Will Second-Home-Rich Florida See Flood Of Housing?
Some updates on the housing bubble in Florida. “With lawmakers ready to negotiate an already-flush budget, economists said Wednesday the state will bring in nearly $1 billion more in taxes. Senate President Tom Lee..said lawmakers should put at least part of the money in the state’s reserves. The economists said they expect smaller increases in tax revenues in the future, at least in part, because the housing market is slowing down.”
“‘We need to prepare for the cooling down of the economy that is expected in the next few years,’ Lee said.”
“Ron Rennick’s firm has been hired by Vero Beach-based Glo Investments to auction 65 acres at the Equus subdivision. A developer decided to sell them off at once after finding that sales were slow. Each lot had a previous listing price of about $599,000 but the slowdown in housing sales has affected Equus. There is no minimum bid at this event.”
“Brad Hunter, who follows housing trends on the Treasure Coast and South Florida for Metrostudy, said developers find it easier to unload parcels through a quick auction. ‘I’ve heard of more and more people doing this as a result of the slowdown in the market over the last six months,’ Hunter said. ‘I suspect that we’ll see more of these types of auctions.’”
The Herald Tribune looks at speculation. “A national study of housing sales during 2005 confirmed what many had suspected, that speculation has been rampant in the booming real estate market. Single-family home ownership records in Florida shows the same pattern, with far fewer recent new owners taking advantage of tax breaks reserved for resident homeowners, implying that they are investment properties.”
“For example, in Charlotte County, 53 percent of homes bought in 2004 did not carry the state’s homestead exemption. In Sarasota County, the figures was 44 percent; in Manatee County, 39 percent.”
“Don’t wait for financial players this year, cautions (realtor) Chad Roffers of Sarasota. ‘Speculators are completely out of the market,’ Roffers said. ‘If I had to guess I’d say 50 percent of our market comes from second-home buyers,’ he said.”
“Others might view that 40 percent figure with more trepidation. It raises questions about the potential sweep of problems should some home buyers be unable to afford to carry their new real estate acquisitions: What happens with the many investors who tapped so-called hybrid mortgages? If second-home buyers do go ‘upside down’, is there a risk that they would quickly ditch their second home to cut costs and potentially create a flood of housing stock, particularly in second-home-rich Florida?”
“Although there has been a ’sharp increase in second-home sales recently.. whether they’ll be able to keep doing so is the issue,’ Northern Trust economist Paul Kasriel said. If they have taken equity out of their first homes ‘and equity growth slows or even falls, it might inhibit their second home buying abilities,’ Kasriel added.”
‘ Tom Lee..said lawmakers should put at least part of the money in the state’s reserves.’
In Arizona they briefly discussed this before deciding to blow it all.
Short selling hedge funds to sue brokerages - http://news.independent.co.uk/business/news/article357449.ece
We need more of this shit and I am sure we will get it with time. As the cost of money goes up, these guys will kill each other as well as the economy
huh???? what does this have to do with housing???
My firm allows naked short selling but they make you pay dearly to do it.
short sell hedge funds to sure brokerages http://news.independent.co.uk/business/news/article357449.ece
As cost of funds go up, see more of this happening…
Wonder when will we hear of MBS frauds and losses ….
“Don’t wait for financial players this year, cautions (realtor) Chad Roffers of Sarasota. ‘Speculators are completely out of the market,’ Roffers said. ‘If I had to guess I’d say 50 percent of our market comes from second-home buyers,’ he said.”
Huh? Second-home buyers = closet speculators in denial.
In many markets, even landlords who own outright are closet speculators. If the rent won’t cover a mortgage, it is likely the owner could sell and generate more income with less risk with the proceeds.
Ben,
I sure hope my landlord is not reading this blog
GS
Ben,
Yes, landlords can exercise their perogative to sell and generate more income. However, you should caveate this by saying that occupany laws in most states to not allow the landlord to arbitrarily and unilaterally tear up a lease and force out the tenant before the end of the lease period — which a lot of “speculators” are now locked into for long periods of time.
Most leases are year to year. When I decided it was time to get out of dodge I made my tenants an offer they couldn’t refuse. Immediate full refund of deposit and a pro-rated buyout of their lease i.e. I paid them to get out early. They were all too happy to take it though they did find out what a great deal they had been getting off me the past few years.
A lot of “investors” don’t realize one key concept to investing when paying cash for homes and condos.
“Return on Investment” that means even if you bought a $300,000 home and paid cash for it and it appreciates 3-6% a year, then you pay taxes, fees, ect, you find a renter but in the end is a 3-6% return (in a normal market) a good return on $300,000?
Is it worth sinking that much cash into an investment that might or might not appreciate in value and carries all kinds of costs with it? Or is it wiser to invest that cash into a stable investment making 6-8% a year with no fees or taxes until its cashed in?
I just got back from a trip to Tampa. Here are my observations, for what it’s worth:
1. My two seatmates on the flight in to Tampa were both mortage brokers. In response to my question about what the R/E market was doing, they both steadfastly maintained it was “hot” but had slowed somewhat in recent months. They also said that changes to tax laws and (especially) increases in insurance premiums were clouds on the horizon. One estimated that 70% of his loans were I/Os, with the number rising to close to 100% of first-time FBs, er, buyers. Property taxes are also projected to rise by at least 23% to help cover a growing tax shortfall, which has homeowners, especially the longtime residents on fixed incomes, up in arms.
2. I spent a few hours checking out the mostly older neighborhoods in Tampa (Bayshore, mainly) and saw relatively few “for sale” signs — maybe one for every 20-25 houses. Most of them were on new-looking or still-unfinished houses rather than in old, established neighborhoods. In the more lower-middle class (or run-down) neighborhoods I saw a lot of “for rent” signs, more than I remembered from my last trip to Tampa in 2002.
3. St. Petersburg has a huge number of realtors and mortage brokers, along with the most breathtakingly shameless hucksterism I’ve ever seen, pushing neg-am and I/O mortages. Beneath the relentlessly cheerful facade of the realtors, however, I sensed fear. A couple of times, when I picked up free listing brochures outside their offices, a realtor (or maybe it was an Ambien zombie, I’m not sure) would come lurching outside to accost me and tell me wondrous tales of the “investment opportunities” in one of the dozens of condo towers that have sprung up all over St. Pete’s. Must…not…laugh….
Meanwhile, I noticed that St. Pete’s has a SERIOUS homeless problem, and saw posters in some of the vegan/artsy fartsy bars and coffee houses railing against the current city council for favoring “condo developers” or the (their word) “indigs” (for indigenous) denizens of St. Petersburg. They accused His Honor’s regime of using bogus “housing violations” to seize and demolish houses in low-income areas, then sell off the lots to developers. Probably true, but an awful lot of those shotgun shacks looked pretty delapidated to me…their occupants, too.
4. The condo towers scream out “faux.” Pretentious-sounding names and they look almost like false-front movie sets — tacky, tacky, tacky. I wasn’t sure if the gates were there to keep the vagrants out, or the FBs in….
Enjoyed your story about your trip to Florida.
I heard a lady got killed today on some space ride at Epcot. Is there anything happening in Florida that isn’t dire?
Note to self: Find receipt. Call Spaniards. Get money back.
You have to remember that the native floridians are an uneducated and sunburn bunch, less than 4 out of 10 graduate high school. Most of the big and new housing is owned by persons who originate from somewhere else as the prices are out of reach for the average floridian. The delapidated shacks should be left to their occupants who, as you can see are now homeless, can not affort to live elsewhere. Those who can not stand the sight of shacks should live in one of those faux communities where everything is fashioned after Dallas.
Back in the ’80s a friend of mine from Ohio went to FLA to work after tiring of the midwest. She was hired immediately, after turning down numerous offers. The places she applied at (car dealers and apartment management offices) told her that native Floridians were stupid and lazy, and they very much prefered Midwesterners who were generally honest and had a much stronger work ethic.
It is something about that sun… I mean people from other places have long moved to florida in order to relax, to do nothing. Floridians are not really into keeping up with the jonesses as much they are into keeping cool so that might affect the work ethic a bit. Work just enough to pay the airconditoning. But seriously, florida is country and people move around a lot, especially the new people, from new house to another new house or from job to job. My friend had to move to florida because her husbands company was moving to cheaper florida. He did not have a choice, move or loose a job. According to my friend people who are still at north are being laid off like crazy.. Anyway, she said the lifestyle they are enjoying in florida puts them in the upper middle class range which would be unattainable were they came from. The only thing she complains about is that there is no one to talk to…The house is big but nothing to do.
It was probably that the business owners were all from the midwest, and wanted employees they could relate to with their mushroom soup/greenbeam/Frenchfried onion ring casseroles. Have you noticed that almost everyone who moves to Florida from the midwest is fat?
Would a native Floridian business owner say Floridians were lazy? I doubt it.
You have to remember that the native floridians are an uneducated and sunburn bunch, less than 4 out of 10 graduate high school.
Amen, to that comment.
I did some sub-contract FEMA hurricane disaster inspection work up after Ivan up in central Okaloosa County just above
a town called Crestville.
Whoowee, talk about some rough, hot, hard-bit, country down there in the Panhandle.
It’s Crestview. All of y’all that want to criticize us native Floridians need to keep something in mind…we aren’t as stupid as you think. We built beach shacks, not only because they’re cheap but also because we’re smart enough to know we live on a great big sandbar. The hurricanes come ever so often, and if they blow them down, we’d build another shack. This was our land and we love it. The native folks are country folks, which is why they call the area you’re referring to The Redneck Riviera. We watched in horror as the mom-and-pop beach motels our families vacationed in for generations were torn down to make way for hideous concrete monsters. So, we’re going to just set here, eating our grits for breakfast, snacking on boiled peanuts, drinking our Coke-Cola and laugh as you rich northerners watch your beach mansions crumble into the sea.
I loved “Old Florida.” My family spent every summer in Florida from the time I was 7 until I was 15. That was a long time ago
I recently went to Ft. Lauderdale where we used to stay and was alternately shocked and horrified by the endless skyscrapers. You can barely see the ocean any more from the road.
On the good side, Haulover is still a pretty cool place. Ever been there? LOL
Your statistic is bogus. What you call native Floridians comprise, in large, relocated Ohioans, and rednecks from Pennsylvania. Most native Floridians are not stupid or uneducated. Millions of low-rent, unemployed, or fixed-income people have come here from other places over the past two decades. Many are illiterate or poorly educated, but they are NOT native Floridians.
As for the people in the panhandle and tiny insular towns, sure, you’re going to find a high percentage are uneducated, but this is true in small backwaters everywhere in the United States.
This “fewer than 4 in 10″ graduating high school is a made up number, and typical of the ridiculous things snobs, especially from New York, say about EVERYONE from the South. The truth of the matter is that Atlanta has more museums and universities than almost any city in the North, with the possible exception of New York (and this has been true for seventy-five years), and the Tampa Performing Art center is the largest in the entire United States south of Boston.
St. Petersburg is loaded with beautiful museums and art gallaries downtown (including the largest Salvador Dali museum in the world); Dale Chihuly is moving his entire operation there from Seattle (he bought a whole city block) . The expensive, flashy highrise condos springing up in the downtown ARE ridiculous and do not fit in at all, but most of the slobs buying them are tasteless New Yorkers, so blame them, not Floridians.
Not to jump in the middle of this high school graduate rate debate but the actual number as of 2002 is 59% for Florida (3rd lowest) highest is Iowa at 93%…not sayin’ who’s what and where they’re from but those are the numbers…
PDF Warning:
http://www.torres4bpt.com/pdf/cr_baeo.pdf
Couple of things: 1. Those numbers are old. 2. They do not break down according to native vs. non-native students (non-natives make up the vast majority of Florida students), and 3. they are estimates, not statistics. They were produced by Jay Green of the Manhattan Policy Institute (New York again) and Kaleem Caire, President of the Black Alliance for Educational Options, on behalf of the latter. If you read their methodology, you will see that they are GUESSING. Their emphasis is on black educational performance.
These figures, even if true, do not dispute my claim. You cannot judge native Floridians, white or black, on the basis of non-Floridians (including many poor Hispanics) who move to Florida. You are comparing oranges and apples.
I need to correct one of my statements: the Tampa Performing Art Center is the largest performing art center south of Washington, D.C., not Boston. I hit the enter button too fast, and couldn’t go back and change it.
I am not a big fan of Florida, but native Floridians are not stupid or uneducated. This is a nasty generalization based on the behavior of transplanted OUTSIDERS.
Having lived in tourist areas my whole life (until last 4 yrs) I’d say the low paying tourism dollars tend to bring in more of the party hardy types. This is true of Cape Cod, Key West and other FL areas, any spring break destination. So if graduation rates suffer it shouldn’t come as any surprise. A family member lived in the Keys for 20 years. There were very well educated, worldly people there living down the street from the drug infested crumbling neighborhoods. Beautiful places attract all kinds.
One of the things I really dislike about Florida is the endless New York accents. Geesus, you’d swear you were in Brooklyn no matter where you go.
Salvador Dali and Dale Chihuly museums? You got to be kidding. Say no more.
Are you being sarcastic? The Salvador Dali museum is spectacular. It’s located on Tampa Bay at the south end of downtown St. Petersburg, but being moved to new facility (not yet built) also on Tampa Bay in the core of downtown. Chihuly is building a museum, studios, and condos. The St. Petersburg Museum of Art is fabulous. Much of downtown St. Petersburg is beautiful, though there are ugly areas, and it’s all designed for pedestrians. Even the city parking buildings are beautiful. Almost everything is Spanish in design. However, the oversized highrise condos, which used to be restricted, look awful and may destroy everything if the city doesn’t put to stop to them. Downtown St. Petersburg should be for everyone, not just for wealthy old New Yorkers, and anything made too “upscale” becomes infinitely boring. St. Petersburg is Florida, not New York, and it needs to stay that way.
Hey Hey, I am from Florida (born in New York though but moved when I was three). I graduated college an work here but can’t afford a home so I am thinking of leaving.
I must say your comments about people in Florida are sadly true. Our schools rank 49th in the nation and there are a lot of drop outs. Luckily there are plenty of jobs in construction for them. Also for those lucky drop outs who got GED’s there are plenty of jobs as mortgage brokers & realtors here for them too.
What the heck is a native Floridian? I was born and lived here all my life, but I was raised by my parents who moved here from New york and California when they were 30. Same with all my friends parents. Has anyone ever met a person over 50 that was born in Florida? Florida is indeed a country that gets a true blending of people from everywhere else. I’ve met people from every corner of the country, and one of my best friends in from Iowa (I wonder how many people move from Florida to Iowa?)
The actual natives that we’re talking about probably about as rare as the REAL natives.
My point is that saying Florida natives are illiterate dropouts is ridiculous, because the people being examined are NOT Florida natives. And, yes, I’ve met many Floridians whose families have been here for generations, and ALL of them have been educated.
To change the subject, does anybody have any evidence of the real estate bubble bursting in Tampa/St. Petersburg? I can’t find any. On the contrary, prices are still rising, many “luxury” condos quadrupling in the past year (jumping from 500-600k to 2.5 million). More “luxury” townhomes were announced today going up in my overbuilt neighborhood, and starting at 700k.
It seems there is no end of wealthy New Yorkers wanting to move here and able to pay any amount, including the 2.5% property tax rate (based on the selling price) in nicer neighborhoods.
What nobody can explain is WHY they are coming HERE. Tampa is one of the ugliest cities in America, with a terrible climate (heat, humidity, mold, pollen, and airborne bacteria). It has no publically funded shelters for homeless and poor humans, who wander the streets. Ever square inch of land on either side of the main roads is covered with trashy billboards, and every business, even within the same strip mall, has a bigger and uglier sign than the one next door.
There appear to be no zoning codes. Housing is mixed with industry everywhere, and million-dollar townhouses are plopped next to run-down convenience stores. All setbacks have been nullified, and huge buildings and townhouses are shoved right up to the sidewalks. There are almost no views in any direction because ugly buildings block them, and the only open spaces, Tampa Bay and Hillsborough Bay, have industrial smoke stacks to look at. Hillsborough Bay has huge phosphate piles and sewage and coal-burning electric plants as well.
I can attest from my visit to Fl. a few weeks ago that almost every corner from Daytona to Miami, and the panhandle had 4sale signs if not 3, on every corner. Miles upon miles of strip malls empty, even though ,I would assume, should be populated as it was spring break/ tourist season?. I had the feeling there was a wholesale rush to the exit…Just reading this blog,and the mainstream headlines ,it seems Fl. is really taking the brunt so far. Seems the tide has turned ,and is picking up speed daily…July?
In downtown St. Petersburg, I did notice a lot of vacant, boarded-up commercial spaces. Most looked like they’d left recently, and in a hurry. Most of the places that were open had very few customers, and on every block I got hit up by at least one homeless person (a.k.a. stew-bums, winos). I get the sense that something in the basic order of things has shifted, and is shifting still, and are headed for an accelerating, cascading decline.
You’re talking about east downtown, not the main area. And some of those “shacks” are actually interesting. Remember that till about ten years ago, St. Petersburg was for old people who didn’t have the money to fix their places up. Now it’s going too far in the other direction. A lot of empty buildings are empty because they’re scheduled for demolition. A huge industrial park is also going in, and many more expensive condos are planned.
I disagree about “an accelerating, cascading decline.” Downtown St. Petersburg is gorgeous compared to the way it looked in the 1980s, and I believe it has the potential to be amazing. But, again, it needs to accomodate all incomes, and ordinary people, not just Yuppies and wealthy boomers. The little shops and small businesses, low population and little traffic are the very things that make it attractive.
I recently completed a 2 month stay in Ft Myers. Within 5 miles I saw 2 townhouse projects of a couple hundred each and a SFH project of well over a hundred going up. For sale signs were everywhere, some neighborhoods had several per street. I went golfing at a public course and there were at least twenty spec homes being built in the 2500-3000sqft range, lots of for sale signs on the occupied home lots. I heard that one home was initially listed for 650K 8 months ago and is still sitting there at 530K right now. Essentially the RE in that town is cooked. I expect to hear stories of realtors throwing themselves off of buildings any day now.
I am seeing the same thing in Orlando. Builders are quietly dropping prices on new developements. Some town homes we saw 6 months ago starting at 275K are now starting at 249K no closing costs & free upgrades.
Its gotten really weird here in Orlando, all over the radio and media home builders are advertising like crazy. They are almost like car dealers on the radio spinning their latest crazy all out weekend sale loaded with incentives and discounts.
Regaarding the radio spots around here, have you noticed they all have some family theme or nursery rhyme in them? Perhaps they’re changing gears from selling to investors, to families who are too emotional to make sound decisions.
it seems Fl. is really taking the brunt so far. Seems the tide has turned ,and is picking up speed daily…July?
Big m*therfookin’ hurricanes do tend to make the herd nervous.
OT
I had the best “paper boy” experience this week. I was in Las Vegas for the week and was in a strip bar. One of the dancers was trying to get me to get a dance from her. She said it was kind of slow but that was OK because she really just moved to Vegas to flip homes.
Also when I was boarding the plane this morning there was a ditzy girl behind me maybe 21-23 years old also telling some one she wanted to be a flipper in Vegas, her exact words were “you cant go wrong in this town buying property”, meanwhile on the local news that morning they were saying how the forecast is for real estate in Las Vegas to decline 13% in the next 2 years(also covered on MSN), I guess that girl didnt watch the news.
Are you sure she didn’t say she wanted to be a ’stripper’ in Vegas? That would make more sense.
Perhaps I should accompany you next trip just to verify what the strippers actually say? Let me check with the wife.
Nope, the nuts are still “in escrow”, sorry.
I think it’s funny how all this time they’ve been feeding us the bull that “about 17% of mortgages were for investors/second home boomers”. Yeah right. Now here we see the range of 39%-53% not claiming homestead exemption. Hmmm. Suzanne, can you research this for me?
I’ve checked these figures with highrise condos and “historic conversions” in downtown St. Petersburg, and I would say almost none of the owners claim homestead exemption, so probably 80% or more are investors. I don’t know why realtors and others can’t simply state the facts. Many developers claim they restrict investors, but the tax rolls prove otherwise. These are open to the public, and easily accessed on-line 24/7.
“Although there has been a ’sharp increase in second-home sales recently.. whether they’ll be able to keep doing so is the issue,’ Northern Trust economist Paul Kasriel said.
Surely he’s not talking about South Florida real estate in recent months?
Sales are actually way down….
http://www.naplesinsider.com/CurrentReport.htm
Been a while since I posted, but I guess I’ll comment here.
I have been following the 33021 area code (Where I grew up) since late 2003. This is in Hollywood, FL (Between Miami and Fort Lauderdale). At its worst, there were fewer than 100 properties listed, with only 16 single family houses for sale. There are now 562. That’s an increase of more than 500%!!! This is actually a low spec area with a large middle class population. I can’t imagine what’s going to happen in the condo rich areas near the beach.
With regards to the all Floridians are stupid comment previously posted, I believe that is a significant generalization. My wife and I are both native Floridians, and I am a 3rd generation Floridian. We both finished high school and college. No one in my family owns a spec property. That seems to be the work of South Americans and highly educated northerners from states with High Graduation rates. Guess they skipped economics.
“With regards to the all Floridians are stupid comment previously posted, I believe that is a significant generalization.”
For the record, that’s not my comment, and I don’t share that sentiment. I’m merely relating what my friend from Ohio was told by several would-be employers who choose her in preference to Florida residents. The fact that she was blonde, hot, SMART and had excellent people skills didn’t hurt her any. I also don’t know if her employers were themselves native Floridians or transplanted Yankees.
Thanks.
Sell Now !
http://www.whartonclub.com/article.html?aid=346
I spent my formative years in St. Petersburg, (ages 3-18) and would have to say that the educational system in a piece of crap for the most part. There are smart native floridians but most people are pretty dumb and uneducated. The jobs there are in tourism, construction, real estate and medical, most of which do not require much intelligence or education.
Downtown St. Pete is much nicer looking than when I grew up there in the late 70’s and early 80’s. However, most of it is from borrowed money and the native population cannot generally afford the new construction. It is being purchased mainly by “investors” on borrowed money. The whinos are still there and the culture (despite the museums) are still pretty low-brow. The city government thinks that you can create culture by having some museums and artsy-fartsy places when it is the people who create the culture. Sadly, the people (generally speaking) lack that sophistication.