December 21, 2009

The World Turned Upside Down

The Palm Beach Post reports from Florida. “Miami’s skyline at dusk tells the story of the condo crisis in stark relief: Some of the luminous towers beam with life, others flicker half-full, and still others are completely dark, mired in legal disputes over past-due loans and stalled sales. In many cases, the frequent bad news of bankruptcies, foreclosures and further price drops came with a silver lining that prompted turnarounds. At the 628-unit Residences at the Falls condos, for instance, Mamie Attar, a condo board member, said the best thing to happen to the struggling community was the bankruptcy of the developer.”

“A trustee took over and quickly turned around the property in south Miami-Dade, making repairs and paying the bills with rents collected directly from tenants living in units still owned by the developer. Still, Attar worries that her relief will be short-lived. She recently learned that the bank holding the loan on the Residences at the Falls, had itself succumbed to the housing crisis undertow and was seized by the FDIC two weeks ago.”

“‘I don’t have any idea what is going to happen now. The [new owner] can decide to keep the property . . . or they can say to hell with it and let’s sell it at whatever price and get rid of it,’ Attar said.”

“As far as the value of her unit goes: ‘I’d rather not know, to tell you the truth.”’

The Sun Sentinel. “Sales are brisk for South Florida homes hawked by the federal government in the wake of the Great Recession. Uncle Sam and two government-sponsored companies are unloading property, from waterside mansions to burned-out shells, often at prices 10 percent to 20 percent below market value. The wave of foreclosed property in distressed regions like South Florida has forced the government, along with Freddie Mac and Fannie Mae, to become a major mover of real estate to clear a growing inventory of empty homes.”

“‘They sell pretty quickly if they are priced right,’ said Raoul Lopez, an agent in Miami who sells FDIC houses and other foreclosed property in Broward and Palm Beach counties. He said many houses were left in sad shape by former owners — full of junk with peeling paint and bad odors. The houses are cleaned up for sale, but buyers must accept them ‘as is.”’

“‘I sold a single-family house for $6,500 in Hallandale that was burnt and had tax liens on it,’ Lopez said. ‘I just sold another place, a waterfront home on a canal in Pompano, for about $400,000. Most places are more like $100,000 or $150,000.”’

The Naples News. “On Thursday, Naples-based London Bay Homes closed on a multimillion-dollar purchase of 50 single-family and villa home sites in Mediterra, a luxury golf community in North Naples. The seller was the Bonita Bay Group, which has been unloading golf clubs and other real estate assets to avoid bankruptcy. London Bay paid cash for the land. The builder now owns 100 lots in Mediterra and has taken over sales and marketing operations for the community.”

“Sales in Mediterra have been especially slow this year. As members fought to take over their golf and beach clubs from Bonita Bay Group, potential buyers stepped back to see how it would all unfold. Now that members have purchased their clubs it has brought back more certainty at Mediterra. Scott Curvey and his wife, Rebecca, are having a custom home built by London Bay in Cortile. The couple has actually owned a home in Mediterra since early 2006. It’s a smaller, 3,000-square-foot villa they bought from another builder.”

“Their new home will span 4,400 square feet and include four bedrooms, a game room and a den, along with four bathrooms and a three-car garage. They wanted to buy now because homes are heavily discounted, he said. There’s an old saying, ‘The best time to get a deal on a straw hat is in the winter,’ Curvey said. ‘That’s when you’ll find a deal, when it’s out of demand.’”

From Ocala.com. “Home sales might be up around Marion County, but county officials expect property values to continue to slide during 2010. The median price of a home sold in Marion County continued to dip, as the cost shown for October fell to $92,100. That was down from September’s $96,300, the lowest amount in almost six years.”

“County Property Appraiser Villie Smith was reluctant to say how concrete the figures were. Smith’s reluctance was rooted in the high volume of foreclosures sales. ‘We have a lot of (housing) inventory sitting vacant. Until that’s bought up, you’re not going to see any drastic changes’ in values, Smith said.”

The St Petersburg Times. “Picking up a line of attack begun months ago by the Florida Republican Party, Bill McCollum is accusing his Democratic rival for governor, Alex Sink, of ‘deceptive loan practices’ while she was a top banker. It’s a risky political strategy, considering McCollum’s history with the mortgage industry. As a member of Congress from 1980 to 2000, McCollum served on the committee overseeing financial services and co-sponsored 1999 legislation that tore down the Depression-era firewall between investment banks and commercial banks.”

“After he left Congress, McCollum lobbied for the Mortgage Bankers Association of America and for a nonprofit with a downpayment assistance program that was later outlawed by Congress after the Internal Revenue Service dubbed it a ’scam.’”

“Both McCollum and Sink parted ways with the banking industry years before the economic meltdown in 2008, but the finger-pointing is likely to continue as Florida leads the nation in foreclosures. McCollum’s campaign sought the spotlight Monday, striking for the first time directly at Sink’s banking record. “ALEX SINK STILL DUCKING QUESTIONS ON HER ROLE IN ISSUING PREDATORY SUBPRIME MORTGAGE LOANS TO FLORIDIANS,” blared the news release, which portrayed Sink as reaping millions of dollars on the backs of laid-off workers and scammed homeowners.”

“Sink has said she led the commercial, small-business and retail banking operations, while a separate corporation handled home loans. ‘McCollum’s attacks on Alex Sink have already been proved baseless and false, and are just an attempt to cover up his record as one of the most anti-consumer, anti-homeowner politicians Washington’s seen in a long, long time,’ said Sink’s campaign manager, Paul Dunn.”

The New Times. “Developers Bruce and Shawn Chait were charged last week with bribing former Broward County Commissioner Joe Eggelletion with $25,000, including a golf club membership, in exchange for his vote to support their unpopular housing development on two golf courses in Tamarac. The Chaits, who own Prestige Homes, also figure deeply into the investigation of Broward County School Board Member Stephanie Kraft.”

“They hired Kraft’s husband, Mitch, to help Prestige get a $500,000 break on mitigation fees the company owed the School Board. School Board records show that Stephanie Kraft used the power of her office to help Prestige get that break.”

“Now we learn that the Chaits also hired Sunrise City Attorney Stuart Michelson, husband of Broward County Commissioner Ilene Lieberman. Michelson represented the firm in a code enforcement action regarding the Prestige project in Tamarac last year, according to sources. Michelson’s wife, Lieberman, also voted to support the Prestige project in 2006, saying that ‘the community came to expect green space, but… if not this developer, someone is going to come in and eventually develop it.’”

“Yes, with this commission in power, I’m sure Lieberman was telling the truth.”

From Bloomberg. “Rob Speyer, now co-chief executive officer of Tishman Speyer, is getting another lesson, one on enduring the global commercial property rout. Tishman Speyer and BlackRock Realty LP’s $5.4 billion purchase of New York’s Stuyvesant Town and Peter Cooper Village apartments is unraveling, testing the young Speyer and his father, a 30-year real estate veteran. ‘A default is expected’ on the complex, according to Fitch Ratings, which has estimated the property’s value at $1.8 billion.”

“The company is facing default on…Manhattan’s biggest apartment complex. The property is a World War II-era, 80-acre development housing about 25,000 people. When Tishman Speyer and BlackRock Realty bought the 11,200- unit property in 2006, they planned to raise rents, evict illegal occupants and upgrade the complex with amenities.”

“Average rents for a two- bedroom Manhattan apartment fell 16 percent after peaking in May 2007 at $3,907, according to Gary Malin, president of property broker Citi-Habitats Inc. Tishman Speyer has ceased signing new leases at the complex, a company spokesman, said. It reached a temporary agreement with tenants this month that will reduce some rents starting in January. Investors including the Florida State Board of Administration, the California Public Employees’ Retirement System and the Church of England put money into the Stuyvesant Town deal. U.S. government-owned mortgage finance companies Fannie Mae and Freddie Mac own the biggest portion of the debt.”

“Florida anticipated a return of almost 14 percent on its investment, according to the memo. Calpers, the California state pension fund, projected a 13.5 percent rate of return on its $500 million investment, according to a document. Stuyvesant Town may hurt Tishman Speyer’s efforts to raise money in the future, said said Lawrence Longua, director of the REIT Center at New York University.”

“‘They’re going to have a lot of ‘I’m sorrys’ to deal with,’ he said.”

“Florida and BlackRock have written down their stakes to zero, according to Dennis MacKee, a spokesman for the Florida State Board, and Brian Beades, a BlackRock spokesman. Jonathan Mechanic, chairman of the real estate practice at Fried Frank Harris Shriver & Jacobson LLP, said Rob Speyer shouldn’t be blamed for deals that have lost value.”

“‘The world turned upside down,’ said Mechanic, who has represented Tishman Speyer.”

“The tenants of the development are now waiting to see how their landlord resolves the debt restructuring. The tenants group that bid against Tishman Speyer to buy the complexes in 2006 also learned a lesson about real estate. ‘I’m glad we didn’t win,’ said life-long tenant Jim Roth. ‘We probably would have overpaid.’”

“Sustainable growth and development comes from job creation, not new houses, one Bonita Springs official said at Wednesday’s City Council meeting. For this reason, City Manager Gary Price suggested Bonita shift its focus in east Bonita’s Density Reduction Groundwater Resource to include commercial development opportunities.”

“Price said developers who have tried to create artificial downtown centers, such as The Mercato in Naples, have missed the mark. ‘I think the continuing initiative to develop residential in there doesn’t match with the economy,’ Price said. ‘People aren’t living in those units. It’s a great idea but I think the way it’s being approached … is not working.’”

“‘I think the development mistake we’ve made in Florida is really letting residential development come first and then trying to figure how retail follows and jobs follow that,’ Councilman John Spear said. ‘I suspect how cities have evolved is just the opposite. You start with the jobs, you start with the opportunities.’”

The News Press. “Besieged by a 13.9 percent unemployment rate and myriad foreclosures, Lee County residents are declaring bankruptcy in record numbers. About 6,720 individuals and businesses filed for protection from creditors in Fort Myers in the fiscal year that ended in September, according to statistics. That’s a 67 percent increase from last year and a 36 percent jump from 2005, a year that saw a record number of debtors race to file for protection before a strict bankruptcy law went into effect.”

“‘The people of Lee County are hurting bad. I see it every day in my office and it’s horrifying,’ Fort Myers bankruptcy attorney Carmen Dellutri said. ‘I’ve had (clients) on the brink of suicide because they think filing for bankruptcy is the worst thing in the world.’”

“David Denslow, a University of Florida economics professor, attributes the high bankruptcy rate to Lee’s heavy dependence on the housing industry and the housing boom that eventually crashed. ‘So when the bubble burst, it burst loudest there,’ Denslow said.”

“Lee has consistently ranked among the nation’s leaders in foreclosures. Communities such as Cape Coral and Lehigh Acres were hit especially hard. Many debtors now in bankruptcy aimed to flip properties for a quick profit but were hurt when prices began to fall. ‘When the first wave of defaults started to come in in 2006, I would look at the mortgage documents and ask people, ‘Do you know what you signed?’ Dellutri said. ‘Most people had no idea what they were getting themselves into.’”

“Pam Leslie of Cape Coral filed for Chapter 7 no-asset bankruptcy this year. Leslie said she filed after suffering two hardships: She was laid off by a computer software company and then had to undergo a medical procedure. Leslie couldn’t make the payments on her three-bedroom home and lost it after declaring bankruptcy. She said she wasn’t able to do a foreclosure sale because she had high debt.”

“‘If you can pay off your debts, that’s the best way to go, but when you have predatory lenders, it’s hard,’ said Leslie, who lives in a friend’s home and now works at Manatee Park in east Lee County. ‘Filing for bankruptcy gave me a fresh start, but it’s still disheartening when you lose your home.’”

“We all can agree that 2009 has been a very challenging year. We all know the problems our community faced with unemployment, housing and tourism. It is a year most of us would like to just forget about and move on to 2010. As we look to the future, what lessons have we learned in the past? Or are we destined to repeat all this again some other time?”

“We didn’t learn from tough times in the ’80s and again in the ’90s. The inherent problems that caused those declines were still there in 2009. Almost 20 years ago, The News-Press reported on the economic demise. We urged then that we must get away from the three-legged economic stool we all depend on. We were dependent then on real estate, construction and tourism -the same three things that drove the boom times a few years ago and now has come crashing around us.”

“We brought in 25 business leaders to talk about 2009, but also about 2010, 2015 and even 2020. Some could not agree that we must depend solely on retirees and tourism. Investors and house flippers are back. They all agreed that we won’t see sustainable growth until people who buy the homes live in them.”

“All wanted the governments - local, state and federal - to get out of the way and let us fix the problems. And all agreed we no longer have an affordable housing problem.”

“Let’s not forget. Let’s always remember the pain. And let’s not repeat this ever again. Happy holidays.”




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64 Comments »

Comment by DennisN
2009-12-21 07:50:23

Investors including the Florida State Board of Administration, the California Public Employees’ Retirement System and the Church of England put money into the Stuyvesant Town deal. U.S. government-owned mortgage finance companies Fannie Mae and Freddie Mac own the biggest portion of the debt.

CALPERS strikes again. Poor guys, they can’t seem to pick anything right these days.

“The world turned upside down.” IIRC that’s what the band played when Cornwallis surrendered to Washington at Yorktown.

Comment by Capn John
2009-12-21 08:10:41

It seems to me that If you are invested in something and hear that CALPERS is buying in. its a signal to sell or stay away!

 
Comment by mikey
2009-12-21 08:49:41

Wow…some people will just say “What a horrible and terrible mess !” concerning what is happening to these housing storm adventurers.

I say, “Fools, it’s way too late to batten down the hatches and head for shore..you’re SUNK sailors !

Let the bells toll, gimme a bunch of I told you so’s and a whole herd of Amens.
:)

 
Comment by Spokaneman
2009-12-21 08:56:25

I wonder how long it will be before we start hearing of a Public Employee’s pension fund bailouts. This is a huge Democrat voter’s base. I

ts plainly evident that under any actuarially sound projection it will not be possible for the penison funds to provide the promised benefits, so, what then?

Comment by Arizona Slim
2009-12-21 14:12:48

It just doesn’t end.

Last week, I was at a community meeting at one of our city council ward offices. The city council member spoke about the state of the ward — and the city. In short, neither are very good right now.

To its credit, the city has embarked on a variety of cost-cutting measures. The housecleaning benefit for firefighters now appears to be history. Apparently, Tucson’s Bravest were so busy fighting fires and rescuing kitties from trees that they just couldn’t get to cleaning their houses.

Which prompted me to ask, “Do you mean the firehouses?”

IIRC, the job of cleaning the firehouse falls to those who are new to the department, y,know, the rookies, and you’d better believe that the more experienced people scrutinize their word very carefully. It’s all part of the process of fitting in at the house.

Well, turns out that the housecleaning benefit was for their personal residences. Fortunately, I did not say “Whiskey Tango Foxtrot?” out loud. But I sure thought it.

Comment by pismoclam
2009-12-21 16:10:08

Reid has exempted taxes on high dollar insurance policies for police, fire fighters, and EMTs. Overpaid already, the middle class gets hosed again.

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Comment by scdave
2009-12-21 15:30:12

start hearing of a Public Employee’s pension fund bailouts ??

Where ya been…California already agree to that long ago…

 
 
Comment by aNYCdj
2009-12-21 11:07:17

Dennis:

The ONLY one to come out of this smelling like a rose was MetLife who sold the property at the peak of the market, then paid down its debt.

 
Comment by measton
2009-12-21 15:33:36

10 to 1 the guys who buy for CALPERS are planning lucrative careers at GS MS etc after CALPERS is fully looted.

Comment by pismoclam
2009-12-22 20:58:18

They’re union thugs. Bd of directors headed by the head of the janitors union. SEIU at your service. Ca down the tubes again.

 
 
 
Comment by 2banana
2009-12-21 07:51:12

“Average rents for a two- bedroom Manhattan apartment fell 16 percent after peaking in May 2007 at $3,907, according to Gary Malin, president of property broker Citi-Habitats Inc. Tishman Speyer has ceased signing new leases at the complex, a company spokesman, said. It reached a temporary agreement with tenants this month that will reduce some rents starting in January. Investors including the Florida State Board of Administration, the California Public Employees’ Retirement System and the Church of England put money into the Stuyvesant Town deal. U.S. government-owned mortgage finance companies Fannie Mae and Freddie Mac own the biggest portion of the debt.”

4 GRAND for a two-bedroom apartment????

The investors read like a whos-who of institutions who lose money in anything they touch. Surprised Harvard was not in this project.

Comment by aNYCdj
2009-12-21 11:04:51

Yeah but it’s LUXURY man LUXURY, and YOU deserve the best, no skimping on YOU …right?

—————
4 GRAND for a two-bedroom apartment????

Comment by maldonash
2009-12-21 13:08:35

For three years I paid $3,000 for a one bedroom on 42nd and 10th … my friend rents his place on 83rd and Amsterdam for about $450 (rent controlled) - also a one bedroom bigger than mine. NY is out of control just like my other home state, CA. I live in downtown LA and midtown manhattan, travelling between each every other week or so. Both of these cities are completely out of touch with the youth. Both keep passing laws and other coercive actions that are designed to protect the old and the establishment. Wonder how long they are able to sustain this short-sided generational tax and how they plan to create long term growth … I wish I could leave these cities but my work does not allow.

Comment by aNYCdj
2009-12-21 14:11:59

I’m in Sunnyside queens just 8 stops from times square 7 train pay $1300 for 5 rms small2 bdrm in a 2 fam house. Of course yesterday i was shoving snow to get out of the house to mycar..

The landlord was upstate, but still If people were smart and realized how to talk and get along with a landlord, people can save hundreds a month over a non descript corporate owned building. Which will charge you late fees and sue if you are 1 day late with the rent after paying $530 for a muffler that had a nice LOUD hole in it.

But you want convenience of being close to everything…so you pay the price.
————–
For three years I paid $3,000 for a one bedroom on 42nd and 10th my friend rents his place on 83rd and Amsterdam for about $450 (rent controlled)

He probably lived there most of his life and cannot move….but if he played his cards right…he could get the LL to buy out his lease for north of $50,000

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Comment by cactus
2009-12-21 17:21:52

“Both keep passing laws and other coercive actions that are designed to protect the old and the establishment. Wonder how long they are able to sustain this short-sided generational tax and how they plan to create long term growth ”

I bet they will have to import youth to work hard to create long term growth.

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Comment by WHYoung
2009-12-21 11:30:34

Yep, but remember that represents a “market” rent, which is often in a newer amenity rich building. (doormen, elevators, laundry rooms, etc.)

Due to rent control and stabilization long term renters often pay much less. A lot of the older housing stock consists of tenement “walk-up” buildings (up to 6 flights) and have few if any of the “modern conveniences” that are standard elsewhere. Some even still have the shared toilet in the hall and the bath tub in the kitchen

Even them rents can be scary. And when vacant, the cheaper apartments rarely make it to the open market, but are rented by those with an “in”, either through friends, family or “key money”.

Comment by Doghouse Riley
2009-12-21 13:09:08

Do you think that rent control in NYC will ever be done away with?

Realistically, of course, I understand we have to defeat Hitler and Tojo first.

Comment by aNYCdj
2009-12-21 14:23:24

Doghouse:

as I posted yesterday nobody has a clue about rent controlled buildings…

Rent control is no different then an easement, it comes with the building and it affects the selling price making it lower then without the restriction.

But the owner would probably never have been able to buy the building if it was free market rent.

And remember the owner signed on the dotted line…he could have walked away and said NO..but he didn’t.

Plus leases can be taken over by family members if you stayed with the elderly for 2 years and made NYC your permanent residence. But realistically how many 30-40-50 year olds would want to move in with mom for 2 years just to get at the cheap rent?……WOULD YOU?????

Today it mostly gay couples that inherit rent controlled leases when a partner dies

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Comment by Bill in Carolina
2009-12-21 15:53:58

“But the owner would probably never have been able to buy the building if it was free market rent.”

No, the previous owner would have never considered selling the building if it was free market rent.

 
Comment by aNYCdj
2009-12-21 19:55:13

He wouldn’t have never sold it at such a cheap price, maybe 30-50% more ….but then the new potential owner would have been priced out of the market.
——————–
No, the previous owner would have never considered selling the building if it was free market rent.

 
 
 
 
 
Comment by Capn John
2009-12-21 07:54:48

Ahhhh.

I LOVE a good Florida posting. Everything predicted on this blog comes true!

Comment by Jerry
2009-12-21 14:12:21

And California falling like Dominos with Alta’ term loans reset 2010 and 2011 underwater, negative loans will all default. No government can bail this out or the Commercial reset loans either in the next year.

 
 
Comment by AZtoORtoCOtoOR
2009-12-21 08:01:35

“We didn’t learn from tough times in the ’80s and again in the ’90s”

I have a feeling that the “tough” times in the ’80s and ’90s aren’t going to look so tough in a few more years.

Comment by scdave
2009-12-21 15:34:15

Early 90’s were difficult….Early 80’s were real difficult…This one dwarfs the early 80’s…

Comment by ecofeco
2009-12-21 19:12:21

Yep. I was there. And in Houston it was doubly bad. The price of oil went through the floor.

We had all kinds of professionals waiting tables and stocking shelves. God help you if you were on the bottom of the food chain, which I was.

 
 
 
Comment by jeff saturday
2009-12-21 08:05:16

“Sales are brisk for South Florida homes hawked by the federal government in the wake of the Great Recession. Uncle Sam and two government-sponsored companies are unloading property, from waterside mansions to burned-out shells, often at prices 10 percent to 20 percent below market value.”

Well, what is market value?

Wife talked to a neighbor in Jupiter Fl. who said they got a letter from the home owners association that said the monthly fees were going up. The letter said that 15% of the 160 houses were in foreclosure. RealtyTrac shows there are 2. That is 20+ in the shadow.

Comment by Michael Fink
2009-12-21 09:56:25

Jeff,

What community (if you don’t mind sharing)? I’m in Jupiter as well, and I’m always curious to see who is/isn’t holding up well. I live in Evergrene currently, and it’s pretty bad in here (dozens of foreclosures/short sales, many more coming).

Thx!

Comment by jeff saturday
2009-12-21 10:04:20

Jupiter Landings, right across from The Shores on Central Blvd. north of Indiantown Road. I can`t confirm but I would bet The Shores is the same thing.

Comment by pismoclam
2009-12-21 19:20:19

If you try to buy one of those, I’ll bet that the realtwhore doesn’t tell you that the HOA is underwater and that the developer is gone or won’t make any repairs!!!

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Comment by Beer and Cigar Guy
2009-12-21 11:16:55

Here at ground zero, I have to crawl out of the bunker and peek out from time to time. There was a nice article on Yahoo last week about the most overpriced locations in Florida and Orlando area ranked #1. The foreclosures here are also in the shadows and there is still plenty of denial in the air. I rent about a mile from the Tiger Woods debacle at the entrance to Isleworth. About 2 months ago, another ‘millionaire’ in a 5 million dollar Isleworth mansion shot his wife in the head, killing her. As the investigation unfolded, it was found that they had not made a house payment (almost $16,000/month) in over a year and their house was in foreclosure.

Comment by DinOR
2009-12-21 13:14:46

Beer,

So sorry to hear that. I hate No-skin-in-the-game FB’s as much as the next bubble blogger, but ‘that’ is never the answer.

I think.., and I invite anyone to prove me ‘wrong’ but one of the saddest aspects of The Boom was that people -abandoned- their skills. I don’t care WHAT you did for a living prior to The Boom, once you’ve had a taste of Free Money, you’re useless to the rest of us!

In fact, when you think about it, once you’ve made 250k, 500k and ‘more’ for doing basically nothing.., your skills DID become useless?

Comment by Arizona Slim
2009-12-21 14:15:33

I think.., and I invite anyone to prove me ‘wrong’ but one of the saddest aspects of The Boom was that people -abandoned- their skills. I don’t care WHAT you did for a living prior to The Boom, once you’ve had a taste of Free Money, you’re useless to the rest of us!

You’ve described one of my cousins to a tee. Used to be an auto mechanic, and a very good one too. Well, as he got older, his back went out, and he had some sort of surgery to correct it. I don’t know how well that worked, but the next thing I hear…

…It’s Steve, the uber real estate agent!

I don’t know how business is for him these days, but the rest of the family likes to remark on how expensive his tastes have become. And, believe me, we are NOT an ostentatious family.

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Comment by DinOR
2009-12-21 16:53:57

Slim,

There -are- trades you can walk away from and pick up right where you left off.., and there’s those that just aren’t possible!

In tech, two years might as well be another lifetime? Even automotive technology changes incredibly in just a few short years. Then there’s all the people where some sort of licensing/certification is required.

Even leaving skillsets out of it for a moment, joing the NAR is like Tropic Thunder ( ‘Never’ go full retard man! ) Everybody knows that!

 
 
 
 
Comment by say what
2009-12-22 04:33:11

That is the story.

 
 
Comment by WT Economist
2009-12-21 08:36:41

“Picking up a line of attack begun months ago by the Florida Republican Party, Bill McCollum is accusing his Democratic rival for governor, Alex Sink, of ‘deceptive loan practices’ while she was a top banker. It’s a risky political strategy, considering McCollum’s history with the mortgage industry. As a member of Congress from 1980 to 2000, McCollum served on the committee overseeing financial services and co-sponsored 1999 legislation that tore down the Depression-era firewall between investment banks and commercial banks.”

“After he left Congress, McCollum lobbied for the Mortgage Bankers Association of America and for a nonprofit with a downpayment assistance program that was later outlawed by Congress after the Internal Revenue Service dubbed it a ’scam.’”

As I predicted, given the power of money in politics, those who obtained dynastic wealth in the recent era of mass fraud, and their descendents, will rule this country for decades. Because even if you vote, you won’t be given another choice.

Comment by DinOR
2009-12-21 09:01:20

WT Economist,

Thank you. We also need to ask ourselves how common loan peddlers were allowed to rise to such a place of prominence?

Converting REIC-fluence into ‘real’ political capital, ‘that’s’ the ticket! Recently in a note to our HOA Prez I noted that while ‘we’ ( the adults ) are busying ourselves with cleaning up this mess, the perpetrators have already moved on to their next stupendous fabulstic ‘deal’.

Bagholders for LIFE baby!

 
Comment by ecofeco
2009-12-21 19:16:10

Where have you been? It’s been like this for decades. How do you think we got here?

 
 
Comment by Mike in Miami
2009-12-21 09:08:51

Year to date sales data in my neck of the woods (0.5 sq. miles in Miami Shores)
8 regular sales at an average of $166/sqft

7 “deed from financial institution” sales with an average of $91/sqft.

The average condition of the regular sales was of course much better than a stripped down foreclosure that has the AC unit and all copper pipes removed by scavengers. In the same area I know about 7 propeties that have been empty for 12+ month and are in various states of decay.
1. 85 NW 103 ST
2. 10317 N MIAMI AVE
3. 195 NW 103 ST
4. 189 NW 102 ST (CONSUMER SOLUTIONS REO LLC)
5. 10414 N MIAMI AVE
6. 89 NW 106 ST
7. 58 NW 104 ST

Those are just the ones on my “dog-route” that are blatantly obvious due to the poor condition of the property. Some have been on and off the market at times with asking prices from $179K - $250K. Anything below $150K seems to sell at a reasonable pace.
While my observations are not scientific, I think it is fair to say that in Miami Shores there’re at least as many foreclosures in the pipeline as have already been sold.

Miami Shores public sales records in 0.5 sq. mile area, year to date.

1 1132060131320 90 NE 101 ST 7 446,300 Deeds to or from financial institutions Residential 1952 1,589 2 2

2 1132060132070 185 NE 100 ST 4 439,000 Sales qualified as a result of examination of the deed Residential 1938 1,741 2 2

3 1121360070150 18 NE 107 ST 8 345,000 Sales qualified as a result of examination of the deed Residential 1941 1,660 3 2

4 1131010180390 55 NW 100 ST 8 315,000 Sales qualified as a result of examination of the deed Residential 1960 1,952 3 2

5 1131010180330 29 NW 100 TER 8 270,000 Sales qualified as a result of examination of the deed Residential 1939 1,862 3 1

6 1132060131710 10250 NE 2 AVE 4 250,000 Sales qualified as a result of examination of the deed Residential 1961 1,820 4 2

7 1121360050110 125 NE 105 ST 8 245,000 Sales qualified as a result of examination of the deed Residential 1939 1,623 2 1

8 1121360080090 189 NW 105 ST 10 227,000 Sales qualified as a result of examination of the deed Residential 1945 1,319 2 1

9 1132060131580 74 NE 103 ST 5 143,000 Deeds to or from financial institutions Residential 1950 2,014 2 2

10 1121360131100 63 NW 103 ST 4 120,000 Deeds to or from financial institutions Residential 1939 1,625 3 1

11 1121360130810 117 NE 103 ST 7 115,000 Sales qualified as a result of examination of the deed Residential 1939 1,303 2 1

12 1121360131550 141 NW 103 ST 5 115,000 Deeds to or from financial institutions Residential 1940 1,251 2 1

13 1121360131020 10300 N MIAMI AVE 3 109,926 Deeds to or from financial institutions Residential 1937 1,590 3 1

14 1121360131060 58 NW 104 ST 9 100,000 Deeds to or from financial institutions Residential 1938 1,363 3 1

15 1131010230290 150 NW 100 TER 8 89,000 Deeds to or from financial institutions Residential 1941 1,701 3 2

Comment by aNYCdj
2009-12-21 11:10:44

Well my prediction is coming true…in the great Mogambo voice:

200 Thousand Dollars That’s a lot of FREAKIN money for a HOUSE!!!

———————————-
Anything below $150K seems to sell at a reasonable pace.

Comment by Mike in Miami
2009-12-21 12:50:20

Especially once you figure in that you’ll pay about 4% of the purchase price every year between taxes and insurance. During the peak the average 3/2, 1800 sqft houses built in the 40s and 50s were selling between $500K and $1 million. Decent n’hood and all but who in their right mind would buy those and expect to keep up payments?
Buying didn’t seem to be a problem, keeping up the payments is another issue as it turns out.

Comment by octal77
2009-12-21 13:16:09


…Especially once you figure in that you’ll pay about 4% of the purchase price every year between taxes and insurance…

Add in to that mix maintenance costs.

So, for a $1 million McMansion, the “homeowner” has
to come up with about $40,000 *cash* / year.

And, of course, that is *NOT* even counting any
mortgage costs.

True, some maintenance items can be deferred, but
we are still talking about a lot of free cash flow
that is required to keep the keys to the front door.

How Joe Average manages to come up with that
kind of cash is, to me, is just baffling.

Especially these days with high unemployment and
salaries declining in real terms.

(Comments wont nest below this level)
Comment by Mike in Miami
2009-12-21 13:41:38

“…for a $1 million McMansion,…”
During the bubble days $1 million certainly wouldn’t buy you a McMansion in Miami. You would get a nice 4/2 with 2800 sqft in a good n’hood. A shack in the ghetto with bullet holes in the siding and a leaky roof would run about $250K.
Actually those have fallen the hardest. You can pick up a ghetto shack these days for about 10% of peak bubble prices (good luck collecting rent from the avg slum dweller). The upper end holds up much better at 60-70% of peak bubble price.

 
Comment by octal77
2009-12-21 13:56:01

Mike

I live on the opposite coast, (Irvine, Ca).

For sure, prices here have fallen at the ‘lower end’ but not
to the extent that you mention has happened in Miami.

Why higher end (>>$ 1 million) have not fallen in
proportion could be the subject of a interesting debate.

With a few exceptions, financing costs of non-conforming
loans (<< $725K here in Orange County) is very high,
typically 8-9% assuming you can get someone to loan
you the money in the first place.

I have long held a pet theory that the carry costs
of ownership (Taxes, Insurance, Maintenance, Association
dues) may in themselves drive down the cost of property
irregardless of where mortgage interest rates go.

Example: Let’s say that your 4% figure (which holds true
here in Irvine, BTW) suddenly doubled to 8%.

Now how in the known universe is Joe Average going
to generate $80K/year for a $1 million anything??

It just doesn’t make sense. I am sure interested if
anyone on Ben’s blog has a reasonable explanation!

 
 
 
 
Comment by JDinCT
2009-12-21 14:43:54

Great Stuff Mike (in Miami),
That’s why i love this blog. Real on the ground observations. The trenchant commentary is just a bonus.
Great work keep us updated.
For what it’s worth, I live in a (relatively) wealthy town , pop. 20,000 in Western CT. Prices are down but not falling off the table….yet.

 
 
Comment by In Montana
2009-12-21 09:20:08

“…in the wake of the Great Recession”

Why do I keep thinking it’s just getting started?

Comment by Rancher
2009-12-21 09:37:58

Great minds that think alike…..laughing..

Time to walk the dogs and I’m already coffee’d out!

Comment by Bill in Carolina
2009-12-21 11:40:48

Inventories up a bit. FedEx and UPS say package volume is trending up. A couple of mothballed ethanol plants are about to restart. Average hours worked are up slightly. The treasury yield curve has widened to a record.

Yep, the GR is still just getting started all right. We know the FED will wait too long to raise interest rates, so it will soon be balls to the wall 5%-plus annual growth.

Oh, and inflation out the wazoo. You do NOT want to be holding cash for very much longer.

 
 
 
Comment by Muggy
2009-12-21 09:59:16

I came dangerously close to getting together a few offers in the last month. I’m glad I am still on the sidelines.

 
Comment by North GA Dave
2009-12-21 10:06:41

In 2003 I bought a small house in a commercial zone to use for my office, in Boca Raton. The purchase price was $185K. As it became obvious that SFL was beginning to implode, I sold it in 2005 for $295K. (along with 4 other properties I owned, including my primary residence) . I just noticed that this property was just listed this month for $179K.

I remember the agent telling me I was nuts at the time, for thinking the market was going down.

http://www.realtor.com/realestateandhomes-detail/489-Lancaster-St_Boca-Raton_FL_33487_1114505978

Comment by DinOR
2009-12-21 13:09:18

Dave,

Too funny. I just Zillowed my 1st home in Molalla, OR and after an original purchase of $67,500 in 1989 it shot up to over 250k at the peak in 2007.

They now show it at 214k ( dropped 10k just last month ) and I’m doubting seriously they could get a penny over 200k. We sold in ‘94 for 130k and owned another home between ‘94 and ‘04.

Just looking back, our buyer in ‘94 would have to stay put for 15 years to make a “profit” of may…be 70k? Small taters for big time Housing Players, don’t you think? Given it’s quite a commute to any place w/ jobs, I’ve no doubt it will correct even further.

 
Comment by X-philly
2009-12-21 13:18:56

I know properties in FL are built to hurricane code but that place looks like a bunker.

Comment by North GA Dave
2009-12-21 14:46:46

Actually, that neighborhood was originally built as military housing for the Army air base nearby (now the Boca Raton Executive Airport). This house was the first property on the side street off of Federal Highway, and the zoning for all the strip malls on Federal extended to this parcel, so I could use it for an office.

So the bunker style may have been a side affect from being designed (or lack thereof) by the military. Nice observation.

The person who bought it from my in ‘05 purchased it to add to his rental property portfolio, and rented it as a residential house.

 
 
Comment by obmanator
2009-12-21 14:37:45

wow Dave, no offense but that is a hole. What idiot paid $295k for that? Did they every occupy it?

Don’t forget that State Farm just announced they are dropping 125k homes off the books and the remaining 600k homes are going to get an increase in 2010 of about 30% on average. Thanks Christ.

I’ve been a homeowner for 15 years until 2003. Rented since and watched those that laughed at me know think I’m a genius. I don’t have the heart to tell them prices are going to drop another 10-20% next year.

Comment by palmetto
2009-12-21 18:27:47

“Thanks Christ.”

It’s Crist. You’ve got him mixed up with Obama.

 
Comment by rms
2009-12-21 23:54:23

“What idiot paid $295k for that?”

I guess you didn’t see the private lagoon swimming pool with love nest cave featuring soft pastel lighting and surround sound music?

 
Comment by North GA Dave
2009-12-22 08:57:16

It is even worse than it looks, the neighborhood is really bad, and the backyard overlooks the service door of a restaurant. The sound of dishwashers bickering in Spanish, and the aroma of food waste from the dumpster were especially seductive. Fortunately, the restaurant is only open for dinner and I normally left the office at 6.

With residential rents in the $1200 range for that area, I could not figure how he figured to make it cap out at that price. The property next door was purchased for $318K about the same time, and then $40K was spent completely converting it to office space (no separate rooms), and has been vacant since with no tenants.

It was a great office for me for a few years, I liked being able to get out of a home office.

 
 
 
Comment by Arizona Slim
2009-12-21 12:05:38

“We didn’t learn from tough times in the ’80s and again in the ’90s. The inherent problems that caused those declines were still there in 2009. Almost 20 years ago, The News-Press reported on the economic demise. We urged then that we must get away from the three-legged economic stool we all depend on. We were dependent then on real estate, construction and tourism -the same three things that drove the boom times a few years ago and now has come crashing around us.”

“We brought in 25 business leaders to talk about 2009, but also about 2010, 2015 and even 2020. Some could not agree that we must depend solely on retirees and tourism. Investors and house flippers are back. They all agreed that we won’t see sustainable growth until people who buy the homes live in them.”

Sounds a lot like my dear state of Arizona.

Comment by X-philly
2009-12-21 13:11:47

Hi Slim,
I just left a voice mail. Are you back east yet?

If not you just missed a doozy of a snowstorm.

Comment by Arizona Slim
2009-12-21 14:17:00

Slim here. Still in Arizona, but am about to trek back to the snowy northlands. And I hear that the photographic ops are mind-blowing. So, here I come with my camera!

 
 
 
Comment by obamanator
2009-12-22 10:32:59

Talked to the Resident realtorwhore today down the street. Were you aware this is a GREAT TIME TO BUY? Rates are low, prices have bottomed and are going up, and I’m just “throwing my money away” in renting.

She works with “foreign investors” that according to her are “scooping’ up all the “bargains” around and I better act soon.

Well, I asked her if any of these “investors” can cash flow positive on their “bargains” she found them. Uh,, no. They are tax write offs. Ok.

I then asked her why TODAY I should buy and pay twice as much to “own” with all the headaches vs. renting. Uh,, because house prices have bottomed and in 3-5 years they will be higher…

So…..I asked her how the folks she said the same thing to since 2005 about low rates and prices are doing, now that they are on average 30% underwater. You know.. 3-5 years ago? Uh… It’s the banks fault for lending to everyone. (Like your poor shmucks that you shoved into a home to make a commission?)

Finally, I asked her to guarantee me in writing that the value of any home she wants me to buy will not be worth less than what I paid if 5 years. She just stared at me with a blank face.

I smiled and said Have a great day!

Car salesmen. Every last one.

Comment by EdSTS2000
2009-12-22 13:08:28

I hardly ever post, but I have to say this: I have more respect for used car salesmen than used home salesmen (or women, in the above case).

Used car salesmen never said “Buy now or be priced out forever!”.

Comment by pismoclam
2009-12-22 16:03:17

Watch them pole and lap dance and you will have more respect!!!

 
 
 
Comment by ocala rentals
2009-12-22 14:50:18

It seems like the housing market in Gainesville and Ocala are starting to pick up. Hopefully this coming year will be better!

 
2009-12-23 06:09:25

Seriously, can you imaging the value that would add to a home down the road if inflation ever does take hold? I am not positive, but I thought FHA and VA loan were assumable; and with so many FHA loan being underwritten, this should bode well for many.

 
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