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

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

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!

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

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

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

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?

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!

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!)

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

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

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

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"!

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

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

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

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

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

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

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

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

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

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

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

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

History of Real Estate

The Incredibly Expanding Mortgage

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

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

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

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

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

Nightmare Mortgages

Finally, A Change in Florida

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

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)

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

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

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

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

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!)

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

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

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...