Investors Are Not In Endless Supply
The News Press reports from Florida. “Lee County permits to build new homes in 2013 spiked up 40 percent while foreclosures fell 45 percent in 2013 as the area’s given-up-for-dead residential construction industry roared back to life. Randy Thibaut, president of Fort Myers-based Land Solutions, said several factors combined to create a more energetic market. Chief among them, he said, was ‘the cheap money for mortgages and the fear that they would be going up, so you have a lot of buyers, particularly young and first move-up buyers, concerned that if interest rates went up much they’d be out of affordability.’”
The Palm Beach Daily News. “Where have all the big deals gone? That’s the question you might ask after tallying up Palm Beach residential sales over the past 12 months. After all, only one transaction has been recorded at more than $15 million since the end of August. By any estimates, that’s an anemic denouement to a busy summer of sizable deals. Since summer, sales of property priced in the stratosphere have all but evaporated.”
“In all, at least 26 single-family-home deals were recorded between $7 million and $13 million. But just six of those occurred between Sept. 1 and the end of the year. And there’s nothing on the horizon that indicates any major shift soon. But, hey, it’s the new year. And, as they say in Palm Beach — where wallets are as deep as the ocean and off-the-market deals are always simmering — anything is possible.”
The Longboat Observer. “Realtors say they expect fewer investors to snatch homes off the market in the coming year, which will leave more inventory available from which primary homebuyers can choose. ‘Investors are shifting to other markets,’ said Peter Crowley, the 2014 president of Sarasota Association of Realtors. ‘That’s not to say they aren’t still here, but I don’t think they’ll be as predominant in 2014.’”
“As of Nov. 30, the supply of homes in Sarasota County’s inventory was 5.4 months’ worth for single-family homes and six months for condos — up from 4.8 months in 2012. New homes account for 56.3% of all homes sold in the Lakewood Ranch market currently.”
The Orlando Sentinel. “Cora R. Fulmor, president of a nonprofit agency that helps distressed homeowners, spoke with Sentinel staff writer Richard Burnett. Q: Some researchers have called Orlando the country’s ‘most financially distressed’ metro area. Today, several years into the economic recovery, do you think that title is deserved?”
“A: I truly believe there is a recovery and it is helping a lot of people. I see a lot of clients whose financial situation seems to have improved, and they are climbing out of debt. That being said, there are many of them who are still not able to make their full mortgage payment. And that’s largely because of the type of mortgage they have. We see a lot of adjustable loans that are resetting higher, plus we have old loan modifications that were given in 2008 and 2009 and they are resetting as well. All of that may cause somewhat of a hiccup for these clients.”
From Miami Today. “Million-dollar homes are selling faster than ever. So fast, in fact, that 156 sell per month, on average, in Miami-Dade and one in every five sales of single-family houses is for a property costing at least $1 million. As for million-dollar-plus condominiums, they account for one in every eight sales countywide. At the 40-floor Carbonell tower, a 1,500-square-foot condo commands an asking price of $920,000. For just under $1 million, buyers get a two-bedroom, two-bath unit with two parking spaces, storage, marble or wood floors, a state-of-the-art kitchen with Sub-Zero refrigerator and high-end appliances by Miele.”
“‘A million dollars doesn’t buy you very much any more, unfortunately,’ said Rob Feland, a top producer with Avatar Real Estate Services.”
The Daily Business Review. “In spite of seemingly boundless enthusiasm by developers, record-setting transaction prices and a conventional view that the market is in full upswing, the recent spate of residential megatower announcements is causing some speculators to quietly pull back on their plans, a Miami commercial real estate broker told The Daily Business Review. Jonathan Gerszberg, a senior associate at the Miami office of national real estate services company Marcus & Millichap, said he had a sense people were holding back on making further announcements, waiting to gauge if the market is currently oversaturated.”
“‘When somebody announces 1,300 or 1,500 new units in a market, it actually has a cooling effect on everybody else,’ Gerzsberg said. ‘If you’re the guy that’s coming a little later, they might want to hold back a bit.’”
“The market will now have to contend with the likely influx of several thousand new units over the next few years, even as employment growth remains stagnant. Gerzsberg said part of the reason for the cautious approach might be the recognition that the foreign investors who have been boosting Miami’s residential real estate market for much of the past four years are not in endless supply. ‘People like to think they’re immune, but these cycles have a way of moving fast,’ he said.”
From Yahoo. “Several months ago, experts began warning of a second housing bubble. I didn’t need to see the affordability index to know my Floridian neighbors aren’t earning higher salaries even though home prices have risen to prices beyond what I paid during the first housing bubble.”
“Although homes quickly sold about 6 months ago, I’m noticing sales have slowed down considerably. I think sellers became overly confident that they could finally sell their homes at a profit since prices have gone up. One of my neighbors invested about $60,000 into the renovation of a former foreclosure. She listed the home above $200,000, which is what it sold for during the housing bubble. No one has bought the home even though it’s immaculate and beautifully staged.”
“When I first saw the listing prices of new construction townhomes in my area, I was flabbergasted. I purchased a new townhome before the first housing bubble for about $100,000. The homebuilders were asking twice as much several months ago, but recently had to lower prices. When the prices on new homes get slashed by 20 percent due to non-existent sales, it seems like the opposite of a housing bubble. I think most builders in my area have hit a plateau with prices as most homebuyers can’t afford to pay more.”
“I am disappointed that the housing recovery quickly mutated into another housing catastrophe just as my young adult sons are looking to buy their first homes. I’m urging my sons to wait before buying since the home prices appear to have peaked, although it doesn’t take much urging. They don’t make enough to qualify for a mortgage at this time. I think prices have already peaked in my community. Now, it’s just a matter of waiting for a new wave of short sales and foreclosures to come on the market.”
“… so you have a lot of buyers, particulary young and first move-up buyers, concerned that if interest rates went up they’d be out of affordability.”
Bahahahahahahah … affordability! I love that word.
If something was affordable then a buyer wouldn’t need guys such as myself to borrow money from and pay back this borrowed money - WITH INTEREST - for thirty years or so. No, if something was affordable then the buyer should be able to buy it. But as it stands now the buyer does not buy a house, the LENDER is the one who buys the house: The lender buys the house outright and then the lender RESELLS the house to the FB on a monthly-payment plan for thirty years-or-so, and the lender gets to collect interest all the way to the end of this thirty-years-or so period, UNLESS the FB decides he hasn’t had enough abuse and thus decides to extend the loan.
Which is just fine with me because the longer the FB decides to pay me the more money I get to collect from him.
Life is good because people are smart.
My goal is to make every financial transaction “affordable” even if the participants of these financial transactions do not have any money - ESPECIALLY if the participants do not have any money.
If people do not have money to buy then that means in order to buy they will have to borrow, and if they have to borrow then they need a lender to borrow from - and this is where I come in.
I shouldn’t be as deeply mired in smart people’s lives as I now am but smart people invited me in and so here I am. And I am here to stay because these smart people have been conditioned to believe that there is no other way to live their lives other than to have a total stranger - such as myself - dictate to them the terms of just how their lives will be led.
They work, I reap.
Life is good. People are smart.
What is amazing to me (and what should be amazing to everyone else but for some reason it isn’t) is the more people that buy into the idea that something is “affordable” when it really isn’t the higher go the prices - the higher the prices are pushed up. But higher prices translates to less affordable. And less affordable translates to more money borrowed to buy whatever it is that has become less affordable.
So this thing feeds on itself, this borrowing to buy what is not affordable pushes prices up and these pushed up prices causes more borrowing and more borrowing puts the borrower into a deeper and deeper hole.
Which is fine by me since I am the guy who gets to endlessly benifit from all this endlessly borrowing nonsense.
People are smart, and I am so glad that they are.
I dunno if I invested that much into a renovation i would want to live in the house for a long time and enjoy it …but that’s me.
————–
One of my neighbors invested about $60,000 into the renovation of a former foreclosure
I had quite a conversation with a very interesting fellow who has been working in Florida since the 1960s. He is still working, and works with engineering firms in the remediation of defective properties, his specialty being roof trusses. Mostly he works in commercial, but gets involved in residential when it concerns a project like a HOA clubhouse.
He’s completely flabbergasted by what he’s seen. His personal opinion is that much of the residential building over the last decade really shouldn’t have more than a nine or ten year mortgage on it, because that’s about as long as it will last, given the quality of the construction. He might be exaggerating a little, but not much. He can’t believe financial institutions have given 30 year mortgages on structures that won’t last more than 15 years.
I think you’re on to something here. This is only an N=2, and the weather has been quite frightful in chicago this week, but…
sister in law moved into brand new condo about 10 yrs ago. 1st floor bathroom pipes burst this week and flooded the garage below her, which equals frozen cars and very unhappy tenants.
partner had new construction house built about 7 yrs ago. Woke up Monday to find water pouring in son’s bedroom. He had developed an ice dam in the gutter (which is pretty common in winter in Chicago) but the roof was compromised with it and water started coming in. Drywall apparently was rotted which meant this had been going on for a while and just happened to worsen.
Again, Chicago winters are tough and these things happen from time to time, but with your above comment and what I’ve read on this board the last few years, I think there has been a lot of shoddy new construction. A lot.
There’s always been shoddy construction. 20+ year old shacks already had the defects exposed and remedied at a huge cost of course.
You’re right, but I’ll go out on a limb and say that during the housing mania your chances of getting a lemon house were much higher than say if you had bought new in 1920. Or 1980.
Probably but were the defects as a percentage of new housing greater or less than that of any other time?
And a stick framed(field or shop fabrication) structure with beam joists beats a pre-WW2 firetrap, hands down.
why?
Go read the archives. It’s been discussed over and over again.
My favorite is the new floor joists which are 2×4’s with OSB sandwiched on edge between the two. Yeah, that’s going to last- NOT. Sure, it may be structurally effective right now, but get back to me after it has gotten wet a few times. Oh, but it’s not supposed to get wet! Yeah, I know, but sh!t happens like busted pipes, flooding, etc. Dimensional fir lasts hundreds of years in this area, even when getting wet, but those weak azz OSB floor joists are going to be crumbling in short order. Imagine how expensive it would be to replace all the floor joists in a house. It’s a tear down at that point.
Beam joists aren’t as bad as you make them appear. I’ve done a couple retrofits personally and hornswoggled new ones in right next to existing. Just leave them in place.
I spent a few years as a telephone installer/repairman (woman). There was a newer housing development with houses 1000-1200 sf “starter” homes occupied by mostly young families. I had to be very careful when using a screwdriver on the siding of the house because with very little pressure it would go right through!
I’ve seen new construction here while walking my dog. My dog might live longer. And some huge old trees were removed to build this crap, so we cut down something beautiful that had lived 150 years to construct something sterile and ugly that will last for a a fraction of that time.
In my neighborhood, asking prices are approaching 2006 levels, so this is a tremendous and soul-destroying failure by our financial and political leaders, although they no doubt perceive it as a triumph. Is it me, or does the Tampa Bay Times have a headline on the housing “recovery” almost every week now?
We are a foolish people and we will get what we deserve.
“Despite the strong rebound in South Florida housing prices, 33 percent of its mortgaged residences were deeply underwater in December 2013, according to RealtyTrac.
Among large metropolitan spots, the Miami-Fort Lauderdale-Pompano Beach area had the fifth highest percentage of homes “deeply underwater,” or worth at least 25 percent less than their mortgages.
Other metro areas in that unenviable status were No. 1 Las Vegas, with 41 percent; No. 2 Orlando, with 36 percent; No. 3 Detroit, with 35 percent; and No. 4 Tampa, with 35 percent. Chicago tied with the Miami area at fifth, with 33 percent of its mortgaged homes deeply underwater.
Across Florida, 34 percent of mortgaged homes were heavily upside down, placing it second only to Nevada, which had 38 percent with major negative equity in December 2012.
In Florida, 61 percent of the deeply underwater homes were in the foreclosure process, putting the state second behind Nevada, where 65 percent were facing foreclosure.”
http://www.miamiherald.com/2014/01/09/3859900/south-florida-ranks-high-in-underwater.html
Somebody who bought a tract house in 2005-07 in Wesley Chapel, or in south Hillsborough, probably is still far underwater. I only can speak to my location in south Tampa, where I occasionally look at for-sale flyers as part of my informal dog walk research. I have been seeing such things as a 1,300 square foot house with a $430,000 asking price, which is about where things were back then.
+1
Informative post Ben…Thanks…
What does having a house underwater mean? I can contrast it say with a house that has equity and all the HELOC potential that can be, but really, does an underwater house mean that the mortgage payer is probably gonna thrown in the towel and take the credit/tax hit instead of keep making payments? Note, I am not talking about people in foreclosure. I am wondering what difference in scheme of things to J6P mortgage payer that his/her house is underwater?
For real?????
‘For real?????’
I need talking points with my local banker.
“does an underwater house mean that the mortgage payer is probably gonna thrown in the towel and take the credit/tax hit instead of keep making payments?”
For a long time an underwater house meant that the mortgage payer didn’t pay the mortgage but continued to live in the house or continue collecting rent on the house for years all the while screaming foul for being water boarded into signing the loan papers or cash out refi papers.
As far as the tax hit, did they extend that law for the Deadbeats yet?
I know a few people around me that are underwater (owe more than they can sell for), but will not stop paying and take the hit. They are stuck for now, but they aren’t going to walk.
‘they aren’t going to walk’
Do you know if they anticipate higher prices in the future?
“Do you know if they anticipate higher prices in the future?”
I’m sure of it, because the moment somebody believes they will never recoup the “lost equity” they will bail.
“they will bail”
They will at least hate the house. Some bump in life will give them an excuse to bail.
I’ve seen that quite a bit in my 8 years here in FL. Mostly divorce or illness of self or family member.
Large amounts of underwater borrowers mean that there are large numbers of:
1. People who will simply walk away; and
2. People who decide to continue to pay the mortgage (perhaps they refinanced with HARP, perhaps not).
Group #1 is playing itself out in form of the foreclosure mess.
While Group #2 is still underwater, they will have a hard time selling and moving up (ie. fewer “move-up” buyers), but ALSO, if they lose a job, etc., they can’t simply sell their house to avoid a foreclosure.
What this means is that whatever a “normal” rate of delinquency or foreclosure is in a market, it will be higher than “normal” going forward in any market with lots of underwater borrowers.
Group #2 will diminish with time, as either a) they lose their house to foreclosure after a default, b) home prices rise enough for them to sell, or c) they pay down enough of their loan over time to no longer be underwater.
Until Group #2 is gone, there will be less labor mobility (people can’t sell and move), and there will be higher delinquency/foreclosures than “normal” (people can’t sell and pay off the loan).
I’ve been scouting central Florida. Saw a house yesterday that was listed as concrete block construction. Rotting 2×4s clearly visible in exterior walls where the fake brick was falling off. Fannie owned it. Or should I say we all owned it? Besides the poor quality, many are butt ugly.
When I read this, I knew we were in for another housing crash, and soon:
http://www.tampabay.com/news/business/realestate/sarasota-juggernaut-joins-builder-battle-for-hillsboroughs-resurgent/2159876
The reason being, this builder looks to be coming into South Hillsborough County, which was the last area of Hillsborough County to get hit by the bubble building ugly stick. It has the most undeveloped land. It used to be an area no one was much interested in. That’s why I liked it. Now, not so much.
Anyway, it was the last to develop and first to get hit by the bubble and it looks like history is going to repeat, as evidenced by this article.
What a boob this one guy quoted is, that they’re going after the “family” market because of jobs. Yep, like those $12.00/hour Amazon warehouse jobs are going to support an overpriced POS.
Both that area and southwestern Pasco County were, for lack of a better word, assaulted by sprawl. Back in the old days south Hillsborough was known for little more than Sun City Center and all the retired circus people who lived around Gibsonton.
I have come to the conclusion that many developers and builders just have a different mentality than we do. They aren’t destroying things to replace them with something better; they’re destroying things to get rich. “Better” has nothing to do with it.
‘They aren’t destroying things to replace them with something better; they’re destroying things to get rich. “Better” has nothing to do with it.’
I understand why they do it. They see others getting rich doing it and want a piece. Others just need jobs. A Floridian told me in 1996 that he left FL because jobs sucked and knew people would work for dirt wages back then. He ended up in Asheville where I worked with him. Even in 1996, Florida was showing signs of fatigue. Everything I hear about it, and having the overlap that its climate is like any other southeast climate AFAIAC, Florida has a special fan club that I hope can see nobody goes there because it is too crowded.
You have a problem with $350k houses on $12 per hour? Suzanne said she researched it, and that’s more than enough.
Mr. Banker Sir…..
How many DebtDonkey farms do you own? Your process seems very efficient. How long have you been involved in the DebtDonkey livestock business? And lastly, how is it you’re able to manage throngs of DebtDonkeys considering how utterly stupid they are?
Sincerely,
Housing Analyst
“I am disappointed that the housing recovery quickly mutated into another housing catastrophe just as my young adult sons are looking to buy their first homes. I’m urging my sons to wait before buying since the home prices appear to have peaked, although it doesn’t take much urging. They don’t make enough to qualify for a mortgage at this time. I think prices have already peaked in my community. Now, it’s just a matter of waiting for a new wave of short sales and foreclosures to come on the market.”
It’s a given we’ll see this again within ten years.
“within ten years…”
It is sure to be like bouncing down a flight of stairs. If the frequency was set by the first step down, it won’t be quite as long as ten years.
“WAVE OF EQUITY CREDIT RESETS SPELLS TROUBLE”
http://www.utsandiego.com/news/2013/nov/10/tp-wave-of-equity-credit-resets-spells-trouble/
Phase II of the Housing Bubble Correction
Stay in cash, get out of housing.
“Game Over for Real Estate: Time to Short US Housing Market”
http://www.nomadiccapitalpartners.com/short-us-housing-market/
Housing price declines are racking up fast. The window to exit is shrinking fast.
A letter to the editor:
‘Foreclosure crisis getting worse in Florida
Published: January 9, 2014
Despite the seemingly favorable stories about the economy and real estate, Florida homeowners are now worse off than ever before. Banks continue their culture of mortgage fraud, and foreclosure litigation has become the legal “wild west.”
For example, on a single day more than 90 foreclosure trials were set to occur before one trial judge. But general magistrates have now become empowered to take the homes of Floridians, despite the fact they were not summoned by any electorate.
In yet another judicial circuit, court staff unilaterally communicates with the bank’s counsel, prompting them on what to file in order to advance the case along.
In yet another circuit, homeowners are being denied routine depositions and discovery.
Banks that ignored the court’s rules for years are not being sanctioned. As if that was not bad enough, courts statewide have been bullied into clearing the backlog of foreclosure cases by the Legislature in order to receive funding. Forget your Pollyanna notions of separation of powers among the state’s branches of government.
The foreclosure crisis is not over; it’s not even close to being over. It’s getting worse. Issue saturation has led to apathy among leaders, the media and the populace. But the due process rights of homeowners continue to be further marginalized on a daily basis across our state.
Charles R. Gallagher III
St. Petersburg
The writer is an attorney.
“The foreclosure crisis is not over; it’s not even close to being over.”
Truth.
Millions of debtors underwater, in delinquency or default, haven’t made a payment in years and millions more facing HELOC payments just coming due without two dimes to rub together.
Got Housing Inventory?
“About 36 percent of mortgaged homes in the four-county Orlando area are saddled with home loans that exceed the value of the house by at least 25 percent. Orlando’s rate of these financially troubled residential properties was higher than Florida’s, which was 34 percent. The highest statewide rate was Nevada at 38 percent.
Orlando was approaching the point of having double the proportion of those underwater properties as the country as a whole. Throughout the state, the Lakeland metro area had the greatest saturation of “seriously” underwater houses – 38 percent. Sarasota had the smallest share of those houses – 30 percent.
In addition, the Orlando area had one of the country’s lowest rates of “equity-rich” houses that are worth double the remaining mortgage owed on them.
The amount of housing stock in that category was 11 percent for the metro area, 15 percent for the state and 18 percent for the United States.”
http://www.orlandosentinel.com/business/os-orlando-underwater-homes-20140109,0,1824794.story
What percentage own outright? It must be miniscule. Debt Nation.
“Number of U.S. Mortgages Going Unpaid = 4,594,000″
http://www.dsnews.com/articles/number-of-us-mortgages-going-unpaid-4594000-2013-10-24
For you debt donkeys doubting the amount of empty excess and defaulted housing inventory in the US.
“California – Epicenter of the HELOC Mania”
http://advisorperspectives.com/dshort/guest/Keith-Jurow-131216-HELOC-Resets.php
“Rising mortgage defaults may force FHA to request bailout from Treasury: report”
http://www.washingtontimes.com/news/2013/sep/25/rising-mortgage-defaults-may-force-fha-request-bai/
Mortgage defaults up up up!
“Maine mortgage defaults rose in 2013″
http://www.sunjournal.com/news/1464182#
But but but…. housing is recovering!!
‘waiting to gauge if the market is currently oversaturated…The market will now have to contend with the likely influx of several thousand new units over the next few years, even as employment growth remains stagnant’
The article goes on to say that rental vacancies are going up. So we have “investors” paying around a million bucks so they can rent these air boxes out? To who, bartenders? And many thousands more units underway.
I recall a few years ago how silly these Miami condo projects looked on the buyers end. Now people are piling in. Jeebus, this isn’t even real estate!
Anyway, when you start to see articles with the word glut in the title, the end is in sight.
‘According to Seattle-based, online real-estate brokerage Redfin, more than 40 percent of homes sold from May to July went for above the asking price. In December, just under a quarter did.’
“As we head into 2014, we will be starting the year with a shortage or low inventory in the price ranges where approximately 90 percent of sales activity is taking place,” J. Lennox Scott, CEO of John L. Scott Real Estate, said in a statement.’
‘The one exception may be Snohomish County, although it’s too early to tell.’
‘Last month, according to the MLS, the number of homes and condominiums listed for sale there leapt 44 percent, while closed sales were down 2 percent, far more than expected.’
http://seattletimes.com/html/businesstechnology/2022608923_homesalesxml.html
It’s to early to tell? Look at the people running for those hills over there.
“Shadow REO’: As Many as 90% of Foreclosed Properties Held Off the Market, Estimates Suggest”
http://realestate.aol.com/blog/2012/07/13/shadow-reo-as-much-as-90-percent-of-foreclosed-properties-are-h/
As of October 2012, MILLIONS of excess empty houses sat. Where did they go? They’re still sitting there….. some of them occupied.
“Vital Signs: Housing Inventory Remains Spacious”
http://blogs.wsj.com/economics/2013/11/06/vital-signs-housing-inventory-remains-spacious/
Per the article, a whopping 13 MILLION houses sit empty.
Required viewing for all of those thinking about “buying” in Florida.
http://www.youtube.com/watch?v=DPL4guf4BV4
Dear and banker
Should I refi my used car
36,48,72 months