The Housing Bubble

The St Petersburg Times reports from Florida. “Tampa Electric lost more customers than it added in the third quarter, an unprecedented reversal that slashed the utility’s profits and promises to delay power plant building. ‘We’ve never seen this since I’ve been working at Tampa Electric,’ said Gordon Gillette, who has been with the company for 26 years. Vacant and foreclosed homes turned out the lights, and fewer new customers replaced them, Gillette said.”

“‘A lot that got built, as we know now, turned out to be vacant properties, but they had electric meters,’ Gillette said. ‘We counted those properties as they were getting built as new customers. But guess what: Nobody moved in.’”

The Tampa Tribune. “Tampa Bay area builders are constructing fewer homes and struggling to increase demand among buyers. Builders started construction on 1,155 single-family homes in the third quarter, a decline of 30.8 percent from the same quarter last year, according to Houston-based housing consultant Metrostudy.”

“Tony Polito of Metrostudy’s Tampa division, attributed the low buyer demand to Florida’s job losses. Single-family housing inventory - homes under construction, finished vacant homes and model homes - totaled 5,778 units at the end of the third quarter. It would take nine months to sell all those homes at the current pace, Metrostudy said.”

“There were 959 lots delivered to the Tampa market during the third quarter, compared with 3,411 lots during the third quarter of 2007. That brings the total vacant lot inventory to 31,451 units. It would take 72.9 months to sell all those lots, an increase of 31.5 months compared with last year, experts say.”

The Herald Tribune. “Swamped by millions of dollars in sour loans, Freedom Bank of Bradenton was shut down Friday by banking regulators. Freedom is the second Bradenton bank to fail this year, falling three months after First Priority Bank. It is the nation’s 17th bank failure of 2008.”

“‘In my 27 years in Florida banking, I don’t think I can recall two banks failing in the same year in the same town,’ said Sarasota banking consultant Tramm Hudson.”

“Hudson said a number of Florida banks got too caught up in rapid growth and aggressive lending. ‘When the economy tanked, it caught up with them,’ he said.”

“Bradenton is not the only city to have two bank failures this year. Two banks in Alpharetta, Ga., have been closed by regulators.”

“Foreclosures in Sarasota County spiked to a record 1,437 filings in September, a 39 percent spike from the previous month, data released by RealtyTrac Inc. showed. Meanwhile, Florida’s foreclosure rate rose 9 percent in September when compared with August, leap-frogging Arizona and California to the No. 2 spot. There were foreclosure proceedings started on 47,956 Florida properties, an increase of 44 percent.”

“The federal government is mulling a sweeping plan that could help 3 million homeowners avoid foreclosures. There are, of course, many unanswered questions at this point: How would a home owner qualify? Would homeowners be rewarded for going late on payments by this system? What would happen after five years?”

“Ritch Workman, the president of the Florida Association of Mortgage Brokers, had some of the same questions. ‘Do I go late to take advantage of this?’ Workman asked. ‘Are we actually encouraging people to go late to take advantage of this?’”

The Irish Times. “The contest between Barack Obama and John McCain in the state is too close to call, but Democrats believe they could be on the verge of flipping Florida into their column as part of a dramatic political realignment across the country. After years of extraordinary population growth when more than 1,000 people moved to Florida every day and property prices soared, the state’s housing market has collapsed and unemployment is at its highest level for 14 years. Gleaming new office buildings in Orlando stand almost empty and blank storefront windows advertise vacant retail space.”

“Obama has held massive rallies throughout Florida this week. Despite the cheerful mood in Kissimmee, Florida is going through hard times and the signs of economic hardship are everywhere. It was just after 8pm but Trastevere, a little Italian restaurant in downtown Orlando, was already deserted and Jeanie Crawford would soon be heading home with her meagre haul of tips. Crawford was riding high until a few months ago, working for one of America’s biggest mortgage lenders until the bottom fell out of Florida’s housing market.”

“‘I used to work for Countrywide, now I’m here waiting tables,’ she says. ‘I’m 33. I stopped waiting tables when I was 23, but now it’s all I can get.’”

The Palm Beach Post. “Republican presidential nominee John McCain’s $300 billion proposal to buy and restructure the troubled loans of individual homeowners would help as many as 1.7 million Floridians, his campaign said today. With Florida essential to McCain’s presidential hopes, the McCain campaign had U.S. Sen. Mel Martinez and former Housing and Urban Development Secretary Jack Kemp tout McCain’s plan in a conference call with Florida reporters.”

“‘Until we do something about the price of homes, until the home ownership crisis abates, we will not see the recovery in our overall economy,’ said Martinez.”

“Obama’s campaign slammed McCain’s proposal. ‘John McCain wants the government to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don’t recover. The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud,’ said Jason Furman, the Obama campaign’s economic policy director.”

“No need to put a fright mask on these numbers: Nearly one in three Florida mortgage borrowers owed more on their loans than their homes were worth in the third quarter. Fully 1.2 million of Florida’s 4.2 million mortgages - 29.2 percent - were upside down, said First American CoreLogic.”

“‘There’s a large percentage of very vulnerable homeowners,’ said Sam Khater, senior economist at First American CoreLogic. ‘If they lose their job, if they run into some kind of health problem, or divorce, they might just walk away.’”

“Palm Beach County’s jobless rate has doubled in the past two years, while St. Lucie County unemployment has hit double digits. ‘The results show what we’ve been talking about anecdotally,’ said Jack McCabe, a real estate analyst in Deerfield Beach. ‘A lot of people are upside down, and a lot of people took out highly volatile mortgages.’”

Time Magazine. “Today in the greater Miami area, there are 110,000 single-family houses, condos and townhouses for sale. Some 55,000 new foreclosures were filed in the first nine months of this year, and an additional 19,000 properties were taken back by lenders.”

“Miami developers threw up some 23,000 units beginning in 2003, many of them bought by speculators who thought they could flip them for a quick profit. ‘Our best guestimate — and we’ve talked to lenders and developers — is that you will not see a residential construction crane in the sky in downtown Miami for a generation,’ Peter Zalewski, a real estate broker, told TIME. ‘Well, at least seven years,’ he said before modifying his forecast yet again. ‘Let’s go with a decade,’ he finally concluded.”

“Zalewski is looking at purchasing a 1,800-sq.-ft condo with floor-to-ceiling windows overlooking the waterfront in a place just north of Miami. That unit sold to a speculator for $940,000 in 2006. The bank is asking $389,000 but will probably settle for $300,000, he says.”

From Shorelines.com. “As the city increases its efforts to crack down on substandard rental housing in the Mayport Road corridor, Assistant City Manager David Thompson is trying to implement a new system. ‘Now, when someone calls the city, staff typically views that as a civil matter. There is no process in place for the city of Atlantic Beach to do something about it,’ said Thompson. ‘We’re going to start out by identifying the targeted areas. The Mayport corridor is the worst.’”

“That’s the area the city has focused on cleaning up this year because of substandard rental units and associated crime due in part to those housing conditions. But the biggest problem, Thompson said, is that many property owners have ‘accidentally’ become property managers. Many bought property with the intention of ‘flipping’ the property, or selling it , shortly after the purchase. But the slumping housing market has prevented sale of those properties, he said.”

“‘Some of these people don’t know how to manage property. They don’t know how to do an eviction,’ Thompson said.”

The Orlando Sentinel. “Metro Orlando’s apartment market tightened a tiny bit this past spring and summer, as the vacancy rate declined slightly to 10.4 percent by September, according to a recent local survey. There are signs the trend may not last because the region’s population growth is stalled and job creation is all but flat.”

“Another 3,699 units were under construction. Charles Wayne President Jim Lewis said that, during the past six months, another 11 condominium-conversion projects — ‘most with low occupancies’ — had returned more than 1,300 unsold condo units to the area’s rental pool.”

“The tightest apartment market on record for the region was in March 2006, when the vacancy rate sank to 3.6 percent. At the time, thousands of rental units were being converted to condominiums and put up for sale as complex owners sought to cash in on the soon-to-end boom in housing sales. Many of those condo projects have since returned to the apartment market as sales collapsed.”

The Herald Register. “In July, Land Resources Companies of Orlando, Fla., parent company of Roaring River, a proposed 4,300-acre, master-planned community in Fayette County next to the New River Gorge National River, closed its Fayetteville office and laid off all of that office’s employees. Friday, the company announced it and 34 of its affiliates and subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code.”

“‘I am presuming this does affect the Roaring River project and its lot owners,’ Fayette County Commissioner Matt Wender said.”

“‘We deeply regret the impact the Chapter 11 filing will have on property owners, vendors and employees,’ Land Resource CEO J. Robert Ward said.”

“Approximately 80 lots have been sold as part of the housing development. In July, a groundbreaking ceremony for water and sewer services was scheduled, then canceled. ‘I’m very concerned about the lot owners who purchased lots, but can’t build on them,’ Wender said. ‘Without that infrastructure, the lot owners can’t obtain building permits to build on their lots. Now, it appears that they can’t get their money back, either.’”

The News Press. “While there are no statistics, agents say baby boomers accounted for a large portion of the 746 existing single-family homes sold in September with the help of a Realtor. Those numbers are up from the 338 sold in January when declining home values started to give the market a kickstart, according to statistics collected by the Florida Association of Realtors.”

“September’s median sales price for a single-family home was $141,400, less than half the all-time high of $322,300 set in December 2005. Agent George Patton in Cape Coral (said), ‘We’re selling more houses now than we did in ’05,’ many of them to arriving boomers. ‘The average sales price is $90,000,’ Patton said.”

“Boomers likely will be buying here in substantial numbers at least until there’s a balance between supply and demand so prices can stabilize, said Michael Timmerman, a Naples-based senior associate with Fishkind & Associates, but ‘that may take awhile.’”

“Meanwhile, the boomers’ interest is a welcome stimulus to a market with about 14,000 unsold houses.”

“Timmerman said the uncertain future on Wall Street may be persuading some people to buy homes here.They say, ‘I can either keep my money in the stock market and watch it go down or I can buy real estate at the bottom and hopefully it’ll come back up,’ Timmerman said.”

The Keysnet. “Conceding the city had fallen behind, Key West Planning Director Amy Kimball-Murley on Thursday sat down with city commissioners in a special workshop to discuss a revised building permit allocation system. It’s in response to a February court ruling that said the city’s previous rate-of-growth ordinance, known as ROGO, had expired and could no longer be used to allocate permits.”

“As for ROGO itself, commissioners on Thursday expressed concern that permit allocations already issued have become commodities traded on the open market. Commissioner Clayton Lopez said that he thinks some people are hoarding allocations. But citing the economic and real estate downturn, Mayor Morgan McPherson said people sitting on ROGO allocations is not a big concern, joking, ‘If anybody wants to write a check for one today…. You’d get a heck of a deal. They are a commodity. They will be in the future.’”