‘Lemminglike Rush Operating In Reverse’: Florida
Some housing bubble updates on Florida. From the Palm Beach Post, “Amid the month’s first cluster of mortgage defaults and property liens are four Tiara condos lost to post-hurricane rehab bills. The condo association charged 320 unit owners $48,000 to $72,000 each to begin reconstruction. But the towers remain unlivable almost two years after the storms, and some residents have not been able to keep up mortgage payments, the cost of temporary housing and repair bills.”
“In fact, some who moved in back in 2001 paid only a little more for their unit than the higher-end repair bills they are being assessed. The units may not even be worth that much now. Property tax bills for 2005 were largely based not on the condo structure, but on the value of the sand beneath it.”
From Realty Times in Naples. “As the height of the season begins to come to a close, I am seeing housing prices lower and savvy buyers trying to pick up property at low levels. Not many transaction are getting done as greedy and unrealistic Buyers and Sellers are looking for ‘their’ prices. I am still seeing numerous price reductions throughout town, but not many properties are actually being sold.”
“A price retracement of 20% to 30% is currently happening. There is a tremendous amount of supply on the market (Over 9,300 properties as of 5/7/2006), especially the further east you go off the beach. Sales in March declined 64% from the previous year and it will take some time to get through the large amount of supply we have on the market before another leg up in prices occurs.”
“Demand for property declined as 665 properties were sold in April versus 1,502 the previous year, a decrease of 55.7%. Sellers are slowly realizing they cannot get last year’s prices for their homes and prices are decreasing. In Naples, I have seen numerous price reductions over the last two months; the low end of the market ($200,000 to $500,000) is weak as too many investors flooded into the market over the past 3 years.”
The New York Times. “Until the summer, investors were crawling over each other trying to get their hands on Southwest Florida homes. Now that lemminglike rush seems to be operating in reverse. Listings are stacking up, prices are going flat and words that haven’t been heard much in some time are being spoken: ‘non-performing loans’ and ‘foreclosures.’”
“Southwest Florida Realtors are faced with four times as many listed homes and three times as many condos as in July, when the market began falling apart after a brilliant longterm run-up. The empty dwellings worry Realtor Steven DuToit. He says that as some of those sellers cave in to the pressure of two mortgages and other carrying costs, their departure will drive prices down further.”
“‘This whole market has been driven by investors,’ said DuToit.”
“For the last two years, Fishkind & Associates, an Orlando-based economic consulting firm, has been advising clients that the Florida residential real estate was approaching a market top that needed to be heeded.”
“Now we are past the peak and in the downside of the cycle, and all the things we said would happen are happening,’ said Fishkind economist Stan Geberer. ‘That includes a reduction in prices, a drying up of investor activity, nonperforming loans, condominium projects that will not be built, and certain projects in certain locations seeing dramatic and significant reductions in price.’”
“In the first quarter of 2006, the state knocked out 29,636 foreclosures, a 14 percent decline from a year earlier. What the statistics don’t show are deals in which investors have simply walked away from their deposits on newly built residences. The developer is stuck with continuing to carry the construction cost loans until he can resell, and is newly saddled with paying the property taxes on a finished residence.”
“‘You just look in the Sunday real estate section to see `All closing costs paid. We will give you $15,000 in upgrades. We will throw in the fancy appliances and the marble counter tops,’ said Geberer.”
It’ll be interesting to see how the next few summers’ hurricane seasons factor into all of this. And the related challenge of who’ll provide homeowners’ insurance in FL, under what terms, and at what cost.
As posted a few days ago, I understand Fort Lauderdale STILL hasn’t entirely recovered from Wilma.
That kind of thing makes me marvel at the role the internet has played potentially in the run-up especially in FL. I know of someone who is flipping props (i don’t ask the details, but she has at least one flip done there, I think, or one in progress, some land buys maybe, etc)in FL and ‘uses the internet’ for everything. I don’t rightly know if she had gone down to see the places before buying…after all, that would take some money, lol! If people can buy properties advertised on the net, from the ignorant safety of their homes far far away, they don’t even need to know about hurricane damage or risk except as an abstraction when they buy-to-invest. They can just google FL, and see how everyone must want to live there, buy there, retire there, vacation there. that some buildings in the community you’re buying in are still boarded up doesn’t tend to get advertised on the first 100 hits pitching condos, condotels, and vacation packages I’m guessing.
I’m hoping and expecting that the internet helps too with the bursting, but to some degree people find what they’re looking for…
for instance, key in “Florida real estate investment condos” and the first 10 hits are all sites pushing condos as great investments, and the one hit you get that smartly includes words about how the boom is over is actually a RE shill/agent telling you that the ‘herd’ isn’t buying but that means there are some great opportunities because selection is great but prices aren’t really coming down (whatever the hell that could mean…I guess he’s smarter than I am and so I should just listen to his advice and picks, because I don’t understand the logic there)
People who are looking to make money in RE or buy a second home don’t look at money mag first these days I think, or Fortune…they google “Florida real estate investment condos” and get this drivel and sales pitches. they think the sheeple read the papers and they’re the first people who’ve gotten smart, gotten the inside scoop from their highspeed modem connection, and are getting the real deal off the ‘internet’ from people who can prove their worth because they’ve done it themselves, they’ve made their own RE fortunes and can show how!
A 20/20 story showing people getting really soaked on faraway flips is good….more of that, USAToday articles on how people can’t flip FL condos or LasVegas condos anymore for example, would be helpful. The press has to replace all the recent blather about how so many RE sales of the last couple years have been boomers buying vacationhomes with stories *questioning* the idea that they will be doing so, that they’re not so interested recently, that people buying miami condos expecting the great convoy of retirees to arrive are getting screwed, and show why why why so that it sinks in and can’t be ‘refuted’ by the RE sideshow barkers. I think it’s been said here that people who lose their shirts will not be so anxious to advertise that at cocktail parties, like the winners had been happy to do in the recent past…
“I understand Fort Lauderdale STILL hasn’t entirely recovered from Wilma.”
I can vouch for that. We visited Miami/Ft. Lauderdale area this last February and saw many, many homes with a blue tarp on the roof. Not knowing what it was, we asked a local, why the blue tarp? He said these homes have not been fixed since Wilma. Either the homeowners cannot afford it, or they are waiting for the insurance to come through. It was also obvious that many of these homes were not livable.
For the non-locals, they are called “FEMA roofs”.
Blue Tarp roof = Florida State flag
Part of the problem is the shortage of state-licensed roofing contractors in Florida. The state is no longer allowing out-of-state roofers to work here using the other state’s license because of concerns that the work they do here won’t be built to Florida code.
There was an article in the Miami Herald a couple days ago talking about how if you want a new roof in that area, it’s probably a six to twelve month waiting list for one if the company’s adding people to the wait list at all at the time.
Full recovery from a storm like Wilma (severe but not catastrophic) is probably going to run 3-7 years.
Yes there are some blue roofs left due to late insurance payments or individual’s finances. Howver there are plenty of roofers. Composition shingles are in supply and easily purchased. Roof tiles are what people are on lists for. In my neighborhood of almost 400 homes I’d approximate 50-60% needed composition roof replacement and almost all have been completed 6 mos later.
Driving on the Turnpike in Palm Beach the # of Blue Tarps from Frances & Jeane have reduced significantly since the hurricanes that previous year.
I re-roofed my own house once down to the plywood. It took a week in the hot July sun. I rather enjoyed it.
Dang, is there anything you don’t do?
Talk about getting your hands dirty.
I re-roofed my own house once down to the plywood. It took a week in the hot July sun. I rather enjoyed it.
The marriage proposal is still open…………..
I might buy a piece of junk shack and give txchic a deal she cant refuse. Free Rent if she tears off the roof and puts another on!
“In fact, some who moved in back in 2001 paid only a little more for their unit than the higher-end repair bills they are being assessed. The units may not even be worth that much now. Property tax bills for 2005 were largely based not on the condo structure, but on the value of the sand beneath it.”
The wise man buildeth his house upon the rock, the foolish man buildeth his house upon the sand, and the lemming buyeth the condo built upon the sand in the hurricane flood zone.
Actually, I don’t think that sand is that bad to build upon. It doesn’t expand and contract with moisture ( especially like that clay they have in N. Texas - you can drive down the street and see people watering their foundations when it hasn’t rained in a long time ) causing your foundation to shift and crack.
It depends on how often the sand is inudated by storm surges, IMO.
“inundated” (sp)
if you know your geology, sand (gravel) are clay (silt) are the main soil elements for the foundations anyway…after all , soils are byproduct of weathering/degradations of rocks, the primordial form of nature. Most residentials are strip fdns :pads sitting on top of soil.
Texas/Lousiana/southern US and central fl to some extent have some issues w/ expansive soil leading to widespread use of post-tensioned SOG…but ribbed fdn could be useful as well.
What is SOG?
The reason I ask is that a while back I was looking at a cattle farm in northern Alabama and when I talked about building a house on it, I believe the agent used the term “Sog” and said it had something to do with the percolation-resistance of the clay soil — that water from rain would just puddle up big-time instead of soak in. Would this be why almost all houses there have basements or crawlspaces, as opposed to the concrete pads we’re accustomed to here in Florida?
slab on grade
Moqui — thanks.
Realtor customer attitudes:
Livin’ large, paying me 6% = Astute Investors in the Amrican Dream
Not paying me = Lemmings
I like the “greedy and unrealistic buyer” comment.
We’ll see about that in a few years.
“greedy and unrealistic Buyers and Sellers are looking for ‘their’ prices”
Yes, what an ultimate “fence sitting” strategy for an RE agent to make. Blame both the buyers and sellers.
Why not they are both scum in any market
“In the first quarter of 2006, the state knocked out 29,636 foreclosures, a 14 percent decline from a year earlier. What the statistics don’t show are deals in which investors have simply walked away from their deposits on newly built residences. The developer is stuck with continuing to carry the construction cost loans until he can resell, and is newly saddled with paying the property taxes on a finished residence.”
Developer = bagholder.
ME = Enjoying being right!
ah, what a beautiful image and phrasing that is…lemminglike rush operating in reverse!
I’ve been watching those stunning Blue Planet videos with my kids lately…it’s a sight to see all those baitball schooling fish move in one way then turn en masse in the other. Since the little anchovies are motivated merely by survival, the viewer gets a little sad to imagine the adrenaline the little fishies might feel when they see the shark and swim swim swim in the opposite direction all at once, but it’s not quite the same “oh poor creatures!” response when the fishies all swimming in one direction were in a feeding frenzy themselves. “ooh, here comes the payback little fishies!” is more how it feels…
Poetic justice = the old Police song (?Synchronicity II)
“Packed like lemmings into shiny metal boxes, contestants in a suicidal race…”
Cars then, and houses now.
Hey, OT real quick…is Freddie Mac in McLean, VA? I think I’ve got someone there that’s a fan of my blog and likes to send links to it all aorund…
Freddie Mac is indeed in Mc Lean, VA. Tysons Corner area.
I have to share my open house experience… Picture this: A new neighborhood in Orlando with
model home in the 550K range. When I walk in, two realtors start talking loudly about how there are only a couple of lots left. China on the table, lit candles floating in the bath tub with a rose on the bottom. Every light and fan are on…One realtor tells me she is the hands off type, not like
a used car salesman and then hounds me in every room. I ate a couple cookies, drank her juice, told her I would buy in a few years when the prices came down and bolted. I almost backed in to her corvette while leaving…Saw noone else around…
You get more food offered to you if you walk into a open house and say ” I just sold my house ,and I need to get into something fast .What do you got ?”
That is good - I’ll try that this weekend! Do they offer better Hors D’oevres at the more expensive units? I hate the bacon on hot dog crap.
Did you visit the DHI Eagle Dunnes community in Sorrento, just curious. I played the golf course yesterday, and there was a corvette parked all afternoon in the model home driveway.
BTW, plenty of sfrs for sale there.
No, This was in the Chuluota area.
I almost backed in to her corvette while leaving…
How do you “sell” clients cramped into the luggage compartment of a Vette?
Geez, you’d think these morons would do a little chauffering for their commish.
No way Jose, Are you kidding me. I’d rather drink hemlock than chauffer another unrealistic Tweedle Dee in my car. With gas at 3.50 they better have a suitcase full of cash and tell me they want to look at no more than 3 properties before they buy
OT, but it appears that Wachovia may have developed a severe case of food poisoning after ingesting GDW at a 15% premium –
http://tinyurl.com/pa4sn
GS, There’s no explaining this one. What a time to pay up for adjustable rate mortgage exposure in Cali, Colorado and AZ! This was probably in the works for months but the timing is horrible!
This looks a dumb deal for Wachovia. Paying a premium with the RE market past its peak. (like paying for a race horse past its peak, the results will be disappointing in the future.). Buying a company from the founders when they want to sell is rarely a good buying opportunity. Wachovia bought the Money Store from its founder in the late 1990’s and shut it at a loss. Looks like a repeat on this one.
“Hey, OT real quick…is Freddie Mac in McLean, VA? I think I’ve got someone there that’s a fan of my blog and likes to send links to it all aorund”
Oh Yeah. Corporate HQ at “8200 Jones Branch Dr. McLean, VA 22102-3110″
David
http://bubblemeter.blogspot.com
Thanks…
OT? Checkout this article on South Florida’s major hurricane scenario.
http://www.realcities.com/mld/krwashington/14518317.htm
and on the left coast is the community of palmdale/lancaster built directly on top of the san andreas fault.
entire neighborhoods will disappear into the earth when that thing wakes up
So when does the condo construction stop? If you know the answer to that, then that is when it shows up on Wall St. and in the economy. Right now, condo construction is full speed ahead!
When that happens, layoffs start, construction spending falls, the whole economy slows. Not just in Fla. but nationwide.
It takes 6 months or for a ship this big to come to a stop. First you will see reductions in the size and scope of projects already started and then they will simply stop coming out of the permit office.
Well there’s the whole “lonely sales office in the parking lot of the building that they just tore down” stage. That can take awhile.
A potential fly in the ointment? If the hurricanes this year are as bad as predicted, and it one clobbers south Florida, I wonder if the reconstruction employment will be significant enough to offset much of the construction-industry layoffs that are widely predicted. And for how long.
Just ran into something new. Well, new to me, and I’d appreciate any input or education you might provide. A builder in NOVA has apparently been using a “guaranteed rental” program as an incentive for investors. I’ve never heard of such a thing, but according to my source, the builder has been offering a guaranteed rental income, either from a placed renter or from themselves for a set period of time after purchase. Has anyone else heard of this type of incentive before? Will the builder actually pay you for a vacant house? Doesn’t this sound more like a “kickback” than an “incentive?”
Side thought: if this type of incentive is what has been propping up builder numbers for the last year or two, they deserve whatever happens next.
We have creative financing and now comes the creative incentive, sheesh!
If I was considering a multi and the builder had to offer a (finite) renter guarantee as an incentive, THAT ALONE would make me run the other way as fast as I could. What would the buyer think is going to happen after the first lease ends?
Oh, yah. Sell the property for a profit.
It will be interesting if any significant number of people really take the bite. I doubt it.
20% reduction in RE employment = 2% of total US employment= recession
where am I wrong
The only honest and legitimate RE Broker I’ve found in Naples:
http://www.naplesinsider.com/CurrentReport.htm
(I’m still waiting for his May Report).
HK_Vol, That was an interesting read…especially the page 2 chart of communities for sale. Hundreds, and hundreds of units for sale, and only a few selling especially in regards to Naples population. Should be real interesting when the herd panics. …they are just starting to get spooked as of now.
very interesting. i liked this:
“Overall the majority of homes for sale remain overpriced for the market trends, but a significant number of sellers have reduced prices. Some sellers have reduced pricing from an outrageous amount to just an absurd price. But others have reduced prices to year 2004 levels. A major reduction off of peak selling prices.”
What a terrific realtor! Can we clone him? - Every city needs at least one.
The Real Estate section in the Sunday Sun-Sentinel is 2 inches thick. Loads of incentives and freebies being offered. Yes Virginia, we have gone from denial into fear. The panic starts in June with the resets and the summer exodus of potential buyers.
I’d like to know if there is seasonality to the coming ARM re-sets. In other words, are most re-sets likely to occur in the months in which the sales were closed and, if so, is there any state-by-state comparison of those relative statistics? In much of Florida there are two “seasons.” The families-transferring season is in the Spring and Summer and the snow-bird condo-buying season (or what’s left of it) is in the Fall and Winter.
Big Daddy’s note makes me think maybe there could be a big blip as early as this summer, reflecting that season’s purchasing cycle of the past three years.
The Sun Sentinel real estate section is grwoing by the week.
Cant believe the price variations in the same neighborhoods between almost the exact same style of homes. Plenty of freebies from the conversions and new single family homes.
Auctions listes “Sold to highest bidder by Sunday PM” How about those classified bolded ad headers “Drastcially Reduced” or “Bargain” I dont recall seeing these 3-4 months ago. There really are some great deals out there, we’ll at least if you compare to what the previous sales where 6 months ago. The knife is falling. I was pretty stunned this weekend when I noticed some street corners with 4-6 signs for open houses. In the paper there was an Open House ad in Ft Laud, “Come join us for drinks and snacks at our Open Houses as you drive home from the Air & Sea show” This is getting ridiculous, how can anyone deny what is unfolding here? The only thing to add new life to Fl housing is if the Tax Portability gets approved next year.
As of April 30th, there are 9,394 properties on the market in Naples
Demand for property declined as 665 properties were sold in April…
I know the number can be volatile, but that’s over 14 month’s inventory supply isn’t it?
Bad sign . Where are the buyers? When everybody wants out ,nobody wants in .
Wow! YOY reduction in sales for Naples - 64% for March, 55% for April.
“‘This whole market has been driven by investors,’ said DuToit.”
Wait a minute, the NAR said that the run up in prices and all the hype was because of sound economic fundamentals. You mean to tell me this wasn’t the case after all?!
My wife’s boss, (a stockbroker) purchased a 2 bedroom condo outside of Naples this past July. Brand new, so he had to furnish everything. They had the unit rented for 2 months this past winter, but it is now empty. He is looking for renters, but is not having much luck. Has a son at Yale; spouse does not work; and is still paying for home here in Chicagoland.
Interestingly, I had considered meeting w/him regarding financial advice at one time. Forget that now. Anyone who would buy at the top of the bubble, and then not have any contingent plan in place should you fail to find renters does not sound like someone I want to entrust my $$$ to. My wife has also noted that he is increasingly ‘rabbity’ and appears to be looking for cash flow. I suspect that the temptation to churn will get worse and worse. Hurricane season less than 1 month away. Yikes.
“South Florida,” he said, ”is working off of a totally new economic model than any of us have ever experienced in the past” according to a realtor who predicted that a land shortage will support higher prices indefinitely.”
- New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
You can keep posting that one forever. It never ceases to amuse me.
I never get tired of seeing that
snake charmer, we must be on the same wavelength, we posted that 12 seconds apart!
now that’s a great bumper sticker
Maybe they should market and sell that “economic model” like those profs at Pomona did. Who knows?Someone might buy it.
http://tampa.craigslist.org/rfs/158563742.html
Here’s a bargin.
Here’s a real one by comparison:
http://www.ranchland.com/store/ppreview179.php
Asking price is $1,575,000 and estimated taxes are $3,000? I am assuming this is in Colorado. Why do I find it hard to believe they have a .19% property tax rate???
wow! where do I sign up? I’ve always wanted $7,000,000 in instant equity! What kind of fool would sell a home for $7,000,000 under market?
Craigslist really does find some super bargains!
clouseau
The Naples house — he’s “sacrificing” it at over $900/sq.ft., yet doesn’t even mention how many feet of waterfront the property has.
“greedy and unrealistic Buyers and Sellers are looking for ‘their’ prices”
“Greedy” buyers? I guess if you’re not stupid enough to overpay for something that makes you “greedy.”
I am starting to see LOTS and LOTS of Harleys, waverunners and small boats for sale here in Central Florida. There has been a HUGE surge of ‘em since April 17th, which was Tax Day. People are pullin’ em out and putting For Sale signs on ‘em and parking them in the front yard.
Also, their is still quite a bit of “Bubble Hushery” and the local papers continue to trumpet the benefits of “Buying Now” while the market is a “Hot Buyers Market”. Local papers refuse to carry any bad news.
The whole place is ready to go down in flames down here and it’s gonna be real ugly.
I would be curious to hear everyone’s prediction as to when the poo hits the fan in S. Florida. So far it has been a death of a thousand cuts and no real bloodletting… What is going to be the catalyst and when is the panic selling going to set in?
Would like to know when you also think it is going to hit in SW Fla? Places like Naples. Any idea which will be hit the worst?
I tend to agree with need2leave — once a big-time hurricane gets near the area, the media feeding frenzy will freak out a lot of tenderfeet who own down there. Otherwise, I doubt they will get past Sept/Oct before tanking sales month after month flush out all but the (fool-)hardiest speculators.
When the season’s first hurricane gets anywhere near the place.