Built For Appreciation In Florida
Dow Jones Newswire reports on Florida. “Advisers say even millionaire clients aren’t immune to fallout from current real-estate market woes. Take, for example, a wealthy client of financial adviser Michael Charleton. ‘He came to me with about $3 million’ just about four years ago, Charleton says. The client subsequently invested in 21 individual million-dollar condominiums in Cape Coral, Fla., planning on re-selling them.”
“The client had kept the risk of his investments manageable before, Charleton says, ‘because he always put 20% down.’ But this time around, says Charleton, ‘all the foreclosures’ in Cape Coral ‘are killing him. It’s a perfect storm,’ he says, ‘and he just has to wait it out.’”
“‘Every client thinks that their house is worth X amount,’ says Darlene McConnell, a retail lending manager at Raymond James Bank. ‘That’s the sensitive part of the market that we’re in right now.’”
“This line of service can also entail much soothing of nerves, says Cadaret Grant’s Charleton. Beyond providing financial analysis, he says, ‘it’s more of a hand-holding type of thing.’”
From TC Palm. “City Attorney Roger Orr said his staff is hoping to secure about 50 lots between Interstate 95 and Savona Boulevard by January or February so the first phase of construction can get under way as planned. But now several property owners along Becker, including many who bought at the height of the real estate boom, are resisting the city’s offers.”
“Karen Allen from North Loxahatchee, bought her quarter-acre lot in 2005 for $86,000, according to records on the St. Lucie County Property Appraiser’s Office Web site. Allen said…a city attorney told her by phone that the city appraised her land at $55,000.”
“‘If they wanted to give me what I paid for it, at least I wouldn’t lose anything,’ Allen said. ‘But it’s really an insult to want to take my lot and give me less than what I paid for it.’”
“‘There’s going to be enormous displeasure,’ Orr said. ‘We understand that we’ll be dealing with property owners who acquired land at the top of the (real estate) bubble.’”
From Newsweek. “Roger Elliott’s neighbors call it the Dream House. Elliott, a contractor, and his wife Allison, built the house in Palm City, Fla., from plans they drew themselves. All told, they’ve dropped about $750,000 on their home, which they’ve lived in for just over a year. But as the housing market has shifted into reverse, the Elliotts–Roger in particular–are plagued by doubts.”
“He’s grown to expect his home to provide more than simple shelter. He wants it to provide a return on his and his wife’s investment–preferably one that’s measured in double digits.”
“Instead, the Elliotts’ Dream House is losing value. Across the country it’s a familiar scenario. The local real-estate market is terrible, Roger says, with listed properties languishing. Roger guesses the house is worth 10 percent less than it cost to build–and he’s worried its fall has just begun.”
“‘I have personal angst,’ Elliott says. ‘Yes, I built this fantastic house. My wife loves it. Everybody in the neighborhood thinks it’s great.’”
“But it was a house built for appreciation. Now that prices are falling, he wishes he’d built something far more modest.”
“Since the home was built partly with an inheritance, Roger feels a special responsibility that the money left to his wife by her father turns out to be a wise investment. It doesn’t help that because Roger served as his own general contractor he chose many of his home’s pricey extras.”
“The Elliotts are realizing they have more house than they need. Roger regrets building a home that has so much unused space. ‘If I could do it again I’d do it a lot differently. I’d scale it back in every area,’ he says.”
“Roger admits his parents probably wouldn’t recognize the anxiety he’s feeling. ‘They bought a home thinking they were going to live there for 30 years and pay off the mortgage,’ he says. ‘It wasn’t ‘We’ll live there for five years and pocket some money.’ It wasn’t an investment game for them.’”
“Then again, they couldn’t imagine living in a $750,000 home, either. ‘We’ve kind of oversold ourselves on the need for our homes to be investments,’ he says reflectively.”
The Wall Street Journal. “Tom Crossett is one investor on the verge of walking away from his properties. At the height of Florida’s condominium boom two years ago, the air-conditioner contractor from Delray Beach, Fla., bought four units with the plan to flip them quickly. He paid between $143,000 and $173,000 for the units.”
“Mr. Crossett now says the developer of the complex that sold him the converted-from-apartment units reneged on many of the promises, including extensive renovations, making them a tough sell.”
“To help make monthly mortgage payments totaling $4,000, he’s been stuck renting the units to tenants who make sporadic payments. He says that next month, he plans to cut his losses and stop paying the mortgages.”
“‘The only way I can see for me is to just get out, stop the bleeding and let them go,’ Mr. Crossett sighs.”
The Sun Sentinel. “Levitt and Sons, the cash-strapped Fort Lauderdale company trying to survive the housing slump, said Thursday it has temporarily stopped building houses as it tries to restructure its debt. The action is an inconvenience for consumers who plan to move into Levitt homes and now are in limbo.”
“‘I’m up in the air,’ said Angelo Palermo, who’s waiting for his $380,000 house in Port St. Lucie to be finished. ‘This is a very bad situation.’”
“‘We realize that there are a number of questions from customers,’ said Michael Freitag, a spokesman for Levitt Corp. ‘But until the matter of financing is resolved, we don’t have answers to those questions.’”
“Bob Oblas of New York was scheduled to close on his two-bedroom house in Seasons at Tradition on Oct. 31, but said a company representative told him Thursday that it was not likely to happen. He wonders about a clubhouse and other amenities that have yet to be built.”
“‘I’m very concerned about the viability of the community,’ said Oblas.”
The Palm Beach Post. “The average rent for an apartment in Palm Beach County from July through September was relatively unchanged from the same period a year ago, RealFacts said.”
“The sale of rental communities also stalled as the condo conversion craze fizzled in the worst housing slump in 16 years. There was only one sale of an investment-grade apartment complex this year, compared with six last year and a peak of nine sales in 2005, according to the report.”
“‘It’s like musical chairs,’ said Chris Bates, sales and marketing director for RealFacts. ‘The music stopped, and everyone is left holding what they have.’”
“Declining occupancy is a trend that confuses Bates, given that other data-analysis companies have documented a tsunami of foreclosures in what has come to be known as the ‘mortgage meltdown.’”
“‘We cover nine of the 10 markets in those foreclosure reports,’ Bates said, ‘and we looked for an increase in rental occupancies after all those people lost their homes. We didn’t find it.’”
“Then he realized that credit reports took a nosedive after foreclosure. ‘When they’re foreclosed on, their FICO (credit) scores are screwed, and landlords take that seriously,’ Bates said, referring to investment-grade units. ‘They can’t rent.’”
“The question then becomes: Where have all these people gone? They can’t own a home and they can’t rent. That’s one of the major dilemmas of the housing crash of 2007.”
“‘They’re doubling up with friends and family,’ Bates theorized, ‘or else they’re exiting the locale.’”
“Local investors stuck with condos and townhouses they couldn’t sell are dumping them on the rental market, real estate agents say, hoping to recoup their carrying costs, even if they don’t make a profit. But getting owners to set realistic rental prices has been a problem, agents say.”
From WFTV Orlando. “Sluggish sales and high foreclosure rates are causing higher bills for some condo owners. Residents at the Uptown Place condos in downtown Orlando said their monthly association fees have gone up $150 to nearly $450 a month. They have also been asked to pay an additional $689 for emergencies.”
“The hike compensates for vacant units and foreclosures.”
“‘That’s not my fault. I’m doing what I’m supposed to do. I shouldn’t be expected to pay for everyone else,’ said Christine Geever, a condo owner.”
The Street.com. “With the housing boom in a massive retreat, homebuilders are feeling a lot of pressure, perhaps none more so than Tousa. The Hollywood, Fla.-based builder of single-family residences, town homes and condominiums has seen its shares lose more than 90% of their value over the last year. The dismal news seems to have given Tousa’s unsecured creditors cause for concern that Tousa may be on its way to a bankruptcy filing.”
“A creditor group that owns more than $1 billion in senior notes and subordinated debt has hired law firm Akin Gump Strauss Hauer Feld to assess its rights in the event of a bankruptcy filing, TheStreet.com has learned.”
“Joe Snider, senior credit officer at Moody’s Investors Service, downgraded the homebuilder’s debt rating…back in July. ‘They really reduced the financial flexibility of the company to zero, in our opinion,’ Snider says. ‘There is definitely a lot of pressure. Just about every one of the macro economic indicators are flashing serious warning signs.’”
The News Press. “Construction and sales of houses in Florida are nearing bottom but expect more decreases in prices, economist Hank Fishkind told the Southwest Florida Regional Economic Outlook on Thursday.”
“Statewide, ‘I think we’re about at the bottom of the housing market,’ the Orlando-based Fishkind said, although he doesn’t expect much improvement over the next two years.”
“Don’t expect your home’s value to go up, he warned. ‘Those prices haven’t adjusted. They’re going to, and it’s going to be very painful in the next two years.’”
“Lee County is especially overbuilt with houses, Fishkind said — at about 15,000, it’s a bigger inventory of unsold houses than anywhere else in the state, and more than four times what it was two years ago. Meanwhile, the median price of an existing single-family home has fallen from an all-time high of $322,300 in December 2005 to $250,800 in August.”
The Naples News. “Southwest Florida has reached the bottom of its housing slump, but a significant turnaround may take some time. That’s the message economist Henry Fishkind delivered in Fort Myers on Thursday afternoon.”
“Fishkind told attendees the volume of housing transactions has stopped going down, and appears to be bouncing along the bottom. However, there remains a 36-month inventory of homes for sale in Lee County and a 12-month inventory in Collier.”
“‘We’re at the bottom of the housing cycle, but it’s going to be long and flat, I’m afraid,’ he said.”
“‘It’s going to take time for that inventory to be absorbed because there’s so much of it,’ he told an audience.” “The hardest-hit housing segment when it comes to values, he said, is the condo market. ‘Condos are at a great risk,’ he said.”
“Some panelists acknowledged the pain that has accompanied the housing slump. ‘I know countless people in business who are just trying to get through,’ said Blake Gable, VP of Naples developer Barron Collier Cos. ‘For the next 12 to 18 months it’s more about surviving than growing.’”
‘The Elliotts are realizing they have more house than they need. Roger regrets building a home that has so much unused space. ‘If I could do it again I’d do it a lot differently. I’d scale it back in every area,’ he says.’
The MSM completely misjudged the McMansion trend as some new paradigm for housing, when in fact it was simply a way to place a bigger bet on the housing bubble.
That guy is a true assclown.
If he was so concerned about making money, why not build a smaller place and invest the rest in the market? At least he’d have someone to sell to!
That house sounds fantastic to LIVE in. Repeat, LIVE IN, the ostensible reason for building a house. They should thank their good fortune and enjoy it.
So many of these people build very expensive places to their specific tastes and needs and then get insulted when they go to sell and the buying public doesn’t put a premium on their special “touches.” Insane. If I’m gonna invest, give me an index fund.
That’s one of the most aggrevating aspects of the real estate bubble. And big house=great investment was everywhere in MSN. I remember an artical on Bankrate where someone was asking on advise about whether to sell their house and downsize because she was going to have an income loss. His advise was in effect to “well, you can sell the house but remember that your bigger house will be worth more when you retire.” Arghh!!! It’s only worth more if someone is willing to pay for it and then you have to give up the house and find somewhere else to live.
I’ve seen this type of behavior with friends of mine. The house stops being a place to live and becomes and investment. Leading to buying a house much bigger than they need. It is never considered the enormous maintenance costs that are involved in keeping up a 4 to 5 thousand square foot house. The people I know who have engaged in this type of behavior are financially secure enough not to be in danger of foreclosure, however they have significantly damaged their long term prospects, that will caused delayed retirements, cut backs in disposable income and a general lack of a financial flexibility. These are people like the guy in the Newsweek who should have known better. It wasn’t just the “stupid” who got caught up in this, the mania affected those in all income brackets and all education levels.
“But it was a house built for appreciation.
Even after months of reading this blog, it isn’t until this Newsweek article that it’s finally sinking into my feeble mind. One night somebody waved a magic wand, and Americans woke up thinking you “build houses for appreciation.”
America has become a nation of the Federal Reserves manipulations. Working hard means little. Making the right choices and living and investing in a responsible manner means nothing. The Fed prints money and creates credit for imbeciles who watch TV and think they can become rich. All of this is aided and abetted in Fantasy Island, while the fed does everything it can to encourage policies that keep average responsible people from getting a pay raise that merely keeps up with inflation.
These people just don’t consider the costs associated with the large house. That’s extra utilities wasted each month, having to furnish the place (big $$), clean house, etc. It makes just as much sense as driving a 3/4 pickup to tow a Uhaul trailer once every 5 years.
Also a lot higher taxes and insurance.
First mistake…building the home as an investment(He even talks about his parents buying and staying in the home to pay it off. Which is what my husband and I are doing..we are done with the buying stage of our life.)
Second mistake…The “Joneses” mentality. Did he build the house for himself or to impress the neighbors..Of course they like it…it makes there home, especially if less costly, a better attraction for someone who wants to live in that community.. Hey, buyers, you can live across from the “white elephant” in the community and for alot less…
Third…Hello, you “wasted” the inheritance on building a stupid house instead of recycling it into your own nest egg.. you should have diversified…
My husband and I have friends who subscribe to the bigger is better mentality..and you know what..when you have to sell that white elephant you will need a certain type of buyer to qualify for that loan…I told my husband when we bought I only wanted to spend a certain amount of money..as you go up the ladder of housing prices that amount at the top narrows down, like the top of a pyramid, how many buyers you can find to get that home.. A house you spent $750K on will require you to sell it for no less than $850K…that means a tax bill of $17K and insurance of $10K. So before the first mortgage payment you have $27K a year of expenses…GOOD LUCK!
Fourth..you learned nothing by example..your parents would have looked at that house and said..What do we need all this for?” Obviously he wasn’t the bright child..
The purpose of buying a house (and taking out a traditional, fixed loan) is not to “make money”, but to create a foundation whereby one will be able to live in a house the rest of their life. Equity gives one the power to buy another house if one needs to move. If someone happens to make money on geographical disparity (e.g., someone moving from CA to … say … Tennessee), then there’s a legitimate profit upon which one can gain a larger dwelling with the same affordability. But in most cases, it’s a zero-sum game. The problem is that the housing casino just shook out an enormous number of gamblers who now will not have the comfort of owning a home for the sake of longterm security. Most will not qualify for a decent, affordable loan for many years. And when they do - unless they are building a nestegg for a very large downpayment - they will be playing catch-up until they’re in a nursing home.
I bought my home in 2002. It may have been slightly overpriced at $250,000 - but it was affordable. It’s a good home. It’s a well-built OLD home. It’s modestly sized (about 1500 sq. ft), but appropriate for our needs. It recently appraised for $305,000. When I saw that, I laughed. It’s probably worth more than what I bought it for - I’d say MAYBE $275-$280, but it doesn’t matter. I sleep well at night. I don’t have to worry about what will happen if I lose my job. We have plenty of equity, and we’re adding equity every month. It never occured to us that we needed to refinance or treat our home like an ATM. It’s our home. And if we continue to make good decisions, no one can take it away. THAT’S peace of mind. I have a feeling a lot of FB’s would trade their European vacations and granite counters for just a little of what I have.
You don’t have granite counter tops! Oh, the horror!!!
But they drew the plans themselves!!
This guy is also coming to the conclusion that he has p**sed away his wife’s inheritance, which came from years of work and sacrifice by her father, and they’ll likely never see it again.
Ouch.
There’s probably something else this guy will never see again, but I won’t mention what it is;-)
Haw!
And I bet you’re right, too.
Would it be something that his wife has on her? Just need a clue.
Mulva.
Neil;
You clue is “Fishkind”
everyone is leaving south florida, duh! that is why “declining occupancy” is a reality. not even close to being a trend. and to mr. “fish”kind, please stop spreading the lies of hitting bottom. we are only in one year of a cycle that is going to take us to the bottom of the ocean.
Six months ago ‘ole Hank called the bottom and predicted that the market would be on the up swing by now. According to hank we should now be in the middle of a “flipping frenzy” selling each other plactic and cardboard boxes.
Plus if there’s a 36 month supply in some places, how can he even dream that we’ve hit bottom. It’s going to take a lot of price corrections to get back down to a 2 or 3 month supply. And a lot of years.
Florida may be facing more of a population crisis than anyone realizes. This would answer the “Where are the renters?” question.
It cost $1,664.00 to rent a 26 foot U-Haul truck, one way from W. Palm Beach to Charlotte, N.C. It cost $159.00 to go the opposite way. The demographic that moves themselves with a U- Haul is the lower income working guy. It looks like they are bailing out of Palm Beach County. There go your renters.
The population of Florida grew by a little over 400K in 2005. 2006 preliminary numbers show a 260K growth. There is talk of near zero growth in 2007.
“St. Louis, MO-based United Van Lines’ “2006 Migration Study” showed California and Florida may be perceived as inbound states but they are also listed as “balanced” states and actually lean toward being outbound. California had a 53.9 percent outbound rate while Florida’s was 51.2 percent.”
So United moved 1.2% more moves into Fla. than out and considers Florida as leaning toward more outward bound than inward bound.
Student enrolments are down in Palm Beach County by at least 2000 students according to the S. Florida Sun Sentinel, Feb 13, 2007, and possibly more. Actually, student enrollments were either well under estimates or below 2006 levels in most Florida Counties.
We priced ourselves out of people. Who can afford to live in PB County, or most S. Fla. and coastal Counties on median wage? As this thing drags on, Florida is at risk of essentially suffering a depression and I don’t see how the US as a whole can avoid a recession.
We are at the beginning of this train wreck. It’s hunker down time
you are spot-on about the average joe leaving FL. over the years the working class has had enough of begging for crumbs from the rich retirees, so they voted with their feet. and left.
let ‘ someone else ‘ be a waiter, cook, maid, gas reader, etc to all these old misers. BUT they will spend freely in the casinos.
G’head, mr kotter swing by any casino anytime; 95% seniors just shoveling money into those machines. that was the last straw to all the screeching seniors we had to endure every election year screaming ” DONT CUT MY SOCIAL SECURITYYYYYYY”. !!
they cant have it both ways. if you want some quality help, not the fly by night gypsies, or questionable immigrants, then its high time to pay a LIVING WAGE.
whats hilarious is the myth of everyone enjoying the fl amenities, rich n poor alike. oh really? the poor are too goldanged busy working 2 jobs to stay afloat to go lounge around the beaches, and forgettabout disney, no way thats affordable.
you just get tired of it all after awhile, then add the housing runup where its unlikely average joe will afford a home? why stick around.
Florida govt/rich people are in for a rude shock. happening right now. and well deserved.
greedy cheap bas*ards
Good rant and very accurate!
It’s getting like those Carribean Islands and Mexico where the locals work in restaurants they can’t afford to eat at, wash cars they can’t buy and clean hotels they can’t afford to stay in.
Florida has it’s natural beauty, but it’s not the end all and beat all. I have lost three receptionists in the last two years, 1 to Tennessee and 2 to S. Carolina, or the reverse…or N. Carolina, I forget. One just left Friday.
I know I lost three employees that moved out of Fla, plus many acquiantences.
It used to be cheap to live here. Not anymore. Looking ahead, the cycle will simply repeat itself like it has in California, Vegas etc.
Good info on migration rates. Thx for bringing it here. I enjoy these kind of statistics.
http://www.unitedvanlines.com/mover/united-newsroom/press-releases/2007/2006-united-migration-study-04-07.htm
The only bright spot I can see for places like Florida is foreign money - I know a friend from the UK who wants to buy here in AZ and I tell him to wait, and wait. He’ll come out again in May for a closer look. (Still much too early.)
Az;
Good link.
I agree, I think foreign money will be part of the cycle. I recall when the dollar was creaming the pound, I bought 3 condo’s on I drive for 20K each. They were in a weekly rental complex that looks like a hotel. I bought them from a Brit who was getting killed by the exchange rate.
Tell your friend to wait. Good advice. In fact, everyone should wait unless you come across a no brainer. I did two flips in the last 3 mos, both serious no brainers.
If sales ar down 60% over 2005, than that means 40% are being sold. There are still sales being made. The buyer has to be Golden and the house has to be waaay below market.
But, I know my market, Orlando, like the back of my hand. I wouldn’t buy in Tampa. I don’t know the market. If you don’t know the market, do not buy anything now.
I moved from Los Angeles to Tampa in 1980. Even then, United Van Lines told me more people had been moving
out of California for years. Of course this didn’t keep prices
and population from rising dramatically in California until
1980 and afterwards. So I’m not sure what these statistics prove.
When I moved to California I was right out of college and
put all my belongings in my car trunk. Similarly, my daughter
moved from Oregon to Tampa and mailed what little she
had.No furniture. And then there are the illegals who probably don’t use United Van Lines !
By the way, I never regretted moving to Florida from California. Weather is just as nice. Beaches are infinitely
better. House prices are half as much or less (still.)
And no state income tax for all 27 years !
I don’t agree that the weather in FL is as nice as CA. Its way to hot and humid in FL in the summer.
Billo;
Don’t get me wrong. I love Florida. I hate that it’s being screwed up.
The moving stats mean less people with money are moving here. What is our economy based on? Disney and retirees?
Suggestion. I like the Gulf, especially Clearwater and south. Wouldn’t it be cool to pick up one of those old motels, that were built in the 50’s and rent the rooms seasonally? They did tear some down to build condos that will never be built, but there are still alot there.
I am going to take a Clearwater weekend and ck it out.
The Gulf is pretty. The state is great. As usually a**holes screw thingd up.
Darth,
The problem with those beachfront motels is the red tide.
I had a coworker who had decided that maybe Clearwater was a good choice to retire to.
Took the family there on a weeks vacation-just in time for red tide.First day was cool, then the tide rolled in.Coughing and throat irritation was so bad they left early-never to return.They seem to think that our East side ocean is a better deal these days! Too bad so many motels here have been torn down too.
So true. A co-worker of mine bought into this idea. He bought a larger home since, “20% appreciation on a larger number is, after all, a larger number.”
Oops.
“Karen Allen from North Loxahatchee, bought her quarter-acre lot in 2005 for $86,000, according to records on the St. Lucie County Property Appraiser’s Office Web site. Allen said…a city attorney told her by phone that the city appraised her land at $55,000.”
My guess is that the tax assessor still has it at $86,000 or even higher. Funny how gov’t has different standards depending on whether they are taxing or buying.
“My guess is that the tax assessor still has it at $86,000 or even higher. Funny how gov’t has different standards depending on whether they are taxing or buying.”
The tax assessor might even have it assessed at a higher value. This is an interesting situation here. People can no longer get for their property what it is assessed at, yet they are paying taxes on that high assessed value. However, the gov seems to want to buy at what they maybe could get for it. Wow.
I always laugh at people who tell me their home is worth so much according to the tax assessor. After my hilarity dies down I explain that number has nothing to do with reality and that it’s actually in their best interest for the number to be as low as possible as that’s what their taxes are set on, not what they could get if they sold their house. And then the little light comes on…
I know of Dumpy lots in the middle of nowhere that are county appraised at 47k and the people are trying to get 8k for and can’t sell them.
I’ve got a friend who’s trailer just appraised this year for 160k. He told me if someone would offer him 75k he’d be thrilled and ” Run with the Money !”
So in essense Marion County’s tax rate is about 7% on houses and 15% + on land right now.
WoooooooooooW !
I am very curious at what point land is the thing to start buying. Seems like land will drop much faster than houses. Definately going to be looking for land during the recession/depression.
“But now several property owners along Becker, including many who bought at the height of the real estate boom, are resisting the city’s offers.”
Ahhhh! There is a wrinkle I didn’t think of — the effect of eminent domain for public projects! The government is required to pay fair market value, but if the value has dropped, people aren’t going to like that.
It could be a short-term issue, as in a year or two state and local governments won’t be able to afford public projects. But if they can — if someone buys more T-bonds and a boatload of public money arrives from DC — I could see the FBs screaming “pick me!” when the planners are deciding whose neighborhood to push the highway through.
They’re using eminent domain so they can build roads to neighborhoods that will never exist. So people that do not live in the neighborhoods that will never exist can get to strip malls that don’t pay enough to buy the houses that would be built if people could afford the houses that will never be built.
Good one.
“as in a year or two state and local governments won’t be able to afford public projects.”
I’ve been trying to ask about this but my posts get eaten. Is anyone seeing any fiscal disruption in the cities/counties yet from all this? My company deals in local govt projects. And things are slow.
Our business hit a wall in the past month and all we do is local governments across the nation. We are down about 60%.
“We are down about 60%.”
How many months can you do that? One way I know this things is still going down is that many people have yet to realize just how extensive this whole thing will be. It will probably effect every component of our economy. Even people think they are safe are going to be hit.
The co I work for is not leveraged at all, it’s just pay-go, but I wouldn’t be surprised to get laid off. Might be the best thing that ever happened to me. I have savings no debt & a paid off house and car. If I never see another local govt RFP again it would be too soon.
You make adjustments. But the real trick is to keep costs low during the good times. No debt. And always plan for the bad times.
Indiana is having a tax revolt. People are furious about tax increases here. Public officials are under incredible pressures. Most of this is because the tax base is not growing fast enough to support spending plans. I can only see things getting worse if property values remain negative or flat.
Much of the problem stems from the IN Supreme Court decision from five years ago that required property taxes to be assessed based on fair market value. Many folks who had been paying based upon artificially low valuations that were in many cases 30 years out of date suddenly saw 200% or more jumps on their tax bills. Not surprisingly, many people were not at all amused to open their tax bills during the past couple of years.
As is the case with surrounding states, the population is static or decreasing while simultaneously aging (brain drain is a big topic) and the industrial base has been hollowing out for over 20 years with nothing to replace it.
About the best thing the state has going for it is access to a lot of water which will become more important as the southwest is already past its carrying capacity and now even the southeast is experiencing a severe drought. Who would’ve thought that the availability of plain old H2O could be an economic lifeline.
Montana;
In Florida the State and virtually all local governments are crying about reduced tax revenues and having to possibly cut services, fire, police etc.
What happened was that as assessments went up and tax revenue went up, they simply expanded government and looked for ways to spend money. There is this little community near Orlando that built this elaborate sidewalk system with pedestrian bridges over roads, a bike path, new fancy street lights, etc. It’s a small example but they had money out the butt.
Now as assessments are declining, so is tax revenue and they can’t fund the bloated government they built in the past 3 years.
How about looking at this years projected revenue and living within that number. Their answer is that we’ll have to raise taxes or cut services.
Poor planning on their part becomes a taxpayer expense.
and of course the services that govt threatens to cut first are the essentials, like police, fire, etc. , as a scare tactic.
even though i live in ca I read the tampa trib online to keep up with local news, as my ex wife has my son there.
i recall the tampa mayor threatening to cut police if her budget plan wasnt approved. looked like a tantrum to me.
yeah, why not cut back on all the non essentials first, like the free county preg clinics?
parks & rec supervisor slackers napping in their trucks?
and other obvious BS !?
naturally all affected depts will scream bloody murder about how their turf is so necessary but hey if you cant get a cop or a fireman when needed, because the allocated funds were “borrowed” to pay for the channelside /ybor area & empty trolley cars, well … all else just pales in comparison.
You are right on, my friend.
Nothing left to say, you said it all!!
In our paper today in NE Ohio they were talking about people in gov taking kickbacks to look the other way when bridges are painted, and not report the fact that they weren’t scraped and primed properly before repainting. Apparently it’s a safety issue, because this causes them to rust and deteriorate at a faster rate.
However, there remains a 36-month inventory of homes for sale in Lee County
“‘We’re at the bottom of the housing cycle, but it’s going to be long and flat, I’m afraid,’ he said.”
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36 month supply and you will be flat - No way! Supply and Demand buddy - more lies by the REIC.
This guy has been wrong about everything for years. Years! I wonder what they pay him?
–
That is what cements a reputation! It has to be earned over years.
Jas
This has been one of the more frustrating aspects of the bubble/bust. Watching people make big bucks to mislead or be just plain ignorant. I don’t get it.
“Lee County is especially overbuilt with houses, Fishkind said”
Thanks for stating the obvious. Here’s a grand for your trouble.
P- Fishkind has been “at bottom” for two years as I recall. Guess he is now writing reports with his crysatl ball clearing up. What an asshat!
“Southwest Florida has reached the bottom of its housing slump, but a significant turnaround may take some time. That’s the message economist Henry Fishkind delivered in Fort Myers on Thursday afternoon.”
That’s the stupidest last name ever. LOL. And his prediction is pretty fishy at best. He must have multiple “investment” properties to unload.
Definitely a candidate for a trout.
He and Snaith are a true pair of deuces. When intellectual captivity is confused with scholarship, it’s no wonder that young people in this country want to play pro sports or be the next American Idol.
“He and Snaith are a true pair of deuces.”
I agree, but just wait until “saneposter” shows up and accuses you of huffing glue for saying that.
Back in July 2007, Hank claimed that the bottom had already passed. He was quoted as saying the absolutely absurd statement, “Florida will ride out … better than most other places.”
This is from the Florida Association of Realtors®:
http://www.floridarealtors.org/NewsAndEvents/n1-072607.cfm
Hank Fishkind: Other economists wrong – housing on slow upswing
ORLANDO, Fla. – July 26, 2007 – Economist Hank Fishkind calls other economists’ dire warnings and negative news about the housing market overblown, and says that, outside of Miami’s condominium market, the state’s housing markets hit bottom months ago and are now on a slow return to normalcy.
Fishkind, speaking Tuesday on his radio talk show, pointed to recent stories released by respected economists. Last Friday, for example, Bloomberg news published a story with an ominous headline – “Miami condo glut pushes Florida’s economy to brink of recession.” It quoted Moody’s/Economy.com’s Mark Zandi who predicted Miami condo price drops as much as 30 percent and a state recession perhaps by October.
“There is no doubt that the Miami condominium market is severely overbuilt, and that there will be sharp price drops and massive defaults,” says Fishkind. “But, this is no surprise to anyone who has followed this market.” But, he adds, “It is also important to note that Florida’s housing markets, outside of Miami’s condo market, have hit bottom months ago. The closing volume for new and for existing homes has stabilized.”
Fishkind doesn’t predict a huge upswing in closings, but “they are no longer declining. Therefore, we have already seen the worst for this cycle. There is no evidence of sharp price drops anywhere in the state, and there is no reason to expect any such drops outside of Miami condos. Population growth is holding up well as the state continues to attract large volumes of retirees and working families looking for jobs.”
Fishkind says that rising gas prices could impact consumer spending more than expected, but he calls that a nationwide problem, one that “Florida will ride out … better than most other places.”
Nice!!
I am going to forward this to him and the reporter who rant the piece today. I will be waiting for their response.
FIshking is an idiot, just like Snaith. They can both eat their housing souffles.
Yup, and here is a Fishkind quote from Jan 2007 saying the market bottomed in 2006!!!!!LOL…:
“”As the 2007 Real Estate Index Forecast report indicates, Florida’s housing markets bottomed out in 2006 across most of the state,” stated Fishkind.”"
We should all blast emails to this clown and the organization he works for…..
It’s called intellectual dishonesty and IMHO it’s worse than a fake orgasm.
Apparently too much.
“Some panelists acknowledged the pain that has accompanied the housing slump. ‘I know countless people in business who are just trying to get through,’ said Blake Gable, VP of Naples developer Barron Collier Cos. ‘For the next 12 to 18 months it’s more about surviving than growing.’”
I’d bet on Barron Collier Cos. getting through since they own a good part of Collier County (no accident, named after the same guy) and their basis in land is about twenty cents an acre. Lee County is totally screwed, but the responses to this article were interesting: “We were the first down; we’ll be the first up.” (so said the people on the Titanic) and “Another economist calling the bottom. Sigh.”
“We were the first down; we’ll be the first up.” (so said the people on the Titanic) and “Another economist calling the bottom. Sigh.”
I’m sure the first down on the Titanic were the first up. The gases built up in their bodies first and then they floated right to the top. Lot of good it did them.
–
“‘I have personal angst,’ Elliott says. ‘Yes, I built this fantastic house. My wife loves it. Everybody in the neighborhood thinks it’s great.’”
“But it was a house built for appreciation. Now that prices are falling, he wishes he’d built something far more modest.”
House you live in is a pure expense, you dumbkoff (dumbo). You should only spend what you can afford like when you buy a car or furniture.
False beliefs have their consequences.
Jas
‘…we looked for an increase in rental occupancies after all those people lost their homes. We didn’t find it.’”
“Then he realized that credit reports took a nosedive after foreclosure. ‘When they’re foreclosed on, their FICO (credit) scores are screwed, and landlords take that seriously,’ Bates said, referring to investment-grade units. ‘They can’t rent.’”
“The question then becomes: Where have all these people gone? They can’t own a home and they can’t rent. That’s one of the major dilemmas of the housing crash of 2007.”
“‘They’re doubling up with friends and family,’ Bates theorized, ‘or else they’re exiting the locale.’”
————————————–
He’s over thinking this — my guess is some of these folks aren’t having too much trouble finding apartments. If a landlord has a unit he can’t rent, my guess is he’ll happily take a chance renting to someone who can afford $1,200 a month rent, but couldn’t swing $3,000 a month after their mortgage reset.
I managed apartments in DC for a couple years out of college — we could be choosier with the better stuff in nicer neighborhoods — and we were willing to take some chances in less attractive properties and neighborhoods. I’m sure there are some apartment complexes in Florida - and most everywhere - where a verifiable job and a certified check or cash for deposit and first month’s rent will do the trick, credit check be damned. Also - landlords realize this is simply a fact of life these days.
“The question then becomes: Where have all these people gone? They can’t own a home and they can’t rent. That’s one of the major dilemmas of the housing crash of 2007.”
“‘They’re doubling up with friends and family,’ Bates theorized, ‘or else they’re exiting the locale.’”
I’ll take theory #2. As posted in bits bucket, current U Haul rates for a 26′ truck, picking it up November 14th–
Sarasota to Raleigh $1908
Raleigh to Sarasota $294
A lot of them are renting off other people scrambling to get any money they can to help with the mortgage. They’re desperate and you won’t need a credit check, just fog a mirror.
where a verifiable job and a certified check or cash for deposit and first month’s rent will do the trick, credit check be damned.
When I had rental units, I never once ran a credit check on a prospective tenant. I called their employer as well as the previous landlord, and I asked the applicant for a year’s worth of receipts that were paid to former LL. (cash receipts or cancelled checks).
That’s how I verified payment history.
Most of our renters came through word of mouth, and we had pretty good luck with them. However, a foreclosure crisis was not occurring at the time. In these times I can see where a credit check would be advisable just to see how much credit card debt these people are carrying.
I agree. Especially in Florida right now where the amount of “vacant” homes/properties is staggering…homeowners want warm bodies to help pay the expenses of that home. condo or apartment..everyone knows there is a housing recession and certainly can take into account that on the credit report everything else is good except the foreclosure…these guys need to get into the real world….
Yeah - “credit check be damned” is over-stating it on my part — you’re right, a lot of other bad credit flags or sizeable CC debt would be a red flag. But, if someone had solid deposit money and means to pay, and I had multiple vacancies - my guess is that some landlords are less worried about forclosure status. Larger and more high-end operations are probably more particular — lower end and/or Mom and Pop operations less so.
Same here, and one more thing. Mention that you will come by on the first Monday of every month to pick up the rent check. Harder to stiff you if they know they’ll have to face you and you know quickly if you have a problem
The problem with “taking a chance” is that it can be very expensive and take a very long time to evict a non-paying or slow-paying tenant. The laws are really stacked against the landlord.
It’s an interesting thing in this post–foreclosed owners evicted from their homes, who can’t rent because their FICO scores are taken seriously by landlords, are missing in action. Now local governments are wondering where they went…doubling up, leaving? It’s been discussed here for a couple of years, but folks whose gov’t paychecks depend on local conditions, just never connect the dots to see what’s coming. The old business of doing forward projections of best and worst case outcomes seems to have been forgotten.
I’ve been waiting for another appearance from Fishkind, who called a bottom several months ago and now is calling another. This kind of feckless lapdog sunshine prognosticating is what passes for eminence among our local economists. Why can’t somebody report that he was wrong? Is it the audience? Next time I hear of a builder or realtor conference in southwest Florida, I’m going to go there and set up a vendor table to peddle pet rocks.
I know subdivision names are a pet peeve of mine, but I can’t be the only one laughing about a south Florida subdivision called “Seasons at Tradition.” Other than a short winter and various college football rituals, in this state we have neither seasons nor tradition. Perhaps the reference is a nod to hurricane season.
Or maybe it’s a nod to the miserable traffic and worse traffic seasons
‘This kind of feckless lapdog sunshine prognosticating is what passes for eminence among our local economists.’
OK. That’s just about the finest slap I’ve read in a while.
“The hike compensates for vacant units and foreclosures.”
“‘That’s not my fault. I’m doing what I’m supposed to do. I shouldn’t be expected to pay for everyone else,’ said Christine Geever, a condo owner.”
I hope this aspect of buying a condo, or in a HOA, really comes home to people. Yes, you ARE expected to pay for everyone else, that’s the risk you take buying a condo or even in an HOA.
People just don’t know what they’re doing. They don’t read the legal documents for the condo or HOA. Not that I blame them, those documents are thick and practically unreadable. But you have to know what the deal is and you won’t unless you read the documents, as unpalatable as that might be. And if you don’t want to read the documents, either don’t buy there, or be willing to take what comes if you do.
That is a perfect example of foolishness that people don’t read the documents. The purchase of a condo is a major purchase (one costing multiples of YEARLY earnings) with major monthly payments that are tied into the physical health of the community as well as the financial health of the community.
While they may be long and hard to read it would certainly be wise and prudent to devote a couple of hours to at least trying to read through one. At least it would help to raise a lot of questions…
My wife and I recently looked at a Condo within walking distance of Emory University in Atlanta. It was 99k for 1000 sq. ft. built on an ancient driving range near a regularly used (5-10 x a day) railroad line. I went through the 65 page document and fired off a list of questions to the Condo board prez (list of improvements made in the last ten years, assessments, minutes of the last 5 meetings, etc.). All of this was before I set foot in the condo!
In the end we chose not to buy. We are just not ready to lock into something for such a long time and feel that with so many Condos coming on line in Atlanta that prices will drop, even for such a low priced Condo…
Whenever I was trying to make an offer on a condo they said I couldn’t read the CC&R’s before making an offer. That never made sense to me since the person who owned the place didn’t even know what the HOA fees paid for. Also why doesn’t whoever is holding onto the property in foreclosure have to pay the HOA??? How come the bank is let out of that??
“…that’s the risk you take buying a condo or even in an HOA.”
Unfortunately the HOA is almost unavoidable in Palm Beach County. If you are willing to live in 1960’s and 1970’s housing or in the acreage…maybe.
I don’t like HOA’s or condo fees, but if I had to choose, I’d take an HOA. With a condo you’re all chipping in to repair the whole building, if there is not enough to cover it. An HOA has a little less than everyone has to cover in the joint ownership.
In California the HOA and Condo fees are the same thing. Though paying HOA for actual housing subdivisions seems really stupid to me. I work on these plans all day long and I just don’t get why someone would want to buy a house like this.
Too bad no one ever knows what the HOA actually goes towards.
I think it was about 8 months ago now that I reported that the condo my friends bought for 1.2M was now selling for 750K, if there were offers at all. The condo tower was only about 15%-20% occupado at the time and I have no idea how many were closed. There were a few knife catching RE agents around lowballing these units, which were about the only sales as I understand it. These units are probably at the 500K level about now, just a guess though. It is a real blood bath down there.
Should have added this was the Ft Myers area.
The benefit of the HOA, though, is that it’s far easier to dissolve or to vote down the unnecessary expenses. My HOA dues are $240 per year and mostly cover mowing grass and water for our park. That, and people in my neighborhood have been in their houses for a long time. There has been a bit of the HELOC virus, but it’s been a mild form, mostly showing up in the form of used cars or minivans.
There are good HOAs, no doubt, climber, not all are bad. But it depends on the folks who are part of the HOA, the board members, etc. That’s a lot of trust. And when you buy in a HOA, that doesn’t mean the people who were there when you bought will continue to be there. Sigh. Nothing stays the same for long, that’s why I always laugh at those who predict “things will be flat for a long time”. Never happens. Things either improve or deteriorate. In the one HOA where I lived, it was nice for a while and then things changed and deteriorated with new owners.
Well, you’re fortunate that you have a low-infrastructure community — sounds like you just have some common-area landscaping to deal with. Start getting into having guards at the gate, swimming, tennis, community center, playground, and that $240 a year turns into $240 a month pretty fast.
Palmetto;
Exactly! Condo buying is full of potential problems. I gaurantee her assoc. agreement spells it out. “Oh, you mean I gotta read something? Man, this is way tooo hard!”
Only buy a Condo in an established building, and read everything.
I’ve never had a bad condo experience and have owned and flipped many. Never did a “pre construction” buy. In a “normal” market, the condo developer has to “pre sell” a certain percentage of units, usually 20 or 30%, before the bank will proceed with funding. Usually these pre sales are priced below what the rest of the condos will sell for. So when “pre selling” was all the rage and prices were pumped up, it was an accident wating to happen.
Condos are the first to fall and in Fla., they are falling hard.
In theory, wouldn’t the condo have foreclosed on the non-paying units to recover the fees? Of course, this would reduce the prices of the units, but would mitigate monthly fee increases or assessments. It would seem they need to pick their poison.
“He’s grown to expect his home to provide more than simple shelter. He wants it to provide a return on his and his wife’s investment–preferably one that’s measured in double digits.”
Thanks for making me spit my coffee out this morning Ben! This guy is an absolute fool. How old is he? 21? Fact is that until 2002-2005 I’ve never seen double digit increases in property year over year.
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“To help make monthly mortgage payments totaling $4,000, he’s been stuck renting the units to tenants who make sporadic payments. He says that next month, he plans to cut his losses and stop paying the mortgages.”
We are only in the second inning of “Walk Away!” Forget about the current inventory, just watch the new inventory forced on the market.
Jas
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“‘We cover nine of the 10 markets in those foreclosure reports,’ Bates said, ‘and we looked for an increase in rental occupancies after all those people lost their homes. We didn’t find it.’”
Because they were empty and no one needed to move out and find a rental?
Jas
Apparently they didn’t factor in how many of these properties were owned by investors.
my thinking exactly
“‘It’s like musical chairs,’ said Chris Bates, sales and marketing director for RealFacts. ‘The music stopped, and everyone is left holding what they have.’”
This guy cant even get this right…
A bird in the hand is a penny saved.
Its a little late to close the barn door, the horses are the long pole in the tent.
Were headed for a train ride.
I love mixed metaphors; they can be hilarious.
“He’s grown to expect his home to provide more than simple shelter. He wants it to provide a return on his and his wife’s investment–preferably one that’s measured in double digits.”
The house as 401k, the house as college fund for children, the house as vacation fund, the house as emergency fund. Blah, blah, blah
Per Ben’s posts, a good swath of the country seems to have been under this delusion. So, we have inflation for everything not counted in the CPI–food, energy, medical costs, tuition, etc. And deflation for retirement dreams, investment schemes, college funding, etc.
This is where a lot of folks wake up and realize the future looks a lot poorer than it did 2 years ago.
I can remember when our kids started college, people asking me if we got a home equity loan for tuition. They looked at me like I was crazy, when I said no. I only know of myself and a couple friends who did not get equity loans to pay tuition. What I can’t figure out is, when these kids are done with college and these people are 50 and over, do they realize they basically just started a brand new mortgage that they’ll have to pay on for the next 15, 20 or 30 years. This is why a lot of them will never retire. They can’t.
You’re right Ghostwriter. Planning ahead meant no college debt for us or for our children. Of course, now that HELOCs have dried up, kids are turning to high interest private loans for college - ouch! They’ll be school debt slaves before they are old enough to become home debt slaves.
It’s another good investment scheme. I’ve seen bunches of them. The players for a few years are promoting the idea of using your house as leverage for more property or investments. It’s nothing new.
About 10 or so years back, someone wrote a book:
YOUR HOME IS YOUR RETIREMENT, or something to that effect.
He’s just following along.
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“A creditor group that owns more than $1 billion in senior notes and subordinated debt has hired law firm Akin Gump Strauss Hauer Feld to assess its rights in the event of a bankruptcy filing, TheStreet.com has learned.”
A bull market for lawyers and accountants (I am glad that my son chose a great career).
Jas
And I can state from personal experience that the law firm of Akin, Gump, et al will do a hell of a lot more than “assess the rights” of this group. By the time they’re through, the debtor will wish they’d never been born. And the law firm will take down around 500K or more in fees.
Are they saying they weren’t aware of their rights in a potential BK filing BEFORE they bought these notes?? That doesn’t make very good business sense does it??
No, of course they did. In a chapter 11 of any size there is usually a bondholder committee apart from the unsecured creditors committee. They hire a firm like Akin Gump to terrorize the debtor and leverage as much as they can out of their relatively small investment.
I’m speaking of vulture bond investors here.
Gotcha. Thank you.
“they hire a firm like Akin Gump to terrorize the debtor . . .”
And Weil Gotshal makes Akin look a bunch of teddy bears in these things.
LOL. Yes they do but Akin is quickly catching up.
I’ve worked with both of them many times.
Everyone on this board needs to realize that the housing market can be saved very easily. If realtors would just start using more balloons the crisis could end immediately. It is just so simple.
One day recently I saw a realtor balloon that had “x”’s and “o”’s on it.
kissy kissy hug-hug
pressboardbox – I can’t stop laughing! I live in Flushing, NY about two years ago they tore down a single family home across the street from where I live and built what appears to be a six unit condo. It took them forever to complete the work, they seemed to be shut down every week for violations and you never saw the same work crew there. The block consists mainly of modest townhouses or attached single family homes. Right on the corner is a car wash. When the realtor sign went up I went on line to see what they were asking for these units - $599,000! Needless to say the entire building is still empty but the balloons in front keep multiplying.
There’s a place like that in south Tampa, near the air force base–townhouses across from a near-empty strip mall and a Circle K. They took forever to build, have metal bars protecting the first-floor windows, and were priced at $729,000 when they finally were finished. I kid you not, one day I drove by there and saw a gleaming black late-model Mercedes, as well as a spotless black BMW, parked in contrived positions out front, as if to advertise that living across from a Circle K signified the endlessly luxurious possibilities of the sexy “Florida lifestyle.” The cars are gone now, replaced by perpetual open house signs and a glamour photo of the blonde realtor now in charge of selling this monstrosity.
Maybe the cars were blow up balloons too. You know, like the blow up santa and reindeer.
Hey, what an idea for a business!!
Buy luxury cars and rent them to Realtors to park in front of the s**tbox properties.
What a genius!! At times I even amaze myself.
Nah, forget the balloons. We need cupcakes!
Personally, I’m up for roast squirrel. A little redeye gravy, some fired potatoes. I can’t say I’d buy a house, but I’d damn sure take a look.
Everyone on this board needs to realize that the housing market can be saved very easily. If realtors would just start using more balloons the crisis could end immediately. It is just so simple.
Isn’t there enough hot air already?
Does any one feel that the bust is really starting to build like a huge snow ball lately? I do.
I was watching CNBC Thursday morning and Mark Haynes was interviewing the CEO of McGraw Hill the parent company of Standard and Poors. After a congenial first few minutes, Mark ambushed the guy from McGraw(also named McGraw) and pointedly asked him, why they gave all these dubiuos home lenders AA ratings to which the McGraw guy stammered his way to a half assed explanation, it was great-let the finger pointing and blame game begin!
Also I read on the front page of the Orange County newspaper that OC median house prices from June to sept are down 70,000.00-it even shocked me. Oh where oh where is Mr. Watts(or should I say Mr. 15% is in the bag)? he is conspicuos by his absence.
Mean while every body is now talking about and buying into the bust.
As Anthony Michael Hall said in Sixteen Candles-”This is starting to get good”.
“‘They’re doubling up with friends and family,’ Bates theorized, ‘or else they’re exiting the locale.’”
Oh yes, the shadow market inventory of single family homes. An apartment owner I know in Sacramento was wondering about his slighlty declining occupancy in the last 12 months. It turns out that the subdivision next door has 163 houses with 701 bedrooms. There are only 223 occupants (31% of the houses are vacant, stuck flippers). Eventualy, all those bedrooms could hold a person, so today, the bedroom occupancy is 32% (yes 78% vacant). The apartment markets in some bubble areas will continue to decline for several years, even if there is no recession.
I’ve said it before but I’m seeing “For Rent” signs around Boston that I’ve never seen in 30 years. Some are regular apartment complexes, two family houses and some are single family.
I’m not sure what this change means but I doubt its a good thing for RE around here. Oh, except for renters.
My mom reports the same sort of thing in Pennsylvania. She’s also noticing that houses that have been for sale for many months are still for sale. And they’re also for rent.
Talk about tenant-bait. Nothing like moving into a house that the landlord wants to sell out from under you.
In Tampa, the rental market is awash in properties. The complex I am moving out of in three weeks has at least 1/4 of the units vacant, and they are advertising on Craiglist some of the funniest stuff I’ve ever read: “Luxury living in 20 year old apts”. The good news is that’s it’s easy to find a parking spot.
Stocks are getting hammered because of high oil prices.
Bernanke, you shouldn’t have listened to Cramer and cut rates. He has no idea.
Would also like to add that high oil prices is not going to do a thing to help with housing.
is paying a “financial advisor” 1% worth it ?
not when you consider the load and annuity craaaap they push
HA HA HA HA HA!
Thanks, Ben, for a great laugh this morning! I nearly spit out my coffee on my computer keyboard.
It boggles my mind that someone takes a notoriously risky speculative investment–the “swampland in Florida” that’s been the butt of jokes for 70 years–and isn’t prepared to lose money.
Having never lived in a HOA can someone explain this? Why is the bank/lender/note holder not liable for the HOA dues? Can the HOA association put a lien on the unit- thus recoup their dues at a later sale? Or is the money other owners have to pay lost forever?
“Sluggish sales and high foreclosure rates are causing higher bills for some condo owners. Residents at the Uptown Place condos in downtown Orlando said their monthly association fees have gone up $150 to nearly $450 a month. They have also been asked to pay an additional $689 for emergencies.”
The remaining owners are stuck with it. Also, if there are any special assessments, say money to settle a legal claim, everyone has to pay.
I once successfully was awarded a judgment against an HOA (that I didn’t live in! I’ve never lived under the rule of an HOA). They neglected to have proper liability insurance, so everyone on the 20-parcel development had to pitch in to pay the judgement. HA!
Read a great article about Banks now going after people’s other assets if they are getting foreclosed on. In Florida your homestead property is protected, however if a foreclosure is done and a balance is owed to the bank they can lien your other properties. So if you foreclose on property A but own property B in NC they can lien that property with the balance…
there are a lot of nuances to the ability of the lender to obtain a deficiency judgement. in many states, the lender has no recourse on a purchase money mortgage. also, usually in order to pursue a deficiency judgement the lender must do a judicial foreclosure, which takes more time and costs more money. if the lender can go this route, usually the homedebtor then files bankrupcty. so additional costs to lender to collect on deficiency judgement.
Reuven, in your judgement against a HOA, were the homeowners aware of your suit and did you collect from each individually? The reason why I ask, is that I won a small claims judgment against my homeowner’s association of $5,000 plus fees. The HOA never notified the homeowners of my suit. This was over an insurance claim that the HOA’s insurance company refused to pay. The insurance company finally made up the $5,000 difference. However, the HOA ran up $10,000 in costs to fight my suit and then took the funds from our reserve account. I attempted to explain to some homeowners what was happening and their eyes just glazed over. They either could not understand what I was saying or didn’t care.
This was a very small development. 20 5-acre lots, only 5 of which were built yet. I had NO IDEA why there was an “HOA” and an “Architectural Review Board” in the first place. There was no common grounds, other than a swale that probably needed cleaning once/year. A much simpler legal arrangement than an HOA could have taken care of that.
They had no liabiity insurance! So when they had to pay me my $1000, basically everyone got a “Special Assessment” bill for $50.
Since it was a small group, everyone knew that it was because of a comment their esteemed HOA president made to a prospective buyer (about how he didn’t want “Rich NY Jews” moving in) that got them in trouble.
“Having never lived in a HOA can someone explain this? Why is the bank/lender/note holder not liable for the HOA dues?”
I’ve never lived in a HOA, but from what I’ve read, the HOA rules are written in favor of lenders - if they weren’t, the lenders wouldn’t lend, and the project would never get off the ground. One more reason why I’ve always bought single family detatched residences. This game is getting interesting, and it looks like we’re only in the top of the 4th inning (dumb lending finally ended in the bottom of the 3rd in July/August). Just think how much popcorn we’ll go thru if we go extra innings.
Got diversified assets?
In Florida it’s hard to find even single-family-detached homes w/o an HOA! Even in non-gated communities. Orange County, for example, *mandates* HOAs for all new developments, in an attempt to keep county code enforcement costs low.
You either have to buy an older home, or buy “acreage” outside a development to escape this.
If its true that a bank doesnt have to pay the HOA fees in a foreclosed condo, I don’t think I will ever look into buying a condo again. That is truly insane.
LM;
The owner, whoever it is Bank, Lender etc is liable. If the property is in foreclosure, the Bank knows this and drags its feet. Technically the person being foreclosed on is the owner and owes the money until the date the Bank actually takes possesion.
If it takes a year, the other owners have to pony up, as it’s very unlikely the foreclosee will pay anything, if you can find him.
The Bank will take it’s time. Eventually, since most banks are only servicing the debt for Fannie Mae or someone else, they are obligated to foreclose. If the Lender is not a Chartered Bank, the rules are differant and they could, in some cases simply never foreclose.
The other owners have to pay whatever the shortfall is.
Read the documents!! Hire a lawyer to read them!! It’s worth the money!!
11 AM, Dow down over 200.
We’re quickly rolling down to the post-rate cut pump area.
A very good reason to lower rates again. Then they can just keep doing that to keep the DOW at above 14,000.
I know it wouldn’t the same percentage decline, but if would be great if the Dow dropped 500 on the anniversary.
Bernanke cut rates. I think that has a lot to do with the decline because of the falling dollar. He needs to jack rates back up 50 basis points.
I’ll see you fifty and raise you another fifty, Tom.
I agree… It is so nice to see that Bernanke and his gang made a mistake the first time they tried. That will teach them not to play with fire again. They will not have the guts to make any major move for a long time. That will be good for the working class people because the economy will improve on its own if these jokers don’t mess with it. Such fools they are. 50 basis points, indeed! They thought they were gods.
And treasury people shouldn’t get involved either. There is evidence that tax payer’s money has been spent to help out the greedy bankers. This is from yesterday’s Wall St Journal:
At first, some bank representatives were hesitant to get involved, saying they didn’t see a need to participate if they didn’t have exposure to SIVs, according to the people who attended. But Treasury officials stressed that even if the banks didn’t have direct exposure to SIV assets, there was a broader risk that would eventually filter down to everyone, including those firms.
At least one bank representative suggested that Treasury step in with some money to help bail out the firms, the people who attended say. Mr. Steel told the group that wasn’t an option: Treasury would only back a private-sector, market-based solution. “We bought the sandwiches, and that’s it,” Mr. Steel told those assembled.
See, they bought sandwiches for bankers. Now that is tax payers’ money. Congress should investigate how much was spent on sandwiches.
“I think that has a lot to do with the decline because of the falling dollar.”
Not to mention the record dollar-denominated price of oil!
Reminds of a boxer trying to get up from the mat.
williemakeit?
sigh, I don’t know why the market doesn’t give up its pretense of being anything but a casino or a horse race. When the opening bell is sounded, they oughta have a couple of guys calling it like a horse race.
Or maybe a boxing match. It’s like the boxer wants to thrown in the towel, but every time he tries, the trainer gives him a whiff of ammonia and shoves him back into the ring.
13,700. Do I hear 13,600?
“anything but a casino or a horse race.” And those earning reports and earnings per share, and their projected earnings are from con men in pin stripe suits
Bettywont
“There is a real incentive for both lenders and borrowers alike to do a workout and avoid foreclosure. Lenders are not good at being homeowners,” says Fred Witt, national director, real-estate tax services, at Deloitte Tax LLP, in Phoenix.
This is secondary to the fact that lenders haven’t been very good at being lenders either.
“Advisers say even millionaire clients aren’t immune to fallout from current real-estate market woes.”
My grandmother’s first husband lost her family fortune with over-leveraged real estate investments in the 1920’s. After real estate collapsed, the family moved from a grand mansion on the hill (fully staffed with servants) to a row house with an open sewer in the basement.
I bet the stats next year show a lot less millionaires. I’m sure many wanted to double and triple their wealth and are in this housing mess up to their greenback eyeballs.
“‘It’s like musical chairs,’ said Chris Bates, sales and marketing director for RealFacts. ‘The music stopped, and everyone is left holding what they have.’”
And what they are holding is sh!t. Game over.
The trading up phenomenon pre-dates the McMansion thing. Remember that under prior tax law, every time one moved one had to pay capital gains taxes on the sale UNLESS a house that cost at least as much was purchased. “Successful” people frequently bought their largest house just before becoming empty nesters back in the day.
The thing is, the change in the tax law SHOULD HAVE discouraged this behavior, by allowing people to downsize the cost of their house virtually tax free (up to a $500K gain per couple). Instead, the McMansion exploded. So much for the effect of economic incentives on behavior.
Not everybody missed their opportunity…
Our $500k tax-free windfall, and the idea that to “win” meant we had to leave the city of angles, was not lost on us, or many other Californiacators that have descended upon the other 49 states, and many locales in the Golden State, as well.
I could never understand why people bought up when it was so favorable to buy down . I still think the flip property every two year plan was the one that was being pitched by the REIC .
When the feds changed the tax law, I fully thought that would be the end of high-priced homes. I figured nearly everyone would buy down and invest or stash their equity elsewhere like we were going to do. Boy was I wrong.
But we went ahead anyway. A couple of houses later, each time buying lower and stashing the extra from the prior sale, we’re now mortgage-free.
Just an offtopic note that I thought we should consider.
This it the (begining of the) END OF THE AFFORDABILITY CRISIS.. not the bubble bursting.
In so many ways the real crisis is ending.
If movement to normalcy relates to an ‘ending’, I agree. And the END of the affordibility crisis will occur when the average joe can afford the average house - might be in 10 years, though.
As Churchil would say we are at the end of the begining not the begining of the end.
Its the flip side to all the BS we have been forced to eat for about a decade or so.
Perhaps savings, hard work, manufacturing will mean something again (vs speculating).
Houses will be places to live and we will be concerned about community (more than things and bling).
More inventory is available is a good thing. More choices for everyone.
Its the positive side to all of this.
Hard work is a blessing from God.
“‘We’ve kind of oversold ourselves on the need for our homes to be investments,’ he says reflectively.”
And the light bulb finally goes on in his head.
Look, you bought a ice cream cone at Cold Stone ice cream parlor for $5.00 you drive 6 miles up the road a guy has a sign ice cream cones $2.00, Cold Stone is not going to refund you $3.00.
This notion why should i be offered less for my home or land then i paid for it is just plain nuts. It is called the market place as it apply’s today, all may change in a day or two 7 yrs from now who knows you took a chance it didn’t work out, you are not entitled to get paid back or even break even on anything you buy, all you are entitled to is the opportunity to exlpore if what you are buying is a good deal to you not someone else?
But at least your assets (after a 6-mile car ride) would have a high degree of liquidity!
“But at least your assets (after a 6-mile car ride) would have a high degree of liquidity!”
HA! Good one!
From the Newsweek article:
“This summer New York Times columnist Michelle Slatalla described how she had begun checking the value of her Bay Area home (using sites like Zillow and Cyberhome) every few hours. In a recent two-month period, the Web suggested her home had lost $92,248 in value. “I really, really need every tiny bit of information I can get about managing my biggest investment,” Slatalla writes by way of justification–before consulting experts who tell her the sites aren’t very reliable and she’d be better off checking her home value only once a year.”
Wow, talk about obsessed over the value of your house. What a freak!!
Day trading mentality for homes.
“‘If they wanted to give me what I paid for it, at least I wouldn’t lose anything,’ Allen said. ‘But it’s really an insult to want to take my lot and give me less than what I paid for it.’”
WELCOME to Investing!!!!! Is that what you tell your stock broker when your stock goes south! ? What is this guaranteed BS these loones expect?
I feel the same way. When I enter a limit order for stock, my broker doesn’t send me an email saying, “Well, you know the last owner paid this much for it…” Yet the real estate agent I worked with would make such comments all the time.
Here is a real big reason not to sign a pre-construction contract on a new home in a collapsing real estate market.
“The action is an inconvenience for consumers who plan to move into Levitt homes and now are in limbo.”
“‘I’m up in the air,’ said Angelo Palermo, who’s waiting for his $380,000 house in Port St. Lucie to be finished. ‘This is a very bad situation.’”
“Levitt and Sons has temporarily stopped building houses as it tries to restructure its debt.”
Restructure debt?
That reminds of those hikers that get trapped under boulders and trees and have to saw their arms off to survive.
Got an email listing today from Celebration FL for a condo hotel they’re trying to sell units in. For ONLY $389,000 you too can own a 754sf unit with 1br/1ba and use it 170 days a year. That’s $516sf. You can buy a whole house or a condo for less than $200sf, some even now at $168sf. New units in Artisan park are reduced $100-150k. Someone is really delusional, because among the listings they sent were 3 new short sales and one new foreclosure, and all of them had MLS numbers that were 2 years old. Anyone in FL that would spend $516 sf for a place is definitely not in touch with reality.
‘He came to me with about $3 million’ just about four years ago, Charleton says.
‘What is the best way to make a small fortune in real estate?’
‘Start with a LARGE fortune.’
Did someone say “Extraordinary Popular Delusions and the Madness of Crowds?” Tulip Mania anyone?
I’m real big on attacking people who have money who made mistakes in the real estate market. Hmmph! Serves them right for having more money than I do!!! Gosh darn them