‘Paper Millionaires’ Now ‘Want Out From Under It’
The Miami Herald has this report on a once ‘red-hot’ housing bubble. “This time last year, real estate agents along this island chain couldn’t keep most properties in stock, as eager buyers snapped up trailer lots, pushed prices for ordinary wooden homes beyond $1 million and spawned bidding wars that had many locals believing they were paper millionaires.”
“What a difference 12 months make. After a string of hurricane evacuations culminated in a storm surge that accompanied Hurricane Wilma and left more than three feet of water in many homes from the Middle Keys to Key West, a once red-hot real estate market seems to have screeched to a halt. ‘It’s kind of flattened,’ said Laura Rolston, an agent in Key West.”
“Now, it seems, there are plenty of properties on the market and not as many buyers. The number of sales in and just outside Key West was down 60 percent in January compared to a year ago, with about 78 percent more properties on the market, 1,299, than the same time last year.”
“The real estate chill has been accompanied by major price reductions, as owners try to unload properties whose chief value now lies in their square footage. Diane Nicklaus slashed the price on her five-bedroom home with a pool and massive lot in the city’s New Town neighborhood by $230,000, to $595,000.”
“But it may have to fall farther still: Like scores of homes in this part of town, Wilma’s surge deposited three feet of saltwater inside the concrete home, burned lush landscaping brown and left a legacy of mold. ‘I thought people would come and see the lot and say it’s a huge place, and I thought it would be gone,’ Nicklaus said. ‘That’s not happening.’”
“Now Nicklaus is in the same spot as many locals here whose expectations, and perhaps fortunes, have turned dramatically in a matter of months.”
“One year ago, Key West resident Kim McGee thought she was on the verge of becoming a near-millionaire when she placed her family’s three-bedroom New Town home with an in-law apartment on the market for $995,000. Now she’s asking $837,000, and that’s probably too much in this market. ‘I just wish somebody would make me an offer,’ sighed McGee. Of her hope to sell, she said, ‘It just has not gone like we hoped it would.’”
“One cause of the inventory glut: A number of native ‘Conchs’ are scrambling to forgo paradise as fast as they can, unloading flooded homes onto the market in hopes of selling out while also pocketing insurance or FEMA checks. And another hurricane season is just around the corner. ‘I have a lot of friends who’ve said, ‘By the first of June, I’m going to be outta here,’ Nicklaus said.”
“The slowdown..also seems to have scotched a local stampede to real estate licensing classes. ‘Everybody who was in the fire department or a bartender got a real estate license,’ said real estate agent John Loulan. ‘It was like the dotcom days, and people were just out there paying whatever just to have the property.’”
“The days of the $650,000 one-bedroom cottage seem to be over, while massive price drops reminiscent of a fire sale have become more common. A flooded home that real estate agent Jeff Searcy put on the market last year for $895,000 recently sold for $400,000 less.”
“‘They did not want to deal with the mold issue and ripping everything up,’ he said of the old owners. ‘They wanted out from under it and were willing to take a bath on it.’”
“One year ago, Key West resident Kim McGee thought she was on the verge of becoming a near-millionaire when she placed her family’s three-bedroom New Town home with an in-law apartment on the market for $995,000. Now she’s asking $837,000, and that’s probably too much in this market. ‘I just wish somebody would make me an offer,’ sighed McGee. Of her hope to sell, she said, ‘It just has not gone like we hoped it would.’”
can we get a little background music on that please?
I know this is off topic; I just couldn’t help it…
$121,000 Indiana Home “Misvalued” at $400 Million Creates Gross Errors in Tax Billings… (Yahoo! earlier today)
I just couldn’t help myself. I had to share this article with this blog.
It simply defies comprehension at the obscenely stupid level of greed that feeds on blatantly erroneous information! Here’s the link and some excerpts from the article http://news.yahoo.com/s/ap/20060211/ap_on_fe_st/misvalued_house:
An outside user of Porter County’s computer system may have triggered the mess by accidentally changing the value of the Valparaiso house, said Sharon Lippens, director of the county’s information technologies and service department. The house had been valued at $121,900 before the glitch.
County Treasurer Jim Murphy said the home usually carried about $1,500 in property taxes; this year, it was billed $8 million.
Lippens said her agency identified the mistake and told the county auditor’s office how to correct it. But the $400 million value ended up on documents that were used to calculate tax rates.
Most local officials did not learn about the mistake until Tuesday, when 18 government taxing units were asked to return a total of $3.1 million of tax money. The city of Valparaiso and the Valparaiso Community School Corp. were asked to return $2.7 million. As a result, the school system has a $200,000 budget shortfall, and the city loses $900,000.
Can you BELIEVE THIS!!!!
Mary
And just think: this kind of adjustment (at lesser percentage but multiplied across millions of homes) will take place all over the US next year (or maybe the year after) which will kill a lot of cities/states and their budgets. $1 million short fall will be nothing compared to what the reality will hit the municipalities next tax collection season in 2007 (or 2008). With foreclosures and bankruptcies and people unable to pay their property taxes, raising the tax rates to make up for the lower appraisals will not sit well with us, the rest of the taxpayers. Think Boston Tea Party!
Wait until you see some of the tricks the assessors will come up with. In Fairfax County, VA in the 90’s tax assessments on the structure (house) fell BUT the land value increased by the exact same amount! Net result - same total assessment. After opening the first 4 or 5 tax bills, I called a local paper. They did an article and quoted the Tax Assessor as stating that this was some kind of weird coincidence.
Ms. Mcgee - intstead of wishing that some idiot make you an offer for your waaaay overpriced house, why don’t you get real and take concrete a steps to reduce your asking price. Here is an idea - take your $837,000 asking price and transpose the 8 and 3, and list the house for $387,000, it’s actual worth! Perhaps then you will get a few offers. Good luck.
Worst sales pitch ever!
Damn Conches — next thing ya’ know, the whole Atlantic Ocean ‘ll be up for sale!
Wait a minute…I thought EVERYBODY wants to move to South Florida. You’ve got all the boomers retiring and that’s where they are headed…right? Just ask any REALTOR in Florida and they will set you straight.
if you thought that the affordability gap was bad in california, you would be shocked by the keys. almost all of the housing is owned by snowbirds and second home owners. the remaining population is confined to trailer parks, many of which were devastated by wilma. new signs on these parks touting luxury condominiums followed the storm. i still cannot figure out what will happen to all of the hospitality workers if the only thing left to live in will be a $650,000 condo.
In Aspen, Co., most of the service workers are bussed in from towns 30-60 miles away. The city also subsidizes housing for a lucky few… I can see the same thing happening in much of the Keys. Service workers will live in Florida City…(last stop on the mainland) and be bussed in every morning.
It will be like Long island, where your house cleaner has a one hour comute and must charge accordingly
“The real estate chill has been accompanied by major price reductions, as owners try to unload properties whose chief value now lies in their square footage. Diane Nicklaus slashed the price on her five-bedroom home with a pool and massive lot in the city’s New Town neighborhood by $230,000, to $595,000.”
Ahh…. A market primarily composed of “motivated sellers.” Now we are getting somewhere. Some other markets are not showing significant price reductions yet but this one surely is. It won’t be long until other sellers become more “motivated.” By summer, we should see prices down in all of the hot markets. I doubt that we will see any market with rising prices.
We know lots of Europeans, Russians, and South Americans have all invested heavily in FL’s RE. It’ll be interesting to know how they are going to do with the big loss. It’s just the beginning and the dollar will depreciate maybe 20% against Euro or 50% against Chinese Yuan. The double whammy means those investors can lose 90% of their investment. That combined with commissions and upkeep costs means the investment can actually goes to zero or negative.
Fascinating point, goleta. Thanks. I wonder if there are any statistics on the number of foreign owners in Florida. And what is the story with latin owners from Central and South America?
Miami is the US hub to most if not all of Latin/South America.
Some info on FL foreign investors here:
http://www.floridatrend.com/issue/default.asp?a=5639&s=2&d=10/1/2005
“# Foreign buyers snatched up 15 of every 100 homes and condos sold in Florida in 2004-05, according to a new survey of the Florida Association of Realtors. Of the 15, British buyers bought five, followed by eurozone buyers, who bought three.”
“here They�re From
Foreign real estate
buyers in Florida*
United Kingdom 33%
Eurozone 21%
South America 21%
Mexico, Central America and Caribbean 8%
Canada 7%
Asia 4%
Eastern Europe 3%
Other 2%
Where They Buy
European real estate
buyers in Florida*
Orlando 33%
Naples-Fort Myers 21%
Miami-Fort Lauderdale 21%
Sarasota 8%
Tampa-St. Petersburg 7%
West Palm Beach 4%
Rest of Florida 3%”
I live in Miami and two of my neighbors live in Bahamas. They are both wealthy and come to Miami once a month for a weekend shopping trip….sometimes they dont visit for months at a time. I asked them why they maintain a house here and they told me that they both dont like to stay in hotels and like to have a home here. Both houses were paid for in cash. Neither of them is aware of the “housing bubble” or the trends in housing in general here. If both of them were in the market to buy a place today, they buy a place without hesitation. They are not speculators and are in it for the long haul.
I know of south americans owning condos on south beach which are used as vacation homes around holiday time and are used for “business use” most of the year i.e people who come to miami on business stay at these condos instead of staying at hotels.
I have yet to meet a single european person who has a house here in the miami area. I am sure they are buying in this area as the stats show, but I have yet to see/hear about one yet.
Europeans who have bought have already lost alot due to the strengthening of the dollar in the last year. If they were investing for the short term, they may already have sold to cut their losses.
I live in Miami. Many Latin Americans own homes here because of the political stability. Those people aren’t going to sell because they want a place of refuge and reason to get into the US if they need to.
But there is a second group of Latin Americans, wealthy Mexicans, for example, that are here for investment purposes only. Their tie to SoFla is purely monetary…and they’ll pull out if they doubt the future of their investment.
Hey, but the market is just ‘flattening’, right?
Please don’t mention the word ‘plummet’
On AOL’s welcome page they have two headlines today:
New House, Free Car: The Bubble Hasn’t Burst, but Sellers Are Going to Extremes
and
Art of the Low-Ball Offer: How to Buy Home at Below-Market Price
They’ve had topics about the bubble before, but thought that was interesting. More MSM reporting on the bubble.
“The Bubble Hasn’t Burst, but Sellers Are Going to Extremes”
The media is also going to extremes — OF DENIAL.
It seems to be the media’s code of conduct: Thou shall not yell “Fire” even if people are being burnt.
I’ve been constantly amazed at how almost no one in the media is willing to cross the line and say “ooops! RE is in trouble”. Everything has to be inverted and cast in something positive sounding.
They gotta keep that big RE ad money a’cummin in, ya know?
Guess that newbie Realtor friend of mine in the Keys is a bit screwed. Good thing she knows how to bartend.
At least it’s clear in Florida. Such is not the case in LA yet. A realtor I spoke with today told me, “now, we’re not predicting a drop in prices, you know?” when I told her I was waiting to buy after the bubble bursts.
On the way out of her open house, she yells, “would you like a brownie? no one is stopping in and I’d hate to throw these away”.
LA realtors are just in denial and it’s just a matter of time…
The house you’re living in is NEVER part of your net worth. These people are fooling themselves if they think they’re “millionaires”, paper or otherwise.
The “next” bubble will be in St Joesph statues!
LOL
The days of the $650,000 one-bedroom cottage seem to be over, while massive price drops reminiscent of a fire sale have become more common. A flooded home that real estate agent Jeff Searcy put on the market last year for $895,000 recently sold for $400,000 less.”
Now THAT’S what I’m talking about. That is about a 45% drop in price. While I *do* feel a bit sorry for the people who are in these predicaments, that growing appetite for “more,more, more!” got them ALL in trouble. Look at them now. As it was mentioned, they are less than 4 months away from the beginning of hurricane season, and some people are finally seeing the light. I really hate to call people stupid…but too many were just f&(%g stupid. The days of bragging at the cocktail party and office water cooler are over.
Ben: Thanks for those extra links to the home page, and the hyperlink of the page title. It’s very, very helpful. Keep up the good work…it is greatly appreciated. I’ll be adding my donation very shortly.
(Oh! Is there going to be a preview option?)
BayQT~
Ben….do these comments go in moderation, too? I don’t see a comment that I made a few minutes ago? Just wondering.
BayQT~
“The days of the $650,000 one-bedroom cottage seem to be over, while massive price drops reminiscent of a fire sale have become more common. A flooded home that real estate agent Jeff Searcy put on the market last year for $895,000 recently sold for $400,000 less.”
One more time…I hope this doesn’t show up twice. Just wanted to say that I like these numbers….almost a 45% drop in price. Too, too bad for the people being affected by this reduction (seller). They are going to have a rough time of it. And it’s not like hurricanes just started happening in Miami…huricanes swirl around there EVERY year. But I want to know WHY people got “stuck on stupid” when making such a huge financial decision as buying a home?? I know…Money. Many lessons are being learned here. And with the beginning of the hurricane season right around the corner, some people are finally starting to “get it”.
Ben….thanks for the extra links for navigating back to the home page, and for the hyperlink of the main page title. Keep up the great work…it is appreciated. I’ll be sending in a donation shortly.
(Is there going to be a preview option added? Just wondering…)
BayQT~
Real Estate is no longer local.
I’ve talked to some ‘investors’ and i’ve found a lot of them have properties in D.C., Arizona, Miami. If pain starts in one area it’s bound to spread to other areas. One debt dries up in one area it will spread to other areas.
I am a petty bastard. My family used to rent a large house in the Keys for a week every February in the early ’90’s until local government passed a law prohibiting rentals of less than one month. Ever since then, I’ve watched each passing hurricane with interest, knowing that one day those folks would be able to catch fish in their own living rooms. And now the bubble has got them as well. What a shame.
In answer to the question about workers in Key West, there is a Keys Shuttle bus that picks up workers (largely used by immigrants) in Fla City and transports them down the keys . The trip to Key West can take two to three hours each way. a big sacrifice for that $5 hr job no?
On another note, I went down to Marathon on Tuesday. Had a nice quiet ride down-almost like a summer day-very few cars on the road or folks in the stores or on beaches.and this is HIGH season!
That reminds me of the affluent resorts in the Colorado rockies I’ve read about where the people who do the actual work live 80-120+ miles away and commute in to their work each day.
At what point will things break down where the people who would fill the low-wage jobs aren’t going to commute long distances to do them anymore? Hmmm.. that’ll probably never come to pass I guess.
It will at gas > $4/gal.
Lots of people in the DC do the same thing - they live in West Virginia and commute in 50+ miles every day. Of course, it being the South, at least 2/3 do so in full size pickups, which adds tremendously to the cost.
FfssssssssssssssssssssssssssssssssssssssssssssSSSSS.
bubble don’t go pop yet… just lots of air ’scapin’
For Immediate Release
Florida Update
2-12-2006
Only One Buyer Remaining in Florida ? (News Out Now)
The number of potential real estate buyers in Florida has dwindled to one person, Mr. Herbert Finklestein of Ft. Meyers, Florida. “I thought it would be a good time to pick up a condo” said Mr. Finklestein, as a legion of Real Estate Agents stood in line to lick his shoes. Being the only potential buyter in the state means Mr. Finklestein has plenty of inventory to choose from. Finklestein has pre-recorded his voice saying “I think it’s overpriced” on his MP-# player to save his voice as he tours open houses. “I’m enjoying this tremendously, but I wouldn’t make an offer until the price falls to $190,000″ said Finklestein as he toured a $835,000 condo near Miami. “Sellers need to come to their senses - there are so many of them and only one of me.”
Hysterical!! Love it.
Hope they are suffering good down there!
Hillarious. Thanks for the laughs.
“What a difference 12 months make. After a string of hurricane evacuations culminated in a storm surge that accompanied Hurricane Wilma and left more than three feet of water in many homes from the Middle Keys to Key West, a once red-hot real estate market seems to have screeched to a halt. ‘It’s kind of flattened,’ said Laura Rolston, an agent in Key West.”
I don’t understand the focus on the hurricane? A hurricane can only cause a huge price reduction or rising inventories if it causes demand to drop. But I doubt that people are currently scrambling to get out of the gulf because of hurricanes (this effect may be more true in New Orleans).
It seems to me that the author of this article doesn’t know what they’re talking about, and they’re peppering the article with lots of “look how awful the hurricane was” effects.
I do not think the desire to sell is the result of hurricane(s) as much as it is paying for the current bill for hurricane insurance that may not soon be available.
When we got our insurance bill on the Coast, it was a wakeup call. From Texas to Florida, there are a lot of nervous coast dwellers.
With respect to hurricanes, there is a big difference between the Gulf and the Keys.
First, the keys are so low-lying, that even a category 2 hurricane will cause significant flooding. And since every category 1 hurricane can become a cat 2 in a matter of hours, ANY hurricane must be taken seriously. Hence, any hurricane requires evacuation. This creates a problem because there is just one road into and out of the Keys. So if you want to evacuate Key West, you’re asking a whole lot of people to drive up a four lane road for more than 150 miles, before they reach the “relative” safety of the mainland. Obviously this creates its own problems. The massive traffic jams force evacuations to begin very, very early…and very, very early means evacuating even when the strike probability is very, very low. The end result… Keys residents are forced to evacuate much, much more often than anyone else in the United States. When they do evacuate, they have to travel much, much farther to get out of harm’s way.
Compare the difficulty of evacuating Key West to the difficulty of evacuating the gulf coast or Miami. In the event of a minimal hurricane, the barrier islands, like Miami Beach, have to evacuate. This means, for the most part, driving 10 miles west. I, on the other hand, am not in ANY evacuation zone. A category 5 hurricane could be bearing down on me, and I’d never be asked to leave.
Some may point to the unbelievable traffic jams in Houston caused by hurricane Rita. I suggest that was a peculiar event. First, evacuations were called while Rita was a Category 5 storm… it hit as a 3 or 4. Second, Rita was following the catastrophic destruction of the Category 3 storm, Katrina. So there was a lot of panic evacuations. Traffic was increased when people who really didn’t need to leave left any way. Traffic was increased because local storm shelters were filled by Katrina evacuaees. It was… a peculiar event… but precisely the kind of evacuation that the Keys go through almost EVERY year.
PARTIAL QUOTE FROM FLORIDA SELLER:
“It just has not gone like we hoped it would.”
Still sounds pretty TAME compared to the “OH $hiT, we’re going to lose everything!!” (fast forward 2 or 3 more months)
“But it may have to fall farther still: Like scores of homes in this part of town, Wilma’s surge deposited three feet of saltwater inside the concrete home, burned lush landscaping brown and left a legacy of mold. ‘I thought people would come and see the lot and say it’s a huge place, and I thought it would be gone,’ Nicklaus said. ‘That’s not happening.’”
I heard about the flood-damaged Katrina cars that have been surreptitiously snuck onto used-car lots around the country. But this is the first story I have seen about the flood-damaged “Wilma homes.” My guess is that it is harder to conceal the fact that your investment home was under three feet of Wilma’s storm surge than the fact that the used car you are selling in CA has a rotting electrical system thanks to 10 feet of Katrina storm surge.
After weeks of schroling through comments by people I’d never seen before I felt the need to say hello. ola getstucco!
The trick is to sell “flood cars” in the cold country. They don’t smell in the winter up there. But you have to sell them before summer because you can’t stand to be inside one then.
This the website site you can check whether a used car has been flood or water damaged by hurrican or whatever. gordo
The standard sellers disclosure down here will ask you about any damage that the house got when Hurricanes X,Y, and/or Z came through the area in addition to the usual lead paint, synthetic stucco, and poly pipes questions.
‘And another hurricane season is just around the corner. ‘I have a lot of friends who’ve said, ‘By the first of June, I’m going to be outta here,’ Nicklaus said.”’
I heard a National Weather Service spokesman recently discussing the hurricane outlook. It seems that we have reverted to the hurricane-intense phase of a decades-long natural oscillation in the frequency of severe tropical storms in the Atlantic Ocean. The 1920s were a similar period when we experienced a ratcheting up in the incidence of severe hurricanes, which helped to end the 1920s Florida land boom and usher in the Great Depression. (Unanswered question: To what extent did the FL land crash at the end of the 1920s actually cause the Depression?)
GetStucco,
I have heard the same thing about the upward trend in Hurricane cycles. I have a family member in Cocoa Beach who has confirmed it. He’s looking to get out, because of it.
Obviously he has missed the “window of opportunity” to get out at the top- but this ain’t stopping him from thinking Florida is the WRONG PLACE to be, at the WRONG TIME.
You got to figure THE HERD is starting to think about stuff like this.
This hurricane data and subsequent insurance cluster F’s are really going to add insult to injury to the real estate bubble down there.
I already have my retirement home in Naples (paid for long ago). In 2 years, when my son goes to college, I plan to park myself on the beach for 3 months each year. I, for one, will be glad to see fewer people down there.
“(Unanswered question: To what extent did the FL land crash at the end of the 1920s actually cause the Depression?) ”
Don’t know but the Bubble was mainly in Florida then, unlike now when it is spread widely around the country and involves a greater percentage of the population, I would assume.
I give up. I talked to my friend in S Fla about an hour ago. He’s not selling now - convinced it’s “different” where he is because the city and developers are building some mixed-use urban “downtown” near his crappy 20 year old immigrant-filled townhouse complex. This will make the value of his place go up even though everything else in S Fla goes into the toilet. I love this guy, he’s my best friend of many years but at this point, I hope he loses his ass. He’s up over 50% (given recent sales) in less than two years and that isn’t enough for him. He claims he’ll be “homeless” if he sells, despite the fact I can show him 18 pages of rentals nicer than his place for what he pays in a mortgage or less.
According to a Tampa Bay real estate magazine, there is no bubble, and everything is just wonderful here!
http://www.suncoasthome.com/
“Median Price of Florida’s Existing Homes Continue to Rise, Sales Show Slight Gain in December
” Is a Housing Bubble Getting Ready to Burst in Florida? No Way! At last week’s International Builder’s Show in Orlando there was no utterance of the word ‘bubble’. A couple of the nation’s leading economists characterize the 2006 housing market as a return to sustainability. The prediction is that this year will be the third strongest year on record for home sales. Job growth, interest rates, and demographics are all strong for Florida housing. A recent media report suggests that single family homes and condos in the Tampa Bay area are overvalued by 23.2%! Nonsense! Need proof? Check out the comparison report for the third quarters of 2004 and 2005 provided by the Multiple Listing System in the state of Florida. A second report recently released by National Association of Realtors refutes such exaggerated claims and provides scientific evidence that the fundamentals of our area’s housing market remain strong.”
Shouldn’t lying carry some kind of penalty? This magazine is designed to market properties, and telling potential buyers that real estate is a good investment now is certainly dubious.
Any suggestions?
Kitty box liner.
Oops. The word “desperate” shows up in a million dollar Miami condo ad.
http://phoenix.craigslist.org/rfs/124898046.html
Sorry for the double post….Here is the website to search VIN numbers for flooded cars…
Webite for flood damaged cars: We’ll get this right..