January 3, 2012

Paying For The Privilege Of Breaking Even

NPR reports on Florida. “Florida is once again poised to play an important role in selecting the president in 2012. Its Republican primary on Jan. 31 is the nation’s fourth nominating contest. But Florida is a very different state than it was four years ago. It is reeling from the housing collapse and suffering from an unemployment rate well above the national average. Sean Snaith, an economist at the University of Central Florida, says unemployment affects the families of those who have lost their jobs, but the housing debacle goes much further. It has taken a personal financial toll on nearly every homeowner in the state.”

“‘The amount of wealth that was lost to the median family here in Florida is really staggering,’ he says. ‘If the median family of four in Florida were to save at twice the national savings rate, it would take something like 18 years to save back what they lost in home equity.’”

“The St. George’s Episcopal Church’s soup kitchen is open five days a week for lunch and dinner. But it’s not just those who come for meals who have been hit by Florida’s economic problems. Those serving the food have been affected as well. Many of them are retirees like Howard Evirs. Evirs says the housing bust wiped out half the value of his main nest egg — his home.”

“‘We had considered selling it just before the market broke,’ he says. ‘Then the value of the house went way down. So we made a decision — we’ll stay in there till we die.’”

The News Chief. “Sean Snaith, an economist at the University of Central Florida in Orlando that publishes quarterly and annual updates on local, state and national economies, compared 2011 to the ‘twinkling of a distant star’ rather than a bright sun. ‘This is, of course, better than a starless, black sky hanging over the economy, but we continue to wait for sunrise to arrive and warm Florida’s chilly economy,’ Snaith said in last month’s report. ‘Unfortunately, 2012 will not be the dawn of that day, as the year is shaping up to be another year of subpar growth.’”

“‘Florida’s housing construction sector hit the bottom of the Marianas Trench (the deepest spot on earth) in 2009 and has been wallowing in that trough for nearly two years,’ Snaith said. ‘Housing starts will climb to a slightly higher plateau in 2012 and begin to progress in 2013.’”

The Palm Beach Post. “Losses to South Florida home values are estimated to be $6.5 billion this year, an amount that, while daunting, is a considerable improvement from 2010. Last year, Palm Beach, Broward and Miami-Dade counties lost a combined $28.6 billion in housing values, according to Zillow.”

“While the thrashing to home worth has lessened, it’s not about to turn around completely, warned Stan Humphries, chief economist for Zillow. Some South Florida experts did agree on an extended market recovery time that will drift into 2013. ‘I thought that we were going to be in better shape in 2011 because we’d have more foreclosures moving through the system, but then we had the robo-signing scandal and it all got stalled,’ said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach. ‘Now I think the rebound will be 2013 or even later, and that’s barring natural disasters or other debacles we can’t anticipate.’”

From CBS 12. “A new report out shows that out of the top ten cities in the nation where housing prices are actually increasing, six are here in Florida. ‘I’m very confident in saying that we’re at the bottom of an adjusted market and if you get in the market now and you’ve got a longer term prospective you’re going to make money,’ said Kevin Kent, Platinum Properties.”

“‘We’re coming back to full swing where Florida is going to again see a rise in property costs and I think you’ll see an influx of people,’ said Bonnie Lazar, 2012 Realtors Association of the Palm Beaches President.”

The News Press. “Local residents facing foreclosure will have no mediation program to take the place of a mandatory state program terminated by the state Supreme Court – at least for the near future. The mandatory mediation’s purpose was to provide ‘a really quick avenue to potential settlement with the bank so they don’t have to go to court,’ Charlie Green, Lee County clerk of court, said. ‘It was a great concept that ended poorly,’ Green said. Most of the time, homeowners didn’t show up and banks were not willing to participate, he said.”

“Jonathan Conant, president of the Conant Mediation Center, said he learned the local program was canceled in an email from the 20th Judicial Circuit. ‘The fear we have is most borrowers are unsophisticated. They are not going to know remedies, they are not going to know about robo-signing and other issues that come up in cases. They will not file answers. They will say ‘I haven’t paid my mortgage, it’s over.’”

“Meanwhile, foreclosures have increased from about 300 a month in spring to about 500 a month, and RealtyTrac, reports another wave of foreclosure filings is imminent in Florida. ‘This next year is gong to be horrific,’ Conant said.”

The Herald Tribune. “Nancy Cason, a real estate attorney with the Syprett Meshad firm, says she often faces people distraught over dwindling savings and increased expenses. ‘A lot come in and start crying before they can get a word out.’”

“Many bought, or refinanced, homes during the boom years from 2003 through 2007. Many were also in the real estate industry, working as mortgage brokers, real estate agents, construction executives, furniture sales people or other professionals dependant on real estate sales. Now, some of those same industry participants have lost their jobs and are unable to find anything else that pays even half as well. They have liquidated their savings and 401K retirement plans. Some have suffered medical problems, marital strife or divorce.”

“Here is what the numbers often look like: A couple bought a house at the height of the boom in 2005 for $250,000 and got a $250,000 mortgage, Cason explained. The house is now worth 40 percent less, or $150,000, and the couple is siphoning off their savings to make monthly interest payments. In a normal real estate market, they could expect the value of their home to increase by 5 percent, or $7,500, per year, Cason says.’

‘In today’s scenario, however, that means it would take 13.3 years for them to break even — if they could garner the appreciation at all. In the meantime, they would have to spend about $1,700 per month in interest, insurance and taxes. ‘That comes to more than $270,000 over 13.3 years that they would pay just for the privilege of breaking even,’ Cason says. ‘That’s just not in their family’s financial best interests.’”

The Florida Times Union. “The average foreclosure process takes 749 days in Florida. You can sing ‘99 Bottles of Beer on the Wall’ thousands of times while awaiting foreclosure eviction, but in the end, you will be homeless and very drunk. Two years is a long time without a house payment. You could sit back, relax, and spend all your money on beer…the problem is you come out the other side without a place to live and poor credit. If you are facing foreclosure, you need a plan, and you may need a legal defense to give that plan a chance.”

“You cannot have 99 bottles of beer on the wall if you do not have a wall to put the beer on. Foreclosure defense keeps the legal battle off the ramparts while the homeowner has the opportunity to pursue his or her plan.”

The Wilkes Journal Patriot. “Foreclosure filings in North Carolina dropped 33.6 percent in November alone to 2,710, compared with the same month a year ago, RealtyTrac Inc. reported. Assistant Clerk of Superior Court Julia Byrd said that compared to the last year, a significantly higher percentage of the properties foreclosed on in 2011 were fulltime residences and a smaller portion were vacant lots or part-time residences belonging mostly to people who live outside of Wilkes.”

“Mrs. Byrd said many of the vacant lots foreclosed on earlier were purchased by people with Florida addresses, apparently as investments. ‘For a while, it seemed like there were people who had bought property without ever looking at it’”




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26 Comments »

Comment by WT Economist
2012-01-03 08:20:25

“‘The amount of wealth that was lost to the median family here in Florida is really staggering.’”

I know how they feel. Since 2007, I have lost my Unicorn.

 
Comment by palmetto
2012-01-03 09:07:55

“Sean Snaith, an economist at the University of Central Florida in Orlando that publishes quarterly and annual updates on local, state and national economies, compared 2011 to the ‘twinkling of a distant star’ rather than a bright sun. ‘This is, of course, better than a starless, black sky hanging over the economy, but we continue to wait for sunrise to arrive and warm Florida’s chilly economy,’ Snaith said in last month’s report. ‘Unfortunately, 2012 will not be the dawn of that day, as the year is shaping up to be another year of subpar growth.’”

Don’t get me started….

OK, you got me started.

Mr. Sean “souffle” Snaith, aka the California Carpetbagger. And now he fancies himself as some literary light, with his crappy metaphors. Go home. Go back to California, he’s drawing pay from the Florida taxpayers and the best he can give us is souffles and starless skies and sunrises.

Comment by WT Economist
2012-01-03 09:42:06

Given he’s from California, he should have been able to provide the Spanglish a mixed community like Florida needs.

F*@keramos.

 
Comment by combotechie
2012-01-03 14:05:31

“Go back to California, he’s drawing pay from the Florida taxpayers …”

I agree, send him back. (But raise his pay first; California needs the money.)

Comment by SaladSD
2012-01-04 00:04:40

Hey, send him back to Pennsylvania which, based on his bio, is where he’s from….

 
 
Comment by Moman
2012-01-03 16:27:16

Why does the media still call on him, given how wrong he was just a few years ago. Like some other economics professors I know personally, he couldn’t fathom that house prices might actually fall.

 
 
Comment by Montana
2012-01-03 09:47:38

This next year is gong to be horrific,’ Conant said.”

They talk funny in Florida

 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-03 11:23:02

‘This is, of course, better than a starless, black sky hanging over the economy, but we continue to wait for sunrise to arrive and warm Florida’s chilly economy,’

I predict deep frost in the metaphorical Florida orange groves.

Comment by Moman
2012-01-03 16:28:41

That’s not good. A close friend of mine owns a couple decent sized orange groves. Besides of fluctuating orange commodity prices, his large diesel tank for the well pump has been drained dry in the night a few times.

 
 
Comment by 2banana
2012-01-03 11:58:27

Such silliness.

It was NOT wealth. It was bubble prices fueled by cheap money. This “wealth” NEVER existed except for the few who sold at the top.

And another sob story of RETIREES who should have had a PAID OFF house but instead (and unreported) took out massive home equity loans and now don’t think they should PAY IT BACK since their bubble price on their home went down.

“‘The amount of wealth that was lost to the median family here in Florida is really staggering,’

Many of them are retirees like Howard Evirs. Evirs says the housing bust wiped out half the value of his main nest egg — his home.”

 
Comment by 2banana
2012-01-03 12:00:55

“‘Florida’s housing construction sector hit the bottom of the Marianas Trench (the deepest spot on earth) in 2009 and has been wallowing in that trough for nearly two years,’ Snaith said. ‘Housing starts will climb to a slightly higher plateau in 2012 and begin to progress in 2013.’”

More like housing prices were ON TOP of Mt Everest and have come down to the Rockies. Still a LONG WAY to go before sea level (ie - affordable)

Comment by Moman
2012-01-03 16:30:42

There is no demand in Florida. There hasn’t been any real demand for about 10 years, the demand has been simply second and third home owner flippers. The state is so overbuilt it’s pathetic, I would guess at least 20-30% of homes are empty.

 
 
Comment by 2banana
2012-01-03 12:05:33

In a NORMAL real estate market this couple would have:

1. Put 20% down
2. Had a job to easily cover P/I, taxes and upkeep
3. Not needed their savings to PAY ANY of the mortgage
4. Expect their house to increase about the same pace as inflation (if they were lucky)
5. Not expect to “retire” on the house appreciation

“Here is what the numbers often look like: A couple bought a house at the height of the boom in 2005 for $250,000 and got a $250,000 mortgage, Cason explained. The house is now worth 40 percent less, or $150,000, and the couple is siphoning off their savings to make monthly interest payments. In a normal real estate market, they could expect the value of their home to increase by 5 percent, or $7,500, per year, Cason says.’

Comment by Steve J
2012-01-03 13:08:52

5% per year is a pipe dream.

 
Comment by Lenseroflastresort
2012-01-03 15:23:25

“Here is what the numbers often look like: A couple bought a house at the height of the boom in 2005 for $250,000 and got a $250,000 mortgage, Cason explained. The house is now worth 40 percent less, or $150,000, and the couple is siphoning off their savings to make monthly interest payments.

But they expected to make these payments notwithstanding. What has changed in their ability to do so? Have I got this right?

Comment by combotechie
2012-01-03 15:41:07

“Have I got this right?”

It wasn’t about them making payments on the house, it was about the house making its own payments.

As equity in the house relentlessly and endlessly increased it was to be regularly cashed out, and part of the cash out was to go to making house payments. What was left over was to be spent to finance a party that was destined to never come to an end.

Then, something absolutely and completely unforseen seemed to happen.

Comment by Carl Morris
2012-01-03 15:45:26

Or the paycheck(s) covered the house payment(s) and you lived off the equity withdrawals. Same difference in the end, I guess.

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Comment by rms
2012-01-03 20:30:05

It wasn’t about them making payments on the house, it was about the house making its own payments.

+1 Exactly!

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Comment by 2banana
2012-01-03 12:08:09

Like living rent free for three years and calling yourself a victim…

“You cannot have 99 bottles of beer on the wall if you do not have a wall to put the beer on. Foreclosure defense keeps the legal battle off the ramparts while the homeowner has the opportunity to pursue his or her plan.”

 
Comment by cactus
2012-01-03 12:47:58

If the median family of four in Florida were to save at twice the national savings rate, it would take something like 18 years to save back what they lost in home equity.’”

I thought the national savings rate was 0 %

Comment by Moman
2012-01-03 17:39:03

The interest on savings is 0%, or negative after inflation.

The national savings rate is fluctating about 5% right now. If it was about double that, 10%, it would do wonders for the economy and help smooth out the business cycle.

Comment by skroodle
2012-01-03 18:50:45

If the savings rate jumped another 5%, it would send the economy into more of a tail dive.

 
 
 
Comment by Alpha
2012-01-03 18:09:34

What is the median home price, and what home price can the median Floridian afford? I bet using conservative numbers the 75th percentile Floridian couldn’t afford the 50th percentile home.

 
Comment by rms
2012-01-03 20:33:55

Of the 20 largest regions measured, Los Angeles showed the biggest loss, with home values down $75.5 billion. New York and Chicago trailed with losses of $44.8 billion and $41.7 billion, respectively.

Once again California leads the nation.

Comment by Professor Bear
2012-01-03 22:07:34

I posted an article over the weekend which suggested the SF Bay Area’s home equity was down by an aggregate amount of 1/3 of a trillion dollars (i.e. $333.3 billion) which would dwarf the reported $75.5 billion loss in home values for LA. This is compared to the bubble peak, and I have no idea where the figure came from or if it holds any water.

But I was impressed by the size of the figure!

 
 
Comment by Robin
2012-01-04 00:37:12

“‘We’re coming back to full swing where Florida is going to again see a rise in property costs and I think you’ll see an influx of people,’ said Bonnie Lazar, 2012 Realtors Association of the Palm Beaches President.”

Bonnie, please spike the local economy by getting $20k in liposuction,
$30k in breast augmentation/reduction or lift (as appropriate), and $12k in Botox treatments. Finance it if you have to.

The locals will reward you handsomely - :)

 
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