Friday, September 29, 2006

A Sign of Where We're Heading

Original ad showed $40K markdown on new homes in Palm Coast. Here is the new ad, with no mention of markdown, just prices as low as $70/sq ft. Wasn't the standard in Florida $150/sq ft??????

Palm Coast - Maronda Homes

Thursday, September 28, 2006

New Series: "Florida Bubble P.O.S. of The Week"!

The easiest way to determine whether or not your town/state/region is in a housing bubble is to look at the prices of the P.O.S. (piece of s...) properties.

Ergo, our new series, "Florida Bubble P.O.S. of The Week"!

Each week, I will be posting a "canary in the coalmine" property from around the Sunshine State, one that is clearly not worth anything close to the asking price. A simple and elegant symbol of the mass psychosis that has gripped the greedy denizens of the realty trade here in Florida.

And here now, our first contestant! Features of this charming house:
  • 1215 sq. feet of living space.
  • 1-car garage.
  • Sits on a microscopic .09 acre lot.
  • Located in a failing school zone.
  • Originally sold for $50K in 1990.
  • Last sold for $135K in 2005.
  • A virtual steal at the current asking price of $200K!

Won't you please buy it and keep the bubble afloat?

Tampa - P.O.S #1

Any other Florida Bubble P.O.S.'s out there? Please post and give us all a good guffaw!

Tuesday, September 26, 2006

Snake Oil Saleswoman

Man, I thought the NAR/FAR had all but won the contest for "Best Ability to Promulgate Lies About the Housing Situation With a Straight Face", but Blanche Evans is competing hard! Recently interviewed by the NY Times following the release of her recent book, "Bubbles, Booms, and Busts: Make Money in Any Real Estate Market", she spewed forth some of the worst BS I've heard in quite some time.

Amongst her gems:

"She sees the current slump as more of a breather, as well as a chance for buyers and sellers to “reposition” themselves to take advantage of the long-term upward trend in housing prices.

In other words, she contends there is money to be made in real estate even if prices head south for a while."

Translation: "I have no idea where the market is heading. The only money to be made in a down market is by REALTORS, who get a commission as long as there is a sale."

"“In the normal market people are still buying and selling homes,” she said. “The market is not crashing; the fundamentals and incentives are still extremely good for everyone else.” "

Translation: "I have not read nor watched any media reports on the crash, so therefore it's not happening. In fact, I have my ear's covered right now - LA LA LA LA (can't hear anything - no crash happening!) LA LA LA LA!"

"Even if there is a prolonged recession in the housing market, she thinks it will be relatively mild on a national level.

“One reason for all the pessimism is that the financial press often assume that whatever is happening on the coasts is happening to the rest of the country,” she said. “But the Midwest, for example, may not experience the highs and lows of the coastal cities.”"

Translation: "Everybody now - move to the Midwest! No matter that you can't sell your house where you live now, you're upside down in payments, and the job market out there is crappy. There's REAL ESTATE money to made out in the flatlands!"

"Her advice: Don’t sell unless you have to. "

Translation: "I own lots of investment properties that I can't unload. So please don't put your P.O.S. property on the market and compete with me. But if you're a BUYER, please buy, buy, buy!!! After all, it's a great time to invest!"

Whew, I think I need to take a "breather" (as she so calmly refers to the market) from all the wretching I've been doing while reading her propaganda. I get sick just thinking about the poor souls who will actually take her advice as fact.

Really Bad Advice Concerning Realty

Friday, September 22, 2006

Nothing for Certain in Florida Except Death & High Home Prices, Taxes, and Insurance

Between the irrational runup in home prices, the 2004-2005 hurricanes, and the "Save Our Geezers" regressive property tax system, it's getting plenty messy down here in the sunshine state. Here now some of the latest on our situation from around the state:

Reexamine the Property Tax Structure?
"Here and across Florida residents find themselves whipsawed by soaring property values and skyrocketing insurance premiums. Worse, surging construction costs caused by hurricane rebuilding from the tip of Florida to Louisiana mean homeowners can pay a lot more for less house than they could get just few years ago. Add on tougher building codes, and sticker shock is rampant.

People used to move to this area because of the low property taxes; today, people are talking about leaving because they are getting so high."

Insurance Woes Abound
"Mike and Terry Thompson were ready to call it quits and sell their mortgage-free Navy Point home.They've never made a hurricane claim in the 31 years they've owned their home, located about eight blocks north of Bayou Grande.

Yet their hurricane insurance premium jumped this year, from $945 to $5,143.

"I thought it was a joke or something," Mike Thompson, 55, a retired Pensacola police officer, said of his reaction when he opened his insurance statement."

Escrow Bomb is Ticking
"Unless you've been under a rock, you know Florida is in a property insurance cost crisis. That cost now has to be paid.

If you are not putting 20 or 40 or 50 percent more money away to cover insurance costs, you will sometime in the next few months receive a letter from your mortgage company."

Angry Tax Payers Confront County Commssion
"The board cut a little more than $10 million from the 2007 budget to save taxpayers about $60 per $100,000 of taxable property value.

"That's nothing. That's not enough," shouted some of the more than 100 people attending the public hearing at the Fred B. Karl County Center. ""

Many thanks to Lizziebeth from Orlando for the links.

Thursday, September 21, 2006

NAR - 2005 vs. 2006

It is truly amazing sometimes, how the NAR can make bold forecasts about how great the housing market is, and how it always appears to be "a great time to buy!". Witness for yourself, this quote from September 2005:

'“David Lereah, NAR’s chief economist, said the fundamental factors for housing remain positive. “With a general background of growing population and favorable affordability conditions, home sales are staying at very healthy levels,” he said. “Housing inventory improved in August but remains tight, and we have some way to go before we get into a range of balance between home buyers and sellers. As a result, we’ll continue to see above-normal home price appreciation for the foreseeable future.”'

Now, a year later, and this is what's coming out of the same "guru's" mouth:

'“The housing boom ended more than a year ago, but sellers are having a tough time accepting that fact, says David Lereah, chief economist at the National Association of Realtors. The result has been tumbling sales as buyers stay on the sidelines.”

“This correction is different from any others because it wasn’t triggered by a recession, high financing costs or job losses. With unemployment below 5 percent, mortgage rates still below 7 percent and a growing economy, "all you need is a price correction, a price adjustment, to bring the market back."

This is starting to sound like a spiel from a used-car salesman. Here in Florida, we now have nearly a year's supply of houses sitting on the market, and the numbers are growing by the week. David, who is going to move into all of these empty houses, and where are these buyer's going to come from? Remember, there is now a housing surplus in every major state.

So I ask again: Where are these buyers going to come from? Mexico? Canada? Russia?

The sad and pathetic thing about the reports from the NAR, FAR and others under the NAR umbrella is that there is absolutely NO REGULATION on their reports to the media, and the media never questions the authenticity of their numbers. And when I say, "Never", I mean it - 100% and unequivocally. With the exception of a few independent websites (such as yours truly) who track their reports and compare what they are saying with what is actually happening, there is no external oversight on what they report.

Latest NAR Report

Friday, September 15, 2006

Affordable Places to Live

If you have the ability to move, you might want to think about one of these places to live. Thoughts that come to mind from going through this list:
  • It goes without saying that the main reason for most of these towns having cheap housing is that the local economy is correspondingly in the doldrums as well. Flint, MI would be the poster-child for this concept.
  • 5 years ago, you'd find a multitude of cities from Florida on this list. Now, nothing.
  • Interesting that only TX and OK have towns on the list that are west of the Mississippi.
  • With the aforementioned crappy economies in a lot of these towns, even at these prices, you could very well "catch a falling knife" and lose even more value over the coming years. But then again, as the saying goes, "When you're at the South Pole, you can go nowhere but up!"

Most Affordable Homes in the US

And by the way, where the hell is "Pharr, Texas"?

Thursday, September 14, 2006

Florida - Now #1 in Foreclosures

Of course, it depends on where you get your data - from a local rag that occasionally chooses to ignore key statistics* or a national news organization that has no interest in protecting the real estate lobby.

First, the local "protected" news, as printed by the Tampa Tribune:

"The Mortgage Bankers Association, in its quarterly mortgage survey released Wednesday, reported that the percentage of mortgages that started the foreclosing process in the April-through-June quarter rose to 0.43 percent. That was up from 0.41 percent in the first quarter and was the highest in just more than a year."

Wow - that doesn't sound so bad. Then...

"Even with the increase, the foreclosure figure is low by historical standards and not overly worrisome to lenders. But it suggests that some borrowers are feeling pinched."

Well - really, not so bad at all. And then, look at this:

"But the survey showed an improvement in the number of late mortgage payments made in the second quarter. The percentage of payments that were 30 or more days past due for all loans tracked edged down to 4.39 percent in the April-through-June period. That was lower than the 4.41 percent delinquency rate in the first quarter and was the best showing in a year."

With all of this great news, from a TAMPA, FLORIDA newspaper, you'd think it was a minor blip on the radar screen. No mention of Florida, no mention of what the rate was a year ago, and no mention of month-to-month comparisons....hmmmmm....better check another source, here....

This now from CNN/Money (neither of which has financial dependence on the real estate lobby):

"In August, 115,292 properties entered into foreclosure, according to RealtyTrac, an online marketplace for foreclosure sales. That was 24 percent above the level in July and 53 percent higher than a year earlier. "

That is a lot of people losing their homes. And then, this bombshell hits:

"Some of the bellwether real estate market states are among the leading foreclosure markets. Florida had more than 16,533 properties in foreclosure in August. That led all states and was 50 percent higher than in July and 62 percent higher than in August 2005."

Finally, this from Rich Sharga of RealtyTrac, a foreclosure tracking service:

"'Usually, foreclosures are a lagging [market] indicator,' he says. 'But we've never had a situation like this with adjustable-rate mortgages amounting to $400 billion to $500 billion coming up for adjustment over the rest of the year.'"

Well, we can conclude 2 things for sure from this comparison-contrast of news reporting on the same topic:

1. Get your news from more than one place. Even if it's a newspaper (supposedly one of the last bastions of honest reporting), there are bills to be paid, and they will play softball with stories that affect their primary advertisors.

2. The meltdown in Florida is only getting started. Put on your radiation suit, climb into your 1950's era bomb-shelter, and don't come out until mid 2009. Okay-just kidding about that! Really, don't come out until mid 2011.

*quick: name the #1 advertisor in any given newspaper....RIGHT! The REALTY section!

Tuesday, September 12, 2006

A Cautionary Tale from Japan

For those who don't know, Japan had a housing boom of its own - peaking around 1989-90. The mania resulted from the same BS that was being said in Florida the last 3 years:
  • Buy now, or you'll be forever priced out!
  • They're not making any more land, you know.
  • We've got plenty of other investors who are interested.

And, as all bubbles go, the boom in the Land of the Rising Sun ended.

And then the prices fell.

And fell some more.

And more....

aaaaand more.

After 15 years, real estate there has still not recovered from its peak. Could we suffer the same fate? Read this fascinating tale by Michael Nystrom, who experienced that bubble first-hand.

A Cautionary Tale from Japan

Also, if you're interested on a comparison of that bubble to the current bubble here in the US, Britain, and Australia, take a look at this entry in Wikipedia - from "The Economist" magazine (article was actually written in June 2005!):

Comparison of Housing Bubble to Japan's Bubble

Monday, September 11, 2006

A Good "Use" of Your Tax Dollars

From the Tampa Tribune. Seems that we don't have enough construction workers down here.

'With bustling construction of new condominiums, roads and office towers across the state, Florida faces an enviable problem: Lots of work to be done, but not enough workers to do it.'

Hmmm....there now exists more real estate inventory for sale right now than in the history of the state, but we need MORE construction workers?

'The state of Florida hopes to solve part of that problem and on Friday announced $12 million in grants during the next 12 months to train entry-level construction workers.'

So, why exactly do we need this?

'Lt. Gov. Toni Jennings said Friday that the state found extra money from last year and wants to eliminate a hurdle holding back growth.'

Oh, GROWTH! I'm sorry, I didn't realize that GROWTH needed to be jump-started in Florida. We've been holding back way too long - gotta eliminate those hurdles.

While I do believe training programs like this do pay for themselves in the long run (skilled workers paying their taxes and becoming consumers and so on.....), I think the money would have been better spent prosecuting contractors who hire undocumented immigrants. These cheater contractors artificially:
  • Drive wages down.
  • Drive tax revenue down by paying under the table. You pay the difference.
  • Place demands on our schools. You pay for the difference.
  • Place demands on emergency services and emergency rooms. You (and your insurer) pay the difference.
  • Increase the work of our border patrol by creating demand for such jobs. You pay for the extra agents and guards needed.

Believe me, I have nothing against immigrant workers -they're doing what's best for their families. But training a bunch of Florida kids on how to do a job that will eventually get undercut by undocumented laborers is nothing short of a boondoggle.

Friday, September 08, 2006

More Food for Thought

More Bubble-Related news, commentary, and research to ponder....

1. How to Survive the Coming Bubble - Or, should I say, "Coming Burst of the Bubble"? A very pointed commentary on how the combination of greedy builders, home appraisors, and lax lending standards have brought us to this. And advice on what to do.

2. St. Joe's Going Out of Business - A Major Builder up in the panhandle, after making money hand-over-fist the past 3 years, is suddenly calling it quits. What does this tell you about the state of the market (in our state)?

3. Top 4 Myths About Real Estate - Beautiful writeup by Shawn Tully from Fortune Magazine - on CNN/Money Magazine's website.

4. Greenspan's Commentary, August 2005 - This was a OVER A YEAR AGO, and he had it right, even back then. Many thanks to my buddy Joe out in Phoenix for locating this beauty. Quote:

"Mr Greenspan said that people were investing in houses as if they were a one-way bet, not allowing for the risk of price falls. He said 'history had not dealt kindly' with investors who kept ignoring risks."

Thursday, September 07, 2006

NAR's Forecast - Going Down, Down, Down in a Burning Ring of Fire

Our good friends at the NAR (National Association of Realtors) have just released their latest forecast for 2006.

Although they keep talking of the market "leveling off" and "returning to normal", let's take a look at their forecasts from the past 12 months, starting in October of last year. These are verbatim from their press releases:

October 28th, 2005
Existing-home sales are projected to decline 3.5 percent in 2006 to 6.86 million. New-home sales, seen to grow by 8.0 percent to 1.30 million in 2005, are expected to fall 4.5 percent to 1.24 million next year. The figures for 2006 would be the second highest year for each sector.

December 12th, 2005
Existing-home sales are likely to decline 3.7 percent in 2006 to 6.84 million. New-home sales, projected to increase 7.0 percent to 1.29 million this year, are forecast to drop 4.8 percent to 1.23 million in 2006 - also the second best on record.

January 10th, 2006
Existing-home sales are forecast to ease by 4.4 percent to 6.79 million this year, which would be the second highest on record. New-home sales, which should be a record 1.29 million for 2005, are expected to decline 6.0 percent to 1.21 million in 2006 - that also would be the second best year in history.

Editor's note: SUDDENLY in February, the NAR figures 2006 will not be the 2nd best year, but merely the THIRD best year, ever.....

February 7th, 2006
Existing-home sales are likely to decline 4.7 percent to 6.74 million this year, down from a record 7.07 million units in 2005, while new-home sales are expected to fall 8.5 percent to 1.17 million from a record 1.28 million in 2005; both sectors would see their third best year after the totals for 2005 and 2004. Housing starts are seen at 1.87 million units in 2006, down 9.3 percent from 2.06 million last year.

March 13, 2006
Existing-home sales are expected to fall 5.7 percent to 6.67 million in 2006 from
the record 7.08 million last year. At the same time, new-home sales are forecast to decline 7.7 percent to 1.18 million from a record 1.28 million in 2005 - each sector would be at the third highest year following the tallies for 2005 and 2004. Housing starts are likely to total 1.98 million this year, down 4.3 percent from 2.06 million in 2005.

April 11th, 2006
Existing-home sales are projected to drop 6.0 percent to 6.65 million this year from a record 7.08 million in 2005. New-home sales are likely fall 10.9 percent to 1.14 million from the record 1.28 million last year - both sectors would see the third best year following 2005 and 2004. Housing starts are forecast at 2.00 million in 2006, which is 3.2 percent below the 2.07 million in total starts last year.

May 9th, 2006
Existing-home sales are likely to fall 6.4 percent to 6.62 million in 2006 from a record 7.08 million last year. New-home sales are projected to drop 11.6 percent to 1.13 million from last year’s record of 1.28 million. Housing starts should decline 3.7 percent to 1.99 million this year compared with 2.07 million in 2005.

July 11th, 2006
Existing-home sales are expected to decline 6.7 percent to 6.60 million in 2006 from 7.08 million last year. That would still be the third highest level on record. New-home sales should fall 12.8 percent this year to 1.12 million from 1.28 million in 2005. Housing starts are forecast to decline 6.8 percent to 1.93 million this year from 2.07 million in 2005.

August 9, 2006
Existing-home sales are forecast to fall 6.5 percent to 6.61 million this year, the third highest on record after 2005 and 2004. New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts should be down 9.1 percent to 1.88 million this year.

Editor's note: UH-OH!!! In the space of a year, the NAR's forecast for New Home sales in 2006 has gone from 2nd best year to...fourth???.....something tells me existing homes will also drop to #4 (or lower) by the end of the year.

Sept 7, 2006
Existing-home sales are forecast to fall 7.6 percent to 6.54 million in 2006, the third best year after consecutive records in 2004 and 2005. New-home sales should to drop 16.1 percent this year to 1.08 million, the fourth highest on record. Housing starts are projected to decline 9.6 percent to 1.87 million in 2006.

So, after reading their forecasts, what do you think is going to happen in 2007?

And really, take my word for it: if you don't ABSOLUTELY have to buy a house in the next 2-3 years, don't do it. The values are dropping, and they're going to continue to drop. Stay where you are, or rent. You'll save yourself (and your family) 10's of thousands of dollars.

Wednesday, September 06, 2006

House Values - A History Lesson

In case you haven't seen it....

Here's a chart that says it all - right now we are in the most UNCHARTED territory in the history of real estate in the US. Where DO we go from here?

History of Real Estate

The Incredibly Expanding Mortgage

The latest numbers from 2005 indicate that 36% (yes, over a THIRD) of all mortgages written last year were "non-traditional" - ARMs, No/Negative Interest, etc. Home prices have become so unaffordable, particularly on the coasts, that these high risk/reward investment tools transformed into common home buyer instruments. Unfortunately, these types of mortgages have adjustable and balloon payments in them, and guess what?

1. Rates have risen. The super-low payments that the borrower's started with are no more. Every month in the US, several billion $ in mortgage payments reset and increase.

2. The underlying property values have dropped. If a borrower finally decides to refinance into a conventional mortgage, he/she will have to have the property appraised beforehand - and guess what? If the property was purchased a year ago, there is a high probability that the appraisal will indicate that the purchaser can't borrow what he or she owes on the place.

What does this mean? Big trouble. Call it a combination of investment mania, greed, and horribly loose lending standards.

For a full scoop, checkout the great cover story from BusinessWeek (a very fine journal, I might add):

Nightmare Mortgages