Today's Local Real Estate News: "I think you will find Canadians who want to buy now are going to be looking elsewhere."

The Miami Herald reports that the state budget shortfall is accelerating:

“Florida's economy, which forced a $1 billion cut in the state budget just weeks ago, is sputtering so badly economists gave lawmakers more grim news Wednesday: Prepare to lose another $2.5 billion over the next 18 months.”

“For Gov. Charlie Crist and the Republican-controlled Legislature, the forecast promises a financial and political headache as they figure out painful new spending cuts in a crucial election year.”

“The economic prediction marks the first time since Florida began keeping close track of tax collections in the early 1970s that the state will record two consecutive years of declining income.”

“Economists blame the continuing downturn on a weak housing market, slowing population growth, rising fuel prices and consumers holding off on big-ticket purchases.”

At the same time, the State recently disclosed that the have significant exposure to subprime investments. Bloomberg.com reports:

“The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt that was cut below investment grade.”

“The downgrades affect more than 4 percent of what the Florida State Board of Administration has purchased for the funds, according to a report by the agency's director, Coleman Stipanovich, that was delivered at a cabinet meeting of Republican Governor Charlie Crist today. Some $3.6 billion, or 7.3 percent, of the securities may be downgraded by credit- rating companies, according to the document, provided to Bloomberg by the state board.”

“The disclosure, which follows a month of inquiries by Bloomberg News to Florida officials brings the subprime crisis that has afflicted banks, hedge funds and chief executive officers to the public finances of the fourth-largest U.S. state.”

“Florida's state funds were affected by bad investments in asset-backed commercial paper, short-term debt sold by financial institutions that is secured by collateral such as mortgage securities and credit-card receivables. As the value of that collateral dropped, investors were unwilling to reinvest their money when the short-term debt matured, creating a liquidity crisis for the financial institutions.”

“‘It's really disgraceful,’' Levitt said. ‘I think what's really bad about this is that the state has called for investments to be prudent and careful but clearly the custodians of this fund were reaching, they were trying to get maximum yield.’”

The Sun-Sentinel reports on the continued woes faced by homebuilders:

“Home builders such as WCI Communities Inc. and Pulte Homes Inc. aim to survive an industrywide unraveling by selling houses at bargain prices, slashing jobs and scrapping growth plans.”

“Bonita Springs-based WCI, which builds in South Florida, recently cut 575 jobs. Pulte of Bloomfield Hills, Mich., also has been reducing payroll by laying off more than 300 workers this year from its DiVosta Building Corp. of Palm Beach Gardens.”

“As the housing downturn worsens, experts say at least a few major U.S. home builders may end up bankrupt.”

“On Friday, Fort Lauderdale-based Levitt and Sons became the largest builder to file for Chapter 11 bankruptcy protection from its creditors. In the past two months, the company defaulted on more than $300 million in loans, laid off most of its 412 workers and stopped building houses.”

“Developers are reeling from sharp increases in loan defaults, which force lenders to be far more cautious about new mortgages. The result: sinking home prices, surpluses of unsold homes and a spike in canceled orders.”

“Even speculators who snatched up new homes during the bubble years hoping to turn a quick profit can't sell, meaning more properties compete for a limited pool of buyers.”

Jeff Ostrowski, a real estate writer for the Palm Beach Post, has been a typical Mainstream-Media (MSM) cheerleader for Realtors®. Perhaps, he’s starting to see the light because his tone has started to change lately. Here’s an example:

“Gotta love those spinmeisters at the National Association of Realtors. They put out a release yesterday touting 2007 as ‘the fifth-best year on record.’”

“That’s based on national home sales of 5.5 million units, which, while way off from the boom of 2004 and 2005, are about equal to 2002 sales.”

“‘All real estate is local - conditions vary greatly from one city to the next,’ says NAR Chief Economist Lawrence Yun.”

“So you can imagine that Yun didn’t mention Palm Beach County as an example of a market where everything is just fine. You have to go back to the early ’90s to find a similarly moribund year here.”

“Based on the 5,595 sales of existing single-family homes through the first nine months of 2007, we’ll be lucky to hit 7,500 sales this year. The Florida Association of Realtors’ online database of housing stats goes back to only 1993, a year when Realtors sold 8,123 homes in Palm Beach County and the slowest year from 1993 through 2006.”

Similarly, Pat Beall, also of the Palm Beach Post, seems to reject the Realtor® claim that droves of rich foreigners are going to save the market:

“It's more than ruffled feathers: Canadian snowbirds are rethinking Florida.”

“‘I haven't met one person this year that wants to stay in Florida,’ said Boynton Beach resident Dory Kilburn, who heads the Boynton Intracoastal Group, a Canadian advocacy organization. ‘They all say they are getting out.’”

“Lopsided property taxes favoring year-round residents are a major culprit, and proposed property tax cuts are getting a cool reception north of the border. Still, talk of leaving might be saber rattling - except that it comes as Arizona, the Carolinas and other states are stepping up efforts to lure the flock.”

“The most powerful marketing tool of all is turning out to be free: Florida's two-tiered property tax system. In his Arizona Real Estate Notebook, blogger and broker John Wake sums up the message: ‘Arizona property taxes don't discriminate. Canadian owners are charged the same very low property tax as their American neighbors.’”

“‘I think you will find Canadians who want to buy now are going to be looking elsewhere,’ Benedek said. ‘I certainly don't encourage anyone to buy.’ He said his neighbors in Canada recently bought a home in Costa Rica.”

Still, not all the MSM are questioning Realtor® propaganda. Instead of reporting on the woes faced by the droves of homeowners facing foreclosure, Channel 10 News is trying to spin the foreclosure crisis into a buying opportunity (or course with the help of a Realtor®):

“There are more than double the amounts of foreclosed properties than this time last year. While the crisis is painful to many, foreclosures can hold the prospect of profit for others. Experts advise caution, however, because foreclosures draw a fine line between big bucks and a big bus”t.

“‘You really have to know what you're doing,’ said David Dabby, a South Florida real estate analyst.”

“To find a foreclosure, buyers should contact banks or realtors. There are also foreclosure auctions, Summers reported.”

“Experts said it's no longer necessary to purchase a foreclosure list because there are plenty of ways to find distressed properties for free”.

“Buyers should also consider hiring a reputable realtor to assist in the purchase of a foreclosure. For a buyer the services of a realtor are free.”

“‘The buyer doesn't pay a cent. The seller, or in the case of foreclosure, the bank, is paying the commission,’ said realtor Dan Kelley”

Likewise, the New York Post quotes a real estate professor that thinks that prices are not going to drop below 2004 levels (our daily F@cked Buyer post already proves him dead wrong on this issue):

“Miami's once-sizzling realestate market has certainly cooled off, but perhaps not by as much as redicted. In a city oozing with the vested interests of owners, renters, potential buyers, investors, brokers and developers, it's diffi cult to get an honest assessment of the market. Brokers and developers want to sell, so most play the “Florida-has-sunand- sand-and-thus-is-immune-to-thereal- estate-bubble" card. Would-be buyers want a deal, so they're hoping media sensationalism coupled with reality - a lot of new product - will bring prices crumbling down to pre-2000 levels. The truth seems to lie somewhere in the middle.”

“‘I think that you'll see prices coming down to the 2004 level, but not much below that,’ says Dr. William Hardin, a real-estate professor at Miami's Florida International University. ‘We're going to have to forget 2006 and part of 2005. I would try to make a transaction at 2004 or 2005 price points - they would be a good starting point for negotiations.’”