‘A Lot Of People Knew This Would Happen’ In Orlando
The Orlando Sentinel has this update from Florida. “Home buyers and home sellers are in a virtual stalemate in Central Florida, with housing prices holding at lofty 2005 levels while more properties are hitting the market and lingering longer. Many sellers are clinging to unrealistic price expectations, Central Florida agents say.”
“‘They not only think it’s still 2005, they think it’s the summer of 2005, the peak of the market,’ said Barbara Brady, a Realtor in Orlando.” “So far, local sellers are not making drastic cuts in their asking prices, Realtors and other industry experts say. But the pressure to do so is building. ‘The trend is definitely downward,’ said Chris McCarty, economist at the University of Florida. ‘And it’s going to continue.’”
“Nationally and throughout much of Florida, median home prices are beginning to slip, especially in places where the price escalation was most rapid, such as Naples, Miami, Fort Myers and Fort Lauderdale, McCarty said. Speculators who bought homes with riskier financing, such as interest-only mortgages, have been selling despite the declining market, adding to the inventory and downward price pressure.”
“A Harvard University study released last week found that nearly one-third of U.S. home buyers last year used riskier mortgages. Many of those homes were bought by speculators, McCarty said, and as those properties are unloaded for less than top dollar, ‘it lowers the value of other homes around them.’”
“Certain homes, particularly those priced $300,000 or more, will be tough to sell, McCarty said. ‘How many people can afford to live in $300,000 homes without an interest-only loan?’ he said. ‘By the fourth quarter and the first quarter [of 2007], you’ll see the full brunt of the declining real-estate market.’”
“Agent Pamela Ryan has been selling homes in Central Florida for 25 years and said she is ‘definitely working harder, 12 to 15 hour days, seven days a week.’ That’s because while there are many more listings, and some agencies are turning down potential listings after analyzing the offering and concluding that the odds of a sale were not good in today’s market.”
“‘People can take their time. They [buyers] don’t feel that sense of urgency,’ said agent Ellie Musgrave. Sellers are beginning to respond to the growing inventory and lengthening time on the market by setting prices at more competitive levels. ‘Reality is setting in,’ she said.”
“Builders of new homes and condominiums..ave been pouring resources into marketing and deals in recent months. Cambridge Homes has been offering buyers a Mini Cooper automobile with certain homes, or upgrades of similar value. Other new-home sellers have been pitching discounts on certain lots of $10,000 to $99,000, though such deals have strings attached.”
“Orlando has seen an explosion in new-condo construction in recent years, especially downtown; last year it was the second-biggest condo-conversion market in the nation, according to one study. ‘Developers [of condo conversions] will pay your closing costs and homeowner-association fees for the first year,’ agent David Tanner said. ‘So you can have someone with $1,000 down, and they can get into a condo. Where else can you do that?’”
“Tanner said he recommends that existing-home sellers use deal sweeteners as well. ‘Clients need to help with the closing costs, maybe a home warranty. Throw in some kind of incentive.’”
“Nationally, some home builders are scaling back on projects, profits are slipping and stock values are taking a hit. UF’s McCarty said home foreclosures are rising, and will continue to rise as many homeowners with adjustable-rate mortgages face higher payments they will be hard-pressed to afford.”
“‘People will start lowering prices even more’ to sell in the weakening market, McCarty said. ‘A lot of people knew this would happen, but a lot of people were just hoping that it wouldn’t.’”
Another Florida link:
‘Developers in south Lee County haven’t been scared off by the cooling residential market. Some are actually dropping approved commercial uses to build more homes instead.’
Florida is sinking and the numbers of houses/condos for sale could be worse. I know friends in Naples who had two condos on the market for six months but took them off because they never even had a nibble. They knew there was no chance of selling at the price they wanted and they didn’t want the listings to appear stale. They can clearly afford to wait in hopes that the market may turnaround next winter when they pray people start buying again. Even with the skyrocketing inventory, there could be a lot more on the market and will be. People are trying to get out of Florida real estate. Hurricane season is not going to help.
This article supports your view. Finally rea lity based report from SHT. You have to read down a couple of paragraghs to get the “meat”.http://heraldtribune.com/apps/pbcs.dll/article?AID=/20060619/COLUMNIST58/606190397/1007/BUSINESS
I hope this the active link:http://heraldtribune.com/apps/pbcs.dll/article?AID=/20060619/COLUMNIST58/606190397/1007/BUSINESS
Hurricane seasons really won’t affect home sales too much, The slump in sales is just due to the fact that its too expensive for people to but down here, the average pay in Orlando is 55K per year for a family of 4 that does not exactly put you in a $300,000 home. There are about 16,000 homes on the market now and I know there are well over 16,000 people in Orlando (myself included) that would like to buy a home but simply can’t afford it. Speculators and investors made up 30-40% of the market in 2005 and even more out near the attractions.
People don’t really flee the state after or before a storm. Its not like an Earthquake, the majority of the damage from a storm is centered around the eye and does not affect a huge area. 90% of the hurricane really just knocks out power, downs trees and other minor stuff. Same deal as a good winter blizzard, minor earth quake or tornados. No matter where you go there is some type of disaster that can do this kind of stuff. Most of the damage from a hurricane is due to the storm surge which Orlando is a good 45-60 miles inland and won’t be affected by (look at New Orleans, the wind and rain did little, the city was for the most part fine until the levy’s broke and the city flooded). By the time Charley got to Orlando it went from a Catagory 4 to a cat 1, 2 at most. Once those storms get over land they weaken fast.
The footage you see on the news is usually the same trailor parks shot from all different angles. The media loves to hype that stuff up.
What? Hype yes, but I saw a whole lot of damage in Orlando in 2004. A lot of residents made insurance claims too. Trees fall on cars and houses, and a lot of trees fell in Orlando.
If 2004’s storm season repeats itself, there could be trouble.
That’s because homes are so overpriced. Even though the market is slowing, it’s still hugely profitable to build homes.
And they’re going to keep building until the drive prices all the way down into the gutter… leaving existing homeowners holding the bag.
They are building homes on land they pruchased a few years ago, and with financing committed at a rate that is only going to go up. The big boys won’t stop building, and when the “cash-flow” dries up, they will go Bankrutcy reorganization just like the airlines and GM. It’s the latest business model, and the builders get to reorganize all their debts and still sell houses at a lower profit and at a lower price. We are in for a very long price decline on houses
Homebuilders are getting desperate too. Just added a post to my blog about Centex staging homes in Cali with actors posing as a family!
http://www.novabubble.blogspot.com/
This is funny, as things get worse for the housing market maybe they’ll stage family fights.
The husband and wife can yell at eachother for how screwed they are and blame eachother for agreeing to buy an overpriced POS in a declining market. Watch out for flying dishes!
“Houses are going to vomit equity”
LOL that should start up all post
Why shouldn’t sellers hold out for prices like it’s 2005? After all, executives are awarding themselves stock options like it’s 1999.
Lots of markets where past comps are too high.
Well, if home owners can “award themselves” a homebuyer then I think they should sell at the 2005 price. However, since the sellers don’t seem to share the ability of CEO’s to compensate themselves then I would suggest they get a clue as to why the market is going to tank and get out while they have some semblance of 04 prices because pretty soon the homes will sell for 03, then 02, then 01 prices (you seeing a trend here?)!
DH Horton in Olivehurst, CA, Yuba County listed $100,000 discount on their homes in the SJ Mercury News on Saturday. Close out sale listed for June 24 and June 25.
1857 sq. ft. was $358,469 now $258,469
2433 sq. ft. was $449,451 now $349,451
2925 sq. ft. was $487,004 now $387,004
Now this sparked an interesting discussion this weekend. Some people said that if they bought in that development that they’d be as mad as a wet hen and would sue the developer DHH. They were shocked that someone could be underwater $100, 000 that fast as RE only goes up. My reply was, if you paid $60,000 for a beamer or Caddy Esc SUV and two weeks later the dealer put them on sale for $40,000 dollars do you think that you have the right to sue the car dealership? After all you agreed at the time of the sale that the car was priced right.
There is only one response:
“Oh? What kind of gun did they use?”
If it is one of those situations where you are left scratching your head as to how they ever afforded the loan in the first place than the kind response would be:
“just make sure everything you signed you can document. I’d hate to see you end up in trouble for any kind of accidental misrepresentation on your part.”
Robert, you make a good point that I don’t think has been emphasized enough. The loan officer, the home builder and everybody else that gets a cut will tell you whatever you need to here to sign the paperwork, but what a lot of these
gamblers, speculator, specu-vestors,investors either forget or don’t realize in the first place is that the only one that will end up in trouble is the one who signed their name as taking full responsbility for the trasaction.It’s the same thing if you use an accoutant to do your taxes at the end of the year. He/she may prepare the paperwork, but once you sign it’s all you baby.
I drove up to Beale AFB near Marysville about a month or so ago and I think I saw some of these developments.
Imagine driving through miles of farmland and then in the middle of nowhere huge cookie-cutter housing developments spring up. To get to these developments I had to drive through the older part of town which was pretty run down looking.
I think the unemployment in Marysville runs at an average rate of 10% probably due to mostly seasonal work (farming). Where do people who buy these overpriced homes work? I would never, never, ever buy in a development like that.
“Where do people who buy these overpriced homes work?”
Laboratories.
“In Florida, it can be illegal to put someone in a high-cost loan he can’t afford.
Deliberately misleading buyers about mortgage terms can be a third-degree felony, according to state statutes. Refinancing too many high-cost mortgages can lead to fines up to $500,000.”…”In 2005, more than $25 million in home loans in Palm Beach County collapsed in less than 90 days, according to a Palm Beach Post analysis of data provided by RealEstat.com, a locally based commercial provider of mortgage information.”….”an organization of low to moderate-income people, pinpointed West Palm Beach as an area where whiter neighborhoods translated to cheaper mortgages. That is another indication of predatory lending, which targets minorities, women or the elderly. “
Salinasron — I haven’t taken out one of these loans, so have not seen the paperwork. But I’d guess that included in the papers is a form, probably with above-average-size print, that says the borrower by signing the form acknowledges that he/she has read and understands all the caveats, risks, etc. That will be the lenders’ CYA.
As usual, this is another media witch-hunt for “discrimination”.
Because you cannot make loans based on race, then there is most likely another reason for the discrepancy. The truth is the whiter neighborhoods are more reliable in making payments and making them on time. Forclosures, defaults, slow-pay, etc. etc. allow lenders to penalize people for BAD BEHAVIOUR. But, as typical, the media looks at “discrepancies” in the numbers and this proves “RACISM” and “predatory lending practices”. I am really, really tired of these claims. People with the same CREDIT SCORES get the same loans, unless they are STUPID, which is another very destinct possibility.
The point is I think Loan officers prey on dumb people regardless of race .During the height of the home frenzy I’m sure dumb people didn’t care what they were signing as long as they could get the house/loan . When the loan officers said “do you have any questions ?”, the dummies said “no”.
Later on when they sign the loan docs. with a notary ,borrowers are under pressure to get it over with, and the notary ,(loan doc signer ),doe not necessary know the answers if the questions come up regarding the final loan documents . The borrower has already ordered the moving van and they are ready to go . To back out at that point is hard and could result in costs .
If I was a borrower in this day and age ,I would ask for a copy of the loan documents and disclosures on the loan I was going on way ahead of time ,so I had the time to review everything carefully .I would tell the lender that I needed a full list of the closing costs as well as a estmate of costs from the escrow company . In other words , don’t put your review off until the last minute like the industry wants you to because at that point it’s hard to back out without it costing dearly .If a lender refuses to let you review the loan docs way ahead of time , I would question that as hiding something .
I’ve never seen a lender prepare loan docs ahead of time. The loan package is usually prepared the day before closing and sent to the escrow officer overnight. That’s why I always told buyers to have an attorney for their closing.
A Borrower can get a copy of blank loan documents from the lender ahead of time ,and they can get a estimate of costs ahead of time pursuant to request .
Kathy ….I mean get blank loan docs ahead of time and copy of the note etc. ,than that gives you more than enough time to review the fine print .
“As usual, this is another media witch-hunt for “discrimination”.”
Incorrect.
there have been numerous studies done where they compare the SAME neighborhood, the SAME lender, the SAME FICO scores. And blacks consistently get offered worse terms than whites, with no other changed variable.
In fact, there are many cases where blacks with high FICOs (above 750) are steered into the subprime category.
I agree that the race card IS often played without merit, but not in this case IMO
clouseau
American “white” people often don’t understand their given white priviledge, they think that it is something they earned for doing a good job at something. Statistics do serve a purpose. Thanks for that!
I’ve read numerous studies which show EXACTLY the opposite. Lenders go out of their way to provide “minority services.”
Can you cite a SINGLE study?? Not just what you think goes on, because it doesn’t. There is NO “white priviledge”.
No white priveledge(sic)? You’re joking, right?
No, I am not joking.
Here is an excerpt from the cited study:
A final possibility is that borrowers of color are no more likely to be served by higher-rate lenders
than white borrowers—but are more likely to receive multiple loans within one year from a higherrate
lender. Because our dataset is comprised of loan transactions and not borrowers, we are unable
to detect instances in which borrowers take multiple first-lien loans in a year. Loan flipping, where
borrowers are repeatedly refinanced primarily for the purpose of generating income for the loan originators
rather than for the benefit of the borrowers, has been identified as an important issue in the
predatory lending context.63 Recent research by Courchane, Surrette and Zorn indicates that borrowers’
subsequent loans in the subprime market are explained in part by the market segment of
their current loan: “We conclude, therefore, that previous mortgage segment is an important determinant
of current market segment even after controlling for risk-related underwriting and demographic
effects.”64 If rapid loan flipping (i.e., multiple loans within one calendar year) is concentrated
in higher-rate subprime lenders, we note that it could contribute to the disparities we observe in
It is likely that all of the factors discussed play some role
in making subprime home loans more costly than necessary for people of color. In addition, the
business practices that support excessive charges could apply equally to individual white borrowers
in the subprime market who may lack the bargaining ability or financial experience to fully protect
themselves.
yes, it’s the stupid ones.
http://www.responsiblelending.org/pdfs/rr011-Unfair_Lending-0506.pdf
this is a link to a study about predatory lending and minorities for those who may be interested.
In that report:
“Several analyses of this information, collected under the Home Mortgage Disclosure Act (HMDA), have shown that African-American and Latino borrowers received a disproportionate share of higher-rate home loans, even when controlling for factors such as borrower income and property location”
The important part of that is, “even when controlling for factors such as borrower income and property location.” Why? Because there is no mention of controlling for credit score. So the likely lynchpin of the loan approval, type and size is not factored in.
The conclusion may then be that Blacks and Latinos are discriminated against in credit scoring; in that case, I’d like to see the analysis of/report on that before drawing any conclusions, as should any truly unbiased observer.
This discussion was off topic, but nonobjective conclusions can’t just slide because of that, in my book.
I would bet that IQ is inversely correlated with higher mortgage rates all else equal. That is no surprise since most salespeople (mortgage brokers) try to maximize their own incomes. And yes laws are needed to protect the disadvantaged from sleazy dishonest salesman.
I’m from orlando and the current inventory is roughly 19000 so up about 2500 since the april mention of inventory in that report.
Lol, a paltry $25M? What is that, like, 4 houses / loans?
1st Stage heading to the 2nd, It won’t be long and the anger will set in, I won’t give it away will change to if I could just sell this,
Orlando and Tampa are not as likely to see major drops in their median prices as some South Florida locales, he said, because their values did not rise as much.
————————————————————————–
No not here.
No Housing Bust for Orlando and Tampa.
Nope.
Just everywhere else in Florida but here.
“Orlando and Tampa are not as likely to see major drops in their median prices as some South Florida locales, he said, because their values did not rise as much. ”
Like 100% was not that much!
And funny how the same guy also says:
“People will start lowering prices even more” to sell in the weakening market, McCarty said. “A lot of people knew this would happen, but a lot of people were just hoping that it wouldn’t.”
This guy must take lessons from DL.
“Clients need to help with the closing costs, maybe a home warranty.”
Well whoopy-do! Home warranties are what, $400? “Help” with closing costs? Nah. Start with a 20% price cut or, better, let’s roll ‘er back to the 2004 price. Or do you want to wait for the 2003 price? 2002, 2001 …
Condo conversions - they could well be the saddest joke when the smoke clears. And new condos in Orlando, at least some of them, are charging condo fees per sq. ft. instead of the traditional per-unit cost. $850 a month for what? So the guy in the office can wear a badge that says, “Concierge?”
Down, down, down she goes.
$850 a month must be on an I/O loan, ’cause the conversion we moved out of were going to cost a whole lot more than that on a traditional 30-year.
Yeah, you can bet I’m keeping an eye on that development that’s still building and not selling.
The $850 is just the condo fee — for common maintenance, water & sewer, garbage collection, probably basic cable. It has nothing to do with the mortgage/cost of the place. However, this is for a real, new condo, as opposed to a conversion.
“Certain homes, particularly those priced $300,000 or more, will be tough to sell, McCarty said. ‘How many people can afford to live in $300,000 homes without an interest-only loan?’ he said. ‘By the fourth quarter and the first quarter [of 2007], you’ll see the full brunt of the declining real-estate market.’”
How many people can afford to buy a $300,000 home with an interest-only loan unless the market value is going up by more than 10% a year?
”Orlando and Tampa are not as likely to see major drops in their median prices as some South Florida locales, he said, because their values did not rise as much. Still, prices in the Orlando area could be flat or slow to rise for some time”
KEEP DREAMING.
Orlando Median Home 2002 116,900
Orlando Median Home 2006 263,100
Up 125%. No problem here.
Same story in Tampa.
2001: $110k
2006: $220k.
You can bet your bottom dollar that the 2009 price will be $150k or less.
A problem with Orlando is the lack of real jobs outside of the travel industry. The town is full of seedy camera shops, flea marts, and general wierdos who have made it a home. Try downtown Kissimmee; it looks like an ugly ghetto area. Downtown Orlando is nicer and there are some nice areas, but I do not see the draw in living in a town that is crawling with tourists.
How ’bout LA median price 2001 $213k to 2006 $500k. An increase of 135%, while median household income has gone from $52k to $56k, an increase of 7.6%. Or put another way, from about 4 x income, to 9 x income. And this is HOUSEHOLD income, not per capita.
Really mind boggling.
good point deb…nothing is underneath these price increases to hold them up long term. The increases have been built on speculation, greed and easy credit…not household income.
I’d wager that the extra 7.6% doesn’t even cover the median annual gasoline tab, too.
Ahem… the “increase” in the median annual gasoline tab.
San Jose has gone from $300K in the late 90’s to $675K median now. Median household income, on the other hand, has actually gone down in the same time frame. (Median household income $74K in 2000; down to $70K in 2004.) Employment has also been staggeringly bad here… 300K jobs lost due to tech bubble bursting; most of those jobs have come back, but 70% of all new jobs created here are in REAL ESTATE!!! Ouch.
“a virtual stalemate” “who will blink first” “a standoff”
The truth is there is no “standoff”, most of the potential buyers aren’t even bothering to look at homes right now and won’t for at least a few years. Look at the comments made by agents about the lack of foot traffic during open houses. Is it a standoff when the potential buyer spent the weekend at the beach or watching the World Cup? If it is, I guess I was part of a “virtual stalemate” this past weekend and didn’t even know it.
The panic starts July 4, when even the realtors will not want to sit an over-priced open house with the temperature in the 100’s and the beach and mountains a short drive away. Then the truly desperate sellers will be at the agents mercy to lower the price. There will be no standoff in 2 more weeks.
I see that 4th of July predicition alot. There may be some merit to it because if/when BB raises rates at the end of June that’ll be fresh in everyone’s mind in the beginning of July.
Also, this year the 4th is on a Tue so another weekend of empty open houses will have just come and gone AGAIN. And…July already feels like the middle of summer because of the unofficial start on Memorial Day and some kids will have already been out of school for nearly a month.
The “HOT” summer selling season that never was will unoficially be half way over.
It is already very hot. Yuck!
‘So you can have someone with $1,000 down, and they can get into a condo. Where else can you do that?’”
Uh, anywhere? Just get a no-doc, 100% financing.
‘A lot of people knew this would happen, but a lot of people were just hoping that it wouldn’t.’”
Classic.
Disney World Vacations for all of us that did not fall into the ‘HELOC and maxed credit card” traps. It should be less crowded a few months down the road.
You know, I’d be surprised if Ben hasn’t been contacted by some serious, forward-looking Madison Avenue types. Think about it… after the crash, a fair percentage of those left with real money to spend will be found here!