South Florida Real Estate Bubble

Vacancy Abounds

2009-07-27T22:14:00.007-04:00

Despite the NAR and Real Estate cheerleaders out in force declaring the housing market has bottomed, Bloomberg reported vacancies are at generational highs.

"More than 18.7 million homes stood empty in the U.S. during the second quarter as the steepest recession in 50 years sapped demand for real estate and banks seized properties from delinquent borrowers.The number of vacant properties, including foreclosures, residences for sale and vacation homes, was little changed from 18.6 million a year earlier, the U.S. Census Bureau said in a report today. The quarterly homeownership rate was 67.3 percent, seasonally adjusted.More than 14 percent of homes were vacant in the period, the Census said."

"Home values dropped 33 percent since 2006, according to the S&P/Case-Shiller index, and the unemployment rate in June rose to the highest in almost 26 years. Tumbling home prices and rising job losses have thwarted government efforts to reverse the housing decline at the heart of the longest U.S. recession since the 1930s.There were 130.8 million homes in the U.S. in the second quarter, the Census Bureau said. In addition to the 1.9 million empty properties for sale, the report counted 4.4 million vacant homes for rent and 4.6 million seasonal properties that are only used for part of the year."

I've been telling people that there will come a time when people simply decide to walk away from their houses, and it's happening in force now. Banks don't want them back and lenders refuse to foreclose. There is a massive "shadow inventory" of these vacant or foreclosed homes that have yet to hit the market.

If you are still thinking of buying a house, make you know the risks involved and conduct the proper due diligence. The landscape is littered with knife catchers who thought they were buying the bottom for the last year.

Why Throw Good Money After Bad?

2009-06-28T16:25:00.004-04:00

That is the question of the day, as many underwater home owners are deciding to walk away rather than continue to pay their mortgages.

Case in point, Richard ''Rick'' Rochon's Boca Raton estate is scheduled to go on the auction block next month after failing to sell for $21.9 million. A lender started foreclosure proceedings in December on the 25,000-square-foot estate in Boca Raton's Royal Palm Yacht & Country Club community. The mansion features six bedrooms, seven bathrooms and three half-baths.

In an interview with The Miami Herald in April, Rochon conceded he stopped paying on the mortgage loan because the house is worth less than the loan. The lender claims it's owed about $12.5 million. Rochon insisted the foreclosure action was not a sign of personal financial problems.

''My position is, you know what, why throw good money after bad?'' he said. ''I'm treating this as an investment. This is not my house.''

Miami Proves Again It's a Banana Republic

2009-06-28T16:02:00.008-04:00

A Miami-Dade Circuit Court judge discovered more than 15,000 foreclosure cases filed this year haven’t been served.

You read that right- 15,000.

The reason this is so alarming (other than the obvious) is that cases where homeowners haven’t been served within four months are subject to dismissal.

Civil Division Administrative Judge Jennifer D. Bailey made the discovery last month as she was taking stock of the circuit’s foreclosure load. She noticed 15,219 cases with no letters of correspondence, no answers and no motions to dismiss. “In other words, no service,” she said.

The circuit is scrambling to find the root of the problem, which could jeopardize most of this year’s 17,000 foreclosure filings. Most of the cases still fall within the four-month window, but no program is in place to speed things up. If a foreclosure proceeds to a default judgment with no service on the defendants, it could lead to a title dispute down the road.

For now, the Court is in full panic mode. "Let’s assume a third of these are subject to dismissal. In my spare time, I’ve got to figure out ways to generate orders in 5,000 cases and pay for 5,000 stamps and serve everyone,” Bailey said. “Are we going to do that? Yes. Am I trying to figure it out? Yes.” “It all starts with service. If people don’t get served, all we’re doing is buying ourselves a bunch of title cases in six years,” the judge said.

The system is beginning to break down under the sheer case load and cutbacks due to the economy and loss of revenue.

A Picture is Worth a Thousand Words.........

2009-06-28T15:49:00.008-04:00

Any questions?

Baghdad Bob Makes a Comeback

2009-06-17T12:53:00.011-04:00

Back in 2006, I suggested to a fellow blogger that the then Chief Economist of the NAR was akin to "Baghdad Bob", would say anything to perpetuate the real estate bubble regardless of the facts. We both made some posts on our blog about the similarity, and the name caught like wildfire. We know know by his own admission, that David Lereah didn't believe what he was telling the public. But he was paid by the NAR and he had to talk their book to the public. In essence, he was a company shill. A charlatan. For those of you that might not know Mr. Lereah, he authored the following two books.

This book on the left written in February 2005, right before the bubble burst. The one on the right (hard to tell the difference, isn't it?) was written in February 2006. Right at the top of the bubble. Lereah was famous for calling us non believers as "Chicken Littles".

One his more famous quotes was, "With sales stabilizing, we should go back to positive price growth early next year" —Lereah, NAR August 2006 existing home sales press release, September 25, 2006 .

Not to be outdone by his predecessor, current National Association of Realtors Chief Economist Lawrence Yun addressed his fellow Realtors in Coral Gables at the 2009 Real Estate Congress last week. Much like Lereah, Yun's predictions have been also completely wrong. Yet that doesn't seem to deter him from telling the faithful followers of the NAR what they want to hear. Good times are ahead! Yun, who never saw a housing market he didn't like, made the following observations.

On the current residential housing market, Yun continues to dispense with the Kool-Aid: “It looks like we’re now in a recovery process, particularly in boom-and-bust markets.” Sound familiar to Lereah in 2006?

How he can come up with that conclusion given the following statement he made at the same conference is any one's guess: “Unfortunately, foreclosures will continue to increase.”

Asked about his predictions of the past, Yun replied:“I didn’t think there could be a housing bubble. In hindsight, I was clearly wrong.”

So, Mr. Yun, you admit to not seeing the housing bubble despite the obvious warning signs, despite a number of other highly respected economists, bloggers, and media personalities warning about it? But now we should believe you because?

When a man has been dead wrong as much as Yun has been yet continues to talk the same nonsense, he earns the name "Baghdad Bob".

Congratulations Mr. Yun, you've earned it!

Build it and they will come.......

2009-06-07T17:25:00.010-04:00

Used to be the mantra during the housing bubble. Thousands of unsold, unoccupied and often unneeded condos were built or proposed to be built. I remember seeing a report that there were some 50,000 condos either under construction or planned. That is about the same amount built over the past decade. Frequent visitors to Miami have witnessed the skyline littered with cranes and scaffolds. If you take a drive up A1A at night, you will see the thousands of empty, dark condos and unfinished projects.

What will happen to all of these?

An indication might be this example.

"A year after taking over a struggling condo project from Boca Developers, mezzanine lender Momentis Property Group is walking away from The Oaks I at Biscayne Landing in North Miami. Momentis, which seized the 373-unit property from Boca Developers in July after the developer defaulted on a construction loan, has agreed to hand the project over to iStar Financial, the senior lender."

According to the developers, the project had become “uneconomical” for it to own, meaning they can't turn a profit. iStar, acquired Fremont Investment & Loan in 2007, which loaned $123 million to Boca Developers in October 2005. Madeleine then lent an additional $275 million to cover Phase 1 of Biscayne Landing and other projects.

The Oaks is the first phase of Biscayne Landing. It was approved at the peak of the housing bubble in 2007. The developer planned 6,000 residential units, 180,000 square feet of office space, a 200-room hotel, 300,000 square feet of retail space and an Olympic training facility. In reality, Boca Developers built two towers with 373 condos.

Now, with the project a bust, iStar will take back 160 unsold condos at The Oaks. It will has to begin construction on the pool and other amenities promised in 2007, but they face the challenge of having to negotiate with the city and Boca Developers to acquire more space for those facilities. Plus, they are are responsible for paying down the construction loan and paying the condo assessments, taxes and insurance on the unsold units.

Building like these are common in Miami and other major metropolitan areas. They are a testament to the absurdity of the speculation that ran rampant during the last decade.These nightmares are now half empty, and will add to the foreclosure problem. The values have dropped more than 50%, and a high percentage of buyers never closed.

Much like the Tech bubble of 2000, the 'build it and they will come' scenario never came to be.

Leading by Example

2009-06-04T19:45:00.004-04:00

Treasury Secretary Timothy Geithner bought this house on the left in 2004 for just over $1.6 million dollars. Now that he's living in D.C., he put the house up for sale. Bad timing Mr. Secretary. After reducing the price on his house to less than he paid for it, Geithner still couldn't find the next greater fool to buy it. Originally listed at $1.635 million in February of 2009, Geithner dropped the price to a mere $1.575 million. Unable to sell the house- even at a loss- the Secretary of the Treasury is reported to have rented out the house, for $7,500 a month.

But it gets better. Mr. Geithner has two mortgages on the property, totalling $1.25 million, plus a $27,000 annual property tax bill, plus home owner's insurance. I highly suspect he is cash flow negative.

Now I would have hoped that the person in charge of the Treasury, and a key figure in solving the housing crisis, would not become part of the problem himself. Unable to sell with two mortgages, cash flow negative, and an absentee landlord. What's going to happen when he owes more on the mortgages than it's worth?

Did I forget to mention Zillow.com estimates the house is worth $1.366 million and AOL Real Estate values it at ............$1.185 million?

Can he apply for a bailout?

Broken Arms

2009-05-31T14:14:00.006-04:00

Adjustable-rate mortgages, or ARMs, the vehicle of choice during the housing boom, are now turning into a nightmare for those home owners that took them. ARMs have dominated mortgage delinquencies and home foreclosures. Nationally, 48 percent of subprime ARM loans were at least one payment past due in the MBA's latest report. In Florida, the subprime ARM delinquency rate was more than 60 percent. And, in the second quarter of 2008, Florida and California accounted for 58 percent of the nation's prime ARM foreclosure starts.

With home values dropping anywhere from 20 to 50%, returning values back to 2003 prices, most South Floridians with option ARMs are unable to refinance because their loan is upside-down, meaning they owe more than the house is worth.

Adding to the problem were all of the toxic ARMs that were developled during the bubble, to put people in houses they couldn't afford, and to pay higher commissions to the salesmen pushing them. Often called ''liar's loans'', these were often given to the borower without any income verfication (anyone remember Casey Serin?) , interest-only loans that often balloon when adjusting and ''option'' ARMs in which the homeowner initially may choose from a variety of payments, including one incredibly insane option that doesn't even cover the monthly interest amount, adding to the principal of the loan (so-called negative amortization).

Adding to the problem, rates are rising. Despite Bernanke and the Obama administration printing up hundreds of billions of dollars, and buying up hundreds of billions in Treasuries and MBS's, yields are higher than at the beginning of the year. The average rate for a 30-year loan jumped from 4.82 percent a week ago to 5,45 percent by the end of the week. Every 100bp increase means the borrower has about 10% less buying power, based on payment.

It doesn't really matter where rates are if you are in a negative equity situation, or if you lost your job. How many people have or want to write a check for $50,000 to refinance a house? Most people are stuck in these loans, and have to make the decision to either keep paying or walk way. As evidenced by the massive increase in foreclosures, it appears people are choosing the latter.

To get an idea of how large this problem is, for the next two years we are going to see about 50 billion dollars a month in resets or recasts. That is a ridiculous amount. If we are running at 40 to 60% delinquency rates now, what is going to happen when this next wave of inventory floods the market, depressing prices further?

I've Fallen and I Can't Catch Up

2009-05-29T18:52:00.028-04:00

I commented yesterday that one in eight home borrowers in the US are behind on their mortgage payment. It's far worse in Florida, as about one in four borrowers was late on their mortgage or in foreclosure in the first three months of the year.

Remember when I told you to go outside and count the number of houses on your block? SURPRISE! Double the number of your neighbors from last night that are either delinquent or in foreclosure. If you have 20 houses on your street and they have a mortgage, 5 of your neighbors are in trouble. Which means you are in trouble.

An additional 99,000 Florida borrowers went into foreclosure in the first three months of the year, bringing the total number of home loans in some stage of the foreclosure process to 374,134. With 11 percent of its home loans in foreclosure, Florida ranked first in the country for defaults and was the only state in double digits. The rate was up roughly 2 percent from the previous quarter. To put it in perspective, the national rate was 3.85 percent, up about half a percent from the previous quarter, a record high. Almost half of all sub prime ARMs are past due or in foreclosure. In Florida, New Jersey and New York the number is above 55 percent.

At the end of March, about 71 percent of owners who bought in Miami-Dade and Broward counties in the past five years were underwater, according to Zillow.com. Just like I said yesterday, we are back to 2003 prices, on our way back to 1999 prices

Notice you have not heard a peep this year from either the FAR or NAR about the "Spring Buying Season", because we haven't had one. With the Summer here, potential families moving have already done so, if they could have.

Take a walk around your neighborhood this weekend. Go to Zillow or South Florida Block Shopper and look up the home sales for the past few years. When the prices were going up 20% a year, no one cared about affordability and how these people could afford the homes or how they financed them. We now know up to 75% were ARMs or other toxic loans.

And what about these government programs that threw hundreds of billions at this? Studies show between 65% and 75% of modified sub prime loans will fall delinquent by 60 days or more within 12 months of having been modified to keep the borrowers in their homes. Even loans whose principal was reduced by as much as 20% were still redefaulting in a range of 30% to 40% after 12 months.

This is not complicated folks. Houses are still too pricey. Those people that bought houses and either tried to flip them and got caught or simply couldn't afford them when they bought them, are not going to continue to pay regardless of any modification if they are 20,30, 0r 50% underwater! How difficult is this to understand?

Until we return to 1999 prices ( perhaps 1994 if this keeps up), purge the system of excess inventory, and sound lending practices, I do not see any "bottom" in sight. For those of you that like to see things in pictures, this chart by Robert Shiller is one of my favorites.

What a Long Strange Trip It's been..........

2009-05-28T21:24:00.025-04:00

After a very loooong vacation, I've returned to continue my blog. There's so much more to comment on. So much more indeed.

Looking back on the posts from when I first started this back in 2006, it's scary to see both how accurate I was, and how insane the bubble was. Even though I still believe we are not yet close to the decline in prices. this is being called the "greatest Real Estate Bubble of the Century". With price declines of 50% and more in many areas, I would agree. But keep your seat belts on folks. We are only back to 2003 prices.Round two is coming which should bring us down to 2000 prices. More on that later.

We have witnessed so far trillions of dollars in house prices evaporate (wiping out equity and making millions underwater), trillions in wealth in the financial markets disappear. millions of jobs lost, over 300 lenders, dozens of banks, scores of builders, Bear Sterns, Lehman, Wachovia, Chrysler, GM ( next week), Circuit City, hundreds of retailers, malls, and countless other business go bankrupt. All in the last year. Despite trillions upon trillions of dollars thrown into this black hole, in a futile attempt to keep house prices artificially propped up to keep the bubble from popping. Trillions of dollars we don't have. Trillions of your, your children's, and your grand children's dollars.

Enough of the past. Fast forward to headlines from today-May 2009. One out of eight home borrowers ( notice I do not say home owners. The bank owns the home until it's paid off) are behind on their payments. One in eight. To put this in perspective, walk outside your house tonight, and count the number of houses on your street. One in eight of your neighbor's can't pay his mortgage. Hit "home" yet? Considering the bank recoups about 40-50% of "market value" on an REO sale, imagine two,three, maybe five of your neighbors going into foreclosure. Then calculate what your house is worth.

"The U.S. delinquency rate jumped to a seasonally adjusted 9.12 percent from 7.88 percent, the biggest-ever increase."

Remember when it was "contained" to only sub-prime?

"Prime fixed-rate home loans to the most creditworthy borrowers accounted for the biggest share of new foreclosures at 29 percent, MBA said, a sign job losses are hurting homeowners. "

As I predicted, Florida would be hit the hardest.

"About half of the new foreclosures were in four states: California, Florida, Arizona and Nevada, according to the report. Measuring both old and new defaults, 11 percent of all mortgages in Florida were in foreclosure at the end of the first quarter, the highest in the U.S. The inventory of new foreclosures and those already in the process of being foreclosed upon jumped to 3.85 percent, the MBA said. Half the loans now in foreclosure, adding the new and existing defaults, are held by prime borrowers, according to the trade group’s report."

Even at "depressed" prices, home sales are faltering.
"New home sales fell 34 percent in April from the year earlier period, the Commerce Department said today. The U.S. median home price tumbled 9.5 percent last year, the most ever recorded, according to the Realtors’ group. That’s more than six times the 1.4 percent drop in 2007, the first decline in the national median since the 1930s. ""

There are no more sheeple left to buy these McMansions.

" The unemployment rate increased to 8.1 percent in the first quarter, the highest since the end of 1983, according to the Bureau of Labor Statistics. "

Does it make sense to anyone over the age of five that we are at or near a bottom? Here's the deal folks, you were lied to. Repeatedly. By Bernanke, Paulson, Frank,Dodd, Geitner, the NAR, Bush, Obama, CNBC, and every other Real Estate Cheerleader that in spite of the huge flashing red sirens we were heading for a crash of epic proportions, told you to buy a house, or two, go into debt, real estate always goes up, buy now or be priced out.

And yet these same liars, con men, and spinmeisters are still given media coverage, still touted as "experts" to be listened to. These same charlatans that were wrong. more than wrong, and sometimes dead wrong. Many of them made fortunes while millions of you lost trillions.

Case in point, from today:
"This year, prices probably will fall 4.9 percent before posting a 4.4 percent gain in 2010, according to Lawrence Yun, the trade group’s chief economist."

Why would anyone give an ounce of credibility to this paid shill for the NAR when they have been wrong each and every year for the past decade? The last 'Chief Economist" for the NAR, David Lierah, ( now out on his own) has pretty much said he was paid to say all those rosy things about house prices and stuff. He was just talking his book. As my grandfather said, " Go ask a barber if you need a haircut. They will always say YES."

But I digress, it's been a while. Ok. I mentioned Round Two earlier. Here's why there will be a Round Two folks. We are merely in the eye of the Hurricane. That should be a very familiar metaphor for us Floridians. We've witnessed the front of the storm. It has not passed, we are in the calm that precedes the back half of the storm. A lot of people think that we've seen the worst, even some of my fellow housing "bears" are calling this a bottom or near bottom. There's talk about "green shoots", instead of preparing for a tsunami of inventory that will flood the markets and begin Round Two of falling prices.

What they fail to mention is that for the past few months there has been a quasi-moratorium on foreclosures. Remember when Obama asked for this and most banks complied back in early 2009? Most institutions with delinquent mortgages didn't foreclose. Well, that's over now and the rush to get properties on the market is coming. There has been billions on billions just thrown at this problem to stave off the inevitable crash. It will not stop it, it only resulted in a pause. An eye of the hurricane. Only 30 percent of foreclosed homes are currently on the market, meaning that some 500,000 sit vacant across the country, part of a vast “phantom inventory” that the market has yet to grapple with. Remember your neighbors?

Did I mention the wave (remember Hurricanes come in waves) of resets? We are approaching a second colossal reset and recast wave hitting the U.S. over the next few years. The resets are when the just the interest rate on your loan changes, but the recasts are when the payments change. That's what's going to up this hurricane a level or two. It's not a big deal if just the interest rate changes but when your payment doubles, your in trouble. Any of your neighbors move in over the past few years? I'll bet they have an ARM, ALT-A, NEG AM, or other toxic loan with almost no down payment and are under water.

Who's there to buy these houses? Potential buyers can't purchase homes when they are losing their jobs, or are already behind on their current mortgage, regardless of how attractive the credits and mortgages are. Banks have significantly tightened their guidelines. Mortgage rates are increasing. Foreclosures will begin to flood the market. Inventories will resume to swell. The price of homes will continue to fall until the properties are affordable for potential buyers. That's worth repeating. Prices will continue to fall until they are affordable- by conventional, old time standards and ratios of solid, verifiable, what the hell are you making and can you really afford it prices. I'm not even going to start with our ludicrous taxes or insurance problems.

I'll continue this in another post, but for now I will leave you with the chart on the left. They say a picture is worth a thousand words. Buckle up folks.

MMMMMM.......Doughnuts......

2007-10-21T18:00:00.000-04:00

I can't stop thinking about Homer Simpson after reading this news story. Palm Beach County has now surpassed one billion dollars in defaulted mortgages during the first six months of 2007. That is insane. Currently, for every one property sold, there are two entering foreclosure.

The problem? Everyone that pretty much wanted a home, bought a home-sometimes 2, or 5, 0r 70. Yes 70. It's just like doughnuts. We call can eat one, maybe two if they are the good ones. How many can you eat before you get sick?

Now that the housing bubble has popped, houses are sitting like stale doughnuts. The problem is, no one is telling the builders to stop making them, and with almost a four year current supply, I have a feeling that these "doughnuts" are going to get old, moldy, and half price.

Read on and find out.

"Michael Sichenzia has a problem. The former mortgage whiz who spent time in New York state's prison for mortgage fraud knows that bad home loans claimed some victims and fattened bank accounts for others.

But telling them apart isn't easy. "The thing we have the most difficulty doing nowadays is figuring out who has legitimately been taken advantage of, as opposed to who went into the transaction with their eyes open," says Mr. Sichenzia, now lead investigator for the Deerfield Beach law firm of Glinn Somera & Silva, which handles foreclosure cases.

That's because so many had something to gain from the mortgage bubble, says Bill Davis, president of Private Funding Specialists and past president of the Florida Association of Mortgage Brokers' Palm Beach County region - and many of those people went about their business winking and nodding. "It's everybody," he says. "The Federal Reserve participated, the big lenders played a part, the credit ratings agencies had a part, so did hedge funds and borrowers, appraisers."

"I had a guy who called me who owns 70 homes," says Stuart broker Michael Morgan. "I know a lady who owns 16. It's the room of 1,000 doughnuts. How many can you eat? Two? Three? Well, how many houses can you live in?"

Dozens of local borrowers now in default loaded up on risk by taking out two mortgages simultaneously: one for 80 percent of the home price and another for the remaining 20 percent. Fifty-eight of those piggy-back loans imploded within four months."

Did anyone notice the recent slew of announcements by several major banks and lenders about the deterioration of their loan portfolios? Even non financial sector companies in manufacturing and retail have publicly disclosed the housing crash is affecting their business, and the it is not contained. The ABX index and the dollar continue to make daily lows. The bottom line is that America has eaten its fill of housing and is now on a crash diet. I cannot imagine how someone is allowed to purchase 16 properties, much less 70. I do know of many, many would be real estate moguls that purchased a second or third 'investment' property without a clue as to cash flow, price to rent or price to income, etc. They simply got greedy and wanted to make a quick buck.

Finally, I thought it was curiously funny that if there is a correlation, the Krispy Kreme doughnuts stock chart going back three years ( KKD) paints a gloomy picture for housing prices.

South Florida Fire Sale....

2007-09-26T21:37:00.000-04:00

First, I know it's been a while since my last post. The reason? I grew tired of being the only sane person in South Florida telling people that the housing market was a time bomb, and that the resulting explosion would be long, hard, ugly, and very painful.

For those of you not native or residing in South Florida, it is ground zero for the national Housing Bubble. Almost every aspect of the economy is somehow tied to it. There are more Realtors, mortgage brokers, appraisers, bankers, lenders, construction, roofing, inspection, lawyers, and other real estate dependent jobs than just about anything except doctors or stockbrokers. ( Which could fill an entire blog of its own with horror stories.) For more than two years, I have been reporting of the insanity that took place here and how crazy prices and people had become here. Yet, no one listened. People laughed. They ridiculed people like myself, and other Floridians like Mike Morgan and a fellow over in Tampa that started a similar blog in 2006. Now, some two years later, the laughter has been replaced with reports of decade low housing starts, record foreclosures, three year inventories, the first national price declines since the Great Depression, and on and on. I watched while out of state retirees bought houses sight unseen with their life savings as an investment, where teachers, firefighters, nurses, policeman, and other good people have been forced to move out of the area because house prices were artificially driven sky high by flippers and speculators, where entire neighborhoods are ruined by half empty houses and uncut lawns and squatters, where corrupt individuals and government officials profited off of scamming poor people into bad loans and over appraised houses, and how people that can't scrape two dimes together bought millions in real estate, only to have their properties go to foreclosure.

So, after months of this lunacy, I have a few months to catch up. Please indulge me for a few moments as I comment.

The current state of affairs in the Real Estate market is no less than abysmal, and make no bones about it, going to get worse. WHY?

Simple, really. There is too much supply and too little demand. There are no more greater fools left. Builders are dumping their existing inventory at fire sale prices, trying to mitigate their losses to stay alive. FB's that either were to foolish or greedy and are now upside down are walking away from their houses in record numbers. Over 160 lenders have gone belly up in less than a year. The Federal Reserve, after causing the stock market bubble of 2000, and the housing bubble of 2002-2005, has set in place the mother of all time bombs in another attempt to bail out their Wall Street buddies. The recent 50 basis point cut in rates will do nothing to save the housing market. In fact, mortgage rates are higher now than before the cut. What the Fed did was to ignite an inflation spiral. The dollar has sunk to record lows against most major currencies, ( I mean the flippin Canadian dollar is higher than the US dollar-the first time in 30 years!)and has dumped billions more into the system to bail out the likes of Morgan Stanley, Countrywide, Goldman Sachs, and to get the US taxpayer to be on the hook for the billions in shady loans these people sold and made millions on. This also has triggered gold, silver, oil, and a number of commodities to record high prices. Like I said, we are looking at an upcoming period of hyper inflation.

Back to the main point folks, and it's very easy to understand. There is no more funny money to be loaned. Gone are the neg ams, the 2/28's. the 3/27's, the no docs, the Alt-A's, gone are LIAR LOANS. Gone are the flippers, the speculators, the 2nd,3rd, or 4th investment property buyers. We are back to the days of 20% down and full doc loans.

Want to see where we are heading?

Take a look at this graph from the NY Times:

It doesn't take a Harvard graduate to figure it out. You don't go up over 100% in price and only go down 15% and then proclaim we have "hit bottom." Remember your statistics class? Reversion to the mean? Folks, if this bubble were a baseball game we just finished signing the national anthem. We have nine, long innings of pain ahead. No, make that a double header. It is inconceivable not to believe that a 5-7 year run up where prices have gone up to record levels will not take an equal amount of time and decline in prices to complete the cycle. Furthermore, just like prices overshot to excess on the upside, they most likely will overshoot to the downside before eventually bottoming out. When will that happen? Ah , yes, that is the $64,000 question. The fact is, no one really knows, but my guess is somewhere around 2009-2010 when prices go back to around 1999-2000 prices. About 2-3 x median income. Back to 120 x rent.

Ok, so that is pure theory, right? Well, ever hear of the futures market? Only a few trillion dollars. Now, earlier this week, the Chicago Mercantile Exchange (CME) extended the futures market on the S&P Case-Shiller Home Prices Indexes from one to five years. Now, futures investors can make bets on where home prices will be as far out as 2011. Anyone want to take a guess where the futures are placing millions of dollars as to the direction of housing prices for 10 major metropolitan cities? ( No peeking now...)

Ok, you looked already. This is not pretty. Miami is looking at another 8% loss next year, and a 25% haircut in the next 4 years. In my opinion, that is being kind. Factoring in the new hyper inflation of at least 3-5% per year, condo owners, hotel conversions, half occupied developments, and over supply will shave some 50% in inflation adjusted prices off some neighborhoods. Yes, I said 50%. You heard it hear first.

Don't believe me? Take a drive to Miami and see all of the unfinished condos. Travel to West Palm Beach and marvel at the numerous abandoned condo projects. Think these builders like Lennar, WCI, Toll, Centex, etc. are going to stop building and adding to the already bloated supply of inventory? Not a chance. They are like sharks that either swim or die- they either keep building or go bankrupt.

Finally, I present you with the last chart courtesy of Robert Lacoursiere, an analyst with Bank of America, outlining the oncoming onslaught of ARM resets. Remember those good ole 1% teaser ARM's of 2004-2006? They are due to reset over the next year or so at significantly HIGHER rates. Over the next year, there is at least 30 billion dollars a month in resets, the vast majority in subprime loans. Some estimates are that about half of these subprime homeowners will lose their homes to foreclosure. Most of these ARM's are tied to LIBOR, which is much higher than the prime. One report I read a few weeks back told of some 15% delinquency rates on current subprime loans at one major lender.

So there you have it people. The party is over and the punch bowl has been taken away. We are left with the hangover and the cleanup that always follows an excessive binge. As I predicted, house prices have fallen and will continue to fall for some time. If you own a house and need to sell, price it aggressively. If you are thinking of buying, please be careful and do your own research. Unless you find an incredible bargain, and I mean incredible, you might consider waiting and renting for a while. Use the rent vs. buy calculator on this site. Visit the links I have and research, research, research. A house is the biggest purchase of your life in most cases. You cannot afford to screw up. In my opinion we are far, very far, away from a bottom. Put the numbers on paper and see if it makes sense for you. In the meantime, take care and I will try to post more frequently.

As always, nothing on this blog is to be construed as financial, legal, or any other kind of professional advice. You are all adults and need to base your decisions on your own. Consult your own attorney, accountant, financial advisor, priest, rabbi, or spouse before making any major purchase- especially your spouse!

TICK TOCK TICK TOCK.......

2007-04-18T10:03:00.000-04:00

Now that the bursting of the Real Estate bubble cannot be denied by the NAR and the rest of the cheerleading REIC, what is in store for South Florida's FB's?

As reported in today's Sun-Sentinel , it's not good. For regular readers of this blog, you have known about this for over a year. Now that everyone is running for the lifeboats, who will be left to rearrange the deck chairs?

"A deluge of South Floridians are falling behind on their monthly house payments, raising fears that many of the delinquent property owners will lose their homes to foreclosure this year and next."Who knows how bad it's going to get," said Richard French, a manager with SunTrust Mortgage and president of the Broward County chapter of the Mortgage Bankers Association. "It's a little scary to think about."

"Escalating home values from 2000 to 2005 caused buyers to overextend themselves. Many took out short-term, adjustable-rate mortgages and are seeing their loan payments spike as interest rates rise. Higher property taxes and insurance premiums also are putting homeowners in peril."

"Broward had 1,168 property owners with late payments in March, a 331 percent increase over the 271 a year ago, according to Realestat.com, a Plantation-based firm that compiles local housing statistics. Palm Beach County's late payments climbed 288 percent, to 888, from 229 last March.Late home loan payments in both counties increased in each of the first three months of 2007. "

"The rise "bodes ill for actual foreclosures down the road," said Mike Larson, an analyst with Weiss Research in Jupiter.Marc Thomashaw, a vice president for Realestat.com, was more blunt."We're set for an explosion [of foreclosures] to happen between now and the next six months," he said Monday."

" Foreclosures in Broward and Palm Beach counties also rose in March, but at a smaller rate than late payments compared with a year ago, according to Realestat.com.Broward's foreclosures hit 543 last month, more than double the 247 from last March. Palm Beach County had 205 foreclosures last month, up 19 percent from 173 a year ago.Nationwide, the number of homes entering foreclosure in the January-March period doubled from a year earlier, according to California-based Foreclosures.com."

'In recent years, some of those owners avoided foreclosure by refinancing or simply selling the homes, making large profits.But refinancing isn't as easy because lenders are tightening credit standards....What's more, South Florida's slumping real estate market is holding down prices and preventing recent buyers from selling quickly to get out of financial trouble."

"Mark Zandi, chief economist with Moody's Economy.com, a West Chester, Pa., research firm, agrees that short-term investors and others who bought within the past few years are most at risk of losing their homes. Still, he said more mortgage delinquencies and foreclosures are inevitable due to a "noxious mix" of aggressive lending, falling home prices and borrowers facing large increases in their monthly payments."

It's obvious in my opninion we are in the beginning of a major correction in prices. People like Ken Heebner, Bill Gross, Sir John Templeton, and other highly respected individuals are calling for a major pullback in prices. I encourage readers to use the tools on this site. Look at the inventory numbers, track teh number of foreclosures, use the rent vs. buy calculator on this site. Plug in the numbers. Do the math. I believe prices need to come down some 20-30% or wages need to go up some the same to reach equilibrium. Which do you think is most ikely?

As always, the opinions expressed by myself and the readers are just that- opinions. You should always seek out the advice of professionals when making a major purchase decision such as an attorney, CPA, finacial advisor, etc. Please do your own research and due diligence.

Of Bubbles and Space Travel...

2007-01-29T21:20:00.000-05:00

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.

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

2007-01-06T20:57:00.000-05:00

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.

South Florida Foreclosures On The Rise

2006-12-30T14:13:00.000-05:00

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.

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

2006-12-20T15:36:00.000-05:00

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 MoodyÂs Economy.com. 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.

Buyers Walking But Developers Say.....

2006-12-10T20:29:00.000-05:00

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."

"It'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.

South Florida Prices Falling Like Rocks

2006-11-24T13:56:00.000-05:00

According to the Sun Sentinel, prices of homes in South Florida continued to steamroll downward in the third quarter of 2006.

"The median price for existing single-family homes in Palm Beach County was $380,900, down $19,000, or 5 percent from the third quarter of 2005, the Florida Association of Realtors said Monday. Broward's median of $371,100 dipped 3 percent, or $12,800.Quarter-over-quarter sales declined 49 percent in Palm Beach County, the biggest slide in the state. Sales fell 27 percent in Broward."

"Some real estate analysts say the housing market could remain soft for another year or more. But agents in Palm Beach and Broward counties say they're encouraged by a surge in sales contracts during the past three weeks.Bob Goldstein, chairman of the Realtors Association of the Palm Beaches, said huge increases in property taxes and property insurance premiums still are hurting potential sales. But he's counting on Gov.-elect Charlie Crist and state legislators to address those issues."

As usual, the head Kool-Aid Drinker himself "David Lereah, chief economist for the National Association of Realtors, was similarly optimistic. He said in a statement Monday that buyers nationwide are being enticed by the lower prices."Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year," he said."

Now, I have to tell you, if you are not living here in South Florida, that sales have stopped- simply stopped. Regardless of the spin that the media and the NAR want you to believe, in the REAL world home prices are being chopped some 20% or more in order to sell. Despite the NAR's shameful forty million dollar ad (scam) campaign, desperatley trying to create a sense of urgency, most buyers have caught on that all they need to do is WAIT and prices will continue to drop.

IF you think that the markets have gone down, wait until next year. We have still not seen the two trillion in ARM resets, the insurance renewals, or the new taxes hit the market. This market is not going to "bottom" until 2008 or 2009. There is almost a four year VISIBLE supply of houses to work through.

As far as Learah, his statements are pure nonsense. I doubt anyone, even the milions of Realtors actually believe him.

In the interim, prices will continue to reflect the extreme overvaluations that exist in the market. I would not be surprised to see a return to 1999-2000 prices, and that means another 30% or so. Look out for the falling rocks.

Florida's Bubble Defined

2006-11-15T10:51:00.002-05:00

"South Florida,'' he said, ''is working off of a totally new economic model than any of us have ever experienced in the past" according to a realtor who predicted that a land shortage will support higher prices indefinitely."- New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05

Looking back, this will be remembered as the "poster child" of quotes when describing the irrational exuberance associated with housing bubble of this decade.

Comments?

Wasting Away in Margaritaville...

2006-11-05T20:53:00.000-05:00

"Wasting away again in Margaritaville,
Searching for my lost shaker of salt,
Some people claim that there's a woman to blame,
But I know it's nobody's fault. "

Ah yes, that great tune from Jimmy Buffet lends a certain irony to the current affairs of Key West real estate.

As reported in today's Key News, home owners were shocked when they went to auction up their slices of "paradise." Even in the city of Hemingway, Mallory Square, Duval Street and incredible sunsets, there's a shortage of greater fools.

"The number of people attending Saturday's housing auction at the Doubletree Grand Key Resort was high, but unfortunately for the 22 property sellers, most of the bids were not. "

"The bidding was OK on some and tough on others, but that's an auction," said Steve Slokumb, chief operating officer of Hudson & Marshall, the auction firm that conducted the event. "

"The owners of 14 homes listed with Resort Realty & Appraisals of Key West and eight listed with Truman & Co. Real Estate Services decided to give the auction a try during a stalled market that in previous years experienced 20 percent to 40 percent increases. Realtors have blamed the past two busy hurricane seasons and the cyclical nature of the business for the slowdown. "

"None of the asking prices were met. The closest bid fell $149,000 short, while bidding on the most expensive property, located at 1411-1415 South St., fell more than $2.5 million shy of the almost $6 million asking price."

Victor Heymann, a broker with Resort Realty & Appraisals Inc., had one of his own properties in the auction. He said he was "somewhat disappointed" that his three-bedroom Azalea Street home appraised at $985,000 only went for $820,000. Others weren't as lucky. Jack Anderson and Kevin Broomell, the owners of a condominium at 1211 Olivia St., said the final bid of $495,000 did not meet their reserve, or lowest acceptable price, and so they would not be selling. "
"The highest bid on his 2,297-square-foot property was $1.3 million, well below his reserve price. The house was recently appraised at $2.15 million. "

"Her clients, Rhonda Florence and Pamela Childs, viewed the auction as unsuccessful considering their 1021 Johnson St. property, which recently had undergone a major renovation and was appraised at almost $2.9 million, received a top bid of only $1.8 million.
"It didn't work for us," Florence said. The pair will continue to try their luck on the open market, as will many others who participated. "

"There are 1,400 residential properties for sale in all of the Lower Keys, and almost 900 of them are in Key West, according to Resort Realty. "

I remember Warren Buffet saying once, " Price is something you pay. Value is what you get." Markets could care less what something "appraised" at. If the homes were "worth" that amount, they would have sold for that amount. Sellers will have to learn that properties have become a commodity, like stocks, bonds, art, precious stones, and even a Mickey Mantle rookie card. They are "worth" what the market will pay, not a penny more.

Just as appraisal value meant nothing on the way up, it means nothing on the way down. How many of us have purchased a diamond ring, only to have the "appraised value" some 30% more than what we paid? It's to make you feel like your not a shmuck. But try and sell that diamond ring and you will quickly learn of the true market value. Real Estate is no different.

The bloom is off the rose. The patient is out from under the ether. The honeymoon is over. The clock has struck midnight and Cinderella's coach has turned into a pumpkin. Reality is hard to accept for many people. as this is not 2005 anymore. One of the sellers commented that buyers were looking for "desperate sellers." Come back in a year and these sellers will be desperate. Regardless, those 22 homes are still wasting away.

$100,000 Discounts and Wishful Sellers

2006-11-05T15:37:00.000-05:00

As reported in the Sun-Sentinel , home builders have stepped up the effort to unload their remaining inventory, as prices continue to fall and demand all but vanishes, leaving sellers in an unfortunate situation of competing with inventory priced 20-30% below their asking prices. It seems that free upgrades and various incentives are not working anynmore, so now the only thing left to do is cut the prices to the real "market value."

"A sense of uncertainty continues to grip sellers across Broward County as the housing slump plods on. Prices and sales of existing homes fell again in September, according to figures released Wednesday by the Florida Association of Realtors.Broward's median price of $370,300 fell $9,100 or 2 percent from $379,400 in September 2005. "

"Prices have dropped on an annual basis for the past three months.There were 741 Broward home sales in September, off 24 percent from the 977 sales last September. Broward's median price for condominiums increased $1,200, or 1 percent, to $205,800 from last September. Sales fell 46 percent, to 647 from 1,203."

"The housing slowdown continues on a national level as well.Existing home sales dropped for the sixth consecutive month in September, according to the National Association of Realtors.The nation's median price was $220,000, off 2.2 percent or $5,000, from $225,000 last September. The median is the level at which half sold for more, half for less."

"Mike Larson, an analyst with Weiss Research in Jupiter, said in a statement that builders are offering $100,000 discounts, one-day sales and other perks, which are helping to lower home values across the region. Sellers of existing homes can't match those incentives, so inventory is piling up."

" Broward had nearly 40,000 homes and condos on the market last month, more than double the number from last September, according to the Miami-based Keyes Co. Realtors. As a result, buyers can be picky, and they're also concerned about the threat of hurricanes and dramatic increases in property insurance premiums and property taxes. "

"Hunter and others experts predict the end of hurricane season Nov. 30 will spur more sales, but Larson doesn't expect buyers to get serious again until sellers cut home prices even more."

"The Laatzes' real estate agent, Andrew Ackerman, said the couple is doing everything to sell their home, which has a new roof and kitchen and other improvements.They're willing to furnish the house for the buyer as much as $5,000 and plan to market to newly married couples because they think the property is a perfect starter home. They paid $200,000 in 2004 and now are asking a reasonable $275,000, Ackerman said.So why hasn't it sold?"

"Palm Beach County's September median price for existing homes was $365,500. That's a drop of $34,500 or 9 percent, from $400,000 last September. Unlike Broward and Palm Beach counties, Miami-Dade had no price decline in September. Its median of $371,700 was almost unchanged from the $371,200 of September 2005.Sales dropped 12 percent in Miami-Dade and 53 percent in Palm Beach County, the largest decline of the 20 metropolitan areas in Florida.Statewide, the median price of $243,900 dipped 1 percent or $2,200 from last September's $246,100. Sales across Florida fell 34 percent."

Not to pick on Mr. Ackerman, but he is the epitome of sellers nationwide. He purchased a home two years ago and belives he is entitled to a $75,000 profit, or 25% in two years. And my question to him is WHY? Did he make $75,000 of improvements? Or is he simply "entitled" to make that amount of profit. There is a certain amount of arrogance to be said for many home owners these days. What is "reasonable" to him seems "unreasonable" to most potential buyers. As many have pointed out, this is not 2005 anymore.

In my opinion, we are still way above the mean in pricing. I would not be surprised to see a return to 2001-2002 prices before a stabilization. There are some 40,000 units for sale in each of Broward and Palm Beach counties, a four year supply. One cannot discount that number.

What makes me chuckle is that most sellers are still at 2005 prices. For fun, pull up a listing on on the MLS and compare that asking price to a Zillow estimate. I have seen some 20% OR MORE differences. And, how are these sellers supposed to compete with builders that can simply cut off $100,000 off the selling price? Talk about being a FB.

This will get worse before it gets better. My guess is 2008 or 2009. My advice ( not to be taken as legal or financial or anything other than pure entertainment) is to not attempt and catch the proverbial "falling knife" of prices.

Buyers Calling the Shots...

2006-10-26T10:19:00.000-04:00

Flashback to 2005. Sellers would receive multiple offers, at full price. Flippers were everywhere. Prices went up 2-3 % a month.

Fast forward to 2006. Like a marriage gone bad, homeowners are trapped in their houses, unable to sell, unable to move, and some are unable to continue to make the payments.

As reported in today's Palm Beach Post , the markets have turned from a seller's dream to a sellers nightmare. The scary thing, is that we have a long way to go until prices return to the mean. The nightmare will continue for some time. Prices in Palm Beach county dropped 9 percent year over year. Notice the key points of this article, all of which have been mentioned since this blog started. As usual, the MSM is reporting the obvious.

"Palm Beach County and the Treasure Coast, once among the hottest real estate markets in the nation, are no longer the booming sellers' markets they were between 2000 and 2005. "

"Now, buyers are calling the shots. "

"The slowdown has caused an astounding 49-month supply of existing homes for sale in Palm Beach County, Regional Multiple Listing Service records show. Last month, Palm Beach County and the Treasure Coast led the state in declining home sales and tied for the third-largest rate of falling home prices. "

"The buyers who are out there now are very aggressively looking for tremendous price cuts," said Klein's agent, Barbara Siegel of Lang Realty.

"Before the slowdown, homes in this community were selling in 24 hours," Siegel said. "There were bidding wars."

"In most neighborhoods where we sell property, the average sales price has dropped more than 20 percent this year," said Thomas Moffett, broker/owner of Century 21 Sunland Realty, whose office sells property in central Palm Beach County. "

"In Martin and St. Lucie counties, the median price of an existing home also dropped significantly, to $244,300 from $269,400 in September 2005. It was the fourth straight month of falling home prices and the biggest percentage drop so far. "

"Until last month, when the median price of an existing home in Palm Beach County fell 6 percent, the last time comparable prices fell year-over-year was in February 1999, according to association archives. But the number of homes sold has been declining throughout 2006, and that trend continued in September, when existing single-family home sales fell 53 percent in Palm Beach County and 46 percent in the Treasure Coast, the two biggest declines in the state. Palm Beach County buyers closed on 566 homes last month, just over half of last year's 1,022. Treasure Coast buyers purchased 336 homes, down from 621. "

"The market turnaround has caused a tremendous increase in what the industry calls "inventory," unsold homes on the market. The regional MLS shows 27,611 homes for sale this month, more than double October 2005's inventory of 11,605. "

"Nevertheless, affordability remains a critical issue in Palm Beach County, where 90 percent of the workers can't afford the median-priced home, recent studies show. "

"Foreclosures also loom large as falling home prices prevent financially troubled homeowners from selling to get out from under exotic mortgages with escalating payments they no longer can afford. "
Statewide, the median price of an existing single-family home fell 1 percent last month, to $243,900. Sales fell 34 percent statewide as every market in Florida posted declines compared with September 2005.

Florida prices post YOY Decline.

2006-10-25T11:55:00.000-04:00

From the FAR press release today. They are not reminiscent of the boom years of 2004 & 2005.

................................Florida Sales Report - September 2006
................................... Single-Family, Existing Homes

.................................. Realtor Sales Median Sales Price

........................Sept.... Sept ... % ........... Sept ......... Sept ..........%
........................2006... 2005.. chge ........ 2006 ......2005... ..Chge

STATEWIDE ............13,485 20,451 -34% $243,900 $246,100 -1

STATEWIDE
YEAR-TO-DATE 142,508 197,098 -28 $249,900 $231,800 8

Daytona Beach (1) 612 1,077 -43 $207,100 $224,400 -8
Fort Lauderdale 741 977 -24 $370,300 $379,400 -2
Fort Myers-Cape Coral 693 1,075 -36 $261,400 $288,700 -9
Fort Pierce-Port St. Lucie 336 621 -46 $244,300 $269,400 -9
Fort Walton Beach 267 347 -23 $231,400 $245,500 -6
Gainesville 215 289 -26 $206,400 $179,800 15
Jacksonville 1,191 1,546 -23 $190,800 $194,400 -2
Lakeland-Winter Haven 387 574 -33 $168,900 $161,300 5
Melbourne-Titusville- Palm Bay 475 679 -30 $206,100 $225,300 -9

Miami 769 872 -12 $371,700 $371,200 -
Naples 236 377 -37 $446,900 $487,500 -8
Ocala 387 429 -10 $168,000 $157,500 7
Orlando 2,015 3,105 -35 $265,000 $250,100 6
Panama City 110 163 -33 $202,100 $201,000 1
Pensacola 466 564 -17 $167,900 $163,400 3
Punta Gorda 206 353 -42 $207,800 $229,700 -10
Sarasota-Bradenton (2) 436 648 -33 $290,000 $343,300 -16
Tallahassee 395 508 -22 $185,000 $169,800 9
Tampa-St. Petersburg- Clearwater (3) 2,595 4,443 -42 $227,400 $215,200 6
West Palm Beach- Boca Raton 566 1,202 -53 $365,500 $400,000 -9

We now have YOY negative prices with volume down an average 34%. Drive through any neighborhood in South Florida and count the number of FOR SALE signs.

Sellers are faced with several problems:

1. Out of control insurance rates.
2. Insurance companies refusing coverage.
3. Skyrocketing taxes.
4. Rampant speculation.
5. Home prices that have for the most part doubled, causing houses to be unaffordable.
6. The majority of purchases in 2004, 2005, and 2006 were using ARMS.
7. Many buyers simply cannot afford the mortgage payment.
8. An explosion of inventory.
9. Rising rates.
10. A decline in the pool of potential buyers.
11. A tightening of lending standards.
12. Declining home values.

In my opinion, I have not seen a market this overvalued ever in Florida, and there appears to be a lot further to go before we see a return to the mean for prices.

A Call to ARMS

2006-10-17T20:10:00.000-04:00

The media is picking up on the "Big Squeeze" in ARM resets over the next three years. In case you are not aware, here's the scoop- in 2006 there will be about 600 billion in resets, in 2007 and 2008 about one trillion in resets each year. Yes, you read that right- each year.

Here is a story I found in the "Orlando Sentinel. It gives you a brief outline of what the current outlook is for the typical homeowner faced with the reset quandry.

"Homeowners who were lured to so-called option ARMs during the big housing run-up by promises of extra-low monthly payments or 1 percent interest could soon face an ugly reality: mortgage payments that could more than double."

"This surprise could kick in early next year for those who took out these loans three years ago, mortgage experts predict. And that's not the worst of it: Borrowers who put little money down, took out option adjustable-rate mortgages and who live in areas where housing prices have barely risen or even fallen can owe more on their house than it's worth."

"There is a lot of concern in the industry and among regulators that a high percentage of people taking out these [mortgages] will have difficulty continuing to make these payments," said Allen Fishbein, director of housing and credit policy with Consumer Federation of America. "They will either figure out alternative ways to make payments or they will have to get rid of their homes."

"This adjustable-rate mortgage usually allows borrowers to choose among four payment options each month. They can pay only the interest or pay principal and interest based on a 15-year or 30-year term. Or they can make a minimum payment that does not cover the interest due. Unpaid interest is added to the principal, so each month the borrower ends up owing more. This is called negative amortization. It's this payment method that worries advocates and regulators. "

"Here's how the minimum payment works:Monthly payments are based on an artificially low interest rate of 1 percent to 3 percent. The actual rate being charged can be much higher and change monthly. Unpaid interest each month is tacked onto the principal, so the balance doesn't go down.Payments are fixed for the year. They adjust annually but usually cannot go up by more than 7.5 percent.At some point borrowers must begin repaying the principal. This usually happens at five years, but it can occur earlier if the growing balance reaches 110 percent or 115 percent of the original loan. "

"Borrowers who took out an option ARM in June 2003, for example, could hit this trigger in February or March, said Keith Gumbinger, vice president with HSH Associates, a provider of mortgage information. Once this happens the mortgage will be recalculated based on the larger balance, the interest rate at the time and years left on the 30-year loan. This is how borrowers can end up with payments more than doubling."

"For many, the solution will be to refinance into another type of mortgage that better suits their finances. But beware: Option ARMs often carry prepayment penalties that can be thousands of dollars if borrowers refinance within the first three years, Sweren said. "

Keep on eye on this subject as I believe that you will see the number of homeowners that simply cannot afford to stay in their homes either list them to sell or hand the keys back to the lender.

Free Falling............

2006-10-14T16:45:00.000-04:00

First, yes I know it has been a while since I posted. Sorry. All I can say is , what a difference a few months make. The air is out of the balloon and the current view of the bubble is that of the picture on the left.

Prices peaked anywhere from the Spring to Summer of 2005, right around the hurricane season. Now they are in a free-fall that in my opinion will be ugly. I mean twenty to thirty percent downward prices from the peak ugly.

As I have warned, the massive amounts of resets are starting to hit. Insurance and taxes are skyrocketing. The latest numbers show over a three year inventory of units across South Florida. There are no more "greater fools" to flip to.... And the builders keep building, and dumping their product at huge discounts. Real estate auctions are popping up all over the place, as flippers walk away from their properties.

The downward spiral of this bubble is playing out infront of us, as reported in today's Palm Beach Post .

"The number of homes in some stage of foreclosing in Palm Beach County and the Treasure Coast soared last month compared with a year ago, while Florida posted the second-highest number of new foreclosure filings in the nation, according to RealtyTrac. "

"The new report gives fresh evidence that local homeowners are struggling with budget-busting energy prices, adjustable-rate mortgages resetting at higher rates and a sluggish home-sales market. "

"In Palm Beach County, 873 homes entered some stage of foreclosure in September, or one in every 637 households. That's a 46 percent increase from the 596 reported in September 2005, according to Irvine, Calif.-based RealtyTrac, which tracks foreclosures. "

"What I am seeing is an increase in selling motivation in Broward and Palm Beach counties. People are not sitting and hoping for a sale," Wiser said. "They are dropping the price, doing open houses midweek, whatever it takes to get out before foreclosure."

"In Martin County, 55 homes entered some stage of foreclosure in September, or one in every 1,190 households, RealtyTrac said. Martin's September foreclosures were up 189 percent from the same month a year ago, when 19 homes entered foreclosure. "

"In fast-growing St. Lucie County, 190 homes entered some stage of foreclosure last month, or one in every 480 households. That compares with one in 1,030 homes in foreclosure across the nation. Further, the September numbers for St. Lucie were up strongly from the same month a year ago, when 106 homes were in some stage of foreclosure, the report said. That's a 79 percent hike.

"Statewide, 12,946 properties entered some stage of foreclosure last month, the second-highest number of new filings in the nation and up 41 percent from September 2005. California was No. 1 in new filings, with 14,806. Florida's foreclosure rate of one filing for every 564 households was the fourth-highest in the nation, RealtyTrac said. "

"Recent government reports indicate that Florida and Palm Beach County have high percentages of option adjustable-rate mortgages. These exotic mortgages, as they are known, allowed local buyers to afford homes in one of the hottest real estate markets in the country. "

"Local home prices nearly tripled in five years, pricing even professionals such as teachers and nurses out of the market. The price gains are astounding: The median price of an existing home in the Treasure Coast soared from just $93,100 in 2000 to $254,000 in 2005. In Palm Beach County, the median price rose from $138,600 in 2000 to $390,100 five years later. Figures are from the Florida Association of Realtors' archived year-end reports. Given these astronomical price gains, many buyers considered option adjustable-rate mortgages their only route to homeownership. However, those loans are beginning to reset with monthly payments that are out of reach for many, making foreclosure an unwelcome choice in a market where homes aren't selling. At the same time, home values are stagnant or even dropping. "

This is just the tip of the iceberg. As this juggernaut starts to build momentum and as the inventory continues to swell, the acceleration downward will grow faster and faster. I have said many times that sellers will run towards the same exit at the same time once they realize the game is over. Like any other bubble, excesses will eventually be wrung out and those prices will return to the mean. In this case, I suspect around the year 2001 to 2002 prices.

Let Them Eat Cake! ( in Fort Lauderdale)

2006-05-24T20:49:00.000-04:00

We all remember the French Revolution and the story of Marie Antionette. Her famous, or infamous, quote has been the benchmark used to depict a disconnected elitist class out of touch from the society it governed.

Another famous saying is that history repeats itself. Fast forward to 2006 South Florida. The dubious honor of bestowing the first Bigdaddy Putz Award goes to our very own Fort Lauderdale Mayor Jim Naugle.

When asked recently about the housing affordabilty crisis in South Florida, his heiness Jim bellowed, " I'm supposed to subsidize some schlock sitting on the sofa and drinking a beer, who won't work more than 40 hours a week?" Naugle told the South Florida Sun-Sentinel last week, voicing opposition to a city plan that would force developers to build some affordable units or pay extra fees. "I deny that there is a problem."

"That's easy for him to say. King James, whose Rio Vista neighbors include captains of industry and trust fund beneficiaries, bought his home on the New River for $362,500 in 1996. Today, that kind of cabbage won't even get you a teardown shack in parts of his city."

Doing his best Joe McCarthy impersionation, King James further orated, "It's the developer and the person who buys a higher-priced unit that will be subsidizing them, and I think that's wrong," Naugle said. "It's government interfering with the marketplace and that's Karl Marx."

"The person who's working 60 hours to get ahead and making $90,000 a year is going to subsidize the person who's working only 40 hours a week and making $60,000," Naugle said."

"So now I'm a `schlock' because I only work 40 hours a week?" Michele Stadler, a full-time working mother, wrote city commissioners and Naugle by e-mail. "To insinuate that by not working more we are lazy is really a disgrace. He needs to take that silver spoon ... and look at the reality of life here in Fort Lauderdale and how it has changed in the last five years from the [perspective] of the middle class."

"Naugle said plenty of affordable housing options are around, just maybe not the single-family homes of people's dreams. He also said they should find jobs they love, not be "stuck on working 40 hours a week," and hold off on having children until they are in a better financial position."It's good to be a gatherer and build a nest before having a family," Naugle said. "That's what I did. I waited. Let's get people thinking about that."

Thanks to my wonderful wife for finding this article. Have a nice piece of cake honey.

Boom to Bust

2006-05-02T08:52:00.000-04:00

We are hearing of many condo's and in South Florida either converting back to apartments, halting construction, or going bankrupt as reported in this story.

In less than six months after being converted from low income housing to high priced condos, millions of dollars are lost and the lender goes bust.

"Lender USA Commercial Mortgage Co. and its related companies — better known as USA Capital — filed for Chapter 11 bankruptcy protection in Nevada on April 14. The filing follows a Securities and Exchange Commission investigation of how the company and its affiliates financed construction projects.

"Up until last week, we had no inkling that anything was wrong," said Virgil Birgen of Nevada, who, with his wife, invested $150,000 to build Sail Club at Clear Lake. About 200 people from across the country gave Nevada-based USA Capital or a sister company money to fund the four-tower, 590-unit luxury high-rise on Executive Center Drive.

Here's how it worked:
People placed their money with the company, usually in increments of $25,000, $50,000 or $100,000. The company bundled the investments into trusts worth millions of dollars.
The money then was loaned to developers, usually for a short time, and usually for very high rates: 17 percent was not uncommon. That allowed USA Capital to pay returns of as much as 13 percent.

Formerly a 186-unit apartment complex housing mostly low-income families, Lake Pointe Villas changed hands in January 2005. Homes for America Holdings Inc. announced plans to raze the apartments and start fresh with condo towers, lofts and town houses ranging from the $300,000s to more than $800,000.

One apartment building has been leveled, but two others remain open, their ovens and water heaters pulled from the wall. A refrigerator stands in the middle of one parking lot, an abandoned portable toilet is in another. Mattresses rotted to their springs lie on the ground. Windows are broken. Yellow flowers have begun to grow up the side of 20-foot-high piles of rock and sand left undisturbed since Christmas.

"This caught us all by surprise.... USA Capital is a source we have used for many years on a number of different projects."

Investors said they weren't aware of progress — or the lack of it — at Sail Club, or any other projects.

But their checks from USA Capital with the promised returns always came. Bankruptcy court filings suggest that investors got paid even when USA Capital didn't get money from developers to pay investors. In theory, without money from developers, money should not have been available to pay handsome double-digit returns.

"We have always gotten paid," said an investor in the local property who asked that her name not be used. But when she recently asked to withdraw her $100,000, there were weeks of delays. Then the company went into bankruptcy court.

"I didn't get anything back," she said.

Million Dollar Lemons

2006-05-01T21:18:00.000-04:00

As told in today's Palm Beach Post, How do you sell a $6.2 million spec house in a chilly market?

"Two months away from putting the finishing touches on a 3240 N. Flagler Drive manse, brothers Richard and Mark Poncy are advertising... a $6.2 million glass of lemonade

Comes with a free home.

The eye-catching ploy may or may not work — Richard Poncy said that as of Friday they had yet to get a nibble — but Poncy, who is brokering the property, isn't worried.

"The market is definitely on the down side," he said, "but this home would be hard to duplicate," given its Intracoastal location and a dearth of similar high-end construction.

Spec homes — shortened from "speculative" and built without a definite buyer — range from the 600 midprice homes Pulte Homes Inc. (NYSE: PHM) had in its inventory as of the most recent fiscal quarter to Addison Development's 2005 sale of a $33.6 million, 34,000-square-foot Palm Beach home.

Are those rarefied high-end deals impervious to fluctuations in the rest of the market?

"We are getting more activity than we have had all winter," said Beverly Knight, who is marketing an $18.9 million oceanfront property just south of Boca Raton.

One possible reason: Some corporate executives get their annual bonuses in the springtime.

Which is why the high price of lemonade may get a little higher when work on the Flagler Drive property's five bathrooms and four baths wraps up.

Says Poncy of the current $6.2 million price tag: "We're actually thinking about raising it."

So You've Bought That House...Now Get Insurance.

2006-04-23T10:57:00.000-04:00

Insuring a home in Florida is getting harder than winning the lottery these days.

Here's a roundup of several recent stories about the state of insurance in Florida.

Three more insurance companies are requesting another round of increases in premiums- story .

"Three more home insurance companies -- including USAA, Florida's fifth largest insurer -- asked state officials this week for approval to charge their customers higher prices."

"The three insurers are the latest in a long line of insurance companies that have requested premium boosts in Florida after the hurricanes of 2004 and 2005. Universal is seeking an average increase of 17.1 percent for single-family home policyholders, and 36.5 percent for condo policyholders, according to its rate filing with state regulators. USAA insures more than 184,400 people in Florida, said Jonathon Kees, an Office of Insurance Regulation spokesman. Of those, 10,674 homes are in Palm Beach County and 9,510 are in Broward County."

"Last year, the company requested and received an average 10.3-percent increase from state officials. Should they approve USAA's new rate request, the company will start collecting higher premiums Sept. 1. Universal, which took over thousands of former Allstate Floridian Insurance Co. policies, insures more than 74,266 homes in Florida, Kees said. Of those, 7,206 are in Broward County and 6,100 are in Palm Beach County. Universal also wants to start collecting higher premiums Sept. 1. Security First insures 11,053 homes in Florida, with 1,698 of those in Palm Beach County and one in Broward. The company wants to charge its increased rates starting July 15. "

So you are not happy about your premiums jumping as much as 36%? Be lucky that you even have coverage, according to this sun-sentinel story. Home buyers are facing a difficult time finding any private insurance companies willing to cover them- for any price.

"Like thousands of South Floridians, Burton Danow is on the hunt for a new home insurance policy. The State Farm agent that insures two of Danow's cars has politely said the state's largest insurer hasn't sold a new homeowner policy in South Florida in years. The same goes for Allstate and another familiar name, Nationwide. Now with major private insurance companies, including Allstate Floridian and Atlantic Preferred Insurance Co. shedding tens of thousands of home insurance policies in South Florida, many will be in Danow's predicament and have to find new coverage for their homes."

"And with the Florida insurance market in upheaval after eight hurricanes in two years, coverage is as difficult as ever to get. Many frustrated consumers are asking the same question: Are any of the 451 private insurers licensed to do business in Florida selling new home policies in South Florida?""

"Though many may think they're stuck with state-backed Citizens Property Insurance Corp., Florida's home insurer of last resort, insurance agents say getting a policy from a private company is possible -- but not easy. There's private insurance options, they say, but insurers are clamping down on what they're willing to cover. Got a screen patio enclosure? Insurers are shying away from covering those, agents say. Was your home built before stronger building codes were put in place? That may hurt your chances, too. Even living in a certain ZIP code can hurt you, depending on whether an insurance company already has a large number of policies in that community."

You may not get the same coverage that you had before the last two hurricane seasons, he said. Take screened patios, for example. " They're so costly to replace that it's killing [insurance companies]," Kornbluh said. With some companies, "if you have a screened enclosure that was built prior to 2002, they won't insure your home," he said. At least two insurers -- American Strategic Insurance Corp., a St. Petersburg-based firm, and Atlantic Preferred -- have asked the state Office of Insurance Regulation for permission to no longer insure screen enclosures. Other conditions, such as an older roof or air conditioning unit, could scare off insurers. "

"With the private insurance market tightening, Citizens keeps getting bigger. The company had 829,527 policies through the end of March, making it the state's No. 2 home insurer, up from 810,017 policies at the end of 2005."

So what happens if your only option is the state run Citizens Insurance? Pay through the nose of course, according to this .

"Citizens Property Insurance Corp. will seek an 18.4 percent statewide average price increase for its condominium association policies west of Interstate 95, the state-backed insurer said Thursday. The average increase will be 18.4 percent in Broward County and 11 percent in Palm Beach County."

With hurricane season fast approaching, many Floridians still live in damaged houses and hundreds have filed claims for unresolved claims- story.

"Most of the complaints involve nonpayment for damage caused by Hurricane Wilma, which hit the state in October. In the past two weeks, 169 complaints have been filed against Tampa-based Poe's three insurance companies: Atlantic Preferred Insurance Co., Southern Family Insurance Co. and Florida Preferred Insurance Co. Combined, Poe's three companies cover more than 350,000 policies in the state, many of them along the state's vulnerable coastal areas."

"Southern Family and Atlantic Preferred are in the process of notifying customers that their policies will not be renewed, a decision that Poe made to stem its losses and reduce its exposure in the state."

Imagine your insurance company dropping you in the middle of a claim... that is happening according to this news story.

"One of South Florida's largest home insurers is shedding the policies of some customers who still have unrepaired property damage from last year's hurricanes, despite a state rule ordering insurers not to drop policies for at least 90 days after repairs are made."

"Poe Financial Group's Atlantic Preferred Insurance Co. and Southern Family Insurance Co. recently told state insurance officials they won't renew more than 186,000 policies statewide because of $2 billion in losses from the 2004 and 2005 hurricane seasons."

"Despite the state rule that requires insurance companies to keep the policies of customers who have open hurricane claims, neither Atlantic Preferred nor Southern Family plans to keep those customers and have informed state regulators of their intent."

"That means some homeowners could be forced to find new insurance coverage while still making repairs from last year's hurricanes. And private insurers won't touch homes with existing damage, meaning those homeowners are destined for policies with state-backed Citizens Property Insurance Corp. However, Citizens, the insurer of last resort, wouldn't be liable for the existing damage."

"The two companies have told insurance regulators they don't have the money to keep these customers, McCarty said."

"The Office of Insurance Regulation has arranged for Atlantic Preferred and Southern Family customers to get coverage through Citizens, and those customers with existing hurricane damage will have language in their policies so Citizens isn't liable, Glover said. Southern Family already is sending non-renewal letters to customers. Atlantic Preferred will start sending notices July 13.Poe's companies had been on state insurance officials' radar because of customer complaints since Hurricane Wilma. Poe's three subsidiaries had 3,558 complaints after the 2005 hurricanes, and 268 of those remain unresolved, according to state records."

"Raising additional concerns are 169 complaints made to the Department of Financial Services between March 31 and April 13, department spokeswoman Tami Torres said. Poe officials will discuss those today in a meeting with insurance department officials on hurricane-related complaints, Torres said."

Pulling the ole Bait and Switch..

2006-04-17T20:00:00.000-04:00

Sorry about not posting in a while but other commitments took precedent. What was once speculation just a few weeks ago about the possibility of a bubble has now developed into an (almost) undeniable acceptance that the peak in prices is behind us and that we (most likely) are in for a rough ride regarding home prices tumbling.

In their desperate attempt to keep the grand illusion perpetuated, builders are now admitting to pulling tricks that would make a used car salesman blush. As told in this story , builders are throwing everything at prospective buyers in order to move inventory and more important not drop the sales prices on their overvalued, depreciating houses.

" Jade at Tampa Palms, a condominium complex in New Tampa, has yanked a page from the first-day-of-Christmas-shopping-season playbook: If you're among the first 25 buyers, you get a free garage.
- Beach Way Condominiums in Seminole is dealing, if not wheeling. "We'll Pay Your Mortgage for a Full Year!" its ad screams across several newspaper columns.
- Heard of blue-light specials? David Weekley Homes, selling houses "from the 380s" in Pasco County's Wilderness Lake Preserve, is holding a "Red Tag Event" with "once-in-a-blue-moon" prices.
- Housing giant Lennar has been slinging flat-screen TVs and $5,000 gift certificates from Rooms to Go. Buy a house, get the goodies. This month it's hawking house discounts, up to $62,000 in subdivisions such as Concord Station on State Road 54."

And why would your trusty Real Estate agent steer you towards one of these lovely bargains? Of course because it's in your best interest, right? Read on and learn...

" Cash payouts to real estate agents account for a big chunk of recent promotions, but the average homebuyer is kept in the dark, unaware that agents can earn big money by steering them to one home builder instead of another.
Builders typically pay agents a 3 percent commission for bringing them customers. Some have upped the ante, hiking agents' commissions or dishing out bonuses. A recent example is U.S. Home offering real estate agents a $9,000 upfront bonus for each customer delivered to Lake Brandon Townhomes off Interstate 75. Home prices range from about $250,000 to $300,000."

The real reason for such giveaways lies here, " Real estate agents caution that some home price cuts and giveaways aren't what they seem. Builders are known to slash standard home upgrades to cover their lower-priced listings. Corian plastic counter tops might substitute for granite, builders grade carpet for plush pile. As one model home sales representative said: "If you get a "free' plasma TV, do you think you're not paying for it in the home price?"

Few builders want to admit they overpriced homes during last year's boom, agents and sales center staffers said. Incentives are a way to stimulate business without depressing the bottom line. You'd rather offer incentives and hold the price the same," Knetsch said, "because when the market turns around, you can pull the incentives more quickly than you can raise the price."

These builders need to keep the sales prices artificially high or they know the game is up, hence they will change the subject from buying a house that is 40% overpriced to " How about that new big screen TV you are getting for free?"

The next time an agent shows you a house that a builder is trying to unload, watch out. The only one not making money may be you.

It's Different This Time. (really)

2006-03-27T21:09:00.000-05:00

If you are not familiar with Mish's blog, I suggest you add it to your favorites. Mish offers up some of the best macro analysis out there with a unique, witty style. In his latest post mish covers our new Federal Reserve Chairman's speech before the Economic Club of New York on March 20, 2006.

Not to bore you with the details but here is Mish's take on helicopter Ben's speech which I found on target and quite funny:

"Paraphrasing Bernanke in 8 points:

The slowdown in housing, even though it contributed 50% of the jobs during this recovery is irrelevant.

There will be no lagging effect due to 15 consecutive rates hikes (counting March).

Unlike Spring of 2000, complacency, merger mania, and stock buybacks no longer matter. Instead they are a sign of strength.

Rising foreclosures and bankruptcies are not really a sign of stress.

The trade deficit is really a sign of a global savings glut. Everyone, everywhere should spend more than they make. We can, so can everyone else. It's the proverbial "free lunch".

Because of the brilliancy of the Fed, the natural interest rate has declined.

The Fed is omnipotent against any and all financial obstacles. There is no problem the Fed can not print its way out of.

The yield curve and the action of the long bond are simply wrong.

Paraphrasing Bernanke in a single sentence:It's different this time!"

Over the last 30 years we have heard this phrase no less than 7 times; 1972, 1976-1980, 1986-1987, 1990, 1994, and 2001. Fast forward to 2005-2006 and once again it is "different this time." As if we as a nation or even as individuals are smarter, or less greedy than the last time. Once again our "leaders" assure us that prevailing conditions are "different", or that they have the expertise or ability to save us all. Hogwash. These are the same people that caused the problems in the first place!

Sometimes People Need Just a Little Motivation..

2006-03-26T11:35:00.000-05:00

The Bubble has burst in South Florida. Sellers have crossed the denial stage and are firmly in the fear mode. Imagine dropping the price on your home $76,000 and you still have to throw in other perks to get some interest. As outlined in this sun-sentinel story , local sellers are pulling out all the stops in order to sell their homes.

"How do you lure home buyers in a slowing real estate market? Try a five-day cruise, $2,500 for furniture and even a one-year buyback guarantee as perks to make properties more appealing than the rest flooding South Florida."

"The couple made the necessary repairs and thought they had the house sold in January. But the contract fell through. Interest has been tepid since then as the real estate market softened. After knocking $76,000 off the $975,000 listing price, the Flynns also decided to give the eventual buyer and the broker one year with a personal trainer at the fitness club they own.A trainer for two twice a week is worth about $9,000, said Maria Flynn, a 32-year-old mother of two."

"In a cooling housing market, builders routinely offer cabinet upgrades and other freebies to new-home buyers and bonuses to their agents. And while sellers of existing homes have previously paid buyers' closing costs and broker bonuses to drum up interest, they're taking the incentives game to another level now that South Florida's five-year housing boom has ended."

"February's used-home sales -- the most recent available -- were down by more than 20 percent in Palm Beach, Broward and Miami-Dade counties, and median price increases are leveling off, the Florida Association of Realtors said last week. With the number of listings skyrocketing across the region, sellers simply can't stick for-sale signs in their front yards and expect the homes to attract interest, agents say."

"Although the perks are getting attention, some agents think they are unnecessary, even in a slow market. They say the best incentive to buying is a fair price."

"Wes Spicer, an investor/developer in Delray Beach, was tailgating before a Miami Dolphins game last fall, but he couldn't stop wondering how to attract buyers in a real estate market that already was starting to slow down.He finally decided on a novel approach: a buyback guarantee.If buyers are unhappy for any reason, he'll take back the property within a year at the price they paid, assuming the home is in at least the same condition. The guarantee is written as an addendum to the sales contract."People are looking for the gimmick, but there is no gimmick," Spicer said. "It's very stale right now. I'm trying to offer a spark."Spicer, 35, has yet to sell any of his 25 homes under the program, but he does have two contracts pending."

"Holly Schiller, an investor in Weston, has tried to sell a three-bedroom townhouse under construction near Fort Lauderdale beach for about six months. Schiller first dropped the price by $41,000 to $599,000, then decided about two weeks ago to make it even more interesting.Not only does the selling agent receive a $2,500 bonus on top of the commission, but the buyer gets a $2,500 credit toward furniture at Robb & Stucky in Boca Raton. The buyer also gets a free design consultation and free setup and delivery.Schiller, 51, said she doesn't mind forfeiting more than $5,000 in profit, if it results in a sale."There are a lot of listings right now," she said. "I want my property to stand out from the masses.""

First: DON'T PANIC!

2006-03-24T16:30:00.000-05:00

That is advice #1 of the top Do's & Dont's in this Yahoo story titled "On the bubble? Heed these dos and don'ts".

"The real estate bubble: It sounds like something out of a second-rate horror movie. And it's some homeowners' worst nightmare. "

"You buy the biggest home you can afford and use every dime to do it. Now, instead of increasing in value, the worth of your home, sweet home takes a nose dive. The bubble has burst, leaving you in a financial mess."

Here are the TOP TEN THINGS ( hit it Paul) to do now that the bubble has burst:

1. DON'T PANIC- "One of the biggest fears with a bubble is that the homeowner will owe more than the house is actually worth. But that's usually only a factor if you're selling, need to tap your home equity, or have an adjustable-rate mortgage (or some funky option where you're skipping or delaying paying the equity) and interest rates start to rise"

2. STAY PUT-"This could be a good time to trade your current adjustable-rate (or interest-only or a negative-amortization) loan for a fixed-rate version."

3. STAY INFORMED-"
Are long-term interest rates going up?
Are existing houses sitting on the market longer? And how does that trend compare to months and years past?
Is it much cheaper to rent?"

4. ELIMINATE UNCERTAINTY- " If you suspect rates are going to rise and values are going down, and you have an adjustable-rate home equity line of credit or home equity loan, this might be a good time to step up the payments"

5. DON'T BORROW MORE MONEY ( I found this one particularly amusing, isn't that how they got this way in the first place?)- " The temptation often is to tap it now with an equity loan. Bad idea. Depending on the drop, you could end up owing more than the home is actually worth, or close to it (Figure an extra 10 percent for closing and moving cost.) So if you have less than 15 percent equity in your house, you're in the danger zone. "

6. REANALYZE YOUR INVESTMENT PROPERTIES- "It's one thing to hang onto a house because rent will cost you just as much each month and you know that your house will (eventually) appreciate. But if you're talking about an investment property and you see signs of home depreciation in the area, then you may want to take another look at the numbers."

7. DON'T GET CARRIED AWAY WITH UNNECESSARY IMPROVEMENTS-"If you're making improvements, make improvements that will sustain its value," says Retsinas. "Nothing frivolous"

You Have Been Warned.......

2006-03-16T10:15:00.000-05:00

It's official. You are on your own. There is no "Greenpan Put." Read this story. Federal Reserve board governor Donald Kohn today declared that the Fed "has no intention of preserving all of the recent gains in home price values."

" If real estate prices begin to erode, homeowners should not expect to see all the gains of recent years preserved by monetary policy actions,' Kohn said in a speech prepared for delivery to a European Central Bank forum in Frankfurt, Germany. In his remarks, Kohn attacked the popular 'Greenspan put' theory that Fed policy would always protect investors from sharp asset market drops while doing nothing to restrain these markets when prices. "This argument strikes me as a misreading of history," Kohn said. "Conventional policy as practiced by the Federal Reserve has not insulated investors from downside risk," he said. "

Mr. Kohn is also "wary" of further rate hikes by the Fed in order to "combat" asset bubbles. Did he say "bubbles?" But there is no bubble....

The bell has officially been rung folks.

Everything But The Kitchen Sink

2006-03-13T21:53:00.000-05:00

We've all heard the phrase before and it certainly appears to be fitting the current level of desperation in the local condo market. A news story in the Palm Beach Post details the lengths to which some developments have gone to prop up sales given the sudden shift in the market.

"More on the cool-down in condos: One of downtown West Palm's better-known apartment-to-condo conversions is tapping the brake on sales, if only for the next month or so.
Less than a year into The Strand's conversion, existing renters are being offered 90-day extensions on their leases.
More business news"

"Why allow rentals? A spokesman for Strand's Atlanta-based owner, Primegro Strand, explains it this way: "We are comfortable with our inventory" available for sale, he said."

"Inventory is plentiful: Since the 15-story luxury apartment building at the corner of Evernia Street and Narcissus Avenue was declared a condo in April of last year, approximately 200 of the 275 units remain owned by Primegro Strand, according to Palm Beach County property records."

"Meanwhile, Ken Prosper at Century 21 Richards Realty advertises on Craigslist that the developer behind the condo-conversion of Boynton Beach's St. Andrews apartments is offering to make the first year's mortgage payments for new buyers."

"Buyers also have the option of deducting that first year's worth of payments from the cost of the property, or putting the money toward closing costs. The very few strings attached: The lender must be mortgage giant Countrywide, and buyers have to put 10 percent down."

"All of which helps explain why Craig King's phone started ringing about last June. The president of J.P. King Auction Co. in Gadsden, Ala., has not done much work in South Florida, or with condos, for that matter. The 91-year-old company's bread and butter tends toward lush estates, seven-figure townhouses and the occasional big toy: The firm auctioned off a $5 million yacht in Fort Lauderdale. That was last year. This year, "What we are seeing in the industry now is not just high-end sellers but developers, who are saying, 'Hey, how does this auction thing work?' And now frankly, we are getting calls from your market."

"King said he's had two phone calls in the past two weeks from condo converters whose sales have turned unexpectedly sluggish. Of course, there are still those luxury parcels available: Okeechobee's Sundance Trails Ranch and its dozen or so equestrian home sites go on the block March 18."

Builders Remorse

2006-03-13T08:54:00.000-05:00

First it was the buyers backing out. Then came the lenders no longer approving exotic loans. Now, according to this Sun-Sentinel article today, the builders are simply refusing to finish completion of existing homes under contract unless the buyer pays them additional money.
In the case mentioned, we are talking another $150,000!

Yet another example of how this bubble is out of control. When the builders are trying to cancel because they cannot make money, be warned.

"Most everything was in boxes as Dottie and Gary Sahadeo prepared to move out of their Coconut Creek home to a more spacious, custom-built house west of Boynton Beach.But with construction almost complete, the Sahadeos received an unwelcome call: Their developer was canceling their contract, requesting $150,000 more to finish the work."

"Instead, the Sahadeos are locked in a legal battle to force completion of the five-bedroom house, which was under contract for $590,000 in 2003 but could sell for around $1 million today. Their case illustrates an emerging problem between developers and homebuyers now landing in court to settle contract disputes."

"From the home buyers' viewpoint, developers have been breaking contracts to sell the home at a higher market value. Some developers, though, cite the rising cost of building materials as having forced them to back out. Speculative buyers in the condominium market likewise have been pulling out as interest rates and other costs rise, making their investments less profitable.Experts expect the trend to continue despite the recent slowdown in the real estate market."

""There is a phenomenon going on in South Florida with the skyrocketing in real estate," said Robert Pasin, the Sahadeo's attorney, of Coral Springs. "The time span to build could be two years, and in that span the price goes up. ... In any circumstance, you have a contract and you think you have a deal.""

"Pat and Martin Lenzer have a similar case against Boynton Waters, where they already live. In July 2003, the Lenzers signed a contract for a $736,000 house a few lots down from the their current home.Two years later, they got a call from the developer. Contract canceled"

"Miami attorney Richard Wolfe said his firm, Wolfe and Goldstein, has about 15 contract cancellation cases pending in Miami-Dade, Broward and Palm Beach counties. And it's getting "more cases every day," he said."

"In the next couple of years, McCabe, the real estate analyst, anticipates a "tremendous amount of litigation" -- speculators suing brokers and lenders, developers suing speculators to get them to close and homebuyers suing developers. "It's been a rose garden the last four to five years," he said. "Everyone's been happy because everyone's making money.""

"NO MORE POLICIES"

2006-03-08T21:52:00.000-05:00

Home owners in South Florida have been through alot over the past few two years. Along with the meteoric rise in values came fourteen hurricanes and the damage that came with them, not to mention the almost doubling of taxes and insurance costs.

Not totally unaware of the fourteen hurricanes are the insurance companies that cover our homes against damage. They have amassed substantial losses and it has come to the point that many are simply calling it quits- miami herald story .

For those of you that are not familiar with the situation in South Florida, since 1992 and Hurricane Andrew, ( which wiped out multiple insurance companies and), if you wanted to insure a home and were not already covered you most lkely had one choice- the state run pool. This was the sole insurer writing new polices for years. Over the years the state run pool sold off some policies to private companies and some private insurers started to write new policies but for the most part it was the state assuming all of the risk.

Fast forward to 2004-2005. Florida suffers numuerous category 3,4, & 5 hurricanes causing billions in damage and millions in losses for the insurance companies that cover the homes hit by these storms. Now the 2nd largest insurer in Florida has thrown in the towel.

"Losses from the 2004 and 2005 hurricanes have depleted the financial resources for Poe Financial Group, the second-largest insurer in South Florida. Its companies will not be writing new policies in the state."

"Poe's exit leaves consumers few options, said Alex Soto, president of InSource, a Dadeland insurance agency. Insurers' unwillingness to take on new policies in the state will force yet more homeowners into Citizens Property Insurance, the state-run pool of last resort that is already South Florida's largest insurer."

"Poe Financial said the move was necessary because it is facing more than $2 billion in losses and more than 125,000 claims from the 2004 and 2005 hurricane seasons."

"Two of Poe's units, Atlantic Preferred and Florida Preferred, don't plan to cancel existing policies. Poe, based in Tampa, also said both companies will continue paying claims."

It gets worse, "A third company, called Southern Family, will cancel homeowners and business policies as they come up for renewal. This is bad news for condo associations -- Southern Family was just one of three companies writing association policies since the 2004 storms. Those policies typically cover building structures."

"Without these three companies providing coverage, it's likely many South Floridians will end up finding coverage only from Citizens, which is required to charge the highest rates in the state."

"Bob Poe Jr., the parent company's vice chairman and president of Southern Family, told The Palm Beach Post that the hurricane losses put the companies below the state's minimum capital requirements."

People have had their insurance premiums almost double over the past three years. Now some may find that they have no choice but to be covered by an underfunded state run pool at the highest rates allowed, which will again increase their premiums. Imagine being a new buyer, with an I/O loan about to reset, paying double the taxes and now a huge increase to insure the property. Reality is about to set in and set in hard for alot of home owners.

I Hate to Burst Your Bubble

2006-03-06T21:11:00.000-05:00

Another great article concerning the current housing bubble on safehaven.com "According to Leonhardt, homeowners ought not to be as concerned about a potential 2006- 2007 housing bust as real estate agents should. But this is partial-equilibrium thinking on the part of Leonhardt. As many of you know by now, Asha Bangalore, my colleague, has documented that about 40% of the feeble job growth in this current recovery/expansion has been housing related.

"But if we do have a housing bust - and we likely will if Bernanke does not soon declare a ceasefire - then a lot more than a rounding error of workers could be lining up for unemployment insurance. The cutback in spending by these unemployed would have a, excuse the Keynesian expression, multiplier effect on total spending in the economy - adding some homeowners not associated with the residential real estate industry to the length of the unemployment lines."

"Today housing is indirectly playing a much larger role in funding expenditures on consumer goods and services than it did in the late 1980s. As shown in Chart 1, in the third quarter of last year, households extracted equity at an annual rate of $633 billion, representing 7.0% of their after-tax income, from their houses. In 1989, home-equity extraction totaled only $82 billion, or 2.0% of after-tax income"

"In recent years, increases in household net worth have been significantly boosted by the appreciation in residential real estate values. For example, in the first three quarters of 2005, the appreciation in the value of residential real estate accounted for 58% of the increase in household net worth."

"Housing today is more highly leveraged than it was in 1989, just before the last bicoastal housing bust occurred. As shown in chart 3, today the housing leverage ratio is about 43%. In 1989, the leverage was about 35%. So what?

"So, as shown in Chart 4, between 40% and 50% of new mortgage debt applied for in the past two years has had an adjustable-rate element to it. Back in 1990, only about 10% of new mortgage debt was of an adjustable rate nature. A lot of these adjustable-rate borrowers in the past two years are in the "sub-prime" category or are speculators. In either case, they probably have little equity in their homes. It has been estimated approximately $600 billion of sub-prime adjustable rate mortgages will reprice over the next two years. Chances are they will reprice at higher interest rates, not lower ones. Chances are mortgage defaults will be on the rise with these repricings. This will put "repos" on the market, which will depress home prices. Speculators, with negative cash flows and slower or no appreciation in their investment properties, also will add to the glut of homes for sale. "

"Again, so what if mortgage defaults are on the rise? No biggie except that, as shown in Chart 5, U.S. commercial banks have a record exposure to the mortgage market. About 62% of bank earning assets are mortgage-related.'

"What I'm driving at here is the potential for a bust in housing to cripple the banking system. History tells us that a crippled banking system renders central banks less potent in combating economic downturns and promoting robust recoveries. In other words, if a housing bust led to large credit losses to the banking system, Chairman Bernanke could cut the fed funds rate to 1% and be surprised that a low interest rate did not have the same magic for him as it had for his predecessor."

As I have to outline in prior posts, the majority of the 'recovery' since the stock market crash in 2000 has been a massive infusion of money into the system by the Federal Reserve, which has simply transferred the bubble from equities to real estate. The entire financial system- banking, Wall Street, NAR, the GSE's, the government, are all responsible for creating this monster. They are now wondering how to push up a rope so to speak, trying to stop the unstoppable forces of economics. It simply won't work. As in prior monetary and business cycles, it is going to 'play itself out.' I would encourage everyone to study the last major real estate decline in the late 1980's- early 1990's as a reference for what lies ahead.

Breaking The "Cult' Feeling of Ownership

2006-03-06T20:39:00.000-05:00

A story in today's Financial Times reads "John, a chiropractor in Los Altos, California, has just committed the financial equivalent of heresy. To the surprise of many of his friends, he has defied the cult of home ownership, selling his historic five-bedroom house in favour of renting. ""We pay about 40 per cent less in rent than our mortgage and don't have to spend a cent on repairs.""

"John's decision may fly in the face of conventional wisdom but in many US property hotspots the financial logic of renting is becoming increasingly compelling. For those unlucky enough to have missed the stunning appreciation of house prices over the past few years, the rationale to buy now is shaky at best. "

An exhaustive survey of the US housing market by HSBC - "A froth-finding mission" - has highlighted the appeal of renting in many parts of the US.

"It's fairly common to say that renting is like throwing money down the drain, but people forget that there is a lot of that in owning too," says Ian Morris, an economist at HSBC. "There is not a lot of difference between paying rent to a landlord or interest to a bank." Even taking account of the generous tax subsidy that allows Americans to deduct their mortgage interest payments from taxable earnings, new homeowners are paying an increasingly hefty premium over renters. The annual cost of home ownership in Los Angeles, for example, is now more than double the cost of renting. "

"HSBC's research shows that even removing capital repayments from mortgages, new homeowners in many areas will still be left paying a large premium. In San Francisco or Honolulu, annual ownership costs are 68 and 73 per cent greater even on an interest-only mortgage - a riskier mode of borrowing that has become popular in richly valued property markets. To make property ownership in many of these markets worthwhile, owners would need to see extremely strong house price rises over the next seven years. "

"To make property ownership in many of these markets worthwhile, owners would need to see extremely strong house price rises over the next seven years. Taking into account the added risks of home ownership, HSBC has calculated that prices would need to rise by 10 per cent a year in Palm Bay Florida, 8.5 per cent in Washington DC and 8.2 per cent in Denver - far more than the 20-year averages.The chance of falling real home prices is less outlandish than most assume. Those buying a house in Washington DC in 1989, when prices started to slide in real terms, would have had to wait until 2001 to see a capital gain. "

"There is even a chance that such calculations are slightly skewed in favour of home ownership. These figures assume that home owners are deducting mortgage interest payments from their taxes and that they pay a marginal rate of 30 per cent. However, only a third of Americans itemise their tax deductions and thus fail to take advantage of the tax break. In addition, many living in California or New York are caught by the Alternative Minimum Tax - a parallel tax system for high earners. This tax system eats into the tax deduction for housing, further chipping away at the benefits of home ownership."

"The benefits of home ownership do eventually reassert themselves if you hold on to houses for long enough, even in the most highly priced markets, says Mr Morris. Assuming house prices remain steady, you would need to hold a house in LA for 11 years before the costs equalled those of renting. In Washington DC it would take 12 years to break even."

"The number of Americans coming to a similar conclusion has been on the rise. According to the confidence survey from the University of Michigan, close to 30 per cent of Americans now think it is a bad time to buy - higher than at any point since the early 1980s. Even so, housing experts say the temptations of home ownership will remain irresistible. "Home ownership remains a potent symbol of success in America," says Nic Retsinas, director of the Joint Center for Housing Studies at Harvard University. "Renters tend to have lower social status in the eyes of many Americans."

"In the US, the cult of ownership is such that John's gamble of selling his house and waiting for prices to fall is unlikely to become a popular punt. But it may pay off. "

Ding.... Ding.. Ding... the bell has been rung folks. Watch the rush towards the exits over the next few months accelerate as sellers realize the top of the market is behind them.

You've Got Mail!

2006-03-02T11:58:00.000-05:00

Here are the 5 most emailed news stories in today's Sun-Sentinel. (last 24 hours)
1.The boom is gone: Home sales fall 36% in Broward
2.Study warns 'American dream is fading' in Broward as affordable housing disappears
3.New paint slaps a coat of silence on cell phone calls
4.The boom is gone as home sales drop 39% in Palm Beach County
5.Sellers be patient; buyer's market returns See the complete list ...

The daily drumbeating continues.....

NEAR BREAK-EVEN CASHFLOW WITH 10% DOWN!!!

2006-03-01T21:07:00.000-05:00

Definition of insanity-buy this place because you will lose money. I came across this wonderful investment opportunity with the headline of "near break-even cashflow with 10% down" on craiglist. This self proclaimed real estate "investor" and agent wants you to flush your money down the toilet along with him. No one can be this insane to actually believe this poor sales pitch.

P.T. Barnum is alive and well living in sunny South Florida.

" I would like to make you aware of a fantastic investment opportunity in Boca Raton. In fact, I will be picking up a unit for myself as an investment property because the numbers work. Units are only available through brokers at this time. Sales will open to the public around March 25 at a higher price."

"The 2 bedroom Tower units have a total negative cash-flow of only $183.15 per month. I based these calculations on very conservative numbers. For example, property taxes in Boca Raton are 1.75%-2.0%. I used 2 percent. I also used the average price of a unit and not the cheapest. I based this on a rental rate of $1,600, for the Tower units, which is very conservative based on what I have seen for comps in the area. The 1 bedroom units will have a negative cash-flow of $321.23. The 2 bedroom Villa units will have a negative cash-flow of $285.67. I, myself, will be getting a 2 bedroom Villa unit even though the negative cash-flow is slightly higher. I prefer the Villas over the Tower units because the building is newer and because of the lake view. Time is a concern because of the sales center opening about 3 weeks from now and prices going up. If you have an interest in acquiring one of these units please contact me immediately. Also, I have more pictures of the property and rental comps that I can email to you. "

Here are some pictures of this fantastic time-sensitive opportunity.

Notice the lovely 35 year old cabinets. This place has all of the flipper signs- Stainless steel fridge, appliances, fresh paint.

Here is the living/dining room. Thrilling isn't it?
Better keep those verticals open or you won't be
able to see in there. Looks like an apartment..
Oh wait, it is.

Here we have a view of the...er.. parking lot. No garage. Looks like just another apartment complex to me.. oh wait, it is.

But don't forget the negative cash flow.

I have NO clue where this person gets a $1600 monthly rent for a 2 bedroom in Boca Raton. Look in the paper and there are rentals from $1100 to $1500 all day long for much nicer places. There are HOUSES that can be rented for $1600 a month. We are talking about 35 year old condos.

I have owned and rented real estate. I have NEVER had a negative cash flow on rentals. That is simply nuts. The fact that this person is going to do it himself speaks volumes. Prices are dropping like rocks for condos in Palm Beach and he wants you to buy a condo conversion knowing it is a loser from day one.

For those of you that do purchase one of these, I have some beanie babies, a few cabbage patch dolls, a couple of boxes of baseball cards, and a pet rock I will sell you real cheap. But hurry as the prices go up March 25.

Oh, I forgot to add.. here is the information from State of Florida License Information on the "investor"/agent.

Licensee Details
Licensee Information

Name:
LECHUGA, LUCAS THADEO PA (Primary Name)

License Type:
Real Estate Broker or Sales

Rank:
Sales Associate

License Number:
SL3127881

Status:
Current,Active

Licensure Date:
06/27/2005

Expires:
03/31/2007

Special Qualifications
Qualification Effective

Professional Association
10/19/2005

Nice to know he has been a seasoned "investor"/agent since October 2005, right at the top of the bubble.

SOUND OFF!!!

2006-03-01T10:03:00.000-05:00

I want to hear your comments concerning the current 'bubble' in South Florida. Does one exist? Are prices going to stabilize? Will we have a "soft landing", or a "crash'?

Feel free to post your observations and stories.

Also, take a second and participate in the poll to the right.

Thanks!

Come Back in 2015

2006-02-26T09:02:00.000-05:00

According to this story, South Florida's high priced real estate market is closed for business for about a decade. The arrogance and greed are simply overwhelimg and out of control. Buyer's are beyond frustration.

"In the past five years, the housing crunch in South Florida has moved up the economic ladder from the low-income to the middle-class, pricing a whole new layer of workers -- thousands of Quintin Taylors -- out of the market. To live in a mid-priced house, a family in the Miami area earning the midpoint income must now spend 44 percent of its dollars on mortgage payments. That's double what it cost as recently as 1998 -- and close to Los Angeles at 46 percent and New York City at 49 percent. Even with the market slowing, South Florida still won't return to the affordable days of the late 1990s, economists say. Incomes are limited by a service and tourism economy that doesn't create enough high-paying jobs. Yet housing prices remain high because of money flowing in from foreign and investment buyers. That adds up to an affordability crunch through 2015, Moody's Economy.com forecasts. But change has come so fast that attitudes have yet to adjust. And so the quest for a home is turning into a hard lesson in compromise."

"But finding a single-family home to fit that budget won't be easy. A Florida International University study for release Wednesday found that Broward County buyers need household income of $100,000 to afford a mid-priced home. It's no better in Miami-Dade, where a Beacon Council study found that a household needs $117,204 to afford the average used single-family home."

'The renovated house, just east of Interstate 95 in Nichols Heights, is listed for $265,000, way out of Taylor's price range. But Taylor thinks he could negotiate. In 2002, the house sold for $91,500. Seven months later, it sold for $134,000. Current owner Domenick Vitale paid $160,000 for it last September. Two months later, in November, he listed it for $299,000. In December, the price dropped to $282,900. In late January, it was $265,000.
Still too high, say Lewis and Hernandez. For one thing, the house is listed as a four-bedroom, but two have no closets. ''This is really a two-bedroom with a den and a family room,'' Hernandez says. She says comparable recent sales in the neighborhood are in the $220,000 to $240,000 range. One estimate by an appraiser placed the value of the house closer to $220,000. The agents leave messages for Vitale for several days. No response. Then Hernandez leaves an urgent message that she has a buyer ready to make an offer.
Several days later, Vitale finally calls. But he's not ready to negotiate. Taylor isn't deterred. A second estimate comes in at $240,000. Taylor gets preapproval for a new mortgage with only 5 percent down and decides to make a verbal offer of $240,000. His monthly payments, with taxes and insurance included, would be $2,300 -- $650 more than he wanted to spend. ''I'll just have to cut back on things like shopping, eating out and going out to clubs every night,'' he says. ``The house is the goal.'' But there's still Vitale. The renovated house, just east of Interstate 95 in Nichols Heights, is listed for $265,000, way out of Taylor's price range. But Taylor thinks he could negotiate. The perceptions of sellers may not have caught up with the cooling market -- another factor that might keep the region unaffordable. As things slow down, sellers -- and builders -- will have to adjust, says Ned Murray, the FIU professor who directed the Broward affordability study."

Unreasonable sellers unwilling to make only 50% profit in 3 years. People making $100,000 priced out of the market. A doubling in inventory. If this is not a bubble tell me what is.

Livin' La Vida Loca....

2006-02-21T20:13:00.000-05:00

I came across a few charts on one of my favorite sites, link . Recently, our new Chairman of the Federal Reserve and the White House have glossed over the fact that for the first time since the Great Depression, our nation has a negative savings rate. Several 'experts' have also parroted this view that the savings rate although negative does not account for huge wealth in assets such as stocks and Real Estate. I beg to differ with that conclusion.

Looking at our nations' debt load, in the past 5 years alone we have skyrocket from having our percentage of household debt/GDP go from 70% to 90%. But , it gets worse. This chart left off in 2004. Add on another few trillion in loans and we are now approaching 100% debt/GDP.

Isn't it a coincidence Congress just passed major bankruptcy legislation when we as a nation are essentially 'bankrupt" by definition?

Who made all of this easy borrowing possible? Why the Federal Reserve, of course. If you remember after the stock market crash, the Fed panicked and began to lower rates. After 9/11 they lowered rates to 1% and kept them there. The Fed printed up money like it was candy. Look at this chart showing the explosion in M3. I remember learning somewhere about monetary inflation? Also of note is that as of March 2006, the Fed is going to stop reporting M3. I wonder why?

Maybe this gives you a reason as to why we as a nation are bankrupt. We simply borrowed and borrowed and borrowed. Why not? The Fed printed up all of this money. It was there for the taking at 1%. Who needed a down payment or proof of income? We peaked at almost one trillion dollars worth in 2004. The Fed opened up the floodgates, people borrowed and lenders rejoiced.

And how much of this cumulative trillions did we manage to save?

This chart shows that for the first time in 40 years, the percentage of Home Mortgage Debt is greater than the owners equity..... Hmmmm. I thought I was taught that equity minus debt equal net worth....But if the debt is greater than the equity? You guessed it, a nation "upside down".

Seems to me like this 'easy money" was spent.

As I have said, Real Estate is no different than any other financial asset. Just like a stock, bond, mutual fund, commodity, or piece of art, the "value" is what the market will pay. People have used their homes as an investment, not a residence. They have replaced stocks as a means for getting rich 'quick' with real estate 'investing', reducing their homes to nothing more than a commodity to be traded. However, just like the Dot.coms of the 1990's, the value in homes will come crashing down and these people will be for the worse. We haven't saved a darn penny as a nation, we bought SUV's and boats and plasma TV's. We sucked all the equity out of our homes and then some. The party is over and the day after hangover is upon us.

Where's The Reset Button?

2006-02-20T19:15:00.000-05:00

Starting this year and going into 2007, as much as $2.5 trillion in exotic mortgages are due to be reset, as reported here story.

"You know those cheap mortgages offered to investors for speculating on housing? With somebody at the other end of a toll-free phone number offering to lend $200,000 at a monthly payment of $678 per month? Lenders who started making those teaser-rate loans a few years ago are getting ready to charge real-world payments on them. "

"The best-case scenario for the future, the one from the real estate agents, is that prices will level out to single-digit appreciation rates. Assuming that scenario, some would-be investors — those who took out highly leveraged loans with extremely low payment options — could soon find themselves owing more on a house than it’s worth. That’s called being “upside down” in a loan. "

"Many more will simply find that their monthly bill has instantly risen by roughly the amount of a car loan. The reason is that after their initial one-, two- or five-year interest, their loans are now scheduled to “reset” at more realistic rates, and will continue to do so, usually for the life of the loan."

“We don’t have enough data to know how big a problem this will be,” said David Berson, chief economist at Fannie Mae, the nation’s largest mortgage packager. "

"John Barron is typical of the new crop of homeowner-investors. They used two separate three-year, interest-only, adjustable-rate mortgages to buy the homes within the past two years. “Besides the two ARMs, we also took out a home-equity line on the Seventh Street house to put down a deposit on the Fifth Street house. There was no cash that we had in our pockets to put down on the Fifth Street house. All we had was our shining credit record — and the faith that the banks have in this real estate market that allows you to borrow 100 percent.” If they don’t sell, with interest rates rising, the couple will have to refinance the loans. "

"Barron and Wood have a lot of company, said Paul Kasriel, chief economist at Chicago-based Northern Trust. With possibly $2.5 trillion in household debt that is going to be repriced higher “the household debt-service ratio is bound to climb to new highs,” Kasriel wrote recently. Even before the reset gets under way, households were devoting a record 13.75 percent of their after-tax income to servicing debt, including mortgage debt. " “Asset bubbles are characterized by cheap credit. Usually what bursts a bubble is higher cost of credit, because that is what inflates the bubble: cheap credit,” he said. "

"Fannie Mae looked at 2002-2004 loan data to determine what portion of the existing loan pool would be “adjusted,” and when. Fewer than 10 percent of the conventional conforming loans will reset in 2006-2007, but nearly two-thirds of sub-prime loans will.

“The estimate is that in 2007, more than a trillion dollars’ worth of hybrids are going to hit their first reset date,” he said. That one chunk of hybrid loans represents 12 percent of the $8.8 trillion in single-family home loans outstanding nationwide. "

This is the calm before the storm folks. Remember the phrase being "upside down" in a loan. You will be hearing alot of that in the years to come. Couple the explosion in listings with the soon to be increase in payments, and the soon to come mad dash to the exits will be bloody.

It's Official!!! NAR Says a "Transition To a Buyer's Market" Underway...

2006-02-19T21:50:00.000-05:00

The nations' number one Real Estate cheerleader, chief economist at the NAR David Learah, has changed his tune on the state of the Real Estate market.....again. According to this link, Mr. Learah is quoted as saying,"It's a seller's market transitioning to a buyer's market." Sellers are reluctant to drop their asking prices, but a lot of them might have to "because the buyers now have a little more control, a little more power."

In case you haven't kept track, Mr. Learah had indicated over the past few months that;

1. There is no housing bubble.
2. There is a housing balloon, not a bubble.
3. That there will be a soft landing, not a crash in prices.
4. That the balloon was actually a ship.
5. That the Real Estate market was now cyclical.
6. That sales of existing homes are falling faster than expected.
7. Now, that there is a "transition to a buyer's market."

Remember also the prediction for 2006 that "home-price appreciation could drop to single digits this quarter, and will only be 5% for the year, down from 13% in 2005."

This raises the question, should one really listen to what the NAR says and predicts? First, read this story. I will let you be the judge.

"What NAR predicted in January 2002: Dr. David Lereah, NAR’s chief economist, said: “Total sales will be fairly even this year, with existing-home sales projected to reach 5.23 million in 2002, down a negligible 0.5 percent.”

What actually happened in 2002: There were a total of 5.6 million existing-home sales in 2002, up 5 percent from the previous record of 5.3 million in 2001.

NAR was off by 6.4 percent and got the direction of the movement wrong.

What NAR predicted in January 2003: “We project 5.34 million existing-home sales, which would be the second-best year for each of the sale series,” said David Lereah, NAR’s chief economist.

What actually happened in 2003: There were a total of 6.1 million existing-home sales in 2003, up 9.6 percent from the previous record of 5.6 million in 2002.

NAR was off by 14.2 percent.

What NAR predicted in January 2004: A growing economy will help to sustain strong home sales in 2004, but housing activity isn’t likely to match last year’s record, according to the National Association of Realtors. “Existing-home sales should come in at about 5.85 million in 2004, still the second-best on record,” David Lereah, NAR’s chief economist said.

What actually happened in 2004: Existing single-family home sales surged in 2004, well above the previous record set in 2003, according to the National Association of Realtors. There were a total of 6.7 million existing-home sales in 2004, up 9.4 percent from 2003. This is the fourth consecutive annual record.

NAR was off by 14 percent.

What NAR predicted in January 2005: After four consecutive record years, home sales should ease but remain close to record levels in 2005, according to the National Association of Realtors. Sales should decline about 2.5 percent to a total of 6.48 million in 2005.

What actually happened in 2005: There were 7.1 million existing-home sales in all of 2005, up 4.2 percent from 2004.

NAR was off by 9.6 percent, and guessed the direction wrong. "

Based on their track record, I would not place much value in what comes out of the NAR. As I learned about twenty years ago, there are no one handed economists, as they always have to be able to say, " on the other hand...."

Cheaper to Rent Than Buy?

2006-02-19T16:33:00.000-05:00

I know we have all read the stories by the 'experts' how it is always cheaper to own than rent, how renters are losers, and that even in today's market it is cheaper to own vs. rent. The NAR predicts price appreciation as far as the eye can see.

With that in mind, I decided to run the numbers through this calculator. The calculator is offered by the Center for Economic and Policy Research in Washington, D.C.. With the median price of a house in Palm Beach County around $400,000, I was curious as to what the results would be.

I plugged in what I think are reasonable data. A $400,000 house, putting 20% down(This really doesn't change the outcome much), 6% mortgage(not an exotic 2% teaser), 28% tax bracket, not selling for 5 years. I wanted to approximate the average buyer and what he should expect the outcome to be.

Needless to say, I was floored by the results! The total net cost of owning in the next 5 years vs. renting is $177,000. That is over $32,000 a year folks. The assumptions are based on a forecasted 48% DECREASE in value of the home over the next five years.

Even if I put ZERO down, my monthly costs ( Your basic monthly costs include your mortgage, maintenance and insurance. You will also pay taxes, mortgage fees, closing costs, and have a down payment to manage.) would be $2700 a month or about $600-$1000 more than rentals in my area. Assuming you were to be optimistic and feel that values will be flat for the next five years, that is anywhere from $35,000 to $48,000 more to own than rent.

Talk about a 'scary" proposition indeed.

Too Hot To Handle?

2006-02-19T14:30:00.000-05:00

More news today that the South Florida Real Estate market is so 'hot' that some lenders are pulling out, afraid of getting burned.

A story today in the Palm Beach Post details of the mass exodus in lenders and the glut in condos.

"Major commercial lenders are withdrawing from financing South Florida condo construction and conversion deals, another sign the overheated market may be too hot to handle. UBS AG is out of the Miami market, confirmed spokesman Peter Casey. So is GE Commercial Finance. Philadelphia-based private real estate investment firm AMC Delancey is still interested in Florida. Just not, for the time being, South Florida."

"The likely upshot: "There are many thousands of condo units announced as future projects or in the planning stages that will never get going," predicts Bradley Hunter, director of Metrostudy's South Florida Division in West Palm Beach. "They won't even get to the starting line."

"See how many are dark at night," said Jack McCabe, Deerfield Beach-based real estate prognosticator and president of McCabe Research and Consulting, of condos newly on the market. "There might be one light on for every 20 units. People are not living there. It is the height of the season, but they are sitting dark."

"Even "pre-sold" buildings are struggling. That's because would-be owners who put down deposits thinking they would secure a 2.5 percent interest rate mortgage are now facing rates of 5.5 percent and higher — just as the condo is ready for occupancy, and they have to sign mortgage papers. "Within the last three weeks, I have seen several reservation holders who walked away from earnest money deposits," McCabe said. "There was a fellow who had put over $100,000 down who walked away."

"People are not going to be able to rent these out at anywhere near the amount needed to cover" their costs, McCabe said. That's because many of the new units were designed to appeal to the luxury market, and a lease big enough to cover seven-figure mortgages is out of reach for many renters. As a result, speculators who can't quickly resell are likely to wind up renting their units at a loss."

Plan On Dying in your House?

2006-02-18T14:50:00.000-05:00

Are 100 year loans far off? In the latest attempt to draw every last ounce of air from the bubble, lenders are giddy about the possibility to offer..... 50 year mortgages. link This is done in an efort to " help some consumers qualify for loans."

We can attribute this insanity to the reintroduction of the 30 Treasury bond. Now lenders no longer will have to price paper off of the 10 year issue, they will be able to use the 30 year. Apparantley, 40 years is not long enough to pay back a loan.

"The reintroduction of the 30-year bond means lenders — who had relied on the government's 10-year note for mortgage rate guidance — have a better idea of what to charge homebuyers for a 40-year mortgage. There is also some talk among lenders, who are always looking for new mortgage products, about creating a 50-year home loan. The longer-term mortgages would lower monthly payments."

Steve LaDue, president of Affiliated Mortgage in Wauwatosa, Wis., said, "bankers could also create a 50-year mortgage because of the Treasury's 30-year bond sale. This would be a product lenders could sell to first-time home buyers, or what LaDue calls "a gateway product."

Well, how much in savings will this mean to a homebuyer for extending out a loan to 50 years? A whopping $22 per $100,000 vs. the already ludicrous 40 year loan. Notice it doesn't say how much more in total amount financed the loan will be, having an extra ten years' interest tacked on. Here is a simple calculator that reveals that small detail calculator .. On a 50 year loan, the monthly payment for this loan would be $563.72. The total principal plus interest on this loan would be $338,232.00, of which $238232.00 would be interest. On the 40 year loan the monthly payment for this loan would be $585.46, the total principal plus interest on the 40 year loan would be $281020.80, of which $181020.80 would be interest. Over $50,000 more interest for $22 less a month in payment. And borrowers that only went 30 years? The monthly payment for this 30 year loan would be $632.07. The total principal plus interest on this loan would be $227545.20, of which $127545.20 would be interest. To put things in perspective, you are trading off paying about $60 less a month to be saddled with about double the amount in total interest amount in dollars. Such a deal!!!

"Last week, home buyers could get a 40-year $100,000 mortgage at a rate of 6.50 percent which meant their monthly loan payments were $585.00, according to HSH's Gumbinger.
A 30-year loan, meanwhile, had a 6.25 percent rate and a home buyer with a $100,000 loan had a monthly loan payment of $616. "

"The new loan products, though, could be of help for a housing market if they improve affordability at time when sales have slowed and inventories have ballooned. Chris Low, chief economist at FTN Financial, a financial services firm, said longer-dated home loans could prevent a dramatic drop in the housing market because their lengthy payback periods would lower monthly payments at a time when interest rates for other mortgages have risen from historic lows. It is a kind of a way to play games with monthly payments," said Dick Bove, banking analyst at Punk Ziegel. "Stretching out the mortgage maturity is simply a way to lower month payments and stimulate sales."

I could not agree more with Mr. Bove. It is merely playing games to stimulate sales, and it will be targeted at first-time buyers and others that otherwise could not afford to purchase.

A Must See Blog!

2006-02-17T23:35:00.000-05:00

For those of you that are looking for great Real Estate blog to bookmark, you need to check out Bubbletown News. This is an amazing place where you will find just about anything related to Real Estate from around the United States. I highly recommend it!

SIGHT UNSEEN???

2006-02-16T21:47:00.000-05:00

I had to re-read this story five times. If anyone had a doubt that we are in a housing bubble, this should push you into the believer camp. Perhaps they should do a follow up and see how these pre-retirees are doing as this story was first published December 18,2005.

Here are some excerpts:

"Should you purchase a retirement home years before you plan to move in Some say the time is now, before prices escalate. Alarmed by the nationwide spike in housing prices, these buyers, known as "pre-retirees," are purchasing homes years before their retirement because they fear they'll be priced out of the market if they wait. They rent the property, leave it vacant or use it as a vacation home in the interim." According to a national survey this year, 27 percent of second-home buyers said they bought the home to use as their primary residence after retirement."

"Does it really make financial sense? Experts disagree, but for Linda Ward-Willis and other pre-retirees, it's a no-brainer." "I see the prices of (homes in 55+ communities) going through the roof," says the real estate agent from Lake Worth. Ward-Willis, 49, intends to buy a home next year to use for her own retirement seven years from now."
Her reasoning is simple: "A place that costs $200,000 today might be worth $400,000 in six years." "

"VALERIE FUCHS and LAWRENCE MORAN:"
"The couple plans to trade up to their dream condo before she retires in 10 years. Their real estate agent, Frank Rao, says 80 percent of his clients who buy something small end up upgrading when they finally retire, using their first purchase as a "stepping stone." After paying $179,000 less than two years ago, similar units are listed in the $290's now, Fuchs says. She'll use the profit from the sale of her one-bedroom condo in 2006 to buy a larger condo. "To hell with stocks," she says. "I'll be waiting a long time for a bank stock to double or triple, you know?""

"LAURETTE HARPER:
"A police detective in Queens, Laurette Harper can't wait to move in to her little slice of paradise — a three-bedroom, two-and-a-half bath townhome in Jupiter, which she purchased last year for $379,900, according to the Palm Beach County Property Appraiser. By the time she closed, Harper says it appraised for $20,000 more. "The one I selected was a three-story (unit)," says Harper. "I loved it! If I could have, I would have bought the whole building." Harper, 49, plans to retire in two years after more than 20 years on the police force. Then, she'll move to the Abacoa townhome full-time. "I love my job, don't get me wrong. But I would love to get down there and relax and have some sunshine on my face," says Harper, who is renting her townhouse to a family for "a pretty fair rental price" while their own house is being built. Harper started looking for a little place to retire to after she heard some of her co-workers had already bought in Florida. She bought her retirement home sight unseen via a colleague's wife, a South Florida real estate agent."

"WILL ENGLUND and KATHY LALLY:
Married for 25 years, journalists Will Englund and Kathy Lally live in a "rambling," historic, six-bedroom home in Baltimore. This year, they bought a two-bedroom, one-bath home in Flamingo Park for $450,000, which they intend to use for their retirement. Lally works for the Washington Post. Englund, 52, works for the Baltimore Sun. After considering the "fragility of America's pension system" and the poor returns on their 401ks, the couple decided real estate was the way to go. Of course, there are ups and downs in the real estate market," says Englund. "But a real house in a real community is always going to be a good investment."Englund and Lally's plan is to keep the Florida home vacant until they retire in about 13 years, and move in full time.""We might want to try to keep both houses and use the one in West Palm Beach all or some of the time ourselves," says Englund. "We might sell the one in West Palm or the one in Baltimore. Or sell both and get someplace nicer elsewhere.""

"LINDA WARD-WILLIS:"
"As a Re-Max Southeast agent, Linda Ward-Willis sees home prices on the rise every day. Right now, she's looking for a home to invest in for retirement. In seven years, Ward-Willis intends to move into the property full-time."I want to buy something . . . before prices just go skyrocketing and I can't afford a retirement," says Ward-Willis, 49." "In two years as a Realtor, Ward-Willis saw property values increase spectacularly." "In some of the retirement communities like Aberdeen (in Boynton Beach), people were paying $10,000 to $15,000 over the asking price just to get in," she says. "And I thought, 'If it's like this now, what's it going to be like when I retire?'"

I want you to read that article again. I couldn't believe it either. They all think that they cannot lose money. Doubling or tripling of money? A stock substitute? Vacant houses for 13 years? Buying a house sight unseen? As I have said repeatedly and will say again, the Dot.com bubble HAS been replaced by the housing bubble.

Are We Over The Edge?

2006-02-16T20:23:00.000-05:00

Anyone get the feeling that home prices have seen the peak and are about to descend like falling off a mountain? For your information, here is a news story from today's Sun-Sentinel link. Believe it or not, there are people in South Florida that might not double their money by selling their home. In fact, some might actually-gasp- lose money! And I thought this was impossible! Didn't the NAR predict sales would rise again in 2006?

"Linda Rudner of Boca Raton bought a two-bedroom condominium near the beach as an investment last year. She fixed it up, then listed it at $450,000 but later dropped her asking price to $399,000. Rudner might have to come down even more, especially now that she can't count on Scripps Florida moving to Boca Raton and raising property values. She wants to sell soon and said she's done dabbling in real estate."

"The rising inventory of existing single-family homes is slowing sales across South Florida. Closings dropped during the fourth quarter, compared with the same period a year ago, the Florida Association of Realtors said Wednesday.Sales fell by 35 percent in Broward County and 23 percent in Palm Beach County, the Orlando-based Realtors group said. Miami-Dade sales declined by 38 percent."

"Broward's median sales price rose 26 percent to $377,300, while Palm Beach's median increased 23 percent to $415,800. Miami-Dade's median rose 29 percent to $375,900."

"The median price means half the homes sold for more, half for less.Although prices rose significantly compared with the fourth quarter of 2004, they have remained flat for the past six months, and experts say that will continue in 2006."

"As inventory builds, homes sit on the market longer, causing antsy sellers to reduce their asking prices."

"Steve Petranick, a Broward real estate agent for Douglas Elliman Florida, said he used to have only three or four properties to show clients looking for homes in the $200,000 to $300,000 range. Now he has 20 or more."There are a ton of listings," he said. "It's definitely become more of a buyer's market."

"Ann DeFries, an agent with Balistreri Realty in Boca Raton, said Hurricane Wilma skewed the fourth-quarter numbers. The storm postponed sales after hitting South Florida on Oct. 24.Still, the housing market has slowed, and sellers need to be more realistic, DeFries said."They can't compare their home to a home that sold a year ago or even six or eight months ago," she said.

"And homes have to be properly marketed. The days of just putting it in the [Multiple Listing Service] or putting a sign in the front yard are over."

"Also hurting sales are rising interest rates.A 30-year fixed-rate mortgage averaged 6.22 percent in the fourth quarter, up from 5.73 percent in the fourth quarter of 2004, according to Freddie Mac. Rates are expected to inch toward 7 percent in 2006."

"As rates do go up, we'll see [fewer] people being able to buy more expensive homes," said Sara Gutierrez, founder of South Bay Lending in Miami. "If you're a wage earner, you'll be kind of limited. But I don't see the market going crazy in either direction."

Take this poor lady and mutliply her story times 100 or so.... that is what's going on in South Florida. The number of listings is exploding.( See my post below They call me Flipper for that info.) Prices have dropped and as I keep saying the rush to the exits has begun. This woman dropped her price $50,000 or 11% already and still can't sell. Hot money is already wanting to get out. I predict another three months of stagnant/falling prices and increased inventory will lead to a full on stampede.

Psst... Can I Borrow TWO MILLION???

2006-02-15T16:57:00.000-05:00

1947 LINCOLN ST HOLLYWOOD, FL 33020
MLS ID#: D1072402
$2,000,000
6 Bed, 5 Bath1,608 Sq. Ft.
Estimated payment:$9,364 Per Month

Here is the realtor writeup," GREAT LOCATION IN THE HEART OF HOLLYWOOD! 4 LOTS TOTAL LAND 20,800 S.F. 160 X 130. GREAT FAMILY COMPOUND CONSISTING OF 2 SINGLE HOMES (ONE IS A 3/2 DIVIDED AS 2/1 & 1/1) THE SECOND IS A LARGE CHARMING AND LARGE 1/1 AND SEPERATE EFFICIENCIES ARE SHARING NICE PATIOS AND LUSH LANDSCAPE. DEVELOPMENT OPPORTUNITY! 4 LOTS TOTAL."

I am speechless...

There's a New Sheriff in Town...

2006-02-15T14:14:00.000-05:00

OOFA...You have to hand it to our new Federal Reserve Chairman Ben Bernanke. He made his debut in front of a very partisan Congress today and walked away fairly intact. He did his best 'bob and weave' in trying not to give either political party talking points they could use. After years of Alan Greenspan's testimony in which Congress needed a Quija Board to interpret exactly what he actualy said, Bernanke tried his best to answer questions directly. For the first time in seventeen years, it didn't take a Batman decoder ring to tell us what the Chairman's remarks really meant.

That being said, Mr. B. was cornered into commenting regarding the Housing markets. The new Fed chairman mentioned the slowing housing market as one risk to the expansion, although he said a, "moderate softening'' seemed more likely than a "sharp contraction.''

"Some cooling of the housing market is to be expected and would not be inconsistent with continued solid growth of overall economic activity,'' Bernanke said. He also stated, "prices and construction could decelerate more rapidly than currently seems likely.''

The new Chaiman indicated that more interest rate hikes may be needed to tame inflation,"the risk exists that, with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately -- in the absence of countervailing monetary policy action -- to further upward pressure on inflation.''

Fed futures are pricing in a 100% chance that rates will move higher in March and conensus is a 5% rate by June. As rates move higher, this decreases the amount potential buyers can afford. Equally important, there are an estimated 2.5 trillion of mortgages that are due to reset in 2006 and 2007 at higher rates. link

The Chairman's testimony came on the heels of a release by the Mortgage Bankers Association link

"The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending February 10. The Market Composite Index — a measure of mortgage loan application volume was 574.1 – a decrease of 7.3 percent on a seasonally adjusted basis from 619.3 one week earlier. On an unadjusted basis, the Index decreased 4.4 percent compared with the previous week and was down 21.7 percent compared with the same week one year earlier. "

"The seasonally-adjusted Purchase Index decreased by 7.9 percent to 391.7 from 425.1 the previous week, whereas the Refinance Index decreased by 6.5 percent to 1636.7 from 1751.0 one week earlier. Other seasonally adjusted index activity includes the Conventional Index, which decreased 7.0 percent to 847.8 from 911.2 the previous week, and the Government Index, which decreased 11.2 percent to 117.8 from 132.7 the previous week."

Mr. Bernanke has a daunting task in front of him with the housing bubble, record deficit, and inflationary pressures in the forefront.

They call me Flipper......

2006-02-15T08:06:00.000-05:00

Remember that 60's TV show 'Flipper'? Check out this news story in the Palm Beach Post link . The current market is infiltrated with 'flippers"- people that have purchased in the hopes of selling to the next person at a profit. ( Often called the "next fool theory.)

" In third quarter of 2005 ..."

"24.4 percent of homes and condos sold in Palm Beach County had been bought in the previous two years. During the same period last year the figure was 19.3 percent, and five years ago it was just 9.4 percent."

"24.6 percent of homes and condos sold in Martin County had been bought in the previous two years. During the same period last year the figure was 22.3 percent, and five years ago it was just 10.8 percent."

"28.5 percent of homes and condos sold in St. Lucie County had been bought in the previous two years. During the same period last year the figure was 26.2 percent, and five years ago it was just 12.3 percent."

"In September 2005, about one-in-15 sales were of homes and condos that had been flipped in just six months or less. That rate was one-in-77 in September 2000."

Couple this with a huge run up in inventory.....

"Active home listings for Palm Beach County in the Regional Multiple Listing Service — including single-family homes, condominiums and townhomes — increased a startling 83 percent from August 2004 to September 2005, said veteran Realtor Randy Bianchi, co-owner of Paradise Properties in West Palm Beach. Active listings for three-bedroom, two-bath, single-family homes in Palm Beach County have risen 64 percent in the same period, to 2,364 from 1,441, he said."

As I drive around town, there are more and more "For Sale" signs popping up. Reality is starting to sink in and as I predicted, those wanting to sell are getting somewhat antsy. The rush to the exitway has begun. No one wants to be the last ones out of a sinking ship. Financial markets ( including Real Estate) are often controlled by human emotions, not fundamentals. We witnessed this time and time again, yet the media and the public fail to comprehend this. As this downward pressure accelerates, the rush to the exits will create a frenzy, feeding upon itself.

Spin Cycle?

2006-02-13T17:59:00.000-05:00

I know that politicians are supposed to put the best "spin" on things, but this story makes you dizzy.

" The high-flying housing market should make a safe landing by gradually losing altitude, the White House suggested Monday. "

"A gradual slowing of homebuilding appears more likely than a sharp drop because the elevated level of house prices will sustain homebuilding as a profitable enterprise for some time," according to President Bush's annual economic report to Congress."

"The direction of the housing market is being closely watched. Most private analysts also are expecting gradual moderation. If the housing market were to collapse, it would pose grave dangers to the country's overall economic health."

"House prices, which have risen rapidly in value, also will probably see slower growth this year, Matthew Slaughter, a member of the White House's Council of Economic Advisers, said during a briefing on the report."

" In other matters, the report said:

"• The decline in Americans' personal savings rate "may not be cause for much alarm for retirement preparedness." The personal savings rate last year dropped to its lowest point since the Great Depression."

"The savings-rate measure doesn't provide a complete picture of households' finances because it does not capture gains from such things as higher real-estate values or financial investments, the White House report and private analysts say."

"• Limiting the massive portfolio holdings of mortgage giants Fannie Mae and Freddie Mac would decrease "the likelihood of systemic problems with little adverse impact on the liquidity of the market." Proposals before Congress would curb the mortgage giants' holdings."

Well, that clears things up! IF the housing market were to collapse, that would" pose grave dangers to the economy"? Really??? And, the United States of America does not care about savings because it does not provide a "complete" picture??? Since when are "gains from such things as higher real-estate values" included in M1, M2, or M3? (Oh I forgot.... M3 is no longer reported as.) And a quick question sir??? What happens if those "gains" go away because the "higher real-estate" prices erode? Hello??? What about the negative savings rate?( First time since the Great Depression.) And what the heck is a "safe landing" and "gradually losing altitude." Now, are we talking going from 30,000 feet to 28,000 or to sea level?- he did say "landing" Darn those little details.

This quote I thought was worth examing,"because the elevated level of house prices will sustain homebuilding as a profitable enterprise for some time." Really?? Someone forgot to tell Toll Bros. that one last week as they announced a very dissapointing quarter. And Centex has to offer $100,000 reductions in price in an attempt to "sustain" their business.

The part about "limiting" FNMA and FHLMC is just too funny. "Little adverse impact on the liquidity of the market," are they kidding? They want to curtail a trillion dollar industry with little impact. Riigghhht............. This is telling you that you are pregnant after you've had the baby. We all know that easy money has created monsters out of th GSE's. In typical government fashion, they want to put the genie back in the bottle. Nice try fellas.

So there you have it. The U.S.A. is devoid of savings, no problem. Real Estate is going to save the day for all of us with a "soft landing". Builders will continue to sell at "elevated levels", and the GSE's will be "limited" but not so much as to have an "adverse impact on the liquidity of the market." If you flash back to 2000 the same things were said about the stock market. But it's different this time, right?

Technically Speaking....

2006-02-12T19:52:00.000-05:00

To the left is a chart from BigCharts.com that shows the NASDAQ over a 3 year period of 10/97 to 10/2000. This was during the market "bubble" and right before the proverbial fecal matter hit the fan. We all remember how it was "different this time", and how Greenspan & Co. had engineered a "new paradigm." Fundamental like earnings, sales, cash flow, were obsolete. Technical analysis was for fools. You had to buy now or pay more later for such darlings as Priceline, JDS Uniphase, and EMC.

Ok, here is a current 3 year chart of the Dow Jones Home Builders Index, again from BigCharts.com . Although not exact, the overall chart patterns are similar, characterized by huge runs to the upside at valuations that are not sustainable or explainable. Currently, the P/E on this index even after coming down some 30% off the high is around 30. We all know what happened in the year 2001 and beyond to the NASDAQ. trading patterns do tend to repeat themselves. If one were to follow this logic, then this is what one might expect to happen.

Here is a chart of the NASDAQ from the peak (March 2000) to the present. It is still some 50% off over five years later after falling over 80%. Now you might say stocks and real estate are totally different,and that stocks are more speculative. My point is charts tell us money is always flowing- either in or out of an asset. Considering real estate has morphed from being a place to live in to a place to make money on, I would not be surprised if history repeats itself.

Reality Sets In For Sellers...The Violins Please.

2006-02-12T15:28:00.000-05:00

Has the bell rung on the seller's market in South Florida? If this news story is an indication, link , then hang on to your hat. It is going to be a wild ride folks. Reality is a hard pill to swallow when the perception has been of 20-30% annual gains as far as the eye can see.

"Four months after putting their Wellington home on the market and cutting the price $40,000, John and Mary Porter are still waiting for an offer."

"Real estate agents and home sellers throughout the county describe a dramatic shift from what only six months ago was a strong seller's market. There's no crash yet — sale prices have flattened rather than plummeted — but there's plenty of evidence the five-year boom has peaked."

"The chill came quickly. Just last year, torrid price spikes made Palm Beach County the nation's third-hottest housing market, according to the National Association of Realtors. Prices here jumped 35.9 percent from early 2004 to early 2005. The typical home's value rose at a rate of nearly $1,900 a week"

"The Porters initially asked $409,000 for their house at 627 Carnation Court, but they've cut the price to $369,000, said their real estate agent, Randy Bianchi of Paradise Properties in West Palm Beach. The Porters paid $279,000 for the house in 2004."

"Indeed, it seems as though everyone decided to sell at once. The number of homes for sale in Palm Beach County nearly tripled in the past two years, from about 7,800 two years ago to more than 20,000 today"

"Some economists warn that Palm Beach County's rapid run-up in prices makes the market ripe for a fall."

"For instance, National City Corp. of Cleveland says Palm Beach County homes are overpriced by 57 percent, while Treasure Coast houses are inflated by 72 percent. To calculate those figures, the financial services firm compared home prices with incomes."

"Others say the slowdown will lead to a soft landing rather than a crash. The National Association of Realtors last week predicted that the number of sales nationwide will dip slightly in 2006 from last year's record, while price appreciation will slow to 5 percent from last year's 12.7 percent."

Send in the violins, please. When people complain that they might only make $90,000 0r 32% on a home they purchased two years ago, I know that the top of the market is in the rear view mirror. A sense of 'entitlement" and 'investment' has turned home ownership into a quasi-casino. Houses are viewed as an appreciating asset, not a home. It is going to take a major shock to the system( in the form of substantial price reductions) to change the mindset of people back to the merits of home "ownership" again.

Home Prices Scare Away Job Seekers

2006-02-12T11:37:00.000-05:00

A very interesting news story today, link . It seems that there may be trouble in paradise. We all know that the middle class cannot afford a home in Broward and Palm Beach county, but now it appears that " engineers, administrators and other professionals who earn above-average salaries also get priced out of the area, according to local employers struggling to fill vacancies."

""I cannot recruit people from out of state," said John Poggi, chief executive officer of REP Associates Inc., a Palm Beach Gardens consulting company. "I am not talking about $30,000- or $40,000-a-year salaries here. We are talking about people not interested in coming to Palm Beach County to make $80,000 a year.""

"Poggi said rising home prices cost REP at least 10 candidates last year to fill vacancies for engineers and scientists needed to help the company expand.That has the company, which offers salaries ranging from $60,000 to $120,000, considering moving its headquarters to a real estate market that doesn't give recruits such sticker shock, he said."

"It isn't just about teachers and firefighters and police officers. We are hearing from hospitals and law firms," said Kelly Smallridge, president of the Palm Beach County Business Development Board. "They can't fill the positions. ... We are losing opportunities for employment."

'If professionals refuse to move to a community, that area loses the economic boost that comes from the money those high-salary employees would spend. Businesses also lose out on landing the professional expertise they need to grow, said Anne Williamson, an assistant director of the University of Florida's Shimberg Center for Affordable Housing."

" Home prices remain a hurdle for companies trying to attract administrators and executives as well as engineers and computer technicians, said Howard Muti, a headhunter for the Bartech Group in West Palm Beach."They come down here and are somewhat floored by how the real estate market is," Muti said. "

" Pratt & Whitney have not been enough to persuade many job candidates to move to Palm Beach County, McAlice said."These are pretty high-paying jobs and people can't afford to live on that here," McAlice said. "Especially young people coming out of college trying to determine where they want to work. It is expensive down here.""">

""Palm Beach County salaries have not kept pace with rising home prices..Increasing salaries remains an option for local companies struggling to fill vacancies, but that can affect the bottom line. ."I am getting nowhere," said Poggi, whose company has been headquartered in Palm Beach County for 15 years. "I am at a competitive disadvantage."

Every day there is evidence that the housing bubble is unsustainable and about to burst. Homes have doubled in value. The average and now not so average person is priced out of the market or they simply refuse to live here. Companies are considering moving out as a more profitable business decision rather than stay and pay 30% higher wages. Is it really worth paying twice the national average for a home to live in South Florida? I think we will find out shortly.

A Chill in the Air?

2006-02-11T11:47:00.000-05:00

An article in the Sun-Sentinel today link that the South Florida Real Estate Market might be 'cooling off.'

"Even the rosiest real estate analysts concede that South Florida's housing frenzy is fading after five years. The culprit? "Its own success," said Lewis Goodkin, an industry consultant in Miami."

"Goodkin and other experts say the market was destined to soften because price appreciations of 25 percent or more aren't sustainable. Prices will increase in 2006, but not at the double-digit rate of the past few years, they say."

"Goodkin estimates South Florida's home sales pace will fall by 20 percent, compared to recent years, while the overbuilt condominium markets in West Palm Beach and Miami will face "dramatic" slowdowns by the summer."

Huh? I thought in the last paragraph it said that prices will "increase in 2006."

"He said the housing forecast for South Florida is typical of what's happening in many growing cities, such as Las Vegas and San Diego."We're really coming back to a more normal market," Goodkin said."

"Here are five key indicators:

1. Sales are down. Whether you're comparing December to the same period in 2004 or looking at the past six months of 2005, the number of home sales across South Florida has dropped by roughly 40 percent, according to the Florida Association of Realtors.The Orlando-based trade group tracks single-family home sales but not condominiums, townhouses or co-ops.Certainly, Hurricane Wilma had something to do with the decline in the latter part of 2005, but agents and industry experts say the storm isn't the only reason for the slowdown. Insurance and property-tax increases are driving up monthly mortgage payments, making many people reluctant to buy."Prices just got to be too high," said Marilynn Obrig, a broker-associate with Intercoastal Realty Inc. in Fort Lauderdale. "There comes a point where buyers say, `I can't do it. I have to sit back and think about it.' ""

"2. Listings are up. It's not just your imagination: You are seeing more for-sale signs in front yards. The number of homes and condos on the market more than doubled in Broward County from July through December, according to The Keyes Co. and multiple listing services. Listings rose more than 81 percent in Palm Beach County and more than 64 percent in Miami-Dade.Speculators helped fuel the housing boom, which drove up prices to record levels, but that's changing as many speculators are leaving real estate. With fewer buyers, houses don't sell as quickly and inventory builds up.There's virtually no sense of urgency, and buyers can take their time considering multiple properties, said Richard Barkett, chief executive of the Realtor Association of Greater Fort Lauderdale."Most Realtors want to be listing agents, but you have to be out looking for buyers now," said Boynton Beach agent Bob Melzer. "With 20 homes for sale in the same community, [buyers] say, `What's my rush?' ""

"3. Prices have flattened. As demand wanes, sellers are losing leverage, and some are cutting their asking prices.Median prices across South Florida rose by more than 20 percent in December compared to the same period a year ago, according to the Florida Realtors group. But from July through December, the median increased less than 5 percent to $408,200 in Palm Beach and to $377,700 in Miami-Dade while decreasing 4.3 percent to $369,000 in Broward."A stabilization in prices has occurred," said David Dabby, a Coral Gables real estate analyst. "That doesn't mean that appreciation has stopped in all areas. It hasn't. You're just going to see more modest increases, at best.""

"4. Incentives for buyers and real estate agents are increasing. Some builders are offering free upgrades on appliances, countertops and cabinets, as well as offering to pay points and closing costs worth thousands of dollars that the new-home buyer normally would pay.Developers also are trying to lure real estate agents. At the Legacy Place condominiums in Palm Beach Gardens, for instance, agents who referred buyers received 4 percent commissions rather than the standard 2 or 3 percent."There hasn't been the necessity to do that before," said Jack McCabe, a Deerfield Beach analyst who is betting on a market slowdown and organizing investors to buy properties at reduced rates. "The environment is going to get highly competitive this year.""

"5. Interest rates are rising and credit requirements tightening. Thirty-year fixed mortgage rates are near 6 percent, and analysts predict they could inch closer to 7 percent in 2006. While still reasonable, that's enough to keep some people from qualifying for mortgages.And as interest rates increase, homeowners with adjustable-rate notes will see their monthly payments rise. That'll mean more foreclosures and distressed sales, experts say.In addition, federal regulators are forcing lenders to become more selective this year. Mortgage applicants will need higher credit scores and more proof of income, while banks are expected to scale back on risky interest-only loans."The direction of the market is clear," said Manuel Iraola, chief executive of Homekeys, a Miami-based online real estate service. "What's open for debate is the magnitude of the adjustment the market will go through.""

So now what ever blooger has been saying for about a year has hit the mainstream media front page. Basically a 20% drop in values if you are lucky.

Here are the latest Median Home Sales Prices for South Florida. The numbers speak for themselves.

Latest Median Home Prices

Hooray for HOLLYWOOD!!!

2006-02-10T22:13:00.000-05:00

Oh yes, dear friends, we have our own little town in South FLorida called Hollywood. Now, please try not to confuse these homes with the ones you see on T.V. in California.

3325 GARFIELD HOLLYWOOD, FL 33021
MLS ID#: D1081593
$329,000
Estimated payment:$1,536 Per Month*
3 Bed, 2 Bath 1,412 Sq. Ft.

Now this little beauty was built in 1957 so it has stood the test of time. And what do you get for your $329,000? Well.. just look at that new paint...er..... ok. how about that well manicured lawn.. ooops. Maybe the garage? Spacious lot? hmmm..5590 sq. ft. (.13 acre) Nope. But, you do have a septic sewer system and thankfully pets are allowed!

Now here is the (snicker) really funny part. See the $1,536 per month payment? That assumes you put down (snicker) only $65,800 with a 30 year 5.75% mortgage of only ( snicker) $263,200! Don't have that much cash burning a hole in your pocket? Only ( snicker) put down $16450 and with 5.75% mortgage at 30 years of (snicker) $312,550 you can own this gem for just $1824 a month!! ( that is before insurance, taxes, etc).

5707 SHERIDAN ST HOLLYWOOD, FL 33021MLS ID#: F689291
$345,000
2 Bed, 1 Bath 0.14 Acres
Estimated payment:$1,611 Per Month*

Not thrilled? Ok how about this one.

Built in 1959... it's newer! Hey and look.. no messy lawn to mow! And the lot is bigger. (.14 acres) (snicker). And, 1 less bathroom to clean, WOW!
And with only ( snicker) $69,000 down, your monthly mortgage payment is just (snicker) $1,611 a month? A little short on cash? Ok, with just $17,250 down this baby is yours for the low monthly mortgage of (snicker) $1913.

706 N 31 CT HOLLYWOOD, FL 33021
MLS ID#: M1021139
$389,900
3 Bed, 2 1588 Sq. Ft .0.15 Acres

Allright then .This is the one. Look.. it has a lawn. It has a tree! Why yes, you are right. It does look like a mobile home. Built in 1958 this baby has a TWO car carport and city water & sewer!

Now I did the math and with just ( snicker) $77,800 down, your monthly mortgage is ( snicker) only $ 1,820!! Oh... I forgot. You are kinda strapped... well with only $19,495 down you can park your pickup out back and hang that old tire on the tree and call this place yers for just (snicker) $2,162 a month. ( again before taxes, insurance, and all that silly stuff.)

Well, there you have it friends. Now you have seen the "other" Hollywood. I bet you think you saw Burt Reynolds in that last one, didn't you!!! Ha ha,,, gotcha!

Comments always welcome.

Deja Vu? Again?

2006-02-10T17:03:00.000-05:00

"It's time to party like it's 1999"..

Upon coming across the site link, I am reminded of this Prince song and the Dot.com Bubble. Remember those non-stop ads on T.V., about how Joe Blow the busboy and Jill Jones the hairdresser made a gazillion dollars trading stocks? Heck, all one had to do was pick a stock that had four letters as its symbol that had something to do with the internet, and viola, it doubled in 2 weeks! People actually quit there jobs to "day trade" and become jillionares. Ah, yes, the days of Mary Meeker and Henry Blodget. Build the infrastructure and they will come.

Then along came this little thing called a "correction." Just a small one, mind you. How much? About 60-80% in the NASDAQ, if you were lucky. And the experts? Like the "experts" of today, they were chanting the mantra of " this time it is different", and " you don't want to sell NOW do you? It ALWAYS comes back!!!" Tell that to the owners of such jewels as Priceline and JDSU.

Are you missing those Halcyon induced euphoria days like me when profits dropped from the sky like snowflakes? Well, relax my friends. Those days are back! Yes! Just listen to these people!!

Below are some of the best from the site: (substitute real estate for stock if you like)

"We Made it BIG!!! "

"NEWS FLASH: NEW PROJECTS NOT YET RELEASED TO THE PUBLIC ARE AVAILABLE...CALL TODAY! "

"In under 6 months the developer tried to buy back the unit he sold me! I was offered $40,000.00 more!!"G.Perez, Miami"

"My property has appreciated $200,000.00 in just 10 months! Preconstruction is the only way to buy..."MJ, Denver, Colorado"

""I flipped my units and made $135,000.00 in just 9 months."D. Angelo, NY"

""PreconstructionWatch.com is absolutely great. Thank you for your courtesy and professionalism. You have helped me a lot."M. Bergman, Fort Lauderdale FL""

This one is the best.....
""Your services are truly unique."A.Cohen, Aventura"My properties will be completed in 2007, by then they will be worth $300,000.00 more than I paid for them."JP, Miami"

""My unit sold for $390/Square Foot. Now new projects are selling for $700 to $1000/Square Foot!"B.Frankel, Germany"

What the heck am I waiting for with testimonials like that??!!! I am going tomorrow and shave the dog, sell the fur and go out and buy that preconstruction condo baby. Just close your eyes, put that Prince CD on and paaaaarrrtyy!!!

As always, your rockin' comments welcome

With "Good Hands" like these who needs enemies?

2006-02-10T11:54:00.000-05:00

From the Sun-Sentinel today - link .

"Only months after declaring that Allstate Floridian Insurance Co.'s proposed rate increase could be denied, state regulators have reversed course and granted the company permission to raise homeowner premiums 20 to 30 percent in Broward and Palm Beach counties."

I found this next part especially interesting..........

"Now the company has the state's blessing to collect the additional premium. If regulators had not reached an agreement with Allstate Floridian and an arbitration panel agreed increased rates weren't justified, Allstate Floridian would have been forced to return the additional money they collected. An arbitration hearing had been scheduled for mid-January but was canceled because both sides "felt that enough progress was being made, that there was a potential to reach an agreement" on Allstate's request, said company spokesman Ryan Priest. "

"The company started charging higher rates to its 663,000 customers Oct. 3. Allstate Floridian is the third largest insurer in Florida; its highest concentration of policies is in Broward County and its third largest is in Palm Beach County.The average statewide increase is 16.3 percent for Allstate Floridian Insurance customers, and 24.4 percent for the company's Allstate Floridian Indemnity subsidiary."

"The company disclosed the increase in a conference call with investors Jan. 31. State officials had not announced the increase was approved but typically don't make such announcements. They(the state of Fl) had announced in October that they intended to deny Allstate Floridian's higher rates, unless the company provided more information."

That upset state Sen. Ron Klein, D-Boca Raton, who has advocated returning the state system to an elected insurance commissioner.

"Apparently this is how an appointed insurance commissioner does business," Klein said in written statement. "Disapprove a rate increase with great fanfare in a very public way, wait until the public isn't looking and then grant an increase without disclosing it."

Wow, let's all hurry and buy a house. Prices have doubled, taxes have doubled, insurance has doubled. This year those I/O's and ARMS are going to reset, so the payments will double. But, after all, it's going to only appreciate in value so you'd be crazy not to.

LOOKOUT BELOW!!!

2006-02-09T20:58:00.000-05:00

I once heard a picture is worth a thousand words. Well, look at this one.

For those of you that haven't spit out your coffee on the computer screen, yes that is correct. It is the current West Palm Beach Housing Market Index, or if you might say, lack of affordability index. The average home sells for just over $400,000 ( down from $421,000 in November 2005).

But wait.... houses are still about 100 % higher than the mean. OOPS! An article in CNN(http://money.cnn.com/2006/02/03/real_estate/house_price_predictions_for_2006/index.htm) lists our area as (cough)ONLY up 31.6% in value in 1 year.

But what about the impending "bubble?" According to this article, prices are forecast to go down a mind numbing .3%. YES that's right. ... .3%. I must assume that is after they have gone down from $421,000 to $400,000. (about 5%).

So, don't worry folks. Plunge your lungs out. Buy that 2/1 in crack town next to the Airport for $300,000. Mortgage your existing house using a 125% I/O and buy 5 more pre-construction apartment conversions. Prices won't come down. They are running out of land. You don't want to get priced out. If you don't buy now you will never afford a house. Bubbles, shmubbles. Not gonna happen. See? It says so right here on CNN.

Comments welcome as always.

Palm Beach POS Parade!

2006-02-09T13:27:00.000-05:00

Kudos to the Palmbeachpost.com for running a story on homes that have been"flipped" over the last few years.

This one is my favorite!

720 Summit Blvd., West Palm Beach 1,847 square feet

$215,000 in August 2005

$190,000 in July 2005

MOST RECENT INCREASE: Up 13.2%, or $1,923 per day

(LANNIS WATERS/Staff Photographer)

Here is the link: http://www.palmbeachpost.com/news/content/news/photos/flipped1218_pbc/

Every day I am amazed. People just do not care what the prices of homes are. They are willing to pay for fear of being "locked out" forever.... Alas, they will soon learn that not owning a home is better than owning a home that is 40-50% overvalued. Anyone remember the Dot.com crash?

As always, I want to hear your comments!!!

Ask Not Whom the Bell Tolls For...

2006-02-08T22:31:00.000-05:00

Great article on Toll Bros. stock. Not in the article is that insiders were selling massive amounts of stock last year right around the time the stock peaked (imagine that!). For those of you not familiar with technical analysis, the current chart looks like what is called a "head and shoulders" formation, which usually signals a major move- in this case it looks like to the downside. If the stocks of homebuilders is to be used as an indicator of things to come, lookout.

February 09, 2006
The Bell Tolls For Toll Bros.by Paul Kasriel
The opening bell on Wall Street was tolling for Toll Bros., the upscale homebuilder, who announced prior to the opening of trading that its orders plunged 29% in the three months ended January 31. The homebuilder cut its forecast for sales for the second time in three months. As this is being written at about 2:30 pm EST, Toll Bros. stock was trading just under $30 a share, or down about 4% from Monday's close. As the Chart 1 shows, after going through the roof in the first half of 2005, Toll Bros. stock price topped out at $58 and change on July 20, and has been falling toward the ground floor ever since.

chart 1

It is not clear that we economists are able to contribute much toward accurately forecasting the fate of a stock, but it does seem as though the behavior of a stock can aid economists in forecasting the behavior of the economy or, at least, a sector of the economy. Chart 2 shows that the year-overyear percent change in new home sales peaked in July - coincidentally with the peak in the price of Toll Bros. stock.
Chart 2

Toll Bros. was not the only one with a downbeat forecast about new home sales today. Also, the National Association of Realtors predicted that new and existing home sales would fall by 8.5% and 4.7%, respectively, this year. A fall in sales is usually what happens to something that gets very expensive. And, make no mistake, houses have gotten very expensive. This is one of the things illustrated in Chart 3. The folks at Wells Fargo were kind enough to construct something akin to a housing affordability index. Their homebuilders housing "opportunity" index measures the percentage share of homes sold that could be considered affordable to a family earning the median income. The latest observation (Q3:2005) is 43.2% -- the lowest in the 15-year history of the series. The other thing shown in Chart 3 is the weighted-average mortgage interest rate. Despite the fact that the mortgage rate is near a 15-year low, this measure of housing affordability is at a 15-year low. The rapid rise in home prices relative to family income has rendered home purchases less affordable. A related measure of this is shown in Chart 4. The market value of residential real estate has risen to a record high 211% of disposable personal income.
Chart 3

Chart 4

The developing softness in the housing market is likely to have a significant negative impact on the economy as a whole. Some analysts have seen Asha Bangalore's 43% and raised her to 50%. That is, building on the seminal research conducted by Asha, some economists have attributed about half of the new jobs created in this economy since the end of 2001 to the boom in housing. Yesterday, I noted that households spent a record $471 billion more than they earned after taxes in 2005. Extracting equity from their appreciating home values was one of the factors enabling households to do this. If housing is weakening, so, too, will home-price appreciation. This means that those personal ATMs will not be refilling as rapidly as they had been. Finally, in the first three quarters of 2005, one hundred percent of the increase in household net worth was the result of asset-price appreciation. And 59% of the asset price appreciation came from residential real estate.
Forget about GM. The new mantra is: As goes housing, so goes the nation - or, at least, the nation's economy.

Paul L. Kasriel, Director of Economic ResearchThe Northern Trust CompanyEconomic Research DepartmentPositive Economic Commentary"The economics of what is, rather than what you might like it to be."50 South LaSalle Street, Chicago, Illinois 60675
The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions.
Copyright © 2005-2006 The Northern Trust Company

David Lereah does his best "Baghdad Bob"

2006-02-08T22:23:00.000-05:00

I made this suggestion to Ben and he posted this on his Marin site. Post your best Captions!