Today's Local Real Estate News

The Miami Herald reports on how the housing downturn is affecting tax revenues:

“Floridians are spending less on everything -- cars, furniture, home additions -- and it's due to one main ill: the slumping real estate market.”

“State economists painted a grim portrait of the state's finances Wednesday, saying the misfortunes of the housing market are to blame for a $1.5 billion projected state budget shortfall.”

“The deficit has prompted what could be an ugly special legislative session in September in which lawmakers plan to close the spending gap by making deep budget cuts. There is enough in reserves to cover the shortfall, but if legislators don't act now, they could be confronted with an even larger budget problem in the spring.”

“The principal problem, state economists said, is that home construction and sales of existing homes have dropped below the slow-down they had anticipated. The sluggish housing market has eroded consumer confidence and dragged down the sales of cars, furniture and other items. Economists warned this cycle could continue until early 2009.”

“The booming real estate market that left Florida tax coffers flush earlier this decade has meant lawmakers have some unspent cash that can cushion the shortfall. But rather than dip into the one-time surplus, the GOP-controlled Legislature plans to go ahead with budget cuts this fall to avoid the need to cut next year's budget when lawmakers meet in regular session this spring.”

The Palm Beach Post explains how the housing slump is causing reduced spending in non-housing-related areas:

“’When people believe the housing market's in a funk, that they're not bringing in as much money every year, their house isn't going to be appreciating as much every year, they don't feel as wealthy,’ she said.”

“So they don't spend money on cars, boats, clothes, restaurant meals and other purchases that have nothing to do with housing.”

Unfortunately, I think the Palm Beach Post missed an opportunity to discuss how some consumers used their homes as ATMs by taking out large home equity lines of credit (HELOCs) to finance their cars, boats, clothes and restaurant meals. A Washington Post story printed back on May 30, 2007 explains the “Housing ATM” phenomena:

“For a long time, Paul and Amy Woodhull's house on Capitol Hill was a honey pot. Through multiple refinancings over nearly a decade, they pulled out money to fix it up, buy a car, pay down credit cards, buy three other properties and improve them, too.”

“Now the pot is dry. The Woodhulls are feeling squeezed by bills, but with interest rates up and home prices down, they're reluctant to touch their home equity again. They called their six children into a family meeting recently, and Amy laid down new rules: No more impulse purchases or frivolous shopping trips. "We're going to have to save our pennies," she declared.”

“That seems to be the new motto in many an American household.”

“For years, as the bull market in housing gathered steam, people used their homes as glorified ATMs, pulling out money for all sorts of reasons. The trend helped support continued economic growth and recovery from the 2001 recession.”

“But now people are reining in their spending, raising concern that their collective decisions could nudge a sluggish U.S. economy into recession.”

And just when you thought they would finally stop building condos in Miami (see Bloomberg’s report on the Miami’s condo glut), now they are using your tax dollars to break ground on even more condos. I wonder if all the funds for affordable housing will disappear this time as well (see this post). The Miami Herald reports:

“An affordable housing complex that ties rent to income broke ground Thursday morning in Miami.”

“The units in Lafayette Plaza Apartments are available only to resident who earn less than the area's median income. Its one-, two- and three-bedroom apartments are expected to rent from $284 to $775 to families earning between $18,447 and $33,540 a year.”
“Lafayette Plaza, at 145 N.E. 78th St., is expected to cost about $33.8 million. Of that, about $5.3 million is to be subsidized by Miami-Dade County and $1.2 million is to be subsidized by the city.”

On the other end of the Miami condo spectrum, the Miami New Times printed a story about high-end units in foreclosure:

“Looking to scoop up some prime Miami Beach real estate? This could be your year. Nine properties valued at a million dollars or more have gone into foreclosure on the Beach since the beginning of 2007.”

“According to research compiled by Condo Vultures, these include a prime, vacant 10,500 square foot waterfront lot on Hibiscus Island ($3 million) as well as several condos that haven’t even been completed, including one at Aqua at Allison Island ($2.6 million). More than 50 Miami Beach properties in foreclosure are worth $500,000 or more.”

But, not all pending foreclosures are due to insolvency; some are due to monster trucks. The Palm Beach Post reports:

“Jeff George's yearlong obsession with his 12,000-pound monster truck has cost the 26-year-old a pretty penny.”

“Actually, several hundred thousand of them. And if the village has its way, it could soon cost him his two-story house, too.”

“The village kicked off foreclosure proceedings on the house at 178 Monterey Way Wednesday evening during a hearing before a special magistrate.”

“The move by the village is the first formal step toward collecting the $5,175 in code violations George racked up during three months last summer, said village attorney Brad Biggs.”

“On Sept. 13, a special magistrate fined George $75 for each day his super-sized Ford F-650 pickup remained parked in front of his house.”