Wednesday, October 11, 2006

Florida - #1 in Foreclosures (and Increasing Our Lead!)

Again, I don't know why this hasn't been reported in the main-stream media. This is pretty important stuff.

"The report said that Florida has approximately 28,000 properties in some form of foreclosure, accounting for 27 percent of the nation's total. With one new foreclosure filing for every 254 households, the state's foreclosure rate was more than four times the national average. '

Think about that - in addition to the 10+ month inventory of unsold homes in our state, there are now 20,000 more that will be coming on the market, all at below (or far below) market value.

'"Florida and the western states are known for their predominance of negative amortization loans in which mortgage holders pay only interest, not equity, on their properties..." '

Flippers and unsavvy buyers are now atoning for their greed.

'Industry forecasters recently estimated that more than $200 billion worth of adjustable rate mortgages will "reset" at higher rates in 2006 and more than $1 trillion will reset in 2007...'

That figure says it all - 5x more ARMs will reset next year than did this year. This is only going to compound the numbers of foreclosures.

Florida #1 in Foreclosures

Many thanks to one of our anonymous posters for this reference. In a related note to all our readers and posters: feel free to make up a screen name - this site is setup so that there is no login required to post your thoughts.

25 comments:

sandi said...

I know a guy (nice but not so smart) over in Tampa who bought a second home during the peak last summer (2005), hoping to flip it for a quick buck. Well guess what? The same neighborhood he bought in now has over a dozen other houses sitting around, for sale, and unoccupied. The alligator is eating him and his family, one payment at a time. And wait till the "Save Our Homes" NON-exemption kicks in for 2007 taxes.

Yipes!

Anonymous said...

Why do these figures not surprise me AT ALL?!!!

Median prices (real prices, not the BULLSHIT that the realtors are spewing forth) are 4-5x median income - it couldn't last. Just a blip in history...

"Johnny, remember 2003-2007? When people got greedy and thought that Florida actually could sustain California-level home prices? Wow, I still chuckle at those fools..."

Crazy G said...

So we sold "all" of our real esate holdings last year after the runup hit the top [guessed on the timing]...Moved from West Palm to Ormond Beach and are now renting in an upscale golf course community of homes in the $200k to $2m category.....
Any way, there's a guy from California who bought """ 5 """ houses on our block...I checked online with the tax acessor, and and he paid $1.3 million for the 5 houses, and he's got $1 million in mortgages on them....4 of the 5 are sitting empty, for sale or for rent...only 1 is rented @ $1350/mo.
Taxes in Volusia county here are @ approx 2.5%...
You figure the guys negative cash flow!!!!

Another guy from West Palm, has got 4 townhouses, he trying to flip....paid a cool million cash, all sitting empty...just dropped his price on all 4 to $285k/ea...

He'll be lucky to get out with his skin, as the developer still has units forsale....aprox 23 or more, and the developer is building more!!!!

zippo said...

Fantastic story, G!

Sounds like that guy from Cali obviously has some money to hold himself over - but for what? The market's not coming back for many years to come (I forecast 7-8). If he's smart, he'll dump'em and write them off.

Especially with property taxes right around the corner.

settled not settled said...

The surplus in Florida right now is only getting started. You will see it grow and grow...month by month. Expect 20-30% drops in prices before the inventory actually starts decreasing again.

Listen to me now and believe me later! - Hans and Franz

Crazy G said...

ZIP reply:

The guy I'm renting from is a 'flipper'....He's from Connecticut, and has got 2 houses

I talked to him last week and told him I wanted a $400/mo reduction in rent...He nearly flipped....

Told me he had mortgage payments to make, taxes to pay, and insurance to carry....
I told him that I understood, ""BUT"" all those expenses go on whether I'm renting it or not!!!!
We agreed on a $250/mo reduction!!!

He's carrying a $200k mortgage on each of his properties and needs the cash flow....
>>>>>"""AFTER ALL HE'S A CERTIFIED FINANCIAL CONSULTANT"""<<<<

41 years old, and thinks all the baby boomers moving to Florida will be buying up the properties....

Seems to me that more people are moving out of Florida NOW, than moving IN!!!!

Anonymous said...

Neighbor of mine in Vero Beach put his house on the market in January 06 for 589k. Now at 469k and still no visible activity at open houses.

Several local unfinished subdivisions are up for sale; several more w/ very few occupants. Gonna be a long time before things settle down. NAR economist (Leary) makes me laugh. Does he really believe this is going to turn around in the first quarter of 07???

Anonymous said...

good observations Crazy G.

Q: will these 'investors' hand the keys back to the mortgage company? How are they ever goign to get out?

Chip said...

In Brevard County, of the 50-or-more-unit condos that have gone up in the past 3 years or so, I see the great majority of them have almost no occupants and only one seems to have almost 50% year-round occupants. We're talking waterfront units, on the Banana or Indian rivers. Several evenings during last Christmas season, my wife and I took a slow ride past many of them to see how many lights were on. Very, very few. That alone pretty much answers the question of whether the owners are snowbirds -- we know the snowbird migration and family-visiting habits well, both of us being crackers, and we bracketed dates to capture any who spend Chritsmas up north with their kids. Nope, mostly empty units.

I haven't had a need to keep up with the tax laws about selling a flipped property. Would have assumed that one year of holding gets you out of the highest brackets, yet many flippers seem to be holding for a minimum of two years. Doubtless, many of them think Greenspan is right and that the market will bounce right back as long as they feed the alligator for another 6-12 months. Me, I think there are some really great buying opportunities on the horizon, in Palm Beach, Brevard and all over the state. Once those Option-ARMs begin to re-set and the alligator grows in size, these screwed flippers will be in full-panic mode.

rick in orlando said...

One of my friends is in deep trouble right now. He and his wife bought a modest (1700 sf) house in early 2003 for $165k-ish. Young engineer earning roughly $65k a year, married to a nice girl who was probably making $25k or so. Affordable situation, no problems.

But they got house envy.

"All of our friends" were buying bigger and fancier houses closer to work. They decided to upgrade to a similar house for $440k. After all, house prices were only going UP, so there was little risk in stretching the budget for a few years...

The modest house was getting appraisals in the $330k range, so they had phantom equity to use for a downpayment. Did a Home Equity LOC on the small house to make the downpayment on the big one.

They moved into the big house in June '06. That was later than they expected, due to some delays with the builder. The small house was listed with a realtor hours later for $330k. So, now they're carrying three large loans. As far as I can tell: roughly $150k, $130k, and $310k (Interest only). But that's just temporarily, until the small house sells and they can satisfy two of the loans...

Of course, it's not selling.

One child (well under a year old), and the wife has finally started working part-time again after recovering from some post-delivery medical issues.

By my rough calculations, the mortgage debt is close to 80% of their take-home pay. The small house has been dropped to $290k, which might be a break-even price after commissions, but hasn't seen much interest.

A year ago, this plan would have worked out fine...

Rick

sorry_2_say said...

Rick, another great story!

House envy - so sad. But that key phrase "schaudenfreude" (I have no idea if I spelled that correctly) kicks in. How could they be so freakin' GREEDY?

It's happening all over the state, and it looks like this couple are going to be adding to that long list of foreclosures in FLA.

Let the bad times roll...(for the greedy).

avril said...

Chip, I am a professional who is very close to the business (not in it, but very close). I can tell you right now, without any hesitation:

The condo market in Florida is DONE for a minimum of 5 years.

Write that down on your calendars, folks. Don't expect a turnaround in the Florida condo market AT LEAST until 2011.

Rick in Orlando said...

One day.

We held the lead in foreclosures for just one freaking day before California passed us to claim the title.

http://www.centralvalleybusinesstimes.com/stories/001/?ID=3251

(via www.forsakencraft.com)

sandi said...

Yea, then I see that Colorado is now claiming that THEY are #1 in the nation. Something's telling me these guys aren't looking at each other's numbers.

At least the latest numbers.

Crazy G said...

So the question was?
""How are the 'flippers' going to get out???"""

Right now in our developemt, the builder/developer, is trying to scale back BIG TIME..."FIRED" most all of his crew...""BUT", and this is a BIG """BUT""
>>>They probably have near 100 houses, coming on stream, in various stages of building<<<

The developer is a private company, so you have NO idea of their finances, etc???

Their cost on those houses, have got to be in the muli-millions, for sure....

"IF", and that's a big "IF"...they have got financing, they will be pressured into lowering their prices...
Which I personally think are VERY, VERY high...>$200/ sq. ft....
Toll Bros, houses are going for $150/ sq ft....
"IF" and "WHEN" this thing turns...

>>>IT'S GOING TO BE A TOTAL BLOOD BATH<<<

NewAndUsedHomes said...

Another Quote from The Central Valley Business Times, located at:

http://www.centralvalleybusinesstimes.com/stories/001/?ID=3231


Regardless of the ranking of #1 or #2 or #10 in Sept., As a former REO Niche RE Agent from Ohio, I can assure you that with the "Style" of Loans and the amount of "Sub-Prime" lending that has been going on in Florida, among many other
states, we are ripe for the picking and REO (foreclosed) homes are generally left in filthy condition, unless the agent assigned can catch the owner and work out a "Cash for Keys" deal in where the house is to be cleaned and keys returned to the agent in trade for a check from the lender.

Foreclosure can hurt a community, not just a homeowner or family.

Many MANY Real Estate agents, Builders and Mortgage Brokers could care little about their "buyers", they see dollar signs... not the person or families!

In my personal experience I made it a habit to show homes way below my buyers buying power. A typical sale example, is making a list from $5K to the max they qaulified for. One of the homes I showed and sold to a buyer (a young family of 4) two years ago, was only listed for $36K, the house only needed new roofing shingles and ceiling sheet rock in the dining and living rooms (which I got the selling bank to repay the buyer for, because the money came from their down-payment funds). This home was a Foreclosed 1800 sq ft ranch style on 3 acres with new windows, doors, H2o heater and central heat & air. Total payment with taxes and insurance is less than $300 a month (fixed rate loan)... They now have a very nice home and house payment! At the time of sale, surrounding homes where comping out at $100K - $120K range (average, not over inflated). Maybe that is just me, being the perpetual Bargain Hunter. LOL

The Grossly Over inflated pricing going on here in FL is a part / factor for the increase coast of Homeowners insurance and Tax hikes (the local government wants it's piece of the over-priced pie too). I have also noticed the DOZENS of empty new construction and an a large number of re-sale homes flooding the Ocala area. Builders offering "Rent to Own" homes with as little as $495 down or trying to lease what they can not unload... These are only good for the Builder, not the buyer, because the home's sale price is locked in at a price that the home may not comp or appraise for in 12 to 36 months. Uh-Oh!!

Foreclosures are climbing in my area as well. I might go get my FL RE license now that the prices are starting to fall and REO homes become more readily available.

Be a savvy home shopper, no matter what state you wish to buy in, always check the tax records, the prior sales prices, permit pulls (for improvements, if any), check the sex offender registry and do not be afraid to talk to neighbors to the property that you have interest in.

Remember, an average home that has increased in price greater than your pay has increased over the past 4 - 5 years is not a good buy. A home purchased for $57,900 in 1999 with no improvements above and beyond routine maintenance should not list for more than $75,900 (unlike the $130+ tags given to them right now in our sunny state of FL, that is sheer greed).


Enough of my babble for now!

Missie

Anonymous said...

I read yesterday that California was #1 with 14k foreclosures. How can that be? We have 28k foreclosures. We're #1.

Is it because 1 foreclosure in California equals 3 foreclosures in Florida? Maybe someone could come up with the total dollar amount for foreclosures, in order to rank who is really is #1.

Crazy G said...

Well!!

I just read an article out of the Palm Beach Post, dated 10/14, in which reporter Linda Rawls stated that Palm Beach County had 873 foreclosures in September '06...

In a previous article, "IF" I can remember correctly, the Post had forecast 10,000 homes to be sold in Palm Beach County in '06...Comparing it to the 11,000 or so listed reaaltors....

Anyway...My point is this....

"IF" the trend continues, it appears there will be more foreclousers per month than there are realtor sales!!!!!
>>>>JUST SOMETHING TO THINK ABOUT<<<<

sorry_2_say said...

G, that's hilarious. Talk about front-page news (that the papers would never publish - can't bite the advertising hand that feeds them, dontchaknow....).

Missy, I really liked your writeup, though it sounds like you're in a "still inexpensive" part of the state. You can barely get a cardboard shack for under $150K in O-Town, Tampa, or the entire SE Coast.

Anon,
I'm positive that California and Colorado hadn't seen Florida's numbers before writing those articles. We have much lower incomes than those 2 states, and rely much, much more on the construction industry than they do.
So it should be no surprise that we're WAYYYY ahead in foreclosures, and will be for a long time.

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