‘Speculators To Blame For Housing Fiasco’ In Florida
The Florida Press reacts to the home sales numbers. “Sales of existing single-family homes and condominiums plummeted in Broward County last month. With more than triple the number of homes for sale compared with last year at this time, buyers have become selective and unwilling to make full-price offers.”
“‘Buyers are a commodity right now,’ said Joanie Villanti, a real estate agent in Broward and Palm Beach counties. ‘When they walk in, it’s like, `Let me kiss your ring.’”
“The market was destined to slip because local wages couldn’t keep up with the enormous price hikes, experts say. More than 20,300 homes and condos were for sale in Broward last month, an increase of 321 percent over April 2005.”
“Sellers, though, are struggling to stay positive. Bruce Sherter finally found a buyer this week for his $599,999, five-bedroom Parkland home. It took six months and five price reductions. ‘If you want the home to sell, you have to be aggressive with the price,’ Sherter said.”
“Sales of single family homes in April in Miami-Dade and Broward counties were down 12 percent from March and more than 30 percent from this time last year. The number of unsold homes on the market has tripled in the past year.”
“‘It’s a stand-off,’ said Andre Dandeneau, who has tried unsuccessfully to sell a two-bedroom condominium in Hillsboro Beach since December. ‘Buyers want sellers to come down, but sellers aren’t capitulating.’ Dandeneau bought his 2,000-square-foot waterfront condo last year for $600,000 and spent about $100,000 to renovate it in hopes of quickly reselling for a tidy profit.”
“In December he put it on the market for $915,000. Buyers showed little interest, so he dropped the asking price to $895,000. Now he says he won’t go lower, but he has yet to receive an offer. ‘I am not selling a piece of garbage,’ Dandeneau insisted. ‘This apartment is to die for. I am not going to give it away.’”
“Palm Beach County posted the biggest sales drop of all metropolitan markets in the state. Local buyers closed on only 804 resales last month, a staggering 43 percent decline from the same month a year ago. A look at the Regional MLS shows the number of single-family homes and condos for sale in Palm Beach County more than doubled in the past six months.”
“‘The growing number of condos for sale is truly shocking,’” said Jack McCabe. ‘We’re going to go through some real pains from this previous boom, and it’s statewide. The next five years won’t be pretty.’”
“Homes sales in the Sarasota-Bradenton market fell 44 percent in April when compared with the same month a year ago while Charlotte County-North Port fell 33 percent. With 11,653 listings in just the Sarasota-Bradenton market, real estate agent Steve DuToit, who owns five condominiums and 19 single-family homes, is bearish about the next 12 months. He is bullish about real estate on the five-year horizon.”
“Something has got to give ‘when listings are up 300 percent and closings are down 50 percent,’ DuToit said. ‘There are a lot of overpriced homes out there and the market won’t recover until the market again feels there is value,’ he said.”
“DuToit expects a decline in the number of real estate agents in the region, a figure that has roughly doubled in the past five years. ‘There is less than one sale per year per Realtor,’ he said.”
“The number of houses sold by Realtors in the Volusia-Flagler market plummeted 37 percent in April, even as the median price for the houses stayed up. Sandy Miller, president of the New Smyrna Beach Board of Realtors said she’s also seeing lower sale prices. ‘Some prices are dropping, but they were overpriced to begin with,’ she said.”
“Home sales on the Treasure Coast dropped significantly in April. Jerry Mabus, president of the Realtors Association of St. Lucie County, said speculators who bought Treasure Coast homes with the expectation of flipping for more money are in for unpleasant surprise. ‘They will have to adjust their prices to the market,’ Mabus said.”
“Jack McCabe said speculators are to blame for the housing fiasco as higher inventory levels pushed prices beyond what local residents could afford. ‘St. Lucie County will feel this the most because Martin and Stuart were relatively conservative when it came to growth and building new subdivisions,’ McCabe said. ‘The speculators were playing the market like stocks, they artificially inflated prices.’”
And more is coming:
‘A massive development project that could have 10,000 homes and span 5 miles won approval from Palm Beach County commissioners Thursday’
‘ By a unanimous vote, the commission approved a zoning change that will allow developers to build Osprey Oaks, 208 homes on 86 acres near Hypoluxo and Jog roads, of which 37 will be reserved for the ‘workforce’
Thanks to the readers who sent in these links.
So let’s see. You paid 600k for it last year and put 100k into. That’s 700k total. Where did you get the idea it was now worth an extra 195k?
Indeed Waaahoo!
The sense of entitlement of these flippers is nothing short of revolting. He should consider himself lucky to get out with his A@#! in that market. His greed will get its reward. That guy is clear evidence that anyone making an offer in the next six months is still playing into the hands of these leeches. Let the market flush out this excrement and then we can get back to considering buying, dare I say it, a house to live in.
BTW, does anyone hate the term “tidy profit” as much as I do? Every time I read that, especially in relation to one of these moronic “investments,” I just cringe and want to send the reporter a thesauraus.
Compare that with this genius (seriously)
“Bruce Sherter finally found a buyer this week for his $599,999, five-bedroom Parkland home. It took six months and five price reductions. ‘If you want the home to sell, you have to be aggressive with the price,’ Sherter said.”
DUH.
the guy probably has about 30,000 in interest, 6,000 in taxes, 6,000 in insurance, 12,000 in closing costs and 10,000 assorted other costs on top of his 700,000 investment.
(calculator clicking away….) 764,000 into it.
sell for 900,000, lose 54,000 in closing costs, net profit of 82,000.
82,000 seems like the amount he’s gonna have to cut in order to sell the dog.
you got that right and he is east of 1 95, you cant get a hurricane insurance policy after june 1. the clock is ticking.
You can get hurricane insurance at anytime, unless there is a named storm within a 500 mile window, as mandated by Florida law.
I hope he loses his A##, that is ridiculous. I am thinking about running a small marketing campaign on how horrible of an investment real estate is. I could easily recoup my costs if I can alone get the price’s of homes to drop by 1%. On a $600,000 dollar home that would leave me with a $6,000 dollar budget. Just a thought, I am not to that point yet.
‘I am not selling a piece of garbage,’ Dandeneau insisted. ‘This apartment is to die for. I am not going to give it away.’
TOO FUNNY! Speaking of dying, he’ll be dying to sell in about 6 months or so.
Hey Dandeneau…Time to get personal with Jesus. Prayer is your only shot …(of course we all know Jesus has nothing better to do than to listen to all of you RE ‘investment’ morons.)
Unfortunately for Dandeneau, since it is a condo, there is no where to bury St. Joeseph.
‘I am not selling a piece of garbage,’ Dandeneau insisted. ‘This apartment is to die for. I am not going to give it away.’”
Ah, the delusions of some sellers. They still think it’s 2005. Get a calendar, folks!
“the apartment is to die for”,”i’m not going to GIVE IT AWAY!”
at least not yet!
Take to aspiren and call me tomorrow!
That proposed 10,000 home development is 2 blocks from my house. It is citrus groves right now and the neighborhood around it is 1 acre rural style lots with a mix of older homes and new homes and zero code enforcement (picture lived in RVs, chickens, goats and cars on blocks). There are only 2 east-west roads out of the area and the are already overloaded. I hope the state puts a stop to this development. There are going to be a lot of lawsuits trying to stop it. The existing neighborhood around the area is full of horse people and kids on 4 wheelers. I don’t see retiring New Yorkers wanting to live surrounded by rural types especially when the beach is 20 miles away and good shopping is 30 minutes away. I don’t think it will happen. The developer is going to get cold feet when the RE market stays low for the next 5-10 years.
wishfull thinking. if the developer decided to make the area workforce, people would flood the area. non rural people are already in the area. it is time to pack the horses and 4 wheelers to move out. plus, they will put up a fence and canal to keep them rurals out.
Just look south in Miami-Dade and Browad county They have pushed out west further than that.
‘This apartment is to die for. I am not going to give it away.’”
______________________________________________________
Please don’t. Keep it for years to come. Eventually this negative cash flowing and Depreciating asset will be your financial RUIN!
Eventually the bank will foreclose and he WILL give it away.
To die for might be right, If you can’t sell it and find yourself in financial ruin you could always jump from the balcony?
Most contractors and experts will tell you, if you put 100K worth of renovation into a home or condo expect it to add $50K to the investment. You renovate a home because you want to live in it.
Renovation contractors can pull it off because it cost them a lot less to do the work themselves and they get deals on the materials needed for the job, plus they typically buy foreclosures and rehabs at discounts and have the knowledge and ability and time to gut them and redo them.
Over the last 5 years everyone in South Florida became a real estate investor and figured out that if you threw a coat of paint up and some new carpet, some other investor would come along and buy the unit thinking they could make another 100K on it when they flipped it.
It was just a big game of hot potato and now who ever is left holding an investment property is getting burned.
Yeah what a jerk, he lowers the prices 2% and has a tantrum when it wont sell. Hey it is not your birth right to be able to flip a condo and make 200K in less than a year, even if it is “to die for”, get real man!
In this enviroment he is lucky if he gets 25k worth of work for his 100k. I just recently got numbers from some subs for a client of mine. Good rule of thumb used to be double your materials for an estimate. (If you buy a $200 door it will cost another $200 to have it installed)
I TRIPLED the amount of materials and figured the subs would come in around 5k for the job. Got prices of 7k, 11k, and 14k!
Unless that guy is a contractor I can just about guarantee that he was screwed.
This is where flippers are REALLY shooting themselves in the wallet. Most of the demand is other flippers. What do flippers do? Minimally fix things up and resell for a “tidy” profit. If you do all the upgrades, what’s left for a flipper (really the only potential buyers out there the past 3-4 years) to do? Nothing. So you’re eliminating from your pool of potential buyers about 80-90% of the market. It was better and more profitable to have a junk house to sell as it attracted the greedheads in search of a quick profit.
Shit, how ironic.
But, I think you are right. Every flipper thinks they can do a minimal amount of cosmetic work and cash in. Sheesh, maybe I should sell my roach hotel now!
‘This apartment is to die for. I am not going to give it away.’
Agree with the above post. I honestly can’t stand people who make comments like this - such an arrogant sense of false entitlement. If it’s really ‘to die for’, then let it be the (financial) death of him.
“‘This apartment is to die for. I am not going to give it away.’””
Financial Suicide.
David
http://bubblemeter.blogspot.com
“‘This apartment is to die for. I am not going to give it away.’””
No you won’t give it way, the bank is going to take it away.
McCabe said. ‘The speculators were playing the market like stocks, they artificially inflated prices.’”
I thought speculators were an insignificant minority..
There is no bubble
Boomers / foreigners will pick up the slack.
It will be a soft landing..
Now the line is “hope we don’t overshoot the soft landing”
The tsunami of inventory is building…watching ,and waiting
“This apartment is to die for.”
&
“We won’t capitulate.”
Buyers will starve these arrogant real estate losers into submission. The revolution will not be televised. These dirt bags will implode in waves while the media bleats on about a “cooling” market and quotes Learah. They will spin this thing to the absolute bottom and I can guarantee you that Learah will end up in front of a Senate special committee.
I hope your right .
Na he won’t end up there.
The CEO’s and Execs from a lot of sub-prime mortgage brokerages will.
One thing I learned about business… “Volume hides all” as long as things are going well, people are happy. Once things slow down and people start loosing money and going broke they look for someone to blame.
What better target than the subprime sleaze bags of Ameriquest, New Century, Country Wide and dozens of others. Ameriquest and Freddie Mac are already half way there.
“They will spin this thing to the absolute bottom and I can guarantee you that Learah will end up in front of a Senate special committee.”
Delightful description Craven Moorehead ! Reminds me of a flushing toilet and Lareah’s role seems particularly fitting if that is the case.
Please televise!
Home sales in California continute to slide
BY GREGORY J. WILCOX, Staff Writer
http://www.dailynews.com/business/ci_3866068
Buyers are buying based on “get in now before the interest rates go up”. The realtors/spinners are making the buyers pay for the interest rate increases. The sellers should be paying for the interest rate increases ,(at least that’s how it usually works ).That’s why the higher end houses are still selling I think in California . The buyers think this is their last chance to get in .
On the money Wiz
The Daily News is a whole lot more honest than the West coast edition of the Chicago paper called the LATimes.
- In Ventura County the median price increased an annual 4.9 percent to $681,190 and sales fell 38 percent from a year ago.
I believe this is the first single digit y-o-y increase for about 5 years.
Things aren’t so good in Weshchester County, NY either….
Posted at indexcalls.com:
Eric Fry of the The Rude Awakening just sold his house in Westchester county at 90% of ask. Opinions of a RE agent.
The Rude
QUOTE
“Hey, now that I’ve sold my house,” your editor queried a local real estate agent yesterday, “I’ve gotta ask; what’s really happening in the housing market here?”
“It’s not good…It’s really not good,” came the reply.
“How does it compare to last year?”
“There is no comparison,” said the agent. “Last year we had a typical springtime market. This year we had nothing.”
“So what type of homes are selling?”
“Not much…A few entry-level homes are selling. But nothing over $1 million. If I were you, I’d rent for a while when you’re out in California. This housing market’s
gonna get worse all over the place. So I’d just wait it out.”
`Let me kiss your ring.’
In a while the ring may not be the thing to kiss…
“‘Buyers are a commodity right now,’ said Joanie Villanti, a real estate agent in Broward and Palm Beach counties. ‘When they walk in, it’s like, `Let me kiss your ring.’”
Pretty soon desperate realtors will be giving “full service” a whole new meaning.
The “kiss your ring” comment struck a nerve with me. When my girlfriend and I go house hunting, every realtor was ready to roll out the red carpet for us!
Now, before you think I’m in need of medication; we have a theory that the homes that sell *now* will most likely be the great buys in two years as they get sold at fire sale prices.
So we tour homes to see what we’ll pick up in a while. 
Neil
think xmas eve 07
I think that you are spot on. I tour houses where the asking price is around 3 times the paid price in 2002, but places that we would like to live in. Just waiting for those GF’s to be FB’s, and get the property at a reasonable price.
Great call Neil, 2007 will be capitulation and 2008 will be the real bust and great deals.
I was speaking to a RE agent friend from Florida yesterday and the market is dead. He said the word is in 2 years interest rates will be over 10%. I dont know where they are getting that but can you imagine the market then.
interest rate must go up. the banks must recover the losses and raise their rates to the less than 1% people who actually have a savings account. ugly!!!
“‘It’s a stand-off,’ said Andre Dandeneau, who has tried unsuccessfully to sell a two-bedroom condominium in Hillsboro Beach since December. ‘Buyers want sellers to come down, but sellers aren’t capitulating.’ Dandeneau bought his 2,000-square-foot waterfront condo last year for $600,000 and spent about $100,000 to renovate it in hopes of quickly reselling for a tidy profit.”
“In December he put it on the market for $915,000. Buyers showed little interest, so he dropped the asking price to $895,000. Now he says he won’t go lower, but he has yet to receive an offer. ‘I am not selling a piece of garbage,’ Dandeneau insisted. ‘This apartment is to die for. I am not going to give it away.’”
What a pr*ck. He and his partner bought this home in 8/05 for $530,000, now it’s worth $900k? In investor/rehabber speak, if they told you they put $100 k into a project, that means they probably put down no more than 1/2 of that total. I take much pleasure seeing a greedy fool like this getting theirs in the bubble deflation period.
he likes the action- must be the “wife” in this deal
selling prices are 4/05 now in FL
That’s what I was thinking. I hate assholes like that and SoFla is loaded with them.
Maybe the Trinidadians will pay them a visit. These guys must be busy, they’re apparently going to bail all of these idiot speculators out!
Maybe it’s not the piece of garbage but he is?
The Florida Associatiation of Realtors seems to be late posting their April numbers. Monthly numbers usually appear around the fourth Tuesday of the month.
I predict June will be a slaughter for “destination” property. Many investors have delayed sales ’til the summer because they spent the winter renting to snowbirds. Among those I know, summer rents are pretty dismal, and are insufficient to cover costs. These investors never intended to be long-term landlords… and as the snowbirds leave, they’re trying to pocket their gains.
Per Realtor.com, the number of Miami-Dade residences for sale is up 36% in 4 months.
17,359 residential properties as of February 1, 2006
20,207 residential properties as of March 13, 2006 (16%)
21,387 residential properties as of April 3, 2006 (23%)
21,966 residential properties as of April 19, 2006
22,747 residential properties as of May 8, 2006 (31%)
23,622 residential properties as of May 26, 2006 (36%)
Andre Dandeneau has an 1% teaser ARM in the amount of $424,000 that resets in October 2006 to index +3.4%, capped at 10%. He also has another $53,000 mortgage (80/20?) at an undetermined rate.
To top it all off, he also has a $150,500 HELOC on another property (assumed to be his primary residence).
The apartment was purchased in August 2005, so this is a pure flip deal.
Do you know if he financed this property as a owner occupied or non-owner occupied? I am assuming this clown used the HELOC on his primary as the downpayment for this purchase.
He has 627K in debt, and he expects to clear it all, and have around 200K in the bank after this is over. Unfortunately the gf is the one in the mirror. At the interest rates that are coming, he is looking at a monthly nut around 5K with no principal being paid. Hope that he has a 120K a year job in order to swing it, otherwise, this is one big black swan…
If they bought it for $530k in Aug/05, it would be worth about 3% less now, or $514k. Throw in $100k worth of upgrades, at a 55% recapture rate, and you might be able to get it appraised for $569k, at the most. Start figuring low ball offers off that for Sept. (by which time the market will be considerably more than 3% down).
Looking for a Greater Fogger?
Looks like is was 80/10/10
530k * 80% first = 424k
530 * 10% second = 53k.
My guess is that the second is probably a heloc in 8%-9% range
OT - forclosures are 1 per 69 housholds in Indianapolis, and 1 per 70 households in Atlanta. And this thing has barely started.
http://www.realtytrac.com/news/press/pressRelease.asp?PressReleaseID=112
Thats interesting data….I wonder if you could get the same data from 1991 ????
It’s to die for! LOL. As in, you’ll die before you ever pay it off!
Someone needs to whack these people.
he dropped the asking price to $895,000. Now he says he won’t go lower, but he has yet to receive an offer. ‘I am not selling a piece of garbage,
How insane have things gotten when an condo can be considered a “piece of garbage” for going for less than $895k?
(my best Yoda voice) High prices lead to construction. Construction leads to inventory. Inventory leads to lower prices. (/my best Yoda voice.)
Yoda voice as well*
“Stupid they are for not paying attention to real estate cycles”
More Yoda
Told you we did, listen you would not… now screwed we all shall be
(Again, Yoda)
“There is….another….F-ed….buy….errrrrrrrr.”
(Disappears)
Pay attention, they do not.
I’m ready for a topic dedicated to posts written exclusively in Yoda-voice!
OT - Yesterday a friend of mine told me that KB Homes laid off 45 employees and had them escorted off site by uniformed police.
Hey, K - I’m on the road, will get w/you early next week.
I thought you might be off somewhere since I haven’t seen you post for a while. I hope you are on some nice vacation over the long weekend.
Too bad she didn’t get a picture. LOL
I first read this as “executed off site.”
AZ;…This is the next shoe to drop….WAMU just laid off a bunch also….It feeds on itself and could be the catalyst that realy takes this real estate market (and the economy) down….
Fasten the seat belts if it happens….
““‘Buyers are a commodity right now,’ said Joanie Villanti, a real estate agent in Broward and Palm Beach counties. ‘When they walk in, it’s like, `Let me kiss your ring.’””
Last year buyers were squirrel feeders and scum on the septic tank wall. Now, she’s kissing his ring in an attempt to steal it.
‘Buyers are a commodity right now,’ said Joanie Villanti, a real estate agent in Broward and Palm Beach counties. ‘When they walk in, it’s like, `Let me kiss your ring.’
Ms. Villanti’s comment scares me, because it illustrates that she has no clue about financial markets. Referring to a buyer as a commodity in this market is beyond comprehension. Buyers in this market are rare. Commodities are homogenous, and readily available that their market price.
Anyone who looks to a realtor for financial advice is setting themself up for a potential disaster.
She just meant that buyer’s have an intrinsic value, unlike the real estate they are looking to purchase . . . oops.
But for clarity, WEBSTERS says as it’s first definition
“Something useful that can be turned to commercial or other advantage: “Left-handed, power-hitting third basemen are a rare commodity in the big leagues” (Steve Guiremand).”
So that definition would clearly fit as in “A greater fool, er home purchaser, is a rare commodity in this tanking market.”
You’re right, that’s what she meant, but that’s not the point that OlBubba was making. It was her use of the term which points to her financial and business acumen (or lack thereof). I’ve worked in manufacturing so the use of the term has negative connotation which implies that it plentiful and easy to acquire and highly price competitive. Her use of the term more aptly describes what buyers were in 2004 and early 2005…not now.
This just in: as it turns out, five hundred thousand dollars is still a lot of money.
I’ve said it before, our monthly income is over 25K/mo and we have never ever paid over 300K for a house. I still have an expectation that I will be able to buy my rental house for less than that in a few years if I want it. Why not, it sold for less than 300K two years ago for chrissake!
It’s crazy, txchick. Totally insane. People in CA especially that make well under $100K/year think $500K homes are “cheap”. This will end very badly.
IMHO if Florida property is not sold by now, it is not going to sell this year. The National Hurricane center is predicting 13 -16 hurricanes. (sorry about the full link, using internet explorer POS from library) “The main uncertainty in this outlook is not whether the season will be above normal, but how much above normal it will be”
http://www.noaanews.noaa.gov/stories2006/s2634.htm
With hurricane insurance rates of $20.51/$1000.00 insured value, all it takes is one Cat 2 to brush the state to convince fence sitters to jump elsewhere.
“OT - forclosures are 1 per 69 housholds in Indianapolis, and 1 per 70 households in Atlanta.”
Those are really scary numbers. I wonder how high this number will go before its all over? I in 30? 1 in10?
Simmsays…bizarre cars
http://www.americaninventorspot.com
They don’t become scary untill it reads like this-
1 out of 69 forclosures have become R.E.O.’s….
Finally everyone’s waking up with from the housing hangover with one nasty headache and the realization that residential housing should not be used as an investment tool, and the fed should have some say in it.
Because when housing is speculated on, real people are hurt, the ones who can’t move their family to a bigger home after a baby is born, because out of town speculators have ridiculously bid up prices. Housing is a basic need - everyone needs it. Not everyone needs to own stocks.
I know it’s taking it too far, but the feds should have seen this coming, and now it’s too late.
The so-called ’standoff’ between buyers and sellers in South Florida will be shortlived. Exploding inventories, skyrocketing insurance rates, crushing tax rates for bubble-inflated housing, and the inevitable cash drain on bagholders/flippers as rates continue to rise and adjustment Armageddon looms…
That fool who wants 915K for his ‘investment’ is in for a rude and painful shock - lets hope he has deep pockets and a sturdy pair of earphones to drown out the sucking sound of hemmoraging money - every month - month after month after month…
I’m surprised no one has commented on the realtor with 24 properties! Many people loathe realtors for their 6% commision and likewise loathe flippers for running up prices, but do not truly grasp that the 2 groups are largely the same group of morons. I’ve said before I estimate the average realtor owns 10 properties but I may be on the low side.
I would disagree with that but I guess it depends on the market and type of property. In my market I find that most realtors very rarely own over 3. And typically they are a 2-4 unit properties. I know a lot of Realtors who don’t own any RE. which I find mind boggling
Dandeneau bought his 2,000-square-foot waterfront condo last year for $600,000 and spent about $100,000 to renovate it in hopes of quickly reselling for a tidy profit.”
“In December he put it on the market for $915,000. Buyers showed little interest, so he dropped the asking price to $895,000. Now he says he won’t go lower, but he has yet to receive an offer. ‘I am not selling a piece of garbage,’ Dandeneau insisted. ‘This apartment is to die for. I am not going to give it away.’
AFTER A GOOD HURRICANE, HE MAY NOT HAVE TO WORRY ABOUT GIVING IT AWAY. IT WILL BE WASHED BACK OUT TO THE SEA. WOULD BE A FITTING END TO THIS GREEDY FLOPPIN’ IDIOT. GREAT POSTS ABOVE. ALL OF MY SENTIMENT TOO.
will insurance pay him $915K or $700K? what is the fair value to be used by insurance company?
They will pay him either the purchase cost he has insured the property for ~600K probably, since geniuses like this are never fully insured, or the cost to rebuild which in all likelihood is so much less.
LOL. Clean, clear Ocean Front Lot for sale. Asking only $1.15 million. Will sacrifice for opportunity to build and reap immediate equity!!!
link to this and it will blow your mind. i will not buy a house in south florida until 2008 maybe.
http://www.colliers.com/Content/Repositories/Base/Markets/FtLauderdale/
English/Market_Report/PDFs/MULTI-FAMILY.pdf
http://www.colliers.com
Here’s your link:
http://tinyurl.com/gf3d7
If you force a line break via a too-long link, it won’t work. tinyurl.com (and one or more others) solves this neatly.
As for the conco conversions, as other posters noted previously, many, many of these will revert to rentals and the properties probably will be nicer as a result of the unintended largess of speculators.
OT, Freddie Mac, commercial on TV I’ve seen several times in the past couple of days, touting housing accounts for 20% of the U.S. economy.
If you want a good laugh at continuing foolishness and hype, click the last link in this post, “Treasure,” and go to the comments. Naw, that tornado can’t hit us…
Homebuilders/Construction
The Real Story: Readers Write
By Marc Lichtenfeld
Senior Columnist
5/26/2006 11:53 AM EDT
URL: http://www.thestreet.com/p/stocks/homebuilders/10288388.html
Emotions are running high in housing and real estate, certainly more so than in most other sectors.
No other stories that I have written have touched nerves like the ones on St. Joe (JOE:NYSE) and Beazer Homes (BZH:NYSE) . The funny thing is that the hate mail I received was equal in volume and fury, even though I took a bullish stance on Beazer and a bearish one on St. Joe.
I was caught a little off guard by the response to my positive story on Beazer, which has admittedly been my worst call to date. The basic premise was that the bad news was already baked into the stock price and that it should eventually recover. Clearly, I’ve been wrong so far, and I’m certainly taking a close look at whether I will continue to be. Meanwhile, here’s what some of you had to say:
J.G. wrote:
This sound(s) like a similar story we heard in 2000 about technology. Wake up. You are deluding yourself and your readers. Housing is so far above the trendline for appreciation from a historical perspective it is insane. Do your homework and you will find that asset class bubbles are brutal as they deflate. 40% of all homes purchased in 2005 were for investment/second homes, and a significant percent were with no principal. This will obviously not continue as rates continue to hit multiyear highs.
While I don’t disagree with the notion that housing became a bubble, I was not and still am not expecting an utter collapse in home prices. The difference as I see it between the tech bubble and housing bubble is that many more people have acknowledged the current bubble and expect it to pop. That wasn’t so during the late 1990s and 2000. And again, with people talking about it, I believed that the news was in the share price.
J.K. of San Diego opined:
Dude, you do not live in the real world.
Homes are now on the market for over six months. New homes come with “perks” or incentives attached, and they still don’t sell.
I personally know of people who are literally living on their lines of credit.
Homes are way overpriced, and wages have not kept up.
I respectfully disagree. I would be a contrarian to the contrarians, i.e., short on the housing stocks for a good long while.
No doubt about it that homebuilders are having a tough time moving inventory, although unsold supply dropped to a three-month low in April. It was the second consecutive monthly decline but still above levels seen in the past two years.
And then there was this gem from H.F.:
Nice job calling BZH … got any other hot stock tips? Do they pay you to throw darts at a board? When you get canned, you can cut my grass and clean my pool.
No, H.F., they pay me to write contrarian stock ideas. Not all of my (or anyone else’s) ideas will work. Perhaps you’d rather read someone who simply cheerleads the current hot trend. And you wouldn’t want me to cut your grass and clean your pool. I’d probably tell you something that you didn’t want to hear, like you should switch grass seed or your pH is too high.
The initial reaction to my story on St. Joe was quite hostile. I was accused of being “irresponsible” for publishing my piece without ever having traipsed along the beaches or in the bogs of northwest Florida. I was labeled an elitist Yankee who didn’t understand the area.
Manny piped in:
I think you are terribly wrong. Personally I think your article doesn’t even make any sense. If you have done your homework, you should find major Fortune 500 companies buying property up and down Bay County. With a new international airport coming soon and being only minutes away from one of the most beautiful beaches in the world, you would be foolish not to buy property there now. You probably don’t have the money anyway.
I don’t believe that the new airport is going to be the savior for housing in the region. The name of the game is job creation, and I haven’t seen any evidence that there is going to be a jobs boom in the area. As far as not having the money to buy property there, maybe you can talk to H.F. about giving me a raise for mowing his grass and cleaning his pool.
Not surprisingly, once St. Joe came out with horrible numbers for the quarter, the vitriolic defenders retreated, and most of the feedback was supportive of my argument.
A.H. said:
I suppose you saw JOE’s updated land analysis yesterday. It’s humorous to hear management say that they no longer consider ANY of their land holdings suitable for timber. Come to Florida and take a look at the land. It won’t be developable for generations. It’s nothing more than an attempt to have Wall Street adjust their models to justify the absurd stock valuation.
I couldn’t have said it better.
A reader who wished to remain anonymous but who claims to live in the panhandle of Florida is even more bearish than me:
Your analysis is spot on, however you may only be scratching the surface of the problems JOE faces. There are no sales occurring in their primary, high-profile projects, even though we are well into the spring selling season in this area.
There is no indication that they can do better in 2Q than the $0.05/eps of 1Q, and the deficit to make it to the new guidance will be just too great to overcome. $1.20/share would be an absolute best-case scenario, and only if activity picks up in 3Q, which is unlikely. This market is just at the beginning of a two-year correction.
JOE’s statement of product mix change is a sham. Their newest projects are self-described as modeled on WaterColor (a St. Joe development) — the “one-trick pony” referred to in the conference call.
I could go on, but you appear to be on the right track. Your $31.00 call may prove to be too optimistic.
A representative from St. Joe did not directly address Anonymous’ contention that no sales were occurring in the company’s high-profile projects. Rather, I was referred to the company’s first-quarter earnings release, which acknowledged slow resort sales along with a comment from the spokesman that said, “This addresses the broader point. … Florida is certainly not a single real estate market, but rather many, many individual markets.”
Whether the emotional volatility around these stocks translates to further stock price volatility remains to be seen. I remain steadfastly bearish on St. Joe and cautiously and uneasily bullish on Beazer.
It’s been said that if you bury a St Joeshp statue in your front yard it will help to sell your house. However, it appears that if you bury Jimmy Hofa in the back yard, a lot of interest will be generated.
What I love about his statement is he finally calls a duck a duck….it’s an APARTMENT !! I still don’t understand why anyone would want to own an apartment (Condo).
“They will spin this thing to the absolute bottom and I can guarantee you that Learah will end up in front of a Senate special committee.”
Delightful description Craven Moorehead ! Reminds me of a flushing toilet and Lareah’s role seems particularly fitting if that is the case.
“What I love about his statement is he finally calls a duck a duck….it’s an APARTMENT”
I agree, I recently attended a party at a former co-worker’s new “condo” and was suprised. I learned about conversions from this blog, it was a “conversion” but I did not see any changes. I always thought a condo was more like a townhouse?
Speculators are NOT to blame for this bubble. The anti-speculator, anti-naive buyer, anti-realtor crowd have their causes and effects seriously reversed. The bulk of the population is always and everywhere unsophisticated, greedy, amnesiac, and wants better housing. I myself have always wanted better housing and still do. None of this has caused the bubble, because it is a constant in human affairs. Something changed however to cause the biggest bubble in history and that was cheap money. Suddenly, beginning in about 1996 money flowed, lending standards dropped, and the clueless could suddenly act on their fondest RE wishes. It all became a feedback loop and the psychology became aggravated so people did get greedier with getting smarter, but psychology was not the cause. In any case, the universe is not moral and does not punish greed. It does sometimes punish mistakes. Unless the central banks make permanent the flow of cheap money, housing prices will revert to historic valuations compared to price and income. Since that doesn’t seem likely we can safely await the crash.
The point may be philosophical, but getting excited at the wrong people seems to me to miss the point. Better to recognize the exceptional conditions and act calmly to protect yourself or even profit.
You won’t win many friends here with your comments. But a good post nonetheless
Hey Harold,
I actually appreciate the argument you lay out. Yes, I agree, greed is nothing new and desire is universal, so perhaps the free money is the new twist. Thanks for a thoughtful post.
However, I am having too much fun not to talk trash about the Andre Dandeneau’s of the world. I have seen plenty of real changes in my town with the new bubble, so I have plenty of bile to vent. I also believe the current level of spin and deceit is unprecedented in the recent past.
Nice, Harold! Great post with some points that are good to be reminded of now and again.
I think most of us would agree that the speculator is not to blame; rather it is government policy/cheap money, as you said.
I might argue, however, that we (those of us on this blog at least) are all greedy. Our needs have been met, yet we want more (house/money or both), hence our interest in this topic of a housing bubble. What we are hoping for is that our Market Economy will punish the STUPID greedy people, like Mr. Dandeneau.
As for the universe, I believe it does punish greed. And it will punish us all equally for it in due time.
I think the speculators , along with the easy money ,did create a false demand market . What is the true demand in a market ?
True demand cannot be established by short term flippers . No reasonable investor would buy a place for long term rental at a 50% ongoing monthly loss . These investors are all short term investors /flippers . These people are just shocked that the market is taking a turn . These flippers are just shocked that the baby boomers have a limit on how much they want to over pay . These flippers are just shocked that another flipper doesn’t want to buy their overpriced house/condo . These flippers are shocked that the locals can’t buy the overpriced flips . When you get 40% of the purchases in the Nation being investor/second homes last year, you have speculation increasing the bubble . Some areas like Florida and Arizona had 30 to 40% appreciation in 2005 .I do blame these short term greedy jerks for a massive increase in the price of homes in many markets from 2003 onward . Of course it wouldn’t of happened without the easy money .
Wiz,
I think his/her point was that the lax lending is what **caused the speculation**. I agree completely.
Let’s be honest. If we had known in 2000 what we know now, would we not have flipped houses ourselves? If you say “no,” I’m calling you a liar. Who would turn down hundreds of thousands of dollars of “free” money — for doing nothing????? Speculators were just doing what they were ENABLED to do. That’s why this is a CREDIT BUBBLE, not a housing bubble, IMHO.
Speculation can drive a market up and what you finally get is excess inventory and no demand because the long term users or locals can’t afford the price ,or just to many units get built . That’s what my point is . In other words ,speculation can create to much supply and not enough demand in the final analysis .
Cheap money and loose credit terms, agreed. Yet doesn’t our education system bear some responsibility for not teaching fundamenals of finance? I have been in that business for years and am constantly amazed about how much I never was told about until I entered the NBA program.
Yeah, I’m Shaq. Meant MBA.
I agree with everything he said. Speculators moved in towards the end but this mess started back in ‘96 with regular people being encouraged to spend more than they could prudently afford.
Then the situation snowballed and deteriorated from there to where we are now- a total trainwreck.
The only thing that can bring on a certain fix is return to sane lending standards. So that is what I am fervently hoping for.
I want the correction to be swift. I don’t care how painful it is. I’m longing for a return to reality, the quicker the better.
Sounds good to me. Tired of all the airy fairy prices and ridiculous upgrades and arguments about realism from people with obvious conflicts of interest. A return to fundamentals would be great, in my opinon.
Sarasota/Bradenton sales down 44% yoy. Does anyone know if there were any other cities in the country outside of FL that have had these types of drops?? Oh, and Sarasota median is down 15% from August ‘05. I’m waiting to see that as a headline down here which may be sooner than later. The fat lady has sung, left the stage, and probably packing her bags and leaving FL……
Just in time for hurricanes.
Just read Excremento, eh.. Sacramento, CA is down 38% yoy. Many other places too.