In not so surprising news, the Sun-Sentinel reports that local-builder, Levitt and Sons, has filed Chapter 11:
“Levitt and Sons of Fort Lauderdale on Friday became the nation's largest builder to file for bankruptcy as the housing market continues to crumble.”
“The storied company filed for Chapter 11 protection from its creditors in U.S. Bankruptcy Court in Broward County. It lists assets of less than $1 million and debts of more than $100 million.”
“The bankruptcy came after the company defaulted on more than $300 million in loans from Wachovia Bank and KeyBank, according to a Securities and Exchange Commission filing.”
“‘The Levitt name carries a lot of weight in the home-building industry,’ said Mike Larson, a housing analyst with Weiss Research in Jupiter. ‘To see them file for bankruptcy, it's a testament that this downturn is going to claim victims.’”
In a related story, Wachovia has warned of loan losses (including those from Levitt and Sons):
“Wachovia Corp., a banking leader in South Florida, on Friday became the latest major financial institution to warn of mounting losses in the credit markets, saying the value of securities it owns that are backed by loans sank by about $1.1 billion in October.”
“The nation's fourth-largest banking company also said it plans to boost its allowance for loan losses in the fourth quarter due to expected credit deterioration in the housing market in certain regions. The provision is pegged at $500 million to $600 million in excess of charge-offs in the quarter.”
“‘The most challenging markets of course are in several pockets in California,’ said Wachovia Chief Risk Officer Don Truslow during a banking conference in Boston. ‘We are also watching on our books several pockets in Florida, as well.’”
“At the time, Wachovia Chairman and Chief Executive Ken Thompson said, ‘Trends in mortgage credit are deteriorating faster than we would have expected.’”
The Sun-Sentinel reports on the condo reversions reversion trend:
“Just a short time ago, investing in the condo-conversion craze seemed like a good bet.”
“Stephen Mahaffee became one of those new buyers. He had been renting a one-bedroom apartment at Cypress Club at Woodmont in Tamarac for about 10 years when he got word the building was being converted to condos.”
“So in January he made his move and paid $199,900 for a two-bedroom unit. Less than a year later, he's one of only 18 owners in the 164-unit complex that Bankers Holding Group reluctantly decided to turn back into a mostly rental property.”
“The emerging trend of going from rentals to condos and — when the units don't sell — back to rentals again is what South Florida real estate experts are calling ‘conversion reversions.’ Since 2006, about 6,059 units that were once for sale in Broward and Palm Beach counties have been switched back to rentals, according to Jack McCabe, a Deerfield Beach real estate analyst.”
“‘The condo-conversions sales market has absolutely fallen off the table,’ said McCabe. “Prices have gotten so high that the vast majority of people they were geared toward can no longer afford them. We are just seeing the beginning of the reversion trend.”
“Mahaffee, the former renter who is now an owner, is left with mixed feelings about the deal and whether he stands to lose money on his property.”
“‘The market just dropped,’ he said. ‘Until I go to sell, then I won't know if it might be a problem. I hope not.’”
Despite these reversions, the Miami Herald explains that many low-income renters are being priced out of the market:
“Low-income renters in Miami face one of the most burdensome markets in the country, with spiraling housing costs and stagnant wages pricing them out of their homes at a ‘worrisome’ pace, concludes a study released Friday by Florida International University.”
“Once they are priced out of gentrifying Miami neighborhoods, low-income renters have ‘virtually nowhere to go’ to find more affordable housing because there is a dire lack of lower-cost apartments throughout Miami-Dade and Broward counties, the study says.”
“‘We've known there is an affordability crisis, but what this study is now pointing to is displacement and replacement,’ said Marco Feldman, a research associate at FIU's Research Institute for Social and Economic Policy and the study's author.”
“‘We're seeing an influx of wealthier people into Miami and a sharp reduction in the number of affordable apartments,’ he said.”
“The Miami-Fort Lauderdale-Miami Beach metropolitan area leads the nation in the percentage of renters who pay more than 30 percent of their income for housing and those who pay more than 50 percent of their income for housing.”
And despite all the bad news, the real estate industry is still making ridiculous claims about all the rich foreign investors that will be arriving shortly to save the market. The Associated Press reports:
“The weakening dollar has caused many problems for consumers, but it may also be providing the fuel for one unintended — and very welcome — benefit: a rally in the struggling housing market driven by foreign investors.”
“For an individual or developer trying to sell a home, interested buyers are just as likely to already have a place in London or Paris as they are to be first-timers new to the market.”
“‘European investment is likely to pick up,’ said Mark Vitner, chief economist for Charlotte, N.C.-based Wachovia Corp. "Now is the time to come over and take advantage.’” [Note the Wachovia connection again!]
“The theory goes that foreign investors step in and replace first-time home buyers who have been squeezed out of the housing market during the recent downturn. These new investors in turn allow current homeowners to sell and trade up to larger homes.”
“But New York and Chicago are not the only locations likely to provide popular options for foreign investors. Places like Florida and California are likely to see a surge in foreign investment.”
“‘In a market with great turmoil, (the weak dollar) is one factor supporting some key markets,’ Wachter said of the weakening dollar.”
“Wachter said markets like Miami and San Francisco, which are under pressure from the U.S. slowdown, are increasingly being supported by foreign investors.”
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4 comments:
The last story about foreign investors is ridiculous. Doesn't the word "investment" imply that the item you're buying is appreciating in value, regardless of exchange rates? Even if there are millions of rich foreigners out there, they'd have to be both rich and dumb to buy a depreciating asset and try to call it an investment. There may be a handful (literally) who are actually in the market to buy a second home in South Florida, but they're home buyers, not investors.
News papers, friends and family told me i was nuts and was never going to find a home for 230k in my neighborhood, well now they are upset that i was rite again. This is only the begining, 100 dollars a SQFT is coming to a nice nieghborhood soon!!! PS I was out fishing this week, didnt see but two boats, i will be doing this when i own my new home too :-)
$100 a SQFT
"Even if there are millions of rich foreigners out there, they'd have to be both rich and dumb to buy a depreciating asset and try to call it an investment"
Exactly. The reason foreign investors were buying condos in Miami was the same reason that US citizens were doing it: because they wanted to make money.
Now that buying property is a money loser, those foreign investors will be gone just like the US investors are.
Plus, it must be doubly-worse for any foreign investor who bought recently. Not only is the value of their property going down in US dollars--the US dollar is down an extra 30% or so on TOP of that.
Why in the hell would you want to buy US-dollar based assets right now when the currency is in a downward spiral?
Any foreigner with investments in the US loses money every time the dollar drops vs their home currency.
Lately, the dollar is only worth 68 cents to the Euro. A dollar and Euro were equal not that long ago. So, that's a 32% drop. Even foreign investors who bought before the market peak are WAY down just because of the dollar tanking.
Housing is sinking worldwide - why invest in Florida when you can invest in Spain, Australia, Greece et al.
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