Florida real estate: Life among the toxic assets
Filed under: Retirement, Investing
When I moved to Florida to be closer to my mom after my dad died, I never expected to be buying into what would become a toxic asset waste dump. Luckily, I bought my home in 2004, before the housing bubble inflated between 2005 and 2007. Surprisingly, I still have a paper profit in Central Florida, but if I lived in South Florida I'd probably be under water. Broward County homeowners have seen a drop of 48 percent with median home values back to where there were in 2002, and Miami median home prices are back to what they sold for in 2003. Most who bought homes in South Florida in the past seven years are under water. In Miami-Dade County, 35,000 houses were listed for sale in February, which is about a 35 month supply of homes. In a stable real estate market, the supply of homes on the market would be six to 12 months.
The Orlando area, where I live, is number 13 on the RealtyTrac foreclosure list with one in every 50 homes in foreclosure. But the section of the area where my development is located, Poinciana, has one in every seven homes in some stage of foreclosure. Luckily, the development I live in has many less homes facing foreclosure -- 30 out of about 3500. But, other area homeowners associations are near collapse with about 40 to 50 percent of the homeowners (many of them the banks who now own the homes) not paying homeowners' association fees.
Very few if any homes are being built. Occasionally I'll see a new home going up in the community I live in. When I rode around this week with my husband we saw five homes under construction versus 30 to 50 homes being built at any one time in its heyday.
This same story is being told all over Florida. People who want to vacation here are finding weekly rentals for 50 percent to 60 percent less than two years ago. When they get here they find nearly empty condo developments with wonderful amenities and almost no people. I went to one of those for a vacation about a month ago in Panama City, Florida, where construction has come to a screeching halt. Two more buildings are planned but all construction was put on hold.
If you do plan to vacation in Florida this year, take time to search the Internet for condos available. Why spend your time in a hotel room when for the same price you can probably find a two or three bedroom condo? Condo.com is one good place to start. Extra Holidays by Wyndham is another possible source. But I'm sure you'll find other options as well.
So what got Florida into this mess? Overbuilding, excessive speculation, record numbers of foreclosures and unscrupulous lending. Florida's lax oversight has a lot to do with the mess Florida needs to clean up. Florida officials allowed just about any crook to become a mortgage broker. Now Florida's top cop, Attorney General Bill McCollum, is finally starting to fight back. He's starting to file suits alleging loan-modification scams, but it's a little bit too late to help most of the people who got caught up in mortgage fraud.
Time magazine writes about an $83 million Tampa, Florida, mortgage fraud scheme that bought up dozens of properties using false information to buy homes in excess of their true value. These type of schemes helped to inflate the bubble that just burst. While the perpetrators of these schemes walked away with millions, they leave ruined communities in their wake.
Now these scam artists are coming back for a second wave in Florida with mortgage modification schemes. The U.S. Attorney's office in the Middle District of Florida told Time they're already are working on exposing these schemes and expect more than 200 indictments in the Tampa area alone. "The idea is to do as many cases as we can at one time to clearly send a message that this is not going to be tolerated," U.S. Attorney Brian Albritton told time.
Isn't it a shame more aggressive action wasn't taken to stop the fraudulent activity that created the bubble and helped to fuel the abuses that have resulted in the financial mess we all face? What I describe in Florida is going on in many of the top foreclosure states including California, Arizona, and Nevada. Real estate speculators, working with mortgage brokers and bankers who were willing to look the other way, walked away with lots of gains, leaving the rest of us to pick up the pieces.
Luckily, I'm happy where I'm living and have no plans to sell. But I have neighbors who've been trying to sell for more than a year with little prospect of doing that any time soon. Those whose portfolios have been hit hard by the financial carnage on Wall Street or whose pensions were cut back as their companies went bankrupt, are now facing foreclosure. I wonder how many more of us will face foreclosure or bankruptcy before we see any kind of a turnaround?
Lita Epstein has written more than 25 books including "Working After Retirement for Dummies."
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Reader Comments (Page 1 of 3)
4-23-2009 @ 9:17AM
Chip Rohlke said...
Forbes magazine predicted another 40% drop in real estate over the next 12 months in certain areas..including Florida. But not all areas are the same..nor properties. To find the best deals takes patience and local knowledge and I believe a bit of Economics 101.
But for me buying now makes sense even as prices fall cause I'm getting properties at 20% or less of their peak pricing and roughly 1/3 of their inherent value(what I call equilibrium prices). Plus you can get solid positive cash flow even with 100% financing as I'm using 2 3/4% money(equity line).
If Cramer is right the market will bottom June 30th but I wouldn't hold my breathe. Foreclosures are going to be at record levels for at least the next year or two and great deals are possible even in the best markets(Aspen, La Jolla, etc) but I'd stick to what's local. Brevard County Florida is my area and I think one of the best in the nation for potential return with prices at pre-2000 and even pre-1986 pricing.
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4-26-2009 @ 10:15AM
marc said...
You can't get any help from any of the perceived programs. The banks want your house so they can dump for a 100% profit. You see, all of their losses have been covered by the private, for profit, Federal Reserve banking cartel from money made from thin air. Just by printing it. What a great scheme if you are a banker.
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4-26-2009 @ 10:03AM
john said...
LETS NOT LET LOCAL GOVERMENTS OFF THE HOOK. AS PRICES BACAME FRAUDULENTLY INFLATED THE LOCAL TAXING AUTHORITIES HASTILY GRABBED THE INCREASES IN PROPERTY TAXES WITH THE REST OF THE BANDITOS!
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4-26-2009 @ 10:28AM
Bob said...
The reason for the price drop in Homes is "Short Sales". Banks caused this problem and they continue to be responsible for this degregation. Banks are stupid and incompetent and we the people are just as bad because we've allowed our tax dollars to be used to bail them out and what are we getting for it? More misery and more homeowners going under water. Shame on the administraction. Banks should be nationalized and top heavy management terminated.
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4-26-2009 @ 3:45PM
J Divers said...
I wonder why you didn't mention the fact that Florida real estate taxes are killing the home owners. This is a factor that goes to the heart of the problem. The present governor ran on a platform to reform but has done very little to help. In all fairness it should be listed right up there with the other issues.
JD
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4-26-2009 @ 12:09PM
Lita Epstein said...
I don't think Florida real estate taxes are high when you consider that there is no state income tax.
Real estate taxes are much higher in NJ, NY, and CA than FL. Also in the mid-Western cities.
While real estate taxes are certainly a consideration when one is thinking about a move, one must look at the total tax bill not just one type of tax.
Lita
4-26-2009 @ 12:07PM
Earl Bailey said...
Just think! If the Supreme Court hadn't stopped the recount in 2000, all of this mess probably wouldn't have happened. Regulations would still have been in place on the banks, preventing them from making these bundled ficticious loans. But, I guess you cant prevent stupidity. Even today the same Republican morons think that we can emerge from this by doing nothing.
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4-26-2009 @ 12:08PM
georgechevy1 said...
You are a moron ! Clinton relaxed the lending guidelines to make home ownership reachable to those that unfortunately could not afford it. Bush approached the newly elected democratic congress and warned of this very thing but Barney Frank and Co. would have no part of the regulation that Bush said was needed to avert the housing crisis. Dont take my word for it as it is in the minutes and public record. Maybe try facts next time as someone that is informed like myself will call you out on your bull shit.
4-27-2009 @ 7:39AM
John Huckleberry said...
To blame Clinton and Dems is a joke. Bush and Repubs had 8 years to change anything they wanted. Dis-information doesn't help your cause.
4-26-2009 @ 11:13AM
tim baum said...
we are gonna be far worse under obamma than under bush looking forward to the end of the reign of stupidity jan 19 2012
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4-26-2009 @ 12:07PM
Don said...
not even close to a bottom
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4-26-2009 @ 12:07PM
bill Harrison said...
The real problem in the mortgage crisis is that anyone can now be a mortgage broker. We need to go back to the time when local banks and local saving and loan company made loans.
The people who make the loans need to be responsible for the loans they make. Make to many bad loans and you lose your job.
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4-26-2009 @ 12:08PM
Donovan said...
Florida may in fact have some great buys on Foreclosures and Short Sales properties. However, Do have a full inspection done on the entire home for mold. It takes very little for mold spores to generate and spread, not only in visible areas, but within the wall cavities and insulation as well. Some species of mold are very toxic to humans and animals alike. And can cause severe respiratory and other serious health issues.
Better to spend the money up front for the appropriate home inspections and mold detection. As opposed to your bargain home find, becoming a financial burden, as well as a potential health hazard for your family and pets after the fact. This applies to any areas, with warm humid weather conditions. Especially Florida.
So even if the contract states "property sold as is" insist on a rider/contingency that lets you out of the contract, pending all customary home inspections. Especially mold.
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4-26-2009 @ 12:14PM
t said...
new line being experimented right now by real estate agents " I'm buying for living in it " . Been noticeing that alot on a lot of real state blogs.
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4-27-2009 @ 4:33PM
QuapawSix said...
That just part of Florida's problem the local governments and the State are hurting for Tax revenue to bad I guess they won't be able to pay for their petty little pet projects but wait they have already raised the price that we pay for car tags and driver licenses. even in Jacksonville Fl there has been talk at the city level about bringing the toll booths back to make up lost tax revenues. So it's not hard to see where the governments focus is. We already pay taxes out the wazoo, take a look at the phone bill the utility bill and some of the other bills we pay
What may I ask is the money we pay in being used for?
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4-26-2009 @ 12:24PM
concerned owner said...
The only news in the condo sales area is bad news. Florida is one of 4 states that are really hurting in today's condo market. I own one in Panama City Beach and see it at every turn. As to condo sales generally, every condo on ANY coastline has at least the same deals we have in PCB and a lot of places like Dade and Broward have even better deals than here as their markets are worse than ours,
All the advertising in the world isn’t going to get people to spend money or commit themselves for 30 years in today's flawed economy. With very few exceptions banks are sitting on their funds despite getting their bailout funds from the government,
Many people can’t take advantage of the low prices as they have little hope of selling what they are in now.
If they aren’t buying cars then they sure won’t buy condos. Things WILL get worse before they get better.
Foreclosures were up 6 percent in Feb and 17 percent in March. Now that the temporary foreclosure freeze is over more foreclosures are in the pipeline. Our complex now has 10 in foreclosure out of 109 sold units, without any question we will have another half dozen this year.
Also retail sales are down 1.1 percent in March. The retail market will show signs of recovery BEFORE either a rise condo sales or even auto sales and there is no good news in retail. Marginal stores are gone or going and while construction in process is generally being completed, new starts are being put off.
I see no light at the end of the tunnel for 2009. Take a look at our condo in Panama City Beach at: http://nautiluscondosrules.blogspot.com
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4-26-2009 @ 1:02PM
Allen said...
I moved from one residence to another, both in Broward County, back in 1997. I have lived in South Florida since 1982, so I am very aware of what's going on specifically in the Miami-West Palm area. There was a lot of speculation, and that's what caused the problem here. The area grew so much since 1982, and we are actually a bit relieved that the population has stabalized and the number of cars on the road has also.Trust me, this is temporary, and the madness shall return! No doubt about it. People from all over the world purchase homes in South Florida to escape the cold weather. There is no getting around that. Keep buying SUVs, and that may all change. But that's a horse of a different color!
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4-26-2009 @ 1:29PM
shelly said...
Its a shame the market has become so bad. Home prices sored between late 2005 and 2007. I remember looking at Real Estate in several areas of South Florida in 2006. I could not believe what you got for the price. Needless to say, we took a pass on purchasing a home in South Florida.
I know from visiting the lower Keys, many home owners took out second mortgages for what ever reason, when the home values skyrocketed. And now their homes are worth less then their total mortgage amount. And now with the credit requirement changes. Many can't even qualify to refinance at the new lower interest rates. Its not a good situation.
I go on to Zillow.com just to get an idea of market values in general, including the estimated current value of my own home. Its rather depressing, to say the least. Buts lets face it. your home worth what a buyer is willing to pay for it. So, perhaps if your selling. You might do better then you expect.
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4-26-2009 @ 1:35PM
oyevette@aol.com said...
Also, just for the record, Dubya DID NOT win the election in Florida (in 2000). The whole thing was rigged. The Supreme Court was in on it. The Supreme Court appointed Dubya. What they did not count on (no pun intended) is how stupid he is, and what a poor choice he really was. Now, we are all paying.
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4-26-2009 @ 8:18PM
Mike said...
Florida, schlamida, Gore lost the race in Tennessee, he failed to win his home state. The race in Florida makes a great conspiracy theory because of the old, confused voters and his brother the governor, but thats all it is, a theory.