Florida Speculators Didn’t Want To Miss Out On The Boom
The Orlando Sentinel reports from Florida. “Fewer than 1,000 homes were sold in the Orlando Regional Realtor Association’s core market in November — only the second time in nearly 11 years that the number has dipped below that threshold. The other instance was three months ago, in September, when sales in the core market totaled 970. The preliminary count of 963 sales in November was down nearly 48 percent from the same month a year ago, according to the association.”
“‘The continuing fall from record-high sales in 2005 is evident throughout the four-county metropolitan area and the region more generally.”
“‘It’s gotten a lot worse,’ said Ron Resch, president of Total Building Consultants and Inspectors Inc. ‘My business is off about 40 percent’ from a year ago.”
“The new-home side of his inspection business is in even worse shape, Resch said. ‘We usually have 30 to 40 in the system, as they progress’ from foundation work to final finishing and trim. ‘Right now, we’ve got four or five.’”
“The Orlando Realtors’ report for November showed that the core market’s local inventory remained above 26,000 properties for a fifth straight month. Using last month’s anemic sales total, that amounted to a 27-month supply of homes for sale — yet another record in that category.”
The Palm Beach Post. “Foreclosures in Palm Beach County and the Treasure Coast tripled in November compared with a year ago as the worst housing slump in nearly two decades continued to ravage the tri-county area.”
“In Palm Beach County, once one of the hottest real estate markets in the nation, 1,671 homeowners received foreclosure notices in November, according to the county clerk’s office.”
“‘People are desperate,’ said real estate analyst Jack McCabe, who has closely tracked the local decline. ‘A lot of people weren’t trying to buy a house over their means, but nevertheless they got caught up in this,’ he said. ‘Now they’re emptying their savings, but for a lot of people it makes sense to cut their losses.’”
“In Palm Beach County, there’s a four-year supply of homes for sale, according to Illustrated Properties Real Estate. That leaves foreclosure as the last unhappy option for squeezed homeowners, as climbing rates in the Treasure Coast show.”
The Daily Business Review. “Veronica Hearst, the widow of newspaper heir Randolph Apperson Hearst, is expected to close on a ‘deal’ in the next few days to save her 52-room Manalapan mansion from a $40 million foreclosure lawsuit, her public relations agent said Tuesday.”
“Hearst has until Jan. 22 to come up with a plan before Palm Beach Circuit Judge Jeffrey Winikoff decides whether lender New Stream Secured Capital, may foreclose on the estate bought by her husband for $29.87 million a few months before he died in 2000.”
“(An) agreement signed in January 2006 required Hearst to list the property for sale and provide a letter of intent to sell for no less than $40 million by Feb. 19, 2007. If the house didn’t sell by then, the lender would be authorized to reduce the listing price to $27 million. If it didn’t sell in another month, the price would be reduced by 5 percent every month until sold.”
“During the deposition, Carlton Fields attorney Alan Grunspan of Miami, who represents New Stream, asked her about an appraisal presented by New Stream that placed the value of her estate at $25 million. He asked if she recalled throwing the appraisal sheet across the room when it was shown to her.”
“‘It’s possible, but I don’t recall,’ she said.”
“Robert Fessler, who has several investments in Manalapan, offered about $20 million for the house around March, according to the deposition. When asked about the offer, Hearst said, ‘I don’t recall exactly, because if I recall I would’ve probably stepped into it and done it.’”
The Naples News. “As the number of foreclosures increases across the region and around the country, so does the popularity of a tool to dodge them: the short sale.”
“There were 1,764 foreclosures in Lee County in November, and the county is expected to break the record of more than 9,000 foreclosures by the end of the year. Many homeowners are turning to short sales as a way to avoid becoming one of those foreclosure statistics.”
“Wes Brodersen, president of EXIT Gulder Real Estate in Bonita Springs, said one of the frustrations with short sales is they take so long to complete. ‘Banks haven’t adjusted to the reality yet,’ he said. ‘An offer will land on someone’s desk and it moves and it moves and it moves until someone either approves it or turns it down. It can be frustrating for sellers and for buyers.’”
“Terry Dona, president and underwriter for Bonita Springs-based Metro Mortgage, said many foreclosures and short sales can be traced back to two things: unscrupulous lenders and buyers who had little money but didn’t want to miss out on the boom.”
“‘You see it in places like Lehigh Acres, Golden Gate Estates and Cape Coral in neighborhoods where families live and lots of speculating was going on at the height of the boom in 2004 and 2005,’ she said.”
The Herald Tribune. “Two of Sarasota’s most notorious bad boys are about to lose millions of dollars in real estate that they accumulated during the past 10 years.”
“On Thursday, a larger auction, consisting of 45 homes, condos and building lots, will take place at 7 p.m.. The properties formerly belonged to Daniel Prewett, a tax felon who is awaiting extradition from an Italian jail on money laundering charges connected to a cocaine deal.”
“Prewett, who ran a Jackson Hewitt franchise in Sarasota for 15 years, convinced many of his well-heeled clients to participate in real estate joint ventures. When Prewett was arrested in October 2006, clients…filed a series of lawsuits demanding repayment of $19 million.”
“Bankers piled on by filing foreclosure suits of their own, requesting more than $14 million.”
“In effort to satisfy a portion of these claims, Prewett’s portfolio of 45 remaining properties will be sold at public auction by Fisher Auction Co., a Fort Lauderdale-based auction house.”
“Included in the mix are 14 single-family homes found from Chipley to Sarasota, 10 condo units from Osprey to Siesta Key, 14 building lots and seven unfinished homes in Sarasota and North Port. Fisher’s Web site lists the total appraised value of the properties at $12.4 million.”
“Though that number is far less than what Prewett paid for the properties during the recent real estate boom, it is unlikely that auction proceeds will match appraised values. For example, the 11 building lots in North Port have appraised values of $27,000 to $38,000 per lot. But land is not selling for nearly that much these days.”
“‘Those assessments are based on 2006 sales, and sales have dropped off since then,’ said Dennis Black, a Port Charlotte appraisal instructor. ‘There are hundreds of building lots available for far less than those assessed amounts.’”
“North Port and neighboring Charlotte County, each with tens of thousands of vacant lots, have an estimated 1,200 abandoned construction sites, yet another problem arising from the collapse of the region’s real estate market.”
“Chief building official Jim Evetts said Charlotte County would need $4 million to $8 million to demolish the county’s backlog of abandoned sites. North Port’s response is ‘interesting,’ he said. But Evetts was wary of possible lawsuits the cleanup could prompt.”
“Meanwhile, crews across North Port are cleaning trash and flattening mounds of dirt in front of half-finished houses.”
“More than 80 of the homes on North Port’s abandoned list are from bankrupt St. Petersburg builder Construction Compliance Inc., a company that has been sued by dozens of jilted clients and owes millions of dollars.”
“And while work has started on some home sites, residents in other areas who have waited more than a year for progress are eager to see results. ‘I have not seen one single thing done,’ said Jacquie Baldelli, who has several abandoned job sites within two blocks of her home.”
“For the first time in at least a decade, Sarasota County educators expect they will end the school year with fewer students than last year. Students have been leaving this year at a faster pace than usual, with enrollment down by about 300 through November. By the end of the year, administrators project the district could lose another 300.”
“‘We are dipping further than we have ever dipped before,’ said Al Weidner, finance director for the school district.”
“School officials believe this year’s declining enrollment is fallout from the area’s stagnant housing market. They say families are leaving the area in droves because they can not find employment.”
“‘One family withdrew today, and they’re going back to Puerto Rico,’ said Diana Anderson, a registrar at Emma Booker Elementary. ‘They lost their job and lost their home. There’s a lot of that going on.’”
“The most drastic drops are in counties where the real estate market was hottest — making Sarasota ground zero. ‘They’re going back to the north, Chicago, Tennessee,’ said Bill Muth, principal of Ashton Elementary, which has lost about 30 students. ‘People feel like this is a good time to move because of everything going on here.’”
“‘The state of Florida has historically been growing,’ Weidner said. ‘Now, we seem to be going in the other direction.’”
The Coloradoan. “Federal regulators have delayed a final decision on the sale of Norlarco Credit Union in Fort Collins while it negotiates with creditors to try to stave off lawsuits.”
“At least 10 lawsuits have already been filed naming Norlarco as a defendant, claiming Norlarco ignored credit-worthiness when approving loans, many in Lehigh Acres on the western edge of the Everglades near Fort Myers, Fla.”
“Construction loans resulted in mounting delinquencies for Norlarco when the Florida housing bubble burst, prompting the National Credit Union Administration to seize control in July within weeks of the lawsuits hitting Florida courts.”
“Norlarco has just over 1,000 real estate construction loans worth more than $238 million in Florida, with much of that — up to $200 million, according to the Credit Union Journal — shared by other credit unions that joined in loan participation programs.”
Lenders closed by the Feds, bad deals involving drugs and phony appraisals. Abandoned construction sites that local governments are afraid to touch. Sure looks like the oil/RE bubble bust to me.
You know when Enron blew up I had a gut feeling that most of corporate America was being run the same way. But instead of everything becoming exposed during that debacle, the powers that be just doubled down. The amazing thing is that they succeeded for almost 6 years and made a killing. Of course if you don’t cash in your chips at the right time and just keep gambling you’ll eventually lose it all…
Right on and getting worse, not better. Take MLB as another example. Why can’t people, athletes, companies, govts play by the rules anymore? Are we so afraid of real work? Our society has deteriorated so far so fast that it is stunning. RE “investing” became another great example of our win at all costs, rules be damned mentality. I’m not an old dude, but I miss the good old days.
And why have we “Ghettoized” our great country and promoted rap hip hop 24/7 to our citizens oops “CONSUMERS” …… maybe that is the key, we are not thought of as citizens anymore.
Hire the dumb, so you get dumb radio tv movies…..and leave me begging for a job.
Don’t think out of the box or no one will hire you……click on my name and see some great music being made in America…
maybe that is the key, we are not thought of as citizens anymore.
I think the real key, is that “we are thought of.” Since when are we supposed to derive our identity from a government?
Time was, we (individually) were the power, and government was a lower institution to take care of some menial tasks.
ghettoized lifestyle has nothing to do with greenspan, the banks, the investors to commit white collar crime within the housing pyramid schemes.
it is called capitalist, elephant leading, globalization greed.
” Of course if you don’t cash in your chips at the right time and just keep gambling you’ll eventually lose it all…”
And this begs the question, will your pension be there when you retire? Can the PBGC protect those pensions out there? Remember you aren’t protected till after the five year mark of your retirement, so those who think they may be ok just might find that they’ll be forced to take a second job during retirement.
CONTAINED !
this doesn’t include the 10 cents for gas yesterday
Wholesale prices shot up 3.2 percent, the biggest jump in 34 years, propelled by a record rise in gasoline prices.
This is the reason the Fed only went 25 basis points. Now they are stuck. How do you drop rates in the face of rising inflation? You can, but don’t expect anyone to take you serious as an “inflation fighter”.
There are no good options at this point.
Does the Western movie expression “They’re run out of bullets!” come to mind?
Look at this quote
“The most drastic drops are in counties where the real estate market was hottest — making Sarasota ground zero. ‘They’re going back to the north, Chicago, Tennessee,’ said Bill Muth, principal of Ashton Elementary, which has lost about 30 students. ‘People feel like this is a good time to move because of everything going on here.’”
“‘The state of Florida has historically been growing,’ Weidner said. ‘Now, we seem to be going in the other direction.’”
From Jerry M. Ray - senior vice president of corporate communications for the St. Joe Co in 2005.
Ray: At this point, baby boomers are beginning to buy second homes and migrate to warm climates. There are millions more people today who are thinking about moving to Florida for a place in the sun than there were three years ago. There will be millions more. This trend is not going to stop for 10 years unless there is some huge impediment.
All those speculators who bought houses in FL based on false demand and the banks who lent them money are majorly screwed now.
There will be millions more. This trend is not going to stop for 10 years unless there is some huge impediment.
Guess that the impediment has been found! HAHAHAHAHAHA
So it took less than 2 years for this statement to be proven FALSE, way to go A-hole!
“‘The state of Florida has historically been growing,’ Weidner said. ‘Now, we seem to be going in the other direction.’”
One would expect good usage of English from a school principal. The phrase “going in the other direction” is wordy, vague and blatantly obfuscatory — could have been replaced by one clear word. The sentence should have been:
“Now, we seem to be shrinking.”
We are in danger of having negative pop growth. I don’t know if that’s such a bad thing.
Like one poster said pretty soon Florida will be a great place to retire to.
Wil someone please tell Ray to lay off the juice..its killing his brain cells.
He keeps mixing up people leaving Florida with people wanting to live in Florida…
“‘The state of Florida has historically been growing,’ Weidner said. ‘Now, we seem to be going in the other direction.’”
Hmmm, sounds like Florida is working off a completely different economic model than in the past.
What’s disappointing is, that although it is now commonly acknowleged that the boom is responsible for the bust, lower home/land prices aren’t commonly viewed as the way out.
I was reading some San Diego analysis this morning. They were saying that because the city had gone into a slump sooner, it should rebound earlier. All that means is the economy will have purged the malinvests before surrounding areas. But it shows that getting the RE correction over with is the only way to get the economy going again. I wish these more mainstream economists could see that.
Most of the people who don’t think lower prices are the way out have a vested interest in keeping prices high.
Nobody ever thinks deflation is a return to stability. Look at the FED, they will kill the dollar at all costs to prevent deflation from happening, no matter how bad the excess was. They are determined to put in a floor and not let it go below that.
They are determined to put in a floor and not let it go below that.
It also looks like that floor is beginning to crumble and the fed cannot stop the inevitable recession.
If Bernanke drops money out of copters do people pick it up if it’s worthless?
If Bernanke drops money out of copters do people pick it up if it’s worthless?
They may pick it up, but it is still worthless. That is what happened in Iraq to their currency.
They do if it’s euro
I find it strange how much the establishment hates lower prices.
Lower prices are awesome. Makes me feel like I am working for something. But then again, I’m not speculating on asset price inflation.
Contrary to many opinions on this board though… the Fed isn’t just staving off deflation out of some religious belief that ‘deflation is bad’. For starters there’s the whole problem of ‘reflation’… which is a spotty practice at best. But the bigger problem is a collapse of equity markets.
We like to think of stock markets as being non-essential pools of ‘risk capital’. Nothing could be further from the truth.
The problem is that the health of our markets is closely tied to the health of every underfunded pension plan, health plan, retirement fund, and boomer nest-egg. If we see a hard landing in the markets we’re also going to have to face an America with destitute elderly. It’s easy to say ‘they should have planned’, but the problem is that many of the elderly poor will have planned well, and the system will have failed them because the system was market-dependent.
I agree with Ben that from a responsible macro-economic perspective, deflation is the only way to create a sustainable economic future — but the problem is essentially timing.
We’re already entering an era in which the strains on our economy will be intense: Social security, medicare, and a vast population of non-working elderly are a vast burden on an economy. Which raises the question — can we pull the rug out from under that system at this time, and do the responsible thing? How much pain are we willing to tolerate as a nation? And who should feel that pain?
Deflation may balance the equation, but the pain is going to be legendary…
I agree that deflation is the only way to get back to a healthy economy. The only problem is that IMO significant deflation would result in the collapse of the government. We are way past the point where we can pay off our debt, leaving inflating it away the only alternative to default.
At this point the Fed and feds are between a rock and a hard place. They can’t go back, they can’t stay where they are and they can’t go forward because there’s a ravenous bear waiting to eat them. I guess that’s the true meaning of the term “screwed”. It’s their fault they created this mess due to their greed. But now we’ll all pay for it.
All the pain will be worth it though if we get a better system after the collapse of the current corrupt one. It just won’t happen with the current crooks in charge.
We are going to have to means test SS and raise the retirement age to 70, in the next 10 years.
the pain is going to happen REGARDLESS so why B.S. about it?
Soho — but if a fully-funded pension plan, for example, is funded by dollars that two years hence are worth half of what they were “yesterday,” how are the pensioners better off?
I believe that part of the aim of government is to inflate its way out of the social security dilemma as much as possible. They will do this by causing actual inflation to exceed by far the amount of COLA increases that are added to SS pensions, Medicare, etc.
Personally, I would prefer a pension fund that is worth half as much, if that reduction was the result of very poor/greedy decision-making, than to have it hold its value in dollars that buy less each day. The first is truth, the second is the big lie that hides the greed and errors.
As long as you realize that in order to ‘deflate the debt’ the population that is supported by that debt must also be ‘deflated.’
That will probably include you.
“We’re already entering an era in which the strains on our economy will be intense: Social security, medicare, and a vast population of non-working elderly are a vast burden on an economy.”
The only problem there is medicare. I wish people would stop scaring others.
Ben in North County San Diego, homes are still way too high. Some crappy condos sell but homes are still hogs. We never went down here and its still unaffordable to buy.
I wish these more mainstream economists could see that.
The mainstream economists see it, but it is their clients that they are protecting. They need to get their clients out of this mess before they lose too much money and push for lower prices to get the RE correction moving to get the economy going again. However, oil is also the big culprit that is having big impact on consumers spending in addition to the RE bust.
I remember the impact of the 1980 oil and gas crisis and interest rates that brought consumer spending to a halt. In todays market, it is high home prices and now high oil and gas prices that appears to be having the same impact on the consumer as in 1980. The next phase, which will happen after the 1st of the year is the massive layoffs. That process has already started with many of our clients.
“Terry Dona, president and underwriter for Bonita Springs-based Metro Mortgage, said many foreclosures and short sales can be traced back to two things: unscrupulous lenders and buyers who had little money but didn’t want to miss out on the boom.”
And now, they won’t miss out on the bust.
Federal regulators have delayed a final decision on the sale of Norlarco Credit Union in Fort Collins while it negotiates with creditors to try to stave off lawsuits.
At least 10 lawsuits have already been filed naming Norlarco as a defendant, claiming Norlarco ignored credit-worthiness when approving loans, many in Lehigh Acres on the western edge of the Everglades near Fort Myers, Fla.
After reading this, I felt this dread in my bones so I went to the web site of the CU I have a little bit of money in and I saw this:
If true, good for them. (and for all the members, including me)
Love the phrase, “speculative mortgages,” calling it what it is.
To be sure, you might ask them if they own any investments that did. They may be saying only that they never offered/financed such loans - not the same thing.
Sleep with one eye open friend, I don’t see where they mention HELOC’s in that statement. HELOC’s were bases on the property value which isn’t there anymore nor is any refi possible to help pay off CC’s and HELOC’s.
Jesus. Twelve hundred abandoned construction sites in Charlotte County and North Port. I knew that area stunk, but not that bad.
Here is the real story how I almost bought a townhome in Miami this week. I know - everybody here thinks waiting 1,2,5,15 more years is better, but I am getting antsy about having to move my cash around (with the global war on savers, having cash is not easy), and we need a larger place to live.
The townhome which we (almost) bought is in a small higher-end development in 33156 zip code, near Pinecrest. The units were selling for 525-550k in 2004 as preconstruction, and in mid-2006 (when the construction was completed), several of them were flipped for 800k, even 835k.
The seller flipped a couple of the successfully, but is stuck with the last one. He listed it for 759k, I offered 644k cash in November, he countered 699k “final”, I countered 662.5k, he said bye.
Then, in 2 weeks, he calls and agrees to my offer. We inspect and appraise the unit, and on appraisal it comes out 2900 sq.ft. total area, and 2500 sq. ft living area, which is 10% smaller than listed footages.
I invoke the sqft clause in the contract, and ask him to go down - both my agent and his agent freak out, he says no way, and the deal is off.
I do think I was still overpaying for the unit, offering him 22% above the (already crazy) preconstruction price. But the prices in this zipcode are much stickier than in Miami in general. Also, I prefer new construction to 1960’s boxes prevalent in the area.
Oh well, let’s see whether he runs to me again - this year or next. I do expect the prices to fall to 2004 levels by Spring ‘09.
I invoke the sqft clause in the contract, and ask him to go down - both my agent and his agent freak out, he says no way, and the deal is off.
Sounds like you almost became a victim of fraud! Report the realtor to the Florida state board. File a complaint with the white collar fraud unit located in Miami. I would not do business with the seller or that realtor!
well, this is common with the flippers. The developer lists inflated sqft on the sales materials. Since the flippers don’t care (they only want to flip), they are not going to question the developer numbers.
Then this inflated number gets recorded, and goes on the tax roll. That’s why we put sqft in the contract, otherwise it is much harder to get out.
In Florida, a case against sq. footage misstatement is hard to win, IMO. The listings usually include weasel words such as “per tax records,” “agent measure,” stuff like that.
What I can’t comprehend is offering $230/sq.ft. today for anything in Florida that is not directly on the ocean or a river or a real lake.
After a couple more months feeding this thing, I bet he capitulates. How long has it been on the market? I agree with the newer construction theory, some here will disagree. Most newer construction is so much more efficient, open and offers some great modern conveniences. Good luck!
Thanks!
There are two more units like this on the market, both at delusional prices (785k or so). This guy listed in September, and at somewhat lower price.
Sounds like he needs to move it . . . down over $100k in less than a month. If his carrying costs are $6k per month and average DOM is over 180, he would be foolish to not accept your offer.
The market’s flooded with inventory, right? Can’t you just move on to the next guy?
A lot of inventory, but in this area most newer buildings are 1m+, not much under 1m.
“A lot of inventory, but in this area most newer buildings are 1m+, not much under 1m.”
I’m going to offer an opinion to you based on personal experience. Zipcode 33414 didn’t offer newer homes under $500K in 2004 and 2005. The prices were “sticky” in 2006. Now we’re ending 2007 and you can buy brand new construction for $300K. You can buy nearly new construction 2002+ for $250-$275K. I think if you had bought in at anything over the $400ish pre-construction prices you’d be kicking yourself pretty hard a year from now. I bought at 2002 prices in 2006 and have watched my “investment” go straight back to the late 90’s/early 2001 price.
I’m with you, Andy. If it’s not on the water or golf course and if it isn’t built by a master custom builder with lots of high-end extras, I wouldn’t pay more than about $100/ft these days if I hoped the place will hold its value over the next 5 years. I think that massive unsold inventory eventually will push prices below the cost of replacement, until the inventory goes down substantially. And cost of replacement is WAY less than 2-3 years ago.
“I think that massive unsold inventory eventually will push prices below the cost of replacement…”
That’s what you have in the Detroit, MI market right now. To think we’re exempt in Florida is silly. Homes in metro Detroit are selling at $150K when it would cost at least $250K to rebuild the same home. We’re talking 2500 square foot homes.
$600K+ for a Florida condo? The seller backed out? Man you just dodged a burst of .50 caliber bullets!
I hear ya. It is hard to hold dollars seeing what is going on today. The reason I am waiting is because prices keep going down, and since my savings are for that purpose, my buying power keeps going up. When it stops for a prolonged period of time (5-6 months) I will probably buy too. But it’s too soon. We have a nasty recession coming (probably already here) and I want to wait to see how negative the outlook becomes. As negative as things are now, they will get worse.
And of course, the math needs to work out. I won’t be buying anything I cannot afford regardless.
OT.. found this on some realtor’s site.. lmao. wanted to see the face of that seller when a person making the offer told him/her to get lost.. i don’t even think $50K off 375K is considered low balling??
“I submitted a lowball offer on a house back in May. House was listed at $375,000 and my buyer offered $325,000. We tried submitting some of our comps as justification for the lower offer. The agent told us the seller was “insulted and would not respond to our offer.”
5 months later the listing is about ready to expire. The listing agent emails me and says that the seller will accept our offer now, if the buyer is still interested. I forwarded the email to my buyer to get his response. He replied back to myself and the listing agent that the seller should “get lost.” He went on to say how the seller was “rude and arrogant” the first time around, but now they want to come “crawling back to us.”
That is just one example of how things can go when sellers are “insulted.”"
I have my eventual-house-buy money in CDs. This past year I’ve gotten about 5.3% pre-tax, on average. But I would rather have a 0% CD, so to speak, than have spent that money on a house that is worth noticeably less next year. The latter is the investment equivalent of paying the bank to hold your money for you.
The amount of money I “saved” by selling when I did, in the first year alone paid for more than three years of my rent and utilities, even if my cash had earned nothing at all.
Sorry, but I just don’t get why in the world anyone would buy in South Florida right now, especially while there are VERY low rentals everywhere. For instance, check these out:
http://miami.craigslist.org/apa/505201576.html
http://miami.craigslist.org/apa/470182677.html
http://miami.craigslist.org/apa/463375128.html
http://miami.craigslist.org/apa/505107226.html
These are all bigger than the unit you were looking at and would cost far less than the carrying cost on a $660,000 home.
Keep in mind that, even if you’re paying cash, you have to figure in the opportunity cost of taking $660,000 out of a safe money market.
You’re also WAY underestimating the drops that you’ll see in South Miami. We’re already seeing 2004 prices on most short sales and REOs. I’ve even seen some 2003 prices on the low-end. I expect prices to drop below 2002 prices and will be approaching 2001 prices by the time things finish falling. The townhouse you were looking at will sell for less than $400K within two years.
Yes, I know some of these rentals.
Good rentals can indeed be found, they are not that cheap - 85 to 90% of the carrying costs, in my estimation. Often, you have to deal with the absentee landlords, which is not fun.
I do not know how fast the prices will drop. In the exurban zipcodes, they are certainly dropping fast. In the prime locations, the inflation and dropping dollar can provide some support.
Ubaldus — I think we have found the core of the problem. It is in your estimation of “carrying costs.” I recommend that you take any of those rentals and compare the carrying cost of the house you offered on. Put your math here in the thread. The Big Five will be: 1. P&I mortgage payment at 30-year fixed, 2. Property tax, 3. Homeowners insurance, 4. Net-of-taxes interest lost on the down payment that is no longer in CDs. 5. The maintenance that you as a renter would not be liable to pay for; include anything a landlord provides such as yard spray, sprinkler maintenance, etc.
If your carrying costs are less than two-to-one by renting rather than owning, I’ll be impressed. Don’t forget to factor in something for a negotiated rent, either, Asking is not the same as getting.
here you go:
1. 0 (paying cash)
2. 12k annual, some of it is tax writoff
3. 4k with St. John, if you take huge wind deductible
4. 22k (tax free at 3.4% with Vanguard Muni MM on 660k), and going down.
5. 8k or so annual
Total 46k annual or $3833 monthly.
The townhouse like this in this area may rent for $3200, I have seen some renting for $3500 as well.
UB - for most of us, the tax writeoff for property tax would disappear completely if we owned our house free and clear. Unless you make a ton of money some other way. A renter does not have to worry about wind damage not covered in order to cut premium costs. The invested money would be subject to endless debate, so let that stand.
So let’s start with $630/month saved outright by renting and bump it to $750 by putting back in some better wind coverage. You’re also assuming that the house you buy will retain its value, at least, and will not decline. At the end of year One, a 5% price decline hits you for $33,000 *after* you’re already behind by the $750×12= $9,000 difference in carrying cost.
Only by the property value rising does it look to me that you could come out ahead financially. So the emotion must be worth $40K+ per year to you, for the next few years. FWIW.
by the same token, property values rising by 1.5-2% annually even things up already.
Since in my case, it is very likely that we’ll stay in the house we buy for the next 8-10 years, the most important (unknown) variable is the price of this house in 2017.
Since you know what you’re doing and want to own that place, best wishes for many years of enjoyment and good neighbors. At least you considered the pros and cons.
ubaldus
biggest problem is the 0 you assume as the cost of your own cash. You should be earning 5%-10% ($30,000-$60,000) on that. You are buying an asset which will depreciate at least 2% per year instead, and incurring insurance and tax costs to boot. Honest math on home ownership seldom points to buy, but especially not now.
Will
Bank of America and Wachovia stating they are going to disappoint again.
http://online.wsj.com/article/SB119746762414723547.html?mod=fpa_mostpop
Hmmmm, bullish.
The seller is taking a haircut, but you won`t ?? You are antsy, to do what? Loose money?
“‘The state of Florida has historically been growing,’ Weidner said. ‘Now, we seem to be going in the other direction.’”
The data by the moving companies seem to confirm more people are moving out than in Florida. It also looks like tourism is going to be down in Florida.
The Labor Department said Thursday that wholesale prices soared by 3.2 percent last month, propelled by a record 34.8 percent rise in gasoline costs.
Meanwhile, the Commerce Department reported that retail sales jumped by 1.2 percent last month, double the gain economists had expected. It was the biggest increase in six months and followed a much weaker 0.2 percent rise in retail sales in October.
How does it compare to last November? Everyone knows retail sales rise in November for the Christmas holidays. Sheesh.
Also, inflation is up 3.4%? Sales are up just 1.2%? Sounds like fixed numbers to me. Of course sales will be up if inflation is up. So why aren’t sales up 3.4%? That would be break even in my mind.
Yes, I agree. The gov just didn’t want to report “Sales DECLINE 2.4% adjusted for inflation”. This whole economy is a smoke and mirrors shell game. And the man behind the curtain is NOT your friend.
Also, last Fall >>just in time for the elections
Used bad characters. Last Fall, just before the elections, gasoline prices miraculously dropped a lot and stayed down past New Year’s, so as not to dampen peak-season spending. No such boost this year. No good news at all, to get people to open their wallets wider.
Speaking of speculative booms! Let the boom begin!
http://www.teaparty07.com
Why do bloggers use this forum to push political candidates? Why not market Tupperware or Herbalife while you’ve got a captive audience? I bet someone stumping for Clinton (ugh) would be censored in a heartbeat.
Actually, although this is a housing/economy blog it is inseparably connected to politics because politics got us where we are today. Now I agree with you that we don’t need to get overbearing on the blog, but I do appreciate that Ben allows such latitude.
There is quite a cross section here, from socialist to middle of the road (no totalitarians that I can remember). What is frustrating is when people jump on a particular party and refuse to be objective. Both parties are corrupt, both sold us out and we are rapidly running out of time to do something about it peacefully.
Anyway, thanks again to Ben for his forbearance. There are a lot of intelligent people on this board and I’ve learned quite a bit about financial matters here.
It’s probably too late to reply to the reply (10:30 p.m.), but I do think this forum is a bad place for people to be pushing political candidates. Politicians may be to blame for much of the mess, but foisting more of them on readers isn’t a solution. Ron Paul’s followers are among the most insensitive, aggressive, and sanctimonious yet, and if water seeks its own level . . . .
The housing panic blog, which is downright ridiculous, wastes endless space on left vs. right and Paul vs. Everyone postings. What I like about Ben’s blog is that it normally stays on course, but lately partisans have become increasingly obnoxious.
My roommate is now a Park Lane jewelry distributor in case anyone’s interested in buying some paste.
Just DON”T put your resume up on CL….lets see i have goten 52 spams from Pre Paid legal, 46 from Primerica, 35 from Bankers Life, then axa, quixtar, mortgage brokers..not counting all the UK money laundering scams, all in the last 4 months..
At one point last year i got 84 responses IN ONE WEEK..to my resume and only 2 actually stated the weekly pay…
A reputable employer would NEVER state the weekly pay in a first communication.salary discussions should be left for the second interview.
By the sounds of things you just send out your resume and expect to get a job that way. WRONG
Try networking this through family and friends, you need a connection to get your foot in the door.
To be honest if you spend more time pounding the pavement and less time complaining on this blog your ratio of success would would rise dramatically.
I am not trying to knock you but I have seen you post over and over the same complaints and you still have not secured employment.
Perhaps you are also looking in the wrong field.
BTW, Pre Paid legal can be quite profitable but again that requires leg work.
Give me a price on two diamond stud earings
about 1 1/2 total ct.
DB,
the jewelry my roommate sells is costume. (I was replying to Incredulous’ post about using the blog to sell stuff - kidding)
If you’re really shopping for diamonds maybe someone in your locality can help you, unless you’re comfortable buying jewelry online.
I’m sorry if posting for Ron Paul has bothered you. I’ve tried to keep it unintrusive. call me a tin-foil hatter, but my impression is the MSM is also complicit in “selling us out” and Ron Paul supporters have had to result in guerilla marketing techniques.
http://www.youtube.com/watch?v=-wucR65Q9OA
http://www.youtube.com/watch?v=tzjSX2kO07Y
I’ve been impressed with Paul ever since we moved to Houston. And I’m a big supporter.
It seems like a great many HBBers support Ron as well, but sometimes someone posts their support of one of the parties (usually Dem) and it throws me for a loop. I just don’t get how anyone who comes here and knows how corrupt the government and their reporting is can support either of the ruling parties.
completely agree, Devil
“I just don’t get how anyone who comes here and knows how corrupt the government and their reporting is can support either of the ruling parties.”
Isn’t Ron Paul a long-time member of one of the ruling parties?
Ron Paul is very difficult for a woman to vote for. However, I’m having a hard time figuring out exactly who I would vote for. I’m so disillusioned, doubt I’ll even vote and that’s pretty bad!
on the left, at least Dennis Kucinich is an honest man
I’m probably in the minority, but I believe that if you are not at all sure of who to vote for, don’t vote. It is a travesty how many judges get elected because their name might be Adams instead of Popolpfski or anything that is not simple or common. People who don’t know anything about a judicial candidate should not vote for them. If total votes were tiny, it would get the attention of the MSM.
Remember that guy who was Saddam Hussain’s public relations officer during the (illegal) invasion of Iraq. As the US and Brit troops grew closer and closer and the Iraqi troops threw away their weapons and walked away, this guy would appear on tv and say, “The Iraqi army has driven back the invaders who are total in disarray and defeated.” He was even given a comical name but I forget what it was.
With all the crap he keeps spouting, I’m starting to think than Ben Bernanke is that guy’s brother! “Inflation is contained as is the sub-prime problem and there is little chance of a recession.” What a joke these characters are.
On a separate note: It’s amusing watching The Financial Gangsters Of Wall Street starting to skim and steal as they go about the task of getting back (via skimming) the billions they have lost. Nice big moves almost daily as they use their tried and true method of skimming on the way up, then skimming on the way down - as they employ the biggest scam in the financial world known as “gap up” and “gap down”. They are allowed to do this with the blessing of their enablers - namely the SEC.
If Wall Street was a football or baseball game, The Financial Gangsters and the SEC would have been charged with “game fixing” years ago.
Bahgdad Bob - Ben Bernenke - BB. Shave and a haircut, two bits.
Bahgdad Bob! Thanks….and it fits Bernanke perfectly! Bahgdad Ben of the Fed!
the only problem is that team “j6p” just walked off the field in protest….this is going to play out over a long period of time. the us vs them line is being drawn. what more can they possibly do..high prices, high housing, high energy…develop a new disease?
Yeah I’d like to see Bahgdad Bob as the new Fed Chairman. That way we could at least laugh and be entertained while we’re getting screwed. Get back a little value for our money stolen by the Fed.
Too late, Devildog… the NAR got him first.
Why can’t he wear two hats?
“These numbers should put some of the fears to rest that consumers are going to stay at home this holiday season. That’s absolutely not going to happen,” said Mark Vitner, an economist at Wachovia Securities in Charlotte, North Carolina.-
20% down in traffic…with consumers spending 20-30% less than last and using discount retailers equates to…maybe around 30-35% total down tick..with an uptick in online sales possible. i guess you can pull numbers from anywhere so thats how i did it.
Reminder: The retail sales number includes purchases of gasoline
…and food.
Funny how all the MSM anecdotal shopping stories seem to always involve WMT and TGT - but how are the boutiques doing? Anyone getting a Mercedes for xmas?
Break out the world’s tiniest violin:
http://www.thestreet.com/s/fannie-freddie-add-fees-amid-mortgage-crisis/markets/marketfeatures/10394304.html?puc=_tscana
LOL.
But I’m inclined to agree with the National Association of Home Builders, which says the fee is “a broad tax on homeownership.”
And NAHB has confused “homeownership” with “homeloanership”.
Yeah, a real freaking shame, isn’t it when they get a “tax” of $1K vs. being able to take up to 500K tax free?
This kind of entitlement crap really frosts me. I get the JT treatment every year from the IRS because I don’t have any kids and don’t own a house.
Nah, the tax breaks are salves on the pain. If you calculate total expenditures on a house right now, the tax break would not be worth it. And I seriously doubt that the tax break makes child-bearing a cash-flow positive event.
So let me get this straight. They buy a house in 2005. The put 20% into it. They can’t even sell it for what they bought it for not even counting the 20%. Now her husband is thinking about taking a job in St. Louis and they are whining because they might a) have to sell for a loss and b) pay more for their new mortgage and that quarter percentage point? Because they are risky borrowers?
Get real lady.
When I sold my house in Bakersfield, Ca, for $16.500 I had to pay an 11point fee for the buyer!
In my first 3 houses I owned and sold, I never made money on the house sale, and it was not until I bought my present house 41 years ago that I had any appreciation of the home value.
Now free clear, and money in the bank.
And, by the way, I was a real estate appraiser at the time.
“In fact, we’d probably have to pay the fee even if we want to refinance our 10-year adjustable-rate mortgage.”
Hmmm. Sounds like if you want to get out of the loan from hell, Fan and Fred are going to take a bite out of you.
“It’s bad enough that we got squeezed out of the housing market as property values soared, only to get stuck with a home that’s valued far lower than what we paid for it once the bubble burst.”
If you were squeezed out, how did you get in a house that’s now worth less?
Looks like you filling you whine glass with gripe juice.
Correction - It Looks like you are filling your ‘whine’ glass with ‘gripe’ juice
What she is saying is that “they were priced out of a 30 fixed loan because the house prices went up and so they bought a more expensive home than they could afford using one of the alternate financial instruments. That happened to me. I started looking at houses in 2003 here in SE Florida. Within in 2 weeks there were no single family homes below my upper limit of 200,000. My initial reaction was to recognize that this was unsustainable although my realtor said prices could go up forever. I got out of the market until 1 year later, when I allowed myself to get swept up in the froth. I bought a 325,000 house with 10% down, 80% 5 year ARM and 10% adjustable 2nd. The 2nd started going up after 6 months. I was saved 1 year later when my company closed down our office and laid me off, along with everyone else. I was forced to sell my house (75,000 gross, not net, profit). I am so thankful I was terminated. I made more money that year (I found a job right away) then I will ever see again. My guess is that my note was considered Prime, and if I still owned that house, I would probable end up in foreclosure when the 5 year ARM reset. Yes, I can tell you that the loan agent told me not to worry, I could just sell or refinance after the 5 years.
you’re kidding- she’s a personal finance editor ?
If the Fed was wondering how its plan was received, there it is, Cramer said, adding that Bernanke and gang need to get out of their ivory tower and onto a trading desk. Until that happens, Cramer recommended staying defensive by investing in supermarket and drugstore stocks. But stay as far away from the financials as possible, he said.
actually cramers almost right…how about a drive around town instead of the trade desk.
Cramer is a Dip S… He was never a big hitter on Wall Street but tries to act like one. Getting “defensive” in the market should mean get into cash. I suggest that anyone that buys into Cramer’s BS check out how “”defensive” stocks did in prior recessions. At first some hold up or even advance and then they join the gang heading down. Wall St will never tell you to go to cash. Their game is keeping you in the game. You will just loose less in defensive stocks or offshore.
A major top is forming in stocks and my work indicates either a top is in the Dow or one more token high in January. Then look out. Any of you that understand the concept of market breadh know that topped in early July.
Yessir. I have a full boat of spring index puts. Normally I can’t stop myself from trading in and out on the short term swings but I’m going to hold this one where I got it.
Wait a minute - are you the former Secretary of Commerce?
The Senate legislation would allow the FHA to insure loans equaling the amount that government-sponsored mortgage companies Fannie Mae and Freddie Mac are allowed to purchase, a level set at $417,000. Additionally, the bill would require homeowners to make a cash investment of at least 1.5 percent in the value of a home, half what the FHA now requires.
Here we go again. Another mistake. Please vote these people out of office..please…
Wow. That might drive prices up in “cheaper” areas like DFW.
“Wholesale Inflation Surges, but Sales Up” says the front page of Yahoo! Finance. (Which then goes on to say that sales are up to the highest level in 6 months).
What utterly b.s. journalism. They didn’t bother to day that since the history of consumerism, sales have always been higher in December than in the preceding 6 months.
Anyway… it’s slightly OT, but inflation looks like it’s really getting ugly. And I’ll believe those ’sales’ numbers after the holidays. I still think we’re heading into the worst Xmas in 20 years…
(Weirdly though, gold and silver are tanking today even on the high inflation news).
We keep hearing that the consumer (which the whole US economy relies upon for survival) is, “Hanging in.” I was wondering if that phrase should be, “Not willing to give up their life-styles and are going even deeper into debt.”
I live in a pretty affluent area (Thousand Oaks/Westlake, ca.) and when I visit the local Costco, there are always plenty of customers wheeling out 52″ TV’s, computers, printers, bikes and baskets laden with all the expensive goodies. The Westlake, ca. Costco must rake in big bucks. When I visit the local Best Buy, same thing. The local WholeFoods is more crowded that the chainstore supermarkets.
However, I noticed that a lot of the consumers are fairly young. A lot of 40 year olds and a lot younger than 40. That means that most have never seen a severe recession or had to go without. Many have VERY good paying jobs at places like Amgen and CountryWide (their HQ’s are in this area) and a host of other high paying tech companies which are located in this area. However, Amgen and CountryWide are laying off thousands, even though the numbers are not showing up in Baghdad Ben Bernanke’s and the governments statistics. Gee, what a surprise.
Consequently, most 40 and under’s have never gone without. If little Snottley (thanks TX Chick) wanted something - he got it without even stamping his little feet. What for me when I was much younger in my 20’s or 30’s, it would have been an absolute luxury to buy a car (forget the BMW’s and Mercs) or an ATV or even a big tv set, they seem to take for granted with the attitude, “Hey, if I want it - I’ll buy it - I deserve it.” With a credit card of course or, in the last 6 years, a generous line of home equity credit a.k.a, “My Own ATM”.
When I was younger (hope I’m not sounding too much like an old fart) only the rich and the upper middle class had credit cards with almost un-limited credit. Now even the Mexican gardener uses his Platinum credit card to buy grass seed at Home Depot. In the old days, if you wanted something - you saved up for it. Now, as we know, hardly anybody saves.
I suppose we can only hope that what is expected to happen by many of the more intelligent non-shills on the CNBC Comedy Business Show (recession and unemployment and tight credit) will not cause too much pain. I can see a lot of divorces coming down the pike if it gets bad. ASs my old cockney mum (long, long gone) used to say, “When poverty flies in the window - love flies out the door.”
Amen!
No comments on the Widder Hearst’s foreclosure woes?
Several documents in the foreclosure case bear Hearst’s signature, but she said she relied on her attorneys to make decisions.
When asked whether she thought she would be able to repay the New Stream notes when she signed the agreement, she said, “I relied on my attorneys, and I relied on the documents being written up by them. I relied upon them. And my intention always was to repay.”
Hearst is believed to have declined several offers on the house.
She rejected the $25,000,000 appraisal, rejected a $20,000,000 offer, and time is short before the lender takes it back.
I liked this qutoe from the sentinel article
Another agent, N. Jill Rees, said her years of experience in advertising taught her that “those businesses that did not make a substantial cut in advertising dollars actually came out with higher market share after the recovery.” Added Rees: “It depends on whether you want to look at the glass as half full or half empty; the doughnut — yum! — or the hole.”
Houses are now doughnut holes!
Florida is doomed at this rate!
Hopefully. It’s the only way I’ll ever be able to buy back in.
Mostly ignored in these discussions is how the subprime loans forced the incomes to rise in some areas. In California when the prices soared the businesses had to raise salaries to get employees to move to california, then the other employees got raises, and , lo and behold, the civil service people started making over $100,000 a year with some over $200,000 per year.
Inflation caused by sub-prime lenders!! LOL