The Housing Bubble

The News Journal reports from Florida. “The glut of unsold real estate on the local market has begun to shrink, but that doesn’t mean more houses are getting sold. The inventory of homes, condominiums, businesses and lots being marketed by agents in Volusia and Flagler counties hit a record 9,541 listings last November but since then it has started to decline gradually, falling to 8,544 by April, the most recent tally available.”

“Since Jan. 1, the number of area properties getting sold by agents has averaged 237 a month…below last year’s depressed rate of 280 sales a month. At the same time, hundreds of listings expire each month after having languished unsold for three to six months. Hundreds of others simply are taken off the market as owners change their minds about trying to sell, according to MLS statistics.”

“Yet more than 1,000 fresh properties continue to be added to the Realtors’ database each month. What’s fueling the new business? Some Realtors say the additions reflect the growing number of homeowners who are in trouble with their mortgages.”

“Nearly 1,000 area owners were served notices during April that they were in danger of foreclosure, and 200 of those were near the point of facing eviction, according to RealtyTrac.”

“Very few sellers still cling to hope they’ll get an offer close to the asking prices that prevailed in 2005, said Bob Millward, co-owner of the RE/MAX All Pro Realty agency in Port Orange.”

“‘It took a little while for sellers to get realistic with their prices, but we’re finally there,’ Millward said.”

The Sun Sentinel. “Setting the right price for a home sounds simple, but too many sellers aren’t doing it. They insist that their properties are special and holding value, even though the median prices for existing homes have plummeted 26 percent and 24 percent, respectively, in Palm Beach and Broward counties since late 2005.”

“Olga and Manuel Delacruz listed their three-bedroom home in central Palm Beach County for $199,000 about four months ago. When it didn’t sell, they dropped the price twice. Now they’re asking $169,999, which is where they probably should have started, their agent, Douglas Rill, said.”

“The Delacruzes and other owners of lower-priced homes are likely competing with an increasing number of foreclosures. Lenders don’t want to hold these properties, so they’re slashing prices. Individual sellers must do the same if they have any hope of finding buyers.”

“‘It’s a little frustrating,’ said Olga Delacruz. ‘If we have to lower it one more time, we will.’”

“Many sellers asking too much for their homes now are doing so because they paid inflated prices during the housing boom of 2000 to 2005. Agents cringe when they hear clients say they have to get a certain amount of money out of their properties.”

“‘Your need doesn’t change the market value of the house,’ said Rill of Century 21 America’s Choice Realty in West Palm Beach. ‘Sellers will say, ‘Can you at least try it at this price?’ I’m happy to try, but it’s not going to work.’”

“Terry Story, (an) agent in Palm Beach and Broward counties wanted to list a Boca Raton home last summer for $575,000, but her client held firm at $625,000. Meanwhile, a similar house across the street was priced more competitively from the start and sold quickly for $482,500. Story’s seller could do nothing but cut his price, finally finding a buyer to pay $460,000 after six frustrating months.”

“‘He chased down the market,” said Story .”

“Virginia Goss first tried to sell her Boca Raton house on her own, but had no luck. So she listed it with Story, who suggested she put it on the market in the low $300,000 range. Although that was much lower than she preferred, Goss listened and immediately sold the home, albeit at a loss.”

“‘It’s hard to swallow a loss, but we’re moving on,’ Goss said. ‘There’s value in that.’”

The Miami Herald. “The Meruelo family spent nearly four decades building a real estate empire stretching from California to Florida. But…the Meruelo-owned companies now face mounting financial problems and a stack of lawsuits.”

“‘Like so many of the developers in Miami, the Merco Group rode the crest of the wave and was highly successful,’ said Jack McCabe, CEO of McCabe Research & Consulting. ‘Like many others, they were overly aggressive in pursuing too many projects.’”

“One of the costliest problems is the Palladio Terrace project. While Eastern Financial Florida Credit Union has won the right to auction the 4.5-acre waterfront property next month, several dozen condo purchasers are still fighting the Merco Group of the Palm Beaches for allegedly failing to return one of their two deposits after the project was canceled.”

“One Palladio buyer, Greg Pill, said he drove around West Palm Beach three years ago and liked the proposed project and site so much he signed up to buy one town house to live in and another as an investment.”

“‘I wish I would have checked out Merco more,’ said Pilla, a resident of Redwood Shores, Calif. ‘There has been a grand injustice perpetrated. They made a deal and didn’t stand by the deal they made.’”

The Calgary Herald. “The sub-prime market fallout has hit Florida hard, but that hasn’t stopped one Calgary-based company that has a project in St. Petersburg. It’s been less than a month since the Lucid Group of Companies first announced it was selling 240 condo units in St. Petersburg at bargain prices, says a news release.”

“With prices starting at $70 per square foot, nearly 70 per cent of the Sunrise Palms development has already sold, primarily to Calgary and Edmonton buyers, it says.”

“‘Buyers are telling us they know it’s a great deal and they are confident that it is just a matter of time before the housing market rebounds in the holiday and retirement community of St. Petersburg. Long-term, they believe it’s a great real estate and lifestyle investment,’ says Adam Drybrough, a partner with the Lucid Group of Companies, in the news release.”

The Bradenton Herald. “The housing foreclosure fallout carries a very real price tag for all of Manatee County. The court system’s backlog of foreclosure cases has tripled in the past year.”

“Home values in some neighborhoods have dropped 30 percent or more as a result of the foreclosures and the real estate downturn. And residents are struggling to preserve the character of their neighborhoods as more homeowners are evicted or walk away from homes that are worth less than they owe.”

“‘It’s actually going to drive the values down on even the homes that aren’t distressed,’ said Bill Kersey, director of appraisal services with Manatee County Property Appraiser’s office. ‘Any sale that occurs now tends to be distressed. Even though it’s not a foreclosure sale, it’s a distressed market. If you want to sell it, you’re going to get a lot less for it than you did two years ago. And what this does is drive all of the values in the neighborhood down.’”

“”Already in the first six months of 2008, there have been more than 2,300 cases filed - nearly as many as during all of 2007.”

“‘It’s never been like this,’ said Manatee Circuit Court Judge Paul Logan. ‘I haven’t seen any signs that it’s getting better. In fact, I’ve talked to a few local attorneys who represent lenders and I’ve said, ‘Hopefully we’ve seen the entirety of the problem.’ But all of them have told me we’ve only seen the tip of the iceberg.’”

“‘At this point there is just an incredible amount of bank foreclosures, which is absolutely affecting the homeowners associations’ ability to collect their assessments,’ said Kevin Edwards of (a) firm in Sarasota, which represents about 400 neighborhood and condo associations in Manatee and Sarasota counties.”

“‘It’s more of a problem I think in condos,’ he said. ‘Most of them were investors who bought these condo units or, in some cases, single-family homes when the market was at its peak and the bank was giving them these no-money down or low-money down loans. These people were counting on flipping them for a profit, and that didn’t occur.’”

“‘A lot of times, they’re not going to get that money back,’ Edwards said. ‘We have cases in condos where the owners have abandoned their units and we’ve had to, as associations, go back in and turn the electricity on to prevent mold growing in those units. And the association is stuck with that bill and the other unit owners are having to pay for it (through increased assessments). It’s pretty bad.’”

The Herald Tribune. “The overall trend in the market for vacant land continues to be downward with respect to price and the number of closings.”

“‘There are a lot of buyers and a lot of sellers out there, but they’re miles apart in their philosophy at the moment,’ said Stan Rutstein, an agent in Bradenton. ‘Buyers are evaluating land values with a microscope, while sellers, who either got in too high or are too leveraged, are operating with unrealistic expectations.’”

“‘How many thousands of vacant residential lots are out there that we don’t have buyers for?’ asked John Stephens, an undeveloped land specialist in Palmetto. ‘Until those lots are absorbed, there won’t be any demand for raw land.’”

“Manatee County property appraiser statistics show that falling demand for empty land is having an impact on prices. Where land was selling for an average of $78,210 per acre in 2006, the average price for the 17 deals that have closed this year is just $25,182 per acre — a level not seen since 2004.”

“Carlos Beruff, a longtime Southwest Florida builder and developer, bought 47 acres for $1.1 million, or $23,787 per acre, in December, according to property appraiser records. That price was 74 percent less than the $4.2 million, or $89,362 per acre, that Kimball Hill Homes paid for the South Manatee property in April 2005.”

The Naples News. “Last month, troubled homebuilder WCI Communities Inc. sold its high-end, Italian-inspired Tuscany Reserve community to foreign investors for $65 million.”

“But it’s still in a legal battle to keep a $1 million deposit from other investors that contracted to buy the 470-acre golf course community in North Naples last year and never did because of disagreements over the terms of the sale, including the price.”

“‘We showed up on Dec. 24. We had all the documents that were required and we were ready to go, and they just simply didn’t show up,’ said Thomas Roehn, a Tampa attorney who represents WCI.”

“WCI designed Tuscany Reserve as its most exclusive golf course haven and expected to sell a limited number of homes for $2 million to $5 million, with golf membership in the range of $200,000. But it never really took off.”

“In the past year, WCI has repositioned the community, offering homes for less than $1 million. It’s permitted for 530 homes and only about 30 have been built.”

The News Press. “Southwest Florida’s real estate crash has left a record amount of garbage at abandoned construction sites and empty street lots, according to the Lee County Solid Waste Division.”

“The county has picked up 140 tons of refuse since April from commercial or home project sites where construction was halted, an unprecedented statistic.”

“‘Nobody abandons construction sites, but that’s what we have now,’ said Brigitte Kantor, solid waste coordinator for the county. ‘We normally have hardly any of those.’”

“The county also has seen a tremendous spike in the number of illegal dumpings, usually discarded belongings such as furniture left on empty street lots. Despite the escalating number of illegal dump sites, the department will propose a $59 million operating budget for the coming fiscal year, about the same as last year, said Lindsey Sampson director of Waste Division.”

“That’s because even a foreclosed home is subject to Waste Division taxes. ‘We have more empty houses sitting out there and empty houses have to pay too,’ Sampson said.”

“Real estate investors turned off by the housing market have another option under construction in south Fort Myers. Two storage condominium projects are underway near Southwest Florida International Airport.”

“The storage condos are on sale and offer storage options for those with boats, motor homes or large car collections that won’t fit in their homes or in traditional storage facilities. Construction started June 4 on the first phase.”

“John Allen, president of The Treasure Chest, said potential owners plan to use the condos to store large motor homes, boats and furniture collections.”

“‘It doesn’t make a lot of sense to keep renting,’ he said. ‘It makes a good investment in real estate.’”