Monday, January 29, 2007

Of Bubbles and Space Travel...

The mantra for the last three years in South Florida, was that you could keep building and building, and that the supply would be feverishly bought up. To boldly go where no builders have gone before!! Never mind that according to some real estate cheerleaders there was in fact no more land to build on in the first place, or that the supply to demand ratios were in nose bleed territory. Buyers lined up to wait for hours, sometimes months in advance of new developments breaking ground for the chance to purchase a property. You couldn't lose! Errr..right?

Like the episode in Star Trek where the crew of the Enterprise were transported with their alter egos , builders are suddenly thrust into the mirrored dimension of the unthinkable- too many houses and too few buyers. Beam me up Scotty!!

As reported in the Palm Beach Post , builders (which like sharks die if they stop moving) have....gasp... stopped building houses. Captain!! She's breaking up!!!

"Free markets supply a bitter antidote to the problem of too many unsold houses, and last year, home builders in Palm Beach County and the Treasure Coast took the cure.

They stopped building."

The dollar value of new residential construction plans in Palm Beach, Broward and Miami-Dade Counties dropped by 24 percent in 2006, according to fresh-off-the-press numbers from McGraw Hill Construction. The dollar value of new home permits even in home building hot spots like St. Lucie County fell by 33 percent - and St. Lucie is considered one of the fastest-growing areas in the country.

It also gives home builders time to lick their wounds. Tuesday morning, WCI Communities Inc. reported cancellations outnumbered new orders in Florida. D.R. Horton Inc. reported a 64 percent drop in first-quarter earnings. "

Presently, there is about a published four year supply of South Florida of properties. That doesn't include FSBO's, REO's, or properties that are being pulled and relisted on the MLS. The builders need to work through their remaining unsold inventory, and are dropping prices like bombs across the country. This is doing two things- first, it is killing the private sellers that cannot compete with the huge price incentives, and second, it is driving the comps down. It is a viscous spiral downward that will continue until they bleed of their inventory, which is going to take some time. These builders are writing down the land they own at massive losses. They are reporting more cancellations than closings. They need to sell and sell NOW. Warp speed Mr. Sulu!!

Not to sound smug, but it's not as if you weren't warned on this blog and many others over the past year that like all bubbles, they eventually pop. And when the bubbles disappear, your exposed to the world.

Saturday, January 06, 2007

OK..OK..I Can't Resist....CASEY SERIN

For those of you that are not familiar with Casey Serin , he is the now infamous poster boy for the current bubble.

By his own admission, "I'm a 24 yr old real estate investor from Sacramento CA. After going to a few seminars I bought 8 houses in 8 months in 4 states with no money down looking to fix 'n flip. I made some mistakes and fell flat on my face with millions in debt and facing foreclosure. Trying to avoid foreclosure, sell quickly, repay everyone, and blog my lessons to help others in trouble."

What he really did is by questionable means, ( some say fraud), used "liar loans", 0 % percent & cash back at closing financing, pumped up appraisals, and more dubious methods to purchase 8 houses in less than a year. Fast forward to 2007 and you know where this is going. Foreclosures, judgments, and possible jail time are all on his plate.

I have refrained from "officially" joining his circus, as it is not directly related to South Florida. However, I decided to change my mind for two reasons.

First, specu-vestors like Casey are part of the reason WHY prices got so crazy. You had naive wannabe millonares with visions of being the next Donald Trump buying multiple properties all across the country. Many of them used "liar loans", and phony appraisals. I have seen my fair share of "cash back at closing!" offers in the newspapers, Craiglist, and Ebay for local properties. One study said as many as 50% of more of purchases in the last two years in South Florida were by investors, NOT owner-occupiers.

Second, although Casey professes to want to 'come clean', and 'pay back every dirty cent', he is quite evasive in providing details, taking or answering advice, and he has resorted to editing and deleting comments that are in contrast to his "spinning." It is my opinion that his blog was primarily to generate Adsense revenue, and when his account was revoked for fraud, the blog is no longer important to him as it can't be used for his benefit.

So, I decided to provide a forum for readers to comment about Casey, unedited. Just keep it clean. No profanity or inappropriate stuff. Hopefully, we can get some clarity and have some fun.