The Hedge Funds And Cash Buyers Have Gone
The Miami News Times reports from Florida. “It’s not exactly a secret that Miami’s latest unhinged condo boom is being fueled by foreign money, but the exact number of new residential units being bought in downtown by those from abroad is eye-popping. According to a not-yet-released report from consulting firm Integra Realty Resources for the Miami Downtown Development Authority that was obtained early by the Wall Street Journal, ‘90 percent of the buyers of new residential units are from abroad.’”
The Miami Herald. “Sales of existing condos have slumped for three months in a row in Miami-Dade, and prices have moderated in 2014 after years of torrid gains, according to the Miami Association of Realtors. Cash purchases — which often signal investor deals — have been on the decline. ‘We’ve seen a real slowdown in buyer activity in the past few months,’ said Mark Zilbert,CEO of Zilbert International Realty in Miami Beach, whose firm focuses on higher-end coastal properties.”
“The median period of time to sell a condo has increased to 61 days from 44 a year ago, and listings are fetching 94.5 percent of original asking price on average, down from 96.9 percent a year ago, the Miami Realtors said. ‘I don’t think there is anything to worry about at the moment,” said Francisco Angulo, who is residential president of Miami Realtors. ‘Wall Street [similarly] goes up and down. We shouldn’t be panicky.” A bit of stabilization after the protracted run-up in prices is ‘healthy,’ said Angulo.”
“The spurt in condo construction is providing stiff competition for the existing inventory, Realtors say. And a lot more unit owners have put their condos on the market to take advantage of the price increases. The supply of existing condos swelled 34.4 percent to 10,967 units — a 7.8-month supply. Zilbert said among higher-end coastal condos, there is 12 to 14 months’ supply of inventory.”
The Tampa Bay Tribune. “The June housing report released Tuesday by Florida Realtors paints a fairly bright picture of the market here with more closed sales and better median housing prices than the Tampa metro area saw a year ago. And for buyers, there is slightly less pressure, since the cash buyers and the hedge fund companies that were snapping up properties for rental have backed away from the area, one consultant said.”
“‘The institutional buyers — the hedge funds buying everything to turn them in to rentals — and the cash buyers have gone,’ said Tony Gonzalez, a Tampa residential real estate consultant and Realtor for Keller Williams.”
“The area’s residential real estate market is a bit more stable now and buyers have some breathing room to decide what is the best property for them, instead of having to race to the table with an offer, Gonzalez said. Statewide, inventory is up 21.7 percent, with 108,046 single family homes on the market in June, compared to 88,746 in June 2013, Florida Realtors reports.”
The Orlando Sentinel. “In Metropolitan Orlando, foreclosure legal filings increased 20 percent in June from a year ago and the region ranked second nationally for its foreclosure rate in June, according to RealtyTrac. And the amount of activity also increased for nearby Volusia and Polk counties last month from a year earlier. Orlando’s deeper dive into foreclosure during the last year may reflect lenders’ increasing impatience with holding onto the properties. They may be less interested in sitting on vacant residential asset pools at a time when homes are no longer increasing in value as much as they did in the past, said Daren Blomquist, VP of RealtyTrac.”
“‘It’s a reflection that even while the foreclosure starts are down, more people who have been in foreclosure are now going to the auction block and losing their homes,’ Blomquist said. “Certainly the slower home-price appreciation means that banks have less to gain by holding onto foreclosures for a longer period of time.’”
“One thing that is certain for Orlando is that its mounting volume of foreclosures does not indicate that homebuyers who purchased in recent years are the ones getting into trouble now. RealtyTrac analyzed the recent foreclosures in the metro area and found that 60 percent of houses that received a notice during June were saddled with mortgages originated in the boom years of 2005, 2006 and 2007. Of the Orlando-area properties that got foreclosure notices in June, only 6 percent had been financed with mortgages approved during the past three years.”
The Herald Tribune. “Southwest Florida continued to distance itself from the foreclosure crisis in the second quarter, with defaults lower than in the first three months of 2014 and in the same period last year. But because there are more defaults stuck in the local court system that will soon be scheduled for auction, the housing market could see another wave of discounted bank inventory — at a time when tight supply has lifted prices to post-recession highs.”
“‘We had the biggest mess of all of the states, and we still have more foreclosures than anyone else, but the numbers are trending down,’ said Jack McCabe, a Florida real estate consultant. ‘The amount of housing assets the banks are sitting on is amazing.’”
From Florida Today. “‘Zombie’ swimming pools at homes in foreclosure soon morph to algae-caked cesspools, inviting habitats for the species of mosquitoes that spread agonizing and sometimes fatal viral diseases such as dengue fever and chikungunya. Both diseases have been inching in on east Central Florida. This past week, state health officials reported the first cases of chikungunya contracted in the United States: one in Miami-Dade County, the other in Palm Beach County.”
“‘It’s just sitting there, festering,’ said Mary Ellen Maciejczyk, who lives next to a ‘zombie’ pool in Suntree. ‘It’s turning into mud right now. It’s black as tar, and there’s mold on top of that.’ The zombie house next to Maciejczyk’s home is set to go on the auction block in August. But that’s happened before, only to have the sale canceled at the last minute.”
“Zombie houses — abandoned by the owners, but still not reclaimed by banks — pose a daunting challenge to mosquito control, code enforcement and other local government agencies. The problem may have grown worse, county officials say, as some foreclosures dragged on for years. More than 8,100 properties in Brevard are in some form of foreclosure, according to county Clerk of Court estimates.”
“‘It’s a huge problem since the recession started,’ said Chris Richmond, operations manager for Brevard County Mosquito Control. ‘The increase in foreclosures just compounded the problem. They’re everywhere, even in the nice neighborhoods,’ Richmond said of the zombie pools.”
‘90 percent of the buyers of new residential units are from abroad.’
Does this kind of news erode political support for a future bailout of recent buyers when prices of owner-occupied housing eventually revert to fundamental value?
Why would it? Our politicians like to import illegal immigrants, some of them terrorists, and set them up as benefactors of the fruits of American citizens’ labor, so I don’t see any reason why they wouldn’t bail out communist speculators. Seems par for the course, IMO.
I would depend on whether banks are affected. I don’t think bailing out buyers ever has been on the agenda. Bailing out irresponsible financial institutions, however, is and will remain front-and-center.
Correct answer!
“‘The institutional buyers — the hedge funds buying everything to turn them in to rentals — and the cash buyers have gone,’ said Tony Gonzalez, a Tampa residential real estate consultant and Realtor for Keller Williams.”
Who is left in the game to drive prices from current to ever-higher levels?
There weren’t that many “cash buyers” in the first place. It was a false narrative (lie) by realtors to create a sense of urgency.
Realtors really need a new play book.
It’s also good to bear in mind that using cash to make a purchase does not rule out the possibility the cash used represents the proceeds of a loan.
Precisely.
Let’s also define “cash” shall we? Otherwise known as margin loans or investor money (also, money off margin). A poor man’s definition of “cash” is really just “leverage”. BTW, want to have a mini coronary …? check the most recent debt clock. That’s a red number show.
(crickets)
Not to mention mosquitoes, at least in FL.
How do we manage to continue to see increases in volume and median price in Broward and Palm Beach? It doesn’t make sense to me.
‘The inventory of single-family homes on the Multiple Listing Service rose 48 percent in June to 6,044 from 4,093 a year earlier.’
‘Condos also are more plentiful, as the June inventory for sale swelled 35 percent from a year earlier to 7,899 units, Greater Fort Lauderdale Realtors said.’
‘Sales of foreclosed single-family homes in Broward rose by 15 percent year over year, and sales of foreclosed condos increased 6 percent, as lenders continued to slog through a mountain of distressed properties in Broward.’
From the same article:
““The amount of homes that are going up for sale is rising steadily, and those prices continue to rise hand in hand,”
Clearly that can’t happen forever.
I just don’t know what got us back here in the first place. Our small home out west would command $200K today while I had no issue picking it up for $80K in 4/2012. While I’d be happy to take my profit and run, where would I go?
The answer is obvious. Rent for half the monthly cost.
And for as long as the realtor and mortgage fraud continues, it will “last forever”.
My mortgage payment is $0. My taxes are $2,000 yearly and my insurance is $1,400 yearly. Where exactly am I going to rent for $300 per month?
That’s right HA, I could have continued to earn $100 or so in interest each month on that money.
So Where exactly am I going to rent for $400 per month?
But then there’s maintaining my home. Let’s call it another $100.
So Where exactly am I going to rent for $500 per month?
Now add in the losses your house represents. Remember…… Houses represent debt and losses.
So let’s say the value goes to 0 in 20 years which clearly won’t happen.
Where am I going to rent for $833 and get 3 bedrooms on 2 acres?
What’s a couple acres worth? $1000/per acre at best? The structure is worth what….. $25/sqft at best? You’re barely up to $38k. Add in well and septic and you’re at $45k. You paid $80k. That difference is your loss.You overpaid.
Well and septic put in for $7,000?!?!? Hardly, if prices fall to what you’re outlining above you’d be lucky to to get anyone to pay more than a grand and a half for the whole job. Remember 2008 when the economy was collapsing? I could get a lot of services/contracting for more than HALF off current prices.
“What’s a couple acres worth? $1000/per acre at best? The structure is worth what….. $25/sqft at best? You’re barely up to $38k. Add in well and septic and you’re at $45k. You paid $80k. That difference is your loss.You overpaid.”
C’mon, I like your message but your numbers are wildly inaccurate for some places. You can’t value timberland at $1k per acre. There are huge trees in my area. And farmland ain’t cheap, either. $7k to install both well and septic? Keep dreaming. You can’t even get the septic installed for that, and that’s a basic gravity system. If it doesn’t perc for that, start adding by the thousands. The cheapest dirt guy (and do you want to use the cheapest?) in the area is going to be roughly $9k on a gravity, and for mound it can go all the way up to $25k or more, depending upon the site and system.
You can get 5 bids for each, and you’re still not going to get a well and 4 bedroom septic installed for less than $20k, and you’re likely going to be close to $25k for the cheapest guys around (again, do you really want to use those guys?). The well requires 6 inch steel casing, and they’re roughly 200′ deep around here. That’s pretty much $15k which doesn’t include finishing it off. To finish it off with a stainless 2 hp pump and end, flat wire, torque arrestors, pitless adapter, basic cycle stop valve, plumbing, pressure tank, regulator, switch, etc. is another $3,000 minimum (for the cheapest guys). We haven’t even talked about the electrician.
Asset bubble inflation has overpriced EVERYTHING. NOW is not the time to build or buy. 2008 - 09 was better but still high. They key is to buy during a fire sale. This ain’t no fire sale.
False Guillotine….
$1000 an acre anywhere in New England or Mid-Atlantic and you’re paying too much. Look for yourself.
Secondly, let’s do a take off on a standard BOHA accepted system.
1000 gal precast tank- $1200 delivered and flown in hole
200′ of SDR perforated pipe 1.50/ft or $300
2 Triaxles of Pea gravel, $800
Operator and shovel, $1500/day x 1 day
Septic= Less than $5k. Now what’s a 20 year old septic worth? 2k? 3k tops?
As far as wells go, the materials are nothing. The big expense is roller bitting bedrock. If you’re paying more than $20/ft your paying too much.
Who’s left in the game? Why Janet, of course! She’s the only “real estate consultant” your grand kids will ever need.
‘A dangerous housing bubble could develop if interest rates are kept at their historic lows for too long, Mark Carney has warned in his latest hint about an impending change to monetary policy. The Governor of the Bank of England said that interest rates will be “materially lower” in the medium term than they have been historically, but warned that a rise will have to happen soon to avoid “other risks” developing.’
“The clearest indication of when rates will rise is when they rise,” he said.’
“The Bank is well aware that a prolonged period of historically low interest rates could encourage other risks to develop,” said Mr Carney. “In the UK, the biggest risks are associated with the housing market.”
That guy’s modus operandi is to encourage dangerous housing bubbles. The fact that he publicly would make those statements, faint-hearted as they are, tells me that he knows what’s coming.
Afetr living in Cyprus for the last five years, I’m very pleased that Ben posts so many real estate stories from overseas.
Unfortunately it’s all tied together now so one crashing countrys’ market can greatly impact another country half a world away.
“‘Zombie’ swimming pools at homes in foreclosure soon morph to algae-caked cesspools, inviting habitats for the species of mosquitoes that spread agonizing and sometimes fatal viral diseases such as dengue fever and chikungunya. Both diseases have been inching in on east Central Florida. This past week, state health officials reported the first cases of chikungunya contracted in the United States: one in Miami-Dade County, the other in Palm Beach County.”
I remember stories of algae-covered swimming pools published many years back, but this is the first one I recall explicitly mentioning the public health hazard created when banks fail to claim the collateral on defaulted mortgages.
“… when banks fail to claim the collateral on defaulted mortgages.”
Hey, don’t blame the banks. It wasn’t the banks that lined up to buy these things, all the banks did was float them loans.
If you want to go after somebody then go after the idiots that signed the dotted lines.
Whatever happened to “people are smart” ?
You’re letting your guard down, Mr. Banker….
It was widely mentioned starting back in 09. Public Health departments have people that go around peaking over fences looking for untreated and neglected pools. West Nile is no picnic. I know a gal who had that a year ago and she is still recovering. places in the south, midwest, Southeast are gonna be more aware than places that don’t have as many misquitos.
Running out of water in places that don’t have mosquito’s is a far greater financial loss than a mosquito borne illness.
It’s about to git realz in So. Cal.
I remember seeing an abandoned large house in my neighborhood in 2009. I peeked over the wall, and saw a foul green pool. My ex-brother-in-law cleaned pools for a living and would tell similar stories.
I chose to vaccinate myself against yellow fever about a decade ago, just in case it ever comes back here. Tampa did have an epidemic in 1887.
But people in real estate are such nice folks… http://www.sfgate.com/news/texas/article/Troubled-NYC-real-estate-heir-arrested-in-Texas-5638447.php
‘Of the Orlando-area properties that got foreclosure notices in June, only 6 percent had been financed with mortgages approved during the past three years’
The second highest metro foreclosure rate in the country and 6% were from the past 3 years? Here it comes.
The past 3 years represented some rather low prices. I can only imagine what’s going to happen with the loans issued right now. No joke I have a file on my desk of someone buying a 1980’s 1606 square foot house for $249K. What will they do when the neighbor’s house sells for $100K in 3 years?
Round and round we go.
Not really. Prices for resale housing 2008-2013 were 2x-3x higher than reproduction costs and long term historical prices.
I don’t know why I bother, but you are so anti-ownership and so pro living in your mother’s basement that you won’t allow yourself to be concerned with things like facts.
My home was built in 1994. Original purchase price, $80,480. My home changed hands in 2001 for $109,000. It changed hands in 2005 for $236,000. It was foreclosed in 2011 and sold for $80,000 in 2012 to me. Mine is a typical story.
And the scary part is with a foreclosure barely 5 years old on my credit report, I get home equity loan offers almost daily.
Your personal situation isn’t going to change much for me or anyone else. But if HELOC’s are being pushed out to poor credit risks, that’s a different matter. Like seeing 6% or foreclosures in Orlando being 3 years old or newer. How the heck do you go into foreclosure with what’s happened in housing the past 2 years?
Were you around a few years ago, when stuff started hitting the fan? Posters started telling us, “oh crap, I lost my job.”
“How the heck do you go into foreclosure with what’s happened in housing the past 2 years?”
I wonder if a lot of these people also levered up from other sources of easy money over the last few years in addition to housing. A couple of new cars at 125% LTV, a few “no interest for 6 mos” appliances, etc. That can eat into housing gains and cash for closing costs.
Been through all of it Ben. I’ve been posting off and on in between as well. From my first home purchase (rental from the bank) to my present for cash.
It’s like all is forgiven on the credit front. I can’t tell you the kind of offers I get.
I think you may be overstating the “looseness” of credit.
You own your house free and clear.
Any HELOC would be in first position, not a second.
With that collateral, I’d have a hard time seeing why a lender wouldn’t provide you a secured line for some amount–regardless of your foreclosure history.
“you are so anti-ownership and so pro living in your mother’s basement that you won’t allow yourself to be concerned with things like facts.”
Really? That’s your excuse for paying 2x long term trend? It’s not my problem bud. It’s yours. It’s not a matter of me or what I think. You paid 2x long term trend. Deal with it.
‘JACKSONVILLE, Florida. — Michelle DeMello’s story is like many Americans. She worked her entire life, but a health problem left her unable to pay her mortgage. After negotiating a short sale with Wells Fargo, Demello said the bank foreclosed on her house anyway. It’s called dual tracking, and it’s illegal.’
‘DeMello was left without a home and the word “foreclosure” was stamped on her credit report across all three credit agencies. “It destroyed my credit. I was devastated,” she said.’
‘After more than four years of battles, DeMello filed a federal lawsuit to force the credit agencies to remove the foreclosure from her file. She wants her story to help other Floridians who feel they’re being held hostage by their credit score.’
“It’s not the end of the world. It may feel like it is. I’ve cried many tears, but you can fight this,” DeMello says.’
We all make mistakes at some point. That unfortunate “stamp” on your credit is supposed to help you make a better decision in the 3 - 7 year future window.
I’ve read stories about people who’ve gone bankrupt. But they still get credit card offers.
how many years did she live for free?
Guess she wants that credit score whitewashed ASAP because she’s missing out on the rebubble! Though it seems like a distinction without much of a difference -
Short Sale: “May be considered to be a derogatory mark on your credit… Some non-HAFA clients report FICO score drops from 50 points to 130 points.”
Foreclosure: “Myfico.com shows 2 examples in which a credit score could fall 105 points to 160 points after a foreclosure.”
The unfortunate irony here is that those who FB or short sold are prepping to jump back in when prices are way to high. Basically setting them up for the same problem they just exited. Rinse and repeat!
‘A Miami real estate agent and former tenant of a home are in the middle of a dispute with squatters. The unwanted guests have changed the locks on the home and are refusing to leave. They claim to have a lease for the house located at 4868 S.W. Fifth St., which is in the process of being sold.’
‘A young mother currently lives in the home, but Realtor Sandra Metrakos said it is not her or her relatives’ house and that the woman and her family are squatters. “They don’t belong here,” said Metrakos.’
‘The house is currently owned by a man who no longer lives in the residence and has a short sale in the works. For approximately two years, William Ruiz has been renting the home but recently decided to move out. “I had packed everything away. I took some of my stuff out, but I went on vacation,” he said. “When I came back a week later, the locks were changed, and somebody answered the door and said they rented the house.”
‘Ruiz’s belongings are still in the home and Metrakos said she did not rent out the house to anyone. “The lock box is gone, the locks are changed, and they claim that they leased that,” said Metrakos.’
‘The owner of the property cannot get the family out of the home, let alone enter the house. “Why is it that a squatter is allowed to stay in there, then my seller has to be pushed against the wall and spend money on evictions on squatters?” said Metrakos.’
‘The house is due to go into foreclosure at the end of July.’
A friend has a rental house that had been the responsibility of her late husband. The neighbors recently called and informed my friend that the house was being occupied by squatters. And that it had been turned into a drug den.
Friend and her son got the squatters out. They’re now fixing the place up so they can sell it and be done with it.
Why is it that a squatter is allowed to stay in there,”
Sounds like what they do in Mexico. I wonder when they will be stealing utilities ?
New business for you Ben, evicting Squatters when law enforcement doesn’t want to and courts are too slow.
One poster was saying here recently that what’s going on now doesn’t qualify as a bubble:
‘It is the latest stage in a remarkable turnaround for the Miami condo market, where many of the 22,200 units built during the previous boom sat empty for years after the housing bubble burst. When prices plummeted, cash-paying buyers—mainly from Latin America, but also from Canada, Russia and Europe—began snapping them up, and the units now have been almost entirely absorbed.’
“We’re basically running out of waterfront properties for high-density development in Miami,” said Robert Given, a broker with CBRE Inc. who co-represented Mr. Colombo and his partners in the deal. The price paid for the 1.25-acre plot of land is believed to be the highest ever paid for a a piece of undeveloped land in Miami in terms of price per developable square foot. The price “beats anything we’ve ever been involved in or seen” in the city, Mr. Given said.’
‘Prices for condos built during the 2003-to-2008 boom have increased about 75% over the past two years, to $400 a square foot from $230, the study found. Units currently under construction typically cost $450 to $550 a square foot. And those in projects that haven’t yet broken ground are averaging $550 to $675 a square foot. Brokers estimate that condos on the Epic site could fetch as high as $1,000 a square foot.’
‘At the height of the most-recent real-estate boom, the priciest condos sold for $650 to $800 a square foot, Mr. Graziano said.’
‘The past year has seen a series of deals in which developers have shown a willingness to pay tens of millions of dollars an acre for unbuilt land. Last July, Swire Properties Inc., a subsidiary of a Hong Kong-based commercial developer that is building Brickell City Centre, an enormous mixed-use project in downtown Miami, paid $64 million for 1.55 acres at 700 Brickell Avenue.’
‘Four months later, the Related Group, chaired by Jorge Perez, a billionaire developer and minority owner of the Miami Dolphins, paid $104 million for a four-acre site at 444 Brickell Ave., a downtown site near the Epic site. And a few blocks away, at the corner of Biscayne Boulevard and NE 3rd Street, multiple bidders have offered more than $80 million for two acres of land next to a Holiday Inn.’
‘There are now 14 towers with more than 4,000 units under construction in the downtown area, said Peter Zalewski, principal at CraneSpotters.com, which closely tracks condo developments in South Florida. Another 44 towers with roughly 13,500 units have been proposed, he said.’
“The Miami market has turned around 180 degrees in record time,” Mr. Colombo, the developer, said. “There is a humongous shortage of land. On the waterfront, there’s none left. Every hole you see on the map now is being filled.”
The number I heard during the bubble was that there were 50,000 condo units being built in Miami. Over the prior decade there were 10,000 built.
Puts in perspective units built today. “Normal” was NOT 2005-2007.
ever been to S Miami
freak show
I never even want to see it on youtube again
I drove from Fort Lauderdale through Miami on I-95 back in 2006, and the skyline was like something out of science fiction, with huge cranes — to me, each one looked like a gigantic preying mantis — building immensely tall condominium buildings, some more than fifty stories tall. One was the ICON building, which featured Easter Island-style moai statues as support pillars.
Glad to see we’re firing that up again.
both headlines on yahoo finance =orwelian
MarketWatch
Fannie Mae slashes forecast for new-home market
U.S. housing turning the corner, inflation creeping up