Florida Converters To Tenants: ‘Stop Packing’
A pair of reports on Florida. “After the developer of a downtown Naples condo project suspended sales and closed the sales center, a Fiddler’s Creek chef approached Naples developer Aubrey Ferrao in a panic two weeks ago. The chef told him he had just recently purchased a $450,000 home down the road from Fiddler’s Creek, and thought he could lose his substantial deposit.”
“‘I told him, ‘Don’t worry about it.’ But people like this are panicking, and that’s not good,’ Ferrao said. ‘The market is nowhere near what it is made out to be.’”
The News Press. “‘Stop packing.’ That’s the message from a south Fort Myers developer who has had a change of heart about turning apartments into condos. Experts say it’s the start of the reversal of a trend to convert apartment complexes into condominiums in a softening real estate market. Condo converters around the state are changing their plans.”
“Tenants of the Promenade, at Summerlin Road and Cypress Lake Drive in south Fort Myers, got fliers from managers last week saying ‘Stop Packing’ and urging them to renew their leases. ‘We are staying a rental community,’ the flier states. ‘For those of you who have given notice and would like to stay, we would love to have you.’”
“Competition from converters already in the market is fierce, Jack McCabe said. ‘What we’re finding is that concessions are now rampant with 70 percent offering some kind of incentive,’ he said. ‘They range anywhere from discounts on prices of as much as $20,000 to the first year’s mortgage payments made to the first year’s homeowner’s association dues paid.’”
“Converters are also wooing real estate agents, he said: ‘They’re offering broker commissions. ‘Bring us a buyer please, we’ll pay anything.’”
“While some Promenade tenants were relieved they could stay, for at least one couple renting there it’s too late to reverse course. Teddy and Alan Hogle, who have lived there for three years, decided two months ago to move when plans to go condo were announced.”
“They weren’t interested in buying their apartment and had been thinking of a move to Delaware to be closer to their children. Now they’ve decided to move to Newark, Del., said Alan Hogle. ‘Of course, by now, we’ve made our decision,’ he said. ‘Once you’ve decided on a course of action, then you get committed to following up.’”
There was a lot of talk in my complex about going condo last year. I was hoping it would so I could get a hell of a deal renting from an investor.
At the local gas station station last night was a 2-bedroom/2-bath with golf course membership down the road for $1100/mo. I thought about calling and offering $900. In just a couple months that will be a heck of a deal.
Want to bet the developer has to raise the price of rents to cover the overpriced amount paid for the rental project to begin with .
If I got the ‘please stay’ flyer I would ask for a hefty rent reduction for my trouble and even then I’d probably rent a luxury condo cheap from a flopper. I like those GCTs and stainless!
I doubt that’ll happen, because the problem was that tenants weren’t staying around in the first place.
There may be some truth to the “don’t panic” advice. Just because market prices are going down does not necessarily mean people should rush for the exits. If you can comfortably make your payments, and like your house, then what does it really matter if prices drop substantially? It’s not like your life got any worse, or the food tastes blander.
In the long run, real-estate prices always recover, so it’s likely best that many home-owners just sit back and relax, not worrying about any short-term market turmoil there might be.
In the long run we are all dead.
Mikhail. That makes perfect sense if you have a stable job, you were smart enough to get a 15 or 30 year fixed mortgage, or no mortgage at all. What most people in this blog, myself included, are looking at is the great majority of recent buyers who have no equity, have ARM’s that are due to reset shortly, or are in a job in a RE related company (mortgage broker, RE Broker).
These unfortunately also make up a lot of the recent buyers, and unfortunately, they have little, to no wiggle room. I am seeing properties bought 2 or 3 years ago, selling essentially for the same amount, and in some cases for less than what they where bought at.
I agree. People with exotic mortgages, or dodgy jobs, should try to get out from under onerous mortgage commitments. That said, the article the blog entry pointed to was talking about a developer who required 30% deposits. I doubt people putting down this kind of money were of the highly leveraged variety.
That said, the article the blog entry pointed to was talking about a developer who required 30% deposits. I doubt people putting down this kind of money were of the highly leveraged variety.
You’re kidding, right? There are a LOT of people taking out HELOCs to fund these kinds of things…and most of them were thinking they’d make a boatload of money. Granted, not all are doing it that way, but many are. Why do you think the foreclosures have increased exponentially over the last couple of years? It’s not just the people who can’t make their payments on their primary house/condo/townhouse. It’s also the ones who took money from the equity in their primary home to finance such things. So when the bottom falls out, so falls their shelter…the domino effect.
BayQT~
I doubt people putting down this kind of money were of the highly leveraged variety.
Why do you think that? Did you read that the guy who was in a panic was a chef? Now, maybe it was Wolfgang Puck, but the more likely scenario is that it was a guy making $60K/year putting down a HELOC-financed down payment. In fact, it’s probably the case that few people who are buying into this unit are very affluent. Rich people tend not to do foolish things with their money - that’s how they got to be rich in the first place.
I agree about not panicking. If you love your home, have a 15 or 30 yr fixed with payments you can afford, have reserves in case you lose your job or are injured, AND if to buy is about the same or cheaper than renting without counting tax deductions.
If you have a short term arm and are paying twice to own what it would cost to rent with no cash reserves then by all means feel free to panic.
ARM Reset=Panic Selling
I agree, *IF* you have a 15 or 30 yer fixed. I do wonder what happends if you NEED to sell? Say you lose your job, maybe have to transfer, for example. That said, I also think 99% of people with an IO mortgage are in for a world of hurt.
I think it would depend on how far upside down you are plus if you could rent it for enough to cover the mtg payment.
I agree about the IOs. I really think only people who have big swings in income like actors, car salesman, owners of seasonal business should use IOs and they should paydown the principal when their money is flowing in while only making the minimum IO payment when its a dry month or quarter.
In the long run, real-estate prices always recover
When are Japan prices going to recover?
C’mon Beta, it’s only been 17yrs. Relax, Suzanne researched this!
I disagree, with the sole exception of the rare one-of-a-kind property that you love more than anything else. Anything else is just an asset. If Ben ran a car blog, for example, and the majority of us had come to the conclusions we did in this housing blog, why would you hang on to a 2003 Smurfmobile if you could sell it for $50,000, rent something similar for less than $200/mo and then buy the Smurfmobile back again (or one just like it) for $30,000 after two years — all this with the guarantee (for apples to apples) that Smurfmobiles depreciate no more rapidly than houses?
Much of the forecasting in this blog, over many months by many posters, is that if you can set aside your emotion about a house or condo and look at the reality of what is happening, you can sell out in your bubble area and buy back in later for much, much less. At that time, you might be able to have little or no mortgage and inevitably you will have lower property taxes. In the meantime, you will have used the tried and true rent ratios to live comfortably and relatively inexpensively in a rental property that someone else believes will only go up in value.
Hang onto a house just because you have a fixed rate mortgage and secure job? You lose the phony bubble equity that exists through no fault of your own. I didn’t — sold out and am renting, waiting for buyback time.
Unfortunately the property taxes in CA only go UP when you buy a house, due to prop 13. After 15 years of ownership, when I sold my house I was paying an outrageous $9K/yr — but the new owners get to pay $17K/yr. And my old neighbors, with a nicer and bigger house, who have lived there for 30 yrs, pay less than $1K/yr.
Re the taxes, I ran those numbers, too. I was feeling sorry for myself in the same vein, here in Florida. But then it occurred to me that if I took just $100K of the profit and, theoretically, set it up as a fixed annuity for my maximum life expectancy and solely to pay my property taxes, it would pay more than all of the difference caused by selling (losing my low protected base) and there still would be money left when I croak.
AND if to buy is about the same or cheaper than renting without counting tax deductions.
Wow…we haven’t had these kinds of fundamentals in a very long time.
have reserves in case you lose your job or are injured,
Uh….most people are also not saving. It’s been major headlines for a few years now.
Just wanted to point a few things out.
BayQT~
ST.Joe, Huge Florida land banker just hit a new 52 week low this morning….
Couldn’t happen to a more deserving company.
Regarding the conversion issue at hand, I was talking to my cousin who is going to get married next month. She has been looking everywhere along with her new husband for a rental property in Glendale, CA. Until yesterday, she could not find any decent 1 bedroom apt for less than $1100, anything below that is old and smelly.
They are now considering buying, since anything decent would cost about 1300-1400 to rent, and if they were to buy would cost them around 2200-2300 w/ 30 YR Fix. They finally did the numbers, and taking into account the tax savings, yearly rental appreciation of about 3-5% per year, 200-300 of mortgage payment going to principal per month, softening market, they are now looking to buy.
they must have one huge downpayment
No joke. $2,300 a month will pay just principal and interest (not taxes or insurance) on a $364K loan. Have they looked to see what $2,000 rent will get them? Comparing $1,100 rent to $2,300 P&I only is apples and oranges.
OT:
As Families Splurge, Chinese Savings Start to Take a Hit
Su Yang, the co-owner of a Shanghai airfreight company, and his wife, Ren Jie, a human-resources manager, earn nearly $50,000 a year. After paying the $375 monthly mortgage on their marble-floored townhouse and shelling out for two cars, food, school tuition and foreign travel, they save almost nothing.
“Life is short,” says Mr. Su, sinking into one of the brown leather sofas arranged around his flat-screen Hitachi television. “We’ve got to live life for the moment.”
The Sus are part of a growing consumer culture taking hold among China’s burgeoning middle class. Enough young urban professionals are blowing their whole salary these days that the Chinese media have coined a nickname for them: yue guang zu, roughly translated as the “monthly tapped-out class,” much to the astonishment of their parents. Savings rates, although still among the world’s highest, are slipping….
The couple pinched pennies by living with his parents in a “very, very small” apartment, says Ms. Ren, also 33. A big night out was fried chicken at KFC. Within two years, their daughter was born. The couple bought a $48,000 apartment. Family members pitched in to cover the purchase price, even though banks in Shanghai had begun offering mortgages the previous year.
By 2003, Mr. Su’s family bank balance had swelled to about $60,000. His two-year-old airfreight business was doing well and his wife had earned a promotion in her job. The future looked so bright, Mr. Su says, the couple decided to stop saving “at the expense of sacrificing our life quality.”
That year, the couple agreed to pay about $180,000 for a townhouse, figuring the second-hand property far from the city center was a bargain. The purchase blew out their savings. They took out a 25-year, $60,000 bank mortgage.
These days, temptations to borrow arrive often — in the mailbox. At least three times in recent months, Mr. Su says he has received a credit card with his name, including one from Citigroup Inc.’s affiliate.
The link didn’t show up, for some reason. It’s on the Wall Street Journal’s website homepage (the website’s free for the next 10 days).
I have a feeling that cheap credit from China and Japan will run out in around 10 years. In Japan, 1/4 of families now have no savings, a surge from 3% in the late 80’s. Within 10 years, most of their savers will have retired. Their younger generations are either over-stretched or not saving at all. The same thing is happening in China and they have a one-child policy for decades, so the demographic structure will be even worse than the one in Japan.
What will happen when the two biggest savers both become spenders?
HBs getting clobbered today. Congrats, shorts!
OT - Yahoo finance has an interesting “Your Money Poll” going on. If you click on the “Guide for First-Time Homebuyers” you will see it. Here’s a snapshot of it:
If you’re on the fence about buying your first home, what’s holding you back?
I’m waiting for property prices to fall. 64%
I may move out of town shortly. 9%
I can’t make the large down payment. 29%
1518 Votes to date
Interesting.
All the people at my office who have been trying to convince me to buy the last two years (I am a young engineer fresh out of college), have changed their tune they last couple months and are now telling me the market is turning and it may be a good idea to wait…
When they start to emphatically tell me not to buy, I will start looking again
I know how you feel. I don’t talk to people at work about this kind of stuff anymore. Most of them are clueless baffoons who can tell you who won the last three “Survivors” but don’t have a clue about the economy or world events unless they eavesdropped in on someone in the breakroom who said he made $100,000 flipping houses; thus is must be easy for everyone to do so.
St. Joe Co. earnings fall 76 percent in 1Q
Tuesday May 2, 11:37 am ET
The St. Joe Co. earned $3.7 million in the first quarter ended March 31, down 76 percent from $15.4 million in first-quarter 2005.
St. Joe (NYSE: JOE - News), the Jacksonville-based developer of residential and commercial real estate, earned 5 cents per share, down from 20 cents a share in first-quarter 2005.
Revenue also fell to $167.4 million from $184.7 million in the year-earlier period.
Chairman and CEO Peter S. Rummell attributes the decline to a major slowdown in resort residential sales.
Based on that slowdown, the company lowered its expected 2006 earnings to $1.40-$1.85 from $1.70-$2.15 per share.
As of March 31, St. Joe owned about 835,000 acres, mainly in northwest Florida. It had $1.1 billion in assets, up from $989.6 million a year earlier.
In Central Florida, St. Joe is developing 616 units on 175 acres in Artisan Park in Osceola County. It has sold 325 units since the project’s inception.
Published May 2, 2006 by the Orlando Business Journal
I tried to renew my lease 2 months ago, and I was told that I would get a rent hike of over $200/month, and my lease was said to be non-renewable. Just recently, I was threatened with a lawsuit for not giving 60 days exit notice by the converter who bought my complex. First they won’t let me stay, and 2 months later they won’t let me leave.
P.S. I have handled the situation.
I live in S Fla and my lease is up the end of June so I sent a letter stating that I would renew my lease at a 225.00 per month reduction and they will need to let me know by the 15th of May since that is when I will start to neg. with a new landlord….
The issue with my landlord would be I currently have 2 other homes on my street for rent and 6 others for sale so I figure I’m in the drivers seat now, and also have started to look and can get more for my dollar today than a year ago =)
lucky me with my cash in the bank and living cheaper on another fools dime…
Very nice. Do you think he’s at risk at foreclosing on anything? That would be my only concern.
What a coinky-dink, I just moved to Newark, DE over the weekend…
> ‘Stop packing.’ That’s the message from a south Fort Myers developer who has had a change of heart about turning apartments into condos.
I wonder when such change of heart will arrive here in Minneapolis. It doesn’t seem to be here yet, as can be seen from a recent letter to an editor:
Clap for the middle class (March 8, 2006)
According to City Pages, what lower-middle-income people need are comfy rental apartments in tony neighborhoods. Instead, why don’t you applaud the fact that more condos are being created in Minneapolis, homes that middle-class people can afford to buy? Owning your home (even if it’s a van) is a ticket out of the poorhouse. Renting is not. Will Meland, Minneapolis