Florida Real Estate News, 11/20/2008

 

The Sun Sentinel reports from Florida. “A typical used home in Broward and Palm Beach counties now sells for less than $295,000, a price not seen here since spring 2004, according to the most recent data from the Florida Association of Realtors. Distressed properties fetch far less than that. Many existing condominium units, meanwhile, are going for under $140,000, nearly 40 percent less than two years ago. Age-restricted communities are seeing growing interest in one-bedroom condos selling for less than $50,000, real estate agents say.”

“Rebecca DiLenge’s only concern was in not buying. She and two roommates were renting an apartment in Pembroke Pines for $1,700 a month. But with home prices falling, DiLenge figured she could buy a home for as much as she was paying in rent. She was drawn to a two-bedroom condo in Weston listed for $165,000. She got it for $129,000.”

“‘Ideally, I wanted to wait a little longer before I decided to buy a home,’ said DiLenge, 25, a personal vacation planner for Carnival Cruise Lines. ‘But with prices so low now, it would have been foolish.’”

“Frank Ginder and his wife Susan Bleda, paid $170,000 for a one-bedroom Midtown condo originally priced at $279,900. Ginder and Bleda, who rent out their home in Wellington, planned to get a mortgage for the condo, but their California lender, IndyMac, failed this summer. Faced with the prospect of losing the Midtown deal or paying cash, Ginder and Bleda chose the latter.”

“‘To me, this couldn’t be a better time to buy real estate, if you believe in an area and the product and the builder,’ Ginder said. ‘Real estate has always been a good long-term investment.’”

The Herald Tribune. “When it comes to financial collapse, Sarasota real estate investor R. Craig Adams has few peers. Adams, who specialized in building waterfront mega-mansions during the boom, has defaulted on nine loans totaling $11.9 million since May. His former wife, Holly Adams, who divorced Adams in 2007, filed for Chapter 7 federal bankruptcy protection in January, listing $22.4 million in debts and only $3.9 million in assets.”

“Holly Adams said the bankruptcy was needed because her name appeared on most of the loans that her husband secured during his long real estate investment career. But that does not mean she knew a lot about her husband’s transactions. ‘I was a stay-at-home mom,’ Holly Adams said. ‘He said, ‘Sign here, sign here,’ and I signed.’”

“In (a) deal that involved sales to and from associates, long-time Adams business associate, Charles Scott Abel, bought a condominium unit on Siesta Key for $380,000 in June 2001 and financed the deal with $380,000 in loans from Bank of America. Abel sold the condo to Adams in April 2002 for $425,000 and Adams received $390,000 in loans from Impac Funding and AmSouth Bank.”

“Adams refinanced his initial loan in 2005 with $588,750 in loans from Opteum Financial Services and BB&T Bank, ultimately selling the condo to his sister’s brother-in-law, David Andrew Strickland, in June 2006 for $694,000. Strickland’s wife, Julie, said the deal was the worst investment decision she and her husband have ever made.”

“‘Craig is a hell of a salesman,’ Julie Strickland said. ‘The way he presented it, it was the greatest condo deal of all time. It was oceanfront property we could buy and pay for by renting it out. But this property has been our downfall. Our credit is ruined.’”

“Washington Mutual seized the condo in April after winning a $552,841 foreclosure judgment.”

“‘Craig’s biggest mistake was that he started doing big $5 million spec houses,’ said Richard Dear, a Siesta Key real estate investor who bought several properties from Adams over the years. ‘That’s when he ran into trouble.’”

“A curious thing happened in early September. After a long time in the darkness, the Southwest Florida real estate market finally began to show signs of life. But the housing crisis triggered a financial crisis, a credit meltdown and an overall economic tailspin that transformed the playing field in a matter of days and weeks.”

“For the Sarasota-Bradenton real estate market, the optimism evaporated. ‘We had people in here looking to buy. There had been a lot of activity. But as soon as the economy tanked, it was like somebody turned the water off,’ said Sherwin Taradash, a Michael Saunders & Co. agent based in Lakewood Ranch.”

“‘Trend lines and rules of thumb do well under normal circumstances, but now we have so many complex variables at work in the marketplace,’ said Jack McCabe, a Fort Lauderdale-based real estate analyst who correctly predicted the housing downturn before it began. ‘No one really knows where this thing is going.’”

The Beacon Online. “Volusia County’s unemployment rate is higher than national and state averages, and home-loan defaults are rising locally. Economic Development Director Rick Michael briefed the County Council on the local economy, noting Volusia has just over 258,000 people employed or able to work, and about 18,000 of them do not have jobs.”

“Perhaps to no one’s surprise, home construction has fallen to about half of the almost $145 million value for the July-September period of 2007. The slowdown in home building is related to the steep increase in foreclosures. The Clerk of the Court’s Office shows there were 4,195 foreclosures in Volusia County in 2007, and the number of homes repossessed in the first nine months of 2008 totals 5,679. ”

“Of those 5,679, only 739 have been sold, leaving a glut of houses on the market and driving the prices of many of them lower. ‘It’s a serious concern to us. It represents about 8 percent of our housing stock,’ Michael said.”

“County Manager James Dinneen recalled stories from Ohio and other Northern states, describing ‘people freezing to death in the streets of cities.’ ‘We’re getting to the point where, if all else fails, you turn to the county,’ he said. ‘How do we avoid the train wreck we know is coming?’”

‘Alluding to the barrage of gloomy economic news, Dinneen added he needs the council’s help to prepare a contingency plan in case ‘the bottom falls out.’”

The Palm Beach Post. “An analysis of the nation’s market for new homes from Metrostudy: ‘There are hundreds of housing markets, and each is on a different trajectory,’ said Brad Hunter, Metrostudy’s chief economist and national director of consulting. ‘Some markets never experienced a price boom, and are therefore having a less severe bust, but they are all suffering badly.’”

“Hunter’s comments came as the Commerce Department reported that construction of new homes and apartments fell 4.5 percent in October, the fourth straight monthly decline. Construction sank to an annual rate of 791,000 units from an upwardly revised September rate of 828,000 units. The results were the lowest on government records dating back to January 1959. Previously, the slowest pace had been in January 1991.”

“‘Naples/Fort Myers starts in subdivisions are off 92 percent from the peak, as of the end of the third quarter of 2008. Phoenix new-home construction is off 75 percent from the peak, while Atlanta is off 84 percent,’ Hunter said.”

“Austin (off 49 percent) and Raleigh (off 57 percent) never had a price bubble, and it is remarkable that they are down as far as they are, Hunter said. ‘Finished, vacant inventories are actually coming down, but they remain too high in most markets,’ he said. ‘The markets that have the most serious problems are Central Florida, with 8.9 months of finished, vacant home inventory, South Florida, with 8.3 months, Atlanta, with 8.1 months, and Coastal Los Angeles and Naples/Ft. Myers, each with 8 months.’”

“These readings are all far in excess of the ‘equilibrium’ level of 1.5 to 2.5 months that is typical in a normal market, Hunter said.”

“A Delray Beach man on trial for mortgage fraud used his position as a real estate closing agent to help others land more than $5 million in fraudulent loans, a federal prosecutor told jurors Monday in Fort Lauderdale federal court.”

“Howard Gaines smoothed the way for a Coral Springs con man to use straw buyers and forged documents to purchase dozens of Broward County properties, prosecutor Jeffrey Kay said in opening statements. That man, Anthony Dehaney, pleaded guilty last month to mortgage fraud charges and is expected to testify for the government at Gaines’ trial.”

“Federal authorities have touted the case as part of a crackdown on mortgage fraud. Since September 2007, federal prosecutors have charged more than 110 individuals in cases involving nearly $200 million in loans, according to the U.S. Attorney’s Office.”

The News Press. “The median price of an existing Lee County single-family home sold with the help of a Realtor was $147,800, down 39 percent from $243,800 in the third quarter of 2007. Sales increased 73 percent from 1,273 to 2,198 in the same period. At the peak of the real estate boom in the county, the median single-family home sold for $322,300, more than twice what it is now.”

“The trend of higher sales volume continued in October, said Steve Koffman, a real estate broker in Cape Coral. For example, off-water homes in Cape Coral sold for a median price of $105,000, down 5 percent from September, he said. Meanwhile, the number of off-water Cape homes sold was 337 in October, the highest monthly rate since 2004 except for September’s 349.”

“Some investors are buying up homes to rent them but many buyers are ‘people who can afford a house at $85,000 who couldn’t before,’ Koffman said.”

“People with good credit usually have no trouble getting financing but risk-sensitive bankers are turning down those with credit problems, he said. ‘If you’ve got questionable credit, you’re not going to get a loan, you’re just not.’”

The Orlando Sentinel. “Beleaguered developer Kevin Azzouz has sold his lavish lakefront mansion in Windermere for $8.25 million, according to a warranty deed recorded last week in Orange County. Azzouz bought the 22,000-square-foot, three-story home for $5.1 million in 1997, when he was riding high as a former dot-com millionaire looking to be a big-time land developer in west Orange County. The Orange County property appraiser estimates the cost of the building new would be $10.6 million.”

“Azzouz, who had ambitious plans to breathe new life into the MetroWest mixed-use development in west Orlando, is now scrambling to salvage what he can of the project, which has been slowed by the slump in condominium sales and the sour economy. Azzouz faces lawsuits, liens and foreclosures totaling more than $70 million connected to his half-built Veranda Park project in MetroWest. He did not return calls seeking comment.”

The Miami New Times. “When times get tough, the wealthy serve pigs-in-a-blanket at cocktail parties. Actually, those little bite-size wieners were the only hint of scaling back at a recent hoity-toity elbow-rubbing event at the Mar-a-Lago estate in Palm Beach. ”

“Members of the Hialeah-based Developers and Builders Alliance recently gathered at the estate to discuss fantasy architecture and how to get richer. Under enormous crystal chandeliers, they talked beachfront property in Costa Rica, shopping malls in Cairo, and, of course, how it’s just the right time to invest in South Florida.”

“‘All you have to do is observe the lifestyle we have here,’ Brickell-based developer Evangeline Gouletas gushed. ‘International buyers have been to the great cities of the world. You can’t buy land like this anywhere else.’”

“Gouletas has heard the economy is sagging. She chortled while recounting the tale of a housekeeper who bought a $5 million unit and then asked for her deposit back. If only Gouletas had a zillion dollars to bargain-shop in this ’soft’ real estate market!”

“Real estate consultant Michael Cannon, also of Miami, pooh-poohed all of those headlines about the weak housing market. ‘I’m guessing that only 25 percent of foreclosure filings actually end up in foreclosure sales.’”

 

Florida Real Estate News, 11/12/2008

 

The News Press reports from Florida. “The Fort Myers/Cape Coral metropolitan area ranks third nationally in foreclosures, a position not likely to improve with 20,000 homes on the market and another 29,000 in foreclosure. An estimated 40 to 60 percent of homes purchased during the boom went to speculators or investors. Problems also arose when individuals who didn’t have the means to own a home took ill-advised financial risks. ‘It was clearly a pace we couldn’t keep up,’ said real estate agent Steve Koffman. ‘Every waiter and waitress in town was buying a home.’”

“Now, the backlog of homes for sale is 22 months, and those in foreclosure would take another 24 months to sell. ‘We weren’t the only epicenter, but if you want to pick the poster-boy case, it is Southwest Florida,’ said economist David Jones.”

The Naples News. “Home resales in the Fort Myers area rose for the 10th month in a row in October. The median price fell to $119,000 last month _ 22.6 percent lower than it was in 2003. Brett Ellis, part of the Ellis Team for RE/MAX Realty Group in Fort Myers…said banks are selling single-family homes for less than $60,000 in Cape Coral and Lehigh Acres. In Cape Coral, Ellis recently sold a single-family home for $52,000. He has another one pending for sale in Lehigh in the mid-$40,000s.”

“Denny Grimes, president of Denny Grimes & Co. in Fort Myers, said about 60 percent of the sales made in Lee County today are bank-owned homes or short sales. He said prices continue to fall too because there are still so many homes on the market. He doesn’t see an end to the trend any time soon. ‘Are we close to the bottom now? We are not close to the bottom with the level of inventory we see,’ Grimes said.”

“But it’s got to stop somewhere. ‘It can’t go down to free,’ Grimes said.”

The Herald Tribune. “Alexis Wittrock stood in her front yard recently amid racks of her children’s old clothes, dishes, a small couch and other household items. She is slowly selling off a garage full of goods, downsizing for a move that she and her husband see as inevitable. They are planning to leave North Port, a Southwest Florida construction and growth boomtown that has fallen hard since the housing bubble burst.”

“In the most pronounced sign of the decline, North Port has issued fewer new home construction permits for the year — 119 — than it did during some weeks during the housing boom peak Wittrock’s husband, Mike Brooks, helped out at the yard sale before leaving for his job delivering pizzas, the only work he has been able to get in the past year. It is not enough to sustain the family of eight, which has had to drastically cut back since the days when Brooks made six figures as a construction manager and Wittrock managed contracts for a national home builder.”

“Jim Rahill, was laid off from (a) Venice window and door maker a year ago, and has managed to stay in North Port, though it has not been easy. Rahill has watched $62,000 in value bleed from his house. He took a two-thirds pay cut at a local manufacturing job, and rented out a room in his house to help cover the mortgage. He describes North Port as being ‘on life support and just won’t die.’ ‘I’ve got a lot of acquaintances that just don’t have jobs,’ he said.”

“Brooks and Wittrock say they cannot wait for a turnaround here. If Brooks finds a good job outside Florida, he will leave with plans for the family to follow later. He is not putting much stock in government efforts to spur an economic rebound. ‘If nobody’s working,’ he said, ‘it doesn’t matter.’”

The St Petersburg Times. “After about $1-million in renovations, the old Victoria Lodge has a new tin roof, turquoise shingles with white trim and a tropical landscape. But the only traffic Friday flew by: an egret, an osprey and a flock of small birds. Just inside the building, built in 1903, a photo of three smiling developers hangs near the door. And a big ‘Marina 200 Main Street’ sign hangs near an empty sales desk.”

“But now, another big sign has gone up on the Main Street side of the 1.6 acres: ‘Great Dunedin waterfront site available.’ Jim Egnew, Richard Gehring and Bill Kimpton are advertising for buyers or investors for their much-ballyhooed $30-million Marina project. After spending more than $2-million of their own money, the developers of the Main Street project are being sued by their bank for defaulting on nearly $5.7-million in loans.”

“Only someone who can afford to buy it and hold it will buy now and they will pay 30 cents on the dollar, said Mark Klein, a Clearwater real estate broker who’s familiar with the project. Klein said the real estate market took a similar dive in the late 1980s to early 1990s during the savings and loan banking crisis. ‘Banks took properties back … and finally let someone buy them for pennies on the dollar,’ Klein said.”

“Klein said his company also has vacant land for sale where condos were planned. ‘There is no market because supply has outstripped demand,’ he said.”

The Daily Business Review. “Corus Bank, one of the most active lenders to developers during the condo construction boom, is taking title to the twin, 26-story Tao Sawgrass condominium buildings in Sunrise in lieu of foreclosure. Although there have been no closings on the complex’s 396 units, purchase deposits are in place on about 80 percent of the project, according to John Barkidjija, a Corus senior vice president in Chicago.”

“Since buyers have not closed on any of the condos, ‘the project is worth less than the capital loaned on it,’ said Tom Bartelmo, CEO of J.I. Kislak in Miami Lakes.”

“Corus Bankshares president Robert Glickman described the ‘current housing calamity’ as worse than even the severe downturn the company had expected. The overall credit market collapse, and Corus’ focus on condo construction loans, have led to significant increases in bad loans and operating losses, Glickman stated. ‘Unfortunately, we anticipate these difficulties will persist for some time,’ he said.”

The Biscayne Times. “According to statistics from the Miami-Dade County clerk’s office, as of the end of September, there were 40,342 foreclosures filed countywide, compared to less than 27,000 the year before, and fewer than 10,000 in 2006.”

“Condos are a problem, no doubt, because that market was driven to a large degree by speculation. ‘That’s still the $64,000 question,’ quips William Hardin, director of real estate programs at Florida International University’s Department of Finance. ‘Who will be the end-user in the condo market?’ (Of course, the joke, courtesy of the Daily Show, is that ‘thanks to Lehman Brothers, Morgan Stanley, AIG, Freddie Mac, and Fannie Mae, the $64,000 question is now worth $1,324.86.’)”

“‘The risk in some of these large buildings is that they aren’t all sold, or you have a number of units in foreclosure and they aren’t paying their assessments,’ he says. ‘So you may get a good deal but you’re buying into a management problem. Some of what we built is too large.’”

“He sees tough times for a mega project like Midtown Miami because it’s too big, too isolated, and a little too far from the Boulevard and Biscayne Bay to compete in this market. That’s why much of the sales effort there has turned to the rental market. ‘It’s a great project,’ he says. ‘The question is the scale of it. Can you draw in literally thousands of people to that area? In ten years, it will happen. The question is what it will look like between now and then.’”

The Associated Press. “It took John Cicero and his wife an appraisal, some convincing by their real estate agent and some hard-to-swallow facts to get them to lower the $525,000 listing price on their five-bedroom home in Valrico, Fla. They closed two weeks ago for about $380,000. ‘We didn’t really understand the severity of the market,’ Cicero said. ‘We lost close to $100,000 in equity so we were walking away from real money.’”

“They built the stucco home four years ago for $380,000 and poured more than $80,000 into it, putting in hardwood floors, granite countertops, ceiling fans, blinds, drapes and a built-in surround-sound stereo system. They also expanded the deck by the pool, turning it into what Cicero called an ‘executive entertainment area.’”

“‘You think you have this wonderful home and people will want to buy it,’ he said, ‘but you’re wrong.’”

The Palm Beach Post. “Known for preaching the power of positive thinking, Realtors heard an uncharacteristic outpouring of pessimism during the four-day gathering of the National Association of Realtors that ended Monday. In educational sessions and news conferences, the 23,000 people in attendance heard speaker after speaker use downbeat tones to describe a still-cratering housing market.”

“There was National Association of Realtors Chief Economist Lawrence Yun saying 2008 will be the worst year for home prices since the Great Depression. And there was Gary Keller, head of national chain Keller Williams Realty, invoking another d-word. ‘It is dire,’ Keller said. ‘Make no mistake about that. These are tough times.’”

“St. Louis broker John Mayfield summed up Realtors’ quandary during a session on keeping agents motivated. In this boom-to-bust market, agents gripe about the lack of business, while brokers lose money and consider closing offices. ‘We’ve got all this stuff running through our head, but we’ve got to sound excited,’ Mayfield said.”

“‘Property Crisis,’ the headlines read in 1950. In 1982, it was ‘Analyst warns of big bankruptcies.’ The year 1991 saw ‘Washington is crippling the economy.’”

“History repeats itself, and America will emerge from the current economic fiasco to one day suffer another, real estate expert Michael Cannon told members and guests of the Developers and Business Alliance at Mar-a-Lago last week. ‘Each decade, we have the same crisis that’s the worst crisis that we’ve had since the previous crisis,’ said Cannon, executive director of Integra Realty Resources in Miami.”

“Most of the speakers shared positive views and hopes for the economy, including DBA Honorary President Evangeline Gouletas, who encouraged the international audience to invest in South Florida real estate. ‘This is not the time to sell,’ said Gouletas, CEO of Skyline Equities Realty in Miami. ‘This is the time to buy. I wish I had a zillion dollars and I could buy, discreetly, as much as I want. The prices will never be lower.’”

“When it came time to answer perhaps the most pressing question – when will this dismal decline end? – Cannon covered all bases with a cautious prediction. ‘We’ll probably see this period to further expansion – I’m not going to say ‘boom’ again – take place probably in the next 36 to 48 months. That’s the optimistic side,’ he said. ‘The pessimistic side? It could take 10 years. I don’t believe it will take 10 years, because this country is too antsy to do that.’”

 

Florida Real Estate News, 11/7/2008

 

The Palm Beach Post reports from Florida. “In the past four decades, the Altman Cos. has profitably built thousands of apartments throughout the eastern half of the country. The developer’s foray into South Florida condos didn’t work out so well, however, and Boca Raton-based Altman Cos. has decided to go back to its roots as an apartment developer. Altman is trying to unload units at the Astor, where all 90 units were presold but half of buyers failed to close, and at the Harborage, where 49 of the 126 units are for sale.”

“At the Astor, it has cut prices that ranged from $300,000 to $700,000 during the boom to between $200,000 and $500,000 now. And today’s buyers get $20,000 in free upgrades, President Jeff Roberts said. At the Harborage, prices have plunged from $300,000 to $700,000 during the boom to a range of less than $200,000 to less than $500,000 now, Roberts said.”

“Mortgage broker Jennifer Bellis closed in April on a $360,000 unit at the Astor Condominium in Delray Beach’s Pineapple Park neighborhood, even though she realized its value had fallen. ‘Ultimately it will be fine,’ Bellis said. ‘I’ll just have to wait for a few years to get my money back.’”

“With the financial markets in turmoil and home prices continuing their descent to unknown depths, more and more home buyers are desperately looking for ways out of pre-construction contracts on new homes. Juno Beach lawyer Gary Nagle is handling a number of…lawsuits, just as he has for many other buyers of new condo projects throughout Palm Beach County.”

“Nagle said buyers are highly motivated to get of their deals any way they can. The condo units have lost so much value since pre-construction contracts were signed a couple of years ago that, in some cases, the lost value is much greater than the 20 percent deposit the buyers handed over as down payments.”

“‘It doesn’t take a math genius to figure out that you lose less money by not closing and just losing your deposit,’ Nagle said.”

“Meanwhile, the developer of a Davie housing community says its own lawyers are to blame for home buyers bailing on their pre-construction contracts. Here’s the alleged mistake: One part of the pre-construction contract requires only an estimated timetable for the homes’ completion.”

“Unfortunately, another part of the contract contains a two-year completion date from the date of the contract, the lawsuit says. That paragraph also contains a provision that nullifies the contract and requires the return of buyers’ deposits if the developer misses the two-year deadline, the lawsuit says. Some of the homes weren’t finished in the two-year window. And so because of the conflicting provisions, the developer has had to return buyers’ deposits, leaving Lakeside Village stuck with unsold property at quite possibly the worst ever period in the housing market.”

“‘They have to carry these properties now,’ said Lakeside’s attorney, Howard DuBosar of Boca Raton. ‘It’s devastating.’”

From CNN Money. “The housing crisis is driving unemployment, which in turn has exacerbated the housing crisis – particularly in bubble states like Florida, Nevada and Arizona. Jacksonville, Fla., resident Paula Seabrooks lost her mortgage brokerage company this year. She has worked in the industry since 2001, first as a contract underwriter for companies such as Wells Fargo. She then opened her own business. Her income dropped from nearly six figures in 2006 to less than $20,000 last year.”

“Seabrooks bought a $165,000 home in March 2006 and financed it with a hybrid adjustable-rate mortgage, which recently reset to 8.375% interest. ‘I thought I’d be doing well,’ she said, ‘I took the low rate, intending to refinance within two years.’”

“Seabrooks has a new job, but it pays only $38,000 a year. That is not nearly enough to afford her $1,400 monthly mortgage bill, much less make up the five months of missed payments and fees that now total about $11,000. She’s seeking a loan modification. Ironically, her new job involves handling applications from people seeking to refinance their own unaffordable mortgages into FHA-insured loans.”

“‘Every other loan application I get, it seems, either the wife or the husband is unemployed,’ Seabrooks said.”

The Sun Sentinel. “Coral Springs city commissioners have rejected the idea of the city entering the housing business. Instead, the city will use a $3,378,142 grant from the U.S. Department of Housing and Urban Development…for down payment assistance and repairs of about 50 to 60 homes that are currently owned by banks.”

“The focus of the program will be on foreclosed properties in the 33065 zip code area. ‘There is foreclosure activity happening all over the city,’ Assistant City Manager Erdal Donmez said. “There are 485 homes owned by banks in the city, while there are another 462 going through the final stages of foreclosure. The largest concentration of such homes is in the zip code 33065 area.’”

“The arrangement with CRA helps the city ‘accomplish more with less risk,’ City Manager Mike Levinson said. ‘The funds won’t be used for cleaning up foreclosed homes. The neighborhood stabilization program goes hand in hand with the foreclosure prevention program that we have implemented. We are doing the proactive stuff.’”

The News Press. “A proposed four-story condominium-hotel and its four-level parking garage on Fort Myers Beach are being met with caution by neighbors who worry the project could do more harm than good. The developers want to add the condo-hotel, which would have about 125 rooms, a parking garage that would hold at least 234 cars, a three-level marine building and retail space, according to plans filed by the developers.”

“John Gardner, who lives on Third Street…said about 25 residents of Third Street are worried the tall parking garage and condo-hotel will block their bay views and bring down their property values. ‘People whose houses appraised three years ago for $550,000 are not going to be appraised the same way when you have a parking garage next to it, and we’re concerned about that,’ Gardner said. ‘These are people’s retirement homes, that’s where they’ve placed most of their money.’”

The Petoskey Review. “Petoskey residents and visitors have long been subject to gazing at the hole at the entrance to the downtown corridor and wondering what went wrong? Lake Street Petoskey Associates development partner David Jankowski, of Grosse Pointe Shores, told city council members earlier this week that a new lender recently committed to the project, and that work at the Petoskey Pointe site — which stalled last year after previous financing was lost — likely will resume soon.”

“At one of the entrances into St. Pete Beach, a popular tourist destination in Florida, Jankowski is at the center of another dormant construction project. Corey Landings was to be another mixed used project like Petoskey Pointe. It too originally included condominiums, hotel and retail space. But when the housing market turned, the project was amended to become a hotel with retail space and a marina instead.”

“But similar to the hole in downtown Petoskey, the development site for Corey Landings is bare, years after the city approved the project. However, St. Pete Beach city manager, Mike Bonfield, said that there are a number of sites like that throughout the city and he said it is mostly the fault of a poor market. While the property was scheduled for foreclosure earlier this year, little has happened.’

“Bonfield said that he has also been told more than once that Jankowski was near to securing financing for that project but it has yet to materialize. ‘It appears they got into something that was over their head financially,’ he said. ‘Now they’re scrambling.’”

The Herald Tribune. “Four years ago, the County Commission and SBC Development negotiated an agreement for a 258-condo high-rise on Sarasota Bay — the first phase of a potential 1,658-home community called Long Bar Pointe. But because of the decline in the real estate market, not a single condo has been built or sold. The parkway extension that the commissioners thought SBC would have completed by the end of this year also has not been built because the money for it was to come from the condo sales.”

“On Nov. 18, the commission intends to amend the agreement to push back SBC’s deadline for the two-lane parkway to July 2019. ‘He’s put a lot of money out at our request,’ Commissioner Ron Getman said of SBC developer Larry Lieberman. ‘It’s an issue of fairness.’”

The News Journal. “The Volusia Home Builders Association — whose customers have been socked by more than $66 million in school impact fees over the past six years — filed suit this week seeking to have the practice declared unconstitutional. Impact fees are charged for every new home that’s built. In theory, new construction adds to the burden of educating additional students in Volusia County public schools.”

“But in reality, the school district has lost enrollment each of the last two years. About 2,400 fewer students attend this year than in 2006.”

“‘There is no need for the impact fee if new homes are not creating new students,’ said Stan Janzen, president of the association and Woodmark Construction Inc., Ormond Beach.”

The Orlando Sentinel. “Dead Winter Park developer Steve Walsh owes banks and investors $255 million, his creditors claim, but the lawyer for Walsh’s estate says they likely will never see a penny of it. Charles Stark, Walsh’s attorney, said the estate is worth less than $6 million, however, and that the Internal Revenue Service will take most of it. The claims that have piled up in probate court, Stark said, ‘may just be a waste of paper.’”

“Walsh shot himself in the chest behind his home June 25. As owner and managing partner of Broad Street Partners, he was one of the most prominent real-estate developers in Central Florida. In 2007, before the construction market crumbled, his company had projects in the works valued at nearly $1 billion. One of them, the high-rise Tradition Towers, would have built two 39-story condominium buildings on the site of the University Club in Orlando.”

“He was working on The Residences at Ravina, a $125 million condo development in downtown Maitland, and his company was one of the partners in The Carlisle, the four-story luxury condo proposed for downtown Winter Park that the city ultimately rejected.”

“Walsh’s good-guy profile, though, changed dramatically shortly after his death. One of his biggest investors, J. Steven Schrimsher, quickly filed a series of lawsuits, accusing Walsh of embezzling more than $20 million. According to the company’s pleading, Walsh would shift money without authorization from a partnership account set up for a specific development…and move it to his own business account, where he spent it.”

“Schrimsher also is fighting to get control of Walsh’s three homes: a $1.4 million house in Winter Park; a $2.6 million, 16-acre estate in Highlands, N.C.; and an $800,000 home in Charleston, S.C., owned by a company that Walsh served as registered agent.”

“‘We have financial evidence that the money was, indeed, converted. That we can confirm,’ said Schrimsher attorney Carla DeLoach Bryant. ‘Now, where it all went is part of an ongoing investigation.’”

The Bradenton Herald. “Philip Coon entered a Tampa federal courtroom on Wednesday to accept his responsibility for helping to bring about the collapse of Bradenton-based Coast Bank. Dressed in a gray suit and tie, the heavy-set, silver-haired man entered a guilty plea before federal Magistrate Judge Mark A. Pizzo for his part in skimming hundreds of thousands of dollars off the tops of loans he issued through Coast Bank via an aggressive lending program.’

“The plea agreement Coon signed beforehand with prosecutors acknowledged that he schemed with another individual — John Robert Miller, the president of American Mortgage Link — to add an extra percentage point to home loans financed by defunct Coast Bank and then split the proceeds. With those proceeds, Coon bought things like a $21,000 grand piano, nearly $40,000 worth of jewelry and a home for his brother-in-law, according to the plea agreement.”

“‘Did you conspire with another to defraud Coast in the exercise of a scheme for providing, essentially, a kickback for providing mortgages?’ the judge asked Coon prior to accepting his guilty plea. ‘Yes sir,’ Coon replied.”

“Coon had been the head of construction loans at Coast Bank and was known as a high producer. Many of the loans he issued were for homes being constructed by a builder who eventually claimed bankruptcy. Coon used Miller’s mortgage company to funnel the kickbacks into the account of a shell company. Miller has pleaded guilty to his part in the crime and will be sentenced in January.”

“Coast Bank ended up with $110 million in loans to 482 borrowers, many of whom held mortgages on homes that weren’t completed or never started. Shareholders of Coast Bank’s holding company had lost millions by the time they sold to First Bank at a fire sale price.”

“Philip W. Coon sat down Wednesday in federal court, adjusted his tie, put on his glasses, took a hit of breath spray and was ready to begin serving time. Coon, the former executive vice president at Coast Bank in Bradenton, wanted to plead guilty to conspiracy to commit wire fraud and money laundering and start his sentence right away.”

“But he needed a deal — if he found county jail too rough, he could post bond to get out and await his assignment to a less-oppressive federal prison. Magistrate Mark A. Pizzo demurred. He would let Coon enter county jail to begin marking time, but the former banker could not seek release if he did not like the conditions.”

“Coast executives fired him in February 2007 after he refused to cooperate with the bank’s investigation into the loan scam. The bank also fired Melissa Coon, his wife, who was head of retail lending. Coon will lose his Bradenton home, a second house, brokerage accounts, jewelry and other items to pay $1.5 million under the plea agreement. Miller, who pleaded guilty earlier, must pay a similar amount.”

“The judge suggested that Coon listen to his attorney, James E. Felman, who wanted his client to wait until formal sentencing to a federal prison. ‘I’ll take my attorney’s advice,’ said Coon, who had brought along a change of clothes in a bag emblazoned — perhaps appropriately — with the logo of broken mortgage giant Fannie Mae.”

“As for Coon’s attempt to immediately start his sentence, it was a new one for his lawyer. ‘I’ve never seen it before,’ Felman said after the hearing.”

 

Florida Real Estate News, 11/1/2008

 

The St Petersburg Times reports from Florida. “Tampa Electric lost more customers than it added in the third quarter, an unprecedented reversal that slashed the utility’s profits and promises to delay power plant building. ‘We’ve never seen this since I’ve been working at Tampa Electric,’ said Gordon Gillette, who has been with the company for 26 years. Vacant and foreclosed homes turned out the lights, and fewer new customers replaced them, Gillette said.”

“‘A lot that got built, as we know now, turned out to be vacant properties, but they had electric meters,’ Gillette said. ‘We counted those properties as they were getting built as new customers. But guess what: Nobody moved in.’”

The Tampa Tribune. “Tampa Bay area builders are constructing fewer homes and struggling to increase demand among buyers. Builders started construction on 1,155 single-family homes in the third quarter, a decline of 30.8 percent from the same quarter last year, according to Houston-based housing consultant Metrostudy.”

“Tony Polito of Metrostudy’s Tampa division, attributed the low buyer demand to Florida’s job losses. Single-family housing inventory – homes under construction, finished vacant homes and model homes – totaled 5,778 units at the end of the third quarter. It would take nine months to sell all those homes at the current pace, Metrostudy said.”

“There were 959 lots delivered to the Tampa market during the third quarter, compared with 3,411 lots during the third quarter of 2007. That brings the total vacant lot inventory to 31,451 units. It would take 72.9 months to sell all those lots, an increase of 31.5 months compared with last year, experts say.”

The Herald Tribune. “Swamped by millions of dollars in sour loans, Freedom Bank of Bradenton was shut down Friday by banking regulators. Freedom is the second Bradenton bank to fail this year, falling three months after First Priority Bank. It is the nation’s 17th bank failure of 2008.”

“‘In my 27 years in Florida banking, I don’t think I can recall two banks failing in the same year in the same town,’ said Sarasota banking consultant Tramm Hudson.”

“Hudson said a number of Florida banks got too caught up in rapid growth and aggressive lending. ‘When the economy tanked, it caught up with them,’ he said.”

“Bradenton is not the only city to have two bank failures this year. Two banks in Alpharetta, Ga., have been closed by regulators.”

“Foreclosures in Sarasota County spiked to a record 1,437 filings in September, a 39 percent spike from the previous month, data released by RealtyTrac Inc. showed. Meanwhile, Florida’s foreclosure rate rose 9 percent in September when compared with August, leap-frogging Arizona and California to the No. 2 spot. There were foreclosure proceedings started on 47,956 Florida properties, an increase of 44 percent.”

“The federal government is mulling a sweeping plan that could help 3 million homeowners avoid foreclosures. There are, of course, many unanswered questions at this point: How would a home owner qualify? Would homeowners be rewarded for going late on payments by this system? What would happen after five years?”

“Ritch Workman, the president of the Florida Association of Mortgage Brokers, had some of the same questions. ‘Do I go late to take advantage of this?’ Workman asked. ‘Are we actually encouraging people to go late to take advantage of this?’”

The Irish Times. “The contest between Barack Obama and John McCain in the state is too close to call, but Democrats believe they could be on the verge of flipping Florida into their column as part of a dramatic political realignment across the country. After years of extraordinary population growth when more than 1,000 people moved to Florida every day and property prices soared, the state’s housing market has collapsed and unemployment is at its highest level for 14 years. Gleaming new office buildings in Orlando stand almost empty and blank storefront windows advertise vacant retail space.”

“Obama has held massive rallies throughout Florida this week. Despite the cheerful mood in Kissimmee, Florida is going through hard times and the signs of economic hardship are everywhere. It was just after 8pm but Trastevere, a little Italian restaurant in downtown Orlando, was already deserted and Jeanie Crawford would soon be heading home with her meagre haul of tips. Crawford was riding high until a few months ago, working for one of America’s biggest mortgage lenders until the bottom fell out of Florida’s housing market.”

“‘I used to work for Countrywide, now I’m here waiting tables,’ she says. ‘I’m 33. I stopped waiting tables when I was 23, but now it’s all I can get.’”

The Palm Beach Post. “Republican presidential nominee John McCain’s $300 billion proposal to buy and restructure the troubled loans of individual homeowners would help as many as 1.7 million Floridians, his campaign said today. With Florida essential to McCain’s presidential hopes, the McCain campaign had U.S. Sen. Mel Martinez and former Housing and Urban Development Secretary Jack Kemp tout McCain’s plan in a conference call with Florida reporters.”

“‘Until we do something about the price of homes, until the home ownership crisis abates, we will not see the recovery in our overall economy,’ said Martinez.”

“Obama’s campaign slammed McCain’s proposal. ‘John McCain wants the government to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don’t recover. The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud,’ said Jason Furman, the Obama campaign’s economic policy director.”

“No need to put a fright mask on these numbers: Nearly one in three Florida mortgage borrowers owed more on their loans than their homes were worth in the third quarter. Fully 1.2 million of Florida’s 4.2 million mortgages – 29.2 percent – were upside down, said First American CoreLogic.”

“‘There’s a large percentage of very vulnerable homeowners,’ said Sam Khater, senior economist at First American CoreLogic. ‘If they lose their job, if they run into some kind of health problem, or divorce, they might just walk away.’”

“Palm Beach County’s jobless rate has doubled in the past two years, while St. Lucie County unemployment has hit double digits. ‘The results show what we’ve been talking about anecdotally,’ said Jack McCabe, a real estate analyst in Deerfield Beach. ‘A lot of people are upside down, and a lot of people took out highly volatile mortgages.’”

Time Magazine. “Today in the greater Miami area, there are 110,000 single-family houses, condos and townhouses for sale. Some 55,000 new foreclosures were filed in the first nine months of this year, and an additional 19,000 properties were taken back by lenders.”

“Miami developers threw up some 23,000 units beginning in 2003, many of them bought by speculators who thought they could flip them for a quick profit. ‘Our best guestimate — and we’ve talked to lenders and developers — is that you will not see a residential construction crane in the sky in downtown Miami for a generation,’ Peter Zalewski, a real estate broker, told TIME. ‘Well, at least seven years,’ he said before modifying his forecast yet again. ‘Let’s go with a decade,’ he finally concluded.”

“Zalewski is looking at purchasing a 1,800-sq.-ft condo with floor-to-ceiling windows overlooking the waterfront in a place just north of Miami. That unit sold to a speculator for $940,000 in 2006. The bank is asking $389,000 but will probably settle for $300,000, he says.”

From Shorelines.com. “As the city increases its efforts to crack down on substandard rental housing in the Mayport Road corridor, Assistant City Manager David Thompson is trying to implement a new system. ‘Now, when someone calls the city, staff typically views that as a civil matter. There is no process in place for the city of Atlantic Beach to do something about it,’ said Thompson. ‘We’re going to start out by identifying the targeted areas. The Mayport corridor is the worst.’”

“That’s the area the city has focused on cleaning up this year because of substandard rental units and associated crime due in part to those housing conditions. But the biggest problem, Thompson said, is that many property owners have ‘accidentally’ become property managers. Many bought property with the intention of ‘flipping’ the property, or selling it , shortly after the purchase. But the slumping housing market has prevented sale of those properties, he said.”

“‘Some of these people don’t know how to manage property. They don’t know how to do an eviction,’ Thompson said.”

The Orlando Sentinel. “Metro Orlando’s apartment market tightened a tiny bit this past spring and summer, as the vacancy rate declined slightly to 10.4 percent by September, according to a recent local survey. There are signs the trend may not last because the region’s population growth is stalled and job creation is all but flat.”

“Another 3,699 units were under construction. Charles Wayne President Jim Lewis said that, during the past six months, another 11 condominium-conversion projects — ‘most with low occupancies’ — had returned more than 1,300 unsold condo units to the area’s rental pool.”

“The tightest apartment market on record for the region was in March 2006, when the vacancy rate sank to 3.6 percent. At the time, thousands of rental units were being converted to condominiums and put up for sale as complex owners sought to cash in on the soon-to-end boom in housing sales. Many of those condo projects have since returned to the apartment market as sales collapsed.”

The Herald Register. “In July, Land Resources Companies of Orlando, Fla., parent company of Roaring River, a proposed 4,300-acre, master-planned community in Fayette County next to the New River Gorge National River, closed its Fayetteville office and laid off all of that office’s employees. Friday, the company announced it and 34 of its affiliates and subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code.”

“‘I am presuming this does affect the Roaring River project and its lot owners,’ Fayette County Commissioner Matt Wender said.”

“‘We deeply regret the impact the Chapter 11 filing will have on property owners, vendors and employees,’ Land Resource CEO J. Robert Ward said.”

“Approximately 80 lots have been sold as part of the housing development. In July, a groundbreaking ceremony for water and sewer services was scheduled, then canceled. ‘I’m very concerned about the lot owners who purchased lots, but can’t build on them,’ Wender said. ‘Without that infrastructure, the lot owners can’t obtain building permits to build on their lots. Now, it appears that they can’t get their money back, either.’”

The News Press. “While there are no statistics, agents say baby boomers accounted for a large portion of the 746 existing single-family homes sold in September with the help of a Realtor. Those numbers are up from the 338 sold in January when declining home values started to give the market a kickstart, according to statistics collected by the Florida Association of Realtors.”

“September’s median sales price for a single-family home was $141,400, less than half the all-time high of $322,300 set in December 2005. Agent George Patton in Cape Coral (said), ‘We’re selling more houses now than we did in ’05,’ many of them to arriving boomers. ‘The average sales price is $90,000,’ Patton said.”

“Boomers likely will be buying here in substantial numbers at least until there’s a balance between supply and demand so prices can stabilize, said Michael Timmerman, a Naples-based senior associate with Fishkind & Associates, but ‘that may take awhile.’”

“Meanwhile, the boomers’ interest is a welcome stimulus to a market with about 14,000 unsold houses.”

“Timmerman said the uncertain future on Wall Street may be persuading some people to buy homes here.They say, ‘I can either keep my money in the stock market and watch it go down or I can buy real estate at the bottom and hopefully it’ll come back up,’ Timmerman said.”

The Keysnet. “Conceding the city had fallen behind, Key West Planning Director Amy Kimball-Murley on Thursday sat down with city commissioners in a special workshop to discuss a revised building permit allocation system. It’s in response to a February court ruling that said the city’s previous rate-of-growth ordinance, known as ROGO, had expired and could no longer be used to allocate permits.”

“As for ROGO itself, commissioners on Thursday expressed concern that permit allocations already issued have become commodities traded on the open market. Commissioner Clayton Lopez said that he thinks some people are hoarding allocations. But citing the economic and real estate downturn, Mayor Morgan McPherson said people sitting on ROGO allocations is not a big concern, joking, ‘If anybody wants to write a check for one today…. You’d get a heck of a deal. They are a commodity. They will be in the future.’”

 

Florida Real Estate News, 10/28/2008

 

The Naples News reports from Florida. “In Collier County, it’s the more affordable communities that have been hurt the most. From Jan. 1 to Oct. 8, the county had 1,500 final judgments for mortgage foreclosures on single-family homes, with a total mortgage balance of more than $522 million, according to a report. Construction workers and real estate agents have been hard hit in Southwest Florida. They are among the hundreds who have lost their homes this year in Golden Gate and Golden Gate Estates. Tony Perez, a real estate agent in Naples, is working with a seller in Golden Gate Estates who has seen his work dry up with a pool company and has fallen behind on his mortgage payments. With creative financing, many buyers put no money down and got into homes they couldn’t really afford, Perez said.”

“‘If you lose your job and you have 100 percent financing on your house, your chances of staying in the house are pretty slim,’ said Rick Parlante of the Parlante Group with Coldwell Banker Residential Real Estate in Southwest Florida. ‘They are walking away from it. That is what is happening.’”

“Investors in Golden Gate and Golden Gate Estates have also been hurt by plummeting values and sluggish sales. They are abandoning mortgages they can’t or don’t want to pay. ‘A lot of people got caught up in this. A lot of good Realtors got caught up in this,’ Parlante said.”

“There haven’t been any judgments this year in such wealthy communities as Port Royal or Aqualane Shores, where there are multimillion-dollar mansions, said Naples real estate expert Ross McIntosh. If the economy doesn’t improve soon, however, more expensive homes could fall into foreclosure.”

“‘People aren’t prepared to go five years without any income, whether they make $50,000 or $500,000 a year. When the spigot gets shut off, sooner or later you lose your house,’ McIntosh said.”

The News Press. “The Lee County court system is ramping up its processing of foreclosures – good news for neighbors of some abandoned homes but carrying with it an added risk of driving down prices in an already declining market. The system has a backlog of 29,000 cases, the result of about 2,400 foreclosures filed per month.”

“The real urgency in speeding things up is that many of the homes being foreclosed on in Lee County are decaying as vandals, mold and heat take their toll, county Clerk of Court Charlie Green said. ‘How long do you want to stretch this agony out?’ he said. ‘You don’t want those properties out there decaying.’”

“Others are less enthusiastic. ‘I would much rather just stay the course,” said Elmer Tabor, owner of Wonderland Realty in Cape Coral. ‘If all of a sudden we get a huge supply that starts coming out of the court system, if anything that’s going to drop (prices) further.’”

“With about 15,000 houses already on the market, a surge in supply could drive down prices and make it less attractive for even solvent home owners to continue paying their mortgages, he said. The median price of an existing single-family home reached a peak of $322,300 in December 2005 at the height of the housing boom but had fallen 56 percent to $141,400 in September, according to the Florida Association of Realtors.”

“One property owner in a foreclosure-plagued condominium said he’d like to see things speeded up so lenders will take back the homes they’re foreclosing on and start taking care of them. Bill Davis has a second home in the Renaissance condominium in Fort Myers. Lenders have filed foreclosure actions on 20 of the project’s 112 units in the past two years and 11 are pending, according to clerk of court records.”

“As a result, Davis said, fewer of the owners of Renaissance’s 112 units are contributing to the complex’s upkeep and some have fallen into disrepair. ‘We’ve got a few that are pretty bad’ with serious mold problems but nobody’s taking responsibility for them, he said.”

“Property owners are protesting the value of more than 6,700 parcels in Lee County, down about 21 percent from last year’s record. Debra Swain invested in a $48,000 foreclosed San Carlos Park property this year, but the county valued it at $161,540. ‘That is a little far-fetched in my mind,’ said Swain, who thinks a value less than $100,000 is more reasonable, based on her research.”

“Pat Mitchell moved into her home in Harlem Heights in 1986. This year the county appraised the property at $189,000, down about $6,000 from last year. ‘I say it should come down at least $30,000 or $40,000,’ Mitchell said. ‘These taxes are killing me,’ said Mitchell, who will pay about $1,300 this year. Ten years ago she paid $292.”

From Reuters. “At the height of Miami’s condo construction boom, a stretch of South Dixie Highway south of the city was the place to be for a painter or drywaller looking for work or a contractor looking for workers. But those days are long gone. Subcontractors like Alex Soto, a flooring and carpentry specialist who once worked on fancy condo towers in the Brickell banking district and on the Miami River, are scrambling for a few days work each month.”

“Where he once pulled down $2,000 to $3,000 a week, Soto said he is lucky to make $1,500 a month and might get one week of work. ‘The other weeks I am looking for work,’ he said. ‘The situation is desperate.’”

“The market is so choked with hungry workers that a bathroom installation for which Soto once charged $1,500 to $2,000 now brings $300. ‘People are working for nothing. Just to survive.’”

The Sun Sentinel. “Home and condo buyers are scooping up South Florida bargains, priced low to sell by desperate homeowners and banks overwhelmed with foreclosure properties. Agent Sharon Castrillon-Harrington said she was recently showing a Canadian buyer homes in South Florida for $280,000 to $325,000. It was difficult to compete with bank foreclosures in the neighborhood, priced around $130,000. ‘They’re just putting them on the market at the lowest price possible and dumping them,’ she said.”

“Condominium sales also saw a marked increase. Broward sales were up 38 percent in September, to 549 from 397 a year ago. The median price fell 26 percent, from $174,600 to $129,600. Palm Beach County’s existing-condo sales were up 35 percent for the month, to 487 from 360. Median condo prices fell 22 percent from $180,000 to $139,800.”

“Broward County had 38,319 homes and condos on the market in September, down 5 percent from 40,297 last September, according to the Keyes Co. Palm Beach County had 32,334 properties for sale in September, down 12 percent from 36,785 a year ago. ‘The system cannot recover before foreclosure activity works its way through the system,’ said David Dabby, a housing consultant in Coral Gables. ‘It’s just the beginning stage.’”

From Florida Today. “Speculators or ‘flippers’ unable to keep up maintenance fees and mortgages and buyers given loans they couldn’t afford have spiked the number of condominium foreclosures in Brevard County. As a result, associations have to make up the shortfall in monthly assessment fees from the remaining members or forgo some maintenance and repairs.”

“‘One of the misconceptions is that it’s a carefree, maintenance-free living,’ said Gary Poliakoff, an expert whose column appears in FLORIDA TODAY. ‘When other owners are not able to meet their obligations, the ones who are paying have to meet the shortfall.’”

“Under Florida statute, a bank that acquires a property through a foreclosure is liable for regular and periodic assessments that became due during the six months before the mortgage acquisition or 1 percent of the original mortgage, whichever is less. ‘What we’re running into now is the banks are saying we’re not going to pay anything,’ said Bill White, chairman of Community Association Institute’s Florida Legislative Alliance.”

The Orlando Sentinel. “Statewide, more than 21,000 jobs were lost in July from the previous month. In mid-August, Linda Nagle, executive director of the Home Builders Association of Lake County, said it was hard to find any homes being built in Lake County. ‘There is virtually nothing,’ she said.”

“Don Magruder, general manager of Ro-Mac Lumber & Supply Inc. in Leesburg…(added)…that the subprime mortgage meltdown has contributed to the slowdown. ‘The root cause of this is that housing has gotten so unaffordable that people had to go to exotic mortgages,’ Magruder said. ‘So now you have a desperate situation where they can’t pay back the loans.’”

The Pensacola News Journal. “There is growing tension between hotel and motel owners and condominium associations. As consumer dollars shrink, and the number of rooms available for nightly rental grows, condos and hotels are going head-to-head, forcing down nightly rental rates in the process. ‘I’m frustrated because from the hotels’ standpoint, condos are soaking up a lot of our business,’ said Beverly McCay, manager of Holiday Inn Express on Pensacola Beach.”

“At the heart of the matter, says McCay, is the decision by several large beach condos starting to offer owners’ rooms on a nightly basis, rather than weekly or longer. While hotel owners are complaining, condo rental agents are losing business to the fast-growing Web site, Vacation Rentals by Owner. On that site are hundreds of local condos available for rent at highly negotiable prices.”

“‘VRBO is really hurting the rental agencies out there,’ McCay said.”

The Herald Tribune. “Some Realtors have advised would-be home sellers that if you don’t have to sell your residence now, don’t try. Helen Sosso is taking a different approach. The owner of Prudential Palms Realty, a long-time observer of the Sarasota housing market, has picked now to put her highly customized, 6,500- square-foot Bird Key home on the market for $6.3 million. Given the current high inventory of homes and the dismal national economy, why would she do that? What does this woman know that you don’t?”

“Sosso isn’t naïve about residential competition in trying to sell her Mediterranean-style, two-story home, so she’s adhered to a proven strategy that she recommends to others seeking a sale with a satisfying financial result. ‘Have your home independently appraised and then price your house under the appraised value,’ she advised.”

The St Petersburg Times. “After an 8-year run as one of the region’s best-regarded builders, Tripp Trademark Homes is calling it quits. Company founder Doug Tripp, a former Pulte Homes president who branched out on his own in 2000, said he can no longer afford to sell houses at a loss.”

“‘We’re going to walk away from this with our reputation intact,’ said Tripp, who has spent the past month clearing debts with banks and contractors. ‘There isn’t a builder out there that’s making a profit.’”

“Tripp said this is the worst housing slump in his 32 years in the business. Sales tanked in previous real estate recessions, but he’s never seen housing values plunge 30 percent. Blame falls mostly on the investors who created ‘false demand’ in 2004 and 2005, he said.”

“Tripp admits he made a mint in the building boom and points to a group photo on his conference room wall. There, he stands with his sister, wife, brother, nephew and mother-in-law: All were employees. ‘It’s really killing me. I’ve got to throw out my ‘For Sale’ signs,’ he said. ‘What do I need them for?’”

 

Florida Real Estate News, 10/23/08

The Herald Tribune reports from Florida. “Phil Coon wanted the money. ‘The extra income. Pure and simple,’ said James E. Felman, Coon’s attorney, explaining the former Coast Bank executive’s motive for an illegal lending scheme that will send him to prison. ‘Simply stated, it was the most stupid thing he’s ever done in his life, a productive and admirable life,’ Felman said. Coon admitted in a plea agreement with federal prosectors last week that he conspired to commit wire fraud and money laundering.”

“In 2005 he made a $100,000 salary and $308,000 in commissions. Coon used the illegal proceeds to travel and buy real estate, jewelry, a piano, clothing and wine, the plea agreement states. He also contributed to a church and supported family members. Now, he will forfeit his Bradenton home, a second house, brokerage accounts, jewelry and other items to pay $1.5 million under the plea deal.”

“‘He will be penniless as a result of this,’ Felman said.”

The Palm Beach Post in Florida. “A West Palm Beach condo conversion is home to more foreclosures than any other condo project in South Florida. In one foreclosure, Selma Fuentes in 2006 paid $170,900 for a 731-square-foot unit at Ponte Verde and took a mortgage for the entire amount, property records show. Her lender filed foreclosure proceedings last month. The condo now is listed with an agent for $59,000.”

“‘Investors went out and bought tons of units thinking they were going to flip them and make money,’ said Debbie Smith, head of Home Run Real Estate in Greenacres.

“Fuentes hopes to do a short sale of her unit, said her agent, Eddy Vieira. He has slashed the price but has sparked no interest. ‘I’m not getting a single call,’ he said. ‘It’s unbelievable.’”

The Wall Street Journal on Florida. “Jorge Pérez is (the) CEO of Related Group, the biggest condo developer in south Florida, and perhaps the greatest optimist in brazenly overbuilt Miami. Having borrowed more than $1 billion to erect soaring towers in downtown Miami, he is scrambling to sell thousands of condos amid the deepest market swoon in decades.”

“Yet the 59-year-old entrepreneur — a fast talker whose marketing flair evokes comparisons to Donald Trump — also has emerged as one of the most aggressive buyers of condos on the cheap, starting with units in one of his own buildings.”

“Mr. Pérez has plenty more condos to market. Within blocks of each other on Miami’s prestigious Brickell Avenue, Related this year has opened two projects totaling some 1,600 condos. Its landmark three-tower, 1,800-unit complex, Icon Brickell, is soon to start taking residents. Mr. Pérez has other large projects in the works outside of Miami, and the rate at which buyers are walking away from deposits is higher than expected. ‘I may end up having to hold 1,000 units,’ he says.”

“Real-estate experts and rival developers are watching to see if Mr. Pérez will be savvy enough to emerge whole from a challenging predicament. ‘Miami is so flooded with product that even at 50 cents on the dollar, most of it doesn’t work as rental,’ says Lewis Goodkin. ‘If anybody can do it, Jorge can.’”

From Reuters on Florida. “Long before she filed for bankruptcy, Ann Neukomm was ‘under water.’ Like Neukomm, many people got into trouble by refinancing mortgages to pull out cash when rising property values made it seem like an almost risk-free deal. She ended up filing for bankruptcy in May after failing to keep up with mortgage payments on her home in Cape Coral, a once-booming town in southwest Florida.”

“‘It’s a dirty word,’ said Neukomm of her bankruptcy and personal feelings of failure. ‘Nobody wants to say it.’”

The Cape Coral Daily Breeze. “Cape Coral is…due to receive about $7.1 million in federal grant money to rehabilitate and redevelop foreclosed property. The median sales price for the Cape Coral-Fort Myers metro area is $146,900, down 41 percent from the August 2007 median sales price of $250,800, according to the Florida Association of Realtors.”

“Councilmember Bill Deile …wants to guard against providing assistance to people who cannot afford to stay in the home. He pointed to federal government policies that made it easier for low-income families to get a home mortgage as a reason for the current housing crisis.”

“‘I don’t want to see us duplicate the same mistakes,’ Deile said.”

The News Press from Florida. “There are 2,644 residences seized by lenders and offered for resale on the Multiple Listing Service in Lee County, said Steve Koffman, an agent with Century 21 Sunbelt. Jack McCabe, a Deerfield Beach-based real estate consultant who tracks the area’s home market, said sales of foreclosed houses are picking up all over the state. Often, he said, the houses have been stripped by vandals or by their former occupants.”

“At one, McCabe said, they’d ‘ripped the plants out of the ground’ and took them, along with items such as the bathroom vanity and light fixtures.”

The Naples News in Florida. “Economic forecasts are only necessary to make astrologists look good, a Florida economist told a room full of Naples business leaders Tuesday. Hank Fishkind then began interpreting constellations of economic charts, including rising unemployment claims, slowing population growth and a glut in real estate inventory.”

“Fishkind offered this prediction: 24 months of recession that he believes started at the end of 2007. Fishkind’s predictions haven’t always panned out. ‘I argue that housing has stopped going down. It is weak. It is painful, but it is not going to get any worse,’ Fishkind said in May 2007, the Sarasota Herald-Tribune reported.”

Voice of America on Florida. “Tammy Graham sells houses in the city of Lakeland, Florida. The real estate agent says many people who bought homes in recent years here using sub-prime loans are now facing foreclosure. ‘I’ve had people ask me, you know, ‘I’m having problems feeding my children,’ Graham said. ‘Should I stop paying my mortgage?’ And that’s a sad state of affairs.’”

The Orlando Sentinel in Florida. “Fewer than half of Orlando’s hotel rooms were filled in September. Occupancy in the Orlando market was 45.9 percent last month, compared with 51.1 percent in September 2007, according to data released Tuesday.”

“Revenue per available room, a key industry measure, was down 11.9 percent from a year ago. ‘That was probably one of the worst Septembers we’ve ever had,’ said Mark McHugh, chairman of the Orlando/Orange County Convention & Visitors Bureau. ‘As bad or worse than 9-11.’”

“Orlando was just one of several large hotel markets that recorded double-digit percentage declines in occupancy rates — Nashville, Tenn.; Virginia Beach, Va.; and the Tampa-St. Petersburg areas were among the others.”

“Orlando’s west Kissimmee submarket, just south of Walt Disney World, was hit the hardest: Its occupancy rate was slashed by nearly a third in September, from 44.5 percent of all rooms a year earlier to 30.9 percent. ‘The year started out very strong,’ noted Scott Smith, a lodging instructor at the University of Central Florida’s Rosen College of Hospitality Management, but now ‘it’s really falling way behind.’”

From Tallahassee Democrat in Florida. “In a talk he gave at the College of Business at Florida State University this month, Bank of America Market President Mike Fields recounted the events that have rattled Wall Street and undermined credit markets. ‘I think this is a critical, critical issue and it’s something you all ought to watch carefully,’ Fields told the business students. ‘Today capital is absolute king.’”

“The aftermath of the financial crisis will be lenders getting back to basics. ‘You really don’t want to loan money to somebody who can’t pay it back,’ Fields said. ‘Now there’s a novel thought, but apparently we kind of got away from that.’”

Marion County is Toast.

Back in June, on my site, www.ocalamarionhousinginfo.com, I wrote a somewhat upbeat piece on Ocala/Marion County and real estate in general. I based my conclusion on the fact that at that time, deed transfers for Single Family Homes (SFH) had been level for about a year, at approx 400 to 450 per month. Well a lot has happened since then, with both the local and national economy, and as it turns out I was totally wrong. Deed transfers for SFH’s in October were 180. I believe we, Marion County, are toast.

 

Just a word on the present financial mess. Anyone who has known me for the last 5 years will tell you that I was alarmed about the bubble building in housing and when it popped, the problems spilling over into the general economy. I was in the minority, but there were many people who agreed with me. How is it possible that a few guys, in little old Marion County saw all this several year ago and the powers that be in Washington and Wall Street, including the esteemed Alan Greenspan, missed it??

 

Either they are completely stupid or we are being played big time. It’s probably both. There is evidence that the Wall Street guys saw all this and grabbed as much as they could before “this whole house of cards collapses”. This quote is from an internal email the FBI recovered from one of the failed “financial institutions”, I think it was AIG.  

 

I was watching the House of Representatives discussing aspects of this crises and subsequent bailout and I think I know where the stupidity comes from. These guys are clueless.

 

But this is about Marion County. First, let me say, as a Business Broker and Business Consultant, this is not your Fathers recession, at least not here. Normally, new car sales will slow and tire sales, auto repair shops and the like will notice an increase in business as people keep their cars instead of buying new. Not so this time. The higher end restaurants will notice a slowdown but the fast food and lower end restaurants, pizza shops, sub shops, etc will notice an increase. Not so this time.

 

Business is down across the board in Marion County from 20% to 50%. This situation should ease up as more business fail and the remaining ones will notice an increase. This has not happened yet. Visit our restaurant graveyard on State Road 200. Its likely more restaurants will fail before that market stabilizes.

 

Marion County is getting hammered for several basic reasons. First, our main industry has been growth. People, selling their house up north and moving here and buying a new one, bringing wealth from somewhere else, here. Well, if you can’t sell you house in Philly, you ain’t moving here.

 

Secondly, we really have scant or no other strong base. The coasts and Orlando have the tourist draw, which is down somewhat but it mitigates their loss of the growth element. We don’t have squat. The front page of the Ocala Star Banner, Monday, October 20^th said it all. Our unemployment is 8.5%, Alachua is 4.6% , the State is 6.6% and the National Rate is 6.1%.

 

Try to find a job here. You can find something, if you are willing or if you can live on minimum wage. Look at Ocala4sale.com. Lots of ads from people looking for jobs. Most sound desperate.

 

To elaborate on our economic base, we have very little in the way of manufacturing and we do our best to scare off job generators like WalMart. We have no Industrial Park and we seem to be hostile to anything of that sort. We’ve squandered opportunities in the past that would surely soften the recent blows we have, are and will continue to take from this nasty down turn.

 

As a Business broker, I can tell you that the segments that are making money are businesses that, provide goods and services to the government, local, state or federal and those that are medical based. Please  don’t pick my analysis apart with, “I know this restaurant or tire place that’s doing good”. There are some businesses that are doing very well, but they are the exception. The present economic problems will “thin the heard” and the survivors will thrive again. It just hasn’t happened yet.

 

That being said the big question is when? Who knows. 4^th Q of 2009? That is being tossed around, but I doubt it. It will be a very long time before Marion County “recovers”. And how do you define “recovery”? Will we be back to the heady days of booming building and real estate sales? Not for a long time. And remember, building and real estate, or growth was our big industry.

 

So what are we left with? Mayberry. We are and will remain a small town. We have some advantages, like being on the I75 corridor, but my prediction is that we will revert back 10 years or so to the economic level of the 1990’s. That wasn’t so bad. I made a lot of money here in the 90’s.

 

We have to stop deluding ourselves with the notion that everyone wants to move here. They don’t. A lot of people, myself included like living here, but what is here to draw families and professionals, other than those in the medical field? Nothing.

 

“Hey, come on down and enjoy our 8.5% unemployment, lack of industry and no opportunity.”

 

It is likely that Marion County’s population growth rate will slow considerably. My personal opinion is that we will lose population. Did you know that aprrox 1,000 less kids enrolled for school this past August? Did you know that in the past year, some Florida Counties LOST population, including Broward County? With our 8.5% unemployment likely to grow, people, families will leave ,seeking jobs in other states. And there are jobs in other states.

 

To conclude, Paul Krugman, an economics professor, wrote, in the New York Times, of October 16, 2008 in an article entitled “Let’s Get Fiscal”: “It’s now virtually certain that the (national)unemployment rate will go above 7 percent, and quite possibly above 8 percent, making this the worst recession in a quarter-century.”

 

We’re way ahead of ya’, Paul.

 

 

 

Florida Real Estate News, 10/17/08

 

The St Petersburg Times reports from Florida. “Nearly half of the people who bought homes in the Tampa Bay area in the last five years owe more than their home is worth. The story is even worse for those who bought at the market’s peak in 2006. More than 70 percent of those buyers in Tampa and St. Petersburg now have negative equity, according to Zillow. ‘We don’t have anything left,’ said Darryl Outlaw, who estimates that he and his wife owe at least $50,000 more than their Dover home is worth.”

“The couple have burned through their savings and a second mortgage they took out to pay bills. They figure it’s only a matter of time before they lose their home. ‘I never thought I’d be in this position. We’ve always made good financial decisions. My mortgage is at 5 percent, and we’ve never lived beyond our means. I just can’t find work. Our only options now are to sell or walk away,’ he said.’”

“Mike Kelly has a front-row seat to the crisis. As a mortgage broker, it’s his job to get people the money they need to buy houses. These days, Kelly spends most of his time trying to get people money so they can keep their houses. He understands their plight; he also owes more on his Seminole home than it’s worth. ‘We’re way upside down,’ said Kelly. ‘But not quite as bad as others.’”

“He blames his situation on greed. Kelly bought his home in 2002. Two years later, the 3-bedroom, 2-bath with a pool was appraised at $310,000, he said. Its current market value is $240,000, about $50,000 less than he owes. A few years ago, he and a partner decided to play the flipping game using his home equity. The pair did well with a couple of properties. But the last one —- a condo conversion at Lake Seminole — bombed. They got $105,000 less than they paid.”

“But Kelly said he’s not giving up yet. ‘I’m not walking away,’ he said. ‘I’m not going anywhere.’”

The Palm Beach Post. “Warrants have been issued for the arrest and detention of Merco Group executives Tony Castro and Homero Meruelo Jr. after the two men failed to appear at depositions linked to the failed Palladio Terrace condo project. The luxury condominium in West Palm Beach was never built.”

“For the past two years, though, Miami-based Merco Group has refused to return $10 million in buyer deposits. Earlier this year, Merco consented to a $1.9 million judgment in a case filed by several Palladio buyers. Despite the judgment, the would-be buyers have not been able to collect, said Greg Pill, a San Francisco man who says he’s owed $166,500 in deposits on two Palladio Terrace units.”

“But Palm City residents Leonard and Dianna Rosenblatt aren’t giving up on seeing their $400,000 again. They are among 26 Palladio buyers suing the Gunster Yoakley law firm for failing to protect deposit money it held in escrow for Merco.”

“Others say Gunster knew, or should have known, construction hadn’t really started, especially since the firm ‘has two offices within three miles of the property,’ Rosenblatt said. Tracy Sundlun of San Diego agrees. Sundlun, who says he still hasn’t received a refund on his $91,400 deposit, has joined the Palm Beach County Circuit Court lawsuit against Gunster Yoakley.”

“‘Somebody has to say, ‘I think we ought to check this out a bit. We’re about to release how many millions of dollars on an empty lot,’ he said.”

“How low can the price of downtown real estate go? Wood Partners is about to find out. The developer of The Edge condominium will hold a bargain-basement auction next month on 41 unsold units – with some listed at a 70 percent discount from their regular asking prices.”

“The Edge is a 15-story, 307-unit building. Despite the location and amenities, only half the units have sold, at prices ranging from $200,000 to $600,000-plus. A one-bedroom unit that was priced at $337,000 will have a minimum selling price of $95,000, or $142-per-square-foot, a 72 percent discount. A two-bedroom, two-bath unit that was going for $560,000 will be offered for $160,000, or $163 a square foot, a 71 percent discount. Other units are being offered at discounts ranging from 42 percent to 70 percent.”

“‘It’s impossible to believe prices could go lower,’ said Gollinger, of Accelerated Marketing Partners, which is conducting the auction. ‘How can anyone go wrong?’”

“After a five-year building boom, downtown West Palm Beach is dotted with empty condo towers from Flagler Drive to Australian – with more than 1,000 units still in the pipeline. Most buyers who purchased units in the past few years have seen their values plummet as sales have all but stalled.”

“For the 151 buyers who have units at The Edge, the auction is terrible news. ‘For most of them, this is going to wipe out their down payments and make the value of their units considerably lower than their mortgage amounts,’ said Jack McCabe, of McCabe Research and Consulting in Deerfield Beach. ‘Existing owners are going to be very upset. And if they’re trying to resell now, the builder just killed that possibility.’”

“‘They are marking down to where the bottom is and to where these units are now affordable for the majority of Palm Beach County’s workforce,’ McCabe said. Still, he said, ‘People are going to take a look at it and say, ‘My God. Is that really where the market has gone?’”

“Jay Jacobson, South Florida director of Wood Partners, admits Wood Partners considered postponing the event because of the ongoing credit crunch. With three new West Palm Beach condos dumping another 1,200 units on the market during the next 60 days, however, Wood Partners thought it best to try to beat the competition.”

“More than anything else, Jacobson and Gollinger said the auction’s outcome could be a crucial economic indicator. ‘We think the auction will be great gauge to see if consumer confidence is still out there, at any level,’ Jacobson said.”

The Tampa Tribune. “Luxury condos for about $128,000? Believe it. An unidentified company paid $21.9 million for 171 condos and 12,900 square feet of retail space at The Place at Channelside, said Lamar Fisher of Fisher Auction Co.”

“The units were originally marketed for about $200,000 to $1 million. The developer of the project, which filed for bankruptcy protection, owes the bank more than $47 million. ‘I think everyone involved is really happy with the result,’ Fisher said.”

The Miami Herald. “He frequents the pool at The Venetia condo building. He leaves his Jaguar with the valet. He uses the gym. He’s also behind on his mortgage and isn’t paying his condo association fees. Neither is his lender, and the association’s board worries the bank is delaying foreclosure to avoid paying dues as well.”

“Sharon Dodge, president of The Venetia’s association, angrily told a crowd of South Florida condo dwellers at a meeting this week that 134 units were not paying maintenance fees in the 382-unit building. Of those, at least 35 are in the hands of lenders who aren’t playing fair. ‘Something needs to change!’ Dodge said, drawing rowdy applause from the crowd in Miami Beach.”

“The unpaid accounts have resulted in higher association fees for everyone and crippling special assessments to cover large one-time expenses like roof repairs. Less than a year ago, The Venetia had to slap an $8,000 special assessment on homeowners because, at the time, roughly a quarter of them were delinquent.”

“‘We are in a death spiral,’ said Miami Beach Commissioner Jerry Libbin. ‘It’s the foreclosures that are not happening, the banks that are not taking the actions that they should be taking that are causing additional assessments to be foisted on good condo unit owners.’”

“At the root of the problem, Libbin and the condo boards say, is a state law that seems to give banks incentives not to foreclose on delinquent borrowers in their buildings. Upon taking title to a unit through foreclosure, a lender must pay condo associations 1 percent of the original mortgage amount or six months of unpaid maintenance fees, whichever is less. After the initial sum, the lender then starts making full monthly payments like other unit owners.”

“‘The association pays to preserve and protect the bank’s collateral while they sit on their hands for months or years without taking steps to foreclose,’ said Ken Direktor, an attorney with a firm representing condo associations. ‘We are providing services for the benefit of the bank. Why shouldn’t they pay for it? They are getting a free ride.’”

“In an interview, Marc Ben-Ezra, an attorney who files foreclosures statewide for lenders, said he was not aware of lenders deliberately stalling foreclosures to avoid condo fees and warned against enacting laws that could make lenders more averse to financing units to new buyers. ‘If the mortgage holder knows they could be wiped out due to a much smaller association lien, the lender wouldn’t lend in those buildings. If they make it too risky for lenders to lend, their property values are only going to go down further,’ Ben-Ezra said.”

“Anthony DiMarco, a lobbyist for the Florida Bankers Association, said banks have been put in almost a no-win situation when it comes to condos. ‘On the one hand, we are working with homeowners and also being encouraged by the government to keep them in their homes, and, on the other hand, we’re being told we’re not foreclosing fast enough. So what are we supposed to do?”’

“”I don’t understand, personally, why the bank who lent somebody money is responsible for someone who didn’t uphold their end of the bargain,’ DiMarco said. ‘Once we take it over, that’s fine. We should pay going forward. I don’t know why if you lend money, you’re somehow responsible for something somebody else didn’t do.’”

“The state’s economy already was in trouble from the housing market bust when the national financial system meltdown added to our woes, University of Florida economist Dave Denslow told a statewide economic development agency, at its quarterly meeting. ‘Florida has been in a recession for about a year now,’ Denslow said. ‘It hasn’t been that severe a recession. Now we get the national recession on top of it.”’

“Population growth, which helped pull Florida out of past downturns, has slowed drastically. In fact, for the first time since UF researchers began keeping track 40 years ago, the number of electric hookups in the state actually fell slightly in September, Denslow said. ‘Population growth has slowed very dramatically in this state,’ Denslow said.”

“He predicted that the state will remain in recession through the 3rd quarter of next year. Tom Cunningham, an economist with the Federal Reserve Bank of Atlanta, gave a similar assessment. ‘Consumption, which accounts for two-thirds of the economy, is falling,’ he said.”

“Board member Tony Villamil, an economist and dean of the St. Thomas University business school, agreed with his colleagues’ prognosis, adding that Florida’s business connections with foreign countries — another major shield against past downturns — is weakening. ‘The international sector has been a key driver,’ he said. ‘That is starting to slow.’”

“Earlier in the meeting, Enterprise Florida president John A. Adams Jr. tried to reassure his board that things aren’t so bad. ‘The underpinning of our economy is basically good,’ he said. ‘We are still a growth state. It’s not as fast as it has been, but remember, we’re still a growth state.”’

“That prompted ridicule from economist Cunningham, who spoke next. ‘Evidently, from our last report, everything in Florida is hunky-dory,’ he said.”

The Pensacola News Journal. “With two teenagers soon headed to college, Shelley and Steve Black are ready to downsize, sell their Cottage Hill home north of Cantonment and move to Pensacola. But the Blacks, who put their rural 11-acre property on the market in July, have seen their plans stymied by a market flooded with thousands of homes and too few buyers.”

“Sandra and Bo Davis, both University of West Florida professors, are in the same boat. Davis said her husband is nearing retirement, and they want their Copper Ridge home to sell as soon as possible. Both couples are taking part in Coldwell Banker United’s 10-day, 10-percent off sale, which runs through Oct. 19.”

“The Blacks have lowered their asking price from $475,000 to $427,500, and the Davises lowered theirs from $210,000 to $189,000. Despite area homes languishing on the market an average of 136 days, the Davises are optimistic dropping their asking price by $20,000 will find them a buyer. ‘We believe our home will sell in a very short period of time at the highest price obtainable,’ said Sandra Davis.”

“Let’s distill the housing crisis down to its barest essence: The United States built millions more homes than there were families to fill them. Economists have dubbed this surplus the housing ‘overhang.’ And we in Florida — forgive the pun — have one of the nation’s worst hangovers.”

“Among major metros, the Tampa Bay area ranked second in home vacancies in 2007 at 5.1 percent, almost triple the empty homes just two years earlier. Orlando was tops at 7.4 percent. Two years after Tampa builders started applying the brakes, we’ve still got about 35,000 homes, new and used, jamming the ‘For Sale’ listings. That number has been almost impervious to improvement, thanks in part to all the foreclosures feeding the glut.”

“This is the year the first big wave of baby boomers are retiring. Unfortunately, these boomers’ departure from the work world coincided with a recession, credit crunch and stock market meltdown. Not exactly prime time to up and relocate to the sunny strands of St. Petersburg.”

“Home prices probably won’t rise substantially for another two or three years. It’s part of our continuing penance for overindulging in 2005. The real estate market will be ready to catch the next wave of boomer retirees in 2011, when they start turning 65. Maybe this time around we’ll build houses people actually need.”

 

Florida Real Estate News, 10/15/08

 

A report from Florida Today. “According to Zillow, 46.5 percent of all homes bought in Brevard since 2003 — or about 30,000 homes — are now worth less than is owed on them, raising worries that the record-high foreclosure rate here won’t end any time soon. Local foreclosure numbers back that up. Just over 7,000 foreclosure suits were filed through the end of August, according to the Clerk of the Court. That’s up from less than 5,200 all of last year and 1,900 in 2006.”

“‘I wish I wasn’t upside-down on my house. But I am,’ said economist Sean Snaith, who bought his Orlando-area home in 2006 when he joined the University of Central Florida faculty. ‘But I’m fine. I’m not going anywhere.’”

“Others, though, feel trapped. If they were to sell, they would have to pay their lender the difference between the selling price and the amount owed. ‘The only thing keeping us here in Florida is our house,’ said Maria Acevedo of Palm Bay.”

“Acevedo and her husband moved from New Jersey to Brevard because they thought the schools would be better for their two children. After renting for a year, they bought a house in 2004 for $114,000. They later refinanced and now owe $160,000. Acevedo said she doubted she could get $80,000 for the house right now. ‘There are so many houses on the market that have been foreclosed,’ she said.’”

“Acevedo said she and her husband took pay cuts when they moved here. That was fine at first, she said, since the cost of living here was low. But as the cost of living has increased…salaries haven’t kept pace. ‘The jobs just aren’t cutting it,’ she said.”

“‘The only thing keeping us here in Florida is our house,” said Acevedo. Now Acevedo wants to move back to New Jersey, but doesn’t see it happening soon because of her house. ‘If I could, I’d leave here in a heartbeat.’”

The Palm Beach Post. “Behind on their mortgage and forced to move to Miami-Dade County for work, Reggie and Noelvis Capiro this summer petitioned their lender, Wells Fargo Home Mortgage, and its servicing company to allow a short sale on their three-bedroom, three-bath house. They found a buyer who was willing to pay $400,000, about $40,000 less than they owed on the mortgage. ”

“The bank countered at $520,000, and the deal fell apart, according to the Capiros’ agent, Dave Derrenbacke. The Capiros lost the home to foreclosure in June, and the bank this month sold the house to a new buyer. The sale price this time: $360,000, according to MLS data. In the end, the bank got paid about $40,000 less than it would have had it gone through the short sale offered by the Capiros.”

“‘There’s definitely success stories out there,’ Derrenbacker said. ‘But there’s a big frustration level on everyone from sellers to buyers to the Realtors who are involved.’”

The News Press. “The relentless slide of home prices in Lee County has left almost half of recent buyers owing more on their mortgages than the home is worth — a sure-fire recipe for a new wave of foreclosures, experts say. Worst off are those who bought homes in 2006, just as the housing boom was ending: 78.5 percent of those now have home values less than the original loan amount, according to Zillow.”

“Among people who bought within the past five years, 46 percent are underwater on their mortgage in Lee, compared with 29 percent nationwide.”

“‘We are so upside down,’ said Michelle Nacua of Lehigh Acres. Nacua and her husband, Lani, bought their house in 2004 for $112,000. They refinanced twice and now owe $161,000, far more than the $114,000 the three-bedroom, two-bath house is assessed for by the county Property Appraiser’s Office. ‘It is our fault, but I hate it.’”

“Since the record high of $322,300 for the median Realtor-assisted sale of an existing single-family home in December 2005, the price has fallen 54 percent to $146,900 in August, according to the Florida Association of Realtors.”

“Even those who have been dutifully paying their mortgages are faced with the fear of foreclosures. ‘The third wave is coming from people who are underwater who are suffering disruptions to income,’ said Chris Lafakis, Florida analyst for Moody’s Economy.com.”

“Fort Myers attorney Kevin Jursinski agreed. ‘My clients are not subprime buyers; they’re people who’ve invested and can’t afford to pay,’ said Jursinski. For example, he said, ‘If I have a house I paid $400,000 for a few years ago with a $350,000 mortgage and I can buy a (bank-owned foreclosure) for $300,000 or $250,000, I’m going to do that,’ he said. ‘I’m gone.’”

“Jim Luccisano is the founder and president of Edison Financial Services, a financial services, mortgage, insurance and real estate firm in south Fort Myers. Q: The long-term prospects for Lee County’s real estate market?”

“A: Long term, I think they’re great. The boomers will come. Remember, ‘if you build it they will come’? Well, we’ve built it! Unfortunately, we built too much, too fast.”

“Once the uncertainty of the current markets settle, the retirees will put their homes up north on the market and we’ll get our share buying here. It will start in those cities that have not been hit as hard by the downturn, cities where the economies have not been devastated. Our snowbird friends are already looking around. A condo that was appraised at $325,000 in 2005 recently sold for $130,000.”

The Herald Tribune. “Like so many other high-flying companies in Southwest Florida, Century Bank’s success was linked to the unprecedented real estate boom. When that boom turned to bust, Century suffered the consequences. ‘I’ve been in banking 36 years and I’ve never seen a recession come on this fast and I’ve never seen property values depreciate as much as they have,’ said John O’Neill, Century’s CEO.”

“The biggest problem Century has had, O’Neill said, is with its portfolio of home equity or second loans. With real estate values down by 20 to 30 percent across the region, there was not enough collateral left in the properties for both first mortgage lenders and home equity lenders to be paid off.”

“O’Neill said his bank has also been burned by loans made to borrowers that were secured against building lots mainly in Lee County. Lots that were selling there for as much as $60,000 during the boom are selling for only $10,000 today, O’Neill said.”

The Tampa Tribune. “Bay area housing prices continue to fall, largely because a big chunk of the homes selling are sharply discounted properties in distress, a new report shows. Of homes that sold in Hillsborough, Pinellas and Pasco counties in September, 28 percent were either bank-owned or preforeclosure properties that sold for less than the troubled borrower owed on the mortgage. That’s up from a mere 0.2 percent during the same month in 2005…according to a real estate consulting firm and brokerage.”

“‘The distressed properties really weigh down the market,’ said Peter Murphy, a consultant with the company.”

“That’s because troubled real estate sells for far less than homes in which the seller isn’t under pressure. In the three-county area, nondistressed property averaged $126 per square foot. Compare that with $78 a square foot for bank-owned homes. In 2005, in the midst of the housing boom, nondistressed sales averaged $165 a square foot.”

The St Petersburg Times. “How terrible is the tug? According to a Tampa real estate consultant, banked-owned properties in September sold for only 62 percent of what nondistressed properties sold for. Distressed sales help explain the duration of the housing slump. More than 600 such properties were sold in the bay area in September alone. It helps explain why a typical house that fetched $215,000 a year ago now goes for about $170,000.”

“John McCain may be the Republican presidential candidate, but his proposal that the federal government buy and restructure $300 billion in troubled mortgages was a page ripped directly from Franklin Roosevelt’s New Deal playbook.”

“‘Is it expensive? Yes,’ McCain said. ‘But we all know, my friends, until we stabilize home values in America, we’re never going to start turning around and creating jobs and fixing our economy.’”

“Some worry such a plan creates an incentive for more people to default on their loans to get to refinance for less. That’s a chance worth taking to stem foreclosures, said Michael Slotkin, an economics professor at Florida Tech. ‘We need to save a generation of homebuyers. If you lose a couple of million buyers, you won’t have them back for years.’”

The West Orlando News. “Pending home sales have risen seven percent in some parts of Florida. The increase is being attributed to falling home prices. The increase in the housing market is bittersweet and things in Florida could get worse before they get better. Florida’s unemployment rate is at a 13 year high and exceeds the national average.”

“Governor Charlie Crist spent an hour meeting with Florida bankers. Afterward we asked if Florida is in a recession. ‘The economy’s tough. I don’t know what you technically call it. You know it’s a difficult challenging situation and there’s no question about it.’”

“Crist says the best thing Floridians can do in these tough times is to keep spending.”

“On the ninth floor of an office building on Cypress Street last week, Brad Robinson looked out across a sea of vacant desks and a deserted fish bowl and framed ads talking about company trust. Only he was left, the last man standing in Suite 950-A, once home to a thriving commercial real estate lending division of Washington Mutual. Now, it’s just another wasteland after the largest bank failure in American history.”

“‘There was a person there,’ Robinson said. ‘Person there. Three or four there. Person there. Person there.’”

“But in an industry full of panic, Robinson, a former senior loan consultant who made $200,000 last year, managed calm. True, he never expected WaMu to sink like Enron, and he lost company stock once worth as much as $75,000. To Robinson, WaMu’s future seemed as safe as a savings account. It had a long, storied history, having given out the first home loan ever in 1890 and more than $150-billion in home loans in 2006.”

“He only recently sold his Jetta after years of ribbing from colleagues and bosses over driving something that didn’t match his moneyed line of work. He saw no reason to get rid of it since it ran great and attracted little attention when he visited properties in rough neighborhoods. He parked it out of sight and arrived early if he had to meet clients.’

“But eventually he caved and bought a metallic gray BMW 335 coupe two years ago.”

“‘You take the good with the bad,’ he said, squeezing a pink piggy bank-shaped stress reliever between his palms sitting behind the office desk he was cleaning out.”

The Miami Herald. “Maria Osorio, 62, of Sunrise, never meant to run up her credit cards the way she did. But the companies sent them so freely. And they were so easy to use. First it was gifts and big items. Then it was gasoline, and that tasty baked chicken at the Golden Corral restaurant, then even groceries.”

“Suddenly the charges on her eight credit cards totaled $14,000. And she couldn’t always pay the monthly minimums. ‘The interest rates were killing me,’ she said. ‘If I sent in $100, only $20 of it was going to the principal. The pressure was building. I started getting the calls.”’

“She was far from alone. Since 2003, Americans have increased their credit card debt by an astounding $200 billion, to a record total of almost $1 trillion, the Federal Reserve says.”

“”People are overextended, losing jobs, losing homes, losing 401(k)s,’ says Meg Green, a North Miami certified financial planner. ‘There’s no place to go but credit cards, and they’re maxed out.’”

“Unfortunately, the economic crisis comes at a time when American consumers have been living beyond their means for decades. By 2007, personal consumption had reached $10 trillion a year. While housing values were booming, they financed purchases with home equity loans.”

”’From 2001 to 2006 homeowners cashed out $1.2 trillion in home equity, to cope with mounting debt and basic living expenses,’ says José Garcia, of the Demos financial consulting firm.”

“Some who approach April Lewis-Parks, director of Consolidated Credit Counseling Services’ Broward office, have so much debt and so little income that she can’t help them. ‘There’s a pool of people who have lost their jobs, and their income is cut and they just don’t have the money even for lower payments. I think a lot of them will just default,’ she says.”

“Green, the financial planner, is no fan of the way credit card companies treat customers. But she blames credit card users as well: ‘Why were people spending money they didn’t have in the first place? Where is it written that you can forget the difference between want and need?”’

The Naples News. “The Collier County Building Industry Association won’t let a tough economy rain on its parade. The Parade of Homes will go on. But not this fall. Originally planned for later this month, the scattered-site parade has been rescheduled for March in hopes of drawing more interest from local builders, who have been slow to sign up as they struggle through one of the worst housing slumps in decades.”

‘Only 13 entries were received — not enough to make a fall parade worthwhile. Typically, there are 30 or more homes displayed. New-home construction has slowed to a crawl in Collier County. In August, permits were down 23 percent for single-family homes, compared to a year ago. Multi-family permits were off 81 percent, according to a monthly report by Naples-based The Bidder’s Broker.”

“For many years, the association has done two parades annually: one at a single site and the other at multiple locations. In 2007, there wasn’t a multi-site parade. ‘That is when things really started to adjust,’ said Brenda Talbert, the building association’s executive VP, in a letter to the media and marketing partners.”

“Custom Construction Associates, a family-owned builder of multimillion-dollar homes on Marco Island, signed up for the parade this month too. But Lynn Lilly, an office manager, said she understood the decision to postpone it. ‘Last year was a little off,’ she said. ‘But it has been tremendously off this summer.’”

“Many builders are ‘absolutely pulling in and not expending any more resources than they have to,’ as they fight for survival, while others are going out of business or bankrupt, ‘losing everything they ever worked for,’ Talbert said.”

 

Housing Pain Gauge: Nearly 1 in 6 Owners ‘Under Water’

From the Wall Street Journal:

http://online.wsj.com/article/SB122341352084512611.html?mod=googlenews_wsj#project%3D

 

This is an excellent article with a great interactive graph showing the rise and fall of home prices and related data.

The present foreclosure mess is primarily a result of sub-prime mortgages but, as I have written before, a lot of people will and in fact have already defaulted on their home, even though their credit is good and they can afford the payment. The reasoning is that their credit will recover long before the value of their house equals what they owe on it.

There is a growing sentiment that “bad credit” will not be that big a deal and there is some logic to that. Banks have to lend money to stay in business. The simple fact is that if a large percentage of the population, say 30% to 60%, have “bad credit”, banks will do what they always have done to stay in business: lower the credit standards.

Before you bury your head in your hands and cry “Isn’t this why we’re in the mess we’re in, stop and think. Look at the scenario. Someone with lousy credit, took out a “stated income, no doc” ARM. This is the guy who said he made $150,000 per year, when in fact he made $50,000. The conventional wisdom was that before his teaser rate reset, he could refi and take money out or simply sell at a profit. No big deal. The real estate agent said so, the mortgage broker/lender/bank said so, His Brother-in law, the head greater at WalMart said so. With so many experts saying the same thing it was a safe bet. We all know what happened. The mortgage reset to an interest rate he could not afford, his house lost half its value and he vanished.

What about the guy who bought a house for $350,000 on a 30 year fixed. He has good credit and a very good household income. But of the 20 houses on his street, 5 have been foreclosed on and 3 are for sale. The bank sold the identical house across the street for $190,000. This guy is now $160,000 upside down. Add to this the fact that another almost identical house, two doors down is for rent for $1,200 per month.

What is Mr. Good Credit paying? PITI and M. Principle, Interests, Taxes, Insurance and Maintenance. PI is $2,100. Taxes are say $200.00 per month and insurance another $150.00. What is a good number for maintenance? You have pest control, landscaping, mowing, painting, etc. What does all that cost? Let’s say $250.00 per month. That’s $2,700 per month, baring unforeseen things like a tree falling on the house or your 16 year old backing your car out of the garage after you backed it in the night before. If you own a house, you know what a pain in the ass maintenance is.

But wait, he can write off his mortgage interest. Ok, interest for the first year is approx $20,900, decreasing each year. If he is in the 30% tax bracket, he gets a $6,270 write off. So he spends $32,400 to live in this house, not including surprises and after the write off, it costs $26,130. And he is stuck. He can’t sell it, he can’t borrow against it and who knows when it will be worth what he owes.

Theoretically, as prices increase and as he keeps making payments, at some point hey meet and he begins to build equity.

5 years from now he owes, $325,690 and has paid $125,904 to live in this house, minus the income tax break but plus the property taxes, insurance and maintenance. Today, the house is now worth $190,000 and at this writing, 10/8/08 and its value is still falling with no bottom in sight. But for the sake of argument, let’s say the value bottoms at $190,000. Remember the house across the street that the bank just sold.

Does it make sense that in 5 years this house will appreciate from $190,000 to $326,690, or increase in value by $136,900? That’s 15% per year and not even remotely probable.

What if he simply stopped paying his mortgage lived in his house free for a year (the present average time from when you stop paying to when you actually get foreclosed on) and then rented the house three doors down for $1,200?

After 5 years he would have paid $57,600. No taxes, interest, maintenance and insurance. In that 5 year period, he saved roughly $70,000. We are making a lot of assumptions here, for example that the rent stays the same, but bear with me.

I know, I know, there are a lot of unknowns. You can pick my analogy apart, but try to look at the big picture here. What is likely to happen is that his house he owes $350,000 on today will depreciate below the $190,000 level. We still are not at the bottom pricewise and we have huge inventories that have to be dealt with. Add tight credit and a recession to the mix and prices go down from here.

What about Mr. (Formerly) Good Credit’s…well, formerly good credit? What’s likely to happen is that in the future, lenders will consider the circumstances of the foreclosure. When I was flipping houses, back “in the day”, one of my strategies was to buy a house for cash, hold the note for a year at a higher than market interest rate and than sell the note. This was extremely successful because I looked for good, solid buyers with what I called “traumatized credit”. One of my first sales was to a guy who had been working for the Govt. for 15 years. His credit was perfect until he got divorced. Typical. Except for the two year period around his divorce, this guy had great credit. The divorce traumatized his credit. He still had the same job and was the same guy, but at the time financial institutions wouldn’t touch him. I took a down payment and gave him a 30 year mortgage for 10%. The 30 year bank rate at the time was 8%. He paid right on time for a year and I sold the paper at a 5% discount to a mortgage broker. I did that numerous times.

Lending institutions will, I predict, begin to differentiate between good and bad risks by looking at the whole picture. It will be a long time before the insanely lax credit standards of the past few years will return, if indeed they ever do. Banks will have to get creative to stay in business.

Mr. (Formerly) Good Credit, after 5 years, with only the one foreclosure on his record, will look pretty good.

That’s just my opinion. But, opinions are like assholes: everyone has one and they all stink.

Incidentally, I am the consummate house flipper and yes I saw the bubble and got out before the market tanked. I didn’t lose a dime on any real estate. I was preaching bubble in 2004. Ask anyone who knows me.

People I know will tell me how smart I am and how knowledgeable I am and frankly, I do know a lot about making money in real estate. But the fact is, I’m simply so damn old. 57, to be exact. This is not my first rodeo. If I drop my pants, you can see where every dog has bit me on the ass.  It’s not so much that I’m smart, it’s more that I now know which dogs not to try to pet.

Anyway, if I had been say 25 in 2003, I would likely be several million dollars upside down, bankrupt and licking my wounds, like a lot of “investors”.

In parting, I have this bit of advice to you “investors” who got your clock cleaned in this bubble. The only thing you could do more foolish than losing your ass in real estate is to give up on it. You have earned your Masters Degree in Dumb Ass. Use it! Long term, real estate is a great way to make money. A good market will return. When? Who knows?

Maybe, the next time, you won’t get sucked into the greed vortex when those around you become pathologically exuberant. Learn from this, because it will likely happen again.