It’s A Spiraling Devaluation, And It’s Feeding On Itself
The Orlando Sentinel reports from Florida. “Accountant Jim Galvin thought of his home-equity line of credit as one of life’s givens, a solid reserve ready for use when the need arose. So he was shocked last month when Countrywide Financial Corp. wrote him to say it had frozen his credit line. He soon learned he wasn’t alone. ‘They are freezing everyone across the board,’ said Galvin, who lives in Clermont. ‘It’s panic mode. But I was shocked when I received my letter. I’d never seen anything like it before.’”
“In late 2006, the housing bubble began to shrink. Home sales dropped, and prices began to slip. That affected borrowing. In 2006, Americans drew on $147.5 billion worth of home-equity credit, according to the Federal Reserve. Last year, the amount fell to $60.5 billion, with the biggest decline coming in the final quarter of the year.”
“Ken Thomas, a Miami banking-industry expert, said property owners can appeal a bank’s decision to cut or eliminate their credit line, but they need to be able to make a case.”
“‘Customers can go to a bank and say their houses couldn’t have possibly dropped from, say, $500,000 to $250,000 in a matter of months,’ Thomas said. ‘But expect the banks to say it’s their right to freeze a loan.’”
“Stan Smith, an economics professor at the University of Central Florida, said concern about the decline in home-equity lending is spreading quickly. ‘Everybody is worried,’ he said. ‘I would argue that, if banks weren’t changing the terms of their loans, they aren’t very good bankers.’”
“The Orlando Realtors group had 25,472 properties available for purchase last month through its MLS. That’s 8 percent more homes than it had a year ago and still close to the record high reached last fall.”
“Larry Belcher, finance department chairman in Stetson University’s school of business administration, said the Orlando area’s lower-wage, tourism-based service economy makes the region more vulnerable to the nationwide downturn in housing because affordability is a problem for average families.”
“Those on a typical service wage of $35,000 or so a year ‘just can’t buy houses’ with mortgage-lending standards so tight, Belcher said. When first-time buyers have a harder time getting into the market, it slows the pace of sales all along the line, he added.”
“Belcher said two years’ worth of inventory is still a ‘huge overhang’ that probably means continued price declines in the Orlando area.”
From TC Palm. “There seems to be no let up in the number of foreclosures piling up on the Treasure Coast. In St. Lucie County, 549 homes entered some stage of foreclosure last month, up from 370 homes in March 2007, according to RealtyTrac.”
“Meanwhile, Martin County came in second in the tri-county region with 160 homes entering a stage of foreclosure last month, only 38 were recorded in March 2007. Indian River County had 153 homes entering a stage of foreclosure last month, up from 58 a year earlier.”
“‘The up-tick in foreclosures on the Treasure Coast is a largely function of real estate speculation that occurred in mainland projects developed in 2005 as values peaked and supply began to exceed demand,’ said Sally Daley, owner of Daley & Co. Real Estate in Vero Beach.”
The Palm Beach Post. “At the CitySide townhouses in West Palm Beach, landscapers, bug men and security guards are showing up less often. At Paradise Cove in West Palm Beach, the water in the hot tub isn’t so hot anymore.”
“And at Carriage Pointe in Boynton Beach, homeowners are paying a combined $60,000 assessment to cover dues their neighbors aren’t paying.”
“The culprit in all three cases is the housing bust. Fully half of 487 Florida associations surveyed recently by Hollywood law firm Becker & Poliakoff say they’re facing financial shortfalls because of the foreclosure crisis. And about one-fifth say they’ll increase fees or impose special assessments to make up for the shortfall.”
“At Carriage Pointe, one out of every three homeowners aren’t paying their bills, which led to that community’s hefty $60,000 assessment. Boca Raton property manager Norman Silverstein runs Carriage Pointe, and he said foreclosures are hitting hard at many of the 30 communities he operates.”
“‘I’m in a state of panic,’ Silverstein said. ‘How can I operate an association with one-third of the funds not coming in? It’s a serious problem that’s going to explode in the next few months,’ he said.”
“The financial squeeze is tightest at communities that were completed within the past few years. After all, those are the neighborhoods most likely to be filled with speculators and others who bought at the peak of the market.”
“The flood of foreclosures is also hurting associations in an unexpected way: Lenders, faced with soaring numbers of defaulted loans, have been slow to seize properties. In the past, banks would foreclose quickly and take over dues payments. Now, Direktor and others say, lenders are taking months to foreclose and start picking up the bill for dues.”
“Lenders filed notices of lawsuits on 1,765 Palm Beach County mortgages last month, nearly four times more than the 445 filings in March 2007, according to an analysis from a local data firm.”
“In Martin County, the number of foreclosures jumped from 15 in March 2007 to 104 in March 2008. And in St. Lucie County, foreclosure filings jumped from 54 in March 2007 to 368 in the first 28 days of March 2008. Foreclosure data were unavailable for the final three days of the month.”
“Homeowners stuck in unmanageable mortgages aren’t able to sell their homes or refinance into cheaper loans before payments on their adjustable rate mortgages reset higher. ‘It’s really a very sinister, spiraling devaluation, and it’s feeding on itself,’ said Bill Davis, president of (a) Palm Beach Gardens mortgage firm.”
“The largest loan to go into foreclosure in Palm Beach County in March was a $3.66 million mortgage on a condo in Palm Beach. That loan was the exception, however. The average amount of a loan that went into default in March was $251,447.”
“The highest interest rate on a loan that went into default was 16 percent, but most borrowers were paying much less. The average rate on defaulted loans in Palm Beach County was 6.7 percent.”
The Boca Raton News. “A home sale market that’s virtually dead in the water has created ‘an unfortunate trend,’ said Boca Raton City Councilwoman Susan Haynie. An increasing number of foreclosures.”
“She suggested city staff might consider following the lead of an ordinance passed in Murrieta, Calif., creating an abandoned residential property registration…’so we know who to contact’ if the property falls into disrepair or is neglected.”
“Negligence of homes is already beginning to show in Boca, Haynie said. ‘Drive through some of the neighborhoods and you’ll see.’”
“The Boca Raton News found a similar ordinance in Modesto, Calif., requiring that community to ‘track abandoned properties.’ The Modesto law makes a telling point, noting that ‘California and Florida together accounted for around 37 percent of all foreclosures in the USA filed in March [2007].’”
“‘Sometimes, it takes years to deal with foreclosures,’ said Haynie. ‘This is not fair to the neighbors.’”
The Miami Herald. “Boca Developers had hoped to raze Las Olas Riverfront and build an eclectic mix of condos, offices, shops and entertainment — including a 51-story skyscraper — that would become the ‘central destination’ in downtown Fort Lauderdale.”
“But the Deerfield Beach developer’s plans are in doubt now that Wachovia Bank has moved to foreclose on the beleaguered property along the New River.”
“The developer, which is grappling with the turmoil in the residential real estate market, also is in default on a $275 million loan intended to help finance the Las Olas Riverfront makeover and some of the firm’s other projects.”
“They are just the latest signs that Boca Developers, which has called itself ‘the most prolific developer of unique waterview communities along Florida’s eastern seaboard,’ is unraveling.”
“The situation at Las Olas Riverfront has deteriorated so severely that a Broward judge recently appointed a receiver for the property to protect Wachovia’s interest. Receiver Tim Rivers didn’t respond to a request for comment. But in court papers, he claimed Las Olas Riverfront’s owner isn’t paying bills, is neglecting the property, and is not following through on getting city approval to level it.”
“Las Olas Riverfront Holdings, the Boca Development-controlled entity that owns the property, lost $3 million on just $2.8 million in revenue last year, a financial statement filed with Wachovia’s foreclosure suit indicates.”
“Boca Developers’ financial troubles appear to have short-circuited redevelopment. It was only four months ago that it submitted another set of revised plans to the city. ‘We were working full guns on a submittal,’ said Oscar Garcia, lead architect on the project. ‘It got to a certain point and it all fizzled out.’”
“‘The complex has been a failure because the owner has quit marketing the complex,’ said Fort Lauderdale Mayor Jim Naugle. Naugle added Las Olas Riverfront’s owners are obligated to operate the property as an entertainment district for at least the next few years.”
“‘Hopefully the property will get into some responsible hands . . . and be less of a burden on the city,’ Naugle said.”
The News Press. “Last year, Lehigh Acres resident Marshawn Green was doing brisk work building outdoor kitchens at local homes. Then, construction of new homes and sales of existing homes stalled and Green’s livelihood evaporated.”
“‘When construction takes a downturn, it hurts so many people,’ Green said. ‘Even the people who have money don’t want to spend it right now.’”
“Green was among more than 2,100 job seekers at the CareerBuilder Job Fair Wednesday at Harborside Event Center in Fort Myers. The fair was the second major job fair in as many days. A career fair on the campus of Florida Gulf Coast University drew about 1,600 job seekers.”
“Lee County’s unemployment rate was 6.1 percent in February, up from 3.5 percent the previous year.”
“Douglas Bassett, general manager of Brinks Home Security in Fort Myers, said he has been seeing plenty of applicants with construction experience or previous jobs in fields related to real estate. ‘A lot of people jumped into real estate and construction from other industries when that was so hot and now they are jumping back into their previous professions,’ Bassett said.”
“Dave Cory of Estero, said he has been looking for work since moving here from Michigan about six months ago. In Michigan, he installed and serviced equipment for homes and industry. ‘I really like this area, but there is not much industry and that has made it hard to find something,’ Cory said.”
The Herald Tribune. “More than 1,800 homes in Southwest Florida slipped into foreclosure in March, bringing the region’s total to about 5,500 so far this year and signalling that the phenomenon is far from over, analysts said.”
“During March, Manatee, Sarasota and Charlotte counties had a 4 percent increase in foreclosure filings to 1,830 from 1,759 the month before. Year-over-year, foreclosures in the three-county area are up 239 percent, said RealtyTrac.”
“‘More and more people are walking away from their mortgages,’ said Paul Kasriel, Northern Trust’s chief economist. ‘In some cases they simply can’t meet the new interest rates being adjusted to. In other cases, people are saying: Why continue to pay on this house that is losing money?’”
“Some Southwest Florida builders think that the regional market has bottomed, but note that buyers remain hesitant to buy because they are having difficulty selling the home they are in and because they are not certain that home prices are finished dropping.”
“That is likely to have dire consequences for many smaller Southwest Florida builders who have tried to hold on for a rebound, said Lakewood Ranch-based builder Lee Wetherington. ‘I think 60 to 70 percent of builders in Sarasota and Manatee will be lost over next 12 months,’ Wetherington said.”
“Don Cantin, a custom builder who operates in Charlotte County South Gulf Cove area, was building as many as 50 houses per year during the boom. He has seen the pace slacken to about 20 homes.”
“Cantin said two of his recent buyers were European investors — one from Norway and the other from France. ‘The dollar being down, they figured they would build now, use the houses for vacations and for their friends and make money later,’ Cantin said.”
“‘If there’s any good thing about this, it’s that when people come back into market, the housing will be more affordable. Things got too high for most people during the boom,’ Wetherington said.”
‘Cantin said two of his recent buyers were European investors — one from Norway and the other from France. ‘The dollar being down, they figured they would build now, use the houses for vacations and for their friends and make money later’
Make money later. These people are speculating as it’s cheaper and easier to stay in a hotel. So as before, when they see that there will be no appreciation, they’ll head for the exits.
‘ Builders like Lennar and Centex suggest that new home sales have picked up a bit in the Tampa Bay area, but such positive momentum is scarcely visible in the overall numbers.’
‘Housing starts in the first three months of 2008 totaled 1,277, according to Tampa housing consultant Metrostudy. That’s 43 percent below the 2,240 starts recorded a year earlier and 13.7 percent down from the last quarter of 2007.’
‘Metrostudy’s Tony Polito marked a decline of 200 in the number of finished vacant homes, a sign that the new home glut is slowly receding. About 3,393 such homes wallowed on the market at the end of March.’
These statistics show that the builders will sink the existing house market at all costs. Starting almost 1,300 houses when 2,000 new, finished houses are for sale and everyone acknowledges the states in a recession? The only thing that will establish equilibrium is for prices to drop low enough for construction to stop.
Make money later. These people are speculating as it’s cheaper and easier to stay in a hotel. So as before, when they see that there will be no appreciation, they’ll head for the exits.
Not only that, as Spain and other European markets tank, their credit will tighten forcing them to liquidate anything they can for the sake of cash flow.
I’ve stated it before: I know quite a few people who would never *have* to sell their investment properties. But at some time they will sell them to free up investment cash.
The number of empty homes in Florida is just staggering.
Got Popcorn?
Neil
The number of empty homes in Florida is just staggering.
Wait until about July, the number of empty homes will be much higher based on the projected foreclosures from resets that have already started. More pain, no gain!
The builders are still building as we speak!
“speak” should be “type”.
Old final scene: The band playing on the deck of the Titanic
New final scene: Builders building Potemkin Villages
But at least with the originals they had their use-if only once…
OSG indicates the fastest growing inventories are in the pacific, south atlantic and mid atlantic. Center of country is lagging those areas in terms of growing inventory. Maybe this spring will be the all hell breaks loose moment that some of us have been forecasting. Maybe that will never happen and the pain just oozes, month after month.
Does anyone have recent figures on the percentage of abandoned plus new-never-lived-in houses in Florida?
Oh, yes, I have seen this before in Hawaii realestate. The Japanese bought a lot of properties in the 80s to be dumped later in the 90s for a discount. Now, the Europeans are buying. Let’s see.
Got Rice?
Zeb
Zeb,
No, but I’ll bring the fish! I’ve always kind of liked the Big Island ( I know a lot of people think that’s weird ) but I actually saw an unimproved lot for sale around Pahoa in 1999 for $1,500. I was sure… it must be a misprint so I called the guy. Nope, you read right mister, it’s $1,500 or rather it was. He managed to sell it. The guy said to take heart as there were literally thousands of lots there and all impacted just as you described. He paid 15k in the mid 80’s.
Well at peak in ‘05 some of these delusional sellers were asking 80-100k! I think they really benefitted from 9/11 as people weren’t looking abroad at all. Well now the lots are back down to 15k and I’m sure many would take less. I think there ‘may’ be some value there as since the 80’s they’ve constructed paved roads, power and some amenities. But I’m still in looking mode.
HA HA HA
Plenty of lava lots on the big island , miles from anything on dirt roads, no water or power, no soil. soil means you can grow something and draws a premium.
Wet or dry side of the island?
My understanding is that Hilo and Pahoa are some of the wettest places on the planet. I suppose there are plenty of lava fields there for the taking but the lots we’ve been looking at are well vegetated with trees that look about 15-20 years old. A lot of people use a “catchment” system and I’d be fine w/ that. Even though I doubt we’ll see $1,500 lots again they have put in ’some’ infrastructure since the mid 80’s. At one point, even though prices were very cheap your vac. home was bound to get vandalized. I understand some improvements have been made. I talked with a realtor there and ‘guaranteed’ me if I built a house in Nanawale Estates in the late 90’s it WOULD be vandalized!
DinOR,
We are going to the Big Island next month curious as to why it would be weird to “like the big island”? Never been there just wondering.
What are the annual taxes on those empty lots?
watch out for the killer vog…
These statistics show that the builders will sink the existing house market at all costs. Starting almost 1,300 houses when 2,000 new, finished houses are for sale and everyone acknowledges the states in a recession? The only thing that will establish equilibrium is for prices to drop low enough for construction to stop.
I really don’t understand how the government can justify a blanket bailout (ie the tax break that just passed the Senate) for an industry that can’t even look out for its own interest.
One idea I have is that if they need bailout money so badly, they exchange it for labor to repair infrastructure.
I see no reason whatsoever for this bailout other than to keep the money flowing from their lobbyists.
“I see no reason whatsoever for this bailout other than to keep the money flowing from their lobbyists.”
Ding, ding, ding!
The Congresscritters also want to keep the donations from the homebuilders flowing into their campaign accounts. It’s an election year after all. The “tax break” is better called a “bribe”.
–
“The only thing that will establish equilibrium is for prices to drop low enough for construction to stop.”
That has been my view, but some people are already calling bottom in New Home Sales. I realize that construction wouldn’t go to zero but should fall at least 50%, nationally, from the current levels. New SFH should fall from the peak of 1.4M to 200-300K annual rate. Half the big builders will go out of business or get taken over for pennies.
BTW, the latest PPSF price drop trend for Miami and Tamp is 20-30% annual rate. So, we have a long ways to any kind of stabilization in prices despite some clueless foreigners.
Jas
Jas said:
I realize that construction wouldn’t go to zero but should fall at least 50%, nationally, from the current levels.
What’s sad… is the longer they perpetuate the overbuilding, the lower construction will go during the bottom!
As the dollar weakens, the clueless foreigners will panic. We’ve seen it before…
Jas,
What’s your PPSF for DC? In particular Alexandria or Arlington. Thanks in advance.
Got Popcorn?
Neil
Those on a typical service wage of $35,000 or so a year “just can’t buy houses” with mortgage-lending standards so tight, Belcher said.
Why is it so hard for people to state the obvious? People who make $35k a year have no business buying a home no matter what the lending standards are. The delusions that fed this bubble are still alive and well.
‘People who make $35k a year have no business buying a home no matter what the lending standards are.’
The median salary in Phoenix is around there and in Flagstaff it’s much lower. By your standards very few people in low wage states would own houses.
The fact is $70-80k houses used to be common and still can be, if the markets are allowed to work.
Yes, but they wouldn’t be 4000+ sq. ft. energy-guzzling McMansions out in the middle of nowhere either.
For the most part I don’t think people who are in the income range should be buying houses. In general the financial cushion is not there for the unforeseen things that come up with homeownership and with life in general. This would be especially true if potential buyers had to put down 20%. Many of the homes that have been built in the past 5 years even when they come down in price will have enormous carrying costs because of their size and will still be out of range for those in lower income brackets even if the price to income ratio comes back to more traditional norms.
You are correct that if the markets are allowed to work we would see houses being built that are affordable for those in the lower income brackets, right now I think that is years away.
One thing that is forseeable is rising rents in most years. Thus, home ownership is a good inflation hedge in normal markets and should be available to responsible ppl even if they are of lower income. Of course, my references are to normal markets, as no one should be buying a home at these inflated prices unless they dont care about losing money. Your argument should be one of how low prices need to drop, not one of wages.
I know of many older ppl who were middle class and lower middle class who bought modest homes they paid off before retirement. Without this they would have had nothing.
Tim,
Agreed. I grew up in Chicago and even in LMC neighborhhods, even janitors owned. True the homes were never fancy on the outside but were well kept and quite nice inside. The problem over the last several years has been that ppl weren’t afraid of losing OPM!
Rising rents : Says who ?
Normal markets. I said normal markets. The last 6 years had nothing to do with normal markets.
Rents can “rise” all they want, but who will pay them?
A good $35K income can buy a $70K lot-plus-manufactured-home right now. Just not the Beaver Cleaver sort of house that has been sold as necessary to respectability.
‘People who make $35k a year have no business buying a home no matter what the lending standards are.’
That is the main issue with housing prices in the Tampa Bay area which are not in-line with local incomes. In fact, the Nielsen company in Oldsmar, a Tampa Bay area small city, recently eliminated about 300information technology jobs that went over to India. I find it amazing that people think prices will always go up which in turn will drive incomes up to keep pace. Coorporate America is going the opposite direction by using the “global economy” which translates to cheaper wages by moving the USA jobs to the low wage emerging nations such as China and India. We can thank the realtors for helping eliminate the higher paying jobs by causing the rapid increase in housing costs!
Jumping into the way back machine…..I made around $35K back in 1992 and bought a ranch home in Scottsdale circa $70K. Best thing I ever did. Taxes were $500/yr. PITI on a 15 year note was $720….cheaper than rent. I had plenty of extra money and cushion even with a 15 year note. Sold a ‘67 mustang to put 10% down and make a conventional loan.
Granted food et al is more expensive today, but if you buy close to work, gas prices are cheap and you could always plant a grapefruit tree or two on the land…..and in PHX ya end up with a truck load of food from that
At that time ranch homes in Tempe/Mesa/PHX were a dime a dozen. Two bedroom places were going for $55K. Decent enough neighborhoods too. Bad neighborhoods were cheaper. Slump block construction, single pane glass windows, linoleum flooring, formica countertops, slatted chain link fence and popcorn ceiling…..the WORKS baby !!! and only 2 miles from work and stumbling distance from the local strip joint. (Diamond Girls for those who remember) Ahh, those were the days…….
Sold the place in 1999 for about $110k. Everything sane and normal for marketplace wages. It was that way then, and it will be that way again.
There aint no land shortage in PHX……although the distinct shortage of strip jonts is disheartening……
Back in ‘93 I was making $30K and bought a $98K house with $0 down VA. I did fine.
I agree…My husband I and were making around 35…he was full time I was part time going to school and we bought a home for 70K…it was of course a much easier time to buy in a decent price range…our second larger home was only 95K…
Speaking of Tampa, I have never seen so many for sale signs as I have seen lately. In south Tampa, I was used to seeing one sign every few blocks. Now there is at least one sign per block. There have been several times when I rhetorically asked my wife if a whole street was for sale. I get the distinct feeling that some people have determined that if they don’t sell right now, they might never sell. If not for the option of walking away, that would be called “being locked in forever.”
I drove to Oldsmar a couple of months ago on Tampa Road. It was dark, and the sprawl was so full of sameness — just the same strip malls and stores and restaurants over and over and over — that on my way back I headed in the wrong direction and didn’t realize it for miles.
telling comment about the nations bland structures. Over the years as I drove accross country from CA to Fl for various reasons, you could gauge yer progress by landmarks on highway 10. Unique gas stations, landmarks, and other items that reflected the origin of the area which they were located.
Not so much anymore. The entire country has become an endless repeating strip of malls of big box retailer lining the major highways. All the same architectre, with a small variation for local materials. And as mentioned above, if you exit onto surface streets it’s now another series of endless strip malls every 2 miles with the required fast food anchor, nail salon, check cashing store, liquor store, and gas station.
When I view recent pics of the US, I usually look in the background for the distinctive foliage, as that is a dead giveaway of an areas location.
side note: Florida’s harsh humidity will ruin all those neglected condos & other structures quickly. Ever smell a lobby carpet in the south that hasnt been cleaned on a regular basis? All that daily foot traffic & wet humidity make it a real swamp bog. I can just imagine the screeching retirees in the 1/3 empty Boca Del Vista Mar condos demanding that ’someone ought to do something’.
heh heh, rage on you old tightfisted crones, rage on . . .
RE: I can just imagine the screeching retirees in the 1/3 empty Boca Del Vista Mar condos demanding that ’someone ought to do something’.
It’s all Morty Seinfeld’s fault!
I bought a 40 year old, 2200 square foot brick in a nice neighborhood with a little elementary school in back of it, and a hospital at the end of the street for $69,500 in 1992. Sold it for $148,000 in 2005 when we moved to Mnpls… $480 a month mortgage payments. Don’t ask what I sold 6/10th of an acre ready to go 1 minute from the Gulf and Intracoastal in Holley by the Sea in Navarre Beach for in March 2005! Bought it in 1995 for $11,500.
As recently as 2003, $80k-$100k 3 bedroom starter homes were abundant in Pullman, WA. As recently as 2004 a colleague of mine purchased a beautifully remodeled 3/2 in the best part of town for $145k.
THis week the median asking price on the Pullman MLS is $276k, with the cheapest (1 bed, 1 bath, handyman special) single family home listed at $150k. Median household income is $50k.
The point is that home prices WERE in line with incomes, even in places with relatively low incomes, just a few years ago. They will be again. People making $35k will be able to purchase a home–assuming they can manage their credit/debt and save up a downpayment.
“People who make $35k a year have no business buying a home no matter what the lending standards are.”
Really? So 85-90k houses is some sort of fantasy?
Houses in that price range are easily built by Habitat for Humanity, and rehabilitated (small/older) homes in foreclosure could be sold that cheaply for even less. It is the land prices that need to drop to make this possible.
Really? So 85-90k houses is some sort of fantasy?
Right in 1986 I ‘bought’/mortgaged my first place for $52,400.00 I was grossing $18,600.00 and I put 10% down with a 9.25% 30 year fixed rate. Worked for me and the bank, of course you had to go to the bank and meet the mortgage officer and with stand the third degree. Plus they came out to see the property!
They were holding the loan, not selling it to some Norwegian who believed the AAA rating given by a bogus rating agency, uh, I mean, the highly reputable S&P which was being paid by the bundlers of the loans to rate them.
I bought my first home in 2003 for 65K. It was a 50 year old, one and a half story, 2 bedroom house in a small town. Only 960 square feet, but the perfect starter. Needed some work, but not much.
What is really delusional is how those “economists” took until now to figure out that a service/tourist based economy, like that typified by Orlando, is highly susceptible to a broader economic downturn. Those guys are sharp - are they ready for government employment or what!? Two years ago they said a service/tourist economy was a rock solid foundation.
As for prices, my income is only slightly north of that $35k and my hole-in-the-wall is paid off. That’s only because of the time I first bought (1998) - early on in this cycle.
‘People who make $35k a year have no business buying a home no matter what the lending standards are.’
So 30% of the population should be barred from home ownership? I couldnt disagree more. I know many hard working single mothers, etc. with jobs like book keepers, secretaries, etc. that should be able to buy a modest home in an ok area. In my opinion, we just need price adjustment to get back to reality. We need to direct our anger at people that took out mortgages at 3.5X their salary or more, not at salary discrimination.
Historically, 60% of the population has owned, and the rest rented.
I see nothing in the last few years minus the usual magic we talk about incessantly that should’ve caused that number to go up to 69%.
It’s going right back down with some undershoot. Even larger undershoot with Chindia online.
I think you misunderstood. My comment was one of barring ppl from home ownership, and was relating to a salary cut off. That is a completely different issue than the historical percentage of homeowners v. renters, as many ppl that can afford to own a home do not and vice versa. My number was an estimate of the % of ppl that make less than 35k a year, not one of ownership v. renters. I can afford to buy mutiple homes for all cash. Yet I rent as we are not in a normal market, and I relocated and 2005 and sold my prior home.
We live in a free country and what is purported to be a free market.
If people want to commit financial suicide, and others enable it, so be it. If they get taken to the cleaners by fast-talking salesmen, upon their head be it.
I see absolutely no reason for nattering HOA types to dictate who can do what where.
That undershoot is going to cause so much collateral damage it ain’t gonna be funny. Just think of all the consumer goods and services that appeared during the jump from 60% to 69%.
Now is not the time to be opening a doggie boot camp - that’s for sure.
Historically (?) man and wife owned and single roommates rented. How far back are we talking about? In my blue collar neighborhood of the Sixties, the wives didn’t have to work to help out with the mortgage payment.
—-So 30% of the population should be barred from home ownership? I couldnt disagree more.—-
Actually, whilst perhaps “bar” is a strong word, in reality homeownership hovered around low 60’s % up to nearly 70% with the housing bubble, so 30% barred perhaps is an underestimate, not unduly harsh.
The Barring of course is not legal or discriminatory. In most markets rather it is just sensible. Even the roughly 3:1 rule breaks down at low end, as a buyer with 200k income buying (yeep!) a 600k house needs only a small percentage of gross income for food/fuel/etc, whilst a 30k income person has a huge percentage demand for the staples, making a proportional 90k house still quite dangerous.
That said, return to real affordability of houses as the market tanks will improve the likelyhood that poorer folks can swing a mortgage and become homemoaners and homedebtors too.
Remember, some of the common (and probably accurate) themes around here are that renting is not- per se- bad, that homemoanership is not- per se- the American Dream- and that in times of job/life insecurity, owing a mortgage does not elevate one to lofty social status.
Salary discrimination is a good thing, because it keeps people from doing foolish things. More of us should be discriminating when it is time to consider taking on the biggest debt in our lives, which is euphemistically and deceptively called “home ownership”
regards
evil
As for the percentages please see my comment above. As for barring or discrimination, my comment was more addressed at saying ppl that make less than X should not buy a home under any circumstances. It had nothing to do with bad credit or preventing ppl from making bad decisions. I dont mind discrimination when it is based on real statistics. While I am liberal, I most certainly am not politically correct and think differences in groups of ppl, if statistically proven, should be used in making decisions.
No, I don’t think they should be barred but in most cases I don’t think it is a prudent decision. If price to income ratios changes I might feel a little differently, but at that low an income especially if it is a household where there are dependents involved renting would be a better option (generally speaking).
And, conversely, there are a lot of people out there making really good scratch who have debt up to their eyeballs because they live foolishly. I’d rather give a mortgage to someone making $40K / year, no debt, has a downpayment plus cushion afterwards, good FICO, etc. than to some idiot with a fat salary who spends every cent made (and more).
Everyone (outside the HBB that is) is all up in arms about tighter lending standards and how “horrible” that will be for the real estate industry. Really? It’d be so horrible to get back to responsibility? Hmmm…
You got it. The key is responsible purchase decisions, not one of salary, although they are somewhat linked in that salary needs to be taken into account in the decision of deciding on mortgage size.
The average Service industry worker makes 16.83 / hr now?
That’s family income. Both spouses working.
Yeah, 35k a year is high for a service economy wage, and retail sales are slowing. And now that many of our high-income mortgage brokers and real estate agents are going to be unemployed, the number of people living off of their Wal-Mart greeter’s salary is going to be higher.
Incomes have been flat in this country and they are going to continue to decline. There has been inflation in costs, but not of wages. If median home prices to actually adjust to median incomes…it’ll be a bloodbath.
I think even those who read this blog regularly have been brainwashed a bit just by the constant exposure to the high prices.
I went for a run yesterday, and of course stopped frequently to look at the for sale prices of various homes. Still people wanting 500-600k for small single family homes. Ya know, half a mil is a lot of money, especially for houses that were maybe 80k before the boom. 500k 1bd 1ba homes seem “normal” now to many people, even while most are earning less in real dollars than they did when those homes were priced under a hundred grand.
I have had my eye on a home that is on the market for $500K for a 1bd 1ba for some time now. The house is over 50 years old, but in a nice location. The owner paid $133K in 2000, and has refused to drop the price even as the property has gone into foreclosure. Of course, the owner HELOCed it for $400K and would rather lose the house than walk away without getting what she paid for it.
I spoke with the bank that owns the mortgage and once I expressed interest they wanted to sell it for 10% above the cost of the outstanding mortgage. I find this funny because in late ‘07 they were willing to auction it off at a starting bid for $250K.
Since I’ve been hanging out with you HBBers, I’ve realized that it’s pointless too worry about it. We still have a LONG way to go.
Incomes have been flat in this country and they are going to continue to decline.
Incomes are actually in the negative area and have been for some time. If Americans want jobs to stay in America, cost must come down so they are in-line with incomes, hence the meaning of affordability. That means incomes will not be keeping pace with inflation and other rising costs such as oil. It also means that these commodities will eventually be forced to drop in value as the consumer is cutting back and rather sharply!
The problem right now is many people are using housing as their retirement package instead of a place to live in and that is the mistake.
The point is that a borrower needs to put a down payment when they buy a home and prove that they have the ability to pay a loan balance with solid income .
The biggest problem with the boom was lenders letting people buy real estate with no skin in the game ,with the no down liar loans, that were designed to go up to high adjusted interest rates .
To even create a loan that a borrower could qualify at a 2% teaser rate and than within a year adjust it up to 8- 11% is a joke. How did the industry think that the borrower was going to afford the 5 to 8% increase in the payments ?In spite of this absurd qualifying by teaser rates ,the borrowers still submitted liar loans to qualify with low or no down payments .That’s what happens in a easy money created mania .
The industry just can’t justify making the faulty loans that they did and the CDO investment trenches are a joke .
That being said ,why should the taxpayers give any bail out funds for either the borrower or the lenders or the Wall Street investors ?
These loans were a defective loan product and the industry is getting what it deserves for creating such products . The industry was just looking for anyway they could but bodies into these loans at ever increasing fake appreciation .
The industry knew at the tail end of 2005 that the increases in Florida were do to about 40% investor purchases ,yet the industry continued to make these risky loans that were based on this faulty short term investment demand .
What ever happened to the concept that these CDO investment trenches were spreading out the risk ?
What the real estate industry did was just as bad as putting 5 million defective cars on the road where the brakes are going to fail at any time.
Well they should be able to buy a townhouse or small “dollhouse” (1000 or less sq. ft., 2BR, 1BA rancher or similar).
IMO.
The financial garrote is being tightened, as torture makes it’s to our shores…
“Accountant Jim Galvin thought of his home-equity line of credit as one of life’s givens, a solid reserve ready for use when the need arose. So he was shocked last month when Countrywide Financial Corp. wrote him to say it had frozen his credit line. He soon learned he wasn’t alone. ‘They are freezing everyone across the board,’ said Galvin, who lives in Clermont. ‘It’s panic mode. But I was shocked when I received my letter. I’d never seen anything like it before.’”
Frankly I’ve never seen anything quite like that my self ( and I’m a pretty old dude ) Still, the guy is an accountant in one of the most bubblicious markets in the country. Do you realize how many people that got those letters are kicking themselves now!?
If those folks have been responsible, made their down payment and kept up the property they are esentially being alienated from their own money. That should be the criteria.
I have to disagree somewhat here.
No one has the “right” to a loan. If a bank is forced to make the loan under circumstances unfavorable to the bank’s bottom line, then they are also being ‘alienated from their own money’. If all banks are refusing HELOCs, then that might be a sign that you are a poor credit risk, or they just don’t have it to lend.
If someone ‘needs’ (as differentiated from ‘wants’) a HELOC, AND they have equity and have been responsible in keeping up the property, they will at least be able to sell.
A house is not an ATM, it is a place to live and you can’t have your equity and live in it too…
NoSingleOne,
Oh I agree, I was just playing DA for a moment. Think of it this way, I step in at the peak of the market and make the TWO biggest mistakes of my life! Firstly I buy a home at a bubblicious price. THEN… I put HALF down ( a lot of accountants do ) the home appreciates for (1) month and it’s been nothing but downside… ever since! But we are nowhere near a point that the lender would be in any peril ( at least where ‘my’ loan/property is concerned? )
Then through no fault of my own ( other than a truly awful entry point ) the bank finds themselves greatly over extended due to their “fog a mirror” underwriting and now it’s MY problem!?
I’m sure in the fine print of the loan contract the bank can cut a credit line ,especially when you have a declining market .
I think all the lenders should take a re-look at the IRS filings of borrowers and cut credit lines accordingly . In fact ,its the Lenders duty at this point to make a attempt to correct their faulty lack of proper underwriting or correct their fraudulent loan agents hand in making faulty high commissioned paid loans .
As it stand now ,this World has gotten so bizarre that the people that committed loan fraud are demanding their rights to credit lines ,loan bail-outs ,and the governments money to insure their faulty gamble that real estate prices always go up .
When it really comes down to it ,the powers are attempting damage control ,but the powers really can’t control the damage that has been done because the people can’t pay for the house and some don’t care to because real estate went down .
The day the powers admit that the market was a mania, riddled with liar faulty loans and fraud ,that you can’t save ,is a day I would like to see .
“alienated from their own money”?
You mean the banks are refusing to allow withdrawls from savings accounts or not redeeming CDs? Not being allowed to borrow more has nothing to do with “thier own money”.
I know people in the exact same boat - solid credit, solid income, solid payment records on their 1st mortgage and HELOC, whose lines of credit are being readjusted down with each montly payment of principal. Available credit balance = zero.
That’s how my loans basically work. No promise that revolving credit will be provided. I did recently make an additional loan to an existing borrower, but increased the monthly payment to the point where the maturity date remained unchanged.
“A house is not an ATM”
Woot!? LOL, yeah kind of funny when we need to be reminded of that. O.Kay… new (new) “hypothetical” o.k?
I paid for the damn thing in CASH!! I owe nothing but made arrangements to have a HELOC just in cash I needed to access ’some’ of that equity? Now should I still be thrown to the wolves? Sorry pal, read the fine print. We’re not obligated to “loan” you jack!
My point is that this is another spoke in the now hopelessly twisted wheel that used to be confidence and trust. Are we that far gone that even bottom feeding and paying cash doesn’t mean anything any more? Is this scenario possible?
I have friends who have no problem accessing their ‘home equity line’.
Of course, they owe 400k on a house that is ‘valued’ at 1.2 million, and their equity line is only up to another 180k. So… yah.
If you’re upside down due to market declines or getting a retarded loan in the first place, don’t expect to keep your loan.
In the case you presented, you’d have 0% trouble keeping your loan.
Countrywide closing them ‘across the board’ is because countrywide’s loans are complete crap ‘across the board’.
Ha..I advised a friend of mine to take her equity line a few months ago when I realized what the lenders were doing..she had a 200K equity line that she withdrew and put to good use in investments..2 weeks later the letter shows up saying it has been closed..She smiled when she showed it too me and gave me a hug! Screw the banks! Stupid enough to hand out money like candy! She is probably going to walk away cause the home isn’t worth the balance now..but she will use the 200K to buy a small house for cash..in her mom’s name!
“Stupid enough to hand out money like candy!”
Your friend sounds like a crook.
She sounds so devoid of honesty and ethics that she will risk bringing down her own mother in her web of greed.
Does your friend realize that a HELOC is a recourse loan and the bank can go after the second house in a bankruptcy court, even if purchased in her mother’s name?
Buy the house in Guadalajara
Ann,
No offense to you or your friend but this is exactly what the banks are trying to avoid. When this type of behavior goes on it affects other borrowers as evidenced by the “HELOC Party is Over” letters that lenders are frantically getting out.
In her case it sounds like she had some “soft” equity gains and was able to sneak under the wire? If people of means can’t buy a house cash and then expect to take some equity out for tax planning or other purpose we can scratch them off the potential buyers list too.
Ann,
your friend is scuzzy. I don’t cheer on bank robbers. She may have beat the bank on this one, but I’m willing to bet karma finds her…or karma finds her mother. Just give it time.
Buzz, buzz, buzz … that first Orlando Sentinel Article is “1 Most Viewed and #1 Most E-Mailed in the online version today. The first thing my wife said was, “I bet a whole lot of people are going down to the bank to cash out their equity lines.”
Those lenders who didn’t act as quickly as Countrywide, to actually cut off the lines, probably are facing a huge amount of withdrawal. Pass me the Kleenex.
lol Probably true. One of my coworkers is very upset. Every year he and the Misses do a luxury vacation/charity over to Asia (Manila). They stay in the nicest hotels, fly business class, and donate $15k to $20k per year to a Philippine medical charity. They even ‘volunteer’ at the clinic for three days a year. (Funny… they attend/organized too many large banquets to get much done.)
This year… he’s worried. Why, the bank told him BOTH of his homes have declined in value and thus he cannot extract equity in 2008. Awwww…
Actually. I feel for the charity. They were doing good work.
Now the kicker: This person earns under $100k/year.
Got POpcorn?
Neil
Wow…. he needs to pass the crack pipe. I earn >100k not including wifes income and I have to think twice about replacing blown fluorescent lamps.
Neil - a bit O/T - a buddy of mine asked my opinion about a “mission” trip to Kenya, where the group would paint the buildings on a tea farm. I suggested that instead he send the farm 20% of the proposed cost of the trip, including r/t airfare. That would buy a lot of paint and employ those laborers who otherwise would have no work if the do-gooders were doing the painting. Then take a trip over to Busch Gardens. Fortunately, he wasn’t offended. I know another fellow who goes to Haiti to help build structures. While still not efficient compared to one person taking the cash and hiring locals to do the work, IMO, it at least marks a more sincere effort to do good and not get a fun safari out of a trip that is billed as self-sacrifice.
not get a fun safari out of a trip that is billed as self-sacrifice ??
I agree…Th test is; Are you doing it to “Do Good” or “Feel Good”…??
Lol
I love the safari quote Chip!
Got Popcorn?
Neil
Wow, I know these trips always kind of rubbed me the wrong way, now I know why. Who among us hasn’t had to sit through some co-workers “slide-show” of their charitable trip? With our “footprint” we take up more resources than if we just sent a check! Yeah, I wish I could party in Manila every year too, hell, who wouldn’t?
I got back from Manila a few weeks back. I don’t want to go back. Manila is a dump. I wrote some blog articles on it and I got a particular kick from this one:-
http://planmytravel.blogspot.com/2008/03/government-warning-crucification-is-bad.html
Well yeah, if you’re on EDSA Avenue, Mabini Street etc. Calooacan is a hell-hole too. Sorry if you didn’t know going there during Easter wasn’t a good time to be there?
Me personally, I love the rainy season but that’s just me. Should start in a couple of weeks. To be fair though, there’s a reason my wife and I are still considering the Big Island. It’s not crazy cheap in P.I like it used to be when the dollar actually meant something? Don’t think the bubble didn’t reach there either! A lot of pinoy MD’s poured bubble bucks back there and it’s hard to find a simple or reasonably priced home there any more. “Tiled entry ways” and “upscale” found it’s way there too. A lot of “American” gated communities look more like their adopted home (California) than P.I. Post 9/11 travel to P.I is a pain, not without good cause but a pain nonetheless.
The level of corruption in some of those countries makes me wonder if $ donated ever reaches those in need. At least if you go there to paint a shack, you know it’s been painted! I can see mission trips by those with special abilities, such as plastic surgeons who repair cleft palates of children. Money sent for that surgery would not be effective, and flying the children back here one by one would be far more expensive than flying a surgical team out there & doing a batch of several dozen surgeries in a short time.
One way to donate $ is to Rotary International projects. Their projects do not exist in a corruption-free milieu of course, but from what I’ve seen the Rotarians work pretty hard to be effective. Since the projects are run or overseen by local Rotary clubs working in partnership with international donors, they are going to stay reality based.
Right on. It’s the old “don’t give a man a fish, teach him to fish” adage.
I’ve gone on trips of this sort. And we “reliefers” worked our butts off. Only off days were our travel days to and from our work site.
Let’s say it again. “Your future is in Florida, the fair white goddess of states.”
I’ll never tire of that quote.
Got Popcorn?
Neil
Defending your right to get a loan…
“Ken Thomas, a Miami banking-industry expert, said property owners can appeal a bank’s decision to cut or eliminate their credit line, but they need to be able to make a case.”
What “case” can you make when the market value has dropped beneath the loan value?
Lawd, it’s like getting into a @ss-kicking contest with a one-legged man!
“Lawd, it’s like getting into a @ss-kicking contest with a one-legged man!”
LOL!!
The comment that strikes me as the most important in all of the above is that the average mortgage rate on defaulted loans (in PBC) was 6.7%. There goes the whole “moving people away from unfair high-rate subprime mortgages will fix this mess” argument.
“The comment that strikes me as the most important in all of the above is that the average mortgage rate on defaulted loans (in PBC) was 6.7%.”
0% over 30 years couldn’t save many in Palm Beach County. Specuvestors bought too many homes that were designed for people to live in that are now vacant. They never intended to keep these loans and affordability was never an issue.
Conversely, my perfectly-performing mortgage clientele are paying an average rate above 9%. They knew the deal, they knew the monthly payment, they said they could do it, and they’re doing it. Congratulations to them.
“Ken Thomas, a Miami banking-industry expert, said property owners can appeal a bank’s decision to cut or eliminate their credit line, but they need to be able to make a case.”
______________________________________________________________
“Can’t we all just get a loan?”
(with apologies to Rodney King)
LOL!
It should be the REIC’s marketing phrase for 2008!
This has been a fairly common news item lately, but I’m still struggling to understand how a home equity line of credit could be perceived by anyone as “one of life’s givens” on par with death and taxes. Rising asset prices aren’t a given, credit isn’t a given, and just wait until people in this country realize that food, gasoline, and employment aren’t givens either.
And Stan Smith. They’ve sure got a genius economics faculty at UCF.
SC - hopefully most people will now return to a view of housing that my wife and I and possibly yourself held from Day One - that a mortgage is a form of forced saving for those who otherwise would have the inability to accumulate enough to buy for cash. The only time we ever had an equity line was for a bridge to get into another house and even then we didn’t use it. The bank rep was surprised when we turned in the cut-up credit card they had sent us to use against the line. I’m really glad those days are about gone, though the damage such credit has already done is mind-boggling.
Right on Chip .
In the past ,as a borrower paid down equity and lived in a home long term, the loan became more and more stable as the borrower built up equity.
The lenders were keeping the borrowers at repeated increasing high loan to value ratios ,which is high risk lending .I remember during the boom ,I was getting mailer after mailer offering me loan money .
How many borrowers were pulling out equity just to puff up their life style ,or buy stupid stuff ,or pay their mortgage or taxes ?
People were convinced during the boom that they should let their house increase their income ability and get the things in life that they deserve .How can you lose since real estate goes up 20% a year ,why not buy 5 houses ?
I also understand that the industry was lying to the people anyway because you can’t take a tax write off on a mortgage amount that was used for anything but home-improvement .
…why not buy 5 houses ?
Based on many stories I have read, many people did buy more than one. Some bought 10, or 12. Investment groups bought dozens.
It now begs the question of just how many owner occupied are losing homes. Maybe not as many as MSM would have us believe.
“Based on many stories I have read, many people did buy more than one. Some bought 10, or 12.”
Teachers making $40K per year were buying multiple homes priced over $250,000 during the boom. Late night TV, part time real estate agent co workers, and buzz in the media fed this no lose “investment.” Now they’re learning…slowly.
“Accountant Jim Galvin thought of his home-equity line of credit as one of life’s givens, a solid reserve ready for use when the need arose. So he was shocked last month when Countrywide Financial Corp. wrote him to say it had frozen his credit line. He soon learned he wasn’t alone. ‘They are freezing everyone across the board,’ said Galvin, who lives in Clermont. ‘It’s panic mode. But I was shocked when I received my letter. I’d never seen anything like it before.’”
My landlord’s mail occasionally reaches us by mistake. One such piece of mail was a letter from CFC two days ago. I joked with my wife that I was itching to open it; now I have to wonder if it was not a HELOC freezer letter (I can only hope, as I would never open mail which was not my own
).
Good Morning Everybody.
Email excerpt.
From Dad:
“Jean’s son Joe has lowered the price on his Fort Myers condo from $125 to $110 and says he’ll take $90. The exact same unit sold for $220 at the top.”
Reply to Dad (I live in Florida):
I play golf at a golf club called Black Bear Preserve in Eustis
Florida–nice country, rolling land, horse farms and space (soil
stinks). When I first played there in 2006, I rode in the cart
with a 35yr old Trump wannabe. B4 we even teed off on 1 he offers to sell me a house he owns on the course for 425k, he just dropped the price from 525k. (I bet his properties are HELOCED to the max.) I told him I wasn’t interested. Later on in the round he tells me he bought the house from the builder for 175k in 2004. Last week, a similar home had a
homemade sign in the window for 199k.
My observations (viewed only from the golf course) from last week: say 40% of the sfh are for sale/rent, not lived in nor maintained (like lawn a dirt patch), with a couple of gutted–vandalized–or otherwise abandoned homes. One house that looked uncared for the week prior, now has boarded windows, destroyed screen enclosure, etc. It’s changing for
the worse, week to week.
Gloomy news but CHEERS to all!
Gynch
Lots of golf courses go under in hard economic times. There’s a Website just for the sale of golf courses, though I don’t know if anyone tracks the belly-up ones.
– belly-up in terms of probably being taken out of use as a golf club and sold for development in another form.
In Oregon the practice has often been that the city or county is forced to take over and they become municipal courses. When it’s profitable they turn around and sell them private party again. The rough, is well ‘rough’ and the upkeep is minimal. As much as I complain we have some of the cheapest golf in the US.
How much for a round? Public and “semi-private” courses in this area charge $20-$25 per person including cart, even on weekends.
Well there are really pricey courses like Bandon Dunes that charge out-of-staters $200 a round but right about where you’re at. I don’t think you’re getting a CART for twenty bucks so you guys are probably even cheaper.
Gloomy to whom? We’re cheering on.
BWAHAHAHHAHAHHHHHHHHHHHHHHHHHHH!!!
Treasure Lie-Land
“‘The up-tick in foreclosures on the Treasure Coast is a largely function of real estate speculation that occurred in mainland projects developed in 2005 as values peaked and supply began to exceed demand,’ said Sally Daley, owner of Daley & Co. Real Estate in Vero Beach.”
“The developer, which is grappling with the turmoil in the residential real estate market, also is in default on a $275 million loan intended to help finance the Las Olas Riverfront makeover and some of the firm’s other projects”.
Well thank GOD Boca Developers still ave the money to support the comany Polo Team!:
Royal Palm Polo | 561 994 1876 - http://boca-polo.com
Sun 6 2008 Season Opener John T. Oxley Memorial Match
Fair Oaks def. Boca Developers 9-8
MVP Brad Blake
Fair Oaks: Bruce Robson, Brad Blake, Joey Casey, Craig Duke
Boca Developers: Brian Street, Dawn Brown, Diego Cossio, Hector Galindo
Sat 12 10 am Boca Developers vs. Parrot Heads /B
noon BullTick vs. Las Fajitas /B
Sun 13 noon Boca Developers vs. Green Meadows /H
3 pm Fair Oaks/No Trees vs. BullTick /H
“They are freezing everyone across the board”, said Galvin, who lives in Clermont. “It’s panic mode. But I was shocked when I received my letter. I’d never seen anything like it before.”
Well Jim, welcome to the Brave New World, that has such creations and creatures in it.
Your eyes might be popping out of your head over the next 48 months; it will seem so different. Just imagine the biggest roller coaster you ever saw, and you’re strapped in, and it’s going 200 miles per hour towards the sharp curve, and you’re screaming “LET ME OFF!!!”
We’re not anywhere near “panic” yet.
But it’s coming up. Enjoy the ride.
Florida nursery rhyme…
Here was their church, and here’s the sheeple
Close the loan door and scare all the people.
Here’s the person going upstairs,
And here he is saying his prayers.
Orlando used to be nice until the 90’s. The it became Queens/Brooklyn South. I’ve never seen so many Mets/Yankees shirts outside of the 5 boroughs.
Are you saying… if we can have the term “Ugly Americans” we can also have “Ugly New Yorkers”?
No effort whatsoever to respect local tradions or assimilate in any way, shape or form? Hey, I know that guy!
Let’s see what happens when cash-strapped Munis get creative and require a residency requirement for full pension disbursement — and people who fled get half.
Do you mean public employees that worked for the Port Authority or whatever move down to FL full time? I’m not sure what you mean here?
Yes, people who leave the NE with pensions have been running a scam for decades and I believe a residency requirement will be implemented, as a means to recoup some of the money being paid out.
For example, if you leave NY with an $80K a year pension, and that check is sent out of state, none of it is being fed back into the local system, via property, income or sales tax. Sooner or later local gov’ts will wise up and realize there is a wealth transfer going on — and that they don’t have to support some janitor’s regal retirement in Boca, with all the Seinfeldian overtones.
Consider that a civil servant employee who starts at 25 will be getting paid for at least 50 years, with 20 of those years being totally non-productive. With salary, benefits and medical, many employees are getting paid the equivalent of $5-$10 million over the course of a lifetime. And 40% of that is a lot of money to be shipping to foreign locales.
Just as the housing bubble burst, I think people sooner or later are going to wake up to how much money they are paying civil servants — and the new meme is going to be, “I don’t get a pension for life, so I ain’t paying you one, either.”
It will probably be labeled something like “out-of-area excise tax.”
Could only happen with new hires. NYS retirement law can only be changed if its a benefit to the employee. Retirement benefits have been reduced, since the sixties ( for new hires). There is an incentive if you retire in-state; no state tax on retirement pensions. Live out of state and you’re subject to that states income tax laws. Its also one of the most fully funded retirement systems in the country.
I’ve always wondered why they haven’t done that before. Makes sense to keep the money in the neighborhood. It would be an interesting court case too…
Prohibited by federal law. CA used to be the high profile “enforcer” for public pensions for many, many years.
http://tinyurl.com/4rxy9n
3 pg pdf
http://tinyurl.com/42uru3
I ran in to a friend two weeks ago that owns a condo at Minorca in New Smyrna Beach. He said he purchased it for 400k and 3 years ago was offered 800k. He said he could only get about 400k today.
“He said he could only get about 400k today.”
If he could get $400K for it today, he should take it and run. Don’t look back! Make sure the check clears!
That $400K cond…even in New Smyrna Beach…will be a $200K condo before we’re done…if he’s lucky!
“The developer, which is grappling with the turmoil in the residential real estate market, also is in default on a $275 million loan intended to help finance the Las Olas Riverfront makeover and some of the firm’s other projects”.
Well thank GOD Boca Developers still have the money to support the comany Polo Team!:
Royal Palm Polo | 561 994 1876 - http://boca-polo.com
Sun 6 2008 Season Opener John T. Oxley Memorial Match
Fair Oaks def. Boca Developers 9-8
MVP Brad Blake
Fair Oaks: Bruce Robson, Brad Blake, Joey Casey, Craig Duke
Boca Developers: Brian Street, Dawn Brown, Diego Cossio, Hector Galindo
Sat 12 10 am Boca Developers vs. Parrot Heads /B
noon BullTick vs. Las Fajitas /B
Sun 13 noon Boca Developers vs. Green Meadows /H
3 pm Fair Oaks/No Trees vs. BullTick /H
“‘The complex has been a failure BECAUSE the owner has quit marketing the complex,’ said Fort Lauderdale Mayor Jim Naugle.
“You keep using that word. I do not think it means what you think it means.” Inigo Montoya, Princess Bride
or, in LOLSPEAK caws and effect: ur doin it rong.
Where HE goes, LOC will follow. (down the tubes in this case)
“Those on a typical service wage of $35,000 or so a year ‘just can’t buy houses’ at current prices with mortgage-lending standards so tight, Belcher said. When first-time buyers have a harder time getting into the market, it slows the pace of sales all along the line, he added.”
–I’ve fixed his sentence. You know, when it became normal to regard PRICES the constant, and LOAN UNDERWRITING the variable, trouble was bound to ensue.
cool, all you need is a generator and the living is easy
maybe a portable solar panel or 2
–
‘I would argue that, if banks weren’t changing the terms of their loans, they aren’t very good bankers.’
If a banker doesn’t make himself unpopular he is a bad banker, according to the great one, Joseph Schumpeter.
Jas
This is especially true of Central Bankers.
Greenspan yearned to be liked and respected and will end up being neither.
Volker was hated by many but respected by most.
“Sonny, is it better to be feared…or respected?”
-A Bronx Tale
–
Taking the punchbowl away just as the party gets going? — Fed Chairman Machesney.
Greenspan & Bernanke believe in spiking the punch until the party gets wild and rowdy (out of control and breaks up on its own accord).
Jas
Microcosmically speaking, Schumpeter is wrong. Clients think I am honorable, so they feel some motivation to show that they are honorable too. I grant you a “real” bank can’t adopt the same posture that I do.
if banks weren’t changing the terms of their loans
Banks are allowed to change terms mid-contract?
(Not being snarky, I don’t know.)
Its a “line of credit” until its drawn. I think that’s how they get around it.
It’s not just the new TH HOA’s in trouble. I just sold my 1978 TH in Wellington (thanks Ben and HBBers) as I saw the community falling apart. Since I bought in 04, the quarterly dues doubled due to insurance and an FHA loan for hurricane related repairs. Also, the reserves were all spent on hurricane repairs. About half of the residents are fixed income seniors who can’t meet the obligations. Add those to the FB’s and what was a decent community 4 years ago is toast.
Bought for 136K in 04
Comp sold for 220K in 06
Sold for 159K two weeks ago
Sold for 83K in 2000
A long way to go!
I don’t know if it’s realistic to expect the price to drop down to 2000 levels (barring an economic disaster in this country). I would say 2000 levels plus at least the cost of inflation over the past 8 years, so maybe $120K, tops???
I believe that method is the most accurate means to remove price distortion for housing. Choose a timeframe where prices were relatively flat, add 3%/yr loss to inflation for every year up to current.
“I don’t know if it’s realistic to expect the price to drop down to 2000 levels (barring an economic disaster in this country). I would say 2000 levels plus at least the cost of inflation over the past 8 years, so maybe $120K, tops???”
An alternate point of view:
How about 200 levels MINUS an amount equal to the drop in real wages, purchasing power, and economic stability. Remember, in 2000 the economy was not too bad off. In 2011, unemployment will be higher, national debt higher, US productivity will be less, and most people will have a lower net worth that they had even before the bubble.
The question to ask is why should housing prices even hold at 2000 levels? Consumers are probably in worse shape now than they were then.
Also, the inflation of other consumer goods that have a fixed manufacturing cost will probably be a depressing factor on housing prices, which are more variable to the market demands.
Exactly. See my other post above. Half a mil is a lot of money for a starter home, and that’s now considered “normal.” If the easy access to credit is taken away, prices have a loooooooooooong way to fall. That is going to require a major psychological shift for the population.
And think of the consequences - everybody who bought a house in nearly the past DECADE would watch as the value of their home declines to diddley/squat? Even with rampant inflation to help hide it, it would be a bloodbath.
The stories some posters told of their first homes being under 100k seem like fairy tales in light of current prices, but actually it’s RIGHT NOW that we’re living in the land of make-believe. The more I think about it, the uglier it seems like it’s going to be.
Don’t LOOK now but that Great Big Wave out on the US finanacial horizon has subprime DISASTER written all over it!
It appears that there’s also two more distant Waves named Alt-A and Prime rolling in.
I’m not sure of future house prices and economics…but you can HAVE my share of the seashells and fish…Bye Bye
“Can’t we all just get a loan?”
(with apologies to Rodney King)
HA
what a riot!
riot! Rodney King. lol
That hits like a brick to the head.
Guilt by Association
“The culprit in all three cases is the housing bust. Fully half of 487 Florida associations surveyed recently by Hollywood law firm Becker & Poliakoff say they’re facing financial shortfalls because of the foreclosure crisis. And about one-fifth say they’ll increase fees or impose special assessments to make up for the shortfall.”
Even though I regrettably belong to one now, if in retirement I say I’m looking at a property that involves an HOA could shoot me in the back of the head please? Please?
This is what happens when you get involved in something that’s “open ended”. We were renters here for 2 years before we were… forced to buy and they NEVER had an increase! Within one (1) month of becoming “owners” they decided they had to be raised. Still and all it’s only $200 but that’s in 2008. What will they be in 2018? I don’t want to be around to find out.
When it’s all said and done we may just sell b/c even a luxury rental will come to about what HOA’s and taxes will be by the time we’re ready to retire!
I’ve seen quite a few his & hers Jetskis (with trailer) for sale on the side of the road, here in California…
I wonder how Florida compares?
And I’m seeing the “Take my SUV. Please!” trend here in Tucson.
Pleaze tek ma $58,000 F350 Super Stroke Diesel extended cab, super lifted, mega-tired, 4×6, pimped out, brush guarded, light barred waste of the Earth’s resources of a Duelie off ma hands so I can eat agin (then mebbe make the same mistake when I gain a few pound back) here in Bama
“Also so I kin git ma fishin poel and huntin gun out of the pawn shop, oh! en my Waf and ma dawg Bo too! Specially Bo, I NEED him!
(I’m not really joking here, it’s like that)
Why should investors purchase loans in a declining market ,unless the borrowers puts 25 to 30% down to offset the risk on prices declining another 30% . This is a very serious problem when you have the fake boom prices crashing and you have trashed foreclosures determining market value .
I know a guy who just spent 50 thousand fixing up a house that he has held for years and a bunch of punks just destroyed it because it was vacant . The police caught 2 of the punks ,but they are out on bail ,and my friend is afraid they will come back and get even. My friend also got news that he has cancer and needs emergency surgery and his wife is disabled and totally depends on him taking care of her,(the wife can’t even talk or drive because of a stroke ).My friend fixed up the house to sell it because of his circumstances and he owns the house free and
clear.
The reason I told this story about my friend is that here is a guy who really has problems ,yet he never complains or expects anything from anybody .It makes me sick when I compare my friend with these borrowers screaming “give me give me a bail out because I’m a victim because my investment gamble didn’t pay off.”
I feel bad for your friend. I’m glad that he isn’t trying to get something for nothing, even though he could totally play the victim card.
The good news is that once he sells the house, he should qualify for Medicaid in virtually any state (if he is not on Medicare already).
My friend has health insurance . The reason why he was trying to sell this rental house (at a low price )was to provide funds to take care of his wife in case he didn’t make it with his operation and he won’t be around to take care of her anymore . Now his operation is delayed because they have to check out his heart to see if he can take this surgery .
In the meantime his insurance company is giving him a hard time about the insurance claim on the damage on the house because it was vacant in spite of the fact that he had renters insurance and paid a higher price for that .
When I think about all the FB’s walking and destroying property on their way out while they scream victim ,while my friend is having a hard time in life ,yet he would never asks for anything ,I just get sick .My friend has been taking care of his wife for 5 years after a stroke and in his free time he donates time to charities and other public causes including the code enforcement that he donate 12 hours a week of free time to.
By the way ,my friend sold the house ,but Countrywide pulled their loan commitment at the last minute ,which pushed him into a different market after those buyers tied up the property for three months . He wasn’t being greedy with the price of the home either and had the house marketed at a low price . Now hes totally screwed .
As long as our society rewards the bad actors instead of rewarding the decent folk ,than we are doomed .
As long as our society rewards the bad actors instead of rewarding the decent folk ,than we are doomed .
You’re totally right. I think that we would have a lot more to look forward to as a country if society rewarded good behavior and punished the bad,
except whenespecially when it comes to making money.ot, but interesting….
http://www.msnbc.msn.com/id/24167304/
It’s A Spiraling Devaluation, And It’s Feeding On Itself
If I were flying an airplane and this happened to me, it’s called a Flat Spin…
Very difficult to maneuver out of one, after it gets going, your airplane and you cratering into the ground, in the end.
“At Carriage Pointe, one out of every three homeowners aren’t paying their bills, which led to that community’s hefty $60,000 assessment.
Condo boards should require every new applicant to pose for a photo. That way, if they stop paying their dues, management can create a “deadbeat wall” listing names, faces, and door numbers in a “name and shame” campaign - nothing like public scorn to make at least some of these deadbeats pay up. They should also be stripped of their parking spaces (and towed every time they “forget”).
Bet there’s a lot of hatred and discontent festering in those “lifestyle” condos right about now.
Somebody earlier said they were “cheering on” this debacle.
Pretty heartless. The market will drop another 100% or more (the same amount it went up).Whattyagonnado? Just sit and wait for the bottom (in 2010).
Here is an update from Naples. Just bought a home on the Bay in Naples. It sold for 58% off the list price back in 2005. Thats 42 cents on the dollar by my math. I know I am probably three years early but the price seems ahead of the market and I am subjected to wife pressure. I am “worthless and weak”.
This town faces a geriatric time bomb as the older property owners pass away, the houses go to estates, the kids can not afford the property tax resets, and the houses go into estate sales. Most property owners are still in denial but some recent sales should wake the crowd to the new reality.