The Housing Bubble

The Sun Herald reports from Florida. “As Will Rogers once said, ‘In a real estate man’s eye, the most expensive part of the city is where he has a house to sell.’ The last couple of years have chastened even the most resolute espousers of that belief, however, as real estate prices have plummeted virtually everywhere. Nathan Tracy II, broker in Englewood, acknowledged there are a lot of midpriced homes languishing unsold in the Englewood housing market.”

“‘Part of that problem is there’s not a big discrepancy in price versus what you’re getting,’ he said. ‘Why pay $150,000 for a 1970s two-bedroom, two-bathroom house when you can pay $200,000 and get a brand new, three-bedroom, two bath house in East Englewood?’”

“North Port’s picture appears a bit dimmer, according to Tony Gustitus of Century 21 Almar Associates. ‘Last year, sales were off maybe 1 percent. We held our own all the way through the year. This year, we’re running out of ways to skew the numbers,’ Gustitus admitted.”

“North Port sells about 1,100 homes a year, Gustitus added, which is how the market has been for the last three to four years. ‘But it bothers me to say we’re down to 651 sales as of Nov. 8, year to date,’ he said. ‘We’re probably going to be off by around 40 percent this year.’”

The News Press from Florida. “Jack and Cindy Claus are trying to sell their five-bedroom, three-bath house in Gateway for $429,000. The bad news is they have plenty of competition as the real estate bubble deflates from 2005’s record-setting prices.”

“The Lee County Property Appraiser lists the value of their home at $349,900. Time may not be on their side, said real estate agent Jen Buffington. ‘Like all agents, I don’t want to be negative, we want to be positive as much as we can, but the truth remains, I can’t change that,’ Buffington said. ‘It’s still a declining market. And you know, I don’t see the bottom of the market anytime soon.’”

“Prices in Lee County peaked at $322,300 in December 2005. By October, the last month available, the price had fallen 26 percent to $239,300, according to the Florida Association of Realtors.”

“‘There is not one listing I have that anyone will walk away with any money on,’ she said. ‘They’ll break even or have to bring money to the table or it’s a short sale.’”

“‘I have a few hundred homes in the Gateway community that I take care of,’ said said Gateway resident Michael Hertog, owner of (a) landscaping company. ‘I guess I am for the first time starting to feel a little bit of the effect of the economy or real estate building falling apart.’”

“For example, he said, ‘I have several homes falling into foreclosure in the past month. I haven’t gotten payment.’ Also, he said, people who are still paying him are cutting back to bare essentials.”

“‘A lot of the properties are rental properties. I’m seeing the renters just disappearing and not paying their bills. Homes that are empty, not getting taken care of. I’m the last one that ever gets paid. I would respect them much more if they’d say, ‘I can’t afford your services anymore,’ he said.”

The St Petersburg Times from Florida. “No matter where you look in the Tampa Bay area, you’re sure to find them: Houses that have been on the market so long two hurricane seasons have come and gone. So long that babies have been conceived and born - and started walking.”

“So long that the ‘for sale’ sign seems a permanent part of the landscaping.”

“‘Price is the most important factor by far,’ says Poul Hornsleth, owner of a Gulfport real estate agency. ‘You can start high but it will turn into a stale listing, and you don’t want to get a stale listing.’”

“‘People need to understand that the market has gone back to 2004 and 2003 prices,’ says Bob Memoli, a Pasco County real estate agent. ‘If you don’t price that way, it’s just not going to move.’”

“On Sept. 7, Memoli listed a three-bedroom, two-bath house in New Port Richey for $199,900. Less than three weeks later, the seller had a contract, largely because she agreed to drop the price slightly and pick up part of the buyer’s closing costs.”

“‘She said, ‘I don’t want to leave this on the market six or nine months. I want to get on with my life,’ Memoli recalls. ‘She was realistic.’”

“It also helped that the woman, a retiree planning to downsize, had paid $125,000 for the house several years ago and had substantial equity.”

The Sun Sentinel from Florida. “What a good time it is in South Florida for renters. Rent is falling and renters have their pick of places to live.”

“An accidental landlord last year would have been called a real estate investor. But now that there are so few home buyers, many investors are renting their homes. The apartment rental professionals say the accidental landlords are a pretty aggressive group, too.”

“‘They’re competing with the [apartment] complexes even if it means they only get 50 percent of what it costs them to own that unit,’ said Jack McCabe of McCabe Research and Consulting, a Deerfield Beach firm that specializes in apartment market research. ‘You can rent a $325,000 or $400,000 house for $1,800.’”

“By comparison, the monthly payment — principal and interest, plus estimated taxes and insurance — on a $300,000, 30-year mortgage at 6 percent, would cost you $2,526.”

“‘In Boca and Wellington, the pressure is coming from investors who couldn’t sell single-family homes,’ said Cris Sullivan, senior VP of Gables Residential, which manages more than 5,000 apartment units in South Florida.”

“In fact, many complexes are offering freebies such as a month’s free rent. Add it up and overall, the cost of renting an apartment in South Florida is falling.”

“Rents in Fort Lauderdale in the third quarter of this year are down by 2.2 percent compared with last year. In Palm Beach County, the decline is 7.8 percent. ‘In a lot of the overbuilt markets, it’s better to be a renter than an owner,’ said Axiometrics President Ron Johnsey.”

“McCabe says he thinks renting is a ‘no-brainer,’ because rents are being held down by the market.”

“But that may not last. And building equity in a home will. ‘I think the issues are the same,’ said Certified Financial Planner Benjamin Tobias in Plantation. ‘Whether prices are high or low, you’re better off buying than renting.’”

The Press Register from Alabama. “Broker Randy Brooks said he never thought he’d see a house in foreclosure on Ono Island, but he’s got one listed in the mid-$600,000s. ‘The owner bought it for $895,000 in early 2005,’ he said. ‘And he was a Realtor who had to move out of state to make a living.’”

“Several of his clients expect to be ‘inundated’ with foreclosures after the first of the year, he said.”

“As of Nov. 20, there were at least 409 houses in the foreclosure filings, according to Jonathan Keith, an associate broker in Mobile who tracks the latest figures. About 25 to 30 percent of the 409 will actually go to foreclosure sale, he said.”

“‘That’s still a lot,’ he added. ‘It used to be 10 percent. But there are not as many investors willing to speculate or take as many risks.’”

“‘We’re not a hot spot,’ for foreclosures, said Lynn Sedberry of REMAX Advantage in Spanish Fort. ‘But we are seeing them where we never had them before, like Gulf Shores, Orange Beach and Foley. It’s the investment and resort home buyers. And a lot of them aren’t local.’”

“Brooks is working with more high-end homes in foreclosure than ever before, he said. One individual ‘bought a house on Bon Secour River for $922,000 in May 2005 and tried to flip it for $1.2 million. Then Hurricane Katrina hit.’ The house wasn’t damaged, but couldn’t be flipped, he said. ‘Now it’s on the market for $650,000.’”

“Condominium units in foreclosure are competing for buyers along with the almost 3,000 units listed for sale on the MLS. Prices have dropped considerably since the buying frenzy of 2004 and 2005.”

“For example, Brooks has a number of foreclosure condo units in Gulf Shores Plantation on Fort Morgan that sold for $370,000 two years ago, and today he has them listed for $145,000, he said.”

“‘I think we’ll continue to see this level of foreclosures for the next 12 months,’ Keith predicted. ‘After Katrina we had a such a push, roughly 12 to 20 percent in appreciation and a surge of high prices,’ he said. ‘Now folks can’t get those prices when they sell their home. The inventory has increased and sales have flattened.’”

“‘The last six months has been the slowest I’ve seen in my 40 years in this industry,’ said Ken Cramton, regional VP of HMC, Home Mortgage Co., in Fairhope. ‘There’s nothing under $250,000 in sale prices on the Eastern Shore and that has hurt activity. There are a few sales of homes in the $130s to $180s, but not many.’”

“Many homeowners facing foreclosure are in denial and don’t think they will lose their homes, Realtors said. Brooks said he has been dealing with a homeowner in a west Mobile subdivision who hasn’t made a mortgage payment since November 2004, but has filed lawsuits in an attempt to stay in the house.”

“‘All you can do is work with them,’ he said.”

The Daily Journal from Mississippi. “Just a year ago, machines and workmen seemed to be flattening every available square foot of ground around Oxford for new buildings. The most notable were condominium apartments slated for construction near the Square.”

“Lately, the hot real estate market in a growing college town has seen some cooling.”

“‘Oxford really experienced a housing boom over the last three years, especially, and now all of a sudden things have really slowed down,’ said Christy Knapp, VPof the Oxford-Lafayette County Economic Development Foundation. ‘I think that’s part of a national trend.’”

“‘Oxford’s market is softer than it was at the peak,’ said Harry Alexander, president of the North Central Mississippi Board of Realtors, ‘but…those years were the best years we’d ever had in history.’”

“One of the chilliest segments of Oxford’s market lately has been condominiums, which for a while were hot property for out-of-towners looking for a weekend getaway, parents whose children attend Ole Miss and, in some parts, students themselves.”

“‘When they started turning all these apartment complexes into condominiums, it kind of flooded the market,’ said Larry Butts, a real estate broker and developer. ‘I doubt if you’ll see anything more going up around the Square, at least until the economy turns around.’”

“The new optimism that has come with Ole Miss’ change of football coaches may help. ‘Whenever Ole Miss has an exciting, winning season or there is a lot of hope (about) an upcoming winning season, it has an impact on not only tourism … but also on the real estate market,’ Knapp said.”

“Alexander agreed. ‘I think with a rekindling of hope for the future on the football side of things, that will give that side of the market an uptick,’ he said. ‘How much? We’ll have to wait and see.’”

“‘People are shopping by comparison, so sellers are having to reduce their houses,’ said Tupelo real estate agent Brenda Estes. ‘We’ve got 1,290 houses on the market, and that’s a lot for the Northeast Mississippi area. Last year was 591 houses at this time.’”