Florida - Paradise Lost

New Century Financial - Empty Pockets

2007-03-09T07:59:00.000-05:00

New Century, the 3rd largest sub-prime lender in the US, is in a world of hurt. First, the rejected loan pass-throughs, then the federal investigation of fraud, and then the resulting dot-com-like crash of their stock price (see graphic). Now, with no one else's money to lend, they've finally come to the conclusion that they can no longer lend any money at all.

From Alistair Barr at Marketwatch.

'SAN FRANCISCO (MarketWatch) -- New Century Financial Corp. said late Thursday that it has stopped accepting loan applications because some of the subprime-mortgage specialist's financial backers are refusing to provide access to financing.

New Century also said that it has received $150 million worth of margin calls from its so-called warehouse lenders. It has satisfied about $80 million of those calls, but $70 million remains, according to the company.

"As a result of the current constrained funding capacity, the company has elected to cease accepting loan applications from prospective borrowers effective immediately, while the company seeks to obtain additional funding capacity," New Century said in a statement. '

Wow - got no money, got no car, got no women, so there you are. (credit Young MC for that genius line). Maybe they could get some crap-ass financing from a pay-day lender to keep them afloat.

'"The company expects to resume accepting applications as soon as practicable; however, there can be no assurance that the company will be able to resume accepting applications," it added. '

Translation: "Put a fork in us - we're done. We'll start accepting loan applications as soon as we get bought by another company. But then agian, who would want to assume our horrific portfolio?"

'Lenders specializing in such loans, like New Century, rely in part on big banks known as warehouse lenders to finance their operations. These backers require that subprime lenders meet certain minimum financial targets; otherwise, they have the right to end the business relationship.

On Friday, New Century said it had breached one of those requirements, or covenants, and also disclosed that it's the subject of a federal criminal investigation. See full story.

New Century said on Thursday that it has yet to get waivers on this covenant from five of its warehouse lenders, having made no progress on this point since Friday.

"Once you get hit with one of these crunches, warehouse lenders don't want to lend to you, so you're really done," said Joseph Mason, associate professor of finance at Drexel University's LeBow College of Business and a visiting scholar at the Federal Deposit Insurance Corp.

Mason, who recently published a study on the subprime mortgage market, said he's expecting more bankruptcies in the sector. '

The lending implosion continues. With less money avaible for mortgage borrowing, it can only hasten the demise of our giant, cancerous bubble. Bad medicine for sure, but the cure is on the way.

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County Clerks Office, Now "Foreclosures R Us"

2007-03-07T09:24:00.000-05:00

Hey, this housing implosion in Florida has created a new job opportunity - processing foreclosures. It's a dirty job, but some one's gotta do it. Maybe Mike Rowe could be called in to do an episode.

From Sarah Prohaska @ the Palm Beach Post.

'FORT PIERCE — For months, a ceaseless routine has gripped the St. Lucie clerk of court's civil office: New mortgage foreclosure lawsuits arrive in unprecedented numbers - huge stacks, some a foot or 2 tall. But as soon as one stack is processed and emptied from the in-box, another dozen or more foreclosures show up the next day.

On really busy mornings, process servers drop off banks' boxes filled with these documents, which set into motion a process that often means homeowners who haven't paid their mortgages will lose their homes.'

Wow - this is the first, honest-to-goodness picture of the true state of housing in our state. Of course, Foreclosure.com and RealtyTrac have also been talking about it, but this really illuminates. And the comparisons to very recent history (when the REIC was blathering on and on that there was no bubble and the sky-high valuations were supported by "solid fundamentals") are spot on.

'The clerks who process the cases shake their heads when they think back to the days when maybe two or three mortgage foreclosure lawsuits arrived each day. They don't have to stretch their memories much: That was only about a year and a half ago.

But now, it's a different scene inside the clerk's circuit civil division across the street from the St. Lucie County Courthouse. As 2006 unfolded, the number of new St. Lucie mortgage foreclosure filings surged upward, culminating in a yearly total of 1,329 cases. That's a more than a 170 percent increase from 2005's total of 485 cases, according to the clerk's office.

Take this snapshot: On Wednesday, the last day of February, the St. Lucie clerk's office received 30 new foreclosure cases. That single day accounted for more cases than the office received in the entire month of October in 2004, according to the office's records.

The trend is playing out across the nation, but some analysts say markets such as St. Lucie County, which enticed a lot of speculative buyers during the sizzling real estate boom a few years ago, are experiencing the biggest increases in delinquencies and foreclosures.'

Exactly. Along with Arizona and California, the state of Florida is the third member of what I like to call the housing bubble-bust triumvirate. All three states had the greatest appreciation over the past 5 years, and as a result all three created the greatest disparity between median incomes and median prices. It takes no rocket scientist to forecast that the triumvirate are also going to experience the greatest shock as the supply and demand curves snap back together.

Back to St. Lucie. Some causes and effects of the fallout.

'St. Lucie officials offer several reasons why the real estate boom has given way to a foreclosure boom:

• The slowing housing market, where owners are realizing their homes are not worth what they thought they were or the homes were over-appraised;

• Adjustable-rate mortgages, which drew in buyers with initial low interest rates that recently have increased substantially;

• Rising insurance rates and property taxes.

Those are the catalysts, many say, for the record number of lawsuits banks have filed to recover their money - and the fallout in St. Lucie, and many other Florida counties, has landed squarely on the clerk office's doorstep.

"In all the years I've done this, I've never seen this many foreclosures," said Nancy Bennett, supervisor of St. Lucie's circuit civil clerks division, who has worked in the office for more than 20 years. "It has never been like this."'

And seriously, with record #s of empty houses and sales dropping like a rock all over the Sunshine State, does anyone believe this is going to get any better in 2007? In 2008?

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Freddie Mac - The Empire Strikes Back

2007-03-06T09:34:00.000-05:00

In my diatribe about the sub-prime industry (how it created the bubble and is now suffering for it's sins), Freddie Mac, a major purchaser of Mortgage Backed Securities on the secondary market, has seen the light and is now clamping down. Hard.

From Dina ElBoghdady @ the Washington Post.

'Freddie Mac, one of the biggest investors in U.S. mortgages, plans to toughen its standards and stop buying certain types of risky loans that have been linked to a high number of delinquencies and defaults.

The decision, announced yesterday, is the latest sign of the deep problems roiling the subprime mortgage market, which caters to borrowers who could not qualify to buy a house with a conventional loan, including people with blemished credit records.

During the recent housing boom, subprime lenders eager to cash in on the home-buying frenzy relaxed their standards. They allowed borrowers to take out mortgages with low teaser rates that ballooned after the first few years. Now that the higher rates are kicking in, many borrowers are struggling to make their monthly payments, and dozens of small lenders are losing money, shutting down or filing for bankruptcy protection.'

Well put. One thing I didn't mention is yet another source of agony on the market - existing homeowners who discovered their new-found "paper wealth" due to the bubble evaluations on their homes. Many turned around and refinanced their once inexpensive residence. Sure, it seemed like a good idea, but many of these folks were guided into toxic loans that are now biting them in the a$$.

Back to the article - some discussion on the importance of Freddie Mac's announcement. How serious is the situation?

'Freddie Mac's decision to clamp down on these types of mortgages signals heightened alarm about the course of events. If the damage is not contained, a crippled mortgage industry could destabilize the economy, several economists said.

"This is one of the biggest voices in the mortgage market saying in a very public way that the mortgage and housing markets are very troubled," said Mark Zandi, chief economist at Moody's Economy.com.

The trouble is most apparent in the fourth-quarter mortgage delinquency rate, which climbed to its highest level in four years, the Federal Reserve said yesterday. The portion of loan payments at commercial banks that were at least 30 days overdue rose to 2.11 percent in the quarter, up from 1.72 percent in the previous three months. Other measures of mortgage delinquencies have also increased recently.

All indications are that delinquencies are rising faster in 2007. Typically, if there's a surge in delinquencies, defaults follow. Many blame the surge on subprime mortgages, which, according to the Mortgage Bankers Association, made up about one-fifth of all new mortgages last year.

That's why Freddie Mac plans to apply stricter standards to subprime mortgages written on or after Sept. 1, 2007, that have "a high likelihood of excessive payment shock and possible foreclosure."'

So, you see - Freddie Mac will continue to purchase low quality loans for another 6 months. I think this is waiting a little too long, but at least they're giving the market time to adjust.

By the way, I beg to differ on that 1/5 number being quoted by the MBA - the number is much higher, but should we be suprised that they are quoting flawed statistics? Like the NAR, the MBA's employment of denial, cooked numbers, and outright lies to the public are the last defense in keeping their gravy boat from sinking.

Now, as to the particulars of the new restrictions....

'The company will buy securities backed by the 2/28 and 3/27 loans only if the borrowers qualify for the highest rate the loan can have. For instance, if the teaser rate is 2 percent but eventually kicks up to 8 percent, the borrower must qualify for the 8 percent loan.

To protect future borrowers from "payment shock," Freddie Mac will no longer buy securities backed by subprime loans that lack documentation of the borrower's income and the value of the property being financed.

The company also is developing a standard to limit the purchase of securities backed by loans in which the income was stated but not documented.

Freddie Mac also wants lenders to consider the cost of taxes and insurance when they write mortgages.'

This is a very good start. We will all benefit in the long run when credit is extended on the ability to re-pay, not on the perceived inflation of the underlying asset.

Unfortunately, the previously mentioned jagoffs who've been making a boatload of money from this scam are now sounding the alarm, all in the name of "helping" first-time buyers. Complete and utter bull$hit.

'The Mortgage Bankers Association questioned Freddie Mac's decision, saying the people who will be hardest hit will be first-time, underserved or minority homebuyers who will suddenly find themselves without access to credit.

"We worry that people who could buy a home today won't be able to qualify for credit in the future if these kinds of subprime loans are driven from the market," said Kurt Pfotenhauer, one of the association's senior vice presidents.

Hogwash. We're now heading towards a record number of foreclosures and people losing their homes, yet Kurt wants to make it easier for more people to fall into the same trap?

More realistically, it sounds like he owns some overpriced bubble real estate that'll become even more difficult to unload with the implementation of better lending practices. Also, less scam mortgages means less scam money in Kurt's (and his brethren's) bank account. Poor guy - he needs a hug!

Time for yet another reality update: when prices drop to realistic valuation levels, then people WILL be able to qualify for homes. Until then, it's just a sucker's market, with a continually decreasing supply of IBs (idiot buyers).

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Central Florida - Toxic Financing Results in Home Turmoil

2007-03-05T10:01:00.001-05:00

Before we move on to Freddy Mac and Fannie Mae's take on the toxic loan market, here now a local story on the effects of these "buy now, pay later" mortgags. From Rene Stutzman at the Orlando Sentinel.

'Three years after Central Florida's housing market turned red hot -- prompting families and investors to buy, buy, buy -- thousands of people are in danger of losing their homes because they can't make their monthly payments.

The number of mortgage foreclosures is soaring this year. Foreclosures had been increasing -- first steadily, then sharply -- for months during the past year.

But in January, lenders filed 1,787 foreclosure suits in Central Florida, more than twice the number compared with a year earlier, according to research by the Orlando Sentinel.

And early results for February are even worse: In the first two weeks of the month, the number of suits climbed 63 percent compared with all of February 2006.

"Clearly, we are in a cooling of what once was a red-hot housing market," said Sean Snaith, a professor of economics and director of the Institute for Economic Competitiveness at the University of Central Florida.'

"Cooling?" Yes, I suppose you could call it that. But "cooling" in this state sounds way too nice, like "I was so happy to be cooling down, after walking across the Florida Mall parking lot." Sorry, it just doesn't fit the circumstances.

How about a more accurate phrase, such as "beginning of a free-fall", "first stages of a total melt-down", or "start of a long ride to normalcy in supply and demand"?

'The pace of foreclosures is what sets Central Florida apart -- although the same thing is happening across the state and, more modestly, across the nation.

And the worst may be yet to come, according to some experts.

That's because there are so many adjustable-rate mortgages on the verge of pushing up monthly payments.

What's going on?

Many homeowners simply took on more debt than they could manage.'

That, my fellow Romans, is the key to our situation. Too much easy credit created a house of cards in this state. Far too many overpriced homes owned by people who simply cannot make the payments.

Like a spoiled rich kid who finds out that he's no longer in the will, the culture shock of our return to actual house valuations is going to be a long, painful, and traumatic process. The denial is real and entrenched - one doesn't recover from these things easily.

'Until recently, homeowners could often sell their way out of problems. Home prices were rising, and the market was full of buyers, especially speculators.

But prices have stagnated. Homes in Orange and Seminole counties now sit unsold an average of 90 days -- three times what it took to sell a residence a year and a half ago. And many speculators who helped buoy the market have disappeared.

That means local homeowners are stuck.

Feeling trapped.

"You feel so trapped," said Jennifer McCall, 30, who bought a $220,000 house near Winter Park in May, then quickly fell behind on her payments and was sued by her mortgage company in January. "It's frightening," she said. "You have a family you're trying to take care of and a mortgage that's eating you alive."

She and her husband, Jason, had never owned a home before and didn't have much in savings, but they found a mortgage company willing to use creative financing, McCall said.

"That's a huge mistake," she said.

They wound up with a first and second mortgage and monthly house payments of $1,986, she said.'

$2K a month for a $220K house? My gosh, that is really, truly a sad statement on the state of our state. And you know what? This is just one example. Multiple this couple's situaton by the tens of thousands, and then you'll get the big picture of our impending crisis.

And, I'd like to point out that I lost all respect for that guy from UCF when he made the following statement. (note, I am a graduate from that fine institution, BSEE '91)

'Although foreclosures are on the rise in Central Florida, they are not at unprecedented levels, and the local real-estate market is not about to collapse, said Snaith, the UCF economist.

Home prices remain far higher than before the run-up, he pointed out.'

Wow - no $hit, Sherlock. The key is the trends - take a look at these, and you'll be likely to see that prices are heading towards those that existed before the run-up.

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A Lesson on Exotic Mortgage Lending

2007-03-02T09:15:00.000-05:00

Today, I am going to discuss a key cause of the bubble here in Florida and throughout the country - the easy availability of loans that people truly couldn't afford in the long run (or never had intention of paying back).

In the supposedly altruistic notion of converting more people into homeowners (regardless of creditworthiness), all sorts of exotic instruments were employed over the past 5 years. They are collectively known as "sub-prime", and they include:

ARMs (adjustable rate mortgages) - Typically start at a low introductory rate, and then 1 to 3 years later the rate resets to LIBOR (London Interbank Offered Rate) + a small %.

Balloon Mortgages - A mortgage that must be paid in full within a set time, typically 5 years. Often used in cases where refinancing or sale of the property is expected before the balloon is due.

IOs (interest only loans) - Used in conjunction with ARMs and/or balloons, the homeowner only pays interest, and does not build equity during an initial trial period. This makes the initial payments even lower.

Negative IOs - Similar to IOs, but to further drop the initial payments, the homeowner pays less than the actual interest for the trial period. Thus, when the balloon and/or ARM resets, the total amount owed on the property has actually increased. As in all the other above-mentioned instruments, this is not a problem if the property has increased in value faster than the principal.

And the worst of all,

No-Doc (No Documentation required, aka, "Liar Loans") - once used in rare cases where documentation of pay history is difficult (self employed persons), the loan is granted without a credit check or verification of ability to repay. In exchange, this type of loan carries higher interest rates. For obvious reasons, this route is the easiest way to commit fraud, and that's exactly what happened.

It should also be noted that all of the above types of loans carry high fees, which go directly to the mortgage brokers who sold them. Finally, the vast majority of these mortgages are bundled up by the thousands and sold on Wall Street as MBS (mortgage-backed securities), thus freeing the brokers to sell even more mortgages and perpetuate the fee-generating machine.

Two of the largest purchasers of these MBS are Freddie Mac (FMC) and Fannie Mae (FNMA), both quasi-gov’t entities whose purpose is to increase American homeownership (and to make a profit along the way).

Back in the "olden days" (pre 2001), such exotic loans comprised a very small % of overall home-loan volume (5-6%). However, by 2005, it is estimated that 40% of all mortgages were underwritten with sub-prime/exotic riders in them.

All of this combined to generate a proliferation of mortgage companies, all pushing exotic mortgages to get the high fees and then passing on the "hot potato" loans into MBSs on the financial market.

It all worked great, especially as house prices skyrocketed, and valuations generated ever-increasing "paper equity". With so much credit available, people who had no intention of ever living in a house ("flippers" and outright criminals) were also bidding on houses, condos, and pre-build properties, pushing prices even higher.

But there was an issue. Every purchaser of an MBS bundle from these front-line mortgage companies puts various stipulations on the purchase - the most important of which is % of defaults (non-payment in the first 90 days). If this % of defaults (non-payment in the first 90 days) is exceeded, the front-line mortgage company is required to buy the defaulted mortgages back.

This issue transformed into a certified problem when it turned out that many of the flippers and fraudulent loan applicants never had any intention of making payments on their loans. Defaults, defaults, and more defaults.

Furthermore, as time wore on, the ARMs and balloons started to trigger, greatly inflating the payments that honest homeowners had to pay to keep current on their mortgage. Often, this increase in mortgage payment far exceeded the homeowner’s ability to pay.

This resulted in the default triggers being exceeded everywhere, particularly in the exploding-bubble states (Florida, Arizona, Colorado, California). Instead of being able to pass them onto other banks and securities, mortgage companies were increasingly getting "return to sender" on their crap-o-la loan portfolios.

The certified problem then metastasized into an outright disaster. As foreclosures started mounting (the foreclosure rate is still increasing as you read this), the smaller lenders began to implode, and the larger lenders have begun charging off huge losses.

And the worst part of the tragedy: people who thought they were living the American Dream are now experiencing a nightmare as their house payments suck their finances dry. Finally, they "throw in the towel" and get foreclosed on. Their credit ruined, they are pretty much denied the opportunity of owning another home for the next 7 years.

Okay, so we have a serious mess on our hands. You can almost here it on the PA system, "We need cleanup on aisle 3!". Our next post will deal with Freddy Mac's proposals to deal with the situation.

I just wonder if they are a "day late and a dollar short" on their response.

Game On

2007-03-01T07:54:00.000-05:00

Of course, we've been preaching to the choir here - either prices have to come down in Florida, or median incomes have to go up (way up). And we all know the likelihood of option #2 coming to fruition. Ergo, the laws of supply and demand are finally coming to life, like an old rusty train that's been overhauled and lubricated and finally leaving the station for the first time in 5 years. From Shannon Behnken at the Tampa Tribune.

'TAMPA - The Tampa Bay area experienced its steepest home price slump in recent memory in January, while the number of home sales continued to drop. Sales activity in the area stands in stark contrast to national data that showed sales of existing homes rose by the largest number in two years.

"The housing market in Tampa doesn't look good at all," said Per Gunnar Berglund, senior economist for Moody's Economy.com. "This is the sharpest drop in pricing since the early 1990s."'

And as goes Tampa, goes the rest of the state. Maybe in the far north interior things haven't changed, but for the majority of the population, consider this to be the starting gun to our multi-year race to the bottom.

And lest we forget, it's always good to hear the cooked numbers from FAR (Florida Ass. of Realtors) as well as "we're just around the corner from recovery" droning from the NAR. The fairy tale just wouldn't be complete without involvement of our evil (yet charmingly simple) giant. First, FAR.

'The median sales price of existing single-family homes in the Tampa-St. Petersburg-Clearwater area was $214,000 in January, down 7 percent from December and significantly below the real estate market's $239,900 peak in June, according to data released Tuesday by the Florida Association of Realtors.

The association said the area's median sales price in January was 1 percent below the same month a year ago. In December, the median sales price was $230,800.'

Wrongo-bongo. I've been tracking median prices for over a year in the bay area, and currently it is still around $270K. So, unless the median home is selling for $55K less than the listing price, these numbers are cooked, baked, and diced. Onto the NAR - cheerleading time from economist Lawrence Yun!

'Yun said he does not think the Florida housing market will suffer too much. The job market remains strong, and many people continue to move to Florida from the Northeast, which should continue to drive demand for real estate, he said.

"This is a short-term correction," Yun said. "The local fundamentals are good."'

WHAT THE F is this guy talking about?!!! More people are leaving the state than are moving in, sales are way down, prices are way down (crooked accounting by FAR notwithstanding) and median incomes are still far below median prices. Mr. Yun, tear down this wall! (of lies and deceipt!) The local fundamentals are not good - the laws of supply and demand say they are very, very bad.

And hey, while we're at it, let's hear the same drivel from our local liars-club.

'Carlos Fuentes, president of the Greater Tampa Association of Realtors, said that despite the drop experienced by the larger metropolitan area, local data on prices in Hillsborough County are trending upward.'

Trending upward in his mind, maybe. Trending upward in one or two super-wealthy neighborhoods, maybe. Trending upwards if you're standing on your head, maybe.

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It's the Inventory, Stupid!

2007-02-27T08:00:00.000-05:00

To say that we're overbuilt in the Sunshine State would be an extreme understatement. With this, you could say that Palm Beach is the poster-child of the situation. From Linda Rawls at the Palm Beach Post.

'First, the good news from housing consultant MetroStudy:

• New-home starts in Palm Beach County hit a four-year low in the last three months of 2006. They dropped 62 percent just from the fourth quarter of 2005.

• Total inventory - including model homes, finished vacant homes and homes under construction - fell to a four-year low in the last three months of 2006.

• Housing supply declined 4 percent in the fourth quarter of 2006 compared with the same period in 2005.

Decline, decline, decline, decline. This is the good news?'

Hey, it beats the alternative. Though a 4% decline from record levels is not likely to cause a sea change in the housing market.

'Yes, in these topsy-turvy times - when it's quite possible to be "upside down" on your house (to owe more than it's worth) or to lower your asking price by $1 million and still not get an offer - declining housing starts, construction and inventory are all good news; signs that the distressed new-home markets in Palm Beach County and the Treasure Coast are trying to recover.

Any recovery, however, could well be postponed into the second half of the year. Most analysts don't even agree on whether the market has hit bottom.'

I don't know exactly why, but it appears the builders are much more bearish on the market than the realtors. Granted, the realtors aren't required to tell the truth because the NAR (National Ass. of Realtors) isn't a publically traded company. If it was, a few things known as the SEC and Sarb-Ox would cause the NAR to provide forecasts more closely aligned with that of the builders (i.e.; truthful).

'Just last Thursday, luxury-home builder Toll Brothers Inc. said its first-quarter profit dropped 67 percent due to hefty write-downs and other costs, and Chief Executive Robert Toll said "there are (still) too many soft markets."

The inventory of existing homes, which was up 71 percent Palm Beach County alone in December, may grow as "re-listers" - people who couldn't sell in 2006 - are likely to try again in the spring. And analysts expect a further uptick in the region's new-foreclosure filings as high-risk borrowers continue to default on loans and lenders tighten credit standards.'

More foreclosures = More distressed inventory

Ergo,

More distressed inventory = Lower Prices

And to continue our boolean logical progression,

Lower Prices = More Sales

And finally,

More Sales = Lower Inventory

But we're still at the very beginning of this clearance process. The article continues with a description as to how this situation was created.

'Many of those borrowers were investors who artificially pumped up demand - and prices.

"Builders ramped up production to meet surging demand during the housing boom," said Michael Larson, a real estate analyst with Weiss Research in Jupiter. "But it turns out a big chunk of that demand surge wasn't 'real' demand.

"It was investor demand - people buying up one, two, three or more homes at a time to flip, rather than people just looking for a place to live."

That artificial demand is gone now, Larson and others say. Investors have pulled out of the market, causing new-home sales to plummet.

In Palm Beach County, new-home sales dropped 36 percent in just one year - comparing the fourth quarter of 2006 to the same period in 2005 - according to MetroStudy in West Palm Beach.

Further proof the local housing boom has gone bust: Palm Beach County buyers closed on only 976 new homes in the fourth quarter of 2006 - down drastically from its boom-time peak of 3,123 closings in the third quarter of 2003, MetroStudy said.'

The situation is not pretty, and much more bad medicine is in store.

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Hard Rock Auction - Results

2007-02-26T07:45:00.000-05:00

As mentioned last Thursday, there was a home auction (actually, it was referred to as a MEGA Auction) scheduled to be held on Saturday at the Seminole Hard Rock Casino. A few surprises but mostly it went as predicted - lots of bids that were far below the seller's reserve price. From Jan Hollingsworth at the Tampa Tribune.

'TAMPA - Scores of gamblers gathered at the Seminole Hard Rock Hotel & Casino on Saturday, but the name of the game was real estate, not roulette.

Alan Westfall was betting he could break even on a six-bedroom home he invested in right before the local market went south last year.'

He bought last year and is hoping to break even? Sorry brother, but if you bought at the peak of the market, you've got until 2016 (or later) before prices will get back to that level. Believe it.

'He hadn't counted on a swarm of bidders betting on a fire sale.

Of the first 10 properties on the auction block, Westfall said his two properties drew the highest bids - $215,000 for a 3,000-square-foot home in the golf course community of Heritage Isles; another $215,000 for 56 acres in Riverview.

"That doesn't make us feel any better," he said. Not when the mortgage on the Heritage Isles place is $150,000 more than that. Not when he was looking for $2.5 million on the parcel in Riverview.

Westfall, like many other hopeful sellers at the mass auction, didn't accept the offers. Each invested $2,500 per property toward advertising costs.'

As predicted, the reserve prices and the winning bid prices were far and few between. Though a few sellers did price aggressively and made a sale.

Now, let's do a quick calc: 46 properties x $2,500 per listing = $115,000. Granted, a lot of work and a bit of overhead went into it, but certainly not a bad way to make money. Some hype from the auctioneer now.

'In the end, it paid off for many of them, auctioneer Jay Bailey said.

"It was weird and wonderful," he said of the event, where 46 properties went on the auction block.

At first, Bailey was disappointed - both with the crowd, which he said numbered less than 300, and with the bids.

The auction ended at 2:30 p.m., a couple of hours before the scheduled 5 p.m. close of bidding.

Then something strange happened, Bailey said. People started cutting deals.

"It's like they were trying to learn how to bid first. I think they reverted back to conventional real estate buying," he said.

Bailey, of Bailey's Real Estate and Estate Auctions, said he doesn't have a tally on Saturday's transactions. Several properties sold. The largest, a 453-acre tract in Levy County, sold for $5,000 per acre in an online bid - $4,000 more than the reserve, or minimum required by the seller.

Other contracts were hammered out after the auction. "We're in real negotiations now with 15 to 20 others," he said.'

In the end - the question is asked again: was this just another marketing gimmick to push overpriced real estate, or a sign of desperation (with more to come)?

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Pricing - Time to Get Real

2007-02-23T08:05:00.000-05:00

How many times can we say it? The property tax situation would not even be an issue if PRICES weren't so far out of line with income here in the Sunshine state.

Fortunately, the MSM is beginning to report on the problem with pricing. Why? Because the supply of idiot buyers (IBs) has just about dried up, and without the IBs, very few overpriced homes are selling. Ergo, the realtors are not making any money and (voila - we come full circle!) they've come to the same conclusion that we have: prices have to come down if sales are going to go up.

From Dick Hogan at the News-Press, an article relating this issue with it's effect on the commercial real estate business.

'A massive inventory of unsold homes in Lee County could bring bad times to both the residential and commercial real estate markets.

But real estate agents could help soften the blow by telling sellers to ask more realistic prices for their houses.

That’s what two experts told a sold-out audience Tuesday night at The News-Press Market Watch at the Harborside Event Center in downtown Fort Myers.'

With 23,000 houses and condos on the market in the county and the number rising, he said, the residential construction market is likely to slow dramatically this year as builders work through a backlog of homes ordered in better times.'

So, what's the connection between the deteriorating residential market and the commercial version?

'With 65 percent of industrial space occupied by people such as developers, subcontractors and suppliers for the residential market, D’Alessandro said, the commercial market could be hurt.

“The bottom line is fewer tenants,” he said.'

And though we haven't really addressed it much, what is the current situation with "work force housing" in Lee County?

'Also making a presentation Wednesday was residential broker Denny Grimes of Denny Grimes & Co., who like D’Alessandro writes a column on real estate for The News-Press.

Talking about the results of falling land prices, Grimes noted dryly that “the work force housing crisis is over” with houses in Lehigh Acres selling for less than $200,000.'

Well, if you think $200K is tolerable for "Mr. & Mrs. Ham & Egg", well...I would have to disagree. But that's just another symptom of the entire pricing situation.

'But generally, he said, the near future isn’t going to bring boom times for real estate in the county.

“Don’t expect the tide to start rising this year,” he said.

He did hold out hope that if real estate agents muster the collective will to talk tough to their sellers about prices, the supply of existing homes could be reduced more rapidly.

Too often, he said, agents soothe sellers with optimistic talk about additional open houses or other tweaking of sales campaigns.

“We all know what the solution is, don’t we? It’s called a price reduction,” he said.

Meanwhile, he said, things are bad and getting worse.

“In spite of what you want to believe,” Grimes said, “we’ve not hit bottom yet” and won’t until the inventory of existing homes starts to shrink.'

Enough said - it's good to see that our gospel is finally being heard.

Full Article

House Auction: Marketing Gimmick or Sign of Things to Come?

2007-02-22T08:04:00.001-05:00

Many of you heard some rumblings in the 4th estate about the steady increase of home auctions over the past year. Now another one up in Tampa - this to be held at the Seminole Hard Rock Casino. From Shannon Behnken at the Tribune.

'TAMPA - Just as the real estate market was starting its downturn in the fall of 2005, Alan Westfall slipped into the investment game.

He paid $365,700 for a six-bedroom home in Heritage Isles, a golf course community in north Tampa. He mortgaged the property at 100 percent, painted, installed wood flooring and quickly relisted the home for $425,500.

After more than year of price reductions and unsuccessful attempts to sell or rent the house, Westfall is getting anxious. So he has decided to try his luck with an auction.

"The weight lifted off my shoulders would be tremendous if this home sells," Westfall said. "I just didn't expect the market to take a downward turn so quickly."'

And some details about the auction itself.

'Westfall is among 50 Florida property owners choosing to gamble big this Saturday at the Seminole Hard Rock Hotel & Casino in Tampa and sell their homes in the All In Mega Auction. There are single-family homes, condos and vacant land for sale. It's planned for 11 a.m. to 5 p.m. and will be broadcast online.'

As the real estate market cools further, a record 34,000 homes are listed for sale in Hillsborough and Pinellas counties. Frustrated sellers are increasingly turning for help to the auction block - once the domain of distressed or institutional sellers - and experts predict many more will follow this year. However, when the gavels fall, some may be shocked to discover what potential buyers are willing to pay. '

How much is this going to cost, and how many have reserves preset?

'Combining the properties into one auction and charging a $2,500 entry fee for each one allows for mass marketing, Bailey said. There have been TV and radio advertisements and billboards to get the word out. "It normally takes $5,000 to market a single home," he said.

Still, Bailey said, he hasn't received the number of entries he had hoped for. "I think a lot of people are waiting to see what happens with this auction. You are taking a risk, but it's your best shot."

Some sellers worry they might not get a good price, so none in Bailey's auction have opted to sell their property "absolutely" to the highest bidder, Bailey said.'

Okay. But with every house set with a reserve sales price, I'll be very curious to see how many homes actually sell. Personally, I've witnessed several houses here (in N. Tampa) go up for "auction" (with plenty of signs advertising the fact) last year, and guess what? They're still sitting empty, because the reserve price was the same as the listing price. If they truly want to close, sellers need to get real.

'While the popularity of auctions increases among private home owners, many sellers may be in for a hefty reality check.

Marty Higgenbotham of Higgenbotham Auctioneers International in Lakeland said sellers are still having a tough time in today's market.

"Sellers aren't willing to accept today's property value," he said, noting that he has seen six real estate booms and busts in his 48-year career. "They'll get over it."

Three weeks ago, Higgenbotham auctioned 115 Cape Coral and Fort Myers properties. Seven hundred buyers showed up, and nearly every property had a contract by the end of the auction. There was $24 million in contracts, Higgenbotham said, but sellers accepted just 15 bids.'

I rest my case. So, my question is: are auctions like this a marketing gimmick or (as foreclosures mount and spec-u-vestors bail out) a sign of more to come?

Full Article

Auction Website

The End of Property Taxes for Homeowners?

2007-02-20T12:44:00.000-05:00

A new and interesting proposal has surfaced in the debate concerning the extreme inequities associated with the current "Save Our Homes" property tax system (aka, "Screw The Children").

The basic concept: all homeowners would no longer pay taxes on their primary residence, and all other properties (rental, commercial, investment, vacation) would still have property taxes, but have an annual cap on increases. The difference would be made up by increasing the sales tax to 9%.

From today's St. Pete Times.

'TALLAHASSEE - House Republicans are developing a proposal to eliminate property taxes for all homesteads while increasing the sales tax by a few pennies to make up the difference.

The plan, which has quietly gained favor among House leaders in recent days but lacks detail and has yet to be announced, also calls for capping property taxes on businesses, second homes and other nonhomestead property.

The cap would likely be tied to population growth and inflation.

"Everyone's pretty excited about it," Rep. Anitere Flores, R-Miami, said after emerging from a property tax summit in the House on Monday afternoon.'

Like we've said, it's been a bear of an issue, because I can personally attest to how f-ed up the current system is. The house that I'm currently living in (a starter home built in 1994) is paying $5500 a year in taxes, while a neighbor across the street is paying only $2200 a year. This is just plain wrong - in so many ways. They have to do something.

'Property taxes promise to be the most challenging issue in the Legislature's upcoming session, in part because of the inequities in the current system, which favors long-term homeowners over new residents while pushing more of the burden on nonhomestead property.'

Right - so here we go!

'An increasing number of lawmakers feel the best remedy is to simply get rid of property taxes homestead owners pay to schools, cities, counties and special taxing districts. The idea is contained in House Speaker Marco Rubio's book 100 Innovative Ideas for Florida's Future.'

On the surface, it sounds like a very intriguing idea, but there are numerous drawbacks. Starting with the fact that a consumption tax is regressive, whereby the poorer you are, the higher % of your income goes to the government. So, out goes the reasoning for the SOH tax system that protects the old ladies on fixed incomes.

That aside, there are other concerns.

'But an increased sales tax could hurt businesses in North Florida, where shoppers could go to Georgia or another state. Also, sales taxes hurt the poor more than other income groups. Vacationers, too, would pay more to visit Florida.'

Can you imagine being an appliance seller or car dealer anywhere within 200 miles of the border? Those businesses would get killed with a 9% sales tax. Also, do we dare tinker with tourism, our #1 business?

Still, I like the idea - thinking way outside the box is a good thing, especially in times of crisis. Don't know if the voters will go for it or not. What do you think?

Full Article

Housing Slump - Bigger Than Ever

2007-02-19T08:43:00.003-05:00

Despite the repeated denial by those in the REIC (real estate industrial complex) over the past 2 years, the numbers don't lie. And the numbers from the 4th quarter of '06 were not pretty, especially in locales with unusually bloated prices - does that sound familiar to you?

'NEW YORK (CNNMoney.com) -- The slump in home prices was both deeper and more widespread than ever in the fourth quarter, according to a trade group report Thursday.

Prices slumped 2.7 percent in the fourth quarter compared to the fourth quarter a year earlier, according to the report from the National Association of Realtors (NAR). That's the biggest year-over-year drop on record and follows a 1.0 percent year-over-year decline in the third quarter.

The most recent median prices are down even more: 3.4 percent since hitting record highs in the second quarter. Almost three-quarters of the markets, reported on by the group, saw declines in median prices over the past six months, with eight reporting double-digit declines.'

And what about those aforementioned bloated markets?

'Vacation markets, where investor-buyers had driven up prices during the building boom of 2005, were particularly hard-hit.

The Sarasota-Bradenton-Venice, Fla., market saw the biggest year-over-year decline in the fourth quarter, with prices plunging 18 percent.

When looking at the change between the fourth quarter and the second-quarter peak, the Palm Bay-Melbourne-Titusville, Fla., market saw the biggest drop, with median prices plunging 19.5 percent.'

Really, is anyone surprised? Unfortunately for those in the larger metro areas of our state (Orlando, Tampa, Miami-Palm Beach), the realtors have been dramatically UNDER-reporting the median sales prices for the past 2 years. Now that prices in these markets have started to fall dramatically, it won't make the news because the previous year comparison numbers have been cooked (to a crisp!).

In the smaller Florida markets however, the realtors haven't been able to disguise the sales prices so easily, and that's where we've seen the biggest news reports of declines.

Back to the article. Despite all the bad news, the used-car salesmen from NAR (National Ass. of Realtors) keep on shovelling the bull$hit.

'Examination of data within the quarter shows home prices stabilizing toward the end," said a statement from David Lereah, the NAR's chief economist. "When we get the figures for this spring, I expect to see a discernible improvement in both sales and prices.'

Remember, this is the same guy (I always get a chuckle when I see others refer to him as "David Lie-area") has been predicting a "soft landing" and a "quick turnaround" since 2005. During this time period, sales have continued to drop, inventory has climbed to new records every quarter, and foreclosures have skyrocketed. I just want to know - how does he do it, lying to the public, over and over and over again? But wait, there's more - this time from the president of NAR.

'NAR President Pat Vredevoogd Combs, a Grand Rapids, Mich., realtor, admitted the group doesn't expect to see a big gain in 2007 statistics.

"Right now, buyers are responding to seller pricing and incentives, and there's a bit of a pent-up demand as a result of buyer hesitation during the second half of 2006," she said in the group's statement. "We're not looking for big changes, but a gradual rise in sales and home prices is projected - that will be good for the overall housing market and related industries."'

Where does she come up with these figures? Again, inventories are at an all-time high, 2.1 million homes are sitting empty, and every major historical indicator says home prices (especially in Florida) must drop at least 30% before getting back in line with median incomes.

The facts: prices are NOT going to rise in 2007, sales are going to continue to drop, and the overall housing market is going to be in bad shape until prices get back to historical trend lines. At this point, the only real question is how long before the price correction goes into full swing.

Full Article

Credit Crunch at the Bottom

2007-02-14T10:45:00.001-05:00

Really it's no surprise, but with the steady incline of mortgage defaults (and the subsequent implosion of mortgage lenders), credit is getting tighter for those with less than stellar ratings. From CNN/Money.

'NEW YORK (CNNMoney.com) -- Just as the struggling real estate market seems to be stabilizing, a fresh problem is brewing far from real estate offices or home construction sites: a jump in defaults by higher-risk borrowers.

News of rising default rates by buyers with less than stellar credit could put a crimp in financing for home purchases - and prices. That's because the rapid growth of new types of mortgages was one of the key factors behind the boom that sent home buying, and prices, to record highs for five straight years through 2005.'

What? Do they mean to say that the skyrocketing prices of the past several years wasn't organic? You mean it was (gasp!) an artificial situation, created by loose underwriting, crooked appraisers, and realtor hype? And WHAT stabilization of the market are they speaking of? The last I checked, there is record inventory and record defaults and a sharp decline in nearly every major market (in Florida, that would be EVERY market).

'Last week, some serious problems cropped up due to rising defaults. HSBC (Charts) announced its bad debt charge last year would be about $1.8 billion higher than expected as problems grew in U.S. mortgage securities it had purchased, particularly loans to borrowers of less than top credit, a sector of the industry known as subprime mortgages.

And lender New Century Financial (Charts), which specializes in subprime loans, announced it would have to restate results for 2006 to account for losses on defaulted loans it would be required to repurchase. That news sent its shares tumbling by more than a third on Thursday, and hit lenders throughout the subprime sector.'

So, what is happening now?

'Beyond whatever problem the rising defaults in the subprime sector might cause to those lenders and their investors, the news was a setback for the struggling real estate market, according to experts in the field.

The problems with subprime loans are likely to lead to problems for many potential home buyers with less than top credit ratings. That's because most lenders don't hang onto their mortgage loans. Instead, they package them with other loans of similar quality and sell them as securities, providing cash to make additional loans.

Some experts estimate that rates for subprime mortgage loans could rise a half to three-quarters of a percentage point because of the higher default rates, and that could top a full percentage point if the default problem gets worse.'

It's about time the banks wised up - qualifying people for loans that far outweigh their ability to repay is bad, bad, business. The question is, how does this affect the overall economy?

Full Article

Florida Homeowner's Insurance - Bad Moon Rising?

2007-02-12T07:42:00.002-05:00

Today, our esteemed governor Charlie Crist is expected to sign the 2007 Florida Insurance Reform package into law. This will take away the downside risk from the insurers and place it on the state, thus (in theory) bringing rate relief.

In other words, in exchange for lowering rates now, if another catastrophic year like 2004 or 2005 happens again, the state will pay the majority of the insurance claims.

Does the state currently have the money to pay these claims? No, they do not. From the Tampa Tribune, some "downside risk" associated with the reform package.

'Insurance reform legislation that passed last week shows what's possible when lawmakers seek "ideas that help Floridians," Gov. Charlie Crist said in a weekly newsletter sent to supporters.

"Help for the people of Florida is on the way! Help is on the way in the form of lower homeowners insurance rates for every Floridian," Crist wrote Friday.'

So far, so good! But....(and it's a big 'BUT'....)

'And it might work, too, unless the state gets hit by a strong hurricane in the next few years.

"We are screwed if that occurs," said Senate Democratic Leader Steve Geller of Cooper City, one of the plan's architects.

A few worst-case scenarios are tempering some of the enthusiasm over what Crist and others bill as a bipartisan triumph:

• What if Florida gets hit by a costly storm before it can build up a bigger, new public catastrophe fund, designed to lower premiums by relieving insurers of some risk?

• What if new rules against "cherry picking," the practice of offering the most profitable types of insurance but not property insurance, send automobile insurers packing from Florida?

• What if a bulked-up Citizens Property Insurance Corp., the public insurer of last resort that's now empowered to offer other types of insurance, steals customers from private businesses?'

Aye, so there's the rub. And Charlie is worried about another one-time event.

'Crist even added his own scenario, which he plans to address at a Cabinet meeting this morning:

What if private insurers try to rush through rate hikes now, while the reform plan is being implemented?

Crist has an answer for that one: offer an emergency ruling to prohibit policy cancellations and require rate changes to incorporate the new legislation.'

So, back to the first point: in this blind pursuit of lowering insurance rates, what kind of risk is Florida taking on?

'Insurance industry officials accept the reforms as a political reality but caution they put state finances on precarious ground.

The eight storms that hit Florida in 2004-05 created $36 billion in insurance claims. Insurers warn this could be a drop in the bucket if the right storm hits the wrong part of Florida.

They insist that Citizens' premiums are irresponsibly low and won't be able to cover all of its claims in a future storm. That could lead to another taxpayer-financed bailout such as the one approved in 2006 and more assessments on all insurance policies.'

So what happens if we get wacked by another storm (or series of storms) and the state is on the hook for a bill that it can't pay?

' Floridians would also be hit with huge assessments on their property, auto and other insurance policies to cover any damages charged to the newly expanded public catastrophe fund.

Private insurers are responsible for the first $6 billion of payouts in a storm under the new reforms. The state's catastrophe fund covers the next $16 billion. If additional claims remain, as in an especially powerful hurricane, a second tier of the public catastrophe fund covers the next $20 billion in losses.

The state would have to issue bonds to finance all of that.'

Oh, and by the way, how much money does the state currently have socked away for catastrophic coverage?

'The catastrophic fund now has less than $2 billion.'

So, the next time a hurricane hits, get ready to pay for all those beach houses, waterfront mansions, and 2nd, 3rd and 4th homes of wealthy people. It's all now being subsidized by you.

Full Article

A Cautionary Flipper Tale

2007-02-09T11:49:00.000-05:00

Here now another great story- about a recent emigree who got into the same old flipping mode as many others did in this state. The thing was, he was very experienced at it, and just got a little too carried away. From CNN/Money.

'NEW YORK (CNNMoney.com) -- Dave Corey has been flipping houses on the side for nearly 30 years, but the latest slump in the real estate market is taking its toll.

His latest struggle: Unloading a ranch in Ocala, Fla., with three bedrooms, two baths and a two-car garage.

He thought it would be a quick buy, rehab and sell transaction. Instead, it's been buy, rehab...and sit. For 10 months.

Before moving to Florida in the early 2000s, Corey's main income came from his used Saab sales and service dealership in Vermont. He sold out and moved south where he earned good money flipping houses at the height of the boom.

"I made $80,000 in the first four months of 2005 and didn't kill myself [working too hard]," he says.'

But then, the music stopped. And then the BIG revelation: Most of the buyers during the boom were OTHER Flippers! Truly shocking, I say.

'A few years ago, Ocala, a small (under 50,000 population) central Florida city, was a hot spot for investors, mainly Northerners, according to Corey. Those buyers have flown back north. "I don't see where any new investors are coming in," he says.'

Now it sounds like the guy knew what he was doing - buying really bad properties and fixing them up. After all, he's been doing this for 3 decades.

'Corey's plan had been to follow the strategy honed in Vermont. Describing himself as a "hands-on guy," Corey looks for places that are structurally sound but in some stage of disrepair or ones that need an upgrade. Houses owned by estates are often good, because the heirs don't want to live there; they just want to get the money out of the property quickly.

Sometimes, the places look like bombs went off in them.

"I took my wife, Sharon, to one of the first houses I bought down here [in Florida]," says Corey. "She went in and said, 'Oh gosh. Let's get out of here.'"

Corey had to convince her that was just what he wanted; a place that looked terrible but that had a good roof and a solid foundation.'

But it appears he didn't follow his own methodology - instead he got caught up in the mania and overpaid for his last investment - the house in question won't be worth what he paid for AT LEAST a decade or more. Based on history, the place is worth about $100K right now. Bad, bad decision - on the price paid and on the timing.

'After paying $146,000 in January of 2006, he's now out of pocket $160,000 including closing costs and renovations, he said. The list price of $178,900 has drawn zero interest. '

At least I'll give him credit for admitting his failure to the national media. When you see experienced veterans of the housing market get burned like this, just imagine what it's like for all the amateur investors out there, who bought in 2004-2006. It's an ugly scene, and we're only in Act I of this tragedy.

Full Article

Oh, and before I forget: this week celebrates the 6th Month Anniversary of Florida - Paradise Lost. Thanks to all the posters and readers. We'll keep up the good fight.

More Negative Forecasts for Home Prices in 2007

2007-02-08T12:25:00.000-05:00

The International Builder's Show is being held in Orlando this week, and it doesn't look extraordinarily bright for this year (which is already 10% complete - can you believe it?). From the Palm-Beach Herald,

' ORLANDO — The real estate market hasn't hit bottom yet, three of the nation's top housing economists told the world's largest building trade show Wednesday.

Always one of the International Builders Show's highlights, the annual economic forecast has featured the same trio of top housing analysts for the past few years: David Seiders, chief economist for the National Association of Home Builders; and David Berson and Frank Nothaft, chief economists for mortgage giants Fannie Mae and Freddie Mac, respectively.

But this year's highly anticipated message was a sobering one: Home prices will continue to slide for the rest of 2007, Berson said. Still, he said the biggest price drops probably are over.

Nothaft predicted that the housing market will hit bottom the first half of this year, with a gradual improvement in the second half that will continue through 2008.'

I don't agree with the last statement - first it's still too far off for such a prediction. 2nd, in addition to the record # of homes for sale right now, 2.1 million of them are empty. Third, the REIC is experiencing record layoffs and job freezes - that's an entire segment of the economy that is shrivelling up faster by the day. Fourth, a trillion $ in mortgages are being reset this year, with record foreclosures expected. Add these facts, and it becomes intuitively obvious that a quick turn-around is not happening this year.

'"We're not at the trough yet for single-family home sales," Nothaft said, noting that home prices will have to fall further to burn through the current high levels of housing inventory. "We are still a few years away from obtaining the robust activity of 2005."

A few years? Maybe if you define "a few years" = "5-10 years".

That's not what the more than 100,000 home builders, Realtors and other industry representatives attending the four-day show at the Orange County Convention Center wanted to hear. But most acknowledge that today's near-record level of homes follows a five-year run-up in home prices, fueled by low mortgage rates and investor dollars.

Nowhere was that more true than in Palm Beach County and the Treasure Coast. The median price of an existing single-family home in Palm Beach County soared to a peak of $421,500 in November 2005, plunged to $365,600 in October 2006 and ended the year at $368,200, according to the Florida Association of Realtors.'

And then this little gem about South Florida,

'But even as the housing market continues its slide this year, Palm Beach County and the rest of South Florida will fare better than other parts of the country, Berson said.

"You have a very large contingent of foreign investors from Europe and Latin America, and their goals are different," Berson said after his presentation on the economic panel.

"They invested as a way to hedge where they keep their money," Berson said. "If there's price weakness, they may not pull out as fast as domestic investors who are looking only for a good return."'

In other words, these foreign investors won't sell cheap, and that'll prop up the prices? Errrrrrrr.....!

Full Article

Realtors - Yet Another Marketing Scam

2007-02-06T12:28:00.000-05:00

Our friends at Realtor.com have taken to adding a new "survey" that pops up when you search on a zipcode and follows with a few questions.

One of the first is whether you are considering purchasing a home. Okay, fair enough.

But then they follow that question with this atrocity:

How would you rate the overall condition of the housing market in the area where you are hoping to purchase a home in next six months? Would you rate it as (please select the rating that best describes the housing market in this area):

Very hot (there are very few homes for sale in my price range; house prices are rising very rapidly)

Somewhat hot (there is a limited selection of homes in my price range; house prices seem to be rising faster than usual)

Stable (there is an adequate supply of homes in my price range, and house prices have been flat or moving up slowly)

Cool (there are a lot of homes for sale in my price range, and house prices have been slowly edging down)

Very cool (there is an abundance of homes for sale in my price range, and house prices have been dropping)

Not sure; I haven't been tracking the housing market that closely

This is horrid marketing at it's deepest and lamest. Notice how the choices all mutually exclude the fact that prices are too high, and that they are dropping just about everywhere. How about adding the following choices, you lying dill-holes?

Crappy (there are a lot of homes for sale that WERE in my price range 3 years ago)

Sucks to be a Seller (there is an abundance of homes that are expected to enter foreclosure in the next 3 years)

Laughable (I am enjoying renting while watching the REIC implode)

But My Neighbor Made a Killing (I can't sell my current Mc$hitbox for what my neighbor did in 2005, and I refuse to budge on price)

What Was I Thinking? (I bought into the hype over the past 3 years that "real estate always goes UP!", and now I'm stuck with upside-down investment property that I can't unload)

Comfortably Numb (there are more houses for sale than I've ever seen in my long life, and I expect to find a bargain as prices drop 30+% over the next couple years)

Not Sure (I am about to make one of the biggest financial decisions of my life, so I'm going to hand this job over to some "professionals" who aren't required to even possess a college degree and whose ethics lie somewhere between used-car salesmen and starving hyenas)

Editor's note: It's good to be back - I'm in a "great" mood today, as you can probably tell.

Little Empty Houses - For You and Me

2007-01-30T08:23:00.001-05:00

From Marketwatch - we've now reached an all-time high in overbuilt housing.

'WASHINGTON (MarketWatch) -- The number of vacant homes waiting to be sold surged 34% to 2.1 million at the end of 2006 compared with the end of 2005, by far the fastest increase ever recorded, the Census Bureau reported Monday.

A year ago, 1.57 million homes were vacant and awaiting a sale.

The vacancy rate for owned units jumped to a record 2.7% from 2.0% a year earlier. From 1965 to 2005, the homeowner vacancy rate had never been above 2%. The long-term average is 1.4%.'

So, in laymen's terms, what does this mean for the housing market?

'"We have more than a million housing units of excess supply," said James O'Sullivan, an economist for UBS. "If you are looking for evidence that the worst is over for housing, you're not going to find it in this report. This argues that housing starts need to go down more."'

And some discussion on how this will affect rentals, which will affect inflation.

'Meanwhile, the homeownership rate (the percentage of homes occupied by their owners) was essentially steady at 68.9%, the government said, close to the all-time high of 69.3%.

With so many vacant homes for sale, owners will begin to offer them for rent, said Asha Bangalore, an economist for Northern Trust. If the supply of rentals rises, rental prices should begin to come down, helping to bring down core inflation.'

Full Article

(thanks to Crazy G)

Free Insurance Money for Everyone!

2007-01-24T07:11:00.000-05:00

Unless you've been living under a rock here in Florida, you know by that Charlie and the populists (the legislature) have caved in to the "we MUST be subsidized" forces, and soon the Sunshine State will have the most socialized version of home insurance in the country.

From the Orlando Sentinel.

'TALLAHASSEE -- Lawmakers approved a sweeping package aimed at cutting the cost of homeowners insurance in storm-battered Florida but quickly drew heat from consumer groups that say it fails to go far enough to help those staggered by two years of soaring increases.

The wide-ranging legislation is expected to cut rates for property coverage anywhere from 5 percent to more than 40 percent.'

Wow - sounds great! But how does this get paid for?

'But with the state poised to shoulder a larger role in hurricane rebuilding, homeowners could face far bigger bills if another round of major storms pounds Florida.

"At first blush, it's kind of frightening," Senate Banking and Insurance Committee Chairman Bill Posey, R-Rockledge, said of the state's balancing act.

Still, he insisted higher risk was needed to lower bills now."

If you assume there wasn't going to be any relief, these people were going to be bled to death in the next year or so," Posey said. "We tried to stop the bleeding."'

In other words, you took a short-term minor gain for long-term major risk. Like everyone else.

'The House approved the legislation 116-2 and the Senate 40-0, ending a weeklong special session. Republican Gov. Charlie Crist, who repeatedly promised rate cuts during last fall's campaign, is expected to sign the measure into law.'

The last time I witnessed a state legislature vote so overwhelmingly on a hugely important, far-ranging issue? California's deregulation of their electricity market in 1996. And now a history lesson from the recent past...

Similar to our current insurance crisis, people in the Golden State were constantly complaining about their electricity rates being too high. In actuality, it was the commercial users of electricity that did the most complaining. On a per household basis, residential californians use less electricity than in any other state - purely due to the mild climate.

Enron, then a growing tiger in the gas and electricity trading markets, was only too happy to step in and provide the state with a heavy-duty lobbying campaign, telling the state everything they wanted to hear, "Open markets will create competition, and competition will mean lower rates for all!". So, when it came to a vote on giving away the franchise and opening the state's electricity lines to competition, how did it go? Senate 40-0, Assembly 80-0, and passed shortly thereafter by governor Pete Wilson (R).

Unfortunately, just like the baboon-ass monstrosity that just passed in Tallahassee, the lawmakers simply didn't know what they were getting into. It wasn't true deregulation - it's just not possible when everyone has to use the same power lines. It was purely a gamble, based on doctored numbers and charts presented by private parties (Enron) who stood to gain the most from legislation.

As it happened, rates did NOT go down for residential users, and only the largest commercial/industrial users were able to negotiate lower rates. Enron, on the other hand, made a BOATLOAD of money from the scheme, manipulating the grid, causing market rates to sky-rocket. The fox was guarding the henhouse, and getting plenty fat from it.

Fast forward to 2000, due to "gaming" of the power grid by private marketers and a record heat wave, rates went through the sky, while large segments of the state experienced blackouts. In 2001, the new governor Grey Davis (D) started the year with a state of emergency (which stayed in effect for nearly 4 years), and a new round of rolling blackouts and skyrocketing rates hit during the surmmer, while the state's largest incumbent electric utility, Pacific Gas & Electric, ended up in bankruptcy.

Finally, the game was over - the state was forced to buy out the numerous contracts for huge sums of money. In the end, rates were jacked up for everybody (much more than they were paying before the deregulation experiment) and Grey Davis got booted out for a perceived "lack of response" during the crisis.

California Energy Crisis

Think something like this won't happen in the Sunshine State? Be honest. El Diablo just got himself another big fat contract.

Full Sentinel Article

Illegal Construction Jobs Dwindling

2007-01-21T12:49:00.000-05:00

Here at Paradise Lost, many have predicted that the collapse of the real estate bubble in Florida would result in the loss of jobs for construction workers. Not only that, the prediction was that since a large portion of the construction work has been done by illegal labor, those job losses wouldn't be reflected in the unemployment numbers. Courtesy of the Herald-Tribune, some light has now been cast on the subject.

'With the huge drop-off in the state's formerly hot housing market, Latinos are leaving Southwest Florida for places offering more work or taking jobs that pay less.

Construction permits across the region were down as much as 66 percent in recent months, and with 50 percent of Southwest Florida's construction industry staffed by Latinos, the shift is likely to have a big impact on that industry and perhaps the region's general economy.

The impact goes beyond construction companies to rental managers and shops catering to Latinos.'

Up to this point in the article, I keep seeing the word, "Latinos" mentioned, but nothing about their residential status. Then this.

'"The majority of us here are illegal," said Benjamin Ramirez, a 34-year-old framing subcontractor from Bradenton, who has worked in the United States illegally for about eight years. " For us, when the work is gone, it's just no more."'

So, what are the options for this "silent workforce"?

'Many Latinos are moving to other areas, such as Louisiana and other Gulf Coast states where residential construction is still strong.

At the same time, lower-paying jobs in agriculture, food service and retail are reclaiming workers as they wait out the construction downturn.

About six weeks ago, Ramirez was called to a meeting with Lennar Homes, the big Miami-based developer and the biggest home builder in Southwest Florida.Ramirez, who had subcontracted for Lennar for three years, was told there would be no more work.'

And as predicted here, the loss of jobs for these guys is not being reported. Because, then the employers would have to admit they were breaking the law this entire time.

'Though the overall unemployment level has remained relatively unchanged in Florida, unemployment claims in construction have risen 63.37 percent since June.

That measure greatly underestimates what is going on because of the vast number of undocumented workers in the sector and its heavy reliance on subcontractors.

"Many of these workers may never have been included in the jobs figures," said Mark Vitner, a Wachovia Bank economist, who focuses on the Southeast. "Many may be working as independent contractors and still have jobs but just not be as busy."'

And the personal tale of the Ramirez subcontractor is very interesting.

'The best documentation of what is happening comes from the workers.

Benjamin Ramirez and his 31-year-old brother, Ricardo, said construction jobs in Southwest Florida have evaporated.

"Last year was nice. Everybody had a job. And there were a lot of houses to build," Ricardo Ramirez said. "This year there's no work."

The brothers came to the United States about eight years ago from Toluca, a congested industrial suburb of Mexico City, known as Mexico's Detroit because it is home to DaimlerChrysler, Nissan, General Motors, BMW and Mitsubishi plants.

They learned the construction trade on the job in Indiana, and moved to Southwest Florida three years ago.

Together, they formed The Brothers Ramirez Construction Co. of South Florida. They built up a base of 60 full-time independent contractors and began working with Lennar

With the downturn, the brothers thinned their crews to a handful of close friends and immediate family.

One crew went to Indiana, one crew went to Miami and one crew went to Tampa," Ricardo Ramirez said. "Others wait. They are sleeping on the couch or playing soccer -- not much of anything -- until there's more work."'

And surprisingly, enforcement of illegal labor laws had a banner year in 2006.

'Last year, employers and workers saw unprecedented enforcement of immigration laws, with more arrests for immigration violations at job sites nationwide than any other period in recent memory

Add to that new rules from Homeland Security designed to prevent employers from hiring undocumented workers, by checking for mismatched Social Security numbers. Employers are now becoming leery.

Wendy Smith, an attorney with employment law specialist Fisher & Phillips, knows why. Her firm began counseling clients about six months ago to be cautious in hiring decisions. Picking up an undocumented worker carried the threat of criminal charges

"We told our clients, 'You have to tighten up and get your house in order,'" Smith said. "We said, 'You know what? This is coming. And with the no-match letters, it's going to be: You can run but can't hide.'"'

And what's happening in these immigrant communities when the jobs have dried up?

'Property managers and owners in Southwest Florida catering to Latinos have been hit with unexpected vacancies

About 25 percent of the 1,400 units that Harvey Vengroff owns are rented to Latinos, and he has more than 40 vacancies

"I'm getting a lot of stories. It's really a very different world than it was last year," said Vengroff, also the owner of one of the world's largest collections companies, Vengroff & Associates. "Last year, people had more money because there were plenty of construction jobs".

Evictions are up.

"We have a huge problem of people who are nice people, but they are taking in other family members. And we are evicting them. It's not because they are not nice people. It's just not conducive to having a good neighborhood," Vengroff said.'

Full Article

Foreclosures Continue to Rise

2007-01-18T12:31:00.000-05:00

From CNN/Money, the latest foreclosure numbers are out. For the month of December, the Sunshine State rates the following:

#12 in rate of foreclosures - 1 in every 878 households. (Colorado is #1 with 1 in 376)

#3 in total foreclosures - 8,321. (Texas is #1 with 14,195)

'NEW YORK (CNNMoney.com) -- Americans continue having difficulties paying their mortgage obligations, with December foreclosure rates above the 100,000 mark for the fifth straight month.

The number of homeowners entering into some stage of the foreclosure process in December was 109,652, down 9 percent from November but up 35 percent from December 2005, according to RealtyTrac.'

You just KNOW that toxic mortgages (interest-only, balloon payments, ARMs, etc...) has been a huge contributor to this malaise. Well, that and prices that have levelled or declined.

'Adjustable-rate mortgages, especially subprime ARMs, continue to drive the spike in foreclosures: many of those loans are due to reset in 2007, and many of the loans written in 2006 are performing less well than in previous years.

The combination of slower home sales and rising interest rates on ARMs continues to drive foreclosures at significantly higher numbers than a year ago," said James J. Saccacio, chief executive officer of RealtyTrac.

Other circumstances are involved. One is that the housing market turned, removing one avenue of escape for some homeowners facing foreclosure. "People would be reselling their homes if they got into trouble," says Rick Sharga, VP of marketing for RealtyTrac.

When they can't sell at or above what they owe, they may go into delinquency instead.'

No! Really?!!! (okay, I'll get that smirk off my face)

Full Article (with foreclosure numbers for all 50 states)

Builders Losing Money

2007-01-17T11:30:00.000-05:00

From today's Tampa Tribune, more bad news from the homebuilding industry.

'U.S. - home builders, stuck with more than 500,000 unsold houses, may report the lowest earnings in five years because a rebound in the real estate market is too little too late to save 2007 sales.

Net income at D.R. Horton Inc., the industry's largest company, may plunge 60 percent in fiscal 2007 to $498 million, the worst since 2002 when the domestic economy was recovering from the slowest growth in more than a decade. The average drop in annual profits at America's four biggest home builders probably will be 55 percent, according to analysts surveyed by Bloomberg.

"The demand side of the market is stabilizing, but it doesn't mean that all of a sudden construction is going to be off to the races," said Michael Darda, chief economist of MKM Partners in Greenwich, Conn. He cited a 3.4 percent gain in new-home sales in November from the previous month.

New-home sales fell 18 percent in 2006 to 1.05 million, the biggest contraction since 1990, after median prices rose 41 percent in five years, making them unaffordable for many buyers, said David Berson, an economist at Fannie Mae, the largest mortgage buyer.'

But there's light at the end of the tunnel. Well, at least according to these guys.

'Sales will rise to 946,000 homes at an annualized pace in the third quarter and gain until at least the second half of 2008 after falling to a five-year low of 942,000 in the second quarter, the Chicago-based National Association of Realtors said last week.

Freddie Mac, the second-biggest mortgage buyer, and Mortgage Bankers Association predict more housing demand in the second half of this year. The National Association of Home Builders in Washington projects new-home sales will gain in every quarter of 2007.'

Lennar, which made a BOATLOAD of money over the past 5 years, has a different take.

'Stuart Miller, chief executive officer of Miami-based Lennar, the fourth-biggest U.S. home builder, isn't as optimistic.

"Market conditions continued to weaken during the fourth quarter and we have not yet seen tangible evidence of a market recovery," Miller said on Jan. 2. Lennar reported its first loss in more than a decade in the fiscal fourth quarter, which ended Nov. 30. Analysts believe Lennar's earnings will fall 51 percent in fiscal 2007.'

And remind us again - how has homebuilding affected overall economic growth in the US?

'New-home sales bottomed in the fourth quarter at an annual rate of 970,000, sliding from an all-time high of 1.3 million in 2005's third quarter, Berson said. The construction slump helped to slow U.S. economic growth in the fourth quarter to an annual rate of 1.6 percent, down from 5.6 percent in the 2006's first quarter, he said on Dec. 20.

Buyers canceled contracts to purchase homes at a record pace in the second half of 2006, swelling builders' inventories. Measured in terms of how long it would take to sell off the existing stock, inventory stood at 6.3 months in November, down from 7.2 months in July and up from 4.9 months a year ago, according to the Commerce Department.'

And my personal favorite: a tale of couple who smartly waited things out, and got a killer deal. My question is: could the price they paid still be undercut in years to come?

'That means buyers like David and Wendy Butler of Orlando are able to purchase an already-completed new home at a discount rather than ordering one and waiting for it to be built. During the five-year real estate boom that ended in 2006, that option was rare.

The Butlers are purchasing a four-bedroom, 3,700-square- foot house in Orlando built by Ashton Woods USA LLC for $545,000. The same home was listed at $768,000 three months ago, David Butler said. Nationally, the median home price probably will slide 5.4 percent in the current quarter to $231,700 from $244,800 a year ago, according to forecasts from Fannie Mae.

"People were saying the average homes in this neighborhood would be $1 million-plus, but there's so many homes on the market the prices have been tumbling," said David Butler, 45. "It's incredible really. All of a sudden, it's time to buy."'

I don't know why they titled this article, "Builders See Deep Losses In Spite Of Rebound". What rebound? To 1999 levels?

Full Article

The Exodus Started in 2006

2007-01-15T12:20:00.000-05:00

From the Sun-Sentinel, new evidence that out-of-staters are getting the message about the high cost of living down here.

'For the first time in 30 years, United Van Lines Inc. says it moved more people out of Florida than in, and analysts see that as a sign that consumers are looking elsewhere for a cheaper slice of life.

The nation's largest moving company reported 16,212 inbound shipments to Florida last year and 17,019 outbound shipments. United moved more people to Florida in each year from 1999 to 2004, but the number of inbound moves fell in 2005, spokeswoman Jennifer Bonham said.

The study isn't scientific, but it does underscore a recent trend in which fed-up Floridians are moving to other parts of the country, in part to escape rising property taxes and insurance rates.'

To quote Mr. Spock, "Simply fascinating." So, if Florida is no longer the #1 moving destination east of the Mississippi, where ARE people moving to?

'United's report shows that North Carolina, Oregon and South Carolina were the top destination states in 2006. Michigan, hit hard by automobile industry layoffs, North Dakota and New Jersey were the states that saw the most people leave.'

Again, fascinating. So the anecdotal stories of "half-backs" and "J-turns" to the Carolinas are true. It looks like the free income tax system in Florida has lost it's luster. I still wonder how many folks who are thinking about moving here realize they'll be asked to subsidize all of the current dwellers (via the regressive "Save Our Homes" tax) when they buy or lease their residence in the Sunshine State. I suspect the word has gotten out, but most are still clueless.

'The housing boom brought more people to the Sunshine State at the start of the decade, but the run-up in home values during the past five years sent property-tax rates soaring. Many residents now say they can't afford to move elsewhere in Florida because of the huge hit they'd take on taxes.'

And of course, along with taxes, our good friend The Insurance Crisis has had a major role in convincing people to move out. C'mon folks, admit it. It is VERY expensive to live and work in Florida (extremely rural areas excepted).

'What's more, busy hurricane seasons in 2004 and 2005 led to massive rate hikes from the state's largest home insurance companies.

It all just pushed us past the breaking point," David Levin, a Delray Beach-based housing consultant, said Wednesday. '

Besides having one of the worst income/housing cost ratios in the country, we have another issue that's been like a debilitating disease, slowly destroying the place. It's called the "build it first, take care of growth problems later" cancer, a product of an unholy union: the scorched earth developers and the elected officials whose campaigns they fund. This has led to bad street design, horrible congestion, overcrowded schools, leveled forests, ugly condo-towered beaches, and the steady, continued degradation of the Florida lifestyle.

'Recent U.S. census figures show that Florida gains 1,000 people a day while losing 400, said Grant Thrall, a professor of business geography at the University of Florida. But some residents clearly are reconsidering because of the cost of living and other factors, Thrall said.

"People move to where their well-being is going to be the greatest," he said. "Many people find the urban-built environment of Florida totally disgusting."'

Thanks to Ben at the Housing Bubble Blog for the story.

Full Article

Insurance Crisis: More Brainstorming in Tallahassee

2007-01-09T12:52:00.001-05:00

From today's Miami Herald, more ideas on how to lower insurance rates.

'A rate freeze for the state-run insurance pool, which is the largest home and condo insurer in Florida, is among the proposals in a 153-page bill that is being offered by the Senate's Banking and Insurance Committee.

Rates for Citizens Property Insurance would be frozen for one year at the Dec. 31, 2006, level and would require the insurer to set new actuarially sound rates for 2008. The bill also would eliminate a rate hike that already was approved for Jan. 1. Citizens would have to provide refunds to any policyholder who was charged the higher rates.'

Sounds great - so how are we going to pay for this? Ohhhh, I see...just gamble and hope that Citizen's never has to actually PAY on claims from a major catastrophe. But hey, at least everyone doesn't have to pay now, right? Sweet - I love short-term thinking politicians - they're the best, and here in Florida, we have the best, ever!

'Sam Miller from the Florida Insurance Council said by lowering premium rates, consumers could be facing higher costs after a major catastrophe if assessments are needed to make up a deficit in Citizens or the Florida Hurricane Catastrophe Fund, which sells reinsurance to insurers.

A proposal from the House Insurance committee is expected late Wednesday.

A major component of the Senate bill focuses on eliminating many of the onerous provisions of the insurance law that was passed in the final minutes of the 2006 legislative session last May.

One provision would be to remove the requirement that the state-run pool raise rates dramatically by March to increase its reserves so it would have the cash to pay future claims from storms.'

And more ideas that were passed around...

'• Citizens would be allowed to continue covering vacation and second homes as well as homes valued at more than $1 million.'

I particularly love that one - let's subsidize the insurance of vacation homes, because you know, THAT's the kind of business gov't should be in.

'• Citizens would be allowed to write multiperil policies throughout the state. Citizens officials have said previously that writing the extra policies would expand its premium base and spread risk. '

To be honest, I have no opinion one way or the other - though it sounds good in theory.

'• Insurers would be allowed to buy additional reinsurance from the Florida Hurricane Catastrophe Fund. This could be less expensive than buying in the private market. Insurers would be required to pass on any savings to policyholders. '

Again, this is a wonderful idea - lower the rates by subsidizing the private insurers. This is almost as genius as the original idea to create Citizen's. Now, instead of just allowing the IL to "cherry pick" the low-risk buyers, we'll now go ahead and remove all hurricane risk from the insurers and pass it on to the state. Brilliant!

'• The Panhandle's exemption from the statewide building code would be eliminated. Most experts believe stronger buildings would reduce insurance losses, and this is a move that many lawmakers and the insurance industry champion.'

Huh? Why was the panhandle ever exempted from building codes that the rest of the state had to follow? Ohhhh, that's right, it's FLORIDA politics at work here. Sorry, I forgot that reason and logic are not strong suits up in the halls of Tallahassee.

• The position of the state's insurance consumer advocate would be beefed up, moving it out of the Department of Financial Services and combining it with the Office of Public Counsel. The public counsel represents consumers in utility rate filings, something the current insurance advocate can't do for policyholders.

Why do I get the feeling that the Office of Public Counsel just got double the work with no corresponding increase in resources? Awwwwwwwesommmmme!

• Homeowners would be permitted to take on larger deductibles, buy less coverage than what would be needed to rebuild their homes after a major storm and even go without windstorm insurance if they've paid off their mortgages.

Another beauty! This way, Granny doesn't have to drive all the way over to the nearest bingo hall/indian casino for entertainment. She can just opt for the "minimum coverage" policy and get great excitement every hurricane season to see whether she loses everything (while the bank losses nothing) if her house gets hit! How is that NOT a cool way to go?

Full Article

Insurance Lobby - Vows to Fight!

2007-01-05T07:32:00.000-05:00

From today's Palm Beach Post, it appears our new governor (in his first week of office) is getting a cold splash of reality.

' TALLAHASSEE — New Gov. Charlie Crist's campaign vow to lower property insurance rates Thursday ran smack into the real world of the insurance lobby.

"If we create more regulations, more mandates, and rate rollbacks, then we will have even fewer companies willing to do business in Florida," said Barney Bishop, president of Associated Industries of Florida, an influential umbrella lobbying group that includes property insurers.

The group staged a news conference Thursday to say it would be following the developments in the special session that is to begin Jan. 16 and would oppose legislation that requires rates to be reduced.

"We believe rates have been suppressed," Bishop said. "And we believe that rates are going to have to rise to the current level to (give incentives to) insurance companies to be in Florida."

Crist, who in his inaugural address Tuesday said that it was time "to rein in overreaching insurance companies," said he was astonished to hear Bishop's assessment.'

Should we be astonished that Charlie is astonished? Hey, here's an idea: let's SUBSIDIZE these poor folks in the IL (insurance lobby)!

'Bishop, speaking for a Florida Hurricane Crisis Coalition made up of Associated Industries members, said past elected insurance commissioners and the current appointed insurance commissioner, who answers to the elected governor and Cabinet, are too sensitive to political pressure.

He and his group instead suggested that Crist and lawmakers should make it easier for insurers to obtain subsidized "reinsurance" - the financial backing to pay for massive claims from a catastrophic storm - from the state; that the state spend $500 million a year to help Floridians harden their homes against storms; and that homeowners be permitted to buy hurricane insurance with 10 percent or even 20 percent deductibles in return for lower premiums.'

A few thoughts:

I can't believe they have the gall to ask for free money from the state.

With that outrageous proposal in consideration, enquiring minds want to know how much the IL collected as a whole, from Florida homeowners in 2006.

The idea for "home hardening" is a great concept, but in reality, it's just another subsidy for the IL.

The last suggestion is a good one - but how do you prove that granny has $60K in the bank to cover the deductible on her $300k home (the one she bought for $75K back in 1982)?

If a company doesn't offer home insurance, they shouldn't be allowed to offer any other form of insurance (as in the highly profitable auto insurance), period. The IL's claim of "you'll chase all the insurers out of the state" is anectdotal CRAP. Not based on fact, not based on anything but their collective money-grubbing hive mentality.

Where are the proposals from Crist to eliminate Citizen's?

Full Article

Disappointing Holiday Sales

2007-01-04T12:58:00.000-05:00

From the Orlando Sentinel, sales were not too keen this past holiday season. Even for Wal-Mart.

'NEW YORK -- An already disappointing holiday shopping season turned out to be even worse than expected for many of the nation's retailers, who said Thursday they had tepid sales gains for December.

The downbeat results came from merchants in all retail categories, particularly from apparel sellers who struggled with depressed sales of cold weather items like heavy coats amid mild weather across the country. Wal-Mart Stores Inc. posted better-than-expected results for December following a dismal November, but the discounter's overall holiday season was the worst on record, analysts said. '

Are customers getting smarter or do they just have less to spend (now that the housing ATM machine is shutting down)?

'Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said retailers were forced to mark down heavily to bring in sales.

"Clearly, this was a promotional Christmas," he said. "Consumers clearly waited until the last minute."

Such aggressive discounting led a number of merchants including Zale Corp., BJ's Wholesale Club Inc., Gap Inc. and AnnTaylor Stores Corp. to cut their profit outlooks. '

Could it be the warm weather? Not enough socks, hats, and boots?

'Mild weather across much of the country meant consumers were in no hurry to buy cold weather wear such as coats and gloves, depressing sales at many apparel stores. Declining gasoline prices and a steady job market should have helped merchants, but Perkins believes the recent drop in home equity loans -- a big source of buying power over the past few years -- curtailed spending among middle-income shoppers.

Sales results were also hurt by two big shifts in the way consumers are shopping: the increasing popularity of gift cards and robust online buying, which is not included in same-store results. Gift card sales are only posted when they are redeemed rather than bought, helping to extend the holiday season into January. '

There were some winners...

'Costco Wholesale Corp. posted a 9 percent gain in same-store sales, beating Wall Street's 5.7 percent estimate.

Nordstrom Inc. reported a robust 9 percent same-store sales gain, exceeding the 4.3 percent forecast. Luxury operator Saks Inc. had an 11 percent same-store sales, gain, nearly twice the 5.3 percent estimate. '

But more losers.

'Pier 1 Imports Inc. suffered a 10.7 percent drop in same-store sales, worse than the 9.4 percent analysts anticipated.

Gap, which has long been struggling with its merchandising formula, suffered an 8 percent drop in same-store sales, worse than the 5 percent estimate. As a result, the company said it was slashing its annual profit outlook.

AnnTaylor posted a 5.3 percent decline in same-store sales; analysts predicted a 0.6 percent gain.

Among teen retailers, Pacific Sunwear of California Inc. had a 3.2 percent dip in December, worse than the 2.9 percent forecast. '

Not being a certified "economist" (who can make predictions that never come true - see David Lireah from the National Ass. of Realtors for example), I am not sure what to make of these numbers. Do they relate in any way to the housing situation? I am inclined to think so.

Full Article

Would-Be Trailer Park Millionaires

2007-01-03T07:39:00.000-05:00

A great article from MSNBC about a waterfront trailer park in Palm Beach County. If they agree to get bought out by a developer, they'll get over a HALF-BILLION dollars for their little 43 acres of paradise.

'BRINY BREEZES, Fla. - The owners of nearly 500 mobile homes in one of the last waterfront trailer-park towns in South Florida stand to become instant millionaires if they agree to sell to a developer. But some are holding out, saying there are things more important than money.

“You just can’t buy a way of life,” said Tom Byrne, a 68-year-old retired sales executive from New York who doesn’t want to sell even though he would make a little over $1 million on the trailer and site he bought two years ago for $150,000. “This is my home.”'

Okay - the first question is - what kind of land are they sitting on?

'With 600 feet of oceanfront property and an additional 1,100 feet along the Intracoastal Waterway, real estate like this in southeastern Florida is pure gold.

Boca Raton-based Ocean Land Investments has big plans for the property if the deal goes through, as many residents are certain will happen. The company envisions about 900 low-rise multimillion-dollar condo units, a high-end marina and a 300-room luxury hotel.

“There really is no other piece of property like this in Florida,” said Logan Pierson, the company’s vice president of acquisitions.'

And a view from an owner who wants to "Sell, sell, SELL! Like NOW!".

'Kevin Dwyer, 47, is all for the deal. Dwyer, who paid just $37,500 for his trailer nine years ago, would make about $800,000.

“See these pockets? They’re empty,” Dwyer said, a stack of unpaid bills sitting on a table in his single-wide trailer less than 100 yards from the ocean. “I’ve nickeled and dimed my whole life. I hit the lottery.”

Pierson acknowledged that the loss of Briny Breezes means a piece of old Florida will be gone forever. But he said that because of the town’s location on a barrier island, a hurricane could eventually wipe out Briny Breezes.

“At some point Briny is going to face a bad storm,” he said. “There are other potential threats out there other than development.”'

And is this really a good idea for the developer, being on the ocean?

'Palm Beach County Commissioner Mary McCarty is not so sure it’s a done deal because of constraints on zoning, water, sewage and traffic. “I find the developers extremely optimistic to the point of being delusional,” she said.

For one thing, the community is in a hurricane evacuation zone and has few ways in or out. Developers will have to clear their plans through the state before any dirt is moved, and neighboring communities will have a chance to weigh in.

“This would be extremely complicated and extremely unpopular,” McCarty said. “But people see dollar signs and it sparks the imagination.”'

Full Article
(Many thanks to SKB for finding this.)

Finally, a "Happy 2007!" to all our readers and posters. 2006 was a break-through year - let's keep up the fight and make 2007 the year that EVERYBODY discovers the truth about the fantasy of a bubble market.

Nationwide New Home Sales Up - Except in Florida

2006-12-28T10:26:00.002-05:00

Commerce figures are out for new home construction sales in November. From the St. Pete Times:

'Maybe it was balmy weather up North, maybe it was lower interest rates, but the country as a whole experienced a mini spike in new home sales in November.

Pity poor Florida: The Sunshine State, and most of the South for that matter, didn't enjoy the rebound.

Nationally, new home sales in November rose 3.4 percent from the previous month to an annual rate of 1.047-million. That exceeded economists' forecasts of a 1.018-million homes.'

Sadly, prices have risen. Again.

'The national median new home price climbed to $251,700 in November 2006 from $237,900 in November 2005.'

Remember, the Commerce Department report does not take into account cancellations - so these numbers tend to be higher than actual.

And for the Tampa Bay region, some reports on the builders.

'Transeastern Homes: The builder of such best-selling neighborhoods as New Tampa's Live Oak Preserve has tried to stave off bankruptcy by laying off more than 100 and dismissing regional president Bob Krieff.

Ryland Homes: Heavily invested in Pasco County, Ryland's southeast division, which includes Florida, saw new home orders tank 64 percent from the third quarter of 2005 to the third quarter of 2006.

Centex Homes: Centex's sales this year have been leaden compared to 2005. In the Southeast region, the number of home contracts plunged 53 percent.

Beazer Homes: In the Atlanta builder's annual report in September, the company said new home orders dropped by a third in Florida. Its stronghold has been southeast Hillsborough County.

Pulte Homes: Based on its latest report, the nation's second-biggest homebuilder sold 29 percent fewer homes in the region that includes Florida. It has trimmed its work force 10 percent. Pulte is active in Clearwater, Seminole, Hudson and Wesley Chapel.'

Full Article

US Commerce Report - New Home Sales

Our Own Private Idaho

2006-12-22T10:46:00.000-05:00

The US Census population growth figures for 2006 are out, and, as you can see, we're trading places with (of all places) Idaho in terms of population growth. (source, US Census Bureau - releases from 2002 to 2006)
(And in case you were wondering who the top 2 have been these past 5 years, in every year it's been Arizona and Nevada. Talk about wandering tribes in the desert!)

Note that these figures are from July to July, so the latter half of this year won't show up until the December 2007 release of data.

Though we've dropped to #9 in % ranking, we're still #2 in total population gained (2nd only to Texas), with 321,697 added. That comes to 881 people per day (and we all know that figure is dropping as we speak). So tell your local realtor to stop spouting off the "1,000 people a day" figure that's been quoted ad nauseum during the bubble.

The bottom line - for the first time in decades, we're almost assuredly dropping out of the top 10 next year. What a surprise.

Full Article from US Census Bureau

Oh, and if I don't get a chance to post before next Monday, have a wonderful Christmas Weekend!!!

- Jerry

Markets Heading for a Fall - Part Deux

2006-12-20T07:30:00.000-05:00

From Yahoo! Finance, more dire predictions for homesellers in 2007.

'Although few experts predict that home values will fall dramatically in 2007, many economists say that prices won't improve for 12 to 18 months. And without the cushion of rising home equity -- which softened the blow of high oil prices last year and kept consumers buying big-ticket items at a rapid clip -- Americans may lose confidence in their finances, and the broader economy is likely to suffer.

Ambitious building booms in many markets in the past half-decade, combined with mortgage interest rates that have increased about 1 percent in the past year, have resulted in residential real estate stagnation. The gridlock defies conventional wisdom, stubbornly remaining neither a buyer's nor a seller's market.

"We are currently experiencing the worst of the market freeze, which is being exacerbated by the gap between the buyer's desire for bargains and the seller's fantasy of what they once thought their homes would be worth," said Diane Swonk, chief economist for Chicago-based Mesirow Financial, who forecasts a rebound in early 2008. "The good news is that there are some signs of stabilization. The bad news is that a substantial backlog of unsold homes still exists."'

Moody's Economy.com makes an important observation - is this a portentous statistic?

'Global forces and U.S. monetary policies play important roles in the housing slowdown, which already appears to be depressing the national economy.

The newest forecast by Moody's Economy.com, a private research firm, projected that the median sales price for an existing home will decline in 2007 by 3.6 percent -- the first decline for an entire year in U.S. home prices since the Great Depression of the 1930s.'

Again, how did we end up in this mess? Quick answer: It's the interest rates, stupid!

'Peter Morici, business professor at the University of Maryland, said artificially low interest rates over the past half-decade encouraged China and other exporting nations to purchase 10-year bonds, which kept U.S. mortgage rates low and fueled the housing bubble -- despite a gaping trade deficit that should have sapped investor confidence years ago.

"In order to play this ponzi scheme, the value of the homes had to go up faster than the economy grew and faster than people could service their debt. We've reached that limit," Morci said. "The housing market sustained the economy at a time of very large trade deficits. It's been a false prosperity."'

And what do the forecasters say about our fine state?

'Florida will likely remain the toughest market for buyers and sellers.

Building frenzies in Miami, Orlando and the Caribbean coast resulted in a plethora of for-sale signs. Developers desperate to unload inventory offer free granite countertops, appliances and furniture -- even cars, vacations and mortgage payments for up to six months.

Meanwhile, insurance companies dramatically raised premiums after Hurricane Katrina. Depending on where they live and their policies, Florida home owners may pay as much as 10 times more for flood and wind insurance than last year; premiums can exceed $30,000 per year on mansions. That's caused monthly costs to skyrocket, pinching current owners and making it all but impossible for renters to buy.

Throughout Florida, 12,773 existing single-family homes were sold in October, down 22 percent from a year ago, according to the Florida Association of Realtors. Florida's median price was unchanged at $242,500, but more than half of the urban areas posted declines. Around Fort Myers, the median price plunged 44 percent to $249,200 from October 2005.'

And let us end with some serious b.s. from a man who obviously owns real estate that he can't unload. His data that he quotes is from pre-2005, and his statements are nothing but air-filled cheerleading. We will keep his statements here for posterity.

'Not everyone is pessimistic -- even in beleaguered Florida.

Long-term demographic shifts from the Midwest and New England bode well for the notoriously boom-and-bust state, said Dave Denslow, professor of economics at the University of Florida. Florida, which gained 430,000 new residents in the past year, is a popular destination for Latin American immigrants and retirees from northern states, Canada and western Europe.

"People start thinking about buying a retirement home in their late 50s, and baby boomers are approaching that age," Denslow said. "The demand for residential housing here is only going to get stronger through 2020."'

What a load of crap.

Full Article

Markets Heading for a Fall

2006-12-19T07:29:00.000-05:00

From CNN/Money, a forecast for the top 100 housing markets in the US for 2007. It should be no surprise to see that 2 of the top 10 forecasted declines are here in the Sunshine State.

'This time last year the big question was whether the real estate market was going to slow down. Today it's "How bad will it get?"

The numbers tell a confusing story. For existing homes, buyers are trickling back into the market - sales inched upward in October even as the median home price fell by 3.5 percent, the largest year-over-year drop on record. And that comes after price declines in August and September.'

And new homes....?

'On the new-home front, sales in October fell, but the median price crept upward. For homebuilders, cancellations are up and orders down. '

Mark Zandi, from Economy.com, says it best.

'"It's possible that the broader housing market will firm in the next few months, that the worst is over," says Mark Zandi, chief economist at Moody's Economy.com. "But that to me is a dead-cat bounce." In a word, yikes.

So Fortune asked Zandi's group and real estate valuation company Fiserv Lending Solutions to give us their take on what lies ahead for housing in the country's 100 largest metropolitan areas. '

Full Article (with forecasts for all 100 markets)

Allstate Backing Off Request for Humongous Rate Increase

2006-12-15T17:26:00.000-05:00

From the Southwest News-Press, some somewhat good news regarding the home insurance rate requests from Allstate.

'Allstate has had second thoughts about its next round of rate hikes.

The state's second-largest private property insurer this week has amended rate filings with the Office of Insurance Regulation to lower the amount of the average premium increases it seeks to 8 percent for Allstate Floridian and nearly 9 percent for Allstate Floridian Indemnity.

It originally sought to raise rates an average of 22.5 percent for Allstate Floridian and 33.2 percent for Allstate Floridian Indemnity — though residents in more than half the company's territories would have seen increases over 70 percent. How the new rate hike breaks down for individual homeowners is not yet available.

Allstate has been negotiating with state regulators over the pending rate hike since September. Chief among the many faults regulators found with the rate hikes was a $259 million charge for reinsurance. Allstate actuaries admitted the company did not buy all of that, but wanted to be compensated as if it did.

Meanwhile, Southern Oak Insurance has filed for an average rate hike of 30.2 percent for home coverage. The Office of Insurance Regulation has set a public hearing on the request for 10 a.m. Friday in Tallahassee.

And if you are with a private insurer, don't forget your little "surchage" to help shore up the largest welfare home insurance program in the United States, our very own Citizen's Insurance.

St. Lucie Foreclosures Up - Way Up

2006-12-14T07:18:00.000-05:00

From today's Palm Beach Post. Interestingly, the article starts off with better news in Palm Beach County, but then jumps right in with St. Lucie's numbers.

'Palm Beach County saw a dip in foreclosures in November, while at the same time, St. Lucie County saw its troubled real estate more than triple.

Analysts are blaming rampant speculation in St. Lucie's new-home market and exorbitant hikes in homeowners' insurance as the cause of its leap to 313 foreclosures from just 94 in November 2005.

The increase is the highest foreclosure level for the high-growth area in nearly two years, according to a new report from RealtyTrac, which documents foreclosures nationwide.

"Tons of new homes have been built in St. Lucie County in the past couple of years, and a big chunk of those were snapped up by speculators," said Mike Larson, an analyst with Weiss Research in Jupiter. "Now, some are finding they can't rent them out for enough to cover their mortgages. Others are likely getting whacked with big increases in insurance rates tied to the active 2004 and 2005 hurricane seasons."

When you add surging property taxes to this dangerous mix, Larson said, "the hardest-luck cases can even be forced out of their homes."'

Okay, this is now - what about the future?

'"The foreclosure train has left the station and is slowly picking up speed," said Jack McCabe, owner of McCabe Research and Consulting in Deerfield Beach. "Expect foreclosures to multiply in 2007 and 2008."

Besides plunging property values that hinder resale and rentals, so-called "creative financing" is a major reason the foreclosure wolf is now knocking on so many doors.

Adjustable-rate mortgages and interest-only loans have taken off since 2004. Indeed, they were the only way more than half of all local buyers could afford to buy a home, McCabe said.

These loans are scheduled for their first adjustments in the next two years, McCabe continued, and many owners will get smacked with 40 percent to 50 percent increases in their monthly payments.'

'Statewide, foreclosures rose 5 percent in November, to 9,362 from 8,872 a year ago.

That's one foreclosure for every 780 households in Florida - a rate that analysts expect will worsen next year.

Larson, the analyst, blames "excess speculation" for driving prices far beyond what fundamental economic forces dictated.

"Now, with prices falling, that irrational exuberance is being wrung out one foreclosure at a time," he said.'

Full Article

The Florida Room - Housing News

2006-12-13T07:43:00.000-05:00

The latest Housing and Economic News from around the state and around the country.

Please do not hesitate to post any interesting links that you've come across.

Knowledge is Power.

Nuclear Power in Levy County

Rents Increasing Faster than Incomes

Older Americans Have More Debt than Ever

Mortgage Defaults Continue to Climb

Jacksonville - Maybe Not as Big a Bubble

Retail Sales Boom in November

Homeowners Getting Riled About Insurance

2006-12-11T11:39:00.000-05:00

From today's Miami Herald:

'Florida homeowners are no longer silent victims of the state's insurance crisis. From the Keys to the Panhandle, they've mobilized.

In Miami-Dade County, they have launched a major petition drive to tell lawmakers in Tallahassee that soaring rates are choking their personal finances and the quality of their lives. In Pembroke Park, mobile-home owners are putting some new ideas on the table. In Brevard and Collier counties, groups of home and business owners have been hard at work crafting their own insurance solutions.

''Next year, I won't have any savings,'' said Zenobia Lopez of Biscayne Gardens, who signed the Miami-Dade petition. ``Where am I supposed to come up with $5,000 again? We need to do something.'''

Wow - sounds like a grass-roots drive. But it isn't.

'Dynamic Public Adjusters Group, a Kendall-area company that helps homeowners try to get higher returns on insurance claims, started the petition in September under the name Floridians in Action. The group is now beginning to put together a board of directors so its work can continue long after the petition has been delivered.

Some of what the petition seeks: rate relief, tougher statewide building codes and a strong lobbying effort for a national catastrophe fund.'

And here's an interesting idea from the owner's of mobile homes. Very interesting.

'Meanwhile, a group of mobile-home owners in Broward County's Pembroke Park isn't shy about putting new ideas on the table, even if some lawmakers sometimes are. They would like to see auto insurers cover mobile homes since they now insure recreational vehicles and boats.

''If the auto insurers would cover the mobile homes, we could alleviate the burden on Citizens Property Insurance,'' said Michael Sousy, Pembroke Park's code enforcement and community liaison officer, who has helped organize the mobile-home owners.

Citizens is the state-run insurer of last resort. But for many homeowners, like folks who own mobile homes, older houses or condos in coastal areas, Citizens is the only insurer. With nearly 1.3 million policies -- nearly half of those in South Florida -- it's the largest insurer in the state.'

Is it sad, pathetic, or just plain wrong that the insurer of "last resort" is paid for by the government (i.e.; you and I) and has become the #1 insurer in Florida? Note: "All of the above" is a qualified answer to that question.

'Residents insured by Citizens are particularly concerned these days because a new state law requires the insurer to boost its reserves rapidly so it has enough money on hand to cover claims from a massive storm. That means big increases over the next three years. The first one is a 55.8 percent hike planned for March.

Last week, Citizens' board of governors decided to table the increase until after the special session. The board is hoping there will be some changes.

So are other groups around the state.

''Our biggest fear is that the proposals that come out of the special session won't be comprehensive enough,'' said Sherri Hudson, a mortgage banker in Brevard County who has helped organize a group of consumers and business owners called Insurance Reform Now.'

I think it's great that everyone is looking for solutions. Unfortunately, somebody has to pay - and I'm still not seeing how we get around that.

'In recent days, Gov.-elect Charlie Crist, Rubio and several other key legislators have said the planned Citizens rate increase is too onerous and the new provision in the insurance bill requiring the increases needs to be modified or possibly scrapped.

Alex Sink, the state's newly elected chief financial officer, and some lawmakers have also said the state needs a stronger consumer advocate to challenge rate increases. Other lawmakers have called for expanding the state grant program for strengthening homes and allowing consumers to increase deductibles.'

Full Article

More Tools To Help Lower Real Estate Commissions

2006-12-08T13:57:00.000-05:00

As we all know, the standard 6% realtor commission has been a 2-edged sword. In a lot of cases (including now, when sales are at rock bottom), Realtors have to work extremely hard to market and sell a house. The buyer's agent? I still haven't been sold on that one.

In most cases, however (especially over the past 3 years, when mortgage lenders were giving away money like Halloween candy and houses were selling in weeks), the difference between the amount of work done and the reward of the 3% commission has been a complete joke.

Now, Zillow.com is getting in on the act. From CNN/Money:

'The Web site Zillow.com, most known for its "Zestimate" price valuations for nearly 70 million homes, launched several new services for home sellers Thursday.

Sellers can now post their home for sale at Zillow - free of charge. Sellers can add details to a page that already includes basic details, such as square footage, number of beds and baths and sales history. '

Sounds good. But wait! There's more!

'And there's something else new - and radical - they can do: "We're encouraging homeowners to post 'Make-me-move' prices," says Zillow's CEO, Rich Barton.

He suggests that owners just toying with the idea of selling can enter an extremely high make-me move price. Then, if they get an offer that blows their socks off, they can make a very profitable sale.'

I like the approach, but these guys obviously haven't paid attention to the market. Unless a house is extra-special (in price, location, or both), it could sit on the database for years. Still, the idea of cutting out the middle-man and saving several thousand dollars is a beautiful thing. And then there's this:

'It's almost the flip side of a service launched this summer by another real estate Web site, Reply.com.

There, buyers are encouraged to make unsolicited offers on any houses they want. Buyers pick out a number of homes, 15 or 20 say (just one or two is too few to work), that they would like to make offers on. They decide just how much to bid on each convey the info to Reply.com. For a fee of $24.95, Reply will deliver a package containing the offers to each of the homeowners.

The company catchword for the service is, "Every home in America is up for sale."

Hmmm...will this drive the total inventory numbers up?

Full Article

Pavement from Ocala to Sebring, Daytona to St. Pete

2006-12-07T13:00:00.000-05:00

New projections from University of Florida's GeoPlan Center for 1000 Friends have come out for Central Florida:

'The state's population will double to 36 million by 2060, and if growth management policies don't change, 7 million of the state's 19.5 million remaining undeveloped acres will go urban.'

Other components of the forecast:

'• Continuous urban development from Ocala on the north to Sebring on the south, and coast to coast from St. Petersburg to Daytona Beach. The corridors of interstates 75 and 4 will be fully developed.

• Full build-out of Pinellas, Hillsborough, Manatee and several other central counties.

• Replacement, or at least fragmentation, of virtually all of the area's natural systems and wildlife habitat corridors.

• The largest percentage of urban land use - 51 percent - of any region in the state. More than a quarter of the region will be transformed to urban status in the next generation.'

What does all this forecast growth mean?

'Unchecked growth presents several threats to the state, according to the study. Crowded schools, traffic congestion, inadequate disaster preparedness and infringement on natural habitat and land that has cultural, environmental or historical significance can deteriorate the quality of life of residents. It could put the brakes on the state's phenomenal job growth, particularly with the "creative class" so highly sought.

"This piece of work is saying, 'We can see the future, and it's not what we hope it will be,'" said Tim Jackson, 1000 Friends' vice president. "Let's rethink this and start by doing a real plan for the long-term future."

Some potential solutions?

'• Expansion of the Florida Forever land acquisition program, to the tune of $1 billion a year from the $300 million now budgeted for conservation.

• New policies on the conversion of rural land to urban use, requiring more preservation, open space and agriculture.

• A 100-year legacy plan, a sort of statewide comprehensive plan laying out what areas are appropriate for development and redevelopment.

• Identification of leaders to organize and advocate for statewide growth management.

Officials from 1000 Friends said they will convene state leaders next year on long-term state planning. The group also is working on a 2060 scenario if projected growth and development patterns follow principles of smart growth.'

But, ney, the DEVELOPERS (and their paid-for lackeys who "represent" us in Tallahassee) have other ideas (that will ensure their pockets are lined for decades to come). Remember! Construction is the #2 industry in Florida. If we don't stop building, we die. Ha!

'The Legislature may not be quick to embrace the recommendations.

An extensive growth management package passed in 2005 now requires concurrency from developers, or pay-as-you-go for infrastructure needs such as roads and schools. The legislation also committed billions of dollars in state money toward road projects and other transportation needs.

And the Florida Forever program - successor to the original Preservation 2000 program - does not expire until 2010.

Lawmakers on Wednesday suggested it might be premature to tinker with growth management policies.

"I commend 1000 Friends of Florida for being visionary and getting out in front and talking about the next program," said state Rep. Stan Mayfield, R-Vero Beach, head of his chamber's Agriculture and Environment Appropriations Committee. "But it's important to take stock and realize where we are in our overall conservation efforts."

Mayfield's compatriot on the Senate side, Republican Dan Webster of Orlando, said he wants to examine the progress of the 2005 legislation before digging in again. "We're not done with what we started," he said. However, "We haven't stopped evaluating what we did. We're not closed to ideas that would say, 'Here's a better way to do it.'"'

So, maybe all this overpriced housing is a good thing? Maybe the "tax thy new neighbor" policy is a good thing? Maybe the insurance crisis is a good thing? Maybe...?

Full Article

Permits at a 4-Year Low in Lee County

2006-12-06T07:19:00.000-05:00

From the Southwest Florida News-Press, it appears the building boom has slowed significantly.

'The slide in Lee County's home-building industry continued in November as the number of permits for single-family homes fell to levels not seen in almost four years.

Builders in Cape Coral pulled 152 permits, the fewest since 81 in December 2002. In unincorporated Lee County, which includes Bonita Springs and Fort Myers Beach, 357 permits were issued — the fewest since 299 in March 2003, according to figures released Monday.'

Have they (like the rest of Florida)(and the United States) overbuilt?

'They're pretty much in a situation of just waiting because there's so much inventory, and you don't want to add inventory" with almost 14,000 existing homes already on the market, he said.

That situation won't change until the inventory of houses starts to shrink, he said.

"They don't want to add more fuel to the fire," Timmerman said.'

And now a story about a guy who's now going to travel 90 miles to live in an affordable house in Lehigh. 90 miles round trip to Naples?!!! That is so sad.

(note: I once had a 77-mile one way commute for 2 years - it was misery, squared)

'About 77 percent of the single-family home permits were for work in Lehigh Acres, valued at about $63.4 million. That's up from October's 74 percent.

The market has stayed relatively strong in Lehigh Acres because prices there are still the lowest in the county, said John McWilliams, a real estate broker with Coldwell Banker Preferred Properties.

"Lehigh still remains the last bastion of affordability," McWilliams said.

Even in Lehigh, he said, "builders are seeking ways to tweak their home/lot packages below $200,000 because they know that's what has to happen for their building careers to continue."

Jack Bowles, 57, and his wife, Ranae, recently closed a deal with America's First Homes on a three-bedroom, two-bath house in Lehigh for $240,000. They'll move from Naples, where he works at Home Depot and they were renting a house.

Bowles said he probably got twice the home for his money than in Collier County. "In Naples, I wasn't able to buy a home for less than about $300,000 or $350,000," he said. "We spent a whole lot less than that and got a brand new home with a whole lot of amenities."

Now, he said, he has a 90-mile commute but the lower price for his house will more than offset higher gas prices.'

Full Article

Housing Slowdown - Effects on Holiday Spending?

2006-12-04T09:30:00.000-05:00

From the Palm Beach Post, some insight on the housing/consumer spending relationship:

'Ask Nancy Bagley about the relationship between the housing slowdown and her net worth, and the Delray Beach homeowner is emphatic.

"Absolutely, I feel less wealthy," says Bagley, who works as a business consultant.

It's a sentiment shared by many homeowners in Palm Beach County and the Treasure Coast as the once-sizzling real estate market cools.

The median price of a single-family home in Palm Beach County fell 12 percent from October 2005 to October 2006, the Florida Association of Realtors said last week, while national home prices dropped a record 3.5 percent for the year. An increasing number of home sellers are getting less than they paid for houses bought last year or earlier this year, according to Palm Beach County property records.'

And for the US...

'As the U.S. economy enters the crucial holiday spending season, retailers and economists are struggling to make sense of how the end of the historic housing boom will affect the annual buying binge.

The consensus: The housing slump won't help holiday spending, but Americans will continue to consume as they always do.

"We should see some effect, but not a big one," says Christopher Carroll, an economist at Johns Hopkins University.

Carroll is one of the few economists to put a number on how changes in home equity affect spending. In a recent study, Carroll and two other economists conclude that for each $1,000 of increase in a home's value, the owner will spend an extra $20 in the short term and $90 over several years.

And as home prices decline, consumers will cut spending by the same amounts. So big drops in housing wealth would "substantially" hurt consumer spending, Carroll says.'

And what about our big retaillers?

'A week into the holiday shopping season, the signals are mixed. Stores were slammed on Thanksgiving weekend, although 5 million fewer Americans braved long lines and crowded parking lots this year than last, according to the National Retail Federation.

Wal-Mart Stores Inc. spooked investors when it reported November sales were worse than expected, and Gap Inc. and Abercrombie & Fitch also reported sales declines for the month. But Target Corp., Costco Wholesale Corp. and Federated Department Stores Inc. all posted healthy sales gains for November.

Mixed signals aside, economists agree that retailers can expect another year of frenzied holiday shopping, although some warn that the housing slowdown will eat into consumers' ability to spend.'

Personally, I continue to wonder how the "concrete-feet" effect of screwed sellers and amateur spec-u-vestors is having on the shopping season. I know of several "For Sale" properties in my area that are owned by persons who really can't afford the carrying costs, and are barely getting by. As such, I will be keeping tabs on the final sales numbers for the 2006 holiday season, because it should be a very good barometer for the 2007 economy.

'But now that home values are slipping, is there a reverse wealth effect that threatens to silence cash registers? Tough to tell, says Bill Hampel, chief economist at the Credit Union National Association.

"We've asked consumers that numerous times, and we don't really get much," Hampel says. "I'm not a big believer that these fringe items (such as the wealth effect) have much of a role in holiday spending."

Yet Hampel says the housing slump means homeowners will have to start saving the old-fashioned way, rather than continuing to spend more than they earn.

"Our houses have been doing our saving for us for most of this decade, and that is ending," he says. "But most people's net worth is so far above what they expected it to be that they don't feel they have to start saving. It's sort of like easy come, easy go."'

Full Article

The Florida Room - Newstories

2006-11-29T12:04:00.000-05:00

This time around, I'd like to get some links from you all with news stories dealing with the Sunshine state and the national media regarding real estate.

Please post and share (Crazy G and Lizziebeth - we all enjoy your posts and links). Here are my latest, submitted for your interest....

FAR Report for October 2006

Florida Tourism Down for Summer 2006

3rd Quarter Home Prices Nationwide

Legislature Addressing the Insurance Problem

Florida Property Tax Reform Comittee - Meeting in Orlando

We're Now #5 in Foreclosure Rate (#2 in Total)

2006-11-27T12:37:00.000-05:00

From RealtyTrac (a foreclosure information tracking service) and Money/CNN, the new numbers are out.

For October, 2006:

We're now #5 in the country, with one foreclosure for every 640 households.

We're #2 in total foreclosures, with 11,413 filed last month.

Our total is now 49.6% ahead of this time last year, which (interestingly enough) puts us at mid-pack in relation to % increases in other states.

Full Article with All States Ranked

At Least 2 More Years

2006-11-22T09:30:00.000-05:00

From a press release by Investment U (via Yahoo Business). As we all have expected, the prospects in housing are far from rosey.

'There's a growing consensus among economic and financial experts on the rate at which the real estate bubble will deflate. It will be a slow leak, they say. But the reality is far more chilling.

Last month, former Fed Chairman Alan Greenspan said, "The worst may well be over." But the "worst" is a frightening picture: Median prices for home sales have fallen sharply year-over-year, for two straight months, according to NATIONAL ASSOCIATION OF REALTORS.

"In addition to being the largest price drops in at least 38 years," The Wall Street Journal reported, "the back-to-back declines are the first time median home prices have fallen since 1995." And the decline is hardly over.'

And how about those exotic mortgages that everyone has been using the past 3 years? How are they going to affect things?

'Those who have interest-only, or "teaser-rate," mortgages could see their monthly payments more than double.

"Interest rates will rise on about $300 billion in adjustable-rate mortgages this year alone," he said. "That figure is projected to skyrocket to more than $1 trillion in each of the next two years."'

And, we have to ask: What states will be affected the worst?

'Arizona, Nevada, Florida and California will be hit particularly hard, he said, and homeowners in these states may not see a 5% decline, as experts predict, "but could fall two or three times that number."'

Full Article

K-12 Enrollment Down in Florida for the First Time

2006-11-17T08:14:00.000-05:00

There has been some rumblings recently about the dearth of expected school increases here in the Sunshine State. Apparently, the state has been attempting to keep this fact in the closet (almost Mark Foley-like!), but after some badgering by some dilligent reporters at the Associated Press, the real figures are coming in.

Bottom line: from October 2005 to October 2006, the state lost more than 2000 students. In the past 50 years, this has never happened.

Note that the state is also attempting to show an actual gain, by comparing the current figures to the end of the school year of 2005 - that's not "apples to apples" because it doesn't take into account the number of dropouts during the year. Nice try, though! I wonder: did the persons trying to push this fictitious "gain" have previous employment at Enron?

"A loss would be historic in a state that has added 34,845 to 65,187 more students in kindergarten through 12th grade annually for the most recent three academic years. A slight gain would still be a dramatic slide.

Either way, the shrinking student enrollment in a state that officially counted 2,641,598 students in mid-October means a $204 million loss to school districts this year, The Associated Press reported Thursday. The implications for the economy may be far greater.

To put it another way, the state fell short of its projections for new students by 48,375.

"A whole school district is not showing up," said Bruce Tonjes, Polk County schools' associate superintendent. "It's scary, isn't it?" "

And we all have to wonder: why did this happen? Could it be.....HIGH housing costs?

"The dramatic drop was evident in August when districts of massive growth, such as Hillsborough County, showed dramatic declines. By early September, soaring housing costs and insurance rates and last year's spate of hurricanes were blamed for keeping working families with children from moving to Florida.

No one has come up with any better reasons as the state tallies numbers from its official October statewide count. The focus is now on just how great the loss is and what it means in dollars.

"No one in a hundred years is ever going to expect this state to be down," said Jim Hamilton, Hillsborough's chief officer for district compliance. "

With this in mind:

Has the word got out about how expensive housing (prices, taxes on those prices, and insurance) is down here?

- Or - (in a derivative of the science fiction that has been quoted by the realtors for the past 5 years):

Is it that everybody still wants to move to Florida, it's just that now they can't sell their previous house?

Also, with less working families moving here, who will they find next to subsidize the current residents of the Sunshine State?

Full Article

UBS: 10% Nationwide Correction in 2007

2006-11-14T11:07:00.000-05:00

From Marketwatch, some predictions about housing prices in 2007.

Home prices will fall 10% on average in 2007 and it will likely take three years to clear out the huge inventory of empty unsold homes currently in the market, according to a UBS report released Monday.

We are now overbuilt to the tune of 900,000 houses. Wonderful!

UBS analyst Margaret Whelan estimated that the industry overbuilt to the tune of 900,000 homes between 2003 and the first half of 2006. "Most of those homes are vacant," which means they'll rely more heavily on price discounting to get sold than if they were homes with people living in them, she said, during a conference call Monday.

"It will take about three years to shift all of that excess inventory," said Whelan. As a result, she expects housing starts to fall 15% in 2007 from 2006 levels.

Whelan said there is currently a five-month supply of existing homes up for sale and a six-month supply of new homes on the market, based on current sales trends.

In past cycles, when inventory levels have reached four or five-months' supply, "you've had a dropoff in real house prices," said UBS chief economist Maury Harris.

Harris is predicting median home prices will fall 10% over the next year, and housing starts will fall by 180,000 units to 1.55 million in 2007 from 2006. He trimmed projected GDP growth to 2% from 2.2%.

Now, my fellow Floridians, I ask you this:

With lower than median incomes in this state, much higher than median prices, and much, much higher inventories (ahem...Sarasota/Bradenton and West Palm Beach...), what do you think will happen to our median prices in 2007?

Full Article

The Florida Room - Local Reports

2006-11-09T08:03:00.000-05:00

This week, I would like to hear from you regarding what you're seeing locally, in regards to homes for sale, homes that are selling (or more likely, not selling), and stories you may have.

Here's my report in Northwest Tampa:

Current neighborhood (about 70 homes) has had 3 homes for sale since the summer. Every one is priced nearly double the value from 4 years ago. Open houses were being held just about every weekend, but now they've stopped. Also, 2 other houses are up for rent - no takers.

Got serious about making a purchase back in June - looked at 9 houses that were in the right locale, but all were seriously overpriced. Finally got interested in 2 homes, both listed for $400K. One was nearly new, but definitely not worth that price. The other was 10 years old, had been bought out of foreclosure by a local flipper, who had the house repainted, the yard re-sodded, and new cabinets installed. Made a bid of $350K on the first house, and did not think the 2nd house was worth anything more than $300K, so didn't bid on it (as much as I loath flippers, I'm not going to slap someone in the face). Result on the first house: knowing that we had made a bid, another realtor convinced his/her buyer to make a FULL PRICE offer. They closed in September. Result on the 2nd house: owner kept lowering his price, first to $389, then $379, then $374 for a looooong time. Then 2 weeks ago, lowered the price to $355. It is no longer listed, so I am assuming that it either sold or got taken off the market. Result on the other 7 houses: every single one of them is still on the market.

Overall, I am still seeing a large disconnect between the sellers and the market. Nothing is selling, yet prices are still not coming down. As per the theory that has been presented on the Bubble Blog, this area is slightly above the median income, so folks can hang on to money-losing properties a LOT longer in this area. Talk about a drag on the economy.

Subsidized Housing in Florida - For the MIDDLE Class

2006-11-07T08:02:00.000-05:00

I find it pretty depressing when they are now considering handing out grants to provide housing assistance for people who make 130% of the median income. Buddy, could you spare a dime?

Middle Class Housing Assistance - Palm Beach

And don't forget, 2 years ago, in the statetwide and national elections in Florida, EVERY SINGLE incumbent won reelection. That's right. Every congressman, every state house rep, and every state senator who was ran for re-election won the race (and many did not even face an opponent). Over 100 different office holders did such a GREAT job that none were voted out. How's that for gerrymandering and the decline of democracy? Of course, this was also in the midst of the real estate boom, so perhaps everyone was so happy that their house was worth double that they didn't care who was actually running the state.

Please take this into account when you go to vote today.

Save Our Homes Killing New Home Buyers

2006-11-02T10:27:00.000-05:00

Front page article in the Tampa Tribune. I know I've been preaching to the choir about how the "Save Our Homes" tax system is royally screwing the real estate here - it's nice to see that the msm is finally catching a hint.

"Recent buyers in Florida’s housing market are learning hard lessons, come tax time.

The year after a home qualifies for a homestead exemption, it is shielded from the double- or triple-digit assessment hikes that have been the norm in the sellers’ market of the past few years. That shield comes courtesy of a Save Our Homes cap that limits such increases to a maximum 3 percent a year.

But before that kicks in, the reassessments that take place when property is sold can yield astounding changes in taxable value.

For Jamie Tingen, the surprise came with this year’s tax bill. A Florida resident for a half-century, she traded up from a two-bedroom to a three-bedroom townhouse on the same street.

Her tax bill more than tripled."

People are absolutely clueless about this. They see what the current owner has been paying for taxes, and the realtors (being the soul-less wonders that they are) make no attempt to inform the buyer that, the following year after the purchase, their home will be re-assessed at CURRENT market value, which can often mean a several-thousand dollar increase per year. For current homeowners who want to move up, it'll bite you good.

"Just last year, Tingen, as a longtime owner of a homesteaded property, was on the enviable side of the street of Florida’s property tax system. Her smaller townhouse, which she bought in 1980, had an assessed value last year of $45,305 – held down for the past decade by the Save Our Homes cap.

Its market value was far more. She sold it for $137,000. The tax bill for the new owners leaped to $2,200 from the $500 Tingen paid last year.

She says such disparities are unfair: “Everybody seems to be in the same boat, and nobody seems to be doing anything about it.” "

People from out of state are being stunned by their predicament.

"Aldegonda Caris and her husband, Glenn Smith, moved from Long Island, N.Y., to Tampa last year after Smith accepted a job as an assistant professor at USF’s College of Education. They heard the cost of living in Florida was lower. Then they bought a house.

“We have a smaller house and pay more taxes,” said Caris, who said their property taxes on a larger home in New York stayed at about $5,500 a year. “The taxes increased gradually, while in Florida, every time the house is sold, it goes up significantly.”

Between last year and this year, the tax bill on their Tampa Palms home nearly doubled to $6,300.

Caris was shocked to see neighbors in a similar home pay $2,500.

“We get the same benefits. Why would we need to pay so much more?” Caris said. “I don’t see what the goal for Florida is. Why do they give a higher burden to newcomers? Maybe they want to chase them away. I definitely think they should do something about it.”

Welcome to the "Greed State", Mr. Caris. Believe me, I care about the issue, but the vast majority of people in this state do not. Another recent immigrant, John Sarver, has the same tale.

"The civilian strategic planner at U.S. Central Command moved to Brandon late last year from Colorado Springs. That recent arrival earned him the not-so-enviable position on the block as the man with the highest property tax bill.

He’ll pay almost $9,000 this year in property taxes. That’s more than he paid for both property taxes and state income taxes in Colorado. Most of his neighbors pay a third or half of that, even though their homes are about the same size as his – or larger.

“I look across the street,” said Sarver, who bought his home for $475,000 at the height of the market late last year. “I know my neighbors have enjoyed all this equity they’ve gained from ’03 to ’05, but I feel like I subsidize their property.”

Let's face it - Pandora's box has been opened, and nobody can close it. People who've lived here for 3 or more years are paying next to nothing, and every new homebuyer since then is subsidizing their lifestyle. Because of this, outside investors won't invest and persons considering a move here won't. I've said it before, and I'll keep saying it until everyone understands:

If you buy now in Florida, you'll pay more in taxes than the majority of wealthier homeowners in this state. And until they move or die, you always will.

Do you think this will help or hinder the real estate values? Ken Wilkinson must be very proud of himself.

Yet Another Reason to Buy in Florida

2006-11-01T11:24:00.000-05:00

Sure, the houses are overpriced and likely to devalue over the next several years.

Sure, the insurance situation is a complete mess.

Sure, the SOH system ensures new homeowners on average will pay more than a hundred thousand dollars more in property taxes over the life of the exact same house than wealthier existing homeowners.

But, look! It appears there will soon be an ALL NEW benefit to buying a home in the Sunshine State. Get'er done!

What a Great Idea!

The Florida Room - Week of Oct 30-Nov 5, 2006

2006-10-30T11:32:00.000-05:00

A recent poll conducted by the St. Pete Times shows that nearly 1 in 3 residents of the Sunshine State have seriously considered moving out of the state, due to high insurance costs and property taxes.

I find this interesting, but what about the highest cost of all: the cost of purchasing a home, particularly one that is declining in value? My feeling is that the amount of money you could lose/overspend on the actual purchase price far outweighs the variability in taxes and insurance.

Topic for discussion: Do you know of anyone who has moved recently or is planning on moving out of Florida? If so, please provide details on their housing situation here.

Full link to Article: 1 in 3 Seriously Considering a Move out of Florida

Florida Inventory - Plenty to Choose From

2006-10-27T13:05:00.000-04:00

With the latest reports from the various realtor organizations around the state, we now have record inventory. Here now the numbers for the major markets, with months supply of inventory:

Tallahassee - 9 months
Jacksonville - 10 months
Orlando - 10 months
Palm Beach/Boca - 11 months
Tampa/St. Pete/Clearwater - 15 months
Miami-Dade - 18 months
Sarasota/Bradenton - 23 months

(Months supply is calculated by dividing current supply by the latest (Sept 2006) sales. It represents how many months it would take to sell all the current inventory. Statistically, an average home would take half this time to sell.)

So, my fellow citizens, with these figures in mind:

Do you see a continuing increase or decrease for 2007?
Is this record inventory due to spec-u-vestors bailing out, or simply too high of prices?
Do the sellers get fed up and take their homes off the market (hoping for a return in demand)?
If it does get worse, how much worse? When do we hit bottom?

Florida Bubble "Greed Poster Child" of the Week - #4 - Orlando Edition!

2006-10-25T12:49:00.000-04:00

In a world full of greed, let us now travel to the land of the Magic Kingdom, where you too can live in an overpriced shack with a price that is unimaginably unjustified - yes, it's a dream come true! This box of junk can be yours, for a paltry sum of $275,000. Features include:

Postage-stamp sized lot (6600 square feet).
Built in 1949 - that's right, kids! You can own a "pre-Korean War" POS!
2 bedrooms and 1 bath - share with your friends!
All these features packed in a "comfy" 1173 square feet of living space!
Sold for $47K in 2003 (that's $50K in today's dollars).
Remember, prices only go up, and they're not building any more land in Florida, so hurry!

Florida Bubble "Greed Poster Child of the Week" - #4, Orlando

The Florida Room - Week of October 23-29, 2006

2006-10-23T12:51:00.000-04:00

Got an excellent suggestion from lizziebeth from Orlando to create an open-air forum to post anything Florida-related here. Great idea, and so here it is - "The Florida Room". This is a great area to post any links, opinions, or articles you might have that would be good for discussion and/or future posts. Also, if you find any real moronic or greed-motivated quotes, this is an ideal place for them.

Nationwide Smacked in Tallahassee

2006-10-20T13:23:00.000-04:00

Maybe I'm going a little old-school with this reference, but it appears that the man from Nationwide is indeed, NOT on your side. Like other insurers used to a free-pass from their shills in the state capital, Nationwide is looking for some more revenue and wants to increase rates. This time, they took it to whole other ballfield: they approached the state insurance commission with a request for 71.5% increase. Oops.

'Florida Insurance Commissioner Kevin McCarty said Wednesday he plans to reject an average 71.5 percent statewide homeowners insurance rate increase proposed by Nationwide Insurance Co. of Florida.

In a notice to Nationwide, regulators said the insurer has failed to provide sufficient data to justify the planned Nov. 10 increase and its intended 15 percent profit.

Supporting data are necessary, especially in a period when Florida residents are feeling the pinch of rising insurance rates, McCarty said in a statement. '

Wow - somebody in Tallahassee standing up for consumers? What alternate universe have we travelled to?

'"In such an environment, insurers must redouble efforts to fully and completely support all requests for increased rates, and that has absolutely not been done in this case," McCarty said.

"The filing contains proposed hurricane rate hikes in excess of 300 and 400 percent for some territories, which are entirely unsustainable."'

Oh, but suddenly, it all becomes clear - we're in an ELECTION year. AND, guess what the #1 issue with voters in Florida this year? Yep, the insurance crisis.

So, back to the story of our friends at Nationwide. With this slap in the face, now what are they going to do?

'It's unclear whether Nationwide will further withdraw from the troubled Florida insurance market because of the state's rejection.

Citing major hurricane losses, Nationwide announced in August 2005 that it was shedding 35,000 homeowners policyholders and its entire book of more than 1,000 condominium associations, and that it will not write any new homeowners or condo insurance policies in Florida. '

Nice guys, huh?

Full Article: Nationwide Rejected

Overpriced Florida Bubble Property of the Week

2006-10-18T12:06:00.000-04:00

This week, we head down to the land of cigarette boats and pastel colors - the original Florida boomtown - Miami. It took no time to find yet another poster-child for the collective greed in our state

This week's candidate:
- Built in 1956 (50 years old this year!)
- 1 car garage, 3 bedroom/2 bath, 1416 total square feet.
- Listed at $325,000.
- Purchased for $264,000 a year ago, and assessed at $185,340! You (and your bank) only pay extra for "Goodwill"!
- You may think it's an old shack, but get this: it has Marble Floors. Oooooooooh!
- An absolute steal (or should I say, theft) at over $200/square foot.

Hurry, because deals (absolute jokes) like this are not going to last!

Florida Bubble Property of the Week, #3 - Miami edition

Considering a Move to Florida?

2006-10-16T11:13:00.000-04:00

For those of you who are "on the fence" on your decision as to making the big move to the Sunshine State, I've compiled a list of highly compelling reasons for taking the risk and moving here. After reading this, I'm quite certain that you'll come to the right conclusion: Florida is going to be your NEW home state! So come on down!!!!

8 Considerations On Moving to Florida

1. After tourism, the #2 industry in Florida is construction. So remember, the only way this state continues to grow is to mow down the trees and EXPAND.

2. So, please, please, please move here! We need your money to keep our contractors employed and this economic engine running at full speed.

3. Florida is a cheep place to live. Okay, not really - houses actually cost much more here than advertised. The FAR (FL Ass. of Realtors) has reported the median price for the following towns, and in every case they have under-reported. The Actual median prices for these towns are shown in bold RED.

Tampa-St. Pete-Clearwater - $237K, Actual: $295K
Orlando - $261K, Actual: $289K
Melborne - $220K, Actual: $250K
Miami - $379K, Actual: $399K
Jacksonville - $202K, Actual: $252K
Tallahassee - $175K, Actual: $216K

4. Okay, so the houses are more expensive than ever - big deal. Please, please, please move here! Our developers need to keep current on their payments for their jet skis, extra-large SUVs, and waterfront homes.

5. You get to pay more in taxes than everyone else. The "Save Our Homes" tax has set in place a system whereby the existing home-owners pay for less than the actual value of their residence. You, however, as the latest Florida purchaser, get to pay the FULL amount. Result: you will pay more in taxes than the majority of wealthier people who have lived here longer. And until they die or move, you always will.
-> For example, you can expect to pay around $5G/yr for a 3 bedroom home in any of the major metro areas, $6G for a 4 bedroom.

6. Okay, so you have to pay more in taxes than the rest of us who already live here. So what? Please, please, please move here! We need your tax money so we can keep ours.

7. And remember, like any "pass the buck to the new guy" tax scheme, if people keep moving here, eventually the newer people will pay more in taxes than you! Isn't that great? Just wait your turn - it might be awhile.

8. Home insurance might be a tad more expensive than what you're used to - if you can get it, that is. 2 years of record hurricanes (2004-05) has left the welfare version of homeowners insurance, Citizen's, as the #1 policy holder in the Sunshine State. By law, Citizen's has to charge the highest rates in order to not compete with commercial insurance companies. By the way, after 2 years Citizen's is already awash in red ink - they will cover their costs by adding a surcharge to all other policy holders in the state.
-> Expect to pay upwards of $1-$2G/yr for most homes.

8. Okay, enough said. Housing costs are higher than advertised, your taxes will be higher than everyone else on your street (unless you live in a brand-new subdivision), and your insurance costs will be much higher than where you currently reside. But hey, it's a "quality of life" issue. We haven't mentioned traffic, pollution, sub-standard schools, geezers constantly screaming for more state subsidies, OR the red tide - but should we have to? Please, please, please move here! We need your money. Seriously.

Insurance Gone Wild!

2006-10-13T08:21:00.000-04:00

Yesterday, an all-day meeting of the "Property and Casualty Insurance Reform Committee" was held in Largo. Lots and lots and lots of suggestions, but absolutely no answers. From the St. Pete Times...

'Gloria N. Ellinwood thinks insurance companies should be barred from creating spinoffs that serve only Florida. Ginny Stevans doesn't like how insurers can buy reinsurance from their parent company. Debby Zolobkowski says it's unfair that her premium can be tied to her credit rating.'

'Of those at the meeting - business people, retirees, politicians, and the committee members - no one denied Florida's insurance situation needs fixing. But few could agree on the best way to repair it.'

'When committee member Frank Kowalski said homeowners can't expect to qualify for certain coverage if they don't replace their roof every 10 years or so, Lt. Gov. Toni Jennings replied, "The roof is supposed to last as long as the house."'

'"For retirees earning $13,000 to $20,000, mitigation won't work." said Ginny Stevans from "Home-owners Against Citizens".'

'Snowbirds and residents of manufactured or mobile homes complained that the My Safe Florida Home program is a raw deal. The program, which kicked off in August, offers matching grants up to $5,000 for improvements that strengthen a house against storms. But the grants are available only to site-built homes with homestead exemptions.'

'Steve Burgess, the state's insurance consumer advocate, questioned the potential conflicts of interest posed by his office's position under the authority of the chief financial officer. He said his office might function better under the Cabinet, "although that perhaps would generate its own set of criticisms," he acknowledged.'

'"It's pretty easy to go out and say, 'Hey, this rate's too high, don't allow it,' " said state Sen. J.D. Alexander. But doing that, he said, will chase insurers out of Florida.'

'Three hours into the meeting, committee member Barbara Weese didn't seem convinced problems were being solved. The point of the committee, said the retired schoolteacher, isn't just to make insurers more accountable, but to make insurance more affordable. "The point we're missing," she said, "is something has to be done to get insurance to the people."'

Full Article: No Magic Formula

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

2006-10-11T09:38:00.000-04:00

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.

Florida Bubble P.O.S. of the Week - Palm Beach

2006-10-10T12:31:00.000-04:00

Wow, a real overpriced beauty in lovely Palm Beach, FLORIDA! All inclusive:

1241 of living space!
A fabulous one-car garage!
Sub-standard schools!
Owners paid $157K in 2004, but worth so much more!
Notice the car parked in front lawn - what a great neighborhood!

And it can be had for a paltry $275,000. Congrats, you have won the FLORIDA BUBBLE P.O.S. of the WEEK!

Florida Bubble P.O.S. #2 - Palm Beach

Florida Bubble News - October 2006

2006-10-09T11:28:00.000-04:00

Latest and greatest news from around the state and around the country.

Real Estate Agents - Too Many, Too Late
'"You've got a lot of people who got into the business in the last two to three years who never really had to do the hardest work of an agent, people who were basically picking low-hanging fruit..."'

Palm Beach - 7-Year Ditch
'"There isn't much positive to highlight," said Mike Larson, an analyst with Weiss Research in Jupiter. "And all that occurred despite a recent downtick in interest rates and a general lack of serious hurricane activity, though we did have an Ernesto scare at the end of the month."'

FSBO Listings Becoming Realtor Listings
'That means there's nothing to push prices higher or perhaps even maintain their current levels. Many sellers, however, refuse to accept that. "They are still holding out for 2005 prices in the 2006 market," said Beverly Pindling, president of the Orlando Regional Realtor Association.'

Florida Home Prices Heading Further South
'Housing prices are getting more attention these days than the Iraq war, Florida Republican Rep. Mark Foley’s follies and, heaven forbid, even Bucs QB Chris Simms’ spleen.'

A Sign of Where We're Heading

2006-09-29T08:34:00.000-04:00

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

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

2006-09-28T08:25:00.000-04:00

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!

Snake Oil Saleswoman

2006-09-26T12:19:00.000-04:00

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

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

2006-09-22T13:21:00.000-04:00

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.

NAR - 2005 vs. 2006

2006-09-21T12:46:00.000-04:00

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

Affordable Places to Live

2006-09-15T16:40:00.000-04:00

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"?

Florida - Now #1 in Foreclosures

2006-09-14T16:55:00.000-04:00

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!

A Cautionary Tale from Japan

2006-09-12T13:16:00.000-04:00

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

A Good "Use" of Your Tax Dollars

2006-09-11T12:26:00.000-04:00

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.

More Food for Thought

2006-09-08T12:58:00.000-04:00

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."

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

2006-09-07T13:04:00.000-04:00

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.

House Values - A History Lesson

2006-09-06T13:33:00.000-04:00

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

2006-09-06T12:25:00.000-04:00

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

Finally, A Change in Florida

2006-08-23T17:51:00.000-04:00

Our "good friends" at the FAR (Florida Association of Realtors) are loath to admit it, but they have released their official numbers for July, and they are not so great. Here now the synopsis:

July, Year over Year, 2006 compared to 2005:

Statewide
# of Homes Sold: 21,691 (down 33%)
Median Price: $250,800 (up 1%)

Major Cities --------- # of Homes Sold --------- Median Price
Tampa/SP/Clear---------2,629 (down 45%)------------- $237K (up 9%)*
Jacksonville------------- 1,374 (down 17%) -------------$204K (up 7%)
Miami ------------------- 673 (down 38%) -------------$382K (up 5%)
West Palm/Boca----------714 (down 44%) -------------$390K (even)
Tallahassee-------------- 467 (down 7%)--------------- $173K (down 2%)
Fort Myers/CC---------- 694 (down 32%) -------------$290K (down 8%)

* Note that this #, in my studied opinion, is serious fudge. The number is actually around $300K. (Please see previous posting here titled "Something Smells in Tampa Bay...." for an analysis as to why and how the numbers are so skewed from reality.)

More commentary on this report to follow. Until then, get your fill of half truth at: July FAR Report

...and remember - unless you have overwhelming reasons for buying a house in Florida right now, DON'T DO IT!!!

To employ a Florida metaphor, we are presently at the very top of the "Kamikazee" water slide at Wet-N-Wild. We've got a lot of air between us and the bottom.

Top Resources for Keeping Track of the Florida Housing Bubble

2006-08-22T18:31:00.000-04:00

In this extremely over-valued market, you can never have too many sources of information to keep an eye on things. As such, I have assembled my top 10 links for Florida Housing Bubble Resources

1. Housing Bubble - This is a national site, the original, the best by far. Updated several times a day, with very thoughtful commentary by a great number of "bubbleheads" from around the country. Areas such as AZ, CA, NYC, MA, DC, and of course the Sunshine State are often in focus.

2. Bubble Meter - Another great site. If you notice, I keep this and the previous site posted over on my links (to the right ------>).

3. Realtor.com - A very good site for assessing what's for sale. Unfortunately, the filters and sorts are sometimes a little too coarse, and they won't reveal the exact address of the listings. Actually, if you go to the listing agent's site, you can often find it there. Also, for those of us/you who plan on renting until the market recovers, it has a great rental search.

4. Matrix - Excellent site run by a Jonathan Miller, a long-time real estate appraiser based in NYC. He's experienced with up-markets, down-markets, and a lot of market influences. Great commentary, as well as categorized topics including our good friend, the housing bubble. Brutally honest and forthright.

5. CNN-Money Magazine Real Estate - Good source for nationally based housing issues. Updated a couple times a week.

6. Florida Association of Realtors - No decent observer of the Florida Real Estate Bubble can get by without checking the laughable lies and half-truths posted on this site. As discussed earlier, many agents are in big trouble in our state, some due to lack of client activity, and others due to holding investments that they can't sell. Take everything you read from the FAR (and the NAR - National Association of Realtors, for that matter) with a LARGE grain of salt. Even though this is probably the worst time to buy since the 1920's, they sure as hell don't want you to know that.

7. RealtyTrac - A good way to find out what's being listed for foreclosure in your town/zip code. This is a for-profit site, so they only give you so many free details on the foreclosing properties, but often you can do further research on your own to get the remaining details. Or, if you're serious about purchasing a foreclosure/lis pendens, become a subscriber. I may become one if/when I feel the time is right. One thing is certain: they will be doing plenty of business over the next several years.

8. New York Times Real Estate - It tends to be a little NYC-oriented, but they also track national issues in housing. As per anything that comes from the NYT, the articles are well written.

9. Zillow.com - See your house from space, and see what your and everyone else's house in your neighborhood is worth. There is some debate as to the quality of the estimates, due to the "comp" (lagging) nature of valuation, and major differences between homes that can't be judged without human viewing (such as landscaping, appliances, carpets/flooring, etc...). Still, its a terrific idea, and a very popular site.

10. Your local property appraisor site. If your county/locale doesn't put all of this info on line yet, you must be living in a third world country. To find it, go to Google or Yahoo, and search on " property assessor". FYI, for those who live in Hillsborough County, its Hillsborough County Property Assessor

11. Okay, I said there would be 10, but hey, don't forget to bookmark yours truly. We're keepin' it real for the homeslices, yo'.

Something Smells in the Bay Area (and its not Red Tide)

2006-08-16T14:28:00.000-04:00

As you know, the NAR (National Association of Realtors) and the FAR (Florida Association of Realtors) just released their 2nd quarter numbers.

Once again, I look at what they are showing for the "Tampa-St. Petersburg-Clearwater" sales, and I am shocked. Not that the prices are not lowering (they haven't) nor that the number of sales has dropped (they have). What is shocking is the median sales price they are listing for the area.

From FAR August 15, 2006 report, median sales price for 2nd Qtr: $232K

Okay, lets do a quick check on Realtor.com to verify what's currently for sale.
Tampa - median price $280K
St. Petersburg - median price $300K
Clearwater - median price $305K

Also, in Orlando, a town just up the road (I-4) with very similar demographics (and much more available land to build on) reports a median price of $265K

What's going on here? It looks like a far rosier picture than reality is being painted here in the bay area. How can the prices for the 3 major cities in the region be $50-$60K higher than what the FAR is reporting? And how does Orlando have a $30K higher price with more available land?

Here's my theory.... Although you can't find it anywhere on the FAR website, the "Tampa/St. Pete/Clearwater" area should be defined as Hillsborough, Pinellas, (and sometimes Pasco) counties. What I believe is happening is that, to keep the numbers down, they are also adding such areas as Hernando, Citrus, and even Levy and Polk counties. If you cherry-pick which geographic region to add or subtract the numbers, you can make the median price trend anyway you want.

"So, it's obvious they are under-reporting the median price here in Tampa. The next question is: Why keep the numbers down?" you may ask.

A great question, and one I've put a lot of thought into. Choose one or more of my postulates:

1. After decades of being one of the cheapest places to live in the country, Tampa is now one of the most expensive (as a % of median income). To attract employers, the chamber of commerce (which includes all of our good friends in the realtor business) needs to keep the "official" housing costs artificially low. Sorry folks, funny numbers or not, unless you just made a ton of money selling your house in NY/CA/PA/NJ/AZ/DC/MA, it is VERY expensive to move here.

2. This is related to postulate #1 above. Nobody wants to be known as the town with the highest increases in the country (see also Naples and Phoenix). It scares away employers and retirees.

3. What goes up usually comes down. If the numbers are correctly reported, the drop in prices (which is already happening) will look even more precipitous. Nothing will ruin a market worse than a perception that prices are falling - who wants to "catch a falling knife"? Instead, with weak appreciation being reported, it gives a look of positive return. Furthermore, in the future when they can no longer hide the fact that prices are dropping, they can say, "Yes, the prices are dropping, but look how small the drop is!"

4. This is also interrelated with all of the above. What, you may ask, is the #2 industry in Florida after tourism? Excellent question, and I'll give you the answer: CONSTRUCTION. Without people constantly moving into this state, the #2 engine in the Florida economy sputters. How else could we afford schools, roads, plumbing, parks, habitat protection, AND no income tax? Answer: we couldn't. The housing numbers HAVE to look good to outsiders. Without a massive and continuous influx of out-of-staters, unemployment goes through the roof and state revenues fall through the floor.

Of course, its just my opinion, and I may sound like a conspiracy theorist, but the numbers don't lie. What the FAR is reporting does not correlate in any way to what the actual sales prices are.

End of story.

A Tale of 2 Taxpayers

2006-08-14T16:14:00.000-04:00

The "Save Our Homes" tax system is creating a 2-tiered hierarchy where one homeowner can be paying 3-4 times the property taxes than another with an identical house in the same neighborhood.

From an excellent article in the Palm Beach Post, a few months back...

"Save Our Homes, the tax relief package aimed at keeping Floridians of moderate means from being taxed out of their houses, increasingly divides Florida property owners into two classes — winners and losers."

If you purchased within the last 3 years, you're most likely in the "loser" category.

"The winners? Longtime property owners with homestead exemptions.

The losers? Everyone else, from recent buyers of homes to apartment tenants, from snowbirds to owners of malls and office buildings, even longtime residents like Matthew Krische who simply move a few miles away."

Why the "fuzzy math" on taxation? Read on....

"The amendment to Florida's constitution [1992] says the taxable value of a homesteaded property can rise by no more than 3 percent a year or the rate of inflation, whichever is less.

Throughout the '90s, Save Our Homes didn't matter much. After all, houses were appreciating by only a few percent a year.

But as home prices have skyrocketed in the past five years, so has the gap between the taxable value and the true value of many homes. "

It really is a "smoking deal" for those who got in early, and a real bummer for everyone else (out of staters, investors, first-time buyers).

"When one homeowner pays two or three or four times as much as a neighbor in a similar home, questions of fairness follow."

Of course, its not quite "taxation without representation". Just "unequal taxation with representation". Sorry, you're not a member of our "Clique" (moved here prior to 2003) - you pay more. A LOT more.

"'Nobody ever said it was fair,' said Ken Wilkinson, the Lee County property appraiser and Palm Beach County native who pushed for its passage. 'The inequity it fixed was far greater than the one it created.'"

Okay, at least he's being brutally hones with his first statement. However, the second statement makes it (to be brutally honest) obvious that this guy is an untruthful sack of you-know-what. When one resident pays triple the taxes of his neighbor in an identical residence, you've got a SERIOUS issue. The inequity is much, much worse.

Still, you've got to admit, it's in Florida's DNA. I just wish they'd spell it out directly in the constitution, so that people wouldn't get confused in the future. It would go something like this:

Article 1. All legislation must be written in a way to maximize SUBSIDIES TO THE GEEZERS.
Article 1a. They deserve FREE MONEY.
Article 1b. Everyone else must pay to support this.
Article 1c. Get used to it.

Really now, it's all a ruse. When the law was proposed, that was the justification:

"Save Grandma's House! She's gonna lose it because taxes are SKYROCKETING! The sky is falling! The sky is falling! Save Grandma's House!".

In actuality, it was people like Wilkinson, Greg Norman, Rush Limbaugh, and Malcom Glazer that are the biggest beneficiaries of being "saved" from losing their homes. Talk about strange bedfellows.

"Save Our Homes also has evolved into a regressive tax where the biggest benefits accrue to the wealthy. Golfer Greg Norman, Tampa Bay Buccaneers owner Malcolm Glazer, singer Jimmy Buffett, broadcaster Rush Limbaugh, even former Tyco International head Dennis Kozlowski, among other longtime owners of oceanfront manses, see millions in property value sheltered from taxes. All saved more than $100,000 in property taxes last year thanks to Save Our Homes.

Yet there's no such break for cash-strapped first-time buyers who struggle to find homes they can afford. They pay taxes on the full value of their homes, posing one more obstacle to affordable housing."

But there is hope. Really.

"State Rep. Fred Brummer, R-Apopka, is an ardent tax cutter but has been an outspoken opponent of expanding Save Our Homes. Not only does the break shift the tax burden from the wealthy to everyone else, it also puts less affluent inland counties at the mercy of wealthy coastal counties such as Palm Beach, Brummer said.

When he introduced a property-tax reform plan in Tallahassee last month, Brummer specifically pointed to Norman's outsized tax break.

'Because the appreciation is so much greater in the coastal counties, the coastal counties have a far greater percentage of their property protected under Save Our Homes,' Brummer said. 'The wealthy homeowners are not paying their full share.'"

Now, the whole thing is actually having a "reverse effect" on the housing boom. Just another reason to be very, very careful where and what you buy.

"During a recent tour of Nettles Island in his yellow golf cart, McIntosh pointed to for sale signs and said high property tax bills have made lots difficult to sell.

'When people are told what the tax bill will be,' he said, 'they burn rubber getting out of here.'"

Full article: 2 classes of homeowner

Yet Another Faulty Forecast

2006-08-09T09:34:00.000-04:00

Similar to the Hillsborough County Schools blunder (see post below) on expected student population for 2006-07, the NOAA is now predicting fewer tropical storms for this season.

"Scientists with the National Oceanic and Atmospheric Administration on Tuesday said they now think this hurricane season will produce slightly fewer tropical storms and hurricanes than they forecast in May."

Now, for those who are counting, we've only had 3 so far this year - as opposed to 28 for all of 2005's season. So, we're way ahead of the curve, right? Not so fast, my friend....

"Three tropical storms have formed since the season's start on June 1. None became hurricanes. However, the most active part of the season runs from mid-August into October."

And really, the decreased forecast seems like a "drop in the bucket" (excuse the pun), really.

"NOAA's new forecast reduced the number of tropical storms and hurricanes by one from its May prediction. Forecasters now expect 12 to 15 tropical storms and seven to nine hurricanes."

I wonder how our good friends in the homeowner's insurance business will treat this news. (I'm picturing nerds in Hartford and NYC hi-fiving each other and planning their next exotic vacations with the bonuses they'll get from record profits this year)

Full Link: Lowered Hurricane Forecast for 2006

Wall Street Journal: Housing Market May Have Hard Fall

2006-08-08T09:52:00.000-04:00

From today's WSJ. Some say its cool, some say it's c-c-c-COLD!

"Bubble or not, the biggest housing boom in recent U.S. history is coming to an end."

Nice to see a major business journal actually admit the fact.

"The boom has depended heavily on the upbeat psychology of consumers, builders and lenders. As moods swing, the landing could be very hard indeed."

Especially the lenders - if they get burnt from the current crop of exotic loans they're holding, things are going to get a LOT tougher for all future borrowers, no matter what the interest rates are.

"'We could be underestimating the dark side,' says Mark Zandi, chief US economist at Moody's Economy.com and among the first to seek to quantify the housing boom's broader effects. 'Euphoria could turn into abject pessimism very quickly.'"

The key phrase schaudenfreude comes to mind.

"In June, total single-family-home sales fell 8.7 % form earlier, to an annualized rate of 6.9 million, the sharpest year-to-year drop since April 1995."

I owned a house in 1995 in Phoenix, doubt that it was worth a penny more than when I bought it (new) in 1993 for $99K - sold in 2000 for $135K (after installing a pool). Recently, a search on Zillow reveled that the place is now worth more than $300K. That, my friends, is the Webster definition for "irrational exuberance".

"Still, judging by most economists' forecasts, the fallout from a slowing housing market doesn't look all that unpleasant. Typically, they expect the decline in housing and housing-related activity to shave about a percentage point off inflation-adjusted GDP growth in 2007, compared with the 1 % point the sector contributed to growth in 2005."

I'm not an economist, but I do possess an engineering degree and an MBA, and have been very observant over the past several years. If the market keeps its current path, a 1% downside from housing will be the very best scenario.

"Economists, however, have few clues on which to base their predictions. Today's housing boom differs radically from its predecessors. For one, it has been bigger and longer-lived. House prices are still more than twice the level of 1991, when the boom began."

It should be noted, that the vast majority of that growth is concentrated on the coasts (CA/NV/AZ/OR/WA and Boston-south-to-Miami). For the most part, growth in rural and smaller cities has been much more sane.

"Because the market has risen so far, economists worry it has the potential to fall much harder than their main forecasts would suggest."

If they're worried, why aren't they quantifying this worry-level and incorporating that into their forecasts?

"There is reason to believe home builders will have to pull back more sharply. That is because the leveling off of house prices changes the equation of homeownership. When housing took a down-turn in the 1970s, new-home sales quickly fell to their long-term norm. This time around, that would entail about a 50 % decline in sales, says Ian Shepherdson, chief US economist at Valhalla, NY-based consulting firm High Frequency Economics."

So, the next time you drive by a new home development, that says in smaller font, "from the mid 400s", remember the price will eventually get to "from the low 200s".

"'It's a 15-year bubble unwinding in two years,' Shepherdson says. 'It's going to hurt.'"

No pain, no gain.

Tampa, we Have a Problem

2006-08-07T13:17:00.000-04:00

Here in Tampa, the Hillsborough County School District (one of the largest in the country by population) has experienced phenomenal growth over the past several decades, similar to many other cities in the sunbelt.

Until now.

It seems the forecasters were a "bit" off for the 2006 school year, which started last Thursday (yep, that's right, August freakin' 3rd* - how WACK is that?). In fact, this is the first time in recent memory that opening day enrollment was DOWN from the prior year. Over 25% down from the forecast.

My question: does the overpriced real estate market have any correlation with this problem? Will it have consequences for the future?

Hillsborough County Schools - Opening Day Shortage

* Our fine legislators in Tallahassee, in a rare moment of lucidity passed a law that actually made sense: Starting next year (2007), schools in Florida will start no earlier than the week before Labor Day.

Defaults on the Rise (like the ancient Phoenix!)

2006-08-07T13:11:00.000-04:00

As you may know from my profile, I lived in Phoenix for 8 1/2 years. It, like Tampa, has experienced an unrealistic surge in home prices over the past 4 years. Now, the party, if not exactly over, has definitely taken a turn for the worse.

Check this link (via thehousingbubbleblog.com) and the talk around the valley of the sun about mortgage defaults:

Arizona Housing Defaults

Sample Resignation Letter

2006-08-07T10:38:00.000-04:00

Funny, Mary is resigning from her job today, and I agreed to help her with her resignation letter. Did a search on yahoo and found this link for a sample letter - note the content of what the resignation is all about.

Sample Resignation

Greetings

2006-08-07T10:30:00.000-04:00

Sorry to be blunt about this - are blogs not overrated? It seems everyone has one, so who the hell is reading all of these?

Personally, I enjoy reading the housing bubble blogs, and occaisonally posting on them. No big deal. Someday I'll own a house again.

Posting my picture here for my profile...