Saturday, December 30, 2006

South Florida Foreclosures On The Rise

While the Real Estate Industrial Complex or (REIC as it is known in the blog community) continues to spend millions on adverstisements spouting it is "time to buy", the endless stream of data continues to come out showing how the bubble has burst. Whether you are a seller or prospective buyer, it is apparent you cannot simply continue to blindly follow the NAR and ignore the facts. People are losing their houses at an alarming rate.

As reported here MSN Real Estate, "Foreclosures nationwide were up 43% from a year ago in the third quarter of 2006. Foreclosures are rising in many parts of the country, fueled by a slowdown in home sales, slumping real-estate prices and rising payments on adjustable-rate mortgages. Homeowners who have lost a job or faced another economic crisis are finding it hard to refinance or take out home-equity lines of credit to bail themselves out, analysts say."

But wait folks, it gets worse. "The Detroit, Fort Lauderdale, Fla., and Denver areas posted the nation's three highest foreclosure rates for the third quarter of 2006, replacing Indianapolis, Atlanta and Dallas, which had been the top three markets for the two previous quarters."

"Among the top 20 metro areas on the list, two pricey Florida markets posted the biggest jumps for the quarter: Fort Lauderdale and Miami saw 87% and 97% jumps, respectively, in the number of foreclosures as investors failed to cash in on speculative buys."

Ft. Lauderdale has the distinction of ranking #2 in the nation with foreclosures, just behind Detroit, Michigan, with 8,431 foreclosures reported in the third quarter of 2006. That equals 1 out of every 88 households, or over FOUR times the national average. This is a mind numbing 86.53 % increase over the second quarter of 2006. We are talking only three months.

For those of you living in Dade County (Miami), you are fortunate enough to be #4 in the USA, with 9,380 foreclosures in Q3 2006,or 1 out of 91 households. This was just shy of 4 times the national average, but an even higher 97.18 % increase over Q2 of 2006. Yes, a double in one quarter.

Palm Beach County joined the party at lucky #13. Congratulations! With 3.643 foreclosures in Q3 2006, it equates to 1 in 153, or only 2.53 times the national average. If you want to put some positive spin on the numbers, this is a mere 37.89 % increase in one quarter over Q2 2006.

The time for being an ostrich is over. If you are a seller, I suggest you adopt an aggressive campaign to sell your property,including major price reductions to sell it fast. If you are a buyer, use one the many available buy vs. rent calculators. The numbers remain so far nutty to buy, I cannot endorse buying. In my opinion, 2007 is going to be far worse than 2006. Like a boulder rolling downhill, this decline is building momentum and is far from reaching the bottom. By every statistical and historical date I have seen, prices remain tremendously overvalued.

As always, nothing on this blog is intended as legal or financial advice. Do you own due diligence and consult professionals such as your attorney, accountant or financial advisor regarding your personal situation and needs. That being said, in my opinion it won't be until 2008- 2009 before we see the bottom of this decline, which will be much further downward in prices. Remember, asking a Realtor if it is time to buy is like asking a barber if you need a haircut.

Happy New Year and may 2007 be a good one for everyone.

Wednesday, December 20, 2006

Five to One Baby, One in Five, No One Here Gets Out Alive,

Yes, I am dating myself quoting a thirty year old Doors song, but it seemed fitting given the latest news that a whopping 20% ( one in five) of subprime loans made in the last two years may face foreclosure. That is HUGE.

According to the New York Times "about one in five subprime mortgages made in the last two years are likely to go into foreclosure, according to a report released yesterday, ending the dream of homeownership for millions of Americans...The report offers a somber assessment of loans that had helped millions of Americans with blemished credit attain homeownership. About 2.2 million borrowers who took subprime loans from 1998 to 2006 are likely to lose their homes."

"The report, written by the Center for Responsible Lending, a research group in Durham, N.C., was based on data supplied by Moody’s Researchers examined more than six million mortgages made from 1998 until the third quarter of 2006; the report is the first nationwide study on the performance of subprime mortgages. It includes projected foreclosure data for all major metropolitan statistical areas. The highest default rates are expected to be in cities in California, Nevada, Michigan and New Jersey as well as Washington, D.C."

Furthermore, "The foreclosures will cost those homeowners an estimated $74.6 billion, primarily in equity."

And, "The center suggests that risky lending practices could lead to the worst foreclosure crisis in the modern mortgage market. "

As we finish with 2006, 2007 will be a watershed year which will decide whether we are in a correction or a full out crash. If studies like this are any indication, it is going to be a very rough year for overleveraged borrowers.

Sunday, December 10, 2006

Buyers Walking But Developers Say.....

Anyone remember 2005, when buyers camped out overnight for the chance to buy a house or condo? I sure do. In fact, I remember having some heated discussions with friends about the housing market. They were full of the "Kool-Aid", and would forever be priced out of the market unless they bought NOW, .

Now, just a year later, it's the buyers that are running away from purchases, not running towards them. The situtation has become such a problem, developers have resorted to suing these remorseful buyers.

As reported in today's Palm Beach Post, some developer's and their lawyers are playing hardball, suing buyers to force them into closing.

"The developer of two Boca Raton condos has a new tactic for dealing with skittish home buyers with balking on their mind: Sue them to force them to close.

At least eight buyers at the Bocar condo and one buyer at the Eden condo have been hit with "specific performance" lawsuits by entities owned by developer Ceebraid-Signal of West Palm Beach."

"The issue is one paragraph in the purchase contracts. The documents state that if a buyer refuses to close, the developer has a choice of two remedies: Either keep the deposit money - or force a closing."
"Buyers who signed sales contracts months or even years ago have seen their unbuilt properties decline in value in the current condo market slump. That's especially true for these two condo projects, which were completed well past the dates first promised. Both properties have been the subject of lawsuits by buyers upset over the buildings' delays and the quality of the workmanship."

t's not clear how these lawsuits will turn out, but one thing's for sure: All the lawyers say their clients should have consulted with them before they signed the contracts. "I wish they had," Dieterle said. "I would have steered them away."

Buyers are faced with the choice of either potentially paying thousands in attorney fees to fight, or continue with the purchase of a property they say has dropped in so much in value, it's worth less than what first contracted for- for some a few years back. It's not a pretty choice.

Let David Learah, the NAR, and the Real Estate salesman keep telling you that the same nonsense. This is real life. Real people are losing thousands of dollars, buyers are walking away from thousands of dollars rather than go to closing.

I encourage you to read a post I did back in January of 2006 entitled "SIGHT UNSEEN." Looking back, if that wasn't the bell ringing we hit the top, then I don't know what was.

The next two years will be much worse than 2006. We are faces with some serious problems. There are some two TRILLION in ARM resets to hit. The insurance and tax increases will be staggering. The inventory levels are at four years. For the first time in twenty years, there are decreases in public school enrollment, as many are relocating out of state. We are starting to see the subprime market implode. Over 90% of the people cannot afford the median house. At least three major subprime lenders recently shut down- with no warning.

Let's not forget any way you crunch the numbers, owning just doesn't make sense. We need to see prices get back to 3x income, from the current 7-10x income.