Today's Local Real Estate News

The Sun-Sentinel reports on the effects foreclosures are having on South Florida:

“In Broward, the number of people behind on their mortgage payments in July almost tripled from a year ago, jumping from 517 to 1,430, according to a recent South Florida Sun-Sentinel article. In Palm Beach County, the number jumped from 298 to 1,063.”

“It's a harsh reality, but it's one that almost always follows a housing boom. Sadly, we never seem to learn the lesson that budgeting and keeping manageable debt levels is critical to the American Dream of home ownership.”

“That said, the impact of the mushrooming foreclosure cloud may not be limited to those people who lose their homes.”

“There's plenty of talk from the nation's capital to the country's financial nerve center in New York of an impending credit crunch. The last time Americans faced such a mess was during the savings and loan debacle, which sparked a recession and required a bailout from the federal government.”

Fortunately, President Bush recently stated that there would be no bailout:

“President Bush said Thursday concern should be shown those who've lost their homes but it's not the federal government's job to bail them out.”

“‘Obviously anybody who loses their home is somebody with whom we must show an enormous empathy,’” Bush said. Asked whether he would champion a government bailout, Bush responded: ‘If you mean direct grants to homeowners, the answer would be No, I don't support that.’”

“Bush said that he does support financial institutions working with distressed homeowners. He also suggested that some people may not have fully understood the terms of their mortgages. The government, he said, can help out by educating prospective home buyers.”

“Analysts estimate that nearly 2 million adjustable-rate mortgages will reset to higher rates this year and next. Some higher-risk ‘subprime’ borrowers were lured by initially low "teaser" rates offered during the housing boom. But those teaser rates can spike upward after the first few years, causing payment shocks.”

After saying for months that property taxes were the major source of our housing woes (see my previous post on this issue), some Realtors® are now saying lower taxes will actually hurt sales. The Sun-Sentinel reports:

“The scramble is on by cities to cut property taxes, but instead of luring home buyers, real estate agents say it may be discouraging some of them.”

“‘A big question on people's minds is what will happen in terms of public services and does this mean schools will have less money, and what about public hospitals?’ said Barry Rothman, sales associate with Lang Realty in Boca Raton. ‘Are we going to get even less service for our tax dollars?’”

“That's not what state legislators had hoped would happen when they ordered cities and counties for the fiscal year beginning Oct. 1 to freeze tax collections at current levels and then make an additional cut, ranging from 3 percent to 9 percent.”

‘People see the tax issue as a bunch of bull, so to speak, because insurance rates haven't gone down, home prices are still high and now interest rates are rising so people who were barely able to get in when prices were down can't afford to buy now,’ said broker Jeff Kahn, manager consultant with Century 21 Hansen Realty in Fort Lauderdale.”

Local Realtors® also once claimed that international investors would continue to drive up housing prices in South Florida (see this 2005 article from the Sun-Sentinel ). Now, The Sun-Sentinel reports a very different story:

Some real estate agents say the state's sluggish housing market has stemmed the tide of international home buyers, particularly from Latin America.

"We had a lot of people from Latin America putting their money here, investing in housing. But with all the negative press about prices falling and the rate of foreclosures, it's slowed down," said broker Natascha Tello of Pembroke Pines.

Even the National Association of Realtors® swayed from its normally Pollyanna view of the market:

“The National Association of Realtors' revised forecast calls for existing home sales of 6.04 million in 2007, down 6.8 percent from last year. The forecast was 1 percent lower, or 70,000 fewer homes, than July's prediction of 6.11 million.”

“This year's sales would be the lowest since 2002, when sales hit 5.63 million. Last year's sales were 6.48 million.”

“Next year, the trade group expects sales to climb to 6.38 million, up slightly from the forecast it gave in July of 6.37 million.”

“The forecast comes as delinquencies among borrowers with weak, or subprime, credit have risen dramatically over the past year, and other loans are showing weakness as well.”

“‘With fewer affordable loans available, that will cut back on some of the homebuyers who wanted to enter the market,’ Lawrence Yun, the trade group's senior economist, said in an interview. However, Yun projected that demand would rebound next year.”

It may be worse for South Florida. The Sun-Sentinel reports:

“In South Florida, existing home sales are down roughly 20 percent in the first half of 2007 compared with the same period last year, according to the Florida Association of Realtors.”

“Sales in Palm Beach and Broward counties are expected to remain sluggish through at least this year, even with Florida Gov. Charlie Crist signing into law a plan to cut property taxes.”

“New home sales also are disappointing. Robert Toll, chairman of luxury builder Toll Brothers, on Wednesday described the southeast Florida market as a ‘flunk minus.’”

“Experts had said the housing climate here could start to recover later this year, but they're revising their predictions in the wake of the mortgage-market mess. Some analysts now say it could be late 2008 or even 2009 before South Florida's housing market rebounds.”

Miami condo builder provide evidence of the downturn as they are now being forced to sell slow moving units at auction (remember when people used to sleep out on sidewalks just to be the first to buy these new units?). The Miami Herald reports:

“Panoramic views of Biscayne Bay. A short distance to the Carnival Center and downtown Miami. Living in the heart of Miami's emerging Edgewater neighborhood.”

“In what may preview the straits the ailing South Florida condo market faces in the coming months, developers of the Platinum condominium are auctioning 20 condos in its 119-unit, 22-story tower. Eight will go to the highest bidder, no matter how low the sales price. The rest require the developer's approval.”

“Carmen Redondo, a principal with Maysville, the property's builder, said buyers started closing on units at Platinum, 480 NE 30th St., in May, but the remaining inventory couldn't attract enough interest in the sluggish market. ‘We decided to auction the last 20 units so we can finish this project and go to a new thing,’ Redondo said.”

“The move echoes the condo bust of the 1980s, when new units were auctioned in bulk across South Florida. Recently, individual condo owners, companies converting apartments into condos and single-family builders have already experimented with auctions, both online and in person with full-throated auctioneers.”

“Market watchers bet more are to come, given conditions in the condo market. In June, the number of Miami-Dade condos sold dropped 52 percent from the same month a year earlier -- although prices held on, gaining 7 percent year-over-year to a median price of $275,500.”

In the face of all this news, the general population still seems completely unaware of the growing economic problems. The Palm Beach Post reports that consumer confidence is actually growing:

“Consumer confidence rebounded in August, rising to a five-month high as receding gasoline prices and a mostly solid employment climate made people feel better about the economy's prospects and their own financial situations.”

“The improved attitudes come even as Wall Street has been enduring a turbulent spell, which has sent stocks on wild upward and downward swings. Investors are worried that mounting problems in the housing and home mortgage markets will hurt the broader financial system and short-circuit the economic expansion.”

“The RBC Cash Index showed that consumer confidence rose to 89.3 in August. That marked a bounceback from July's 76.1, the worst reading in almost a year. The new reading was the best since March. The index is based on the results of the international polling firm Ipsos.”

“‘This indicates that there is a significant disconnect between Wall Street and Main Street,’ said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group.”