Friday, August 31, 2007
Today's Local Real Estate News: "Inarguably, this is the worst time to buy a house."
“Mortgage defaults on investment properties are playing a major role in rising loan delinquency rates nationwide -- especially in Florida -- as speculators who can't find buyers amid a housing slump simply walk away from mortgages, says the Mortgage Bankers Association.”
“About 25 percent of homes with high-quality or ‘prime’ mortgages in default in Florida were not occupied by the owner of the house, according to MBA data as of June 30. Nearly one in three defaulted homes in Nevada, and about 21 percent in California, were not owner-occupied. The MBA considers a mortgage in default when the borrower is at least 90 days past due on the loan or in foreclosure.”
“‘The areas with the fastest growing delinquencies are the areas dominated by investor properties,’ said Jay Brinkmann, a research and economics vice president at the trade group.”
“The MBA looked at home starts during the past four years and determined California, Florida, Arizona and Nevada were among the states with the most home starts per person during that time. Investors and speculators followed the home builders into the states, Brinkmann said, hoping to cash in by buying homes and holding them for a period of time before selling at a profit.”
“The estimates of how many Florida buyers are speculators -- who bought so they could cash in on rising home prices -- have ranged from 30 percent to more than 70 percent.”
“Those investors were often taking out mortgages with the lowest payments possible, such as interest-only or adjustable-rate mortgages that had low initial interest rates, Brinkmann said.”
“Once the housing market cooled and interest rates went up, investors realized they were unlikely to make a profit, and simply began walking away from the mortgages, Brinkmann said.”
An article published by the Sun-Sentinel shows how national housing statistics can provide widely different conclusions:
“Compared with the first quarter, U.S. home prices rose in the second quarter at the slowest pace in nearly 13 years, according to government data that provides fresh evidence of the housing market's problems.”
“The Office of Federal Housing Enterprise Oversight on Thursday said in its quarterly report on the housing market that nationwide home prices grew 0.1 percent from the first quarter to the second quarter.”
“The agency's index of U.S home prices grew 3.2 percent in the second quarter from year-ago levels, the smallest year-over year price growth in 10 years.”
“Other reports have come up with different readings of the housing market.”
“The Standard & Poor's/Case-Schiller quarterly index, which tracks price trends among existing single-family homes across the nation compared with a year earlier, on Tuesday found that U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since S&P began its nationwide housing index in 1987.”
The Sun-Sentinel reports on some good news, thon growing median household income in South Florida:
The nation's poverty rate declined for the first time this decade, but the number of Americans without health insurance rose to a record high of 47 million in 2006, according to census figures released Tuesday.
The statistics offered a mixed picture of the economy's ongoing recovery from the recession of 2000-2001. While median household income rose for the second consecutive year in 2006, the increase appeared to be driven by a jump in the number of people in each household taking on full-time jobs, rather than a rise in wages.
Overall, South Florida had 716,609 people living in poverty, the data showed. Florida's poverty rate fell in the middle range of the 50 states, tying Kansas for 25th place, at 12.6 percent. Maryland had the lowest poverty rate, at 7.8 percent of the population. Mississippi had the highest rate, at 21.1 percent.
The percentage of people living below poverty — $10,294 a year for an individual — declined in Florida from 2005 to 2006, the data showed. The rate for Florida dipped to 12.6 percent from 12.8 percent, with a total of 2.2 million people living in poverty. The rate dropped in Miami-Dade, which has had one of the highest poverty rates nationally, going from 17.8 percent in 2005 to 16.4 percent in 2006. Palm Beach County's rate declined to 10.7 percent from 11.1 percent. Broward's rate increased slightly to 11.2 percent from 11.1 percent.
Mirroring a national trend, median household income also increased in Florida and South Florida from 2005 to 2006. The median is the point at which half made more and half made less.
Florida's median income grew by 4 percent, to $45,495, below the U.S. median of $48,200. Broward's grew by 5 percent, to $50,499; Palm Beach County's grew by 4 percent, to $51,677; Miami-Dade's grew by 8 percent, to $41,237.
The Sun-Sentinel published a letter by Douglas Cohen asking for fairness in our property tax system:
“Re the Aug. 22 letter, "Property tax reform proposal is our best hope": The letter writer says the lowered revenue caused by the decrease in property tax will not affect the educational system or other services but only take the money the governing bodies are wasting out of the system. Now it is hard to make the education system worse. So how we will have at least equal services with less money, the letter writer does not say.”
“Yes, our system is not perfect. All homes are not taxed equally. All taxpayers are not treated equally. The current system and the one being proposed rewards the individual who is a resident and never moves. The new homeowner pays a higher property tax on a similarly valued home. The nonresident bears a higher share of the property tax while using a lower portion of the services. The landlord who helps to provide housing for those who can't afford or do not desire the American dream of home ownership is punished with higher property tax. The young family just starting out with fewer resources is taxed based upon the current fair market value of the home but that family who does not move watches the value of their home increase while paying property tax based closer to their original purchase price.”
“So, if you want a fair property tax system, value all real estate based upon its fair market value. Total the amount of the fair market value in a tax district. Divide the total budget by that total fair market value. No significant difference for the length of ownership or type of ownership. Adjust the fair market value for all real estate every number of years, say three or five years.”
The Palm Beach Post published an outstanding letter by Gregory Block explaining why “now” is not a good time to buy:
“Sunday's front-page article ‘As house sellers remain dug in, buyers wait for price fallout’ outlines a number of factors that will put immense downward pressure on home prices - tightening credit standards, ballooning inventory, foreclosures, higher interest rates and adverse buyer psychology.”
“Inarguably, this is the worst time to buy a house, since someone buying now has a good chance of seeing his or her equity erode in a declining market. Yet the article quotes Douglas Rill, president of Century 21 America's Choice, as saying, ‘This is the time to buy a home, especially if you have less-than perfect credit or are self-employed.’ This absurd, self-serving assertion goes unchallenged by the reporter.”
“How can it be the best time to buy a home when housing analysts themselves are debating whether housing prices will fall by 20 percent or 40 percent? Surely, this is a better time to rent rather than buy. Rental costs are falling by the month as speculators who are not able to sell their houses are forced to rent them at prevailing market rates.”
“The best time to buy will be when housing prices again are affordable. Since the median household income in Palm Beach County is $60,000, prices will stabilize once the median home price falls to $180,000, or three times median household income. This indicates a 40 percent decline from today's median price. Today's buyer is likely to be underwater for the next decade, at the mercy of a medical emergency, divorce or job loss.”
“A person with ‘less-than-perfect credit’ is better served by learning financial management than he or she is by buying a home. These are the very same people who are now threatened with losing their homes due to adjustable-rate resets, or because they were talked into a home purchase that was out of their budget. It seems that The Post's journalistic integrity stops short of questioning the outrageous assertions of one of its major advertisers.”
Today's F@cked Buyer (Riviera Beach)
2028 Oakhurst, Riviera Beach, FL 33404
- 3 Bed, 2 Bath Townhouse
- Bought in June 2005 for $253,990
- On the MLS for $159,900
- Loss before the Realtor® commission: $94,090
- Loss after the Realtor® commission: $103,684
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Bush and the Fed Promotes a Taxpayer-Funded Bailout of Irresponsibility
“Offering federal help for strapped mortgage holders, President Bush is proposing to aid hundreds of thousands of borrowers hard hit by the housing slump.”
“The president on Friday was to talk about several initiatives and reforms to help homeowners with risky mortgages keep their homes, a senior administration official said Thursday. Bush also was to discuss efforts to prevent these kinds of problems from arising in the future.”
“The official said Bush will direct Treasury Secretary Henry Paulson and Housing Secretary Alphonso Jackson to work on an initiative to help troubled mortgage holders get services and products they need to keep them from defaulting on their loans. The official spoke on condition of anonymity to discuss details of the initiatives ahead of the presidential event.”
The Chairman of the Federal Reserve is also promoting the idea that hard-working taxpayers should be forced to subsidize reckless flippers and those that are living far beyond their means. The Sun-Sentinel reports:
“Federal Reserve Chairman Ben Bernanke is suggesting that policymakers look for ways to encourage a wider range of mortgages geared for low income and other borrowers who have been hard hit by the housing slump and credit crunch.”
“Bernanke, in a letter to Sen. Charles Schumer, D-N.Y., that was released Wednesday, said the Fed is keeping close tabs on financial markets and is "prepared to act as needed" to ensure spreading credit problems that have rocked Wall Street in recent weeks don't hurt the economy. It's a message the central bank has been sending as the markets have grown more turbulent.”
“Foreclosure and late payments have spiked especially for "subprime" borrowers with blemished credit histories or low incomes. Higher interest rates and weak home values have made it impossible for some to pay or to keep up with their monthly mortgage payments. Some overstretched homeowners can't afford to refinance or even sell their home.”
Do you want to increase the Federal debt in order to promote irresponsibility? Or would you rather they raise your taxes?
I previously wrote about the bailout proposal (click here to see the post) and encouraged readers to write their Congressional representatives to demand that there be no bailout. At the end of the post, I provided links to the email addresses of your Representative and Senators.
Have you sent them a letter yet? What are you waiting for?
If you’ve received any response from your letters, please forward them to me and I will post them on this site.
Thursday, August 30, 2007
Today's F@cked Buyer (Sunrise)
11750 NW 31ST ST, SUNRISE, FL 33323
- 3 Bed, 2 Bath SFH
- Bought in September 2006 for $320,000
- On the MLS for $250,000
- Loss before the Realtor® commission: $70,000
- Loss after the Realtor® commission: $85,000
Video: House wouldn't sell at 50% off? Real Estate never goes down?
CLICK HERE TO WATCH THE VIDEO
Wednesday, August 29, 2007
Today's F@cked Buyer (Margate)
5516 MONTE CARLO LN Unit: 5516, MARGATE, FL 33068
- 3 Bed, 2.5 Bath Townhouse
- Bought in August 2005 for $265,500
- On the MLS for $215,000
- Loss before the Realtor® commission: $50,500
- Loss after the Realtor® commission: $63,400
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Update: South Florida Median Listing Price and Inventory
Among single-family homes, Broward showed a 1% year-to-year drop to $373,700 from $380,400 last year. Likewise, Miami-Dade showed a 1% drop to $377,400. Palm Beach County dropped 5% to $372,200 from $390,100 last year.
Condo statistics, on the other hand, were mixed. In Broward, median price fell 10%, to $187,200 from $209,100 a year ago. In Palm Beach County, fell 23 percent to $178,200 from $231,300 a year ago. Dade actually showed an increase in condo median sales price, rising 13% to $285,000.
Anyone who follows our current housing market knows that these numbers provide by FAR do not even come close to representing reality. This is especially true for the Dade County condo market, which clearly has not been going up in value. A previous post on the “Myth of the Median Price” shows how the median sales price is used to distort reality.
A much better gauge of market performance is the median listing price. Here is an update on the median listing price in South Florida (source: Housingtracker.net):
This shows that listing prices have dropped by 10.37% across the board in South Florida from one year ago (or 14.49% since the earliest available data in April 2006). It also shows sustained and constant drops. Clearly this chart shows a much different picture than painted by FAR.
Even more important is the continued ballooning inventory of listed homes in the South Florida area:
As the chart shows, inventory has grown by 25.5% since August 2006 and an amazing 47.36% since April 2006.
Is anyone surprised that the three major newspapers are not showing these graphs?
Video: Dow sinks on economic worries
CLICK HERE TO VIEW THE VIDEO
Tuesday, August 28, 2007
Today's F@cked Buyer (Boca Raton)
Thank you to a reader for this one in Boca Raton. It's a newly listed "short sale" that was just purchased in March 2006. It sure didn't take this homeowner long to get into trouble even though we can assume it is her primary residence (it's homesteaded).
12890 MAPLETON Ct, Boca Raton, FL 33428
- 4 Bed, 2 Bath, SFH
- Bought in March 2006 for $490,000
- On the MLS for $427,900
- Loss before the Realtor® commission: $62,100
- Loss after the Realtor® commission: $87,774
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Today's Local Real Estate News: "‘We're really in a crisis right now."
“Sales of existing homes in Broward County declined in July, just as they have for 36 of the past 37 months. That dismal trend isn't likely to change soon as lenders across South Florida make it tougher for consumers to qualify for mortgages.”
“Analysts don't expect the housing slump to end until the second half of 2008 or later, in part because the recent credit crunch is thinning an already small group of would-be buyers.”
“The county had 559 sales last month, down 22 percent from 721 in July 2006, the Florida Association of Realtors said Monday. The median price dropped 2 percent, to $373,700 from $380,400 last year.”
“The market for existing condominiums in Broward also took a hit in July. Year-over-year sales fell 19 percent, and the median price slid 10 percent, to $187,200 from $209,100 a year ago.”
“Existing sales and median prices could be even worse this fall in South Florida because those numbers will reflect the credit tightening that spread this month beyond risky borrowers to include people on solid financial footing.”
“‘There's more pain to go through,’ said John Burford, senior vice president and chief economist with The International Bank of Miami.”
The Sun-Sentinel’s report on Palm Beach county is even worse:
“Twenty months and counting.”
“Sales of existing homes in Palm Beach County slipped in July as they have since December 2005. That dismal trend isn't likely to change soon as lenders across South Florida make it tougher for consumers to qualify for mortgages.”
“Analysts don't expect the housing slump to end until the second half of 2008 or later, in part because the recent credit crunch is thinning an already small group of would-be buyers.”
“The county had 605 sales last month, down 15 percent from 714 in July 2006, the Florida Association of Realtors said Monday. The median price dropped 5 percent to $372,200 from $390,100 last year.”
“The market for existing condominiums looked particularly bleak in July, with year-over-year sales falling 14 percent and the median price plummeting 23 percent to $178,200 from $231,300 a year ago. It's the first time the median has dropped below $200,000 since September 2005.”
“Meanwhile, the percentage price decline in the county's existing condo sales was the second-worst showing among the state's 20 metropolitan markets, behind Lee County's 33 percent slide. The huge drop is an indication that less expensive condos were selling, and certain owners were desperate to unload them, analysts say.”
But, don’t worry, the Florida Association of Realtors® is reporting positive news in Miami-Dade (see my earlier post on how FAR uses the median price statistic as propaganda). The Miami Herald reports:
“For Miami-Dade condominiums, sales plunged 39 percent compared to a year ago and were flat compared to June.”
“Some experts attribute lackluster sales to sellers' unwillingness to lower prices in a meaningful way. While sellers still are balking at cutting prices to spur activity in hopes of a better deal, buyers continue to wait for better bargains.”
“The median price of a Miami-Dade single-family home was off only slightly in July compared to last year, declining 1 percent to $377,400, and was up 1 percent from June. Broward single-family home prices were down 2 percent to $373,700 compared to July 2006 and 2 percent from June.”
“Miami-Dade condo prices actually shot up significantly, rising 13 percent to $285,000 compared to the same month a year ago and 4 percent from June. Experts attribute the increase to relative strength in high-end condo sales, particularly to foreign buyers.”
“The total number of homes listed for sale grew to 78,959. That's a bit higher than June, when 78,066 houses and condos were for sale, and much higher than July 2006, when the number was 58,662.”
“But a new big cloud over the housing market is the troubled mortgage industry. Lenders who made too many risky loans are now tightening credit standards, making it harder to get a mortgage. That in turn will make it harder to reduce the glut of homes for sale.”
The New York Times reports on some South Beach condos facing foreclosure:
“The Savoy, which is known for its guitar-shaped pool, is going through court proceedings with a lender, the BankFirst Corporation. Court records show that in late June, the bank sued for $4.7 million, and last month, the court issued a lis pendens, a pre-foreclosure step stating that a suit is pending.’
“As the housing market began to slow, states like Florida have been particularly hard hit with home foreclosures, but until recently, the luxury end of the market seemed to be holding up. But the turn of events for the Savoy indicates that even luxury properties are getting a second look from banks that do the financing.”
“Seth Semilof, a former broker and publisher of the lifestyle magazine Haute Living, said that financial problems illustrated how difficult it had become to sell some projects even in desirable beachfront locations with brand-name architects and designers. In the past, other Miami projects that have run into trouble have been in less desirable sites.”
“‘You have a situation where you have one of the most beautiful locations in Miami right on the beach. You have an amazing architect. You have an amazing designer,’ Mr. Semilof said. ‘This is the first of many that’s going to go down.’”
“Jack McCabe, a real estate consultant in Deerfield Beach, Fla., said that the Savoy project was an example of the problems that luxury developers may face. Typically, he said a struggling developer will try to sell a project or form a venture with another developer to complete it.”
“‘This is just the start of the project foreclosures and this is going to accelerate over the next 24 months,’ he said. ‘We’re going to see commercial-owned foreclosures on new condominium projects, condo conversions, condo hotels.’”
The Street.com reports on another troubled development in Miami:
“The developers of Jade Ocean, a luxury high-rise condo near Miami Beach set to be completed in 2009, claim they've already sold 98% of the building's units -- a seemingly astounding feat given that many housing experts expect the Miami condo market to implode before the project is even finished.”
“Of course, the reality is that this ‘pre-construction sales’ number at Jade Ocean carries little meaning. It's a phrase that previously impressed people but carries little meaning in present-day Miami -- which is increasingly looking like the Netherlands in the aftermath of the Tulip Craze more than 300 years ago.”
“At the forefront of a looming crisis in the market is Corus Bancshares (CORS) , a Chicago-based bank that has been one of the largest construction lenders for Miami condos in recent years.”
“Skeptics say that buyers for Miami projects like Jade Ocean -- the largest of the Florida condo projects for which Corus has provided financing -- will have left the market in droves by the time the buildings are actually finished. Buyers will walk away from their 20%-down deposits because of rapidly falling prices and a huge inventory overhang that will only get worse in the market, several industry experts say.”
“Buyer cancellations in the Miami market will only get worse, says Jack McCabe, head of McCabe Research and Consulting. He expects walk-aways from new condo projects and deposits will reach 30% to 50% of sales through 2008 in the South Florida counties of Miami-Dade, Broward and Palm Beach.”
“‘Corus is really in trouble,’ McCabe says. ‘The walk-away rate we are going to see is on more-expensive condos, primarily half a million [dollars] and above,’ where Corus has large exposure, he says.”
The Christian Science Monitor explains how tightened lending standards are affecting the market:
“Americans are quickly finding out that the turmoil in global credit markets is making it difficult – and in some cases impossible – to buy a home or refinance a mortgage.”
“Since the beginning of the month, lenders have tightened their standards. They are now very reluctant to make high-risk loans to individuals with spotty credit records. They're also requiring higher down payments, meaning that home buyers need to have much more money saved up. In addition, some Americans – including the self-employed, consultants who work from home, and those with unconventional sources of income – may be denied home loans.”
“The same is true in Florida, says Jack McCabe, CEO of McCabe Research & Consulting in Deerfield Beach, Fla. ‘Last year, over 50 percent of the mortgages made were volatile adjustable-rate mortgages,’ he says. ‘They were heavily used by speculators, and all income levels, and now with prices declining in Florida, we're seeing a large number of walkaway rates.’”
“For example, in Fort Myers, the foreclosure rate is up 400 percent over a year ago, Mr. McCabe says. ‘We're really in a crisis right now,’ he says.”
The Sun-Sentinel explains how the housing slump is affecting our state’s budget:
“Facing the worst budget crunch since the 2001 terrorist attacks devastated Florida's tourist economy, state legislators on Monday were told they might need to slash state spending by more than $2 billion over the next two years.”
“Florida's bleak housing market is the culprit, forcing a dramatic drop in state revenues collected through sales taxes and real estate transactions.”
“This week legislators have begun the task of looking to slash $1.1 billion out of the $71 billion state budget that took effect on July 1. Those cuts will be finalized during a three-week special session set to begin on Sept. 18.”
“It's anticipated the Legislature will have to trim up to another $900 million next spring when it must put together the next state budget.”
“Among the possible cuts in coming months are state spending on nursing home and hospital care for the poor. Also, university students could face higher tuition as soon as January and people who use state programs, such as parks, could be facing higher fees to make up some of the money.”
Monday, August 27, 2007
Today's F@cked Buyer (Coconut Grove)
3052 SW 27 AV Unit: 103, COCONUT GROVE, FL 33133
- 1 Bed, 2 Bath, Condo
- Bought in October 2005 for $206,000
- On the MLS for $190,000
- Loss before the Realtor® commission: $16,000
- Loss after the Realtor® commission: $27,400
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Sunday, August 26, 2007
Today's F@cked Buyer (Lantana)
"No mortgage - paid cash. So, no mailing the keys back to the bank on this one. It's all out of pocket loss. Not to mention the holding costs for the past 2 years. Total loss should be well over $150k+ when it finally sells."
"By the way, The Moorings was one of the last big condo projects to sell in Palm Beach County. There will be TONs of F'd buyers in that community. 130 active listings currently, plus who knows how many that are rented out well below carrying costs. Keep an eye on that development."
"I actually went to the preconstruction sales "party" for this development 3-4 years ago (I don't remember exactly when it was). It was a crazy mob. People camped out all with $ signs in their eyes."
"I overheard a lady that was in line to buy one say "Oh - it's not going to be completed for at least 2 years - that's great!" She thought that the longer they took to build it, the better, because the property values would keep going up and up while she only had to put down her $10k deposit."
"I looked around and said to myself, "I'm in Lantana - on land next to a crappy boatyard, a trailer park and a bunch of rabid condo flippers." I didn't even go into the sales center. I left after 30 minutes of standing outside waiting to get in. I was there with some other people who thought you couldn't lose buying pre-construction. Fortunately, they agreed that it was a waste of time."
806 E WINDWARD WY # 208 - BLDG 3, Lantana, FL 33462
- 2 Bed, 2 Bath, Condo
- Bought in August 2005 for $465,000
- On the MLS for $379,900
- Loss before the Realtor® commission: $85,100
- Loss after the Realtor® commission: $107,894
Today's Local Real Estate News: "Florida homes are overvalued by 40 percent."
“An increasing number of homeowners and prospective homeowners are getting caught up in the fast-spreading mortgage crisis that is claiming victims from all income levels and demographic groups. Many are trying desperately to get their loan terms reworked but are finding it's not possible in a tightened market.”
“For five years, the housing boom put money in the pockets of lenders, brokers, realtors and investors and granted easy mortgages to homeowners with both good and blemished credit. But as home prices decline and interest rates climb, the cracks in the housing market's foundation are widening.”
“Exotic mortgages, once hailed for helping to increase U.S. homeownership to its highest level at 68.9 percent, have become the undoing of an entire industry and, most heartwrenching, millions of homeowners.”
“Loans with adjustable rates, payment choices and loose requirements have trapped borrowers in too-high payments with few options for escape. Some have taken on second and third jobs, depleted savings, retirement and college funds and wrestled with lenders to stave off foreclosure. Those who fail see their homes sell to the highest bidder at an auction.”
“‘The increasing availability of mortgages has been an important and positive long-term trend,’ said Doug Elmendorf, a Brookings Institution economist. ‘But like many positive developments, this one was taken to an unjustifiable extreme.’”
The Palm Beach Posts expands on this issue:
“For most of this decade, buyers of homes and businesses enjoyed "easy" credit, allowing them to get low-interest loans with few questions asked.”
“Suddenly, credit has become ‘tight.’ That means people with spotty credit records are no longer getting mortgages, the largest home borrowers are paying higher interest rates, and some corporate buyouts are in jeopardy.”
“But how did credit get so easy in the first place - and what's making it so tight now? And will any of this matter to people who aren't buying a house or a corporation?”
“Yes, it may well matter, many economists say. They say credit troubles could further depress residential construction, which would push up unemployment. That, in turn, would shake consumer confidence and reduce sales of everything from cars to Christmas presents. Rising loan defaults also could further rattle financial markets. All of this together could trigger a severe recession, perhaps for the entire global economy.”
The mortgage mess is not only affecting the economy, it’s affecting local neighborhoods. The Sun-Sentinel explains:
“Miramar Code Enforcement Officer Paulina Vial crunched through knee-high grass, walked past multiple violation notices posted on the abandoned home's front window and a mailbox brimming with mail, and came to the backyard pool filled with thick, green scum.”
“When a neighbor first complained about the house on Miramar Parkway, it was for sale. But since then, Vial said, the owner gave up and left. It now sits vacant and unkept, a local eyesore and headache, one of a growing number of derelict South Florida properties left by a busted real estate market and rising foreclosure rates.”
“Code enforcement officers throughout South Florida have reported a rise in such homes, with neighbors calling to complain about uncut lawns, pools lacking child-proof fences and other symptoms of neglect and blight. At present, Miramar alone has at least 65 open cases involving unkempt properties in various states of foreclosure or bank repossession, up from the usual five a year.”
“Such vacant, foreclosed properties present unique challenges for the communities where they are located. Their owners are often less willing or able to correct a violation, and local governments have fewer enforcement options, said Bob Morgan, Miramar's code compliance manager.”
“In normal cases, if homeowners refuse to mow their lawn or clean it of trash, cities issue fines. If those fines aren't paid, cities slap a lien on the home and, when the home is sold, officials get their money.”
“But in cases of foreclosure, fines are no real threat to the owner, who has bigger financial problems, Morgan said. Putting a lien on the home doesn't work either because when a bank files for foreclosure first, it is legally entitled to money recovered from the sale of the property. Unless there is money left over — and there seldom is — the city gets nothing, Morgan said.”
The Miami Herald explains how unscrupulous foreclosure “rescue” firms are bilking troubled homeowners:
“For Kayhlene Gainer, it started two years ago, with a knock on the door on a Sunday spring afternoon.”
“The two women who stopped by her Coconut Creek home knew the 55-year-old widow was behind on her mortgage payments and facing foreclosure.”
“They promised help. For a fee, they would arrange the sale of Gainer's home so that she could stay there, paying rent. With the foreclosure halted, Gainer would get credit counseling and, after a year, a new mortgage and her home back in her name. She agreed.”
“Now, the Broward County schoolteacher and more than a dozen other homeowners contend in interviews and court filings that two companies -- National Foreclosure Management and American Home Rescue -- promised to save them from foreclosure but sucked out their home equity through excessive fees, what they claim is a fraud known as equity stripping. Then, they say, the firms skipped out, leaving owners scrambling again to prevent foreclosure on new, higher mortgages.”
“Mortgage fraud that flourished along with Florida's real-estate market in the past few years has many variations -- loan applicants who fudge their income to qualify for a higher-priced home, scam brokers who flip homes among fake buyers, pocketing the mortgage proceeds. But equity stripping, regulators and lawyers say, is especially pernicious because it preys on desperate homeowners looking for any solution that will stave off foreclosure and keep them in their homes.”
The Sun-Sentinel reports that builders are continuing to build despite the housing downturn:
“In South Florida, builders continue to struggle, with Lennar Corp. of Miami and Fort Lauderdale-based Levitt Corp., among others, reporting falling profits or losses as they discount homes and offer incentives that hurt their bottom lines.”
“Despite softer demand, housing starts rose in Broward County during the second quarter, according to a study released last month by Metrostudy, a West Palm Beach consulting firm.”
“Broward starts increased from 454 in the first quarter to 762 in the second. Palm Beach County had 423 housing starts in the second quarter, down 49 percent from 824 starts in the first quarter.”
“To lure buyers, builders are offering help with closing costs or lining up financing and working with lenders to lower interest rates on loans. Other builders are throwing in free upgrades and swimming pools to sweeten deals. That's allowing more buyers to consider new homes rather than existing ones.”
“‘Buyers are looking for exceptional deals,’ Brad Hunter, South Florida director of Metrostudy, said Friday. ‘They're getting that from the builders now.’”
This comes in the faceof much tougher lending standards. The Sun-Sentinel reports:
If you are a borrower — and who isn't — you need to know the rules of the mortgage market have changed. The credit crunch has taken some of the exotic loan options off the table. A lot of those loans were bad for borrowers. And some ugly lending practices are disappearing.
“You can still get a mortgage, even if your credit isn't great or you have only a small down payment, but you'll have a harder time qualifying for it.”
“For those with a mortgage who want to refinance, that's trickier. It can be done, but not if your property's value has fallen off a cliff.”
“‘Banks haven't stopped lending money to people, they've just made it more practical on both sides,’ said Casey Casperson, a senior loan officer with Chase in Palm Beach Gardens. ‘Now they're making borrowers prove they can pay it back.’”
“During the housing boom, lenders didn't require that of borrowers. As unbelievable as that sounds — let's give money to people without checking to see if they have a job or looking at their pay stub — it was the way the subprime market worked. What happened a few weeks ago was investors who bought those mortgages from lenders simply stopped buying. They feared the tumble in housing prices and the rise in mortgage defaults made these mortgages virtually worthless.”
Despite this, the Palm Beach Post explains that many seller remained dug in at their high prices:
“The supply of single-family homes and condominium units for sale in Palm Beach County's Multiple Listing Service reached 32 months' worth in June in the $200,000-$299,999 price range, according to Illustrated Properties Real Estate.”
That means it would take nearly three years to sell the 3,973 homes listed in that price range at the June sales pace - without adding another home to the list.
“The bleak story was the same in nearly every price range: too much inventory and too few sales, according to Illustrated Properties' figures.”
“In the $300,000-$499,999 range, which has included the county's median price since the boom times, sales declined 73 percent from June 2006 to June of this year. And although inventory was down 5 percent, it still would take 37 months to burn off the supply.”
“With the myriad problems besetting the housing market - from the subprime mortgage meltdown to fleeing speculators who left a trail of unsold "investments" that they finally dumped into the MLS - most housing forecasts are looking well into 2009 before the market recovers.”
“Meanwhile, most analysts agree that prices must drop. Jan Hatzius, senior economist for Goldman Sachs in New York, thinks Florida homes are overvalued by 40 percent. Florida's record home-price appreciation since 2000 makes it "the epicenter of the U.S. housing bust," he told the St. Petersburg Times.”
At the same time, the Miami Herald explains how employers are having difficulty hiring qualified employees due to high housing costs:
“Recruiting workers and keeping them has become increasingly challenging for South Florida employers, as home prices have soared out of reach even for many two-income households.”
“The numbers tell the now-familiar story of how we feel priced out:”
“Income gains have not kept up with soaring home costs. In fact, the rise in income per person here between 2000 and 2006 -- 28 percent to an estimated $39,900, says the University of Florida's Institute for Economic Competitiveness -- has been all but gobbled up by the rise in property taxes and insurance alone.”
“The property tax on a median-priced home in unincorporated Miami-Dade rose to $8,011 last year from $3,114 in 2000 and hit $7,988 in unincorporated south Broward, up from $3,505 in 2000. Homeowners insurance has skyrocketed similarly.”
“That's if you can afford to buy a home in the first place. Between 2000 and 2006, the median home price rose 172 percent to $375,800 in Miami-Dade and by 148 percent to $367,800 in Broward, says the Florida Association of Realtors. (The median is the point at which half the homes sold are above and half below.)”
Saturday, August 25, 2007
Video: "It's not fair!"
CLICK HERE TO WATCH THE VIDEO
Today's F@cked Buyer (Lauderhill)
2211 NW 59TH WY Unit: B-66, LAUDERHILL, FL 33313
- 2 Bed, 1 Bath., Condo
- Bought in December 2004 for $75,000
- On the MLS for $39,900
- Loss before the Realtor® commission: $35,100
- Loss after the Realtor® commission: $37,494
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Do you want your tax dollars spent to bail out irresponsible lending?
“Sen. Charles Schumer urged federal regulators Wednesday to do more to help certain homeowners struggling to make mortgage payments.”
“The Democratic senator from New York made his plea in a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke -- two men at the forefront of efforts to make sure the credit crunch that has rocked Wall Street doesn't undermine the economy.”
“Schumer asked Paulson and Bernanke to support a plan in Congress to provide $100 million to nonprofit housing groups to help troubled subprime borrowers -- those with blemished credit histories -- refinance their homes.”
“‘I urge you to use your leverage over financial institutions -- whether banks, lenders, servicers or brokerages -- to encourage them to match the federal government's efforts to provide funding to nonprofit group working to prevent foreclosures, and to work with the nonprofits to help borrowers who need loan modifications,’ Schumer wrote.”
“He said he intends to offer legislation when Congress returns next month to boost investment caps on Fannie Mae and Freddie Mac "to increase their flexibility to participate in loan modifications with borrowers and lending institutions." The administration has so far been opposed to raising the caps. The two mortgage giants a few years ago suffered multibillion-dollar accounting scandals.”
The problem with these proposals is the bailout will not help the borrowers – it is purely a bailout for the irresponsible lenders or hedge funds that invested in poorly-structured mortgage-backed securities.
Troubled borrowers got into their position because they bought homes they could not afford. Most were enticed by low-interest, negative-amortization ARMs that have since reset to their normal rates. While restructuring their loans to a fixed-rate mortgage will temporarily lower their monthly payments, in the long run, most of these troubled borrowers can not afford the payments unless they can continue paying the low, negative-amortization payments.
Furthermore, this encourages these troubled borrowers to continue paying monthly for an asset that may be worth hundreds of thousands less than their outstanding loan balance. In many cases, over the long-term, it would be better for these borrowers to simply walk away.
Sure, they will have ruined credit. However, appropriately-managed credit will typically recover partially in three years and fully in seven years – far less than the 30-year sentence that will be imposed by the restructured debt on an asset that may end up being worth 50% of what they borrowed.
On the other hand, the bailout will help those that recklessly loaned money to people who never had a chance of sustaining the payments. It will also help the hedge funds and their investors that fueled this recklessness. Your tax dollars will be used to prop up their irresponsibility.
A second part of Senator Schumer’s proposal is to increase the $417,000 cap on Fannie Mae and Freddie Mac. Under current Fannie Mae and Freddie Mac regulations (for more information on them, see this link), these quasi-government entities are prohibited from buying mortgages beyond the cap. Because of these caps, mortgages that exceed $417,000 are sold on the open market – a market that has recently soured to these Jumbo loans in the wake of a flood of foreclosures. As a result, Jumbo loans have become expensive relative to mortgages under $417,000. Thus, Senator Schumer’s proposal is simply an attempt to reduce the cost of mortgages in excess of $417,000.
Keep in mind the Fannie Mae and Freddie Mac were created by Congress to assist low- and middle-income Americans. They were never designed to help higher-income Americans.
Most financial advisors recommend that homebuyers should not purchase a home in excess of three times their annual income. This means that only those with a household income in excess of $139,000 should consider a Jumbo loan. Hence Senator Schumer proposal to increase the cap ignores the original charter of Fannie Mae and Freddie Mac. Ultimately, Schumer is simply attempting to pass a government welfare program for the rich.
Is this how you want you want Congress to spend your tax dollars? Do you want to fund a bailout of irresponsible lenders and hedge funds – a bailout that could potentially hurt the homeowners Schumer claims to be protecting? Do you want your government to guarantee loans that will only benefit those with incomes in excess of $139,000?
Have you written you Congressional representatives and told them how you feel?
I did. When Senator Schumer first started pushing for a Federal bailout of subprime borrowers, I wrote my representatives, Senator Bill Nelson, Senator Bob Martinez, and Representative Robert Wexler and pleaded with them not to consider any bailout.
Unfortunately, only Senator Martinez replied to my emails and his reply was nothing but a canned reply that didn’t even remotely respond to the email I sent him. This was his response:
Thank you for sharing your views about responsible lending practices. I
appreciate hearing from you and would like to respond to your concerns.
As you know, on March 15, 2005 Representative Bob Ney (R-OH) introduced the Responsible Lending Act (H.R. 1295). This legislation responds to the growing complaints of predatory lending practices, conflicting state laws, and the need to further enhance consumer education and protections. H.R. 1295 was referred to the House Subcommittee on Housing and Community Opportunity in the House Committee on Financial Services.
You may also be interested to know that on March 9, 2005, Representative Brad Miller (D-GA) introduced the Prohibit Predatory Lending Act (H.R. 1182), legislation to amend the Truth in Lending Act to eliminate specific abusive lending practices
and ensure that credit for home ownership is available for consumers with
impaired credit. H.R. 1182 was referred to the House Committee on Financial
Services.
Although no related legislation has been introduced in the Senate, as a member of the Senate Committee on Banking, Housing, and Urban Affairs, I am working closely with Chairman Richard Shelby to develop comprehensive legislation that addresses the need for uniform, responsible lending practices and consumer education. State laws are cumbersome and Congress must update existing federal laws to create a strong national standard with significantly greater protections.
Again, thank you for sharing your concerns with me. If you have any other further questions or comments, please do not hesitate to contact me. In addition, for more information about issues and activities important to Florida, please sign up for my weekly newsletter at http://martinez.senate.gov/.
Sincerely,
Mel Martinez
United States Senator
Obviously, our elected representatives need more input for their constituents. Please take a few minutes to write or email you representatives in Congress, even if it’s just a short paragraph.
You can find your Senators' address and email here and your Representative’s address and email here.
Please take a few minutes to write them and tell them what you think of Senator Schumer's proposal.
Friday, August 24, 2007
Today's F@cked Buyer (Sunrise)
This property had a 36% price drop less than two years.
10830 NW 20TH CT, SUNRISE, FL 33322
- 3 Bed, 2 Bath., SFH
- Bought in December 2005 for $390,000
- On the MLS for $250,000
- Loss before the Realtor® commission: $140,000
- Loss after the Realtor® commission: $155,000
Today's Local Real Estate News: "Nothing in this county has gone up 30 percent in value."
“Gov. Charlie Crist urged real estate agents during a speech Thursday to rally support for a January ballot measure that will cut property taxes. He also repeatedly criticized the property insurance industry as tenacious and greedy.”
“Crist had a very receptive audience for the two issues he has promoted during his campaign last fall and since being elected governor in November, and he predicted agents will see significant results when he, lawmakers and voters work to bring down homeowners' costs.”
“‘Florida's going to have a sonic boom when this happens. You're going to be busier than you've been in your life,’ Crist told 550 agents at the Florida Association of Realtors' annual convention. ‘Get ready, get your rest, make sure your license is up to date.’”
“He depicted the industry as smart and disciplined as well as greedy.”
“‘How much do you need to eat? How many cars do you need to drive? How big a house do you have to have? C'mon, there's fair and there's fair. I'm a pro-business guy, but I'm pro-good business,’ Crist said. ‘I believe in profits but I do not believe in profiteering on the backs of my people.’”
Despite the efforts of Governor Crist, the Sun-Sentinel reports that few in Broward County were helped by recent tax cuts:
“Property owners across Broward County began learning this week how much they will save because of state-mandated tax relief, and some are far from happy.”
“The disappointment over the size of tax cuts is coupled with confusion about how property values used to calculate taxes went up when sales prices have gone down.”
“Property Appraiser Lori Parrish will finish mailing out more than 800,000 tax notices today and is already being deluged with calls and e-mails. She says misunderstanding and questions are rife because of the tumultuous real estate market and complex tax law changes.”
“Coconut Creek resident and landlord Jeff Merlin won't see any savings on a condo he rents out. Because its assessed value jumped 30 percent, he will pay $300 more in taxes.”
“‘Nothing in this county has gone up 30 percent in value,’ Merlin said. ‘What I see happening is the county raised assessments to compensate for rate cuts. They made sure their tax revenue stayed the same.’”
The Palm Beach Post reports a similar reaction in their county:
“When Palm Beach Gardens retiree and landlord Fred Wang received his tax bills this week, he wondered where the big savings had gone.”
“The assessed value of one of his properties, a duplex in suburban West Palm Beach, soared by 35 percent. His tax bill on the home rose 17 percent from last year.”
“‘I was surprised,’ Wang said Thursday. ‘The governor pushed the tax reform, and the legislature worked real hard to lower taxes. But when I get the bill, it looks like there's a disconnect.’”
“One common question: How can my taxable value rise when my market value falls?”
“That's one of the quirks of Save Our Homes, the tax break approved by voters in 1992. The amendment to the state constitution says the taxable value of homesteaded properties can rise by no more than 3 percent a year or the rate of inflation, which was 2.5 percent in 2006.”
In some good news on the national economy, the Labor Department reported fewer jobless claims last week:
“Fewer people signed up for jobless benefits last week, an encouraging sign that most businesses aren't resorting to big layoffs amid a housing slump and the painful credit crunch.”
“The Labor Department reported Thursday that new applications filed for unemployment insurance dipped by 2,000 to 322,000 for the week ending Aug. 18. It marked the first drop in new claims in roughly a month.”
“Turbulence on Wall Street over credit problems in recent weeks has increased uncertainty and has the potential to restrain overall economic growth going forward, the Federal Reserve said last week.”
“‘The downside risks to growth have increased appreciably,’ Fed Chairman Ben Bernanke and his colleagues concluded last Friday. It was a much more sobering assessment than they had offered just 10 days earlier when they met to examine economic conditions and interest rates. Against this backdrop, the central bank sliced the rate it charges banks for loans, a narrowly tailored move aimed at propping up sagging financial markets.”
The Miami Herald reports that a judge has ordered mediation in the ongoing battle between Federal officials and Miami-Dade:
“A federal judge has ordered mediation over control of the Miami-Dade Housing Agency, a small early victory for county leaders trying to fend off a takeover by the U.S. Department of Housing and Urban Development.”
“Over HUD's opposition, U.S. District Judge Donald Graham ordered the nonbinding mediation on Monday. A daylong session is scheduled for Sept. 10.”
“‘Both parties will get to present their viewpoint, their perspective,’ said Assistant County Attorney Cynthia Johnson-Stacks. ‘The mediator will help with their common points, where he thinks he can bring together the parties toward resolution.’”
Thursday, August 23, 2007
Video: The Expanding Housing Crisis
CLICK HERE TO SEE PART 1 of 2
CLICK HERE TO SEE PART 2 of 2
Today's F@cked Buyer (Palm Beach Gardens)
2207 DRIFTWOOD Cir, Palm Beach Gardens, FL 33410
- 3 Bed, 2 Bath, SFH
- Bought in May 2005 for $1,205,000
- On the MLS for $999,000
- Loss before the Realtor® commission: $206,000
- Loss after the Realtor® commission: $265,940
Today's Local Real Estate News: "I’m really having to explore other options."
“U.S. banks and thrifts suffered the biggest increase in late loan payments in 17 years as more homeowners fell behind on mortgages, the Federal Deposit Insurance Corp. said.”
“In the period ending June 30, loans more than 90 days past due rose 10.6 percent to $66.9 billion, the largest quarterly rise since 1990, the FDIC said in its Quarterly Banking Profile released Wednesday.”
“In South Florida, late monthly mortgage payments have been increasing since last year. Experts expect these late payments will result in a foreclosure surge sometime next year.”
“The number of people behind on their mortgage payments in July, the latest data available, almost tripled in Broward County from a year ago, from 517 to 1,430, according to Plantation-based Realestat.com. In Palm Beach County, the number more than tripled from 298 to 1,063.”
The Palm Beach Post reports on some good news associated with the housing downturn:
“Palm Beach County's property appraiser mailed more than 620,000 property tax notices on Tuesday, and the preliminary bills show two things homeowners haven't seen in years: falling values and falling tax bills.”
“Of the 620,647 residential and commercial properties in Palm Beach County, 59 percent are worth less this year than last, said John Thomas, assistant director of residential appraisal services at the property appraiser's office.”
“Palm Beach County home prices have been in a slump since late 2005, when the speculative frenzy of real estate sales and double-digit price increases subsided.”
“Meanwhile, the number of homes for sale has continued to grow. Nearly 25,000 homes are for sale in Palm Beach County, according to Illustrated Properties Real Estate. At this time last year, 22,000 homes were on the market, according to Illustrated's Web site.”
“For longtime homeowners with homestead exemptions, the drop in market value will have no effect on their tax bills. That's because the Save Our Homes amendment to the state constitution allows homes' taxable values to rise 3 percent a year even if the market value falls, as long as the taxable value remains less than the market value.”
The Miami Herald reports on recent job losses in the mortgage industry:
“At the North Carolina offices of mortgage lender HomeBanc Corp., Archie Clark is the only employee left. But in a few days, he'll be gone, too. When Clark finishes helping movers from the company's Atlanta headquarters collect computers and other property, he'll join the more than 25,000 workers nationwide who have lost jobs in the financial services industry since the beginning of the month - with more than half coming since last Friday.”
“With few exceptions, the cuts are the direct result of woes in the nation's housing market.”
“More layoffs are announced daily. On Wednesday, Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs, while Accredited Home Lenders Holding Co. added 1,600 positions to the heap. The night before, banking giant HSBC said it would close a main financing office and cut 600 jobs.”
“Since the start of the year, more than 37,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.”
“It's an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.”
Appraisers are not doing much better according to an article by the Daily Business Review:
“Fewer sales and refinancings in the plummeting home resale market along with pressure from mortgage brokers are taking a toll on residential appraisers.”
“With the sales downturn, South Florida appraisers must expand their search criteria for comparables sales and spend more time explaining their conclusions. Some are taking on other types of appraisal work to stay afloat.”
“‘There are a lot of appraisers sucking wind,’ said Florida Real Estate Appraisal Board chairman Frank Gregoire.”
“Some appraisers around the state who once worked 10 to 12 assignments a week are now down to one or two, he said. South Florida appraisers are not immune.”
“‘I’m really having to explore other options for something to do after 26 years,’ said Doreen Campbell, owner of Campbell & Associates Appraisers in Davie.”
Mortgage-industry employees and appraisers are not the only ones looking for new options. According to the Florida Association of Realtors®, their memberships are dropping. The Union-Tribune reports:
"Plummeting stock prices. Mortgage lenders filing for bankruptcy or shutting down. Layoffs at homebuilders and banks. Soaring foreclosures and loan defaults."
"Damage from the nation's slumping housing market is evident throughout the economy and permeates financial markets. Add real estate agents to the growing list of victims, although they know few tears will be shed for them."
"Nancy Riley, president of the Florida Association of Realtors, said membership more than doubled since 2001 and stood at 169,434 last year. The group had budgeted for a 25 percent drop, but expects roughly the same total by year-end."
"'Most people getting out got in just to make a quick buck,' Riley said, blaming tax issues, insurance costs and the media for the perception that Florida's real estate market continues to falter."
"'It's not doom and gloom,' Riley says, insisting the state is gearing up for another population boom. "
The Miami Herald reports on a troubled local developer:
“WCI Communities, the Florida home builder that reached an agreement with Carl Icahn to overhaul its board, reported a second-quarter net loss after weak housing demand forced it to write down some properties.”
“The net loss totaled $33.2 million, or 79 cents a share, compared with net income of $22.7 million, or 52 cents, a year earlier, Bonita Springs, Fla.-based WCI said Wednesday in a statement. Revenue fell 54 percent to $241.8 million.”
The Sun-Sentinel published more news of troubled companies that have business in South Florida:
“Toll Brothers Inc., the biggest U.S. luxury home builder, said Wednesday its third-quarter profit tumbled, hurt by higher-than-expected cancellations as the housing downturn and credit quality concerns continue.”
“Robert Toll, chairman and chief executive, said cancellation rates for the quarter were greater than at any point in the 21 years the company has been traded publicly.”
“Earnings for the three-month period that ended July 31 dropped to $26.5 million, or 16 cents per share, from $174.6 million, or $1.07 per share, during the period a year ago.”
“Toll Brothers has several projects in Palm Beach County, including Trieste in Boca Raton and the Jupiter Country Club.”
Jeff Witkin got his letter to the editor published in the Sun-Sentinel:
“The recent flurry of letters from opponents of property tax reform is appalling. “
“We have an unusual opportunity to make a statement that we are desperate for tax reform! (And no, the cuts will not affect our education or services — poorly managed funds do way more than these tax cuts ever will).”
“Stop seeing the world with blinders. If you're complaining, you've probably made an unexpected fortune on your house. Pay your share of taxes and stop whining. Think of the benefit to the community, and we will all see a benefit.”
But, don’t worry; one Sun-Sentinel columnist assures us the housing will recover shortly:
“South Florida is no stranger to real estate booms and busts.”
“In the 1920s, even swamp land was going for premium prices. A couple of disastrous hurricanes literally put a damper on the land speculation and housing boom. Then the stock market crash of 1929 and the ensuing Great Depression sent the region even deeper into the economic muck.”
“South Florida eventually recovered, but not until after World War II, when a revitalized national economy and the widespread use of air conditioning resulted in massive migration to the region.”
“Florida has been particularly hard hit, with the home sales rate the lowest in the country and foreclosures among the highest.”
“In economics, as in physics, actions are followed by reactions. The reactions following boom times are painful, but in a free-market economy, they are necessary to wring out the excesses and bring things back to a semblance of equilibrium.”
“Rest assured, the South Florida real estate market eventually will revive itself, although it will take time. There's only so much land available with South Florida's climate, and for millions of people, chancing a hurricane still beats shoveling snow, scraping windshields, and driving on icy roads.”
Wednesday, August 22, 2007
Today's F@cked Buyer (North Bay Village)
1625 KENNEDY CA, Unit: PH103, NORTH BAY VILLAGE, FL 33141
- 2 Bed, 2 Bath, Condo
- Bought in August 2006 for $460,000
- On the MLS for $379,900
- Loss before the Realtor® commission: $80,100
- Loss after the Realtor® commission: $102,894
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Tuesday, August 21, 2007
Today's F@cked Buyer (Weston)
3952 SAN SIMEON LN, WESTON, FL 33331
- 2 Bed, 2.5 Bath, Townhouse
- Bought in August 2006 for $305,000
- On the MLS for $239,900
- Loss before the Realtor® commission: $65,100
- Loss after the Realtor® commission: $79,494
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Today's Local Real Estate News
“Foreclosure filings rose 9 percent from June to July and surged 93 percent over the same period last year, with Nevada, Georgia and Michigan accounting for the highest foreclosure rates nationwide, a research firm said Tuesday.”
“‘While 43 states experienced year-over-year increases in foreclosure activity, just five states - California, Florida, Michigan, Ohio and Georgia - accounted for more than half of the nation's total foreclosure filings,’ said RealtyTrac Chief Executive James J. Saccacio.”
“Florida's foreclosure filings fell 9 percent between June and July to 19,179. The July figure represents a 78 percent jump from a year ago.”
The South Florida Business Journal reports that unemployment is down in the up in Broward and Palm Beach Counties:
“The unemployment rate in Broward and Palm Beach counties edged up in July, while Miami-Dade's unemployment declined in a year-over-year comparison, the Florida Agency of Workforce Innovation said. “
“Broward County posted an unemployment rate of 3.8 percent in July, up from 3.3 percent in July 2006. Palm Beach County also was up, to 4.7 percent from 4.1 percent.”
“Miami-Dade County's unemployment rate dropped to 3.8 percent in July, compared with 4.1 percent in the year prior.”
“Florida's job growth has been slowing since September 2005, when it peaked due to a booming housing market and construction-related hurricane recovery, said Monesia Brown, director of the Florida Agency of Workforce Innovation. She said the slowdown was tied to weakness in the construction, manufacturing and industrial sectors.”
Miami-Dade continues to fight the Federal takeover of their troubled Housing Agency (see this video for some background):
“After months of threats and negotiations, HUD announced Aug. 7 that it would take control on Aug. 21. County attorneys waited until the end of that window and expect to file their request for an injunction today, said acting county attorney Abigail Price-Williams.”
“The federal government began probing the agency last year, following The Miami Herald's House of Lies series, which exposed widespread waste and mismanagement in the county's affordable housing programs.”
“Some developers who received millions of dollars to build affordable housing delivered few, if any, units. Delays in the replacement of housing projects forced hundreds from their homes for years, and tens of thousands of Miami-Dade residents are still on waiting lists. At least three developers have been arrested.”
“They have fought HUD, saying they are already doing everything possible to rebuild the department. A takeover, they have said, would only kill their momentum and take critical programs out of the hands of locally elected leaders.”
Maybe taking the program out of the hands of local “leaders,” the ones that failed to oversee the Agency in the first place, is a good thing.
Finally, the Sun-Sentinel printed the following letter to the editor:
“The Property Appraiser's Office has been tying our house values to the volatile housing market of the last several years. Thus, many are paying taxes based on a much higher, and false, market price.”
“Why not just fluctuate these guesstimates in proportion with the stock market or the pay-outs at the Hard Rock Hotel & Casino? The taxpayer's ability to pay is of no apparent significance.”
“How does an overtaxed public retaliate? Go to bcpa.net and download the form for challenging your assessment. This is something every taxpayer should do by the Sept. 18 deadline. Swamp the bandits!”
Monday, August 20, 2007
New URL: www.SoFlaHousing.com
http://www.soflahousing.com
Please share this with anyone you know that might be interested.
Of course, the old URL will also continue to work.
Today's F@cked Buyer (Brickell)
2025 BRICKELL AV Unit: 306, MIAMI, FL 33129
- 4 Bed, 4 Bath, Condo
- Bought in August 2005 for $1,000,000
- On the MLS for $679,900
- Loss before the Realtor® commission: $320,100
- Loss after the Realtor® commission: $360,894
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Today's Local Real Estate News
“Yes, the housing market is slow. Yes, the contest has a number of restrictions. But still, the city of Miami Gardens thought it would be easy to sell this house.”
“After all, the sale sounds like a good deal tinged with some competitive mystery. The city is selling off a three-bedroom house for $170,000, almost $70,000 below its market value.”
“It plans to select the homeowner in a random drawing. The problem: Virtually no one seems to want to put their name in the hat.”
“Only six people have turned in completed forms since the city started accepting them in June.”
“The low turnout has left Mayor Shirley Gibson scratching her head, while highlighting just how difficult the path to home ownership can be in Miami-Dade.”
“‘I don't know what this means,’ Gibson said. ‘Everybody said they needed to get a house or find affordable housing. There are supposed to be all these agencies doing training. If [these agencies] are doing all that and getting people ready, where are they?’”'
Meanwhile, many cities continue to complain that they will be affected disproportionately if the “super exception” amendment passes. The Sun-Sentinel reports:
“The communities with many of the condos and homes most affordable for middle-income families in Broward County would take the biggest financial hit if a shake-up of state property tax breaks wins voter approval.”
“The proposed ‘super exemption’ on a statewide ballot in January could cost Coconut Creek, Lauderhill, Margate, North Lauderdale, Tamarac and West Park at least a tenth of their tax base, according to an analysis of property tax data by the South Florida Sun-Sentinel. Each city would face drastic cuts in services.”
“The six cities lack large swaths of luxury housing, investment property and commercial development that protect other communities from a major hit. Instead, vast numbers of homeowners in their middle-class neighborhoods and senior communities could cut thousands from their tax bills.”
“‘It would be tough to run the city and offer people the services that we have always offered,’ North Lauderdale Mayor Jack Brady said. ‘Come check our books, because we haven't overspent. This would devastate us.’”
In one letter to the Sun-Sentinel editor, a reader argues:
“Suppose this ‘super exemption’ passes, and the non-exempt value of a single-family home is reduced by $195,000. Great, but, what's to keep the Property Appraiser from raising the assessed value to the real market value at 100 percent, in conformity with State of Florida guidelines? Guess what? It's already happening. Here's a real example: a single-family home in the Bel Air subdivision of Lauderdale-by-the-Sea now shows an assessed value $165,000 higher, compared to $428,000 in 2006, in a market that has been declining for the past two years, and this is generally true for all of the homes in this subdivision. This substantially wipes out the ‘super exemption’, and with the protection afforded by the Save Our Homes (SOH) limitation gone, future tax increases would be unpredictable. While appraisals are partly an analytical process, much subjectivity goes into the process. The only protection we have from our government is the Constitution, whether it be state or federal, and we cannot afford to give up SOH, even though they are throwing us a bone by allowing us to elect to keep it, but stopping short of making it portable.”
“The only transparent way of predicting your tax burden is by eliminating property taxes entirely and replacing them with a consumption tax or sales tax, making your burden ‘simply unfooled-around with,’ as some TV commercial says it. This would keep your tax burden in line with your ability to pay; and by keeping necessities like food, medicine, emergency supplies, back-to-school clothing, etc, exempt from sales tax, the impact on lower income folks would be minimized and, perhaps, even improve their possibility of home ownership. But, with that not likely to ever happen, beware of the new proposals.”
“Do yourself a favor and go to the Property Appraiser's website, check out the current Assessment Value for your property, and click on the Super Exemption Calculator to see what your future risk is. The Calculator shows that in 25 years the single-family home in the example above will have a SOH taxable value of $263,000 versus the Super Exemption taxable value of $1.6 million, for an ad valorem tax difference of $29,000 per annum out of your pocket. So, come January 29, 2008, vote NO, to the proposed Constitutional Amendment. But if the "super-exemption" passes, and you currently have SOH protection from rising real estate taxes, elect to keep it, and lobby the Legislature to make SOH portable. Don't fall for the ‘gift.’ It's a Trojan Horse.”
Of course, this argument is easy for this reader since he is protected by SOH in a home he bought long before the boom. He currently lives in a house with an assessed of $593,000. Yet, due to SOH, he is currently paying taxes on $116,530 worth of its value.
Sunday, August 19, 2007
Today's F@cked Buyer
10081 SW 16TH PL, DAVIE, FL 33324
- 4 Bed, 2 Bath, SFH
- Bought in September 2005 for $448,000
- On the MLS for $329,000
- Loss before the Realtor® commission: $119,000
- Loss after the Realtor® commission: $138,740
I need your help with this daily feature. Do you know of a F@cked Buyer? Just add the MLS number or the FSBO link in the comments section and I will add it to an this daily update in the future.
Video: How Millions of American Will Lose Their Homes
CLICK HERE TO WATCH THE VIDEO
The creator of this video also have a interesting blog. Check it out at: Armcrash.com
Do not trust a Realtor's® advice on short sales.
“Short sales are becoming more prevalent as South Florida's housing slump deepens. It's an attractive option for debt-ridden homeowners who bought at the height of the housing boom or who siphoned the equity out of their homes and now are left in the lurch as prices plummet.”
“Short sellers walk away without the stigma of losing their homes to foreclosure tainting their credit reports. But they do have to count any amount forgiven by a lender as taxable income.”
“Lenders also benefit because they're saving thousands of dollars in carrying costs and other expenses by wiping the properties off their books.”
“‘It's a great tool,’ said Ron Rosen, Stark's Lighthouse Point-based real estate agent. ‘It helps out everyone.’”
But there’s a huge problem with this statement; a short-sale does not always “help everyone out.” It does help out the Realtor who typically makes much more in commissions from a short sale than from selling a bank-owned foreclosure. It does help out the lender who will save thousands on legal bills by avoiding the foreclosure process. From an accounting perspective, it is also advantageous for a lender to encourage a short-sale because it will not have to carry the foreclosed property on its books – a property that will have to be carried on a lower-of-cost or market basis, which is typically far below the fair value of the mortgage debt.
However, a short-sale can be absolutely devastating for troubled borrower because of its potential tax implication. Depending on their personal situation, a troubled borrower could end up paying a massive tax bill following a short bill. Jonathan Alper, an Orlando attorney, does a great job of explaining the potential tax implication in his article, Income Tax Liaibility From Deed In Lieu Or Short Sale. In another article, he explains:
“Many people who invested in real estate at the end of the boom are in financial trouble. I have been getting more and more inquiries from individual investors facing foreclosures of their investment properties. Often, people tell me they are discussing “short sales” with their mortgage lenders. In a short sale, the lender allows the house to be sold for less than the mortgage balance. The borrower avoids a deficiency judgment. The lenders would rather get most of their mortgage through a sale arranged by the owner then take the property back at a foreclosure sale. Borrower should beware of short sales.”
“The problem for the borrower in a short sale is that the difference between the payment to the mortgage company and the full mortgage balance is a forgiveness of debt for tax purposes. The mortgage company is forgiving the debtor’s liability for the deficiency. The IRS considers forgiven debt to be taxable income to the borrower. The mortgage lender may send the borrower a Form 1099 for the amount of the deficiency. Most borrowers who cannot afford mortgage payments can even less afford additional tax liability. Owing money to the IRS is usually worse than owing money to a mortgage lender. Many mortgage lenders will not pursue debtors for deficiency judgments; the IRS will always pursue unpaid taxes. For that reason, most borrowers will fare better by letting their property go to foreclosure, even if the foreclosure may result in a deficiency liability.”
I just wish that every consumer that was considering a short sale would read this before they went forward with a short sale. However, the vast majority will enter a short sale completely ignorant of the potential tax implications.
The problem lies with most Realtors® and lenders. Both parties have a vested interest in talking homeowners out of foreclosure and into a short sale. They do so without any disclosure requirements on the tax implications whatsoever. In many cases, the consumer learns about the about the IRS debt forgiveness rules for the first time when they receive their 1099 at the end of the tax year.
Even if the consumer is aware of the potential tax liability, I have seen many Realtors® and lenders give completely false information. Usually, it's poor advice on Internal Revenue Code (IRC) 121 insolvency rules, rules that allow certain taxpayers to avoid recognizing the debt forgiveness as income. A consumer should know that these rules are highly complex and does not exclude most assets (including tax-deferred retirment accounts) from the calculation. Many CPAs, tax attorneys, and the IRS themselves have problems with these calculations – having a completely unqualified Realtor® or lender provide advice on these matter is, without a doubt, foolhardy.
Lately, I have heard that some Realtors® explain that new rules passed by Congress allow homeowners to exclude the forgiven debt. Beware of this advice as well. The Mortgage Cancellation Tax Relief Act of 2007 (H.R. 1876) is nowhere near passage. And, even if it does pass, it will probably not be retroactive.
Going forward, I will be broken record on this issue: If you're having trouble with your mortgage, whatever you do, do not trust a Realtor® or a lender to provide you with financial advice. Remember, it was probably a Realtor® or lender that helped you get into this mess, relying on one to get you out is simply foolish.
If you are having problems, seek out a qualified CPA or an attorney before you talk to anyone else.
By saying all this, I am in no way saying that a short sale is always a poor choice for all troubled borrowers. For many troubled borrowers, short sales are the optimal choice. However, Realtors®, lenders, shill media writers, and even this humble blogger should not make that decision. Again, seek qualified, professional advice from a CPA or an attorney.
Saturday, August 18, 2007
Video: CNBC on the South Florida Market
CLICK HERE TO WATCH THE VIDEO
Today's Local Real Estate News
“Out of 20 single-family housing markets in Florida, 18 posted declining existing-home sales in the April-to-June period, according to a Florida Association of Realtors report released Wednesday.”
“Palm Beach County and the Treasure Coast were among those markets. Miami saw the biggest decline, followed by the Treasure Coast, which tied Orlando for No. 2 with a 40 percent year-over-year sales slump.”
“In Palm Beach County, buyers closed on 21 percent fewer single-family homes in the second quarter - 2,170 sales compared with 2,733 in the same period a year ago, the report shows. The Treasure Coast's drop represents 921 sales in the April-to-June quarter this year, compared with 1,523 in the same period last year.”
“‘I tell buyers to buy when people aren't buying,’ said Douglas Rill, president of Century 21 America's Choice, which has four offices in Palm Beach County.”
Meanwhile, the credit markets are becoming even tighter for South Floridians. The Miami Herald reports that Option One, the mortgage arm of H&R Block, is abandoning the Florida condo market:
“In a blow to an already weak housing market, Option One Mortgage will no longer provide mortgages to buy Florida condos, a decision industry watchers warn other lenders could copy.”
“Option One's move comes as the once-hot market for condominiums in Florida has become glutted with thousands of unsold units, threatening the prospects of developers like WCI Communities that are under pressure to round up scarce buyers. Compounding the problems for mortgage lenders, investors are refusing to fund loans they think look risky, producing a credit crunch that has roiled the housing market and forced dozens of lenders out of business.”
“Option One wouldn't discuss what led to the move in Florida, which in the first four months of the year was its second-largest source of mortgage originations. Mortgage brokers in the state say they expect other lenders to follow suit.”
“Warned Alex Barron, an analyst with Agency Trading Group: ‘It's got a pretty broad implication. If other lenders follow, you're going to find a lot of very desperate buyers' who won't be able to close even if they wanted to.’”
Expanding on the credit crunch, the Miami Herald reports:
“Mortgage broker Ed Smith Jr. has been arranging home loans for 24 years and it's never been tougher for him to close a deal than during the past few weeks of turmoil.”
“As more lenders collapse, the skittish survivors are raising their rates and changing the rules for getting a loan every few hours as they scramble to stay alive. The upheaval has made it virtually impossible to secure financing for scores of borrowers who would have easily qualified for mortgages just a few months ago, creating a lending drought likely to deepen the housing slump.”
“The fallout figures to be especially hard on homeowners facing dramatically higher payments on exotic mortgages that they obtained two or three years ago. These mortgages began with bargain-basement, or "teaser," interest rates that offered extremely low payments so borrowers could buy a home and refinance later.”
“But falling home prices and stricter lending criteria have chained these borrowers to their current mortgages, lumping them with higher payments that they can no longer afford.”
The Miami Herald provides more evidence that the housing downturn is affecting our overall economy:
“State and some local July unemployment figures rose to their highest levels in two years Friday, and the housing slowdown is to blame.”
“The real-estate downturn also weighed on job growth, with Florida's recent standard of outperformance now looking a lot more like the national average.”
“The slowdown is causing construction to limp along. But it has spread further into the economy, to industries such as retail sales, as Floridians are extracting less equity -- their spending money -- from their homes.”
“The slowdown is causing construction to limp along. But it has spread further into the economy, to industries such as retail sales, as Floridians are extracting less equity -- their spending money -- from their homes.”
The Palm Beach Post also reports on unemployment, which seems to be affecting the northern counties even more:
“Its once-booming housing market at a near-halt, St. Lucie County showed a dramatic spike in unemployment in July, state officials said Friday.”
“Unemployment rose to 6.6 percent from 5.6 percent in June, giving St. Lucie the dubious distinction of having the state's second-highest rate, trailing only Hendry County's 9.9 percent. Indian River County also had 6.6 percent unemployment.”
“Slower construction activity has rippled through St. Lucie County's service-heavy economy, said David Skiles, president of First Peoples Bank in Port St. Lucie.”
“‘We're so dependent on housing,’ Skiles said. ‘It's one of the big drivers, and that has slowed considerably.”
“Martin County saw a more modest rise in unemployment. Its jobless rate jumped to 4.7 percent from 4.1 percent in June, the Florida Agency for Workforce Innovation said. Palm Beach County's jobless rate also jumped to 4.7 percent from 4.1 percent.”