September 18, 2014

A New Breed Of Investor Moving Into A New Paradigm

The National Post reports on Florida. “Lured mostly by cheap prices, Canadians spent $2.2-billion on Florida real estate last year, easily making them the Sunshine State’s No. 1 international buyer of real estate. ‘We went down there on a holiday and prices were so damn low, I said to my wife ‘let’s buy,’ said Jerry Jarson, a 74-year-old retiree from Shanty Bay, Ont. The former air force officer and lawyer bought a condo two years ago in Cape Coral for US$79,900. He estimates its value has risen US$39,000 in two years. Mr. Jarson said he was able to use the equity in his Canadian home to buy his condo. ‘We never had any money but the bank has lots,’ he said about the line of credit on his Canadian home he was able to use to finance the purchase.”

The Washington Post. “Forget mortgages. In areas like Miami, the rise in foreclosures and other distressed properties attracted moneyed investors and foreign buyers who used their cash to buy homes at firesale prices. Miami’s share of cash sales hit 70 percent in 2011 and 2012, according to CoreLogic. As we reported last year, real estate executives said institutional investors — who in some cases are bidding on hundreds of homes a day — accounted for as much as 70 percent of sales in some Florida markets.”

The Miami Times. “Industry experts agree that with markets moving as rapidly as they are in South Florida, it’s only natural for people to ask if we’re in the midst of a land price bubble. ‘Miami is moving into a new dynamic, and historical perspectives will be non-relevant moving into a new paradigm,’ said CBRE Managing Director Ken Krasnow. ‘We have a new breed of investor who looks at the demand drivers,’ he said. ‘There’s a deep demand pool out there.’”

“Not everyone is sanguine about the rising cost of land, however. Demand will remain high for at least a few years, mainly because of population growth, but the trend will not last forever, said Jack McCabe, real estate analyst and CEO of McCabe Research & Consulting. In fact, he is concerned about a global recession in 2017 if not before and worries that people have short memories of what Miami – along with the rest of the country – went through not that long ago.”

“Mr. McCabe said flight capital from Latin America is inflating land and residential prices. ‘It doesn’t matter to many people fleeing distressed counties how much they pay because they just need to get their capital out of some of these countries,’ he said. ‘Will this flight capital continue to come to Miami? We don’t know.’ Mr. McCabe said Miami has the highest foreclosure rate among the nation’s largest metropolitan areas. ‘This is a very abnormal market,’ he said, ‘propped up by flight capital.’”

The Orlando Sentinel. “Home prices in the core Orlando market took a seasonal dip in August, dropping from a midpoint of $170,950 in July to $165,000 last month, according to the Orlando Regional Realtor Association. Prices typically soften after the peak of the summer buying season, but association officials said the decline was also the result of a large number of distress properties selling last month. ‘Closings on foreclosures jumped 30 percent in August,’ said association Chairman Zola Szerencses. ‘Foreclosures tend to carry discounted price tags — great opportunities for buyers — so the cumulative effect of all these sales is a restraint on the median price.’”

“The volume of sales was down, with 2,449 houses selling in August — a decline from both a month earlier and a year earlier. One concern for prices in the future is the prospect of inventory levels increasing to the point that the Orlando market becomes more of a buyers’ market than it has been during the recovery of recent years. The core Orlando market had a 5.4-month supply of homes on the market — the highest level since January 2012.”

The Sun Sentinel. “Lenders filed 238 foreclosures last month in Palm Beach County, up 10 percent from a year earlier, according to RealtyTrac. Broward filings jumped 26 percent. Scheduled auctions — when a judge sets a date for a home to be repossessed — also increased in both counties. After years of foreclosure backlogs, existing cases are moving swiftly through the courts, observers say. Jerry Tepps, a foreclosure defense lawyer in Palm Beach and Broward counties, said courts are hiring retired judges and administrators to ‘make things happen.’”

“Tepps has a few cases that will be resolved this year, only months after they were filed. ‘It used to be three or four years before they were over with,’ he said. ‘The court system has become much more aggressive in applying resources than it ever has before.’”

The Saint Peters Blog. “In the last year, foreclosure judges in Florida have been working under explicit guidelines from both the state Legislature and Supreme Court to clear court dockets by tying up old cases, mainly by giving banks tens of thousands of homes statewide. The objective of the Florida Supreme Court was to dispose of 256,000 cases every year for three years of the program, writes Alison Fitzgerald of the Center for Public Integrity. ‘They just slam the defendants,’ said attorney Margery Golant, who practices in Palm Beach and Broward Counties. ‘They deny them their rights; have hearings in absentia and just flush them down the garbage disposal.’”

“Undeniably, most unresolved cases involve homeowners who are unable to pay and are not fighting foreclosure. Many have already left their homes.”

The Tampa Bay Times. “Ricardo Lopez could barely contain his fury as he walked from the St. Petersburg courtroom in late July after Judge Karl Grube for the second time in five months set a date to sell his family home. ‘How can this happen? He didn’t even listen to you. This is a total fraud!’ the 12-year St. Petersburg police officer fumed as he paced around Matt Weidner, his lawyer, in the courthouse hallway while his wife sat rigidly behind sunglasses on a nearby bench and his two small kids’ wide eyes took in the scene. ‘I could go in and arrest that lawyer. I can call the economic crimes unit right now,’ he offered, brandishing his cell phone.’

“Lopez got to this point because he was injured in 2009, missed two months of work and got behind on his payments to JPMorgan Chase. As he recovered and began paying, he says, the bank allocated the money to his past due debt, late fees and other charges. He tried to send something extra each month, but no matter what, he remained more than 90 days late. ‘It was never an issue of can we afford the house,’ he said. ‘They wouldn’t make anything current. It was constantly past due.’”

“Finally, he stopped paying, and asked for a loan modification. At the trial in March, Weidner argued that JPMorgan couldn’t foreclose because it didn’t have an original promissory note, the only original document required in a foreclosure trial. Grube disregarded the discrepancies and allowed the document into evidence. ‘So we’re making a factual determination that this is, in fact, the original?’ Weidner asked. ‘Overruled, sir,’ Grube responded. Lopez is racing the calendar while negotiating with Bayview mortgage in hopes of keeping his home. There’s still an order in the St. Petersburg courthouse to sell his home on Sept. 29.”

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Comment by Housing Analyst
2014-09-18 04:16:39

” ‘We never had any money but the bank has lots,’ ” and he’s from “Shanty Bay’.

And he will never have money and will live and die in a depreciating shanty.


Comment by Puggs
2014-09-18 09:23:39

Classic OPM syndrome.

Comment by Ella58
2014-09-18 11:48:36

“We never had any money but the bank has lots.”

Best quote of the rebubble. That deserves the Golden Bubble trophy, at the semi-decadal HBB Awards Show called “The Crashies.”

Comment by Whac-A-Bubble™
2014-09-18 05:01:57

Florida…land price bubble!? How do people come up with such crazy notions?

Comment by Whac-A-Bubble™
2014-09-18 05:38:23

In fact, he is concerned about a global recession in 2017 if not before and worries that people have short memories of what Miami – along with the rest of the country – went through not that long ago.

Why 2017? Is there any special reason that should be the year a global recession will happen?

China’s Slowdown Seen Yet to Bottom Even After PBOC Acts

By Bloomberg News Sep 18, 2014 3:42 AM PT

China’s growth trajectory is still pointing down, even after an $81 billion liquidity injection.

The People’s Bank of China move to provide 500 billion yuan of three-month funds to the nation’s five largest banks will help overcome any pre-holiday cash crunch, though is unlikely to move the needle on gross domestic product, according to economists at banks including Barclays Plc.

Eurozone’s Economy Stagnates in Second Quarter
Decline in Investment Spending, Inventories Offset a Pickup in Consumer Spending, Exports
By Paul Hannon
Sept. 5, 2014 5:08 a.m. ET

Pickups in consumer spending and exports were offset by declines in investment spending and inventories to leave the eurozone’s economy stagnant in the second quarter, while an unusually large decline in construction also played its part.

BoJ holds off fresh stimulus despite slowdown
The April-June quarter saw Japan’s economy suffer its deepest contraction since the 2011 quake and tsunami owing to the sales tax hike
Published: 19:22 September 4, 2014
Gulf News

Tokyo: The Bank of Japan’s chief on Thursday stuck by his rosy view of the economy despite mounting evidence that an April sales tax hike has stalled growth.

Haruhiko Kuroda’s upbeat take on the world’s number three economy has appeared increasingly at odds with the official data, but he brushed off questions about the apparent gap after a meeting where policymakers held fire on launching more stimulus.

“Although there has been a bit of weak data, there is also a favourable cycle of rising income and spending in households and the corporate sector,” he told reporters in Tokyo.

“So, the impact of the tax rise and the broader economic trends — excluding the impact of the hike — should be looked at separately.”

Economy Sep 16, 2014
India’s export growth at 5-month low in August due to slowdown in Europe
New Delhi: Growth rate of India’s exports slipped to 5-month low of 2.35 per cent in August at $26.95 billion, pushing up the trade deficit to $10.83 billion.

Gold imports jumped significantly to $2.03 billion last month, from $738.7 million a year ago.

Exporters body FIEO attributed the poor performance of exports to slowdown in European markets.

“The situation in EU is still bad. The exporters are waiting for the new foreign trade policy. We are expecting measures to boost exports,” FIEO president Rafeeq Ahmed said.

Comment by Puggs
2014-09-18 09:28:03

If you think back to the last epic recession it took a good two years for things to REALLY unwind. A good chunk of reliable economists and this blog saw the impending doom in 2006. I couldn’t believe people were still paying what they were for houses in Spring of 2007 when it was clear overvaluation was not just a concept.

Comment by Whac-A-Bubble™
2014-09-18 19:33:44

The global economy is walking on the edge of the abyss, with only stimulus to prevent it tipping over the precipice.

Comment by Ben Jones
2014-09-18 05:51:59

“Zombie” Homes Haunt Florida Neighborhoods”

By Alison Fitzgerald, Center for Public Integrity

These people are pissed when the foreclosures happen or don’t happen.

Comment by Ben Jones
2014-09-18 05:54:08

‘The Federal Reserve Wednesday reassured investors that it will hold interest rates near zero for a “considerable time” after it ends the bond-buying program known as quantitative easing in October. In response, the Dow Jones Industrial Average closed at a new record high.’

‘Former Director of the Office of Management and Budget and author of the book, The Great Deformation, David Stockman, has significant concerns about that very policy. “I’m worried… that we’ve got the greatest bubble created by a central bank in human history,” he told Yahoo Finance.’

‘Stockman blamed Fed policy for creating that madness. “We have been shoving zero-cost money into the financial markets for 6-years running,” he said. “That’s the kerosene that drives speculative trading – the carry trades. That’s what the gamblers use to fund their position as they move from one momentum play and trade to another.”

‘And that, he says, is not sustainable. While Stockman believes tech stocks are especially overvalued, he warns that it’s not just tech valuations that are inflated. “Everything’s massively overvalued, and it’s predicated on zero-cost overnight money that continues these carry trades; It can’t continue.”

Comment by Guillotine Renovator
2014-09-18 21:19:12

It seems to be able to continue for a long, long time, perhaps until we’re dead?

Comment by Whac-A-Bubble™
2014-09-18 22:56:41

I think that’s generally the goal: To keep the balls in the air until we’re all dead.

Comment by Ben Jones
2014-09-18 06:17:58

‘The median household income in South Florida fell 5.8 percent in five years, the data show. Pay here ranked almost last among the 25 largest metro areas at $46,946 in 2013. Only Tampa was lower: $45,880. Granted, income has fallen in all 25 metro areas except Pittsburgh, but only six have fallen faster than Broward, Palm Beach and Miami-Dade counties.’

‘The news contrasts sharply with almost daily reports about the strength of the local economy. Unemployment has fallen from 10.7 percent in 2009 to 6.2 percent in July. The value of goods and services produced has grown for four straight years.’

‘And yet, the amount we spend on food, clothing and other necessities keeps going up, eating away at that dwindling paycheck like Giant African Land Snails on a stucco house.’

Comment by Whac-A-Bubble™
2014-09-18 06:23:07

‘Granted, income has fallen in all 25 metro areas except Pittsburgh, but only six have fallen faster than Broward, Palm Beach and Miami-Dade counties.’

And yet residential real estate values are back up through the roof.


Comment by In Colorado
2014-09-18 11:12:05

Tamer Mahfouz, 21, is one of those working part-time. He works 30 hours a week teaching martial arts

He gets paid to do that? In my experience, there is only one person who gets paid to teach martial arts: the owner of the dojo. All the other teachers are junior level black belts at the dojo, and they are expected to teach for free.

Comment by Ben Jones
2014-09-18 06:19:20

‘This week Miami Beach was named both Florida’s most livable city and its most dangerous city by different websites. Of course, the site’s assertion that Miami Beach residents have a “1 in 9″ chance of being a victim of being a victim of crime is completely disingenuous. A significant amount of those violent crimes are committed against tourists (at times by other tourists), and and property crimes include everything from vandalism of public property to someone stealing something from a hotel room.’

Comment by iftheshoefits
2014-09-18 08:52:36

So is it more or less dangerous now that Michael Westen and Fiona are gone?

I loved the BN episode (ca 2009 or 2009) where in Michael’s narrative he described how empty condo towers were excellent to use as resources for meeting and surveillance. The script writers used what they were blessed with and worked it right in.

Comment by In Colorado
2014-09-18 11:16:20

I saw Jeffrey Donovan (and Brian Campbell) at Denver Comic Con. It was an entertaining panel. The official video’s on youtube.

Comment by iftheshoefits
2014-09-18 11:59:35

Cool. I’ve seen some of the panels from earlier years with Bruce but not this one. Got my evening’s entertainment lined up - thanks!

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Comment by Ella58
2014-09-18 11:59:50

I think of that episode every time I read a post about Miami real estate here!

Michael was standing in a half-finished luxury penthouse, with scaffolding and plastic and paint cans, like the workers left for lunch one day and never came back. You’d think that image would be enough to scare a whole generation away from real estate speculation. How quickly things change in five short years!

Comment by iftheshoefits
2014-09-18 13:20:38

“Bottom line - as long as you’re underwater, you’re not going anywhere.”

Comment by Whac-A-Bubble™
2014-09-18 19:34:58

And you’re not breathing, either.

Comment by joesixpack
2014-09-18 06:33:15

“Finally he stopped paying………”. Oh, the magic words.

So let’s see here, not only was his savings at near zero, such that he could not afford missing work for a couple months, but in three or four years could not catch up on payments.

“He TRIED to send something extra each month, but no matter what, he remained more than 90 days late.”

That is what happens when you TRY to do something as opposed to actually doing it.

(I tried to put my seat belt on officer, really, I don’t deserve a ticket. My arm hurts cause I injured it and can’t reach around that far.)

‘It was never an issue of can we afford the house,’ he said. ‘They wouldn’t make anything current. It was constantly past due.’”

He pretends to be surprised.

My guess is, that loan is upside down, and he thought he could squat without paying indefinately because he would get a break from the judge, being entitled as he surely must be as a police officer and it backfired on him.

Comment by Ben Jones
2014-09-18 07:14:02

But he brandished his cell phone.

‘I could go in and arrest that lawyer. I can call the economic crimes unit right now,’ he offered, brandishing his cell phone’

Comment by Blue Skye
2014-09-18 08:16:22

Yes, but he was afraid to pull the trigger.

Comment by cactus
2014-09-18 08:33:28

“House of sand and Fog”

Comment by Ryan
2014-09-18 12:24:36

He brandished his cell phone in a threatening manner, therefore I drew my service weapon and fired 13 rounds, reloaded and fired an additional 12 rounds. At that point, I made the determination that the suspect was no longer a threat. After cuffing the suspect I radioed for medical to provide first aid as I seemed to have developed a blister on my trigger finger.

Comment by rusty
2014-09-18 07:26:03

I thought the exact same thing when i read that.

We have neighbors that have been almost 6 years in their house without a mortgage payment. They were ‘lucky’ since they had a BoA house.

Comment by Whac-A-Bubble™
2014-09-18 19:36:27

Interesting. We have friends who were similarly unlucky, as their BoA house suddenly had a notice of eviction pinned to the door when they stopped paying their monthly.

Comment by oxide
2014-09-18 11:16:28

It also sounds like the original MERS controversey. The bank doesn’t have the original note, therefore there is no note at all, therefore, the FB thinks the house should be given to him, preferably outright.

My guess is, that loan is upside down

If so, I’d like to know what he did with the cash-out refi money. The article says they’ve lived in the house for 12 years, which means they bought in 2002. Houses didn’t really drop below 2002 prices.

Comment by iftheshoefits
2014-09-18 06:49:31

‘Miami is moving into a new dynamic, and historical perspectives will be non-relevant moving into a new paradigm,’


Comment by Ben Jones
2014-09-18 07:19:40

In the evolution of a mania, such statements are important. Failing to rationalize pricing with fundamentals, even if inaccurate, when participants fall back on new paradigms and pie in the sky, the end is closer than ever.

Comment by iftheshoefits
2014-09-18 07:54:44

Yeah, that one caught my eye as the perfect caricature of bubble mentality. It’s exactly the words an HBB poster might choose, when commenting on current state of affairs with the maximum degree of sarcasm.

Comment by Puggs
2014-09-18 08:38:15

The timing has never been better to sell. Just do it!

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