Today's Local Real Estate News

The local flood of foreclosures (see my previous post on this issue) means that our market is among the worst in the entire United States. The Miami Herald reports:

“Miami-Dade and Broward counties made the top-10 list of metropolitan areas with the nation's highest foreclosure rates in the first half of 2007, according to RealtyTrac.”

“The top three cities in the country were Stockton, Calif., Detroit and Las Vegas -- three areas with vastly different economies and demographic trends, the data firm said.”

“Rounding out the areas with the top foreclosure rates are Riverside-San Bernardino, Calif.; Sacramento, Calif.; Denver; Bakersfield, Calif.; and Memphis, Tenn. Cleveland tied with Fort Lauderdale for 10th place. Miami was seventh.”

The foreclosure crisis has led the Miami Herald to call for Federal intervention to make mortgages more consumer friendly:

“The meltdown in the market for subprime mortgages is a disaster long in the making. Loaning money to borrowers with shaky credit on terms that made timely repayment difficult is risky business to begin with. Factor in gullible borrowers, greedy investors, sticky-fingered brokers, over-eager lenders and lax supervision, and you have all the ingredients of a full-blown crisis.”

“The subprime market consists of loans to borrowers who do not qualify for regular loans because of low earnings, a bad credit history -- or both. These loans usually carry higher interest rates and often are loaded with cash-draining gimmicks. These include an ''adjustable rate'' that starts out low and then suddenly increases, often steeply, as well as prepayment penalties and high fees for the mortgage brokers who today originate about 75 percent of all home loans.”

“Another twist: The loans can be bundled together and ‘securitized,’ which turns them into financial instruments for investors to buy. As testimony before the Senate Banking Committee earlier this month revealed, many investors and hedge funds did exactly that because Standard & Poor and Moody's gave them an AAA rating even though the entire pyramid of debt was balanced on the high level of risk posed by borrowers whose ability to repay had been deemed questionable from the beginning.”

“Bailing out investors and hedge funds is not a good option. Neither is expanding the loan limits of the quasi-government agencies that buy mortgages -- such as Fannie Mae. It would be wrong to transfer the risk and the losses resulting from bad decisions made by lenders and investors to the strapped taxpayer.”

“What the Fed can do is expand its regulation under the authority of the Homeowners Equity Protection Act. It can severely restrict prepayment penalties, limit the fees pocketed by brokers, create a mandatory grace period before a higher rate mortgage kicks in (giving borrowers time to find better funding), and encourage lenders to restructure faulty loans before resorting to foreclosure. Owning a home remains the heart of the American Dream. The government has a duty to keep it from becoming a nightmare.”

The Miami Herald reports that promised property tax cuts will not have a significant effect on most Dade and Broward homeowners:

“As early property tax notices start hitting mailboxes across South Florida this week, most taxpayers are due a slight drop in their bills”.

“Even so, more than half the cities in Miami-Dade, and a third in Broward, are set to avoid the most severe effects of the state-mandated tax cuts.”

“In Cutler Bay and Miami Gardens, two communities that are exempt from the cuts because they are relatively new, revenues could climb as much as 24 percent, based on a Miami Herald review of preliminary tax rolls.”

“That exemption, and several others, mean that the tax cuts mandated this year by the legislature will be muted across much of South Florida -- if the initial tax rates proposed by communities stay where they are. Local governments can reduce the rates that they have announced, but they cannot increase them.”

The Sun Sentinel explains how one city, Davie, will decrease millage rates but it will still not impact most homeowners:

“The Davie Town Council tentatively rolled back the millage rate from 4.97 to 4.12, and the annual budget has been tentatively rolled back from about $98 million to $96 million.”

“Davie town officials don't expect any layoffs of staff, but they do plan to impose a hiring freeze and may not be able to offer as many municipal services next year. There had been discussion about laying off one person in the development services department, but the council requested that the individual be retained on staff.”

“Council Member Susan Starkey said tax relief is important to Davie residents, but she is concerned that while the millage rate is being decreased, county tax assessments on properties are being raised, and so residents really won't see as much relief. She is concerned this may cause many Davie residents to leave the state and go to places with a lower cost of living.”

“‘Everyone in town is being hit by higher taxes,’ Starkey said. ‘The tax appraisals for housing has gone up. We are seeing many homes in foreclosure.’”

USA Today has brought the plight of Briny Breezes to the nation (see my previous post on why Briny Breezes defines the bubble):

“Who wants to be a millionaire? Never mind.”

“That's the come-on, and ultimate torment, recently served up to Briny Breezes, a 43-acre mobile home community on Florida's Gold Coast. In January, Ocean Land Investments of Boca Raton agreed to pay Briny trailer owners $510 million for their oceanfront property, a defiantly unpretentious middle-class oasis wedged amid mansions, high-priced condominiums and opulent hotels.”

But two weeks ago, Ocean Land, facing an Aug. 10 deadline to pay the rest of a $5 million non-refundable deposit (it had put down $500,000) asked for a 45-day extension to talk to nearby towns opposed to the project. Briny's board of directors refused, and the deal is off.

There goes the money. The new sailboats. The lavish gifts for grandchildren. Most troubling: A few dozen residents have already bought new homes in anticipation of the big payday.

"Some of these people have purchased elsewhere," says Roger Bennett, mayor of Briny Breezes, which incorporated as a town in the 1960s. "Some can afford it, but it's the many who couldn't that I feel sorry for."


More South Florida companies are reporting poor earnings as a result of the housing slump:

“Sales slumped at building products firm Imperial Industries ( IPII) on weakness in Florida housing construction.”

“The Pompano Beach-based firm said sales slid to $13.6 million from $20.4 million in the second quarter of last year. The company had a net loss of 6 cents per share for the quarter compared to 43 cents in profit last year.”

Meanwhile, Fort Lauderdale-based homebuilder, Levitt is calling off deals due to the housing slump:

“The proposed marriage between home builder Levitt and BFC Financial may be on the rocks. The reason: the ongoing housing slump.”

“Levitt lost $58.1 million in its second quarter, the company said, compared to $737,000 in the same quarter last year.

That poor performance has prompted BFC Financial and Levitt, both based in Fort Lauderdale and headed by chief executive Alan Levan, to rethink their deal. Levitt told investors in its earnings statement that BFC Financial is ‘reviewing the transaction to determine if it is willing to proceed.’”

“Levitt said it's also deciding whether to go forward or not.”

“On Monday, Levitt stock sank 10.7 percent to a 52-week low of $3.96 per share; its 52-week high is $15.44.”

Yet, despite all this (plus evidence from our daily F-cked Buyer posts and virtually every other piece of objective data), most Florida homeowners remain absolutely clueless about the current housing situation. In fact, most Florida homeowners are actually optimistic:

“Florida homeowners in a recent survey overwhelmingly said they remain optimistic about the local housing situation, despite media reports expressing views of a volatile market.”

“The survey, which is part of the Fund Consumer Education Campaign sponsored by Florida's Attorneys' Title Insurance Fund, Inc., concluded that 63-percent of Florida homeowners believe the value of the homes in their community will either rise or remain the same during the next 12 months. The report says ‘more than half of the respondents believe now is a good time to buy a Florida house or condo,’ but only one in five plan to do so within the next 2 years.”

“‘The good news is that, amid proliferating news stories about an underperforming national real estate market, Florida homeowners remain optimistic about the value of their homes and are encouraged by the growing buyer's market,’ said Charles J. Kovaleski, president and chief executive officer of Attorneys' Title Insurance Fund.”