. Not a peep about the home sales figures released this week.
And while existing/new sales in NE were reported to rise, I somehow doubt they are doing that in NYC (witness the times walktrhough item last week about anemic open houses) -or the Times would toot that horn. I reallly wish some paper or organization would report directly on inventories/sales in nyc -but the info appears to always be shrouded.
Actually my prayers may be answered - S&P will unveil housing tracking project in april that includes major metro areas - what do you all think?
http://www.realestatejournal.com/buysell/markettrends/20060324-talley.html
Interesting concept for sure but we will need to see how liquidity is handled in them; i.e., how much of their own money various firm are willing to risk in that area. If it’s just you and me making the market, it won’t be worth much.
Housegeek,
This is taken from the end of that article:
MIDDLE-AGED homeowners tend toward caution, said Allen Fishbein, director for housing and credit at the Consumer Federation of America in Washington. They often see homes primarily as dwellings that may return gains over time through growing equity.
Younger homeowners, on the other hand, may know only hot markets in which appraised values double every few years. More than ever, today’s young buyers appear remarkably comfortable with risk, he said, though it remains unclear whether their attitude shows a real change in the market or an anomaly.
While she is 35 years old and is really not a that young, she was only a teen when the boom of the late 80s, 90s happened. It doesn’t really matter that they are both real estate agents, albeit, the husband is a part time agent….they are really fooling themselves into thinking this is a sensible and financially responsible thing to do.
Loan payments of almost $7,000/month?? That is beyond ridiculous. What happens if one of them falls ill, or (God forbid)one of their children falls ill and family resources have to be tapped into? It is just beyond my comprehension that people will over-extend themselves because they don’t have enough room to accommodate their extended families during the holidays.
Why can’t dinner be at Great Aunt Mary’s house and this couple can bring in or cook the food there? They are raising 3 children, for Pete’s sake (who IS Pete, BTW, LOL!)?? There are certainly other options that could have been considered and adopted instead of this obvious over-indulgence.
BayQT~
I don’t want to get into ethnic stereotyping here but I most of my Indian friends and acquaintances, of which there are many, would not be profligate spenders and risk takers with their own money like that. That surprises me.
Actually Indian culture places a much higher value on saving than the US-debt culture. A large part of the thanks for this is due to well-intended US govt retirement programs which grew out of the depression (Social Security and tax-qualified private pensions). Once the US labor pool became accustomed to the idea that funds were getting set aside to pay for their retirements, the need to save (and the culture of saving that accompanied it) was stricken from the US public awareness. I have heard from my parents that my grandfather (who died before I was born) saw the folly in the Social Security system from the start, and I am proud to be his grandson for that among other reasons…
I could see why they opted for a remodel instead of a teardown — this way they preserve their Prop. 13 taxes.
Not exactly…they will have a new tax base established based on the cost of improvements (i.e. new tax base = prior tax base + cost of improvements). There new tax bill might be an eye opener to them, especially if they are actually using the 400K+ on the improvements! But since they are both Realtors (TM), I’m sure they are on top of it! This is why people don’t get permits, etc. for illegal improvements/additions, but in this case any legitimate builder will pull the permits, etc.
Younger people are ” comfortable with risk” because they’ve never seen the downside. They will.
Exactly. For all the talk of ‘risk taking’, these people actually perceive no risk whatsoever.
But they soon will.
The bigger contingency than one getting ill is the certainty that their income from real estate sales is going down. This is a recipe for disaster!
Absolutely! I so agree with you. No real planning or looking ahead.
BayQT~
Exactly! That is what scared me about the article glamorizing this couple’s risk taking. And that it got all fuzzy at the end– why couldn’t the reporter come right out and say (or quote any number of financial advisors) that the couple are leveraging themselves silly in a market that is now running ice cold, instead of the mealy-mouthed “young homeowners..may know only hot markets.” I bet you the consumer fed guy had a lot stronger language on this and it was edited out.
“for Pete’s sake” is a modern contraction of “for Saint Peter’s sake”, which was said in mediaeval times instead of “For God’s sake”, which was considered blasphemous.
Thanks, libertas.
I knew someone had an answer for me.
BayQT~
Judging from Ben’s posts of the past seven days, I am guessing that economic historians will identify last week as the one when housing prices clearly started to drop, as evidenced by countless news stories to that effect…
I agree, GS. And here is yet another from USAToday:
February New-Home Sales Plunge 10.5%
http://www.usatoday.com/money/economy/housing/2006-03-24-new-homesales_x.htm
BayQT~
Regionally, it seems that the Professional SpecuVestors are still drinking the Seminar Kool-Aid and chasing the dream. They proselatize and leave, in their wake, a yet broader swath of American Dream Believers, who may spend, like them, several hundred dollars or more on seminars and books, buy real estate, and become underwater over time. Greater fools, but very sad to see the gullibilty of those who will need financial security most. They may be doing it for their love of their kids, but it’s their kids who will suffer the most.
Even realtors are getting in on the act. From the last link:
‘Bravo Realty’s Thomas Heimann stands by his earlier bearish prediction of a 20 percent ‘price correction’ this year’
I’ve started getting that impression too. Ben is finding so many articles in the mainstream press. The denial stage is fading. Reporters are meeting people not in denial.
Will historians remember this as the national RE crash of 2006 or 2007?
My gut feeling is that it’ll be 2007. For example, the economy of late 1989 was pretty tepid, but the NBER defined that recession as starting in late 1990.
I remember reading about all the manufacturing layoffs during 2000. But again, the NBER defined that recession as starting in early 2001.
Wait, what??? Are you pulling the strawman thingy on my post above? I said the prices were clearly dropping as of March 2006, not 2007. Please do not distort my message, as I do not mince words and hate it when others mince mine for me.
“http://www.mercurynews.com/mld/mercurynews/14191462.htm”
OT-Check out this business headline in the Mercury News. It is “Are we finally seeing the Bubble burst?” Hows that for capitulation?
I will only become fully convinced of capitulation when I see that business headline in the OC Register. So far, the bad news is hidden from view unless you follow the link to Lansner’s blog
http://blogs.ocregister.com/lansner/
Mid-March: Prices +9.6%; volume -21.6%
Forget the first two months of the year. They’re wacky. It’s now prime shopping season. And the first peek — fresh stats from DataQuick — shows if the current trends hold, March will be be the fifth straight month of year-over-year sales declines and the worst one-year drop since October 2004. For 22 business days ended March 15:
Median price Change from ‘05 Volume Change from ‘05
Resale houses $698,000 +14.1% 1,847 -26.9%
Resale condos $469,000 +13.0% 912 -28.1%
New residences* $649,500 -21.2% 531 +33.4%
All homes $627,000 +9.6% 3,290 -21.6%
*-Homes, condos and apartment conversions
I may have mentioned this previously, but the obvious interpretation of the new- versus used- home sales figures is that the OC builders are undercutting used-home sellers, thereby leading the price down…
This so reminds me of the South Florida real estate market of 1990. All of these realtors had all sorts of bonuses and trips etc to try to sell homes.
Sort of like wha’s descibed today in the Sun-Sentinal?
Sellers adding perks to deals
It’s stunning how fast housing is turning to the downside. After this spring the real panic should set in. The “Spring season will save us” crowd will relize that all their “hoping and wishing” was for nothing. Anyone that doesn’t unload this year for whatever they can get will be in severe distress by next year. And the builders will keep building , 2 million new homes this year, and competing for the available buyers.
“Sell when you can not when you have to.”
JMO
Florida could be hit harder than many originally thought, given the additional wild card of losing homeowner insurance.
Wouldn’t it be ironic, too. Before people were trying to pump up the value of their home. It will be interesting as people now start trying to push the value of their home down to put it below some insurance cap that would otherwise make them uninsurable.
One more knife in the already bleeding body…
Sorry to repeat a post, but this WSJ article about rising insurance premiums is very relevent. 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
I read about this issue a while back and knew it was going to potentially be a HUGE factor. People looking to purchase these home in flood prone areas may not think about this or have any disclosure from the seller to that effect (why would they?), but their insurance companies WILL evaluate the property when the buyer makes an offer and could very quickly kill the deal. End of story for this home purchase.
Once it really gets around what the costs are for owning these homes - and ones even further inland you wouldn’t think would be affected but are still in the flood zone - man, will the east coast be in big trouble!
would = wouldn’t
People have always loved the ocean and lived near the Atlantic coasts. However– people in the 1800’s knew to keep it simple, because the storms were nasty. Better to just make small shacks that you can afford to lose. They also tended to build on the leeward side of the barrier islands, which do not get the full force of the storm surge and wind.
““John Pinson, a real estate broker in Palm Beach, said people buying an expensive home as an investment don’t want to pour a lot of money into insurance and taxes, both of which are skyrocketing here. ”
What were these people thinking before they bought the property? Went walking today in the morning sunshine and picked some fliers from today’s to be open houses….not one mentions cost other then mortgage P/I….no costs for property taxes or home owners insurance or association fees …….
Doesn’t Florida seem to be crashing harder and faster than even people here suspected it would?
Just talked to my friend down there. No fear at all. Unbelieveable.
It’s that way here in Panama City, too. People are still building like there’s no tomorrow. Condo sales dropped by more than 50% last month and 60% the previous month, but construction continues, and a developer here is putting together a 30-story building out on the beach that’s going to be so big they’re having to close two streets to build it. And there are new McMansions going up out at the beach with a sign in front that reads, “Starting in the low 700’s.” I can’t tell you how many people have said to me that prices are only going to go up here, because we are going to be the new Palm Beach. Most of the people I know here just smile condescendingly when you say the word “bubble.”
But a few people here do know what’s going on, and the sales numbers don’t lie. The runup here was so high and so fast, and so much of it due to speculation, and there were so many purchases made with suicide mortgages, that the crash can’t be anything other than a hard one.
You have to be somewhat fearless or at least oblivious to danger in order to willingly buy overpriced housing in the path of future Cat 5 storms…
Anyone watch the peice CNBC on housing this morning? People on this blog have long complained that CNBC was overly bullish on housing. Well, this morning was a little different. They talked about fundamentals, inventory explosion, even used the the term “hard landing”. I about fell out of my chair.
I’ve always loved a good hard landing!
Are all I/O loans for 5 years or does it depend?
The period can vary. They can be for 3, 5, 7 or even 10 years from what I’ve read.
Something I found that stated this fact (a lender site). Just an example:
http://www.firstpatriot.com/loan_programs.aspx
BayQT~
….and then the reset begins. With the increase in interest rates as Alan G. was on his way out, a lot of people got the big surprise when their new payments were more than they expected or could handle. That said, some of the 3 and 5 year resets could be responsible for the up tick of the number of foreclosures.
BayQT~
I had mentioned last week, that I had a friend who had filed BK and just signed papers on a house valued at 205,000. The interest rate said 11.4% and the monthly payment was 614.13 with a variable loan…
Looks like a subprime, interest only ARM. When was the reset due?
BayQT~
signals of how the market will go
Saturday was a good day to stay home — or at least off of the road, where everything from Donald Trump to sliding muck made driving a painfully slow slog.
As bursts of rain and gusting winds poured in from the Pacific in the morning and early afternoon, construction narrowed a major San Francisco artery at the same time thousands of would-be real estate tycoons and evangelical teens were flocking to separate downtown events.
Both groups are like lambs being led to the slaughter. IMO.
WITH three children and large extended families, Alisha and Sudhir Karandikar thought that their 1,800-square-foot house in San Jose, Calif., was too small. “For holidays, we really need a formal dining room,” Mrs. Karandikar, 35, said To finance the project, the Karandikars — she is a full-time real estate agent, and he is a high school math teacher and also an agent, part time — got a $450,000 construction loan from First Horizon, a home loan lender, which also took over the couple’s existing mortgage. When the house is done, the total loan will be $1.2 million.
For someone being a math teacher, he sure flunked this test. Let’s see, a RE commission agent who will be making ZERO when this goes south, and a teacher making $60K approx, will have a $7000 mortgage (and subject to increase). $100K reserve (good for 1 yr). All due to a NEED to keep up with the Jones. My family (3 kids) had an 1100 home, and it was fine for when Aunt Barbara, Ruth, cousin Kent, etc came over. We sat wherever. Their homes were similiar.
I wonder what they will need when they get behind on the mortgage? “Hold that refrigerator box, we will need to add it to that oven box”. This casual attitude to debt is going to be the undoing of so many people.
You know… I’m wondering if part of that “large extended family” might not be living with them? It might not be so hard to make the mortgage if Mom is living in the house, etc. It would also explain the need for 6 bedrooms with only 3 kids.
You may have nailed it. You need room for all the relatives that are getting sponsored for immigration from India or Pakistan (guessing on the location, Sudhir Karandikar sounds like he’s from someplace over there). Maybe even a few illegal imigrant relatives. That has always been the trend. First the legal folks get in on a work visa, then they apply for mom and dad, pretty soon brother and sister, then aunt an uncle…. That’s when the big house will come in handy and each relative can chip in $500 bucks for their room as they defraud medicare and apply for welfare and other benefits. The great American Dream! I know my comment sounds nasty, but I witnessed it in areas of SoCal and know it happens.
FL legislature capping flood insurance at $1M to lower exposure? Well, when this really drops, many of those wouldn’t be worth $1M as they will become abandoned albatrosses to the excess of some. Nobody would want to take on the risk, or the upkeep expenses, yet alone a mortgage on a depreciating asset.
Of course the wealthy don’t want to put their money into insurance and taxes. Neither does anybody else. At least the wealthy probably thought of that up front, in order to have become wealthy in the first place (for most, there are exceptions).
Lenders will then require “gap” insurance above the $1M, or they’ll raise rates in the mortgage pool to compensate. There is no free lunch.
I just returned from Cape Coral/Fort Myers, FL. Here are two observations:
1. I drove around a residential neighborhood North of College Parkway along Chiquita Parkway for about an hour on Wednesday, from 10:30 to 11:30 am. I noticed several unfinished houses. Then I noticed that most of them had no one working on them. So I began counting. I counted 66 unfinished houses and only 17 had a worker/workers on site. Only one had a crew at work(about 8 workers). The houses varied from foundations to roofs on and glass and doors installed.
Occupied houses were for sale in large numbers as were building lots throughout the area.
Can’t quite figure out why so many were sitting there without workers. I checked with the owner of a rental company that rents construction equipment. He reported that business was good.
Strange….
2. Visited a Condo project on Fort Myers Beach that was underway a year ago when I visited. There are 5 buidings, each containing 16 condos. Three were complete and were lighted - hallways and parking garage, exit signs, outdoor lighting. Landscaping was in for these three buildings and a finished drive into them.The other two were nearly complete. There were no signs of occupancy in the finished buildings. At 8:00 pm there were no lights on inside the units, there were no cars anywhere on the grounds or in the parking area under the units. There were no signs concerning units for sale. The condos appear to the naked eye to be on the large size and the building seemed upscale to me. Last year the buildings were just coming out of the ground to the first and second floor levels.
This developer has some expensive inventory on hand it appears and substantial carrying costs until he unloads them.
The workers were all out protesting immigration reform today.
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Donald and his buffoons will continue to pimp RE as this whole bubble implodes on them. Will they change their tune as more evidence comes our way? It would be nice to hear.
The site is http://www.learningannex.com
Any other observations.
I saw an ad for this in the LA TImes, Price has been slashed from $179 to $99.
Thats funny because Donald Trump had to file for bankruptcy protection in the 90’s real estate downturn. Did anyone else read that article?
Man, if you are interested in Trump, you should read the full story on him. This is a good link, en.wikipedia.org/wiki/Donald_Trump
Trump is NOT a savy real estate investor or developer, but he IS an extremely savy salesman (selling himself and a false image as a successfull investor). Read his bio, he is just another rich kid who has blown most of his deals and relied on family money to bail him out or allowed his creditors to lose out. Another example of the great American success…just looking for the next greater fool to sell whatever is popular. Trump is the last guy you should listen to at a seminar, unless the seminar is on how to promote yourself and image. He has done extremely well at that! I’d buy stock in Trump the image, but never invest in any of his real estate deals.
Haven’t read these yet. These are the current choices for financial news at http://www.msn.com
Financial News
* The curse of vanishing wealth
* When should you accept a job buyout?
* The great American condo glut
The flood insurance program, especially in Florida is a great example of welfare for the wealthy. What else would you call a program that gives low cost insurance against huricanes to people who live in very expensive homes on the water in high risk areas.
The insurance premiums for our Townhouse association has gone up by over 50%. Also, we were forced to increase the coverage as construction costs have gone up. We are actually lucky compared to others in the miami area. We are located about 18 ft above sea level.
For people located in areas that have flooded in the past and along the ocean are paying hefty premiums. This is hurting people who bought recently more than folks who have owned their house for 5 years or more. The triple whammy of higher interest rates, higher property taxes and higher insurance will push a lot of people into the red in the coming months and years.
There is a condo a few blocks from my house…a very desirable location….has been on the market for a while now and is not selling. Price has been lowered many times. Buyers are not biting as there is a brand new condo building coming up (Mayfair lofts next to cocowalk) next door and if they wait a few months, they can get a brand new condo/loft for the same price as a “used” condo.
There is no ‘used’ home or condo. They were ‘previouslly loved’. That is worth a premium. Until, here comes Wilma, Katrina, Rita, Charlie, Ophelia, and whatever storm can come along. Then VERY desirable.