Friday, February 19, 2010

It's been a while...

I apologize for not posting in a very long time. My professional and family life had to take precedence over the blog. Luckily, both have calmed in the past few weeks and I decided to start posting again.

One of the factors has made me want to post again is the repeated claims by the Realtors® and their shill MSM reporters that we’ve reached the “bottom.” If you look closely at the data, we’re still nowhere near the bottom.

I predicted years ago that the bottom would be reached by now. What I didn’t foresee was the massive amount of government intervention since the bubble burst. Back when I making predictions on the direction of the South Florida real estate market, I never expected TARP, all the various homeowners rescue bills, and the homebuyers’ tax credits.

I also didn’t expect the lenders to move so slowly on the foreclosure backlog. I have been hearing anecdotal stories of lenders not initiating foreclosure actions on borrowers that haven’t paid a cent on their mortgages for as long as two years. Of course, most of this is due to government intervention, somewhat through TARP, but mostly through rewriting the “Mark to Market” rules.

It’s these interventions in the market that has prevented us from seeing a bottom yet. But, it’s not like the public and its elected representative should have seen this coming – this is exactly what occurred in Japan a decade earlier in their bubble.

There’s an excellent article in Reason Magazine on this issue. Here’s a brief quote:

The scenario was eerily familiar. A long real estate bubble that had expanded extra rapidly for the previous five years suddenly burst, and asset prices came crashing back down to earth. Banks and financial institutions were left holding piles of worthless paper, and the economy soon headed south. The national government responded to the crisis by encouraging more lending and spending previously unfathomable amounts of money on public works projects in an effort to stimulate consumer spending and restart growth.

But that stimulus did not save the Japanese economy in the 1990s; far from it. The ensuing period came to be known as the Lost Decade, characterized by multiple recessions, an annual average growth rate of less than 1 percent, and a two-decade decline in stock prices and corporate profits.

The Japanese government’s easing of credit rates, instead of spurring real demand, created artificial demand. Federal loans and stimulus spending were not economically productive, and they vastly increased the nation’s debt and prolonged the economic malaise. Worse, businesses spent critical time on the sidelines, waiting for government bailouts and other centralized actions, instead of speedily consolidating their losses, clearing their balance sheets of bad investments, and reorganizing.

The United States in 2008–09, unfortunately, has started down the same path. Federal intervention and the expectation of additional government action are removing firms’ incentive to clean up their balance sheets by selling “toxic” assets. Why accept pennies on the dollar if a deep-pocketed new bidder (i.e., the state)
looms large on the scene? The Japanese experience shows that when the government is an active participant in the market, many firms would rather accept state support than initiate the inevitable financial reckoning. Such a status quo does
not provide a sustainable foundation for the economy. Instead, it restricts
economic growth and creates a cycle of stagnation.

And when we look at a graph of Japanese housing prices compared to ours, we can see we may have a long way to go:

After its crash, Japan took 15 years to reach its bottom. Unfortuantely, we're only 4 to 5 years into our real estate crash. We may have a decade to go.

Sunday, December 21, 2008

Today's F@cked Buyer (Miami)

This F@cked Buyer is following the market down. He listed the home 111 days ago for $1.3M. Since October, he's been reducing the price by $10,000 every two weeks. How low will he go? At only 36% off his 2006 purchase price, I think he's got a long way to go.

3921 SW 130 AV, Miami, FL 33175

Saturday, December 20, 2008

Today's F@cked Buyer (Coral Springs)

This is a classic F@cked Buyer. At the end of 2006, this couple bought the house using a 80/20 piggy-back loan -- of course, with no money down. The primary mortgage was an interest-only ARM. What's interesting about this house is the timeline of the inevitable foreclosue. First, the ARM was not due to reset until January 2009. So, the homeowners defualted long before the loan ever reset.

The homeowners received their notice of default (Lis Pendens) of February 22, 2008. The final judegment on the case was on April 22, 2008 (surprisingly fast). However, the house is just now being listed on the MLS -- nearly 11 months after the first notice of default and probably 14 months after the couple missed their first payment.

Now the house is being sold for 55% off its original late-2006 purchase price.

11061 NW 41ST CT, Coral Springs, FL 33065
New request: I am looking to add "buyers" that have multiple distressed properties for sale. If you know of any, please provide a link or MLS listing to one of their properties. I want to highlight some of speculators that were caught holding multiple properties.

Wednesday, November 19, 2008

"Overbuilding and a high rate of foreclosures toppled Florida's housing market, making it one of the worst in the nation."

Prices continue to fall rapidly according to the South Florida Business Journal: “Finally, a bit of positive news about Florida’s housing market. Sales of existing family homes in the tri-county area rose in the third quarter. But, the good news was tempered by the fact that prices across the board continue to tumble, according to the Florida Association of Realtors.”

"’Coming on the heels of positive sales activity in September, Florida's existing home sales are once again above year-ago levels in the third quarter,’ FAR President Chuck Bonfiglio said. ‘Despite lending restrictions and the difficulties of finding affordable credit, we're seeing buyers take advantage of homeownership opportunities in the current market – buyers who want to make a long-term investment in their future.’”

“Sales of existing single-family homes in Fort Lauderdale were up 20 percent, to 1,796 from 1,498 in the same quarter last year. However, the median sales price was down 24 percent, to $277,900, from $364,400.”

“Miami reported a 2 percent increase, with 1,271 sales in the third quarter, up from 1,250 during the same quarter of 2007. Median prices tumbled 24 percent, to $287,300, from $380,400.”

“The West Palm Beach-Boca Raton market saw a 9 percent increase in sales of existing homes, to 1,797 from 1,644. The median price there was down 18 percent, to $300,200, from $365,400.”

Meanwhile, the same publication reports that builder confidence is dropping: “Homebuilders’ confidence that there will be a resolution to the housing crisis anytime soon is at an all-time low, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index.”

“As the financial crisis worsens, the job market weakens and an overwhelming uncertainty hangs over the economy, builders fear it will take major incentives to bring homebuyers back to the table.”

“’Today’s report shows that we are in a crisis situation. If there’s any hope of turning this economy around, Congress and the administration need to focus on stabilizing housing,’ NAHB Chairman Sandy Dunn said. “Beyond the work that is being done to help reduce foreclosures, Congress must immediately incorporate such incentives for qualified buyers in a new economic recovery package.’”

The Miami Herald reports on dropping prices: "The median sales price for South Florida single-family homes fell 16.9 percent from a year earlier in the third quarter, the Chicago-based National Association of Realtors said Tuesday.”

“Nationwide, prices were down 9 percent and sales of properties with mortgages in default accounted for at least a third of all transactions.”

“Home prices fell in four out of every five U.S. cities in the third quarter, a record spurred by distressed foreclosure sales across the country. Prices fell in 120 U.S. metropolitan areas, rose in 28 and were unchanged in four, the biggest share of declines in data going back to 1979.”

“In the Miami-Fort Lauderdale metro area, the median price for existing single-family homes sold in the third quarter was $287,800, down from $346,300 in the same period of 2007.”

“South Florida condo prices fell 14.6 percent to $159,000.’

A large home auction was also announced in Market Watch: “Hudson & Marshall Will Raise its Buyer Agent Commission from 2% to 3% to Attract More Buyers to Florida Auction “

“Overbuilding and a high rate of foreclosures toppled Florida's housing market, making it one of the worst in the nation. With ample supply to choose from, savvy buyers are turning their attention to bank-owned foreclosure auctions because they offer great deals. America's largest foreclosed real estate auction firm, Hudson & Marshall will auction nearly 700 homes throughout cities in Florida December 2nd-7th. Approximately 120 homes will be auctioned in Orlando and more than 300 homes will be auctioned in the Miami/Fort Lauderdale area. “

“To attract more qualified buyers to the Florida auction, Hudson & Marshall is increasing its buyer agent commission from 2% to 3%. Unlike other real estate owned (REO) auction firms, Hudson & Marshall retains the banks' listing agents to better market properties to prospective buyers. Having marketed the foreclosures for many months, listing agents have extensive knowledge that can help buyers understand a property's market value so they can be successful bidders.”

Tuesday, November 18, 2008

Don Peebles, the "successful" real estate entrepreneur sees 60% to 70% drops in South Florida

Forbes magazine recently published an interview with Don Peebles where he described the South Florida market:

"Forbes: Do you see big differences in regions of the country where you think some are harder hit than others, or some may come back quicker than others in this thing?"

"Peebles: Yeah, I do. I see we're actually in two markets that I think are probably the worst two markets for residential, for sure, and that is Las Vegas and South Florida. South Florida was overbuilt. And you take Miami, for example, on the condo side: In downtown Miami alone, almost 50,000 new units were built during this market cycle. And that's not a center of employment. I think it's their values have plummeted, 60%, 70%."

"Forbes: Wow."

"Peebles: And then they have a bigger problem: that many of these condo buildings, the owners who are in foreclosure, or the banks who have them, are not paying condo fees. And so you have this small number of people in the buildings that are having to carry the operation of the whole building. And so the building's getting a little bit more run-down and has greater financial problems. So buyers are even more reluctant to buy, so that pushes value down. I think that market doesn't recover for five to seven years, maybe even a bit longer."

Monday, November 17, 2008

Miami-Dade plans to buy foreclosures

Miami Today reports that the Miami-Dade County plans to use our tax dollars to buy foreclosed properties to use as low-cost rentals: “Creating more affordable rental housing is to be a key priority for Miami-Dade County and the City of Miami in spending the tens of millions of dollars the federal government is sending their way to help reverse the national foreclosure crisis. “

“Plans for the Housing and Economic Recovery Act money — the county's $62.2 million and the city's $12.06 million — are due to the US Department of Housing and Urban Development by Dec. 1.”

“The funds, which are to impact only a fraction of local foreclosed units, are meant to provide a shot in the arm to low-income areas hit hard by foreclosures.”

“In Miami, this means affluent Brickell is out, but areas such as Little Haiti, Overtown and Allapattah are to receive a big chunk of the program's millions.”

Wednesday, November 12, 2008

UPDATE: Plantation sellers featured on new TLC television show

Over a year ago, back when I was much more active on posting, I made a post about a home seller that was featured on a new show on The Learning Channel. Please read the the original post here (make sure you read the comments section):

Original Post on the TLC Show

In the post, I discussed the house in Plantation Acres that was listed for $649,000. I explained why the price was well overpriced and I made the following recommendation:

"The Bentals could drop their price down to $551,000 and could still walk away after paying the Realtor®’s commission and paying off their outstanding mortgage. Instead, the Bentals remain steadfast, paying nearly $5,000 every month to maintain an empty house. At the end of the show, Dan explained that he was going to hold out until the real estate market turned around."

The Bentals did not take my advice at the time (even thought they made comments to the post) and kept trying to sell their house at the inflated price. I watched this house for months after my original post and the price remained the same.

Recently, I was reviewing some old posts and decided to look up the house and see what happened. The Broward County Property Appraiser’s website shows that the Bentals ultimately ended up selling their house in August through a short sale for just $440,000.

While I am happy that the Bentals were able to finally sell their home, I think it's unfortunate that they were not more aggressive about their original approach to selling their house. Had they started off with a low price, in theory, they could have sold their house at price that would have covered their outstanding mortgages. This would have kept a short sale off their credit report and could have saved them some of those $5,000 monthly mortgage payments.

I'm not posting this to pile on the Bentals -- I truly empathize with their plight. Instead, I am posting this update to serve as a case study for those of you facing similar situations.

If you are in a similar situation where you must sell your house and you still equity in the house, you should be extremely aggressive in your pricing strategy. Based on the current inventory levels in South Florida, prices will only continue to fall. You have the option to sell quickly in an effort to preserve your falling equity and your credit standing or you can hold out for a turnaround that probably will not happen for a decade. It’s your choice. However, consider this particular case when you form your strategy.

Tuesday, November 11, 2008

A Shrine to the Housing Bubble – The Tao Condominiums in Sunrise

For many, the high rises in downtown Miami, South Beach, or Brickell best represented the South Florida housing bubble. However, to me an even better example of South Florida’s irrational exuberance for residential real estate was the Tao Condominiums in West Sunrise.

These twin, 26-story high-rise condominiums were painfully out of place from the beginning. Flanked by a the massive Sawgrass Mall on one side and a sea of middle-class single family homes on the other, any casual observer could see that these condos were going to noose around a bunch of flippers necks. Who would want to live there? In exchange for deal with Bank Atlantic Center and holiday mall traffic, you could get the great view of the air conditioning units on top of mall.

If you haven’t seen these condos, check out their sales website:

The Tao Condiminums

Not surprisingly, today The Daily Business Review reported this about these condos:

“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.”

“Corus, as W/K Sawgrass LLLP, expects to start closing unit sales next month. Construction trailers are still parked across from three fountains at the Tao entrance. Corus has hired Hyperion Development of Miami to complete unfinished portions of the complex. Hyperion affiliate POSH Residence Management will handle leases and broker re-sales for condo buyers.”

So, does anyone want to guess how many of the 80% who made purchase deposits will actually close their sale? I imagine very few. At the same time, these condos which once advertised one-bedrooms starting in the mid-400s, are now being converted into rentals – the South Florida housing bubble at it finest.

Friday, October 17, 2008

What Realtors® were telling us back during the Boom -- Part 1

Realtors® are supposed to be trusted advisor – providing consumers with industry knowledge needed to make one of the most critical financial decisions they make in a lifetime. In the current environment, South Florida Realtors® regularly declare that “Now is the time to buy.” Should you listen to their advice?

Before you decide, you should consider what Realtors® were saying back in 2005 in the peak of the bubble (long before the 40% price reductions we’ve seen in South Florida).

One my favorite “trusted advisors” is Ron Shuffield, President of Esslinger-Wooten-Maxwell. In 2005 he wrote an essay title, “Bursting the Bubble Talk” (Click to see the whole article) Here are some excerpts:

“While the growth in South Florida values will probably not continue at such heated rates for the remainder of the decade, most acknowledge that we will experience rates of growth far-exceeding national averages. The long-term perspective for our markets is one of continuing world-wide attraction.”

“Just about everyone agrees that thousands of newcomers will continue to purchase homes in Florida, either as permanent or part-time residences. As the demand increases for homes and the supply of developable land decreases, South Florida values are going to rise. It’s that simple.”

“It’s not a question of, ‘if we build it, will they come?’ They’re already here… hence the growing demand for first, second and even third homes. It’s a great time to be living and working in South Florida.”

I'm sure at least some people bought homes in 2005 based on this advice.

Friday, March 14, 2008

"Unusually high default rates"

They're even following our real estate downturn in the UK. The Financial Times reports, "The slick real estate professionals who congregate each Friday night at the waterfront restaurants in Miami’s financial district seem unaware or unconcerned that they are relaxing near a crime scene."

"Three buildings in the Brickell area saw 166 units go into foreclosure last year with borrowers owing a total of $120m (£59m, €77m) on the properties."

"These unusually high default rates have attracted the attention of fraud investigators. 'There’s not just one or two cases [of mortgage fraud] in each building – there are 10 or 15,' said Lucas Lechuga, a Miami real estate broker. 'It’s a lot more widespread than people thought.'"

"One in every 29 homes in Miami-Dade County is now in foreclosure and the authorities estimate up to 30 per cent of all foreclosed properties in Miami-Dade county have been affected by fraud. A report yesterday by the Mortgage Asset Research Institute found that mortgage fraud rates in Florida outstripped every other state as a proportion of all loans taken out in 2007."

"Prices are falling faster in Miami than in any other city in the United States, with the latest Case-Shiller house price index showing the market dropped 17.5 per cent over the past year."

Million-Dollar Foreclosures

Forbes reports, "In Detroit and Southern California, foreclosure opportunists are going after cheap homes in downtrodden neighborhoods, which are selling in the five-figure range."

"But there are plenty of million dollar-plus homes out there, in good neighborhoods, which have fallen into foreclosure as the result of shoddy lending practices, speculative buyers and homeowners walking away from a negative equity situation."

"Foreclosures have always been present in the top end of the market, but what best accounts for the increase are negative equity situations. For homes around the million-dollar mark, especially those derided as McMansions, it's a case of the home no longer matching the value of the loan. Many of the million dollar-plus homes listed as foreclosures and REOs were built in the last five years and are now worth significantly less than the inflated prices the owners originally paid. But it's not necessarily that buyers didn't put down enough money or had a piggyback loan; the owners may have owed more on the house than it was worth, sinking them into a negative equity situation."

"But foreclosures are not all bad news for the high-end real estate market. Nelson Gonzalez, a broker with Esslinger-Wooten-Maxwell, specializing in Miami Beach, says that the rash of foreclosures in Florida, which has the second-highest foreclosure rate in the country, has driven interest from out-of-town and foreign buyers looking to snag a deal. 'They think that every house in Florida is in foreclosure,' he says. 'The offers we're getting are fairly decent, but the sellers are not coming down yet.'"

As you can see, the Realtors® are still claiming that waves of rich, foreign investors are coming in droves to South Florida with suitcases full of cash to snatch up local bargains. If these rich foreigners really existed, why would we still be seeing record low sales?

Florida is tops in mortgage fraud

This report from the Miami Herald is hardly surprising to anyone who has been following South Florida real estate: "For the second consecutive year, Florida ranked No. 1 in the country for mortgage fraud, as the stalled housing market quickly pushed both prevaricating borrowers and seasoned criminals into foreclosure."

"Lenders reported more than twice the number of suspected fraud cases in Florida than would otherwise be considered average, based on the number of loans originated here in 2007, according to a report Thursday by the Mortgage Asset Research Institute and an industry group of the nation's biggest lenders."

"The fallout is showing up in state's historic foreclosure rates. The report notes that fraud and delinquency rates are closely linked, as borrowers who may have lied to qualify for a home loan find themselves unable to make their monthly payments and criminals abandon properties after they have skimmed the proceeds of illegal mortgage transactions."

Florida also ranked second in the number of new foreclosures filed in the last three months of last year, and third in the total number of loans in foreclosure at the end of 2007, the Mortgage Bankers Association reported.

Video: The Boca Raton Housing "Riot."

Developers continue to build

Despite record vacancy and inventory levels, the developers continue to add to insanity.

The Sun-Sentinel reports, "Housing slump. Burst bubble. Real estate decline. Really?"

"Developers in Fort Lauderdale sought and obtained approvals Tuesday for 629 residential condos or apartments that had been approved several years ago in slightly different form but never built. The projects will move forward, the developers say, even in a real estate market that has frightened off some investors."

"Despite a lot of bad rap about the real estate market, developers continue to submit building plans in Fort Lauderdale City Hall for new multi-family residences, while construction continues on hundreds of condo units approved in recent years."

"For example, construction workers this week hammered away on twin condos at the beach, completing the top floor of the 172-unit Sapphire condo and hoisting the ceremonial tree to the rooftop. Across from Holiday Park on Sunrise Boulevard, the same developer, Joel Altman, has a rental complex called Satori under construction."

"Developer and lawyer Ron Mastriana knows about slump-time building. Mastriana just finished Coconut Grove Residences on Holiday Drive, with 57 condos on the beach sand in Fort Lauderdale. And his 63-unit Bamboo Flats downtown, on Third Avenue, just opened as well."

Wednesday, March 12, 2008

Near-riot over Boca Raton housing vouchers sends 9 to hospital

The housing bubble affect all social classes. The ultra-high-end home being sold at auction. Meanwhile, at the other end of spectrum, desperate citizens are near rioting as they search for the affordable housing.

The Sun-Sentinel reports, "In a sign of the desperation facing Palm Beach County's poor, hundreds, maybe thousands, descended on the city Wednesday for a chance to get on a subsidized-housing waiting list.The wait nearly turned ugly when housing officials told hundreds still on line Wednesday morning that they only had enough applications left for those with disabilities. The crowd surged forward, almost crushing mothers with children and people in wheel chairs, said Judith Aigen, Boca Raton Housing Authority executive director. 'I think a riot was about to happen,' she said."

"It was then that police in riot gear stepped in, dispersing the angry crowd. Boca Raton Fire Rescue took nine people to area hospitals for medical conditions such as seizures, fainting or diabetic shock, said fire Chief Tom Wood. Police arrested two people and charged them with resisting arrest without violence, said police Chief Dan Alexander. No one foresaw the response to an announcement by the housing agency that it planned to give out 600 applications for its Housing Choice Voucher program. Only 200 of them will be accepted."

Click here to watch the Palm Beach Post's video of the incident.

CBS 4 runs a piece on

CBS 4 ran the video in the link below on a recent newscast. You'll find the video on the right-hand side of the video:

Video on

Luxury homes in auction around South Florida

Even the high-end properties are falling victim to the housing downturn.

The Sun-Sentinel reports, "Even sellers of high-end properties are struggling to find buyers during South Florida's housing downturn.Nestler Poletto Sotheby's International Realty of Boca Raton and Miami-based Sol Sotheby's International Realty said Monday they will hold a luxury home auction for Palm Beach, Broward and Miami-Dade counties on March 28.More than $200 million in properties will be for sale, and some of them will go to the highest bidder, regardless of price. Frustrated by the glut of homes for sale, more sellers are choosing auctions as a way to unload their homes. The March 28 event will be at the Bahia Mar Beach Resort, 801 Seabreeze Blvd. in Fort Lauderdale. It will feature large-screen videos and gourmet beverages and hors d'oeuvres."

Losses Stall Affordable-Housing Projects in Miami

The Wall Street Journal reports, "Affordable housing is the latest victim of the credit crunch that is reverberating through financial markets."

"Projects are being canceled because some of the nation's largest financial companies, including Fannie Mae, Freddie Mac and Bank of America, have scaled back their participation in the federal government's largest and most prolific affordable housing tax-credit program, designed to boost construction of below-market-rent apartments."

"Carlisle Development Group, a developer that manages 6,000 government-subsidized units in Florida, recently shelved the first phase of a $100 million project it was planning in Miami with the local YMCA. It would have provided 355 affordable housing units. The housing authority in Pueblo, Colo., delayed a 25-unit project for senior citizens this week. Developers report similar tales around the country."

"'I've got a lot of screwed up tax-credit deals,' says Matthew Greer, chief executive of Carlisle. On the YMCA project, he qualified for $74 million in tax credits but the investor who had committed to taking the credits walked away. 'There's lack of liquidity,' says Mr. Greer. "

The Housing Bubble

Tousa wins bankruptcy court OK to sell interest in Florida property

The Sun-Sentinel reports, "Florida homebuilder Tousa Inc. won bankruptcy court approval to sell a note it holds on a piece of property in one of Orlando's most popular tourist areas for $13.5 million.Bankruptcy Court in Fort Lauderdale on Thursday said Tousa can sell the note to PRN Real Estate & Investments Ltd, a Florida company."

"Tousa sought to sell the note after the note's issuer, which pledged the debt as part of the purchase of the Orlando property, defaulted on the note."

"In court papers filed last month, Tousa said that, by selling the note, it would avoid having to initiate a lengthy foreclosure action against the note's issuer. The company said PRN's $13.5 million bid was its best option in spite of a $2.8 million shortfall between the offer and the note's face value of $16.3 million."