What The Future Housing Market Could Look Like
The Dallas Morning News reports on Florida. “As I drive down U.S. 41, which connects Cape Coral, Fort Myers, Bonita Springs and Naples…the roads are still busy. The cars are still shiny. Massive new shopping centers greet the snowbirds, the early retirees setting up house and the usual vacationers escaping the cold of Minnesota, Michigan, Massachusetts and Maine. But something is wrong in paradise.”
“Last summer, everything seemed to stop. At the Florencia, the newest luxury tower, few purchases had been completed when the project was finished in the fall. Only a handful of units were sold in the last quarter. The downturn drove WCI close to bankruptcy.”
“On Jan. 8, WCI lowered prices dramatically at Florencia. A spectacular penthouse unit that was priced at $1.7 million on Jan. 1 can now be had for $1.3 million, a 24 percent drop. Discounts on other units range up to 40 percent.”
“According to Fort Myers MLS Board figures, it would take 44.5 months – nearly four years – to work off the current inventory of homes for sale. That doesn’t count the discouraged sellers who have taken their houses off the market but still want to sell.”
“The local News-Press regularly advertises auctions of homes built to sell for $250,000. The minimum bid: $50,000. Small condos are offered with opening bids of $25,000.”
“Over lunch, a Realtor tells me that those $250,000 houses are now selling for $100,000, when they sell at all. She also explains that most of the properties that are selling are ’short’ sales.”
“The Realtor herself fears becoming a victim. The blunt reality is that she is ‘upside down.’ Worse, she depends on scarce real estate sales for the income to pay the mortgage. Sadly, she is in the same position as the Texas condo slaves of the late 1980s.”
“According to www.realtor .com, Fort Myers has more than 12,000 listings, with nearly 2,000 available at $125,000 to $175,000. Many cost less than $100 a square foot.”
The Associated Press. “Places like Cape Coral went from southwestern Florida swampland to bustling bedroom community and one of the state’s centers of a building and buying boom. But now there is a sea of unsold homes and undeveloped lots in this 115-square-mile city.”
“‘It was very good before. It was like houses everywhere, buildings coming up everywhere, and all of a sudden everything stopped,’ said Elliot Aguilar, an electrician who lost his permanent job and is working a lower-paying temporary position. ‘If this continues, we probably have to move to another state.’”
“The slowdown is not just along the Gulf Coast. Across the state, people tired of hurricanes and high housing costs are reconsidering Florida.”
“Beth Mann lived in West Palm Beach until a year and a half ago, when her husband was offered a teaching job in Georgia. He took it — at a higher salary than he was paid in Florida — and they moved to Buford, Ga.”
“Their house is three times bigger. Their property taxes are 75 percent less. Their home insurance bill has been cut nearly in half. ‘We’re like, ‘Why didn’t we move sooner?’ she said.”
The Herald Tribune. “When the real estate market turned in 2006, the net migration fell by 100,000. Then for the year that ended in June 2007, it fell to 35,301.”
“‘The bad news is that a recession in the U.S. delays the workout of our real estate problem,’ said Brian Presley, a Punta Gorda-based financial adviser who manages hundreds of millions of dollars for wealthy investors. ‘If they can’t sell their home in Poughkeepsie, they are not going to buy in Punta Gorda.’”
“Bob Mikla is waiting for one or two of those boomers to show up and buy the luxury condominium that he has been baby-sitting since a late 2006 closing. He also would not mind getting a few more of them to loosen up their wallets and rent one of his limos.”
“The 46-year-old freely admits during a tour of his never-lived-in Rivo at Ringling condominium that his mid-life diversification plan has turned into a recipe for disaster. ‘I am getting nailed on every end,’ said Mikla, who has gradually lowered the price of the $780,000 unit to $610,000, holding an open house every Sunday.”
“He has made monthly payments of $3,500 on the condo ever since he closed: now $50,000 in carrying costs. ‘The reason I am not listed now, I am already losing money,’ he said. ‘If you put a Realtor fee on top of it, you are losing more.’”
“The limousine business he set up in Sarasota is struggling with the local economy. ‘December, which should have been a very busy month, turned out to be miserable,’ Mikla said. ‘People are cutting those services out because they don’t have the money. It is a luxury item.’”
“The median gain in value for a Sarasota home was $112,000 during the six-year period from Oct. 1, 2001, to Sept. 30, 2007. The comparable gain for a Midwest home was only $34,800. ‘Midwesterners would definitely experience sticker shock in the Sarasota market,’ said Walter Molony, a research analyst with the National Association of Realtors.”
“Mikla’s spacious three-two condo seems like it is priced to sell. His pre-construction price was $580,000 and he spent another $20,000 on upgrades. The problem is that his unit is one of many. More than 4,600 are for sale right now just in the Sarasota MLS; a three-year supply based on the current sales rate of 28 per week.”
“The city’s mood is a far cry from the heady days of the post-2000 building boom, when spirits soared along with economic prosperity and the population. Burglaries have nearly quadrupled in North Port, from 130 in 2001 to 466 last year, according to data compiled by the Florida Department of Law Enforcement.”
“Unemployment and financial stress have increased the sense of desperation in this community. While the housing bubble burst nationwide, North Port is a bedroom community and retiree haven that has little industry beyond construction. ‘People do crazy things when they they’re feeling like everything is crumbling around them,’ said Yvonne Parrish, a mother of five.”
“North Port resident Steve Crawford said he has three friends who moved away to find construction work after the housing downturn and another friend who ‘went right to alcohol and drugs.’ ‘The boom is over,’ said Crawford, a laid-off construction worker.”
The Miami Herald. “Justo Luis Fernandez isn’t feeling the urge to splurge amid the current economic gloom. The 53-year-old Miami car-rental agent expects to use money from the federal government tax rebate deal worked out last week for life’s basics.”
“‘I’d spend it on my household — on the things we need,’ Fernandez said. ‘Things are tight and pretty rough.’”
“‘I think things have changed for the worse [in recent weeks],’ said David A. Denslow, a University of Florida economist who thinks Florida’s housing downturn could drag on for a lengthy period.”
“Ask Richard Welch, a Miramar tax auditor, about the outlook and he’ll say ‘The worst is yet to come.’ He’s driving less and holding back on buying a flat screen TV and new computer to save money. And he doubts the stimulus package will be enough to get South Florida’s economy on track.”
“‘You’re going to see a lot of people lose jobs in the next eight to 12 months,’ he says.”
“Besides rising foreclosures, Welch says, many people are struggling with higher housing payments as adjustable rate mortgages reset to higher interest levels. ‘They’re not able to put that money towards restaurants and movies and to go shopping. That extra income is going to pay the mortgages. These are the homeowners who used to drive the economy.’”
“Many economists, like Henry Fishkind, say the region will power through the rough patch better than the nation and Florida overall.”
“‘We certainly have a housing recession, and we’re going to have a condo depression,’ Fishkind said. ‘But the general economic picture for South Florida is somewhat better than the nation and the state.’”
The Palm Beach Post. “So is Florida in a recession? With no guidelines for state or regional economies, the answer depends on which economist you ask.”
“No, says Sean Snaith, an economist at the University of Central Florida. ‘A pronounced slowdown? Absolutely. But I don’t believe recession is going to transpire,’ Snaith said.”
“Susan Jarrett disagrees. ‘You can see in the streets with the for-sale signs and closed businesses,’ says the retiree. And she expects it could take more than the president’s $150 billion economic stimulus plan to bring things around: ‘I think it will take 20 years for the economy to ever get back where it was.’”
“‘Everybody’s being affected by this economy,’ said Mildred Davila, a medical assistant who lives in Boynton Beach. ‘People don’t want to spend money.’”
“Local businesses and consumers are padlocking their pocketbooks, said Greta von Unruh, executive director of the Economic Development Research Institute, a nonprofit think tank in West Palm Beach. ‘We are clearly in a severe downturn.’”
“As for recession, ‘Is there any doubt?’ asked Paul Emmet, founder of Duffy’s Restaurants Inc. That’s not to say the chain is doing poorly. Just the opposite, said Emmet. But double-digit growth driven by housing sales has slackened, and established competitors such as RJ Gators have fallen by the wayside.”
“‘I don’t know about the rest of the country,’ says Duffy, ‘but Florida is clearly in a recession.’”
“After hitting record lows in 2005 and 2006, jobless figures are shooting upward in Palm Beach County and the Treasure Coast, according to the Florida Agency for Workforce Innovation. In December 2006, unemployed workers in the three counties numbered 26,638. But by last month, that figure had soared to 40,984, a 54 percent increase.”
“Sales of taxable goods ranging from clothes, cars and furniture to building materials and industrial supplies have been falling in Palm Beach County - and plummeting in the Treasure Coast.”
“It’s no secret that home prices have fallen, but figures released Thursday by the Florida Association of Realtors show just how serious the housing correction has been.”
“The median price for a single-family home in Palm Beach County fell from $421,500 in November 2005 to $337,900 in December 2007, a 20 percent decline. And in the Treasure Coast, the median dropped from a peak of $269,400 in September 2005 to $196,800 last month, a 27 percent correction.”
“Nearly 5,000 St. Lucie County households defaulted on their mortgages in 2007. Palm Beach County’s foreclosure rate skyrocketed to one for every 45 households in 2007. In some neighborhoods, such as Thousand Oaks in Riviera Beach, multiple houses on the same street slipped into foreclosure.”
The Northwest Florida Daily News. “The housing market in Okaloosa County is not expected to bottom out until the summer of 2009, according to a December 2007 study by Moody’s Economy.com.”
“‘These forward-looking projections are based on past trends,’ said Rick Harper, director of the Haas Center for Business Research and Economic Development at the University of West Florida. ‘The study does not capture the influx due to BRAC (Base Realignment and Closure).’”
“‘Those new folks who are coming in, they and their households will need homes to live in,’ said Harper. ‘I think they’re wrong.’”
“Realtor Diane Keller agreed and blamed the Destin market for much of the bleak forecast. ‘Destin built a lot of houses with nobody to live in them,’ said Keller. ‘At some point there has to be an end user. Someone has to live there and work in the community … for the market to stabilize.’”
“She said she has recently seen houses less than $200,000 in Fort Walton Beach — her primary sales area — selling fairly well. ‘Destin can’t supply that,’ she said. ‘Destin’s houses are too expensive.’”
“Another challenge facing the area is that sellers still refuse to acknowledge how far prices have already dropped, real estate agents say.”
“‘Probably 60 percent are still living in that 2004 mentality,’ said Realtor Debbie Gericke. ‘And you’re doing damage to a home by keeping it overpriced in a market that’s overcrowded.’”
“Gericke said she’s looking to a successful tourism season to boost the local economy and work through some of the excess property on the market. ‘People need and desire to own a home,’ she said. ‘If there’s no water in Atlanta this summer, then where are they going to come? We still have a lot of unrealistic sellers out there, but there are some good deals.’”
“Although Harper disagrees with Moody’s long-term assessment of the Okaloosa market, he does not dismiss concerns about plummeting prices. He warns that Florida must restore affordability and keep the area’s popularity from sagging.”
“‘I think 2008 will be an extremely difficult year,’ he said. ‘If Florida is not successful in fixing windstorm insurance or property taxes … then this (study) is a reminder of what the future housing market could look like.’”
“Over lunch, a Realtor tells me that those $250,000 houses are now selling for $100,000, when they sell at all. She also explains that most of the properties that are selling are ’short’ sales.”
So if I go into a restaurant and order a short stack of pancakes and while i’m waiting for them to arrive, they short sell them to somebody else, am I still hungry?
A price drop from $250k to $100k represents a faster drop than prices ever escalated! That’s 60% drop since the peak!
Still eager to buy a house in American Siberia?
Please explain. American Siberia? That must be cold, cold north Minnesota. No thanks. NW Pennsylvania is as far north as ill buy
That probably means the house is worth even less than that.
For condos, if a substantial portion are empty, and you need to fork out for maintenance, the true price can be, wait for it, negative!
“The Realtor herself fears becoming a victim. The blunt reality is that she is ‘upside down.’ Worse, she depends on scarce real estate sales for the income to pay the mortgage. Sadly, she is in the same position as the Texas condo slaves of the late 1980s.”
WTF? You are not a “victim”. You are a speculator that is going to lose a lot of money because you did not understand what you were doing. You didn’t want to understand what you were doing. No amount of plain talk and common sense could have stopped you from doing what you were doing. You lost.
You are not a “victim”. That title should be reserved for those that get cancer and other diseases, are on the receiving end of random violence, are destroyed by natural disasters and other such things that are completely outside of their control and influence. Labeling yourself such is an insult to real “victims” the world over.
Yeah, and Burns should know better. I read along as he wrote about the rise and fall of N TX real estate i the 80’s. I sent him a link to this blog in 2005. He wrote back with something like, ‘interesting, but why a blog on a housing bubble?’
Sadly, journalism, like housing, appears to be nowhere near its bottom. The decline is pointing straight down. Just look at all of the morons they put on the morning shows with their big opinions. I can’t even watch the Faux News Saturday programs any more. Mike Norman, Dennis Kneale, Tracy Byrnes, Charles Payne, Quentin Hardy, etc. are your experts? I saw Hardy at a Cisco presentation back in December. There were about 30 of us in the room, listening to him and a couple of other windbag journalists. Painful and pointless, to say the least. It is shocking to see what makes it in that profession.
Sadly, journalism, like housing, appears to be nowhere near its bottom.
They have to be near their bottoms, because both have their heads stuck up their butts.
I guess this doesn’t bode well for my daughter who wants to be a journalist. She wants to be a science journalist a la Carl Sagen and make science interesting for the masses. Intends to get masters in journalism at Columbia. I suggested the science writing masters at MIT. Actually, her sister and I said to write some sort of crap that will make big money (fiction) and then she can live for her art, but she’s 19 and still idealistic. What’s a mom to do!
Real-time hard-hitting journalism is being written every day on blogs, like this one.
That is to say, very few people will be able to earn a living being a journalist, in the old fashioned way… soon.
Ben’s the only one making money, here.
(a less than subtle hint to send him a little something, for the effort.)
“What’s a mom to do!”
Depends on who’s paying the tuition and other costs, IMO.
Naah, don’t do that. You won’t change the idealism, and she’ll resent you.
Bad juju.
There are some things only time can change. In time, she will figure out a middle way for herself. Everyone does.
and whether there is a poopload of loans waiting to be paid off post graduation.
It’s because news organizations figured out that having some loudmouth spout opinions is much cheaper than maintaining news offices all over the world. And viewers would much rather than tune in to some red-faced blowhard than actually learn about what’s going on in the world or the nation.
RE: windbag journalists. Painful and pointless, to say the least. It is shocking to see what makes it in that profession.
Seen the size of an issue of Time & Newsweek lately?
The used car section in the BGlobe is bigger.
Pathetic really.
Maybe the time is right to dig through your email archives and send him a reply to his reply?
Maybe you should write him again with another link, but diplomatically omitting “I told you so,” because diplomacy is our friend.
Yeah, I wrote to all the real estate writers at the Morning News a couple of years ago to clue them in that I wasn’t buying all of their BS cheerleading on the local real estate scene and offered a link to this site if they wanted some unbiased insight. They blew me off too and continued on with the “it’s different here” nonsense even though this area tanked during the S&L/Condo crap of the late 80’s which IMO will be dwarfed when the current tsunami finally reaches Big “D”. As we were driving through Uptown yesterday, my wife, without any encouragement from me, began to count the number of cranes in a little 1 square mile section of the city. The buildings just keep going up with absolutely no one to occupy them. Good luck Dallas and thanks to our leaders at city hall for throwing a boatload of tax incentives at these projects to get them built. Finally, it’s also fascinating to see the revolving door of retail establishments that come in to all of these projects, last 6 months to a year and then close up shop. The promised downtown residents never show up and the ones here don’t support the neighborhood businesses.
“The promised downtown residents never show up and the ones here don’t support the neighborhood businesses.”
Once again, developers and local pols just can’t wish a thriving streetscape into existence. IMO people seem to be demonstrating that they are more picky about where they shop than where they live. This will doom many a “downtown” nationwide.
You’re exactly right. I don’t go to the grocery store downtown because I check expiration dates and when stuff doesn’t sell, it ages. I go the Wallmart Neighborhood Market a mile from where I live because the items move off the shelves there, replaced by fresher ones.
I’ve read Scott Burns columns for about as long as you have Ben, and I think he lost his edge about a decade ago. (Hmm.. just realized that’s when he lost his son too).
I feel like he went from being in tune with the average man, to having only a partial sense of the issues at large. Perhaps it’s become harder to see pasy his own personal security and situation. Occasionally Pamala Yip has shown a much better sense of know what the masses are really experiencing, but I wonder if both of them are limited by the papers or their editors.
For what it worth, I just canceled my Dallas Morning News subscription yesterday. I had reduced it to weekends only since I spend my weeks in Austin, but now I am giving up a regular paper as part of my lifestyle. Big deal for me as I have been a regular, daily newspaper reader since age 8.
I didn’t know that about SB, sorry to hear it.
I was inspired by Scott Burns’ concept of “independently middle class.” Basically, being independently middle class means you have income from your investments to live a middle class lifestyle. In that scenario, you don’t have to work. But you have enough money to make car payments, mortgage payments, medical and insurance payments, dining out, entertainment, clothes and so on.
Works for me. It’ll be interesting see how engineering, science, sw development and other technical jobs play out in the next 10 years.
A bit OT.
Here’s a comment from another blog in NM.
http://lanl-the-rest-of-the-story.blogspot.com/2008/01/sf-new-mexican-coverage-of-udalls-visit.html
In context, “Udall” is the Rep for Los Alamos in the US House of Rep. “Mikey” is the Director of Los Alamos National Laboratory.
“Was it just me, or did it appear that Mikey was trying to speed up Udall’s departure near the end of the Q&A?
I liked the question from the lady who pushed back on Udall when he mentioned his desire to beef up the US math & science educational “pipeline”. Why beef up math & science education, she replied, when those who are already in the field can’t seem to find secure jobs even with the national labs?”
Main blog
http://lanl-the-rest-of-the-story.blogspot.com/
This blog has a long history and started with the first one on this list as shown in the links column of that blog:
The Original LTRS
The Former LTRS
The Former LTCS
These provide an insight of sorts into a place that has undergone a large and not altogether smooth transformation. Most don’t think much about the place outside the area. While many of the comments tend to be caustic, personal and non-informative, there are some good ones. The posts, mostly news articles, are decent.
Although I haven’t heard the terminology “independently middle class” before, it’s a good descriptor for the ambition that is sending our country down the tubes. EVERYONE wants to be Independently Middle Class. Sorry, that won’t work — someone has to provide the goods and services. So far, I’ve been Independently Middle Class for about 12 years. Dog Eat Dog: some of us Independent Middlers will survive as IMC, and some won’t. HBBers seem more likely to make it than others.
Everyone cannot inhabit the “rentier” class by definition.
For all those who want to live on “economic rent”, there has to a debtor somewhere to take on that debt.
That having been said, HBBers are more likely to make it than others. They tend to live beneath their means, and they “save”.
What a shocker, that last one!
az_lender, it takes years of taxpaying work to afford to build up the net worth to go independently middle class. Most 18 year olds won’t be independently middle class on graduation day. The point is you pay your dues. Most people won’t attain independently middle class status until they are at the traditional retirement age anyway, so it should be no problem. I understand your concern. Even if I attain that status, I will look for something constructive and productive to do on my own and see if I can make money off of it. I am fascinated about doing some software research, for instance.
The “independent middle class” SHOULD become the “independent missile class” and go totally BALLISTIC when the see their lifestyles go down the tubes and finally figure out that they were SOLD OUT by Wall St., the Beltway Gang and their lobbist Friends
Burns should have known better is right. He has written in the past about getting stuck with Boston real estate in the downturn there when he first moved to Texas.
Tell him its a Housing Foreclosure blog. HFB
Once again, a print journalist is critically looking at RE in an area that is beyond his local reader’s area. When SHTF in Dallas will SB be just as critical of his local area’s RE troubles? When Condos in Dallas are selling at auction for 25 cents on the dollar will the DMN report it with two short paragraphs on page 11 buried in advertisements?
I think he’s part of a generation that has already retired and doesn’t have much at stake. My guess is he probably thinks this will be like any housing slowdown that has occurred. The critical piece he is missing the advent of the internet as a medium to get the word out (he was still writing for the Dallas Morning News until he started his own website/company in 2006) and the growth of the derivatives market and its link to both commercial and residential real estate. He had a nice article awhile back but made it sound like this would just be another S&L crisis. I think it will be much much worse because there was a lot more price inflation and speculation and more debt taken on than in the 80s.
I’m sorry to hear he lost his son as well. That can’t be easy for anyone getting into the latter stages of their life.
Calling the realtor a “victim” is like calling someone who was driving drunk and was killed in a wreck he or she caused, a “victim” of a drunk driver.
You are not a “victim”. That title should be reserved for those that get cancer and other diseases, are on the receiving end of random violence, are destroyed by natural disasters and other such things that are completely outside of their control and influence. Labeling yourself such is an insult to real “victims” the world over.
AND people who paid off their conventionally-financed house, retired with a substantial savings, and now can’t make ends meet because of LOWER INTEREST RATES, rising PROPERTY TAXES (caused by phony valuations from the specu-flippers) and INFLATION. These people are among the only true victims of the “housing crisis” and nobody cares about them.
True. Renters were the only victims. Ppl like the realtor in the story were worthless parasites.
Renters victims. They were smart enough not to buy!
Existing homeowners whose PROPERTY TAXES went up were victims.
I hear ya. I bought my house 12 years ago and knew how much I wanted to pay, knew that no more than 28% rgoss per month with loans (even though I had no other loans) was the way to go. In the meantime, my friggin’ taxes more than doubled to help build schools or some shit. Well what the hell, if they’re going towards building schools for all the new houses in the township, shouldn’t that come out of the additional revenue from the taxes on those new houses. If anything, like an inusrance pool, the larger the pool the less the premium, not more.
Well, that pretty much describes me, except I am not retired, and probably will never get to retire as the FED keeps its war on savings going strong.
I also expect that when it’s my turn to dip into the bucket of all the SS money they took from me that it will be “means-tested” away for the benefit of illegal aliens and their off-spring.
Inflation will kill this country in the end, even if the official version tells us another story.
RAISE INTEREST RATES…………….stop rising prices.
LOL. If we had had the “stimulus package” a couple of years ago, I’d have gotten my few hundred bucks. Not now. Too “rich” - not that my income would support buying a house! (I admit I do have the dough, will buy house for cash when a safer time comes.) Anyway, the bait-and-switch trick known as inflation is something you just get used to over a lifetime …
I was the victim of a roulette table a few times.
Old reality TV show = Flip this house
New reality TV show= Pimp this ass
This realtor will surely be a contestant.
“People are cutting those services out because they don’t have the money.”
What! No money? What happened to all that fiat currency that we are supposed to be flooded with? People on this blog say the Fed can print all the cash they want and drop bundles of it out of helicopters, so where’s it at? Where’s the cash?
Cash-hugs drive fiats with worn out ire.
Excellent point. What the heck does a rate cut mean to a person who doesn’t see job prospects? This is what people failed to see during the boom. I’d have trolls post about how the Fed ‘can’t let housing fail.’ The world doesn’t work that way. Recessions are how the economy purges malinvestments. In this case, reallocating ‘resources’ (meaning jobs/capital) back into more productive parts of the economy. It is easy enough in theory, but requires a painful transition for the people on the ground.
Note to Washington: the sooner we get this over with, the better for all concerned.
–
I have been saying that for a long time in my arguments with “Printing Money” inflationists. There was no printing of money, only pushing of debt, and that game is coming to an end. Bernanke pushed for the fiscal stimulus because he knew that raining money on banks wasn’t getting to those who would love to spend. We are running out of more money to spend. And most of the extra money spent was borrow-and-spend money. Now, only the Federal govt can borrow-and-spend, but how much and for how long?
Jas
Bernanke is a tool of the Bush administration at this point, an administration I usually support.
Bernanke knows he is impotent to do anything meaningful to stop this debacle. He knows, too, that he will ultimately be held responsible for it and replaced when the next administration takes over in ‘09.
The poor guy was simply in the wrong place at the wrong time and is going to have to shovel Greenspan’s sh-t.
>> the Federal govt can borrow-and-spend, but how much and for how long?
At $300 oz. in ‘01, Mr. Pretcher said gold would go to $250. Gold is over $900.
At 2,500 Mr. Pretcher also said the Dow would crash to under a thousand. We are still over 12,000 today, down from 14,000.
Yup, sure looks like deflation to me!
Funny how ever since there’s been paper currency, there’s been counterfeiters; granted, most have been in it for their personal enrichment, but counterfeiting has also been done as an act of war by other governments to destabilize enemy economies. We complain about North Korea possibly counterfeiting our “supernotes”, but what do we call it when our own gov’t prints funny money?
Uh, Alex, what is “GDP growth” for $500.
You know what pisses me off, when some idiot clerk in a Quickee Mart pulls out a black marker to check my twenties I got from the ATM machine, what’s the point? They make a big deal out of counterfeit money printed in Korean or Afganistan or something but don’t worry about counterfeit money streaming out of the Fed.
Even so, I got in one clerks face about it because basically she’s going to take a bill I got from an effing ATM machine or from the clerk at the bank and then proceed to possibly nullify my money and then hand it back to if it turns out some asshole in Korean printed it. That’s BS. Sorry, you took it, it’s yours now clerk, you want to make it possibly invalid while it’s in your hands, it stays in your hands and give me my change please.
What the heck does a rate cut mean to a person who doesn’t see job prospects?
Rate cuts mean nothing to those who do not have a job and when goods cost more than local wages. Most realtors and realtor associations just don’t get this point and are part of the problem.
People need to understand that your house is only worth what someone is willing to pay. The flippers and investors were willing to pay the high prices in their attempt to profit by manipulating the market, but the end users are not willing to pay these high home prices and the banks are not willing to lend beyond the borrowers means in todays market.
“The Realtor herself fears becoming a victim.
This is the perfect example of greed by a realtor/investor/flipper who was trying to drive up housing prices in this market. This realtor is a victim of their own greed in their attempt to manipulate the housing market Now the real lesson will be learned by this realtor as this person will be drained financially and ruined through their own greed!
“People need to understand that your house is only worth what someone is willing to pay. ”
My house was worth what an appraiser would say to get me an equityline so I could cash out at 100% LTV. Tighter regulations have caused me “less cash out” opportunities
It’s all about cash flow. Because of “free trade” salaries will be flat or decreasing given that the layoffs are already occurring. Life in
America as we have financially known it is rapidly disappearing.
“Free trade” is war on the middle class. A broken financial needy person is easier to control than a financially independent person.
Every recession I’ve experienced has washed away more and more of the jobs infrastructure as business owner’s say I’m tired of the never ending taxes and bureaucratic regulatory harassment.
So it’s offshore we go.
No more FICA-no more EPA-no more OSHA-no more state revenue agents-no more sexual harassment lawsuits-no more double-digit worker’s comp hits.
What’s left after this downturn won’t be much.
Yes, each recession does seem to cut deeper into our economy. This recession will probably wind up being the recession where globalization induced job loss is no longer a distant specter in another state, or in another town, or even down the street - this time it may very well sit down next to a fella on his couch and try to steal his beer.
The checks they’ll be dropping on some won’t make much difference, either. Not enough to really do anything substantial or life changing. I still contend they will keep coming up with these stupid plans in hopes of votes. They will give the people just enough to think they’re getting something (giving the tax money back to the people comes to mind). Most of the general public only watch TV soundbites to get news and certainly don’t read blogs like this. They think the stock market going up means the economy is OK. They believe the phony economic and jobs stats put out by the government and they think that their neighbors, friends and family’s financial woas are personal and not indicative of a larger systematic problem. And, if they get too depressed, they just numb themselves with TV fiction.
If cutting interest rates below the rate of CPI inflation and mailing checks to people who don’t pay taxes doesn’t qualify as helicopter drops, nothing does. This is only the beginning of the helicopter drops; expect more and more aggressive measures. I’m not saying the Fed will save limo drivers. The Fed doesn’t care about small businesses one bit. They do care about the big banks, and they have successfully (so far) held down long interest rates at record lows. They have sparked a refi boom. Hell, I can get a 15 year mortgage below 5% now and while I don’t want one, some people are going to take the bait. Bernanke is following the script and printing like mad, and they are going to inflate a bubble somewhere. So far it seems to be in PMs but that could change.
The national evening news broadcasts yesterday were full of cheery stories of sudden record applications to refi. Everybody is smiling. So folks are now refi-ing themselves into depreciating assets with no bottom in sight for housing prices. And this is supposed to be good news?
OK then. Stupid is as stupid does.
Soon, very soon…
Somebody high up enough will do a mea culpa, and expose what we all know to be true.
Truth prevails when dishonesty fails.
Yes, I noticed this misleading statistic. The rise in refis is due to rising rejections from more strict lending standards. Anything to spin this disaster into a positive.
rising applications
$150 billion “stimulus” is a money drop, plain and simple. It isn’t over yet, not by a long shot. Monetary policy alone can’t do it. Bernanke isn’t the only one on the “economic team.” This is both parties across both the legistlative and executive branch. It’ll be the executive, legislative, private central bank, and other large investment banks working together to bring “change.”
We’ve had soft communism. If these folks are serious, I have no doubt they have the power to institute hard collectivism. I’m sure it won’t be called communism. It’ll be some other term to clothe the naked fact that it is some version of collectivism.
They are serious. They are just poking around to see if they feel the people will revolt, or will lick it up and ask for more of the same. If it is the latter, standby for some serious change. Be careful what you wish for, you just might get it.
“Places like Cape Coral went from southwestern Florida swampland to bustling bedroom community and one of the state’s centers of a building and buying boom.”
“While the housing bubble burst nationwide, North Port is a bedroom community and retiree haven that has little industry beyond construction.”
Cape Coral and North Port are “bedroom” communities????? For what city? Miami or Tampa, which are about 2 hours away? Give me a break. I’ll leave it to other posters to come up with some clever ideas about why these godforsaken subdivisions should be called “bedroom communities”.
Maybe because there are no jobs there so there is no good reason to leave your bed.
I’ll take that on. They are called “bedroom communities” because that’s all they have….places to sleep. There are no supporting industries. They were originally built for RETIREES. They get a check from the government for their source of income.
The car lots, stores, gas stations and various supporting service businesses grew up as a consequence of a block of residents with money to spend, though limited.
The “real estate boom of 2000-2005″ brought huge amounts of “growth” in terms of housing units. The error, of course, was this was assumed to be more residents with government money to spend. The houses are now empty. There are no new residents except illegals who came to build the houses. The only industry was homebuilding.
But you still have all those bedrooms waiting for occupants. Vandals will camp out in them temporarily, before they strip out whatever they can for some easy cash.
For a cleaver “entrepreneur”, i think a metal recycling business would probably bring in lots of money. Metal prices are up and there’s plenty of copper and aluminum in those houses for enterprising thieves.
That will bring a new economy to the area.
These aren’t even good retirement communities, unless your retirement goal is sitting in a lanai and staring at the varmints in the drainage ditch behind the house.
“…staring at the varmints in the drainage ditch behind the house.”
Ah, the good old days before the Offense Department handed off to Homeland Insecurity. Used to be able to sit out back with a .22 and pick off those varmints. In fact, if you didn’t have a .22 handy, you were considered strange.
They’re bedroom communities for the New York, except most people don’t commute, they just saty up in New York.
“the roads are still busy. The cars are still shiny. Massive new shopping centers greet the snowbirds,”
Paradigm shifts take a long time to sink in. Bubbles don’t pop suddenly, they echo and there are dead cat bounces, etc. Witness the stock market which had several phases of a crash starting in the late 90s. Many people who had correctly sold out bought back in at what they thought were bottoms, only to lose when the market legged down. They didn’t realize there had been a fundamental change and the market was not going back to the old highs; not for years and years.
IMO this is the end of the first leg down in real estate. Those 250k houses that are selling for 100k now will sell for 70k on the next drop. There hasn’t been capitulation yet. We aren’t even close.
The only thing that saves homes from being pet.coms or the like, is we all need a little shelter.
The pendulum has only swung back a little ways from it’s peak, and one should never get in the way of momentum…
“There hasn’t been captiulation yet. We aren’t even close.”
And each drop toward capitulation will erase hundreds of billions of dollars of “equity” from the system. The erasure of thin-air dollars will make the spendable kind (M0 and M1) that much more valuable.
Cash is king.
My question is why Florida, but not Pennsylvania? I mean $250k to $100k is incredible. Haven’t seen anything like that in my area.
Because they have bigger inventory and more flippers panicking to exit at ANY cost. A problem is that RE is illiquid and that prices are “Sticky” on their way down.
Pennsylvania will see the same effect but at a different timeline. RE bust is at different phases in different locations. Like a roller coaster, the boom locations are the ones leading on the downside.
I was wondering the same. Accroding to zillow, Pennsylvania was “worth” more in 1998 than Florida. Besides Philadelphia(nice big city with lots of jobs and “close” to NY, wouldn’t most people choose to live in FL than PA at the same price?)
I saw a $50k 525 square foot house on 5 acres in NW pennsylvania. The house is worth maybe $15k, the land $7k an acre which looks to be way too high considering theres miles of land in north FL anywhere from $10k to $30k an acre and ive been told those prices are going to drop to an average of $4000/acre. Ive been told NW Pennsylvania land should be no more than $1500/acre. Comments please!
I am outside Philadelphia. I’m struggling with seeing small ranchers or townhouses (that aren’t complete dumps) listing in the mid-$200s. Too high. They were easily affordable to someone like me back before the boom (guess I moved back from Chicago just a tad too late).
And while living near a big city does lend to the old “location, location, location”, these burbs have been getting “rougher and rougher” in the past several years. More crime, changing demographics. Not saying they aren’t still decent areas to live in, just saying the realtor argument of how great they are is silly since things have slowly been changing for the worse.
I don’t buy this “location, location, location” hype. If it doesn’t come down to jobs(im self employed) then one location is almost as good as the next. For me, it’s house prices, low crime, climate, shopping, natural beauty.
“More crime, changing demographics. Not saying they aren’t still decent areas to live in, just saying the realtor argument of how great they are is silly since things have slowly been changing for the worse.”
Hey, are you saying the Ownership Society was a bad thing? LOL Most of those people had no business owning a house. If you’re a dirtbag (not you, I’m just talking in general) I don’t want you in my ‘hood, and I highly resent free guvming play money to these people to allow them to move in a act like the trash they are.
And where will those prices be at the bottom? If $250k homes are dropping this much, would this mean $1m homes could potentally drop to below $250k in parts of California? Ive been ridiculated for predicting such huge drops! No one believes prices will drop more than 30%
We could see 1985 prices in some locations. Most locations will drop to 1998 prices or lower. Should I worry that some locations won’t drop enough in price or is there no such thing as “its different there”
It’s a great question, Bye FL. Every non-believer in West LA always repeats something along the lines of: “West LA prices will never drop that much…go to the other side of the hill if you want major price drops.”
But I don’t buy it. Nothing is selling in the Inland Empire and we are already seeing 40 percent price drops. I think you will be able to buy in that area for 25 cents on the dollar before long…
According to Robert Shiller in the book Irrational Exuberance, prices can only drop so much anywhere, before it causes people to second guess their areas’ home prices, which in turn causes them to leave the area.
I have to believe we will see that everywhere, but I’m very curious if those ratio of price living in prime area (IE West LA) vs. outer areas (valley, Inland Empire) will mirror those ratios of the bubble peaks…
Also, tracking this in the SF Bay Area, as I have a friend jonesing to buy in San Carlos and I have been pleading with him to hold off.
The only place I’ve read an in-depth analysis of this is Shiller’s book. If anyone else has any in-sights or article recommendations, they would be much appreciated.
How far can prices drop depends very much on how far incomes can drop. Getting the speculative fever out of house prices is just the beginning, and easier to “calculate” based on the average (past) earnings in the area. The tricky part is taking a wild guess at how bad the recession will be. No one knows. If it gets real bad, we’ll probably send everyone your age over to die in the sand dunes and leave geezers like me here with pea shooters to watch the back door. That’l sure reduce demand for housing. Right now, the bottom line in places like Oil City is how much a month is Social Security or Welfare or VA benifits. That and some lumber, a little dwindling hunting and the landfills are all the economy is based on. Social Security/4 * 100 is kind of a floor. Call it $40K if you will (for now). Mileage may vary.
Persoanlly, it would make me happy if you would stop making predictions. You have way more questions than experience.
Personally, it would make me happy if you would stop pretending that you will buy a McMansion when prices correct. We know you don’t have any money saved to do this, that may come in your life, but you are not there. Have you spent any energy investigating what a bank will lend you based on an $8 do-it-yourself dot.com (possibly even unreported to the IRS)? I respect you for pulling yourself up by the bootstraps this way, I have worked for much less, and supported wife and child, and it ain’t easy.
At your age (being an old fart I can reconcile talking like this) you should strive for a low impact lifestyle. Flexible. Live below your means without debt. If you save a dollar a day you will be wealthier than most Americans.
I participated on-line in a condo auction in New Smyrna Beach for 30 brand new beach-side units on Saturday, at a place call OceanWalk. I did extensive fact-finding before the auction, going to county property appraiser and zillow websites covering that particular condo complex and all the surrounding areas. I tracked and recorded all the sales occurring in that condo development going back several years and nearby areas. What I found was that 2BR/2BA 1,300 SF units are currently listed for short sale at $195K and recent transactions in late 2007 were about $225K in non-auction sales. I was thinking I may get a chance to buy one of these brand new ones for $150K, after all this is an auction and if you can’t get something at an auction cheaper than regular sales, what’s the point.
Oh well, wishful thinking. The first 2/2 unit came up and within 45 seconds the price shot up to $225K, BEFORE 10% buyer’s premium kicked in. So some auction buyer paid about $250K for a 2/2 he or she could buy for $195K straight-up, before any negotiation. I wonder if these people did the homework I did before coming to these things and know what they were doing? Did they search all the units that are currently for sale or have sold in the past several months to see what the “regular price” is before bidding on an “auction price”? I think not. Good thing I didn’t spend $400 on a plane ticket & hotel going down there in-person (I live in NJ) instead of just wasting 3 hours on-line Saturday.
Looks like foolish money is still out there.
Could have been shill buyers. It is probably illegal, but like e-bay, maybe the builder/owner had “friends” bidding to make sure the condos did not go too cheaply and to create a sense of frenzy.
Bingo
Definitely some of that as the auctioneer was very good in saying things like “Look at this beautiful unit, save $100K today off list price”. I am not the type who gets persuaded in such non-sense; I know what I want to pay and not a dollar more. I just wish they had a live video link so I can see what the in-person bidders were like… were they totally under the spell of the auctioneers or are they carrying notebook full of past-sales/currently for-sale information and checking them constantly to make sure they are in fact getting a great deal?
“Looks like foolish money is still out there.”
Not for long.
I also vote for shill bidding. It seem to be the norm now. It will come back to bite the owners because what they will get a year from now will be less that what they could have gotten now in a legitimate auction.
I vote for shill as well. My friend confirmed in Ohio, he wanted to bid on houses but the shills kept outbidding him and others.
Auctions are a waste of time, just find some desperate seller or buy from the bank directly.
Auctions are not a waste of time, as long as they are bonafide.
99% of the ones happening now, are bogus.
“What I found was that 2BR/2BA 1,300 SF units are currently listed for short sale at $195K and recent transactions in late 2007 were about $225K in non-auction sales.”
How can there be short sales already happening if the auction units are “brand new”?
“How can there be short sales already happening if the auction units are “brand new”?”
The short-sale units are in the same condo complex, just a different building completed in an earlier phase. The 30 new units are in the third phase or something like that, but there are units in the earlier phases that are already being sold for below the auction prices. So go figure.
There used to be a few climate change deniers on this blog and they’ve gone quiet on us, for some reason?
I keep reading about crazy windstorms and the damage they cause.
I never heard of this phenomenon, until just recently…
“‘I think 2008 will be an extremely difficult year,’ he said. ‘If Florida is not successful in fixing windstorm insurance or property taxes … then this (study) is a reminder of what the future housing market could look like.’”
“There used to be a few climate change deniers on this blog and they’ve gone quiet on us, for some reason?”
A lot of this came from Coté (and others from his blog). It died down when he became less regular.
I guess you can call me a “climate change denier”, if you need to categorize people. 20 years ago the environmental hot-button was ‘global cooling’. There was going to be another ice-age and we were all going to die like the dinosaurs, because of population growth and industrialization. Don’t get me wrong, I don’t think that billions of people and resource depletion/industrialization don’t have an impact, but I honestly do not think that we have adequate or accurate enough information to make those claims. We don’t even know what is at the bottom of our own oceans, yet we are supposedly certain of temperature trends for the last thousand years? We can’t predict earthquakes, but science can predict the future climate? The time span for which we have accurate measurements is statistically insignificant in terms of geologic time. Satellite data has only been available for less than 50 years. What we are doing to the planet is not positive, but I don’t buy the “fact” that science has the answer.
man, have you been in a cave? that was 30 years ago, and it was started by the media (who were loving the Blizzard), NOT climate scientists.
BS, Global warming has been on the agenda since at least 1953.
I recommend TED to get unbiased information.
from Youtube.com
David Keith: A Surprising idea for “solving” climate change
http://tinyurl.com/25m6ce
“The problem is absolutely solvable.”
The talk starts out with a picture of the New York Times from 1953.
That really is old news, even without reference to a 1953 headline, but in the 1970s and 1980s, many, many environmentalists were claiming all the CO2 in the atmosphere was dangerously close to producing a new ice age. Some articles to this effect were still being published in the late 1980s.
The BBC has done programs on global dimming caused by pollution, holding temperatures down, but reducing the amount of sunlight hitting the planet also affects crops, and global dimming is blamed for many famines in Africa.
The simplest solution to all of it seems to reduce reproduction via contraception, till the replacement rate is lower than the death rate. Fewer people = less pollution, less starvation, less misery. Scientists tinkering with the atmosphere to produce one result or another would probably cause more disasters than they could ever hope to avert.
If climate change is indeed human-induced, then maybe a global economic slow-down is just what the doctor ordered. Factories go dark. Prayer and fasting come back into vogue (low energy consumption). Square dancing makes a comeback, replacing computer gaming and YouTube. The planet is saved! Look for the silver lining! I’m in favor of global warming. BOO! I’m sooo scared.
Hi Beer and Cigar Guy. My reply to aladinsane hasn’t appeared yet. In it, I said that I haven’t read any posters with brains here denying climate changes, but please don’t take this as an insult (your letter hadn’t yet appeard when I posted mine). What you call denial isn’t; its cautious skepticism. You aren’t denying changes are happening, just questioning intepretations and predictions. I remember when they were predicting an ice age, too, and no, it wasn’t a story created by the Press: I had classes at U.S.F. where it was taught as absolute fact, and textbooks to prove it.
Climate predictions are notoriously inaccurate, even two or three days into the future.
The trouble with documentaries such as Gore’s and others is that their writers often cherry pick “evidence,” and good editors can splice any film to make a case for anything. There was a documentary several years ago called “Conspiracy Theory” that claimed we never went to the Moon. It was extremely well-done and very convincing, except that it was all malarkey. The producer had made a successful Hollywood film (”Capricorn One,” I think) with the same theme (substituting Mars for the Moon) years previously, and just rehashed the idea for a supposedly true expose.
Yes, ice caps are melting. This is real. But, the oceans haven’t risen yet. The average tide line here on Bayshore is exactly where it was twenty years ago.
About this time last year, there were intense windstorms that came down Hwy 14 towards L.A.
They caused the power to go out for about 250k Angelenos, for about a week.
I was reading the L.A. Times blog, and one guy said he was driving on the 14, and the winds busted his windshield inwards towards him.
Anybody ever hear of that happening, before?
I haven’t, but I can try to find out. When it comes to California, almost nothing seems surprising.
The letter below was posted long before the one above. I don’t know the filters work here, but chronological order doesn’t seem to be a factor.
Another funny on the global wamring thing, apparently our induistry and SUV habits are so bad they’re actually affecting the polar caps on Mars too. Who’d a thunk it?
Apparently the CFO and the NWO were working the climate change thing back then but the actual weather patterns were throwing a wrench in their plans so they had to do an about face and say, “Oh wait, did we say global cooling, no we meant warming, yeah warming. That’s the ticket.” LOL
Perhaps they found a more appropriat blog. Why not stick to housing bubbles on this one?
Good point. Sorry.
Ignoring the future of our environment is a recipe for disaster, and yes, it goes hand in hand with housing bubble.
See the Aral Sea, for instance
http://en.wikipedia.org/wiki/Aral_Sea
““There used to be a few climate change deniers on this blog and they’ve gone quiet on us, for some reason?”
A lot of this came from Coté (and others from his blog). It died down when he became less regular. ”
There is a portion of intelligent discussion here, but it is mixed with fervor. “I’m right because I know it. End of discussion”
“Science” bloodied by politics and neo-religion. Whenever skeptics are labeled heretics scientific protocol isn’t being followed, it isn’t even understood. Those who label logical skeptics as “deniars” have parted with logic.
‘There is a portion of intelligent discussion here, but it is mixed with fervor.’
IMO, you are engaging in symantics. Say what you want and defend it. What is wrong with that? If I say it is and you deny it, what am I to call you, a disagreer?
Scientific protocol? This is a blog! And economics is an art.
I’ll stick with the ‘portion’ I find around here.
Fair enough! But “denier” is for holocost history rewriters. It bugs me to have that applied to global warming apologists, which is not economics. Then again maybe it is.
note to self…Do not post stupid stuff when plastered.
There have always been crazy wind storms; only now they make headlines as global warming and its possible effects have become trendy to exploit. Notice we had no killer hurricanes in Florida last year, despite all the ghastly predictions, but the predictions got the headlines, and their spectacular failure did not.
I can’t remember any posters on this blog disputing climate changes (but, then, I don’t read every post, so I could have missed lots of them), only the contributing role of humans. Is global warming man-made, or is it cyclical? The thing that puzzles me most in all of this is why nobody is addressing the overpopulation problem. Whether global warming is our fault, or Nature’s design, creating zillions of human replicas cannot be good for the planet.
Incidently, I don’t believe requiring everyone to buy toxic mercury-based compact neon bulbs instead of incandescent bulbs (Bush signed this into law, to take effect in five years or so) will help the environment, but it will definitely help GE (owner of NBC and CNBC), a leading voice in the supposed green movement (NBC has endless “green” reports all of a sudden, and all of them promote technology that GE just happens to be marketing).
On the bright side, there is a worldwide subcult of people who believe the world is ending on December 21, 2012, so the price of real estate should be collapsing for at least four more years.
If it makes you feel better Incredulous — from Popular Mechanics: Even if the mercury contained in a CFL was directly released into the atmosphere, an incandescent would still contribute 4.65 more milligrams of mercury into the environment over its lifetime.
That makes me feel better, yes, but I still hate those compact florescent bulbs, and I cannot believe we are going to be forced to buy them. They’re ugly, expensive, and the light they give off is hideous.
I recall reading that CFLs will soon be obsolete, replaced by LED technology.
This conclusion bears definition; the “contribute 4.65 more milligrams of mercury..” is based on calculating the incremental power plant mercury emissions due to the addition energy required by the incandescent over it’s life, not the direct mercury contribution of the devices themselves. If this sort of consequential effect logic is to be used, then please stop recycling as the energy required to gather and process recycle waste exceeds the original product input energy. As in all things controversial in nature (including global warming), the data can be distorted, cherry-picked, and manipulated to draw a lot of different conclusions.
Thanks Cracker Jim for clearing that up. I think I’m going to stock up on incandescent bulbs right before the stupid new law goes into effect. I should be able to buy truckloads for next to nothing.
I wouldn’t stock up too much on bulbs. I have noticed that they “age” in the package and the ones that have been sitting around a while seem to last far fewer hours than the ones that are fresh. If you do stock up get the GE. The sylvanias are c**p and so are the phillips.
I don’t deny climate change, I deny the reasons people have for those climate changes.
And I question the impartiality of the scientific community, living high on the global warming grant funding hog. As well as their post-communist enablers who are looking for a new secular religion to replace the debunked faith in marxism.
OTOH, waste not want not.
I’m organizing a $10k bank run for this Monday, if anybody wants to join me.
Is this a charity run to raise money for the bank?
Participants must have proper fiscal fitness, to partake.
What is $10k, the unreported cash transaction limit?
You should know by now, how I like to torture words…
Combo 10,000 meter run/$10k reporting limit.
I’ll do a $1k bank run. I’m not going out of the country though
Stories from the front lines. I’m a practicing commercial architect in Houston, Texas. The Houston economy seems to be doing ok, but I have heard the following stories from friends:
1. I personally am busy, being involved with multi-family rental. Those guys are booming right now, as they don’t rely on banks for financing. Traditionally they are funded by pension funds and insurance pools. Also, lots of folks are suddenly not homeowners anymore.
2. One small condo project I had was DOA last September, never having made it out of pre-sales. Another developer I know is bleeding $35k a month on a smaller infill condo project located in a good area. Nothing is moving.
3. A builder I know is sitting on 17 finished housed, no buyers in sight, and is slowly bleeding to death.
4. I have several ‘recession proof’ wealthy oil-business clients building fancy houses. One told me friday to ‘take-my-time’ as they believe the house construction cost will be cheaper in a few months.
5. I know several other architects that have been spending a lot of time rearranging their desks for the last couple of months. Lots of stuff still in the pipeline for a number of firms, so most architects are are still busy.
6. Houston is developing an overly large number of ‘lifestyle’ retail centers. There is no way they will all make it. My favorite is the crazy guy from California that is building “The Pavillions,” a multi-story open air retail project in downtown Houston. It does rain a bit here, and the humidity is a killer. He seems oblivious to those facts.
7. I know people that work with affordable housing organizations here in Houston, and they told me last week that the banks have all clamped down on back ratios. HUD assistance allows back ratios of 50%-55% with Down Payment Assistance programs and the banks have been complicit in lending to these ratios. The banks have all cut their back ratio requirements to 42% in the last couple of weeks, with no exceptions. Keep in mind that these are the programs that are mandated from the Community Reinvestment Act. Just to give everyone a frame of reference, these are houses that retail for $109,000, which gives you a 1250 brand new three bedroom house in Houston.
I’m posting because I’m always interested in hearing what other insiders are seeing and hearing in their markets, so I thought I would share. Thanks for such an informative blog, folks.
MT
MT, thanks for the anecdotes…
“Houston is developing an overly large number of ‘lifestyle’ retail centers. There is no way they will all make it. My favorite is the crazy guy from California that is building “The Pavillions,” a multi-story open air retail project in downtown Houston. It does rain a bit here, and the humidity is a killer. He seems oblivious to those facts.”
That guy is a nutter…
If you wanted to do me in, life sucking humidity would do the trick.
Yeah, high humidity is a killer. Phoenix has Desert Ridge, which is an outdoor shopping mall with restaurants, movie theaters, and such. It’s popular all during the year, even in the height of summer. Dryness is a world of difference! In five months I will expect posts from whiners and such about how bad it is to live in Phoenix and “I’d rather pay $8,000 monthly mortgages by the ocean than pay $300 monthly air conditioning bills on a house with a $2,000 monthly mortgage in Phoenix” - all other such wit.
MT: Thanks for posting. I was intrigued by “The Pavillion” so googled it and found http://www.realestatejournal.com/propertyreport/retail/20060127-herrick.html
I don’t think it will work either. Open air has some precident in Rice University village which is pretty popular. However, downtown rarely venture to downtown itself. I’ve always found the parking and traffic lights too much hastle.Parking in downtown is pretty steep.
To add to your comments on residential. I see a lot of new places going up around Washington towards memorial. Lots of for sale. The area is still semi-gheto (Taco places near tapas bars !) and popular place for illegals looking for work. The one drawback of this area is the railway line which is used at night and with it’s slow moving/mile long trains, you’ll hear the blast of the warning siren for a good 15 minutes. It is loud !
I’ll have to take some pictures of the area and especially the builders bill boards boasting last year of “how much properties gone up” to this year “limited time free upgrades”. Funny to see same properties on both ‘for sale’ and ‘residential lease’ on HAR. I would be very cautious about renting from a builder. He is a very reluctant landlord and that is signaling a potential bankrupcy in the happening. Your lease would count for nothing in that situation.
Even some of my collegues at work are commenting about housing and how overbuilt greater Houston is where some of the neighbors are selling but it just sits on the market.
What is a lifestyle retail center?
Its a gussied up strip mall. Outdoors, they sometimes try to recreate the feel of an old downtown. But at the end of the day, they are just fancy strip mall with an anchor store or two.
We have “Hyde Park Village,” which is an outdoor (i.e., uncovered) shopping center (they call it a shopping “district” or shopping “village”), that sound’s about the same. I still don’t grasp what the “lifestyle” involved is supposed to be. It seems that most people here have pretty much the same “lifestyle” unless their living in an iron lung.
I wonder what would happen if FL gets hit with another major hurricaine in the next couple of years (certainly don’t hope that happens). Last couple of times it seemed like the affected areas were built back up relatively quickly, but I’m not sure that would be the case in the current market.
Hurricanes sunk that last boom in Florida in the ’20s, I also pray it doesn’t happen again.
In October 1925, in an effort to improve Florida’s clogged rail system, the railroad companies placed an embargo on all railway goods other than food, which further contributed to Florida’s skyrocketing cost of living. New buyers failed to arrive, and the property price escalation that fueled the land boom stopped. The days of Miami properties being bought and sold at auction as many as ten times in one day were over. The first Florida real estate bubble had burst.
The next year brought the 1926 Miami Hurricane, which drove audacious Biscayne Bay development projects such as Isola di Lolando into bankruptcy. The 1928 Okeechobee Hurricane and the Wall Street Crash of 1929 continued the catastrophic downward economic trend, and the Florida land boom was officially over as the Great Depression began.
http://en.wikipedia.org/wiki/Florida_land_boom
It might help with the inventory backlog.
Punta Gorda got flattened last time (a few years ago), and now sports all these million dollar McMansions. I guess the builders could get the land for practically nothing. There’s nothing there. It used to be migrant workers and trailers. Now, it’s migrant workers, trailers, and empty gitchy condos and McMansions. It has to be one of the ugliest spots in all of Florida.
IMHO, the builders, rehabbers, etc have transformed many areas of Florida from a ho hum middle class / affordable environment to an incredibly expensive mecca of McMansions, luxury condos and high end shopping malls. This was all financed by uncle Al’s cheap dough, and now they are shocked that only a tiny percent of the population CAN AFFORD IT!
Here we go. This project is pretty much the most prominent (in location) condo construction in Tampa. And it is poised to be a spectacular disaster.
http://www2.tbo.com/content/2008/jan/26/bz-condos-in-chapter-11/?news-money
Notice the realtor/investor trolls posting “everything will turn around” propaganda. The area is not a crown jewel of Tampa, it is an industrial wasteland posing as a tin crown. The views are horrible; the air is so filthy, contracts include disclaimers (Harbour Island has a very high cancer rate compared to other areas). All of it should be knocked down. I understand the developers were give no-property tax deals by the city to build all the crap in Channelside, and now the city will be able to use the buildings for Section 8 residents (the same people who lived in that area before). For the city to replace old public housing projects with new ones at developers’ expense is very clever.
“Beth Mann lived in West Palm Beach until a year and a half ago, when her husband was offered a teaching job in Georgia. He took it — at a higher salary than he was paid in Florida — and they moved to Buford, Ga.”
“Their house is three times bigger. Their property taxes are 75 percent less. Their home insurance bill has been cut nearly in half. ‘We’re like, ‘Why didn’t we move sooner?’ she said.”
And the beat goes on as thousands upon thousands say “bye FL”
I am going to be one of those. Prices are soooooooooooooo much better elsewhere, the disparity is shocking!
““According to http://www.realtor .com, Fort Myers has more than 12,000 listings, with nearly 2,000 available at $125,000 to $175,000. Many cost less than $100 a square foot.””
Wow we are already down to $100/foot? I haven’t seen this low price anywhere else in FL, even north FL costs more! Gainesville is pretty nice but prices are majorly out of whack, it’s taking longer for prices to drop there. It could be possible Palm Beach County and Gainesville could reach parity in price. Must be all those UF students buying/renting that keeps prices stubbornly high.
Gville has had a population increase, and the building started very late.
Also, lots of subprime lending.
Gville is going down, only a matter of time. Condo market is already toast.
I feel sorry for my sister’s boyfriend’s father who spent $200k on a luxury midrise condo for his daughter to use and he wants to flip it for profit after 4 years. He will end up losing $100k plus
No offense, but I don’t feel sorry for anyone who wants to “flip” anything and fails to profit therefrom. Flipping is gambling, just not in a casino. Tough noogies.
“Another challenge facing the area is that sellers still refuse to acknowledge how far prices have already dropped, real estate agents say.”
The realtors and the reators associations were the ones telling people that real estate prices would never fall. Now they are telling the same clients/sellers that they need to lower their prices in order to sell the property.
It’s no wonder that the sellers are not lowering the prices. The realtors have lost their last bit of credibility with both the sellers and end users.
“‘The bad news is that a recession in the U.S. delays the workout of our real estate problem,’ said Brian Presley, a Punta Gorda-based financial adviser who manages hundreds of millions of dollars for wealthy investors. ‘If they can’t sell their home in Poughkeepsie, they are not going to buy in Punta Gorda.’”
First they CAUSE the recession, then they BLAME IT for their problems!
does anyone really want to live in places like Poughkeepsie ? I think the places with the harshest winters could be in real trouble as younger folks were already flocking south and west to warmer climates.
‘If they can’t sell their home in Poughkeepsie, they are not going to buy in Punta Gorda.’”
My take on that stupid comment was……………….
It didn’t stop them before. In fact, they not only bought one, they bought another to share, or flip.
All with no money at all. Amazing. You can buy a $350,000 house with a piece of paper that says you really, really, really are going to pay the money back.
Is Carlton Sheets still selling his “No Money Down” real estate course?
If you want a good insight as to who buys the Carlton Sheets course, read these “testimonials”
http://www.infomercialscams.com/scams/carlton_sheets_no_down_payment
Back In Sarasota: Observations So Far
It’s Sunday morning and I’m typing this while watching a five-foot alligator sunning itself across the “lagoon” from our rental condo. The owner is trying to sell it for the mid-$200K range, which equals close to $200/sq ft. Good luck!
The real estate display ad section of the Sarasota Herald Tribune is much smaller than it was three years ago. Some ads trumpet price reductions and others do not. There is a definite emphasis on lower-priced homes and developments. The small print ads for individual homes show that many owners are still wishing for 2005 prices. That compares to what sells (according to homes.com), which are priced at 2001 to 2002 levels.
http://www.homes.com/Content/Sold-Homes-Prices.cfm
The number of For Sale signs in our old neighborhood is WAY down compared to this time last year. Not sure why. Restaurants have been busy but not crowded. We have not noticed a lot of vacant strip mall space, except in newly-built ones. Obviously no one is starting a new business in the area now. Several golf courses we remember are now closed, and others offer significant discounts, even for prime tee times on weekends. Haven’t gotten over to Siesta Key or downtown Sarasota yet. Will be looking for signs of life (furniture on balconies) in the new high rise condos, and also how full the parking lot is at Crescent Beach.
Temperature will be 70 today with sunshine and a fresh breeze. Each succeeding day will be a bit warmer. My wife and I now agree that the lack of winter is the only attraction for us now. And we can rent for a few weeks or even a month every year for far less than the annual carrying costs of owning something here.
The only good thing my parents and others can say about FL(especially south) is the lack of winters and tropical-like climate. This won’t change the fact it’s hot 300+ days out of the year and it’s boring without four real seasons. I could be living in NE Tennessee and enjoy four seasons without the harsh winters, itll just have to wait a couple years because house prices at $70/foot are a huge ripoff.
Bah! I don’t need 4 seasons. Lived 25 years of my life with them in central California. But in Los Angeles, specifically the south bay, spring is 50 weeks out of the year. Summer is 2 weeks. Phoenix has spring from November to March and summer the rest of the time. No ice on roads. Now that is how I like it!
Its still LA: crime, traffic jams from hell, high prices on everything, illegals taking over, etc. If Disneyland wasn’t there I would never set foot in metro LA.
Also forgot to mention the smog. I lived 25 years in SoCal. Good riddance.
I lived 2 miles from work. No freeway commute and all in the south bay. Did a 1.5 hour workout 5 days a week before work and had a lot of time left over in the day to head over to the Hermosa Pier for drinks with colleagues. Very enjoyable.
Thanks Bill, interesting report.
anybody know how to short EURO, are there any ETFs available which short EURO
I believe you can short FXE.
Sam : I’ve abandoned the idea of playing ETF’s linked for currencies. Even on big day moves, they barely change. I believe I can use the money elsewhere. As interest rates around the world are forced to come down, commodity prices will increase. I like DBA (grains) at the moment and DBS (Silver) ETFs. DBS is cheaper than SLV. I’ve also added some PAL (North American Paladium) where they’d dropped big time and recently posted a short term buy signal. PAL is more speculative and could go down.
Here is an intersting article on 1920’s Florida bust and today’s. It highlight the role of yep, fraud. http://www.heraldtribune.com/article/20080127/REALESTATE/801270839
A Dorchester woman facing eviction following the foreclosure of her home won a reprieve yesterday morning after dozens of activists gathered outside to impede a constable from removing her and her possessions.
Pretty soon, they will armor FL&P trucks to protect their workers turning off the power in foreclosed homes.
Florida may appear cheap at $100 a sq ft but before the bubble you could buy half of west palm beach, destin, or fort lauderdale for $50 a sq ft. $100 a sq ft was actually waterfront in places like the Keys.
In 1999 you could buy a direct-oceanfront condo in an older but serviceable building for less than $100/foot.
“The only good thing my parents and others can say about FL(especially south) is the lack of winters and tropical-like climate. This won’t change the fact it’s hot 300+ days out of the year and it’s boring without four real seasons. I could be living in NE Tennessee and enjoy four seasons without the harsh winters, itll just have to wait a couple years because house prices at $70/foot are a huge ripoff”
I woke up a couple weeks ago in Johnson City, TN and it was snowing. Later that day I travelled home to South Florida. As long as I can afford it I’ll keep the warmth.
I’m with you Broward. We have a lot of problems, but it sure was nice to be out on the ocean Thursday in shorts and a t-shirt. I don’t think I could give that up.
Hope you enjoy the 95 degree humid warmth for much of the year.
I did not complain once about the cool weather in October when I visited NW Pennsylvania, actually I was complaining about the heat wave there the first couple days!
Me personally I like the heat, I am from New England so I know all about the four seasons and the cold and I love it here like you wouldn’t believe.
However I readily admit the 95 degree humid weather isn’t for everyone.
Ive never got a chance to experience four seasons while you are getting tired of it. We are opposites. However houses tend to be less overpriced further north
After the first summer there, I was never too hot in Florida. You could find me out on a golf course on a July afternoon, pulling my bag cart along as I walked. It was just the hurricane threat that chased me away in 2005.
LOL. October is still summer in NWPA. Visit in February.
>>>”“Bob Mikla is waiting for one or two of those boomers to show up and buy the luxury condominium that he has been baby-sitting since a late 2006 closing. He also would not mind getting a few more of them to loosen up their wallets and rent one of his limos.””
Bob, according to the article you are 46 years old. Look to your left. Look to your right. If you can’t spot the boomer who is going to buy that property, then the boomer has already bought it. That boomer is you, Bob.
Actually with regard to the weather here in Florida, about two months ago I was in Montana by the border with Idaho (absolutely beautiful out there). Anyway by chance I met a guy who actually had a house in Sunrise which is not too far from me.
He lost his house recently in a foreclosure and that coupled with the fact that a lot of undesirables have been moving into Broward from Dade County he was determined to move out of Florida.
Anyway as we were standing there talking, though it was beautiful there, it was also very cold. He was a German immigrant and said when he moved to Florida he swore he would never scrape another windshield in the cold morning again.
As we were both standing there shivering he said he recently called his kids and told them “never mind, we’re staying in Florida”.
As to Bill in Carolina’s observation on the local activity in Sarasota, I can say this about here in North Broward;
I drove by the Festival Flea Market today in Pompano. I don’t even know really what that place is, I think it’s like the Swap Shop in Sunrise, (I’m not a big shopper). But it was absolutely jammed packed. Almost like it is on Christmas day when that’s the only place open and cars are parking on the street.
I then went by the Casino in Coconut Creek, and plenty of cars in the parking lot. Absolutely no doubt prices got way out of control here and there is going to be a world of hurt but people still seem to be spending.
The answer to that is it’s Season. The Q-Tippers are here…despite all the economic gloom and doom talk. Tuesday afternoon at Publix was absolutely filled with retirees. It’s pretty much dead that time of day otherwise.
I am a Palm Beach County resident. Prices have fallen about 25% and will probably fall to about a 40% to 50% peak to trough drop. Will make this area affordable again. This is a good thing.
As to the teachers and others leaving for Georgia and TN, good riddance. South Florida is going to continue to appreciate once the crash is over and become more of a luxury destination than it already has. The middle class will leave, replaced by wealthy retirees and wealthy second homeowners, and the professional / gardner servant class.
No other place in the country has the weather and ameneties that South Florida has. Year round golf and tennis, boating capital of the world. Try golf in North Carolina in your shorts in February. Try hopping on your boat for a quick trip to Bimini from Tennessee. Not!
South Florida remains an aspirational destination. The whiners and losers can pack it up for West Virginia or some other banjo pickin spot.
I agree completely and hope that you are right. I found this article today which supports what you say.
http://www.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20080123005079&newsLang=en
“The median gain in value for a Sarasota home was $112,000 during the six-year period from Oct. 1, 2001, to Sept. 30, 2007. The comparable gain for a Midwest home was only $34,800. ‘Midwesterners would definitely experience sticker shock in the Sarasota market,’ said Walter Molony, a research analyst with the National Association of Realtors.”
That gain is after the first leg down in prices. The *entire* gain was (according to the Florida Association of Realtors):
1998: 115k
2001: 150k
2006: 350k (early 2006)
So depending on where you start - the actual gain during the bubble was much more than 110k for the Sarasota/Bradenton median - more like more than 200k - a 200% gain in 8 years.
(BTW the median is now back down to 250k - ouch)
10%, 20%, 30%…whatever.
Prices will have to drop in real or nominal terms in the short, medium or long term down to a reasonable price in relation to incomes and rentals. All the justifications for the bubble are obviously wrong and the causes well known.
What continues to amuse me is that no matter how ludicrously high the prices got in a neighborhood, a city, or a state, experts calmly talk about corrections of ten percent or implosions of fifteen percent, all the while continuing to ignore the reality of the underlying price. If house prices double over five years while real incomes go up by two percent, then a ten percent drop is just the start of a very large fall.
The famous “US Consumer” (homo sapiens creditus) is broke. He tapped out his cards, his house ATM, his 401k, and his kids’s college funds. He won’t be buying new houses, old houses, new cars, vacations, or lattes. It’s sort of end of the world stuff, which won’t be allowed to happen, of course.
If you accept long term affordability ratios as rational and further take into account the recession, high inflation (yes, they CAN go together), and bank insolvency, you would expect median house prices to tend toward two and half times median income. Guess what?
Median house price will be $125k in real terms within two years. That is down from $218.
Oh, but don’t worry, all real estate is local, so the adjustment will happen to someone else. Whew!
In McLean, VA, which is supposed to be rock solid, govt worker and contractor supported paradise, albeit I am looking at the very low end of this market. I am following condos (1960s rentals that went condo in late 1980s) that went from 100k in 2000 to a blowoff peak of 385k in 7/2005. They are all the same size so good yardsticks. Condition can vary since some have not been renovated since late 1980s.
There is now a short sale on the market for 185k, i.e. 50% haircut from peak. Wells Fargo foreclosed on a unit in June 2007 and is trying to sell for 240k. Both properties sold for $300k in 2006. You would think that these morons realized that the market had turned by then. Especially being weak buyers that foreclosed within a year or so!
I heard from a resident that the units are going to get a large assessment (like 20k each for exterior upgrade), so that’s a killer in this market.
Interesting to note that the 2005-6 peak buyers typically have Iranian, Arab and Turkish surnames. (Not implying that they are foreign. I suspect local young flipper types getting their feet wet, sorry, I mean burned.)
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