‘Prices Not Seen In Years’ In Florida
The Palm Beach Post has this report on that Florida real estate market. “The gavel slammed down almost as soon as the bidding had started. In minutes. As fast as the words could tumble out of the mouth of the auctioneer, whose voice buzzed like a bumblebee: Sold for $165,000.”
“‘We’re in the basement, folks,’ the auctioneer said. ‘What a bargain.’”
“And that was just the beginning. About 200 people turned out Saturday for a reserve auction at a hotel near Stuart, where the Graham Auction Company took bids on 43 properties in two posh Ginn Co. developments: Tesoro Club and Tesoro Preserve.”
“Promising ‘prices we have not seen in years,’ auction organizers said the sea of sellers looking to unload properties was anything but a poor reflection of the Tesoro communities.”
“Rather, this is a case of novice investors who got caught up in a hot housing frenzy and now can’t afford to carry their properties, auction organizers said. ‘This is definitely a reflection of the type of real estate market we’re in now,’ said Ann Cusa, an agent of the Treasure Coast who worked the event. ‘Things have just slowed down.’”
“But not every bid was accepted, even after the auctioneer’s gavel slammed on the podium. Sellers reserved the right to decide whether to accept the bid. One property with a home, reportedly worth more than $1.5 million, was taken off the auction block when no registered bidders appeared willing to shell out $800,000, the seller’s minimum.”
“Not all those who attended the auction were looking to bid, anyway. Some were Tesoro property owners curious about how low the bidding would go. Most people seemed to agree the bids were even lower than expected.”
From the News Press. “Homeowners, real estate agents and appraisers alike are finding it hard to tell as prices and the number of sales plummet in Southwest Florida’s volatile real estate market. And if you figure you’ll just ask for a wildly inflated price and negotiate down, forget it. With 12,000 homes listed for sale in Lee County, buyers aren’t even bothering to look at houses that aren’t already priced to sell.”
“Determining what’s a good deal can be a tricky thing these days, said W. Michael Maxwell, a Fort Myers-based appraiser; with a huge inventory of houses for sale, the usual way appraisers work has been turned on its head. Now, he said, ‘We have to ferret through the listings’ of properties that are still for sale to determine what the market will bear.”
“‘Most lenders aren’t going to want to have sales that are too old’ used as the basis of an appraisal, he said.”
“Don Kelly, of the Chicago-based Appraisal Institute, said it’s not clear whether the current market is exacerbating the problem. ‘The pressure to deliver a predetermined value, most often higher, or ignore defects in the house, structural problems, the pressure to use one (comparable sale) outside the neighborhood, is unfortunately nothing new and appraisers across the country face it almost daily,’ he said.”
“There’s legislation pending in the U.S. House of Representatives that would make it a crime for anyone involved in a transaction to pressure an appraiser, Kelly said. ‘Since the beginning of time everybody’s tried to influence or hope the appraisal will come down or up,’ he said. ‘The fundamentals of that have not changed at all.’”
I made my living going to auctions one year, and attendance is not an indicator of solid interest. In a large crowd, there are usually a few pople that dominate an event. The rest of the crowd are usually either spectators, or the consignors themselves.
Miami broker Alex Embry, who already shared a few Tesoro lots with a few partners, said he was interested Saturday in adding even more to his portfolio. ‘It’s cost-averaging,’ he said. ‘I paid a lot more for some of the lots. But now I’m getting a really good deal on some other lots. It averages it out.’”
Last year I got my heinie handed to me in some really bad deals. But this year, I’ll buy more property in only mildly bad deals. That way it cost-averages out to just a plain old regular bad deal.
sounds like a guy i knew that bought Amazon.com at $400 per share … then at $180 per share, he bought more to cost average down .. than at $100 per share, he bought 5 times as much at this ‘ridiculous bargain’ i think he is still holding this position to this day .
NEVER average down. That is a loser’s bet-the old adage of catching a falling knife. What makes this man think this is the LAST of these auctions and not the first?
“If you figure you’ll just ask for a wildly inflated price and negotiate down, forget it. With 12,000 homes listed for sale in Lee County, buyers aren’t even bothering to look at houses that aren’t already priced to sell.”
I have seen the future, and its name is “low-ball.”
I made my living going to auctions one year, and attendance is not an indicator of solid interest.
No, but it does indicate the writing is on the wall. The gawkers at these events (the vast majority of attendees) will go back to their dining room tables, water coolers, and back-yard barbeques, and relate what they’ve witnessed to family members, friends, and co-workers. Therein lies the true significance of this story. Despite the frenetic efforts of the NAR truth-makers, the word is getting out: the Bubble is toast.
Auctions (trustee sales) in the rural counties near me are often unattended. The auctioneer reads the list aloud to an empty room! The banks are not discounting enough yet, to make these interesting to “real” investors.
Think a minute. Who “owned” these properties? It wasn’t 43 newbie investors. They all didn’t get in trouble at the same time and even then they wouldn’t all go to auction or to the same auction. Kust goes to prove there’s scams on the way down as on the way up. Ginn Co. was holding a fire sale and made money on every purchase. The buyer/suckers just helped out a F@cked HomeBuilder and no one even noticed. I’m willing to bet most of these properties revert to the homebuilder within the next few years as they fall arears on HOA dues and other things.
I agree and the ability to set high reserves artificially keeps prices up
My understanding was that banks generally unload foreclosures (5-10 at a time) onto commercial investors who then try to sell them at “market value” rather than make them available to little-guy buyers. Can anyone clarify?
That hasn’t been my experience, I bought mine directly from the banks who often did little other than slap on some cheap paint and intsall HUD grade beige carpet in for a sale. There is a surprising variation in quality and amount of repairs needed. One I had to put in complete bathroom & kitchen, one just needed some cleaning and paint touch-up.
Not true Sammy
How does one find info regarding a custom home that appears to be about 85% built but now apparently halted in its tracks? My understanding is the city has stopped them from proceeding due to a non-compliance issue related to them putting an existing power pole under the ground which was in the terms of their permit (gotta be costly). How can you find what bank has the construction loan and what the status is? I’m not in the RE business but sure would like a crack at this before the realtors get involved… Are most construction loans fixed or variable?
In most towns, non-compliance orders are public. Just make some phone calls to the town’s building commissioners.
SJ
This article about the FBI looking for a RE Investor” who is on the run after skimming several millions….Should be reading more ,and more stories like these as time passes…L/P: jilsander@dl.com / bupkis
http://www.newscoast.com/apps/pbcs.dll/article?AID=/20060423/BUSINESS/604230543
Husani had once been one of the most sought-after real estate investors in Southwest Florida, but now several of his closest associates are trying to distance themselves from him.
LOL. The ships are sailing from the sinking rat.
I know inventories are rising faster in several cities such as Phoenix, but for overall statewide insanity, and general lawless corruption I think history will repeat itself in Fla.
” Then everybody simultaneously saw the writing on the wall, and panic selling ensued. With thousands of sellers and very few buyers, prices came down with a sickening thud, twitched a bit, and then crawled down even lower. ”
We all have read this several times ,but bears repeating. Until I read this blog I was unaware of this crash ,and the historic precedence that preceeded the Depression….” Those who fail to learn from history are doomed to repeat it ”
http://www.investopedia.com/features/crashes/crashes4.asp
“‘We’re in the basement, folks,’ the auctioneer said. ‘What a bargain.’”
I think you are passing the 10th floor on your way to the basement there fella. Come back in 08 and let me know your thoughts about what floor you’re on.
Here is an excellent, well written explanation of the monetary policy failures leading to this bubble and what it portends for the future.
http://www.financialsense.com/editorials/englund/2006/0422.html
That is a great article and his views have been expressed by others over the past few years. Being the old duffer that I am, I keep things in perspective and have learned to realize that not every scary scenario plays out to an Armaggeden. However, I am not ignorant to the real possibility of such a tragedy.
This should be a warning shot across the bow of all of those areas (Seattle comes to mind) where people think that prices won’t come down.
This auction was music to my eyes when I read it. This can only get more intense as time passes. Next stop, auctions for overpriced condos in downtown San Diego.
Cavuto on Business: if it is not too late to watch repeat on sunday, it was on yesterday you get to hear Barbara Corcoran say high price of gas could bring down housing prices. Yes she said Price of gas could deter buying a home as if price of gas should even be considered in cost of a home unless you commute 100 miles a day in a Ford Excursion and have 4 kids who commute to school.
I really can’t stomach anything on Cavuto, or anything that comes out of Fox, they are nothing but admin. propaganda…any fool can recognize that.
sorry stanley, not saying you are a fool, just realized what i typed.
I only believe what I hear on Fox news when they agree with what I think. And if anyone is a fool it might be more than a few not all of their Saturday mornings financial guests.
I do not watch Fox news. I deal with preforeclosure borrowers. IMHO my average client will be in Foreclosure if gas reaches $4.00/ gal.
Of course a buyer today needs to LOWBALL to the max. But how much? 20% lower? 30% lower? 40% lower? This is an important question. I know that the market price is set by supply and demand, but when a buyer goes to a seller, they need some idea as to an appropriate price.
One suggestion that I have is to look at comps before the P/E ratio in the region took off. I know that personally, in my area that was 2002. So it seems to me that the “correct” price, at least in terms being appropriate in the long run, would be about what the home sold for in 2001 or 2002.
Of course, there’s no guarantee that prices won’t overshoot on the way down, but going back to prices in a normal P/E envirornment at least gives a ballpark figure.
I used to have the same approach but
then you should take in account that
rates in 2002 were lower then they will
after 2006
I think this appraisal thing will be one of the big stories when this thing busts. I personally have a friend who bought a home and his appraisal came in 90K!!!!! shy of the sales price, instead of running in the other direction he got another appraiser(recommended by the selling agent) and the 2nd appriasal came in 1K over the sales price, how convenient for every one. Now I know appraising is an art not a science but a 91K difference(almost 20% of home value) is not a mistake, it is criminal if you ask me.
By the way my friend is trying to sell now and can not even get what he paid for it. Add in transaction fees etc and he is way underwater, what a nightmare huh?
That’s his tuff shit! He overpaid so now he can undersell!
So your friend pulled an appraisal scam on himself — brilliant!
So your friend pulled an appraisal scam on himself
Not necessarily. I semi know what what I am doing when looking at an appraisal. But what does the average home buyer knows. All he/she thinks is the real estate agent is a professional who is playing by the rules.
The average idiot knows that if someone tells you a property isn’t worth the sale price that you shouldn’t shop around for appraisers who will tell you it is.
You friend is a racketeering victim.
He should report the appraiser to his state’s standard’s board and see a lawyer about suing the second appraiser, the broker who recommended him/her; and the mortgage lender who utilized the appraisal to make the loan.
I’m sure he’ll be able to find an honest and ethical appraiser act as an “expert” witness. Lots of good appraisers waitin’ for the rubber stamp, number-hitter hacks to swing at the end of a short rope.
I’m not disagreeing with your views on the 2nd appraiser etc. (and surely the first appraisal here would supply some evidence).
BUT
I wouldn’t give this buyer a cent unless it could be proven “beyond reasonable doubt” that there was something unethical in the sale process (as distinct from the financing process). Seems to me on the face of it that (s)he was complicit all the way along.
OT: for those of you who are interested in the San Fernando Valley (I know there’s a bunch of us).
Recent sales volume is dropping dramatically when seasonally it should be rising. We were already running 20-30% below last years volume so far this year, but suddenly an even greater shift has taken place. We are now back to the levels of homes going pending that we were seeing in Feb (always one of the slowest months) of this year. Mind you this is in APRIL (one of the very busiest months), and Feb 06 was the slowest Feb since ‘99. The next few months are shaping up to bring some really ugly stats. I am finally seeing a few sellers who are giving in and letting their properties go under recent comps. I am taking this data from the MLS, it won’t show up in industry stats for a while.
I have said this before on this blog: The median price is not reflecting this shift, nor will it for some time. Buyers are still spending the same amount, they are just getting more for their money.
I’d be interested if any other readers involved in RE out here are seeing the same thing. I think that the Los Angeles area has huge implications for the rest of the country. If we go, it will shake the foundation of RE across the country.
hi deb im in chatsworth sold 3 properties in 04.i know a lady who has had her mission hills home on the market for 7 months.she is asking 515k down from 550k and she recieved a lowball offer for 480k a few months ago and declined.i bet she would love that offer now.
Let her eat Alpo, the greedy bitch!
Go baby, go!! I hope those muts in SF Valley get their azzes handed to them. A well deserved punishment for their greed. Those flippers are hosed.
Where is the SF valley? Is that north of LA? South? Is that the same as Riverside County?
Hard for us non-californians to know what’s up.
How about “Santa Maria” is that overvalued too?
NW LA county near the 101!
it’s north of LA. makes Bagdad look like a quiet little town.
SF valley is the San Fernando Valley…remember the song from the 80’s, “Valley Girl”? It’s, like, The Valley, ya know? Totaly!
Northridge (from the Northridge earthquake) is in the northern part of The Valley. You also have Reseda (”It’s a long day, living in Reseda, there’s a freeway, running through the yard”…Tom Petty), Van Nuys (Dr. Suess mentions Van Nuys once or twice), Woodland Hills, Chatsworth, Sheman Oaks (”it’s like, the Galleria!”), and so on.
If you are in Westwood/West Los Angeles/UCLA and take the 405 freeway north through the Sepulveda pass, you end up in The Valley.
Santa Maria is (way) farther up highway 101, about an hour north of Santa Barbara. Sorry, I don’t track Santa Maria real estate.
Thanks for the update on SFV!
thanks deb. the valley has wide implications for the greater LA basin. it gets a lot of bad press, but much of it is very livable. 3 & 2’s in the working class reseda hoods need to get back down to $175k
Thanks for the update. I can’t wait for these numbers to churn through, and see some of the idiots I deal with on a daily basis can watch their pseudo-equity vanish.
the usual way appraisers work has been turned on its head
Oh excuse, me?
The Uniform Standards of Professional Appraisal practice is specifically clear on the way appraiser’s engage in an approach to value. Nothing different than your standard acccounting procedures.
There is no deviation-you do it right or you don’t. There’s no gray area as the poster implies.
Now all the hacks who simply backed into contract numbers provided by the lending rackeeteers can’t muster the knowledge and expertise to do a competant job in coming up with an independantly formed number.
hehehe…and these are the bozo’s who’ve been appraising Fannie and Freddie’s multi-trillion dollar portfolio for the last 4 years, since all the legit and honest professionals were run out of the biz, by the black-balling rackeetering lenders and RE sales scammers.
Sure hope the E&O providers got their reinsurance. Gonna be lots of civil suits flyin’ around.
Buyers have been hood-winked, into thinking somehow the appraiser in the process was watching out for their interests.
Guess what-THE LENDER IS THE CLIENT-IDIOTS!!!!!!!!!!!!!!
FB’s-YOU’VE BEEN HAD!!!!!!!!!
Can’t wait for all these RE heroes to get their poles pounded in. Jackasses! Bring on the RE crash! I beg you!
Absolutely, I agree with you 100%. The thing is, this is no secret, the complicity of every one involved here is disgusting. It is all greed here, no one involved in the so called “RE boom” wants to stop the increasing values. Thats why I think it is important to get on record that this appraisal fraud as well as other types of misconduct was done with the full knowledge of all the players so we can’t have another Enron,with Lay and Skilling saying they did not know. Hey if I know and I am not in the RE business, then every one in the business knows. They should be the ones to pay the bill when this thing busts.
If these institutions are subject to implied guarantees and are to be bailed out(as I believe they will be) with tax payer money, then they must be subject to strict guidelines and controls. They should not be placing high risk gambles with tax payer money. And giving mortgages to undocumented and unqualified buyers and engageing in massive appraisal fraud, hoping that the home values will reach the inflated appraisals is nothing but gambling, and it is a bet that can not win
Bye bye, Florida. Can’t say you don’t deserve it…
Things will get worse in FLA the closer we get to hurricane season. Then there’s that issue about the Poles melting and covering over these RE gurus in 5 feet of water. FLA will become the next NO. Panic selling begins in May.
During the last RE downturn in the early ’90’s Fannie Mae’s conventional loan limits only rose from $202,300 to $207,000 (2.3%).
It has only gone down once since 1980 from $187,600 to $187,450 (1989 - 1990 (a mere $150).
From 2002 to 2006 it rose 40% from $300,700 to $417,750.
I’ll be curious to see where it is five years from now.
1992 202,300 2002 300,700
1993 203,150 2003 322,700
1994 203,150 2004 333,700
1995 203,150 2005 359,650
1996 207,000 2006 417,000
Increase + 4700 +116300
+2.30% +40%
“reportedly worth more than $1.5 million, was taken off the auction block when no registered bidders appeared willing to shell out $800,000″
Ummmm, errrrrr, so how is it worth $1.5 million?
Notice to reporters: ‘Worth’. You keep using that word. I do not think it means what you think it means…
“But not every bid was accepted, even after the auctioneer’s gavel slammed on the podium. Sellers reserved the right to decide whether to accept the bid. One property with a home, reportedly worth more than $1.5 million, was taken off the auction block when no registered bidders appeared willing to shell out $800,000, the seller’s minimum.”
That is a nice anecdote to illustrate what I have been suggesting for some time now: The bid-asked spread is wider than the Grand Canyon in some formerly frothy markets…
Stuart, Florida was one of the last “undiscovered” places along the east coast of Florida where one could get a reasonable deal on property. “BD” (Before Disney) it was a favorite Saturday-morning fishing destination for Central Floridians. While still popular for fishing, the traffic enroute is a pain now. Stuart remains, in a way, the oceanside equivalent of Holopaw or Keenansville — halfway from anywhere. Maybe Stuart will retain/regain its smallish-town character when the flippers are flushed. At least for a while.