Today's Local Real Estate News: "‘We're really in a crisis right now."

The Sun-Sentinel reports on dropping home prices and sales:

“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.”