UK Speculators Face Vacation Home ‘Glut’ In Florida
The Orlando Sentinel reports on some Florida speculators. “A year ago, if Shani Parkin delivered an eager buyer to a vacation-home builder in the red-hot Four Corners area, the Kissimmee real-estate consultant had little to show for her effort. Builders then had plenty of their own buyers, thank you very much.”
“Today, they call. They send cards. They want her help unloading their new homes. The houses, popular with British vacationers, are getting harder to sell as the properties soar in price, grow in number, and more overseas investors cash in their equity, experts in the business say. Rentals of the homes also are down.”
“‘The bubble hasn’t burst, but let’s say it’s leaking,’ said Parkin, vice president of a business that specializes in helping overseas investors, particularly those from the United Kingdom, relocate to the United States.”
“Sales, though, have plummeted in recent months in Polk County. Polk has 4,127 such homes owned by people from the United Kingdom.”
“Sales of such homes in Polk dropped more than 35 percent from September to October 2005, remained steady for another month before sinking again more than 48 percent from November to December. Sales were 46 percent less in December 2005 than December 2004. Distribution of sales-tax money from the short-term rentals in Polk is down more than 13 percent comparing January with the same month a year ago.”
“One Brit homeowner in Osceola, where about 4,000 people from the U.K. own vacation homes, says it’s about money. Simply put, prices are sky-high. Paul Pilsworth, 50, has watched his Kissimmee vacation house leap in value about $90,000 in one year. ‘They have gone up astronomically,’ said Pilsworth, a British electrical engineer vacationing for seven weeks in the house he co-owns with three partners. ‘That’s probably what’s putting people off.’”
“The same phenomenon happened in England, where the British watched their home values soar and a pound-to-dollar exchange rate tip wildly in their favor.” “Anthony Wressel, who co-owns the house with Pilsworth, said he has considered selling, knowing he could get enough to comfortably retire to Spain, another popular locale for Brits. ‘Every time we come we are amazed how quickly they build,’ he said. ‘You reach a saturation point.’”
“Parkin agrees that a glut of vacation homes going up in the past two years along U.S. Highway 27 has affected the market. Thousands have gone up in the Four Corners area where Polk, Lake, Orange and Osceola meet, with more coming.”
“Ninety percent of the 294-unit first phase and most of the 678-unit second phase of the sprawling Sonesta Orlando Resort at Tierra del Sol along U.S. 27 is sold, for instance, mostly to international buyers.”
“‘I know some people say the market is slow, but at least for the next two or three years we feel the market will keep going,’ said Vega, who is a realtor and recently bought his own vacation home in Four Corners, which he plans to rent out.’”
“Many of his buyers, mostly from Puerto Rico and New York, plan to hold onto the homes for two or three years and then flip them for a profit.”
Guess that kind of blows a hole in the theory of “wealthy foreign investors” holding up prices…
That theory never made sense. If anything, someone from the UK has even less commitment than a US citizen. It proves they were just speculating.
dumb, since uk started dwon in spring 04- these fliks already have seen the future–but UK is only off 5-10% after 19 months-same for us ?
Living in Orlando I see it first hand, back in 2002, 2003, 2004 and into 2005 Speculators from Europe & the middle east were buying up entire subdivisions.
They just had a big story a couple months ago about how one developer is planning a new $4.5 Billion vacation home community out towards Kissimmee where originally he planned on building another convention center.
All the demand from foreign speculators spilled over into the rest of Orlando and a lot of downtown condo projects, condo conversions and new home developements that are a good hour or so from the theme parks were being bought up by European investors. They would hire realtors to go door to door asking people if they wanted to sell there homes.
Speculators and investors are definately missing from the market here. Builders and developers are going back to trying to roll out the welcome mat for speculators again at condo conversions & new housing developements all over town after banishing them this summer.
That is interesting. A friend of mine just sold their condo in SoCal to a person from the UK. It sold in a matter of a week or so, and went almost at the asking price.
SoCalMtgGuy
Another F’D Borrower
FORUMS
“Many of his buyers, mostly from Puerto Rico and New York, plan to hold onto the homes for two or three years and then flip them for a profit.”
Fools and their money…
“‘I know some people say the market is slow, but at least for the next two or three years we feel the market will keep going,’ said Vega, who is a realtor and recently bought his own vacation home in Four Corners, which he plans to rent out.’”
“Many of his buyers, mostly from Puerto Rico and New York, plan to hold onto the homes for two or three years and then flip them for a profit.”
How passe– Maybe this tired old line would have gone over in spring, 05, but this guy needs to face the new reality. It’s Feb, 2006 and the music has definitely stopped playing.
Bankruptcy laws getting some attention.
(In my best Emperor Palpatine voice:)
Everything that has transpired has done so according to my design.
Much as I despise deadbeats, the BK laws really do seem one-sided. How about holding the creditors responsible for their actions? I think they need to be more careful about thier choice in borrowers. I’ve loaned money a number of times to people who never repaid. Lesson learned a long time ago: most people who need to borrow money on a regular basis are likely not able to pay it back. I still make “loans” on occasion, but consider them gifts when I make them.
If lenders were held responsible for their decisions, we wouldn’t have a housing/credit bubble, either. Can’t blame the flippers/speculators; they’re doing what’s to be expected when someone waves free money in their faces. It’s the lenders who have a fiduciary responsibility to shareholders and their lenders, IMHO.
Glad we can post at night again!
Just make sure all the homes are sold in fully inflated prices and all our trade deficit will be gone. We export bubbles in exchange for oil and goods. Better yet, make it difficult for them to sell, so they will keep subsidizing our public schools for years to come.
next reitired myth, retiring boomers will prop up prices for years.
Completely OT,
But on the right side of my screen I get Google Ads that are all real estate related advertisers, most being Florida developments. Kind of akin to an AA website with Google Ads from Budweiser, Boon’s Farm, et al!
Oh well, a small price for a free, wonderfully informative, website.
I think this proves my opinion that the housing bubble is a worldwide problem, and that it isn’t over until the factors that propped up the bubble are removed everywhere (and not just in the US).
regarding the comment by flat: yes, the UK started a slow decline 1-2 years ago but the speculators and the RE mob are still active; they just switched to other areas where they can still make money using the same old tricks (like Spain, Eastern Europe, Turkey, Dubai etc.).
Even if Bernanke removes the easy money in the US (and I don’t believe he will) the easy money keeps flowing like never before in Europe. Some EU countries are already gearing up for a new thrust ahead in housing prices, despite huge gains in previous years.
“Even if Bernanke removes the easy money in the US (and I don’t believe he will) the easy money keeps flowing like never before in Europe..”
Agreed. However, easy money (excess liquidity) flows to where it can most easily push up prices and make a speculative profit. That has been in assets where new supply cannot keep up with increases in liquidity (it was easier to print money than build homes, pump oil, dig for gold, or produce any commodity with a futures market).
But since prices skyrocketed, end user demand has fallen, and at least in single family homes in the U.S., supply has increased dramatically.
With the laws of of supply and deman now exerting themselves, I think easy money will look elsewhere to make easy money.
“With the laws of of supply and demand now exerting themselves, I think easy money will look elsewhere to make easy money.”
good point Mr. D; however, if we get bigger drops in US (second) homeprices I would not be surprised to see EU speculators go on a bargain hunt in the US (again). Although US prices may seem expensive, in many states they are still lower than in some EU bubble markets; and this difference will exist or grow as long as EU prices remain elevated.
Also, don’t think that these EU speculators are ’smart money’; most of them are just following the herd that got wealthy beyond belief in the last 10-15 years by speculating in European real estate. Most of them have no idea what they are doing.
What if foreign investors, having already gone through a similar bubble overseas a year ago, got out at the top? What if the equity gains were largely foreign and we only assume it’s Americans selling at the top?
“US prices may seem expensive, in many states they are still lower than in some EU bubble markets; and this difference will exist or grow as long as EU prices remain elevated..”
I think it’s more likely bubble buyers are more likely to chase rising prices than go bargain hunting. If all of my assumptions are correct (that liquidity will remain excessive, that home prices will fall this year, and that bubble buyers will look to rising markets for future gains), then I think that it’s more likely that a new bubble will form, and I think it’s likely to be in stocks.
BTW, a case can be made that the stock market bubble never popped. After all, the NYSE and the Russell 2000 (a small cap index) recently reached all-time highs. It’s hard to prove a bubble has popped and it’ll be 15 years before it recovers (as some have posted) when broad based indexes are hitting new highs.
Here is some food for thought.
European or foreign investor dumps money in US housing market. They buy at the peak.
But wait! They convert Euros and Pounds etc to Dollars. Dollar has also risen in value… now they see it is about to fall in value??? You know they want to cash out that equity before they lose in the currency exchange rate. They could get double burned. After US Housing drops and the dollar drops will you see these investors come in and scoop up houses for literally pennies on the dollar.
The smart investors anyay.
I’m confused…the timeshare salesman, or um real estate agent, is counting on American’s to prop up his sales? Weren’t the foreigners supposed to save the FL RE market? Seems to me that the Brit is the only person interviewed in this article who took an economics class..supply has met the demand putting downward pressure on the price, which is currently too damn high.
I disagree that Bernanke will continue loose money policy. For one thing, he cannot. If he does, the dollar will drop and the long bond will soar. That will do even more damage to this housing market and to the entire economy. He is hoping that the housing froth is not as big a bubble as it could be, and will continue to raise rates to stop inflation and protect the international system. Investors in US bonds must know that the bond will not lose value, so inflation MUST be tamed. When Bernanke says there is not a national housing bubble, I believe that means that he is not going to let the froth stop him from controlling inflation. My concern about all this is that he has little “wiggle room” and may overshoot on raising short term rates. This could result in a recession.
America is the biggest tax shelter on earth by far, always has been lots of foriegn re investors, does not apply if you are a US citizen however.
I know multiple people that gave up US citizenship to avoid taxes and stil spend most of the year in the US vacation home.
that depends; if you have a very high salary (upper 1% or so), or your main source of income is investments, you are usually better of in the Netherlands than in the US (despite all the claims of the contrary). These people pay effectively nearly 0% tax.
Left LA Behind — I believe the reason you see Florida real estate ads is because the advertising is now intelligent re it finds key words in the screen and posts related ads. I like it, actually, though others may not. I’ve found a lot of the ads interesting to browse through as they add a different dimension to the topic. Often it is roughly like reading left and right news sites to get a more complete picture of the topic.
“What if foreign investors, having already gone through a similar bubble overseas a year ago, got out at the top? What if the equity gains were largely foreign and we only assume it’s Americans selling at the top?”
I don’t think foreign investors got out at the top; most of them are dumb speculators. Just like in the stock market, they held on to their assets when prices started declining because they believe prices will always recover (the Greenspan etc. put).
Judging from anecdotal evidence, I think most of these foreign RE purchases, both in Europe and in the US, are financed with the unrealised equity gains from the European housing bubble. It’s not a coincidence that the UK and Dutch buyers are the most active, their markets have the biggest and oldest gains (the Dutch RE bubble started around 1992 already, UK a few years later) so they have the most leverage for new purchases.
There are some signs lately that EU speculators are trying to cash out in some markets (like Spain) so they can move to newer RE bubble markets. In the past this wasn’t necessary as their old purchases (including first home) where still appreciating rapidly, so maybe this could turn into a structural change. I don’t think there will be much demand for these speculator homes in falling markets, there might be no one left to hold the bag.
” Investors in US bonds must know that the bond will not lose value, so inflation MUST be tamed.”
really? these foreign investors have been taking losses for years already by believing the phony CPI numbers and the ’strong dollar’ policy. If you check over the last 5 years or so, most of them are sitting on significant losses. So why not use some tricks to continue this? - much easier than sound monetary policy. It’s most of all a question of who blinks first and up to now both sides choose to largely ignore the problem.
NHZ, you may be right. But I would say that there is not much inflation considering this fact: we have had massive stimulation through easy money, and through tax cuts to the rich. Even after all this stimulation, there is just the beginning of inflation. I think that worldwide, there are competitive pressures like outsourcing and deflation in most other places, that are going to win the day. I think that the corporations with their millions will not pump up our economy so much after the consumer is tapped out, but will be conservative or invest out of country. I could be wrong, but then why wouldn’t there be more inflation right now after all this stimulation? It doesn’t make sense.
depends on how you define inflation: sure, there is no inflation in many normal consumer goods and outright deflation in most of the superfluous China widgets etc. (your ‘competitive pressures’).
On the other side, there is strong inflation in many necessary services (all kinds of government taxes, medical bills, education) and items like energy, raw materials. These are the things that no one can avoid to purchase that that’s why they bite (instead of the declining widget prices which are irrelevant to me, but they dominate the CPI). I’m from Europe but I think it’s exactly the same in the US.
There definitely is inflation as defined by ‘increase in the money supply’ (my preferred definition): M3 has been growing by 8-12% yearly on both sides of the Atlantic for many years already. The fact that the FED stops publishing this number next month is a sure sign where M3 is heading.
NHZ, I believe the fed is committed to stopping inflation. What choice does it have? Our government is already in debt up to its gills and must have long bonds pay lower interest than would actually occur if the fed went easy on inflation. Bernanke believes inflation is the greatest enemy, and will continue raising rates IMO. Asset inflation could make its way into the general inflation, but so far it hasn’t. And since the fed may overshoot its mark, I think this anti inflation campaign will kill the RE speculators.