New Miami Condos – Closing Rates for September 2008
September 22, 2008
by: Lucas Lechuga
It’s been a little over two months since my last condo closing rate update. The last one was published on July 8, 2008.
Below, you will find the date that each condo development began closings followed by the number of closed units in each condo development:
You’ll notice with this first batch that I dropped Star Lofts from the list. I noticed a lot of double entries which made it difficult to gauge the true number of closed condos. Additionally, Star Lofts on the Bay hasn’t shown much progress in a very long time. Ten Museum Park closed 11 units since the last update while 50 Biscayne’s vast improvement reflects the bulk sale that took place. The rest of the condo developments showed very little progress.
Plaza on Brickell once again showed the most improvement within this group. Its closing rate jumped about 14 points since the July update revealing a total of 660 closed condos of the overall 1,000 in the two towers. Apogee South Beach once again inched closer to hitting the 100 percent mark, with only 2 additional condos to close before reaching it. Quantum on the Bay moves into second place in this group and has now closed around 75 percent of its condos.
The big story in this group is Midtown 4. It jumped from a 19.10 percent closing rate to an 84.92 percent closing rate. A large bulk sale of over 250 condos seems to have taken place to a buyer with a second party name of “D M MIDTOWN MIA OWNER LLC”. The same buyer also closed on slightly over 50 condos at Midtown 2 on the same day. Was this simply the developer transferring units to one of its other entities or was this an outside buyer with no association to the developer? Marina Blue jumped about 10 points, settling at around 70 percent of its condos closed. Wind and Asia showed nice improvements this update with Wind increasing around 17 points and Asia about 18 points.
These last four condo developments all showed good progress since the July update. The biggest surprise to me was Ivy which closed 125 new condos since that time. I would have guessed that 500 Brickell and Axis would each have more closed sales than Ivy.
Disclaimer: The above closing rate information was derived from public County records. There can be a 2-3 week delay from the time that a closing occurs and the time that the closing is recorded.
Sold out of my long bank positions at the open. Long IPI, auy, gld, etc…still short tlt.
Got out of the stock market friday morning. Sold the financials (XLF) and homebuilders ( ITB) As mentioned in the previous thread, its time to go long real-estate by low-balling bank foreclosures. I’m looking for a single family home in the upper east side region. Not looking for a condo. Think you really need to know what you are doing in that case. Problem with condos, as I see it ,and I’m sure this has been mentioned by astute posters in prior threads, is the HOA fees are too high and will need to be cut in order for average folk to afford the payments. So lets say HOA fees are cut; then what happens. Well that means services, upkeep, maintenance, landscaping etc will suffer thereby further devaluing the property. So condos are a dicey proposition but I’m sure there are some deals out there.
I think your numbers are off on Quantum. I see 514 units with recorded deeds in public records. That would be 73%
Lucas,
Where did you get your data of Quantum from ? There is quite a large discrepancy to the figures from Samir.
Get ready for 500+ comments.
People treat this blog like a message board for miami real estate.
bubblerefuge, I do agree with that last comment.
Samir,
Are you using Terra ADI as the first party name? I don’t see 513 deeds.
Even with as bad as things are I think most buildings will be able to weather the storm and survive, the only ones I doubt are Onyx, Axis, Opera, and anything on that Crap River.
Lucas,
Terra ADI Intl Bayshore
I searched Terra ADI Intl Bayshore,
01/01/2008 – 04/01/2008 (339 deeds)
04/02/2008 – 09/22/2008 (175 deeds)
Now I’m getting 526 but found 2 duplicates. Quantum’s total closed condos should be 524. I’m going to redo all of the buildings with over 400 deeds. I noticed now that some deeds aren’t displayed if the date is too far out. I did the following search:
01/01/2008-03/31/2008 (324)
04/01/2008-09/22/2008 (202)
Raffi, You are spot on. I will just add Avenue to your list of about to fail buildings. I see that you already included ‘crap on the river’ without mentioning ‘Wind’.
I am extremely disappointed with the 900 numbers. It is a classy building. A1+. Is it because 900 preconstruction prices themselves are high to begin with as it is an ultra luxury building?
Is is pointing towards things to come for the super six? If 900, which is one of the best buildings out there did 31% closings in 4.5 months, What hope will the super six have? I expect Marquis to turn into a hotel, unless the bailout plans really shake things up.
AJ, under the “crap on the river” I include everything thats there, wind, ivy, lofts, whatever….they are all absolute junk. and Avenune on Brickell is actually a quite nice building in a great location thats going to have some really nice retail underneath, I think at the moment its a bit overpriced. If prices come down it should be alot better than 500 brickell or plaza.
Didn’t 50 Biscayne complete the sale of the remaining units to a bulk buyer?
Everything should be correct now. The ones with over 400 deeds were corrected. You’ll see a big change in 50 Biscayne and Quantum on the Bay.
AJ said: “What hope will the super six have? I expect Marquis to turn into a hotel, unless the bailout plans really shake things up.”
Re: Marquis “turning into a hotel”. Not going to happen. The developer’s “cost per room” (condo unit) is way too high to make it economical. Nobody “needs” a 60-story hotel at that location. It makes absolutely NO sense. The economics of a hotel operation have no real synergies with the operation of a condo building.
Two of your “super 6”, Epic and ICON Brickell, are already mixed-use (condos and a hotel). These hotel components were designed, on day one, as such and the projects’ condos were designed as such.
Lucas, thanks for correcting that. That puts Related Group in a pretty good light. I wonder how ICON Brickell will do in this market? It was priced so high and there are almost 2,000 units (if not, more).
Is there an estimated date for closings? I’ve noticed a lot of progress in the last month.
higher oil prices….less money to spend on Miami CONDO INVESTMENTZZZZZ
What is the closing rate for Met1. How come that building was not included? Thanks
Cane,
I couldn’t find the first party name for Met 1. If anyone knows the first party name for Met 1 I’ll be more than glad to include it.
Any of the condos that offer retail on the lower floors. Has any retail moved in? It seems like stores are closing down in general from Miami to Lauderdale.
I’m suppose to close on my condo in a few months…..but with the mortgage lending market all dried up…does anyone know which banks are lending to all of these people that are trying to close on their condos? They can’t be all paying cash? Is the lending criteria alot stricter if you own the condo for an investment only?
Lucas,
I think it may be “MDM RESIDENCES LTD”
unrelated
spot on. leviev wants to dump the propery according to the third party accounts i’ve gotten. problem is, the property won’t work either as a rental or hotel.
AJ said “I am extremely disappointed with the 900 numbers. It is a classy building. A1+. Is it because 900 preconstruction prices themselves are high to begin with as it is an ultra luxury building? ”
I think in general preconstruction was low $400s per sq ft. for 900 Biscayne? I think this bodes ill for Icon Brickell be cause I believe they were in the $$600 per sq. foot Pre-construction range? Anybody know exactly?
I am as giddy as a school girl or an AJ as the case my be, they are opening up an Epicure Market & Cafe within an easy walking distance! I don’t know what an Epicure is but I be they have sushi for under $75 a pop! LOL Sounds nice and cool……. 🙂
I am quite surprised by the number of closings at Latitude (81%). I have not been all that impressed with the building-especially location and view (substation anyone?). Is the building as healthy as the closings make it appear to be?
Has anybody notices changes in condo prices since the events of the past week occurred? I have noticed a couple of buildings around 2005 vintage which have had several bank owned properties appear in the past week at considerable discounts to prices several months ago? Any inside info on how the banks are looking to handle their units over the next few months? Will they negotiate their prices or hold firm at the listing price (albeit it is already on the low side)?
Renter Tom said: “yhey are opening up an Epicure Market & Cafe within an easy walking distance! I don’t know what an Epicure is but I be they have sushi for under $75 a pop! LOL Sounds nice and cool……. ”
RT, Epicure is a higher end grocery with deli take-out. Their original store is at Lincoln Rd. & Alton Road. They have some great “party” foods, especially their bakery. Bit pricier than Whole Foods but I like the selection a lot better. (It’s once a month for Epicure vs. once a week for Publix for me.) The site you are referring to was a well-known deli that the same family owned for a long, long time. Epicure should be a great success up there.
I think if this buying season doesn’t show signs of a bottom, then people/banks will start getting aggressive on the sell side.
What’s lost in this bailout news is how the whole world got a wakeup call from France to Russia to China. The US lost it’s credibility as a safehaven and I think people in every country would prefer to hold tight to their money in cash for the next couple of years.
It wasn’t just our financial system that got whipsawed last week, every financial system got whipsawed. The same fear that gripped wealthy Americans with the discretionary income to buy 2nd home toy condos gripped wealthy foreigners everywhere.
During the 1926 real estate boom properties in Miami would change ownership several times in one day. What a lame real estate boom this is.
All joking aside about Sunny Isles, I have a friend who has been involved in Real Estate all his life and feel that area has the most potential after things bottom out. Maybe when all that construction fills up it’ll have the critical mass and associated new retail to be a destination? Afterall, the Oceanfront is the same there as anywhere else.
In terms of Downtown Miimi, we keep talking about having the “vision” for the next 5-10 years. 5-10 years from now, maybe Sunny Isles will be reinvented.
Who wouldn’t trust these guys LOL
All of South Florida will be hot again. I’m getting in before 2068 when prices will take off again.
Lucas, you know anything about the Lexi in normandy isles? I’m close to making a cash offer for a “b line” unit on a high floor. Curious about info on closing rates for this building as well as a smart estimate on actual value for price/sq. foot.
gables,
I live in Latitude. It is a great building. I have souht view (I-95, city, & far ocean). Pluss the association management is excellent.
Un-Related – Thanks. Wasn’t sure what it was going be and wasn’t familiar with the brand. But wow, I am just awestruck that little ole Sunny Isles Beach is getting one of the fancy stores like SoBe while AJ’s urban utopia is getting a Wal-Mart (maybe even a Super Wal-Mart) and another methadone clinic instead. LOL Will have to try it out once it opens which looks to be within 60 days. Sunny Isles is nice in that it is just 5-10 minutes to Adventura Mall which is nice and tons of other shopping is nearby along with a decent, and soon to come more, walking distance stuff. The $1M+ condo glut is gonna hurt though. And if they continue to develop Haulover Park, that place is pretty darn huge for a park, that would be great with the Marina and all.
When I was driving by Mary Brickell Village today I thought to myself, what the hell is going on w/ Skyline at MBV. This project was supposed to break ground in ’05, was it canceled? Anyone here have a contract there or know whats going on with it? I always thought it had a pretty cool design, guess that doesn’t really matter too much these days.
Let’s not get carried away…..sunny isles is boring a fawk and old folks central. If cougars are your thing than its probably ok, but come on. Downtown may not be the be-all-end-all by any means, but the whole ‘my city can beat up your city’ is silly. Different areas have different draws for different people…but you guys’ constant bashing of each other and where you chose to hang your hat is getting tired.
Christian,
Skyline at MBV is being built directly on top of the allotted Gourmet Publix retail space. The construction has been purposefully delayed, and closings were pushed back until December of 2011. Deposit holders were offered the opportunity to get their deposits fully refunded about a year and a half ago. My understanding is that Evangeline & Co. were able to renegotiate their construction contracts on more favorable terms and secure more favorable financing, as well. The elevator shafts and building generator have been installed. Real construction should begin soon.
Lucas,
Please get those Met 1 numbers.
Lucas or Samir,
Could you tell me how to look up this information?? What is the website?? And what keywords should I enter for 900 ???
Tom, Epicure is accross the Lincoln Road movie theaters. When they open in SIB, just stick with your Walmart TV dinners. You may not stomach Epicures sophisticated wine/cheese, gourmet meat and dessert section or their prices. Oh, by the way, Do you really like hanging out on the Haulover with 70 year old bald paunchy men walking around naked? I am imploring you to leave that retirement ghetto and come down to where the action is. Just ask Alex of MUL. Go to one of his downtown parties to see how exciting living here (downtown) would be.
Another tip, if you like to walk on beach, try the Nikki Beach and see some sizzling hot bods for a change.
JL,
That is exactly what I have been saying. With all due apologies to all the bloggers on this site who booked a flat in Icon, What in the World were you thinking??? The project looked like crap even in the shiny brochures they first provided. Looked like 3 low income projects cramped so claustrophobically close to each other with absolutely no character what so ever. Even location wise, the 4 Embarassments are better off than Icon Brickell. Why would anyone pay $600/sf in 2005 to book a flat in this eye sore? Were you expecting it to sell for $800/SF in 2008? I think even $400/sf for this eye sore is too much. Can any investor in this building explain to us candidly what they saw.
Lucas and Samir,
Thanks for the correction to Quantum numbers. I was unhappy when I saw the initial uncorrected numbers. I feel that Quantum and 18 are very related and affect each others well being. But thankfully both buildings have reached or crossed the critical 70% threshold. I guess the sluggish North Tower of Quantum is doing well now.
I have a theory as to why 1800 only increased its closing from 66% to 69% in 2 months. Talk is that BCom, Inc holds the unclosed units totally free and clear of any loans, liens and Mortgage. They are very bullish about their product and absolutely do not discount more than 5-6% of the asking price of their flats and lofts. So they seem to have the holding power.
So with the 120 units in 50 biscayne going to a bulk buyer putting it over the curve, we can declare 50B as the first Lux sector building to achieve the complete close out. So infact a complete success!
Lucas,
One Miami is one of my favorite buildings but is in a lot of hot water as I hear. How much of the building is sold? Is it fully closed? Tks.
Nice article, gives you some context about what’s happening in the Ivy/Wind area. It seems they’re putting a bunch of condos and a lot of manicured green space behind a fence to keep the undesirables around the Miami River at bay. Idea kind of makes sense although I still wouldn’t want to live there.
http://www.philadelphia.bizjournals.com/southflorida/stories/2008/05/05/focus2.html
http://www.miamicondolifestyle.com/images/mint-siteplan.jpg
Renter Tom………..I have been reading this blog for some time now,and can see that you are an EXPERT authority on Real Estate in your area.I think a lot like you and respect your opinion’s.Can I ask a serious question? I …like you are waiting on the sideline’s for a REAL DEAL.Of course nobody knows …even you when the bottom is going to hit.I like Sunny Isles and would like a nice 2/2 Ocean view.MY QUESTION is…what would you have to pay TODAY for a nice unit on a higher floor with direct ocean view? And do you think that in the near future they will decline even more?? Any help at all would be greatly appreciated. Thank you.
LUCAS or SAMIR or ANYONE ELSE…..
How do I find the records on closed sales for 900 Biscayne….I am curious as to what these went for. Is the site miamidade.gov? And what is the keyword to search for 900??? When I search by address, I get nothing. What am I doing wrong???
All eye’s & ear’s – That is a tough one for several reasons. First, there are a ton of units that will be coming on the market (Trump Tower II, Trump Tower III, Jade Ocean, Jade Beach, St. Tropez (across the street) and of course buildings that are occupied that range from Tump Tower I, the two Turnberry Ocean Colonies, Sayan, (Oceanias were from mis-late 1990’s), La Perla, Aqualina, the three other Trumps buildings, etc. As such, I just can’t put a number on where pricing will end up…..so much inventory being brought to market in some very lux buildings with high HOA fees (and taxes too). You can go from $300-$600 s.f. to be directly on the beach. Second, the only true price indicator that one can really rely on is rent rates in this uncertain environment since we know that is what someone is actually willing to pay for shelter, not speculative home price appreciation, and no one has published those numbers for these new buildings yet. Getting stats on rents would be very helpful, maybe more helpful than closing prices right now. Being able to buy a prime unit with phenomenal view for $250/s.f. looks low risk, $400/s.f. in the right building might be OK too, but $500/s.f.+???? As I previously mentioned, banks are not or are very very strict on lending in these buildings with one story of $2.25M down and the other $2.25M couldn’t get financing for that…. Yes there are cash buyers, but no enough to support this market as indicated at the dead resale market in some buildings these past few months. The reckless enthusiasm is gone once you realize the fun condo might be a costly albatross that you can’t get rid of without a very substantial loss. If you need to buy now or next year, start searching. You will get a feel for the buildings and prices and what just sits and sits on the market.
My area is anywhere from SoBe to Ft. Lauderdale. I have a good sense of Sunny Isles which is a convenient location for now. I have glanced at things south but don’t have a real feel, haven’t explored north yet. There just isn’t a rush given what is going on and the certainty that prices are going to continue to slide through 2009. It isn’t like these things are being gobbled up. Even a decent closing rate in new condo buildings doesn’t tell the story of what is going to be put right back on the market soon. There are a lot of people who psychologically can’t walk away from their 15% deposit and are of the mindset that if they ride this thing out they will somehow be ahead (money and time wise, they won’t be in many many cases). It is like the irrational gambling mindset where many people can’t walk away when they are ahead and continue to gamble, or when you hear about the big wins but not the big losses. You will know a bottom is here when inventories come down (6 months is a fairly balanced market), banks lend based on credit worthiness and don’t avoid regions and buildings en masse, rentals at least break even before tax considerations, etc. We still have a sense of desperation out there, sellers really want out and rentals are whatever they can get. Start looking but be patient. Trust realtors at your own risk.
I wish I had access to the MLS inside info, then I would get a better feel for recent sales and rent comps.
“Among the largest 100 metro areas, Miami- Fort Lauderdale had the highest percentage of cash-strapped homeowners with mortgages. Nearly six out of 10 homeowners with mortgages there are spending 30% or more of their income on housing. Stockton, Calif.; Riverside-San Bernardino, Calif.; Cape Coral-Fort Myers, Fla.; and Los Angeles-Long Beach round out the top five.”
– USAToday 9/23/2008
That is one stat that would indicate home prices will continue to go down and become more affordable and foreclosures will continue at a record pace…no more home ATM.
Hey guys,
Is their a quick way to to gauge the true market value of a building using the rental price?
I have been using the formula 1.25X where X is the rental price which should include the HOA, taxes etc. However, in a bear market like this, the market value can go below the above formula, does that mean the prices should rise in the near future once the economy stabilizes?
Vic,
The best way is, you look into a crystal ball.
Vic wrote: “does that mean the prices should rise in the near future once the economy stabilizes?”
LOL in 2015??????? This isn’t your usually little economic hiccup.
Visionary,
No wonder you are named so. I guess the question is for the more intelligent people on the blog
My question was more like can the rental price of a building be used to gauge it’s market value? Would a formula like 1.25X, where X is the rental price, be close to the market value?
Vic – I would use rental prices as the best gauge to real home values. Rental prices were not nearly as inflated as home prices and were not subject to such speculation (although I suspect before the peak they may have been a bit higher than they should have been). There are different formulas and multiples to use and including HOA and property taxes (since FL has high property taxes) is the way to go. Start at the break even multiple and see where that takes you. Rents are pretty firmly tied to incomes whereas home prices got untethered to incomes during that bubble, that is about to change.
DJ,
With respect to your question (post #33), the Lexi has 81 transactions listed in the county records since closings began. That is just under 50% of the 164 unit total. The last transaction was in April and the system seems to be updated through the end of July thus far so closing activity has largely ceased for several months. Make of this what you will.
I can’t offer an estimate of value per sqft but I would point out that there are 3 more buildings finishing up construction on the neighboring North Bay Island, which will further add to local supply. There is also a building that was completed a couple of years ago (Blue Bay condo) that has a lot of pending foreclosure activity.
Thanks Samir. I just added Met 1 to the post.
LUCAS !
Help….Can you please let me know how to view the closed sales at 900? Is it Miamidade.gov? What keyword do I type in???
Again, great information to have. Thanks Lucas!
Now.. here is my small analysis:
If you back into the unclosed units in these buildings, you can see that that there are 4,270 units that haven’t closed. Of course, there are some buildings that started closing just a short time ago, but walkaways have been steadily increasing as valuations have come down, so these closing rates are not going to get any better soon.
So.. 4,270 units are either constrolled by the developer, the bank or some vulture fund. If you add the number of units coming online in the next 6-12 months (Icon, Epic, Marquis, Met 1,etc.), and assume a decent absorption rate, I bet this number will reach at least 6,000 by the end of the year. Needless to say, this is an incredibly high number of supply.
Obbisouly, yhe condos that have been closed on these buildings are a combination of investors/speculators, international buyers/second home buyers, and end users. The question is, how many of these do you expect in the near future?
Investors/Speculators are basically out. Valuations have come down enough for people to realize that they have already “lost” their deposit. They can drop the contract, lose their deposit and get a cheaper unit from the developer that will carry less taxes. Of course, there are still some people out there who got caught and are still trying to make a profit selling their units, but many of those won’t be able to ride this out. Either they will reduce the prices to sell them, or get foreclosed as we have seen recently.
International buyers have also been diminishing. The economic crisis is a worldwide event and there aren’t just that many europeans/latins who can afford buying a condo at $400psf in Miami.
As far as the end users, this is where the real demand is. The problem is that in order for this area to absorb 6,000+ units from local residents, prices need to come down significantly for it to be affordable enough for people from other parts of town to move here. No way $300psf+ is affordable.
One final comment AJ… you commented that a 70% closing rate was a “critical treshold” and I don’t really undersand why and have to disagree. It might be good compared to the other buildings, but a 70% closing rate means in most cases that the developer has not paid off the construction loan. In the cases that it has, they are still carrying HOA’s and taxes for the unsold units, which can be very high and provide more incentive for the developer to sell these units. Also, you need to add the opportunity cost of the equity they have in the deal which is sitting on unsold units. All of this puts a lot of pressure to get these units sold quickly.
My two cents
dlr –
you have to use miami-dadeclerk.com
left hand side – “search recorded documents”
then – “standard record search”
then party name “900 bisc llc” and document type “deed”
if records are more than 400 you will have to put in date ranges to break up.
dlr-
As for sales prices, I wouldn’t expect to see those – these are just deeds to show you how many have closed.
Sales prices will only be known by the developer, brokers involved and buyers. The MiamiDade.gov website will eventually put them there but not yet. Maybe a few months from now.
Also, I forgot to add the number of units available in MLS for sale…
For example, I looked at a few buildings and this is what I found:
TMP 44 units for sale
50 Biscayne 66 units for sale
900 Biscayne 12 units for sale
MB 47 units for sale
So, if you look at TMP (for example), there are 79 units available or not closed (35 not closed, 44 in MLS). This means that almost 40% of the building is for sale. In the tables that Lucas posts, usually there is a problem when more than 20% of the building is for sale…
Interesting to see what a similar analysis for newer buildings results in…
what the hell is up with the met 1, you cant get info from anywhere. Do they even do re-sales? they have no advertising, no usful website, and brokers dont list units for sale. anyone have any answers?
Hugo P said: “Interesting to see what a similar analysis for newer buildings results in…”
AXIS on Brickell
718 Units – Claims to have sold out 100%
143 Closed (19.92%) since May 19
575 Units NOT closed (80.08%)
48 Units for Sale (zilbert.com)
90 Units for rent (condo.com)
138 Total Units for Sale or Rent = 96.5% of Closed Units!
27 Investor Lawsuits as of 09/22
Anybody got anything worse????? God, I hope not!
Samir,
Actually you are able to calculate the sales price for each closed condo that has been recorded. All you need to do is divide the deed tax by .006. The reason is because the deed tax is 60 cents on every $100 of the purchase price. Just work backwards and it gives you the purchase price.
Anyone with info on One Miami? How many units or how much percentage closed?
AJ,
One Miami? The building has been completed since the end of 2005.
Un-Related…. good analysis, exactly what I was referring to.
However, I bet there are some units for sale AND for rent, so your number might be a bit off.
Hugo,
Even if there is some overlap with “for sales” and “for rents”……if it looks like a disaster and smells like death, I am willing to prematurely “put a fork in it” because I believe the Axis is DONE!
That’s the way it should go:
http://www.miamiherald.com/business/breaking-news/story/698190.html
AJ, I haven’t heard very good things about One Miami. Have you checked out the comments on MUL?
VISIONARY,
That is the funniest thing I have seen all day. It’s worth posting the entire article. I wonder if the Fed would agree to “permitting” the banks to pay more?
“Miami Beach leader wants banks to help with condo fees
A Miami Beach commissioner wants to force lenders to pay condo fees on foreclosed units.
Posted on Tue, Sep. 23, 2008
BY MONICA HATCHER
[email protected]
Miami Beach City Commissioner Jerry Libbin is leading an effort to change a Florida law that allows lenders and banks to largely avoid paying condo association fees once they foreclose on a unit.
Under current law, lenders are required to pay only 1 percent of assessment fees to condo associations on foreclosures. With mortgage defaults sweeping through South Florida’s condo market, unit owners in buildings with high foreclosure rates have faced higher assessments to make up the balance.
Assessments are collected from building residents to cover maintenance and other services, from pool cleaning to cable television.
Libbin claims some lenders fail to make even the minimum payments, forcing associations to sue them to collect arrears.
”Banks are taking unfair advantage of condo owners who have done absolutely nothing wrong,” Libbin said in statement. “It’s disgraceful to shift this huge financial burden onto them. Florida residents should not be forced to subsidize predatory banks.”
Libbin has formed a coalition of associations, unit owners and condo management companies to lobby the Florida Legislature when it convenes in the spring for reforms. A town hall meeting is being planned on the topic in the coming weeks.”
Hey UNRELATED,
How do you find out how many lawsuits are against the building??? Where did you find this info????
dlr,
Do the following. You can get info for any building provided you have NAME of SELLER
Then, “click” on Standard Search
Then, enter the name of “SELLING ENTITY” (on the Purchase Contract)
Several “Seller Names” I know:
AXIS – BCRE Brickell
ALL Related Projects (COMBINED) – TRG
500 Brickell – TRG 500
ICON Brickell – TRG Brickell Point
Hope that helps!
Wow, if Banks had to pay the condo fees wouldn’t they just dump the units for next to nothing?
Petronius (post #55),
Thanks a lot for the info, that’s exactly what I needed to know. Under 50% is a scary proposition for this particular building. The sales guy quoted that they had sold 100 units so far, but wasn’t sure about closings. I guess this why he didn’t want to give up that info. I’ll definately have to consider this closely, but if I do decide to make an all cash offer, I’m thinking low $200/sq. foot will be reasonable. The unit I’m considering at the moment is beautiful, 1735 sq. feet on the 17th floor with amazing views. Asking price is $480k, which is ridiculous. Hearing about their low and sluggish closing rate makes me wonder if an auction might be a possibility in the near future.
Un-related that article is incorrect When a Lender Forecloses on a property they are responsible any maintenance fees starting from 6 months prior to the sale date.
Lucas, I was just wondering if they are 100% closed after being open for 2.5 years.
Miami 2008, I hear a lot about that building. I don’t know if it is just habitual grumblers or real issues. Parking I believe is horrible though. I like those 2 buildings. I think it is the best downtown location.
AJ, I agree the location is very good. I wanted to go to Il Gabbiano on my last visit but never made it. Maybe next time…
One Miami has the worst valet and the place is a nightmare to get out of in the morning. 800+ units and one small ass entrace, you do the math. The views are good though and you can get units at good prices.
One Miami has a great location if you work in Downtown or Brickell. The floorplans are okay. The balconies are a bit small. The garage is a POS. It takes a friend of mine 15 minutes to get out every morning. The valet is horrible, and you cannot valet your car on weekends after 8pm (no spaces left). The residents are very middle class (not that there is anything wrong with that). That said, the views from certain units are amazing. And if you use the right finishes, you can have a very nice place at a good price.
You should be able to get the developer information off http://www.sunbiz.org if you don’t know the exact name of the particular building’s legal entity.
AJ, I would forget about One Miami if I were you.
Horrible building, crazy on weekends, parking is a MESS, feels like the Flamingo on SoBe. Good views, but cheap finishes and the cons far outweight the cons.
I meant the cons far outweigh the pros!
I’d like to check on the recorded deeds for The Plaza on Brickell (tower 851) – can somebody provide the first name? Thanks
DJ…I think $200 sq ft for LEXI is to much. I say maybee $100 -$150 p/sq ft.
Place always seems empty and values in Normandy have been falling drastically. Perfect Example Blue Bay Tower not to mention the the projects Eloquence and Cielo which are about to be completed and were sold at way to high a price. I would prob think almost all defaults.
Hugo said: “feels like the Flamingo on SoBe”
That would feel pretty good on a Friday night.
Thanks for the info on One Miami.
Once Again, You have been under the radar for a while. Isn’t Lexi a Lennar project? Probably their only condo project of an otherwise single family home company. Their SFH are good though.
Most And Least Expensive U.S. Cities For Renters
http://realestate.yahoo.com/promo/most-and-least-expensive-us-cities-for-renters.html;_ylc=X3oDMTFvc3VmOW9kBF9TAzI3MTYxNDkEX3MDOTc2MjA0NjUEc2VjA2ZwLXRvZGF5BHNsawNleHBlbnNpdmUtY2l0aWVz
360 is the Lennar Built condo community which is also desperate due to the tons of ads they put in the Sunday Paper circulars with all sorts of discounts/incentives. If I was looking for a SFH then yeah I would consider a Lennar property.
However, Lexi is not Lennar. It’s Greenwall Group.
Visionary,
Regarding the issue of banks having to pay HOA’s fee’s. If banks had to pay HOA fee’s this would increase carrying costs for banks which would further depress values because banks would be under more pressure to unload condos for less. So the HOA is shooting itself in the foot with this one IMHO.
Thanks for clearing that up Lucas
bubble refuge lucky for you, I cant find the right time or amount to sell my visa stock I am seriously in hole with this stock and very nervous . People say look to mastercard in a weak moment but I can’t .
Hey, have you seen the Florida unemployment charts? numbers look very grim. A certain bearish Miami blogger has them posted on his site. There is a blog link from eyeonmiami.
This is pretty staggering from AP News:
“Millions spend half of income on housing”
“But the most cost-burdened homeowners in the country live the Miami-Fort Lauderdale-Miami Beach metro area: 58 percent of homeowners spending 30 percent of their income on housing costs, and 29 percent spending half of their income or more on housing.”
———————–
So what happens when you spend half your income on something that declines in value 10%+ per year? … and I’m not going to even mention the 15% of income going to BMW lease payments or 10% for Nobu for the average SoBe head.
http://ap.google.com/article/ALeqM5h4j_nTWGqFRwX4TkhkBe0tmSKQNgD93CCS680
http://www.inman.com/news/2008/09/23/millions-spend-50-income-housing
LIAN,
Buy low sell high. Don’t panic. 😉 Maybe you can swap you shares in Visa for an equivalent value in MasterCard? That way you can deduct the loses from Visa off of your income taxes and recover your money when they comeback.
National housing numbers out today. Inventory down 7%. Prices down 9% -a record. The bottom is in on inventory a very positive signs for the bulls.
Will be making an offer on a foreclosure in the next week or so (SFH). Sent mortgage papers in yesterday. With foreclosures you do everything backwards. First send your mortgage app to underwriting and then do a sales contract with the bank once you are sure the bank will give you the loan. Be interesting to see what the bank says. I’m going to offer about 25% off of what the bank is asking.
bubbleRefuge – I saw that but I Cali was down some 24%. I haven’t seen FL numbers yet. But a slight decline in inventory is a minor positive but as we know the second and bigger wave of foreclosures is just beginning. 1/3 of sales were distressed home (i.e. foreclosures, defaults). We aren’t near the bottom. Jim Cramer is predicting a bottom in housing in 281 (today 280) days for the country. Miami has longer. I would be curious to see what the YOY price declines for Miami are. He also stated that high end NYC homes are now declining too. One month minor inventory decline does not a trend make.
DJ and Once Again, (posts #85 and #89)
Nothing in Lexi has broken $200 per sqft yet but Space 01 on a neighboring island now has some listings as low as $150 per sqft. It’s a hard comparison since Space 01 units are an urban loft design while Lexi is more conventional but both originally targeted a similar price range per unit.
360 is the Lennar condo in that area (where I happen to rent) but the units are generally a tier below those in the Lexi and were priced accordingly. Closings in 360 have reached around 75% and Lennar has continued to sell units at a trickle by gradually discounting. However, rents are still below carrying costs so prices are likely to continue to decline. The bulk of closings ended in the first few months of this year but Lennar still has about 100 units, which is substantial inventory for the area. There are also 16 foreclosures proceedings recorded for the property, although this is only 4% of total units.
I meant Cali prices are down something like 24% YOY…
The national ( not florida,california,nevada ) market looks like it has bottomed inventory-wise. Housing starts are microscopic. Prices are dropping dramatically. Government bailout forthcoming. This is bullish. Ultimately, prices are the slave of inventory. Just hope the democrats don’t pass their crazy mortgage modification ideas.
Petronius, I live in 360. Real nice place.
bubbleRufuge —- Way way way too early to call a bottom inventory-wise. My monitoring of inventories in the midwest ares that I follow indicate otherwise and more significant home price declines than anticipated. Home starts are at a mulit decade low, good thing, but existing and new home inventory levels are still at near record numbers.
Check out today’s Wells Fargo Jumbo Mortgage Rate……. 9.176% APY. Yep that’ll really help (sarcasm).
Jumbo Loans – Amounts that exceed conforming loan limits1
30-Year Fixed 9.000% 9.176%
See also:
http://www.marketwatch.com/news/story/you-dont-buy-house-uncertain/story.aspx?guid=%7B85E6AF56%2DAF5F%2D4897%2DA6AC%2DD05B849466D9%7D
This may not be “condo” but it may wake up the rah-rah crowd:
When the Fed says “banks are frozen”, BANKS ARE FROZEN! In late-2004, the 10-year treasury rate was just about the same as today (app. 4%). In the CMBS arena, the usual conduits carried various premiums over the 10-year rate: Offices (0.5%), Retail (1.0%) and Hotels (2.0 – 2.5%). So for my hotel transactions, (70% – 75% LTV), you got a NON-RECOURSE, 10-Year fixed rate of 6.0% – 6.5%. Rate Locks, if applied: 0.75% of loan. At the time, we bitched about the “hotel premium”. Mind you, every one of these loans are still working.
Last week, I was quoted the following for $30 million (60% LTV) – 3 Years Term with two 1-year extentions (with possible bumps), Non-Recourse, 3.5% – 4.00% above LIBOR on a floating rate + 2.00% to open + 1.00% at end of term. Rate lock? Was told to “buy a swap”! Last week LIBOR app. 2.75%; today 3.43%.
I concluded lender did NOT want to make loan! Today’s garbage smells worse than yesterday’s garbage.
Chart reading is subjective, but it looks like a top to me as far as inventory.
check it out:
http://www.moslereconomics.com/wp-content/graphs/2008/09/2008-09-24-existing-home-sales-inventory.gif
Here it looks like a bottom in existing home sales
http://www.moslereconomics.com/wp-content/graphs/2008/09/2008-09-24-existing-home-sales-yoy.gif
5.875 for a 30 year fixed with zero points
http://www.loansatwholesale.com/lenderRates.aspx?loanAmount=300000&propertyValue=400000&state=15&loantype=1
I think we have a ways to go on price declines. But overall the market looks like it has bottomed as far as sales and inventory. Prices follow sales and inventory. Its hard to see a bottom when you are at the bottom. Its easy to see the bottom looking back. I watch charts all day.
As far as the marketwatch article. Journalists are not economists but I agree with the opinion that the current bailout is not going to do much to help the economy There are much better ways to do it.
Also the market agree’s with me. Homebuilders up 4.7% @ 1:33pm.
bubbleRefuge – You cherry picked a minor decline inventory state. Prices are still falling and a 10.5 month supply is still not a price stable market by any terms. The homebuilders stock jump could quite frankly be related to the fact that they have cut back production or on fed bailout hopes. We’re not even in the seventh inning stretch…hold your horses.
You idiots need to look at unemployment. Unemployment has gone parabolic in Florida in the last 3 months according to the Bureau of Labor and statistics. It is now higher than the peak of the 2001 recession.
People without jobs can’t buy homes anymore.
I never said prices were not falling. Please read carefully.
I published some charts but they are awaiting moderation. Why can you post links but not me?
And in those charts you will see that inventory ( topped ) and sales ( bottom) look like they are signaling a turn in the market. You never see a bottom till it has passed.
Mark – I did see the unemployment graph. It is worrisome…..but remember, the luxury market won’t be affected by this and of course the wealthy foreigners, esp. the Russian, will buy up this inventory no problem, afterall if just 1% of the wealthy Russians bought in Miami we’d be back to 20% YOY price increases! (obviously sarcasm)
bubbleRefuge – I wish the bottom was here, but the stats all point to much further decline. Remember the RATE of decline will moderate but the declines will continue (and continue and continue in real dollar terms). Inventory levels are not healthy for price stability. Remember, my prediction is the 4th Q of this year will see a substantial capitulation on prices in the Miami market. Be patient, the pain train is coming….
Lucas,
Do you or anyone here know what is going on with Infinity at Brickell???
Does anyone know anything about the Blue condo building? I’m looking to buy a place to live in midtown, preferably on the bay, and it looks great from the outside, but heard some people were complaining about noise. I’m also looking at Cite and Quantum (although quantum is on the high end of my budget). I still have a while before I buy so I’m hoping prices are going to keep going down anyways, but thought I’d try and get some initial feedback on places in that area before I start nailing down my top choices.
Thanks
RT, don’t disagree with you about price. Nor capitulation of Miami. But Inventory appears to have topped and sales bottomed on a national scale.
JoeL
Infinity at brickell is suppose to start closings sometime in October.
midtowner,
The Blue condo, although considered high end for some, cannot be compared with other newer ones because it has an OPEN corridor. In case you don’t know what this means, it means that once you get to your floor, you have to walk in an exposed corridor (rain, wind, etc) to get to your unit.
This is a very cheap way of doing this and that is why the units there are cheaper than the comparables.
I haven’t seen the inside of the units or the ammenities, but I would not want to live in a high floor and be exposed to rain or wind getting to my unit in Florida!
midtowner,
The overall finishes of Blue are nice, but the noise a problem I was in a unit on a high floor and the noise was still annoying. You will not want to sit on the balcony for sure. Also, the location is not very good. You don’t actually have to walk outside to get to your apartment, as there is a small foyer when you get off the elevator. I didn’t like the finish of Cite and the views were bad from the units I saw. I did not see Quantum but 1800 is a better bet in the area. Nice finishes in 1800 and smaller than Quantum. The park is a nice feature to both.
Hugo P,
You obviously have not visited units at Blue Condominium because what you say is not true. You do not need to go outside in order to get to your unit.
Bubble refuge, name one time in the history of the world where prices increased during a recession? Even in 2001 they plateaued for a year then continued the upward ascent. Not gonna happen broham.
Lucas, you are correct. I guess I was misinformed then.
I think the LEXI will continue to falter as there are no closings and the large avaialbility of units. Add to that the potential of foreclosures as those who did close are all way upside down now which will prob lead to foreclosures. Not ot mention who’s paying the HOA fees. My guess it’s under the developer still so the fees arent as high but as soon as it’s transfered over you can bet Special Assessmsnets abound. They can’t even rent some of the units so alot of issues are coming.
Petronius,
What corporate entity are using to search the county records on the Lexi? Thanks
Midtowner,
One of my realtor friend says that there is a large 1/1 with balcony with direct bayviews in Cite. It is on foreclosure and listed for a silly price of 150K. At one time similar were selling for 315-350K. If you are interested, Send me your email or phone number to me at [email protected] and I will put you through to him.
Silly? Is that too low???
who the hell is David Hogue and what is he talking about??? are you upset because you bought at onyx and opera tower?? hahaha
his comment got deleted so i guess most of you wont know what im talking about, oh well.
Lucas.. I’d like to check on the recorded deeds for The Plaza on Brickell (tower 851) – can you provide the first name for the search? Thanks
aFG…it’s 851 Brickell. The other one is 901 Brickell.
Hey guys, the freaking president is on TV talking about the credit crisis and you are talking about buying overpriced condos. ahahahah
One moron giving credibility to another!
Most Americans Still Say Home-Buying Is Best Investment
rasmussenreports.com Wed Sep 24, 9:58 AM ET
Two-thirds of Americans (66%) think buying a home is the best investment most families can make, despite the recent meltdown of the U.S. housing market. Just 19% disagree.
“Two-thirds of Americans (66%) think buying a home is the best investment most families can make”
I’m going to look into my crystal ball and guess that currently Two-thirds of Americans (66%) own homes… a correlation there?
Regardless, if true, that would not be a good indicator for an RE market bottom. You need 66% of Americans saying their home was the biggest mistake they ever made. Now that would be a sign of a bottom. A large % of people saying they can make money reliably (ie. investment) on their house says there’s still room to fall.
JL – You are correct, 2/3’s own homes. It goes like this:
1/3 own with no mortgage.
1/3 own with a mortgage.
1/3 rent.
So, yes, the quote about 66% think buying a home is the best investment is because 2/3’s own. The investment portion of owning a home is debatable even with the tax breaks and a normal market.
DJ,
It’s listed as “LEXI DEV CO INC”.
I am actively looking for oceanfront investment properties in Dade and Broward County but I am seeking the help of all of you who seem to know so much more about the market then I do. I am an active investor in NY and to be honest my stomache turns to think of buying an investment property without positive cashflow…let alone even a 1% return on my money. These buildings, which are for the most part beautiful that are in so much trouble seem to barely debt service considering taxes and HOA alone…forget about cost of funds.
Anyone out there who has been through several cycles who can tell me……is there ever positive cash flow? I feel the market has to get to at least break even to make sense which is somewhere around $150/ft in the most luxurious of buildings before real investors will buy again. Did this happen in previous cycles? Is it possible to happen again? Let me know what you think?
Wayne, to put it plainly, these condos aren’t investments, they are liquidity traps. The people on this board are mostly Realtors and they will lie, cheat, and steal to make a sale.
150sq/ft in a luxury buliding on the ocean? I don’t think you’ll ever see that. what needs to come down are the HOA and taxes not so much the price of the units. you can pay cash for one of these units and still have like 1500/month for maintenance, etc. thats where the trouble is.
Well Raffi, are insurance rates going down? Does the govt need LESS MONEY? Well, if those things aren’t changing then the condo price will go down regardless of what you think
AJ – If your talking about #412 it is currently pending sale. It was beat up too, needed carpet replaced, walls needed to be patched up. In general needed TLC. But still a great value.
Mark said: “Wayne, to put it plainly, these condos aren’t investments, they are liquidity traps. The people on this board are mostly Realtors and they will lie, cheat, and steal to make a sale.”
Couln not have stated it with any more clarity!
I have nothing against relators in general ONLY with the lying slugs that did the developers’ dirty work in the pre-construction pump-and-dumps!! In the securities business, these carnival-barking frauds would be doing time in the “greybar condominium”, where there are NO taxes and NO HOA!
Well…mortgage brokers and banks created the mortgage crisis and we all see what happened. Mortgages have returned to make sense investments (if you can get one)….so regardless of whether the realtors helped cause the problem….with the oversupply of oceanfront condos … oceanfront premium is out of the picture. Have to bring it back to basics of sound investing…positive cashflow. HOA costs are real hard costs…so they are not going to come down. Taxes will take several years to equalize to the new prices so you can discount them somewhat. Bottom line is … taking the speculators out of the picture is a correction to positive cashflow (@$150/sf) possible? I guess my question about historical comparisons is moot because there has never been a bubble like this historically. Anyone know any good sources of info on previous Miami booms and busts? It would be interesting to see.
Thanks for your insights guys.
Wayne,
New Miami condos cannot and will not be wise investment choices if your goal is positive cash flow early in your investment. HOA and taxes, in addition to capital expenditure of the unit, will always produce negative cash flow early. Otherwise everybody would be investing in them at this very moment. If you can carry the cost over a longer time horizon (say 10 years), you will most likely develop a positive cash flow and then profit from appreciation. If you cannot carry long term, better to put save your capital in an interest bearing account for a while (inflation will force up interest rates and help you in the near future on this approach).
Actual end users, however, can and will profit much earlier than investors, when compared to renting. The question for them, is if you hold the property less than say 5 to 7 years, it may only be break even. And you may also hold an illiquid asset. This is the risk an end user must assess case by case. But the drop in capital required to purchase a unit will help the end user.
Thank you Gables…..you seem well informed. What do you do?
Maybe living in Miami has got my view permanently distorted, but going to Wayne’s point… Can you get Condos with substantial amenities (that are less than 20 years old) at positive cash flow anywhere in the country?… ever?
For a historian out there, it might be interesting if they could remember how much a particular unit in Portofino Towers was selling/renting for in 2000 compared to now to give an idea of the cash flow difference then and now.
I look at a high end place not directly on the water that has reasonable HOA costs (by Miami standards) like 900 Biscayne and Marina Blue and it looks like something you can rent for $5K a month will cost you about $10K a month to own assuming a no money down low-interest 30 year loan (obviously which is not possible but just makes comparing things easier) and factoring in taxes + HOA.
At least on the high end, it’s tough to justify buying anything. I assume the spread isn’t as bad as you work your way down the price scale but everything directly on the water is pretty much at the very high end of the scale still.
Anybody else think lack of NY demand might be the biggest factor for a price correction this winter? Even though NY might not be a relatively big demographic of Miami buyers, I would be surprised if whatever normal interest that demographic has doesn’t drop dramtically this year. Everybody I know that works in or close to Wall Street is in a daze. It’s a change of an era in mentality meaning people that assumed they would be rich in 5 years are doubting whether they will have a career in 5 years. You won’t have the young Wall Streeters in the pipeline eying a Miami Condo on the assumption that they are going to be banking in the near future. I still think this NY-Miami connection is strong. It’s hard not to run into NY’ers … no matter how hard I try LOL.
JL
Not only will you see weak NY-Miami demand but except for the Setais of the world you will see much less European/Asian-Miami demand. Global markets are hurting and smart people will not put money into Miami real estate right now whether euros or dollars.
Any updates on Everglades by (on) the Bay. Closings were set to start Early this year but I don’t believe they have their CO just yet. Nice building…
Thanks.
Mark,
I’m not arguing that prices wont come down, especially in downtown Miami or Brickell or the crap river BUT Prices will not be 150 sq/ft in a lux. building on the ocean. do you mean to tell me that lets a say a typical 1/1 in sunny isles, hollywood beach area which are typically 900sq/ft will be worth 135,000?? I dont think so. in some buildings you may see that but not on the ocean. lets be realistic. actually i hope those units will come down to 135k, I’ll buy a few myself hahaha.
I forgot my examples, ocean 4, the beach club, trump towers, etc.
Samir,
Thanks for the info. I dont know the unit #. I guess you know better. So it is pending sale already? Ofcourse, what do you expect when offered such a great deal, carpet or no carpet, I would take it gutted too, especially with direct bayview.
All you guys beating up on the positive cashflow concept, take a step back and chill out. There is no such thing. If it is the market norm to get assured returns on your investment and still own RE, no one, I repeat NO ONE would ever put their money in the banks or stocks. Dont expect your renter to pay your mortgage. Even though the equity accumulated every month and the tax breaks are substantial.
I have said this before and I will say this again, World over people consider owning a property, only after it is paid off or if it has no mortgage on it (outright cash purchase). So if you have a property free and clear of mortgage, ofcourse you will make the positive cash flow.
For example, let us say, you have $400,000 and you do not want to put it in sinking stock market or risky banks or falling commodities. Say you bought a 2/2 in 1800 club outright with that money and rent it out for $2200-$2400. After paying the Taxes and HOA which work out to $1000/month, you have a positive cashflow of $1200-$1400/month. If you consider the mortgage payments, which are $2000/month, you will be in the hole for $600-$800/month which is not bad either as you are getting $400-$600 equity (depending on if it is 30 year or 15 year mortgage) and not even counting the tax breaks on Mortgage interest or claiming depreciation on your investment property.
JL
Did a little research on Portofino and 40th floor 4,300 square foot penthouse sold for $1,500,000 at the offering in 10/1997 ($348/sqare foot).
11 years was not that long ago….in fact the DOW was higher than it is today. So I think if we get back to fundamentals we should in fact see luxury units for $150-$200/ ft. Maybe not Portfofino Penthouses but very nice buildings.
AJ,
Sorry, but you miscalculated the taxes.
Taxes and HOA fees are higher than $1000 a month.
Taxes alone are abot $700 !
AJ – You should really google “Cost of Capital”. Read about it, learn about, figure it out.
It’s only called equity if the price of the unit appreciates.
Are Miami 500K+ and up condos (with decent amenities) cash flow comparable to 500K+ condos in California, Vancouver, etc?
The fate of a condo investor that has to pay out significant cash each month to support their “investment” rental. The realtor is play by Leslie Nielson…
http://www.youtube.com/watch?v=rSjK2Oqrgic
“In Fort Myers-Cape Coral, home sales jumped 32 percent, to 684 from 520. But, prices plunged 41 percent, to $146,900 from $250,800.”
– What the heck happened there??? Wow.
http://www.bizjournals.com/southflorida/stories/2008/09/22/daily32.html
Visionary, You are correct, Taxes work out to about $666.
2/3 of Americans still believe their home is the best “investment” possible, 1/3 disagree. When these numbers flip the bottom is in.
I hope you guys are setting up long commodities positions in anticipation of the bailout….
Hey “investors”, better buy now because mortgage rates are reversing course: http://www.thetruthaboutmortgage.com/mortgage-rates-reverse-course/
JL asked in Post 156: “Are Miami 500K+ and up condos (with decent amenities) cash flow comparable to 500K+ condos in California, Vancouver, etc?”
As far as building / amenities go, the $500 K Miami condos are probably superior.
As far as a pool of LEGITIMATE potential buyers go for 500K condos go, L.A., San Diego, S.F. area, Vancouver, even Seattle have far greater numbers of the population that are able to earn enough to be able to buy and maintain $500K – $5 million houses or condos. These cities don’t have to rely on second-home owners, foreigners, etc for a QUALIFIED population pool of potential purchasers.
Renter Tom,
About FT. Myers, read the article “Tending the Boulevards of Broken Dreams”, published in the NYT Sep/21, then you will understand a lot.
AJ,
What do think of the planned property tax hikes in NYC ? Will they influence the RE market ?
Thanks Visionary. I think the homes within 5 miles of Three Mile Island held up their values on average more than in Fort Myers-Cape Coral……
Move along, there’s nothing to see here…
Mind boggling number. Prices down 41 PERCENT IN CALIFORNIA… OMFG
Note, however, sale are up 56% YOY. Is this the bottom for California?
OT asked: “Any updates on Everglades by (on) the Bay.”
Somebody mentioned here earlier that there was a contractual reason why they had to start closings Sept/Oct. However, on craiglist, a broker that seems to be well tied with the project has been giving a countdown and the latest is “THE DEVELOPER IS GOING TO OFFER NEW BUYERS THE OPPORTUNITY TO PURCHASE A UNIT AT PRE CONSTRUCTION PRICES PLUS GIVE THE DOWN PAYMENT MONIES FROM THE PREVIOUS BUYER TO YOU….”
That offer is basically a 0 incentive right now. Was preconstruction there like $350 sq/ft?
bubble refuge, wait until interest rates on conforming loans hit 9%….hahahah!
AJ (#151). I respectfully disagree with you opinion. If you had $400K and you put it in the bank, you automatically have positive cash flow. i.e you will make money. There are plenty of CDs that pay between 4-5% for 6-12 months if you shop around.
If you buy a condo for $400K, you have instantly lost money. The closing costs, legal fees, etc etc. On top of that you will lose money every month if you rent the place out compared to having the money in the bank. If you ever wanted to seel it, you will lose 6%.
BTW, 5% interest on $400K is about 20K per year. You can probably rent a place for under $20K per year and keep your principal intact and liquid.
I have said that California will be the worst hit numbers wise…..both in total number of defaults and total dollars lost in equity and bank writedowns. It was absolutely nuts out there. Just take title to as many properties as you could with little to no money down and become an overnight (or next year) multimillionaire on paper. The home of tech stock bubbles is also the home of the worst housing bubble. They really really ought to crack down on their marijuana laws since obviously they is some group delusional thinking out there and their stuff is too strong now….. LOL
There were some posts about The Spire in Chicago, a most ambitious plan to say the least. I had heard it was really DOA. Here is a post from today:
“Spire is dead, the architects stopped working on it. The construction site currently has zero activity. The dream is over, and now the hangover begins….. All the ultra-wealthy with the deep pockets are now feeling the effects of the downturn in the economny too. Their was a recent article in the WSJ which touched on this topic.”
So much for those foreign buyers helping out…….
And Chicago was not a big bubble market, some heavy froth maybe but nothing like Cali and Florida.
Visionary, In the past it never affected NYC market. But times are different now.
I see 900 getting down to 330 psf. Do you think this high end building will go well below 300 anytime soon?
wamu failed…one less bank to lend to AJ
As predicted, the OTS and FDIC are trying to facilitate acquisitions of weak banks by strong banks. That is what happened with WaMu. All depositors will have all of their money transferred to JP Morgan Chase….no deposit lost one penny nor did it cost one penny to the FDIC insurance fund. Pretty slick and certainly helps to prevent bank panics. What would be very very very helpful would be to simply insure all deposits or up $1M per depositor….it would help banks to raise deposits instead of having money flee to treasuries even with a zero or negative interest rate. Just my two cents if you wanna strengthen banks and lending…and much better than simply by fiat backstop money market funds from losses without any insurance…. Why hasn’t ANYONE suggested this on any show, etc. Duh, it is obvious.
Candela,
Mondrian is opening in a couple of months! Below is an email exerpt from Zilbert.
MONDRIAN SOUTH BEACH, the brand-new hotel by the same people who brought us the DELANO and a handful of other famous hotels from around the world plans to open its doors during the ART BASEL festival on the first week of December.
So, what’s my impression? In one word: WOW.
As you pull up into the covered driveway (valet area) you are amazed to see massive gold metal bells hanging overhead, and inside (where you normally expect to see the bell ringer-stick-thing) you see a crystal chandelier! What a concept. And, these bells are huge, about the size of a car!
So, you then enter the lobby, where you see this distinctive black and white pattern everywhere, hand painted and clearly the signature look of the MONDRIAN. The vertical beams in the lobby are fashioned to look like giant table legs. There is amazing lighting effects, and we are told will be accompanied by video walls of faces and people. Oh, yes, the faces. Everywhere you go at MONDRIAN, the rooms (more below), the hallways, the public spaces, you see faces painted on the walls. Giant faces. All kinds of faces. A very interesting effect.
Now, as you pass by the main reception area, and enter the main public area, they’ve built a giant, twisted black metal staircase, which seems to float in thin air. The entire lobby is set against 20-foot windows, which give you a clear and unobstructed view of Biscayne Bay. You get a water view, no matter where you are standing. And, it’s a bright and brilliant view.
There is a lobby bar, unlike anything else you will see in Miami. It’s made of a giant collection of white marble slabs, and the bar is set smack in the middle of the lobby, with room all the way around for patrons to enjoy the scene. The bar will also have amazing sunset views, rarely found in Miami.
The signature restaurant, which is getting its finishing touches, is the legendary ASIA DE CUBA, which you will find at several Morgan’s Hotel locations around the country. This restaurant, part indoors, part outdoors, is certainly going to be the place to be.
The pool area sits along Biscayne Bay, with a brand-new pool, custom-built for MONDRIAN. There are an array of private cabanas, with 20-foot trellises covered in ivy. Very stylish! There are also two docks that will rent boats and jet-skis.
The rooms at MONDRIAN are first-class, and something unlike you have ever seen before. Stone flooring accents a series of white and black furnishings. Each room has a special painted face on the wall (as we mentioned earlier), and you simply need to see it to understand it. Suffice to say, there is nothing else that looks like MONDRIAN.
MONDRIAN – Sounds like some sorta wacked out fun house with all the faces, huge bells sans the ringer, and giant table legs. What I can’t seem to comprehend is the “brand-new pool, custom-built for MONDRIAN”…..I’ve been in a lot of condos with pools and they have all been custom made for that building, so what’s different here? The painted face on the wall sounds creepy. Maybe you wondered into a creepy funhouse???
Anyone listen to the JP Morgan conference call? They expect 44% peak-to-trough price declines in California (58% if severe recession).
All real estate is local right boys? Miami should start appreciatin’ pretty soon now.
MONDRIAN – I looked at the website. Kinda cool to visit but the over the top artsy fartsy will get tiresome and boring soon like a cheap toy. The design aspect just looks like they tried too hard to be hip. Maybe real photos will change my mind. I’m sure this temple to shallow chic will do well in the current economic environment. I actually like the Lowe’s boutique type hotels, they are fun, don’t know about MONDRIAN though.
Loews Hotels….spelling error (not the hardware store)…
How many units at MONDRIAN are you buying renter tom? I’m buying 7 to flip for 100% profit!!!
Question for all,
Does anybody have an idea what the going square foot is at the everglades on the bay?
what will be a good price to pay for a 563 sf flat? I belive their pre construction prices were 360 sf. How much lower do you guys think the price for sf has fallen?
John –
No, price/sf in Miami is impervious to economic conditions or recession. In fact, the banks all becoming insolvent has actually caused prices to increase! Now if you’re look for a bargain, perhaps you should look in Wisconsin or Iowa….you know…properties for cheap ass*s like yourself. Cheapskate! Why won’t you quit being so cheap and buy my condo at MONDRIAN from me?
But on a serious note: In my haste I failed to mention the JP Morgan conference call expected a 64% decline for Florida!!!! OMG! What do you think of that AJ? AHAHAHAH!
evidence at calculated risk (links are apparently banned)
JOHN,
Everglades is one of those buildings you really want to see some closings on before you pull the trigger. They’re not local, and although CABI’s a big big Mexican operation, they dont’ have a proven track record (ie. uber aggressive/connected Sales Operation) in Miami for closing out a project that big. Their previous smaller scale project, they tried to do it alone then needed help to sell it. Forgot the name, up in Aventura I think.
Mark where did the specifics on the 02 Black on Black 3 Series come from?
JP Morgan Chase in its conference call presentation today projects the following for the State of Florida real estate market.
Current home prices to trough: -16% current est.; -21% deeper recession est., -36% severe recession est.
Peak to tough home prices: -44% current est.; -49% deeper recession est., -64% severe recession est.
Unemployment: 7% current est.; 7.5% deeper recession est., 8% severe recession est.
So the range of peak to trough home price losses range from 44% to 64%.
So that $1M would lose $440K or $640K. Ouch. that would mean most of the 1/3 of residences would be underwater on their mortgages (1/3 own outright and 1/3 rent). Bye bye HELOC’s and home ATM.
The peak to trough number is interesting since I had thought a 40% decline was probable and 50% was reasonably possible. The 64% drop is pretty much worse case scenario I think except that if the unemployment rate goes to double digits all bets are off.
One other important note, this is JP Morgan Chase’s forecast for the average home in Florida. South Florida will be worse than average and South Florida condos will be among the absolute worst. Hence a 75% peak to trough haircut in a bad recession could happen. Hope not, but is a possibility that may be a single digit possibility. Think about it South Florida condos are the worst of the worst regarding price drops. Would seem to indicate that actual sales prices will probably drop below land acquisition and construction costs. No wonder new home construction is the worst in decades….new home construction will get worse IMO.
Art Falcone of Miami World Center is lobbying to bring Casinos to his project and Miami Beach. Read the full story:
http://www.miamiherald.com/103/story/702108.html
Might as well bring in gambling to round out all the prostitution down here
I told you the World Center project would turn into a mess of corruption. Let the lobbying begin. This city will get even more corrupt if that’s even possible. Why not allow hotels in Miami Beach with more than 666 units to have gambling?
frankly, gambling in Miami would be awesome. i miss the days of rolling dice at 3AM in gary indiana (or was it joliet? who cares). if you think about it, Miami is just as flakey as Vegas with the only difference being that Vegas locals are generally Americans while Miami’s locals are Latin. why should we hold back Miamians from reaching their true cheesedick potential like their Vegas cohorts? you’re just being selfish Wild Bill.
Of two minds (link at a certain bearish Miami condo bubble blog) has an excellent article about why prices will fall below construction costs. I read a thing about why condos – with their high taxes and association fees- might be practically worthless. Also note, GM cars are selling for less than they cost to build. Too bad the same isn’t true about new BMWs, right AJ?
Also, renter tom – the 645 haircut ios for severe recession which they indicate is 8% unemployment. Florida is already at 6.4% and getting worse by the minute. The state cuts due to lower assessed values are the key. Once the state starts making cuts look out below. This will also negatively effect condos in the pace park area for tweo reasons. Higher unemployment = more violent and property crime. Less police = more criminals with sharp knives waiting around to stab people for $8.
Regarding The Mondrian………….They have implemented a program, where buyers have already closed on their units. You can check public records to verify. I thought this was VERY interesting.
64%
It’s MONDRIAN.
Regarding Gambling, What other solution do we have for the impending local government collapse
that we are probably facing? This is such a huge problem that gets very little coverage. With property
values cratering, how will local tax revenue pay for municipal government. As houses get assessed lower ( albeit you’ll have to drag the county property appraiser across the floor kicking and screaming to do it) . How are we going to pay for all those fat pensions that our municipal employee’s worked so hard for when they reach retirement at age 45.
RT, regarding deposit insurance of 1m. You are right on. Its a no-brainer. There were talking
about it on CNBC last night.
RT, James Galbreath one of obama’s advisors is advocating this very policy.
He is one of the ecomomist that I’ve been learning from.
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092403033.html?hpid%3Dopinionsbox1&sub=new
He advocates the following economic fundamentals that no-one seems to get that
I talk about.
1) Government spending funds the private sector. ( not vice versa )
2) Government Debt only exist to control the FED Funds rate not to fund government.
3) Better to be an importer than exporter.
JL –
Thanks for the update on Everglades. The reason why I ask is that I know investors that invested heavily in that building back in 2004. Their contracts have a provision that the closing must take place before Sept. 2008. Well, Sept. is almost over and the building looks complete but they’ve not been notified of closings just yet. Anyone know if they’ve obtained a CO or have a clearer picture on when they’ll start closing?
Appreciate the feedback…Thanks.
“1) Government spending funds the private sector. ( not vice versa )”
– Government spending taxes the private sector, if the private sector wasn’t so inefficiently taxed, they could use the money to fund themselves much much better.
“2) Government Debt only exist to control the FED Funds rate not to fund government.”
– Congress controls the spending and overall debt level. None of Congress do this to control the fed funds rate, that is an indirect consequences. The government’s debt/others willingness to loan to it is not unlimited.
“3) Better to be an importer than exporter.”
I don’t know what that means. We do export. It isn’t the importing that makes you strong, it is that fact that you have a strong currency that allows you to import. Our strong currency is getting weaker.
We’d all be better off with a ZERO federal debt.
“1) Government spending funds the private sector. ( not vice versa )”
– Government spending taxes the private sector, if the private sector wasn’t so inefficiently taxed, they could use the money to fund themselves much much better.
[yes we are inefficiently taxed. where would we get money from? Gold? the Fed’s create money when
they spend. They destroy money when they tax. If they spend more than tax then new net money is
created. simple accounting. ]
“2) Government Debt only exist to control the FED Funds rate not to fund government.”
– Congress controls the spending and overall debt level. None of Congress do this to control the fed funds rate, that is an indirect consequences. The government’s debt/others willingness to loan to it is not unlimited.
[ Congress sets the debt ceiling. The Fed buys and sells treasury notes/bills to sustain interest rate policy. not to finance government. This is a big and common misunderstanding. ]
“3) Better to be an importer than exporter.”
I don’t know what that means. We do export. It isn’t the importing that makes you strong, it is that fact that you have a strong currency that allows you to import. Our strong currency is getting weaker.
[ Imports are a net benefit to us exports are a net cost. Yes a strong currency means we can
buy more ]
We’d all be better off with a ZERO federal debt.
[ Thats fine we can have zero debt. as long as we the gov spends more than it takes in most of the time
we should be ok. Again, FED debt only exists to execute interest rate policy not to fund government.
A common misunderstanding. We need enough spending to support desired levels of GDP and unemployment. ]
With new homes sales at a multi-decade low and new home inventories at a multi-decade high, new home starts will continue to decline. There is no or little profit to building at this time. Spec homes are becoming a thing of the past right now for many buildings and builders continue to drop employees after doing what they could to retain them and work through this economic downturn. However, it was a 6 month holdout, it will be years and now home builders are now resigned to that fact. If you can’t build and make a profit, you stop building. Home prices will dip below construction costs. We just got through a period where home building techniques, systems, and scheduling created a lot of cost efficiencies but construction materials had risen to offset that.
Durable goods orders have now plunged. That means one thing and one thing only, we will in fact have a GDP defined recession. It also means tremendous problems and challenges for the new president. I don’t want one that comes with training wheels…
BubbleRefugw (#199) said: “Regarding Gambling, What other solution do we have for the impending local government collapse that we are probably facing?”
In Florida, Casino Gambling” is NOT a “solution” for shotages in funding. State restrictions are EXTREMELY tight and include a definitive STATEWIDE ballot measure requiring a super-majority (I recall) to implement. Then, the Indians would tie it up in count all the way to the US Supreme Court. The vote on slot machines in both Broward and Dade were limited ONLY to existing racetracks and fontrons and was a county election not a state election.
Statewide casino gambling initiatives have been both proposed and failed to make the ballot AND voted down in the past. It took years to approve the lottery, which is a lot “cleaner” than casino gambling. One of the biggest opponents of casind gambling for Florida, during the early-1990’s recession, was Donald Trump because of his NJ holdings. I suppose our “Donald Trump of the tropics” would be its biggest supporter today if he could put “casinos” into 50 Biscayne, the ICON, 500 Brickell……
Might work, he is a huckster and looks like an over-stuffed croupier…..
(Disclaimer: My opinion IN NO WAY constitutes the opinion of management!)
Re: Gambling
“Then, the Indians would tie it up in count all the way to the US Supreme Court.”
True to that… can’t beat the Indians… they pad more pockets than anybdoy else. Falcone would get easily outbribed.
Re: Everglades on the Bay
“Their contracts have a provision that the closing must take place before Sept. 2008. Well, Sept. is almost over and the building looks complete but they’ve not been notified of closings just yet. Anyone know if they’ve obtained a CO or have a clearer picture on when they’ll start closing? ”
Right, supposedly they have to by September which isn’t happening. Maybe CABI is busy getting Related Group’s crack legal team to stiff the contract holders? I’m sure there’s a potential out clause on Page 134 Section 7 Paragraph 4 Line 3… just look for the annotation which then takes you to Page 206 Left hand side, section 2 midway down in small print… or something like that.
“That means one thing and one thing only, we will in fact have a GDP defined recession.” GDP was 2.2% last
quarter. We’ll see the jury is still out on that one.
JL said: “Maybe CABI is busy getting Related Group’s crack legal team to stiff the contract holders? I’m sure there’s a potential out clause on Page 134 Section 7 Paragraph 4 Line 3… just look for the annotation which then takes you to Page 206 Left hand side, section 2 midway down in small print… or something like that.”
It’s not that complicated. They rely on ambiguities. They use the “slow-screw” process, such as sending out time-sensitive letters without dating them and have “substitutes” endorse them, rather than the “executive” whose name appears as the signee. That way the “executive” can “truthfully” state: “I didn’t sign that!” and “It certainly was signed by “anyone” on the date you claim!”
Then, when they get sued, they yell: “ambulance chasers”! Like I stated in another thread, if they want to stop the “ambulance chasers”, all they have to do is turn off the siren and lights, park their ambulance, and honor their contracts! (IMHO)
bubbleRefuge – I have been hopeful and the past GDP number was helpful. However, we are just now really seeing the effects of very tight credit. Hence, a GDP defined recession looks inevitable esp. with Ireland officially entering recession most of Europe till follow. Even with exports, where will the demand come from? I am now in the recession as defined by 2 consecutive quarters of negative GDP will occur…..unemployment is increasing which is another indicator of where things are headed. It would be hard to believe that we would come out of this without a recession and the JP Morgan Chase presentation assumes at least a mild recession then goes on for deeper and severe. Hard to disagree with people that have been putting real money on the line.
RT, my main man Warren Mosler has been mildly bullish on GDP. He is almost always right. Like I’ve been trying to convince you, federal budget deficits appear to be increasing fast enough to create enough aggregate demand to support GDP and spending will continue to increase. The problem is we don’t want that ‘demand’ to be sucked out of our economy on crude oil exports which is what has been happening. That is scary because there is almost nothing we can do about it in the short run and we have little control over it other than exercising military power. As long as oil imports continue to suck demand out of our economy our standards of living will decline and the closer we come to a banana republic ;-(
“Then, when they get sued, they yell: “ambulance chasers”! Like I stated in another thread, if they want to stop the “ambulance chasers”, all they have to do is turn off the siren and lights, park their ambulance, and honor their contracts!”
Un – I wouldn’t blame my acquaintances if they decided to “chase the ambulance” in this case. I seriously doubt that the unit will appraise to what it once was back in 2004 but that’s certainly not contingent on the sale (builder one sided). The builder is contractually bound to close by a certain date and although the language on the contract is ambiguous, I would imagine that they do have a leg to stand on. I wonder what the heck is going on with that building/builder. I can’t imagine that all contracts have the same completion date…if not, they are leaving the door open for several deposit demands.
“federal budget deficits appear to be increasing fast enough to create enough aggregate demand to support GDP and spending will continue to increase”
Isn’t that what just went on with the consumer credit over extension??? They bought and bought and bought on credit and were unable to pay it back? GDP growth based on debt is not the solution. The fed govt does not have unlimited borrowing ability and MUST get into the mode of bringing down the principle owed. Otherwise, the borrowing will continue to cause erosion of wealth based on US$, plain and simple. Under your logic of GDP growth via Fed Deficit spending, why not just give all Americans $1M and an MB sports car to boot??? Silly silly silly.
Hey – I have been planning the FDIC limit issue since since Dec 2006, long before the crunch in August 2007 started. Anyway, finally, people are drawing attention to the silly $100K limit on FDIC per depositor per bank. Even Jim Cramer on Mad Money opened up his show today with this very issue. About time. What he didn’t mention was that the FDIC protection isn’t worth much for most business….the whole point of the FDIC insurance is to insure your deposits with the full faith and credit of the fed govt……the flight to treasuries is the only alternative to get it without a limit. Deposits are the cheapest capital for banks, make it simple and increase the FDIC insurance limit.
Let me also reiterate my statement from August 2007 that this whole thing (which Erin Burnett chuckled at…and read my name by the way) is “Refi-Madness” which is exactly what is continuing to this day….trying to refi the bad mortgage debt into a fed govt bailout. You can only pass on the debt hot potato for so long through refi’s until you have to address the underlying issue of actually repaying the debt…… By the way Jim Cramer a week or two adopted the refi-madeness theme too….Bob Marley and all. When you’re right you’re right….
Isn’t that what just went on with the consumer credit over extension??? They bought and bought and bought on credit and were unable to pay it back? GDP growth based on debt is not the solution.
[ Once again government Debt does not finance government.Government debt is a tool for draining and supplementing reserves to the financial system in order to hit federal funds rate targets. ]
The fed govt does not have unlimited borrowing ability and MUST get into the mode of bringing down the principle owed.
[ No the government needs to worry about GDP, Unemployment, and inflation.]
Otherwise, the borrowing will continue to cause erosion of wealth based on US$, plain and simple. Under your logic of GDP growth via Fed Deficit spending, why not just give all Americans $1M and an MB sports car to boot??? Silly silly silly. [If we can achieve low unemployment, high GDP growth , and reasonable inflation
levels, then yes. ]
Read this article and see what you think.
http://www.moslereconomics.com/mandatory-readings/soft-currency-economics/. You can’t apply
Everglades contracts do state a September closing but will probably be precluded by the developer buying time and declaring some form of force mejeur using both Hurricane Katrina and Hurricane Wilma as the stated reasons. The appraisals so far are coming in close to in line.
But it is a very attractive building with a great views and a great location.
bubbleRefuge – I think you confuse managing one’s debt and its effects with something that is a good thing. Debt limits ones options, it is a positive opportunity when not investment debt. Given the federal spending, one would be hard pressed to think these deficits and the overage federal debt was necessary or for investment purposes. It is no different than an individual juggling credit cards to manage the interest rate they pay on their credit card debt…..it is Refi-Madness. Soooo much effort managing debt that you take your eye off the ball of wealth creation. What a waste of time and talent…just like the complicatd tax code it.
“it is NOT a positive opportunity when not investment debt”
Really need to read before posting…. mea culpa.
RT, bubbleRefuge’s macroeconomic ideas are bizarre.
I would like to throw this in the hat, compliments of Richard Russell:
If the American people ever realized or understood how the Fed operates and how money is created in the US, there would probably be a ten million man and woman march on Washington and more specifically a march on the Federal Reserve Building. The Fed is a private banking monopoly that has “grabbed hold” of the money-creation of the United States. Who controls a nation’s money, controls that nation.
The US needs money to pay for building roads, for buying war planes, for fighting wars, for paying Congressmen, for paying IRS and Post Office employees, for a thousand different items. For this the government turns to the tax payers or it turns to the Federal Reserve. The Fed is nothing more than a group of private banks that charge interest on money that never existed before.
How does the system of money creation work? A simplified but true explanation. The government needs ten billion dollars (aside from what it takes in income taxes or from what it borrows). So the government then prints ten billion dollars worth of interest-bearing US government bonds. Next, it takes the bonds to the Fed. The Fed accepts the bonds, and then places ten billion dollars in a checking account. The US government then writes checks to the tune of ten billion dollars against their checking account. But where was that ten billion dollars before the Fed issued the money? The money didn’t exist. Can you believe it, the money was created by the Fed “out of thin air.”
In other words, the Fed lends the US government the money — and the crowning irony is that the Fed then charges the government interest forever on the bonds that the US government sold to the Fed in the first place. And the debts build and build and the national debt grows ever- larger.
How about the interest that is owed on the national debt, which has now grown to a choking $500 billion a year? That’s part of where our income taxes go. The government taxes our sorry asses partly to pay for expenses incurred by our very own government. And a further crowning irony — the government taxes us to pay for the interest on the ever-expanding national debt.
http://www.dowtheoryletters.com
louix – The US$ represents a certain amount of wealth. If there are 10 US$ represent the wealth of 20 cheeseburgers if suddenly there is printed 10 more US$ (now 20 US$) then each US$ is really worth 1 cheeseburger. There is no value in the paper itself only it what it represents or is backed by. Just like a stock split you’re not any wealthier.
I understand that there are conspiracy theories that surround anything powerful, but if you really think the fed is some nefarious organization, go get a job with them yourself and see how boring it really is for yourself.
Renter tom you disappoint me. Read your Roman history. We fail to understand something that they clearly did. Interest eventually collapses every empire. It wasn’t lead goblets or german invaders or neurosyphilis that did them in. Their own historians note that the Roman debt and the nature of interest caused the economy to collapse. If I was to charge 6% interest on a 3 inch circumference gold coin starting in the year 0 by the year 1300 I would have a gold coin the size of the sun.Why does no multi-generational rich family have a gold coin the size of the sun? The same reason that every nation that was ever in our position has defaulted on its debt. The same reason the stock market CANNOT grow at 6% per year ad infinitum. Interest is a GEOMETRIC function while human output can only grow algebraically
Hey Mark – How do I disappoint? Did I write a typo or something?
Wow! 45% down……and – the drum roll please – 7.8% mortgage rate! Wow! And they sooo wanted to be friends with AJ even if he does call people names.
http://www.miamiherald.com/459/story/704660.html
Homes now affordable, but mortgages aren’t
“To understand how the credit crisis is hitting home in South Florida, consider the plight of Teresa and Hoover Encalada. The couple found a two-bedroom condo they loved at the Plaza on Brickell. At $434,000, the price was right. Their credit was good.
Friday, they got the bad news: The lender wants 45 percent down on a five-year loan with an initial interest rate of 7.8 percent. Now Encalada, a 39-year-old administrative assistant, and her husband, an Ecuadorean banana grower, are waiting on a second bank offer requiring only 40 percent down before they proceed.
Existing home prices in South Florida have fallen 20 to 30 percent over the past year, putting once-unaffordable homes within the grasp of buyers — if only they could qualify for a loan at reasonable rates.
Credit markets have gotten so tight that in many cases it is impossible to qualify for a loan with less than 20 percent down. Compounding the problems of financing, especially with condos, is the dearth of PMI, or private mortgage insurance, which is required for down payments below 20 percent.”
………..
“Miami-Dade has a 32-month supply of single-family homes and a 41-month supply of condos”
And more on the way….. New condos, foreclosures rising from record levels, south Florida unemployment increasing and foreign buyers hurting…… The second half of the hurricane is upon us.
On a positive note, homes are more affordable. 🙂
Sorry RT, no tone on the internet….what I meant is…you should be skeptical of the fed and govt.
WOW RT, does Aj live in plaza? Man AJ, you’re so screwed. Prices will be down another 50% by July 09 if 40% down is the name of the game. How many people have 200K CASH? hahahahha!
Banana grower (farmer) + administrative assistant (secretary) = 80K/year tops. They should not be buying this home. With HOA and taxes they SOOOO cannot afford it. Max price should be 240K.
I don’t see a problem with having to put 45% down for a new Miami condo. Plaza on Brickell probably has more than 30% renters. That should add one percentage to the loan. You want to live in a high risk building your going to have to pay the price.
Stick with single family houses any you won’t have a problem with having to put 45% down.
Tom, the example of how the Fed monetizes debt is true. The Fed’s balance sheet provides insights into how they operate. In simple language, they issue the paper dollars of our currency. They hold Treasuries as the principal asset against that paper money. They have a little gold and a few small items like the buildings that house their offices. They also hold some reserves – those required of the commercial banks – and a small account for the Treasury.
Thus, the balance sheet is currency issued on one side of the ledger, against Treasuries on the other. The way they operate is to issue currency to buy Treasuries. The amount to buy or sell is dictated by the Federal Open Market Committee’s target fed funds rate. As they create money to buy Treasuries from the banks, they drive up the price of Treasuries, which drives the interest rate down.
In terms of the traditional measures, the Fed has lowered the fed funds target rate from 5.25% to 2% in less than a year. But then they added whole new ways to loan money, and not just to the commercial banks they regulate… but also to the investment banks that were not traditionally regulated by the Fed. As collateral for the Treasuries it has provided to these institutions, the Fed has taken onto its balance sheets some of the most unsalable mortgage-backed securities.
To facilitate these operations, the Fed has invented a number of new programs. One program has it loaning funds to the banks in the Temporary Auction Facility. Another is the provision of credit to the investment banks by swapping Treasuries for “toxic waste” paper. And another has the Fed providing loans directly to primary dealers, much as the discount window was supposed to provide for commercial banks.
Some facilities, such as replacing the Treasuries on their books with loans and toxic waste as collateral, mean they aren’t immediately reflected on the Fed’s balance sheet and so aren’t measured as traditional money supply increases.
I totally agree with you in that the paper is worthless and the value comes from what it is backed by. The problem is their is a lot less backing up our currency now. The Fed has loaned out Treasuries in exchange for paper that no bank wanted. And now in the new bailout the Treasury is issuing more Treasuries to the Fed so it can grease the gears a bit more. Who has a higher credit rating right now, Mcdonalds or the US government? I think the reserve status of the US dollar is coming to an end.
However, McDonalds can’t take your money via taxation…… big difference. I do agree that no discipline (because there is no constraint imposed by the gold standard) results in excesses…. No good.
“Four men stabbed near downtown Miami night club”
http://www.miamiherald.com/news/breaking-news/story/705324.html
If your considering Park West I would get the west view. More excitement.
Wild Bill,
Be nice and maybe those in denial will soon trade their “Rah Rah Park West!” for a NRA pistol training seminar! The most amazing thing about this is the fact that it happened in the middle of the afternoon!
“The men were attacked at around 2 p.m. in or outside Metropolis Downtown at 950 NE Second Ave., police said. It’s unclear if the club was open at the time.”
This could be viewed as a great long-term business opportunity. Why don’t we explore the available empty retail spaces at the new condo buildings around the area and open a “Kevlar-R-Us” boutique! We can get three-year financing at 4.00% above LIBOR!
Rent vs. Buy
“Robert Shiller, a Yale economist and author of “Irrational Exuberance,” which predicted the stock price collapse in 2000, has recently turned his eye to house prices. Between 1890 and 2004 he finds that real house returns would’ve been zero if not for two brief periods: one immediately following World War II and another since about 2000. (More on them in a moment.) Even if we include these periods houses returned just 0.4% a year, he says.”
realestate.yahoo.com/promo/renting-makes-more-financial-sense-than-homeownership.html;_ylc=X3oDMTFta3Jqcjk3BF9TAzI3MTYxNDkEX3MDOTc2MjA0NjUEc2VjA2ZwLXRvZGF5BHNsawNyZW50aW5nLWJldHRlcg–
louix – The US$ represents a certain amount of wealth. If there are 10 US$ represent the wealth of 20 cheeseburgers if suddenly there is printed 10 more US$ (now 20 US$) then each US$ is really worth 1 cheeseburger. There is no value in the paper itself only it what it represents or is backed by. Just like a stock split you’re not any wealthier.
[Prices are not determined by how much currency is in circulation. Prices for goods are determined
via supply and demand. Placing more money in circulation could boost demand for a good. But that depends on
consumers marginal propensity to save. If they don’t spend the money then it doesn’t increase demand and thus prices can remain flat. This is why we as a nation have been able to run these twin deficits ( current account and budget) for so long without demand side inflation. Our money is being saved by Japan,China,Korea, + the oil exporting countries. ]
” “Renting is for poor people.”
True. But it’s for rich people, too. The average renter makes about $34,000 a year, but while the percentage of renters declines after incomes exceed $20,000 and rents exceed $600 a month, it jumps again once incomes top $150,000 and rents top $1,200 a month. In other words, poor people rent modest apartments for lack of choice. Middle-income people buy houses. High-income people, presumably with a dose of financial savvy, often rent nice apartments instead of buying. ”
Yep, that is a true statement. This is an excellent article, but they forgot about the AMT part too (everyone seems to forget that!?!?).
Other link:
http://www.smartmoney.com/home/living/index.cfm?story=rent
bubbleRefuge – Demand based on debt (like the housing bubble) is an illusion.
Oh yeah, I’m a little late, but Wachovia was just acquired (but who are we kidding – they FAILED) —> one less bank to lend to AJ
Where did the number 700 billion come from in the US bailout equation?
“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”
Steve Keen pointed out this amazing piece of honesty on his blogexternal link. He found it in forbes magazine hereexternal link.
It seems that the theme of the entire bubble has worked it’s way right up to the level of government participation.
How much should you as a house owner pay for a house that you believe is going to go up in price forever at a rate higher than the cost of money? Pick a really large number.
How much should you as an lender lend at a minuscule margin to a house buyer who is buying an asset that you “know” is going to increase in “value” faster than the borrower can increase his loan size even if he does throw on a bit for a boat or to “consolidate” debts now and again? Pick a really large number.
How does AJ buy a condo? Pick a really large number.
How much should you as a government give to lenders so they can continue to lend and keep the economy “productive” (ie. keep us importing toys, paying ever more for ever bigger houses, looking after each other’s children and taking in each other’s washing)? Pick a really large number.
Mr Swan and Mr Rudd, how did you decide that four billion was the right amount to bail out our financial system which you tell us is in very good shape so we can avert disaster in our economy which you tell us is in very good shape? Oh I see, you picked a very large number!
anybody ever wonder about the timing of this bailout? lehman went under and nobody really cared. aig, an insurer was going under, and the government bailed them out. an insurance company, which the government cannot legally intervene with, was propped up. guess who had a very large investment and business porfolio with aig? goldman sachs, from what i have been told. why did the bailout occur in time to save goldman from the same fate as lehman? i am not traditionally a conspiracy theorist, but i certainly would like to know why former GS ceo hank paulson decided the bailout had to occur just in time to keep GS from insolvency. just a thought…
bubbleRefuge – Demand based on debt (like the housing bubble) is an illusion.
[RT, the entire monetary system is an illusion if you think about it. So called ‘Bank Money’ which is money created when banks make loans is created of out ‘thin-air’ meaning banks make loans without having the
funds in reserves. They only need 10% reserves and when they are short reserves, they can borrow them.
But to your point, you confuse private sector debt with government debt. I agree with you on private sector debt. Too much private sector debt can cause bubbles. But its government spending that funds the private sector and not vice-versa.
]
Bailout failed. Looks like deflation it is. Oh man oh man! We are going to an ALL CASH MARKET. There will be ZERO lending.. ZERO.
Can you say 100% down payment?
gold is up $26
at this rate I can sell my inflating gold to buy a deflating condo.
oh man! Look at the vix ! Look at the TED spread! Oh shit! AJJJJJJJJJ, you are screwed!!!! Cash is king. Credit is dead.
Deflation may be here with less credit based demand lessening. Oil is down. Safe haven gold is up. Home prices are down. Car prices should be coming down too with sooo much supply. We gotta lotta goods that we need people to buy but can’t. Cash is king…just make sure your king is with the FDIC limits at any bank, er castle!
bubbleRefuge – We’re just gonna have to agree to disagree. As I mentioned, your statements regarding govt debt are really secondary and are about managing one’s debt, doesn’t create real wealth and probably erodes real wealth. Govt debt is not the solution to all of this, it is the problem. If the govt wasn’t absorbing all of this credit it would be available to the private sector which actually creates wealth.
Hopefully the govt will use the opportunity to refinance its long-term debt into really really low rates!
RT, I think long term yields are going up. We have to roll over a lot of debt in the next two years. I personally think our Govt and Aj are screwed.
Gables
the reason why the gov’t engaged in a sophie’s choice of sorts is simple. after bear went down, the feds were given access to each i-banks positions in a host of trades along with various other positions. having this access, the fed felt comfortable in letting Lehman go. conversely, AIG was in a far different position. aside from its traditional line of businesses, it has a tremendous amount of CDS exposure (which is something i have been whining about for nearly eight months now). the failure of one of the largest counterparties in the CDS market would have been catastrophic. the debt and equity markets would be on the brink.
Mark to Market – that’s why the govt needs to take advantage of this flight to treasuries…..lock in those low rate like the ditech commercial says…. 🙂
Well gold has gone back over $900 today, but my gold miners went down today 🙁 which is to be expected on a day like today. I still think that a huge bailout is coming and possibly many more. Seeing how the whole country was against the bailout our congressmen realized they need to be re-elected in a month. Bailouts are still coming, it is the nature of the beast and our fractional reserve system.
It might be years before I buy a condo and I do like the discourse on here except when it becomes too personal. I figure urban sprawl has run its course and is now not economical (unless suburbs are built like mini cities that have everything a city would so the people wouldn’t need to leave) and the condo must be close the public transportation. I think it will be a big selling point now and more so in the future.
But there is not enough blood in the streets for a non productive asset like a condo.
Louix, I agree. I think inflation is coming, but I got MURDERED on potash. I am long AUY and physical gold only now.
Iwonder if condo owners wil be the ones jumping out windows instead of stock brokers in this depression
…or off their balconies as the case may be….
Anybody wants a good deal in ONYX ON THE BAY?????????????
unless the government bailout arises from the dead, things are going to get ugly. My question is how quickly will new house prices adjust to the new reality of loans and interest rates? I will assume that interest rates on mortgages will increase in the future. This will drive down the home prices, since people will still only be able to pay a fixed price on housing per month, so if interest rises principle cost decreases. how quickly will the RE market adjust to this new order and lower the prices? will they continue to hold out hope for another month? two months? end of year? unless the government passes a new bill this week, significant damage will have been done. enought to take away any hope of a RE recovery in the next couple of years. cash buyers will dominate the next year or two. how soon will reality sink in?
Hey, I heard today that SunTrust has been talking to Wells Fargo…..
hmmm.
I got killed in the market today. I guess the silver lining is that all the money I’ve lost in the past week will be slightly offset by the deal I’ll be getting on the condo I plan on buying. Thank goodness for cash.
guillermo – great to hear from you again. What are you offering? I hope that it has a better view than my financial portfolio. Show me the good deal 🙂
Kevin – Consolidation in this market makes lots of sense. SunTrust is the only US bank that I know pretty well and they’re in relatively great shape. Check the trading of the financial preferreds to see who’s next on the plank. watch as they trade from $25 to $5.00 and then they just disappear, just like WaMu…. Is Corus Banc next??
Grant asked: “Is Corus Banc next??”
There is definitely something going on at Corus! As far back as two years ago, over half of their multi-family portfolio was loans to MIAMI CONDO DEVELOPERS! For them to even be breathing must mean they have found the secret recipe for cooking their books!
A week ago I put a stop loss on SunTrust for monday am. sold at 56.4. Amazing, I must be a genius. No, think about this stuff. Right now its all about this credit freeze/ financial crisis. All of this is the temporary problem of credit. When they do get a bailout package there will be a bounce and a little relief but this is all only the tip of the problem. This consumer economy has been tapped out and all relief is temporary and forebodes a yet bigger problm in the near future. No one in general can afford these condos at these prices. The answer is clear. For a trusted analyst or “quote” expert to call a bottom is criminal or at least insane. There is absolutey nothing in fundamental economics that would or could support such a claim in the dire south Florida housing market. Any temporary reprieve is a false stopgap for a yet more drastic correction. And again I wish I was wrong for selfish personal reasons but that does not change the reality of this situaion.
The big economic issue is NOT housing, it is DEBT, plain and simple. If you give someone a 110% LTV loan, then you are simply giving people unsecured debt or debt not fully covered by the collateral, regardless of what that collateral is, a house, a car, a spaceship, doesn’t matter. Or if you let people borrow money based on some pretend valuation of an asset as collateral you are giving unsecured loans. DEBT is the problem and deadbeat debtors along with stupid banks caused this.
Geee, CNBC must be reading my posts! LOL Just kidding. They did just make the point of the easy credit pulling future sales to the present (sales of 17M cars now going to 12M) and now that the cheap credit is gone coupled with not being able to pull future sales into the present we are going to see a pullback. My point exactly in a past post. This is going to have a huge effect on consumer spending and less imports.
We now have to pay for our past debt financed prosperity…
With 94% of mortgages current, why the crisis?
That really isn’t funny at all.
RT, once AJ stops paying his 8 mortgages….we could see a 1% downtick….
RT, do you see condo price RATE of decline accelerating? I think the combination of this financial panic (domestic and internation), the slow selling seasons of the year, and lack of credit could cause massive price declines. We could be seeing $150/sf by summer 09′. Watcha think?
MtoM – I think we will see the capitulation/resignation to reality in the 4th Q of this year. Price drops over a future quarter compared to past quarters can’t be steeper, we’ve already seen the steepest declines and rate of decline has to lessen. With that said there is some city in Cali with a 70% average price drop from peak. Crazy valuations must be thinking there are some tech stock traders out there that got into housing! A 40% drop from peak prices is certainly very very probable for this market. Hence, a $1M condo would be worth $400,000.00 less. OUCH! But then again in 2001 it was only worth $350K anyway.
Maybe we should short stainless steel, granite, and hardwood???
This was a NC mansion that was erroneously put up on craiglist for Miami Dade… I know RE is all about location but man oh man, what $120 sq/ft can buy in states where people tend to cling to their guns and their religion.
http://home.nc.rr.com/aperfecthome/
Seriously, people talk about crap cookie cutter Condos can’t go under $250 sq/ft because of some imaginary price floor due to construction costs, but what the heck are the construction costs for that mansion in the link? Don’t forget to look at the 2,000 sq ft. heated garage/basketball court that’s not included in the overall 10,500+ sq. footage. Holy Dang Mackeral!
http://home.nc.rr.com/aperfecthome/photogallery/Basketballct1.JPG
Did any one attend the REDC auction? CBS titled their piece, “Buyers Leave Foreclosed House Auction Happy”; were there any real deals?
You guys are on the right track. I just read a Credit Suisse piece that says approx $4.5 trillion of assets need to be sold to bring global banks back to their long-term average leverage position. There’s no doubt that condos have to be high on their list of assets to sell, right after Ninja loans, and CDOs.
Corus must be up to something… I give them two weeks maximum
Interesting…….some progress….
FOR IMMEDIATE RELEASE
September 26, 2008
Media Contact:
David Barr (202-898-6992)
The FDIC’s Board of Directors today adopted changes to simplify the rules for determining the coverage available on revocable trust accounts – commonly called payable-on-death accounts or living trust accounts. The interim rules, which are effective immediately, eliminate the concept of qualifying beneficiaries, so that coverage is based on the naming of virtually any beneficiary.
Under the revised rules, coverage for the vast majority of account owners generally is based on the number of beneficiaries named in a depositor’s revocable trust account(s). The insurance limit will still be based on $100,000 per named beneficiary. For revocable trust account owners with more than $500,000 in such accounts naming more than five beneficiaries, the coverage is the greater of either $500,000 or the sum of all the named beneficiaries’ proportional interest in the trusts, limited to $100,000 per different beneficiary.
“We believe the interim rule will not only result in faster deposit insurance determinations after bank closings, but will help improve public confidence in the banking system,” said FDIC Chairman Sheila C. Bair. “We strongly encourage owners of revocable trust accounts to make certain that the names of their beneficiaries are included in the bank’s records.”
The new rules are effective as of today and apply to all existing and future revocable trust accounts at FDIC-insured institutions.
Comments on the interim rule are due no later than 60 days after the interim rule is published in the Federal Register. Publication is expected to occur within a week.
# # #
re: Did any one attend the REDC auction?
I had already answered this elsewhere, so this is a cut/paste.
–
Well, if I MUST
And, if not to someone as generous as you, then to whom would I tell?
Let’s see! Carnival anyone? Loud blaring music from dozens of massive speakers, hundreds of people, the auctioneers in tuxes. Their helpers also in tuxes but they carried whistles which they would excitedly use as they jumped up and made furious hand motions. One BIG screen with the property currently under auction. Two other screens with the number IDs of the previous properties that were either sold or “sold subject to seller confirmation.” These were important according to one of the auctioneers, as these could come back on the block if no contract was written up (and many did.) More on that in a second.
Before I forget, you needed $5,000 in cash or cashiers check to bid. I learned of the auction just Friday, went to the bank (name not mentioned on purpose) and asked for $5,000 cash. It took 3 (THREE tellers’ drawers to round up that much cash!
And, AND, hold on… wait for it… WAIT… they would not have more cash until Tuesday when their delivery arrives!
end of first part (got steamed up and need coffee)
–
Now, if your bid “won,” then, one of a number of girls (they were all constantly clapping) came and escorted you to a waiting area. From what I could see, they verified that you were a registered bidder and that you at least knew what property you had bid on. After they had in that area a number of such people they were then escorted to an area behind a screen were loan officers were waiting. YES! Loan officers. Hence, why properties would be recycled back to the block! Some properties were cash only; derelict, roofing problems with water intrusion, and you still had bidding.
Some people did have a lot of cash and came with their own brokers (more on that later)
part 3 if this post shows up.
What kept coming to my mind as I witnessed this was “sheeple” a word I never use. But yet, they did look like sheep. Although all the auctioneers and their helpers were men, these escorts were women, I thought about that even in the midst of all the whistles going off and the constant loud over many speakers “Do I have 90? 90? 90? 85 90!…” Why women as escorts? Less threatening?
This was not a “no reserve” auction; hence the “sold” and “sold subject to confirmation” the auctioneers made a %5 commission over the bid price which becomes the purchase sale price.
This guy with his broker started talking to me. His mistake. I look like I have a lot of money, 3 year old Sperry top-siders, no socks and instead of the mandatory in Palm Beach Bermuda shorts and brand name top, I wore faded jeans and long sleeved dress shirt rolled up with my prescription sunglasses. He told me of the 400K condo he bought a little while back at a steal from the high 600s and paid cash for and how the rental on that property is down to $2000 from $2800 (ouch, figure at least $600 HOA and $400-600 towards taxes. Guy is sure that Real Estate will rebound in 2-3 years and will be double what he paid for it. He left worried after speaking with me, sort of glassy look in his eyes.
I was going to bid 15K for a condo, after an hour of looking I decided it was not worth my time and left my bid for 15K written in the back of my bidder card as a back-up bid for the property with my number.
I do not expect a call.
My take on the event.
Crisis? What crisis? As the auctioneer said at the beginning of the auction just before the first property came on the block, with the bail-out imminent, and low interest rates… “now is the time to buy!”
The Case-Shiller graphs are interesting. Real estate busts usually take 1-1.5 times the amount of time on the way down as the way up. To date. it looks like it is a 1 times on the way down which shows that for now the bust is tracking the same path down as on the way up. I would suspect that that won’t continue since the more probable path is 1.5 times. Looks like we will be back to the long term trend line in 1/2015 and near it in 1/2013 if the graphs stay on the same 1 times track on the way down. Sooo, consider buying in 2013! Now if it drags out to 1.5 times add three years…. 2018 for return to trend line with 2016 getting close and start looking.
The bubble started in 1/1998 and started to really take off in 1/2002.
It does not look like a quick resolution to the housing over price issue.
Does anyone know if “Cima by Neo” will get developed?
I don’t know Skyline…but speaking of info on new developments, does anyone have any information on Euro Club? The site has been leveled for years with no progress, but the fence still has the advertisements for it.
What is going on with ONYX o2 ????. Who is KENNEDY FUNDING??.
Where is AJ guys?
DO you think they repo’ed his computer along with the condo?
Mark to Market – Be nice, he may have been one of the guys stabbed or something…….should we check the local hospitals?
No Cima no Euro club, both have been put on the shelf for a while
having trouble closing on acondo unit in peninsula 2 trying to go in with 25% does anyone have any ideas or resources they can shoot my way thanx in advance
Muir
It sounds like that auctioneer, “now is the time to buy!” deserves a golden BULL SH*T shovel. I mindfully award them to the likes of Developers and Sales Agents who say “we are SOLD OUT, these are the only few units that the original contract holders are offering”. I swear next time I visit a developers sales office I am going to bring my knee high boots to wade through all of that BULL SH*T.
Lucas, thanks for the hard work. I’ve followed this blog for a while now, mainly because I’m invested in Corus Bank and I like seeing the closing rates. Some of the recent comments about Corus prompted me to write.
Maybe someone here can help with a question I have. I’ve been trying to figure out what number of closings a developer needs in order to pay off the banks’ loan. My guess at a formula depends on several factors that vary for each loan, but a “typical” loan should have an answer. Using the last quarterly report’s example, a typical condo loan is 0.6 of net sell out value.
One formula for paying back the loan would be:
0.6 = Closed + Forfeited Deposits + Liquidating remaining units.
0.6 = %Closed + (%Pre-sold – %Closed)*0.15 + (%Remaining*%Liquidate)
The %Closed is obvious. If the project gets 60% closed, the bank gets paid back first as the 1st lien holder and the rest doesn’t matter. My understanding may be wrong. If so, someone please enlighten me. Maybe the developer gets to keep part of the profit for operating cost (utilities, sales force?)
In markets where pre-sales are allowed, the deposits are usually 20%. If buyers back out, the developers keep 15% and return 5%. Hence the 0.15 and you subtract those that actually closed. The result is a pile of money that is in escrow and I assume the 1st lien holder eventually gets it.
The last pile of money would be the units remaining (un-sold) times the amount the bank could liquidate them .
Now I have to make some (more?) assumptions. For the % pre-sold, I’ll assume 75% because I don’t have a better number. Anyone know what a typical % pre-sold number should be? The %Liquidate is also a wild guess. I’ve read where the last Miami crash had condos selling for 30% of peak values. I think that was from the very peak to the very bottom for probably one condo, but I’ll use that as a conservative number.
Now, we solve for the percent of units a project needs to close in order to pay off the loan. Replace %Remaining with (1-%Closed):
0.6 = %C + (.75 – %C)*0.15 + (1-%C)*0.3.
0.6 = %C(1-0.15-0.3)+(0.75*0.15)+0.3
%Closed = (0.6 – 0.1125 – .3)/0.55
%Closed = 34%
With these assumptions, the project has to sell 34% of the units at pre-construction prices in order to repay the bank (eventually). It ignores the carrying cost of the liquidated units, foreclosure, etc. Assuming less pre-sales or the ability to get more/less than 30 cents on the dollar for bulk condo sales will make a big difference. Now note that hardly any developments in Lucas’ closing numbers are less than 50% closed after a year.
So, I think Corus’ Miami loans are fairly safe. They have recently had good success with Marina Blue, Quantum, and Continuum II (my guess from closing numbers and the 2nd qrt report). This quarter, Ivy and Sole are doing well. Time will tell if Jade Ocean, Paramount, Mint, Infinity, Carribean, and Artecity do as well. The only real problem loans I think they have in Florida are ones that are closing but can’t get buyers: Onyx and Edge. And it looks like Oynx may pull through (at least from Corus’ point of view.) Corus has many other problem loans (Infinity?, Artecity?), but they seem to be developers not paying interest. Can’t really blame them if they know they are already losing money on the deal, why pay the bank interest? I think Corus will recoup a lot of this interest when the units eventually start closing.
These are just my opinions and me trying to figure out if I’m wrong about Corus.
I was at the REDC auction and everything there was REO’s that have been on the market for over 6 months, all those properties that were cash only the auction house would say “we would like to make a note that this property has a partial missing room, is in flooded area and has previously had illegal activity” on one I yelled out “what like a Meth Lab????” but I guess I was the only person that found that funny….
SLS I will be really surprised is Corus is okay after they get back the collateral on all the projects that they issued the loans. The bath they took on the projects they financed with Boca Developers is one of many to come….
“Corus is the lender on 85 loans in the Southeastern U.S. for a total of 25,601 units. Of those deals, 68 are in Florida totaling 21,451 units” From a seekingalpha article. Not to mention that you are not factoring into your formula adbvertising, sales commisions, and the cost of getting the line of credit. Standard Development Budget is usually 20% Hard Costs 80% Soft Costs.
CORS has been all over the place this month so I might be wrong and its a steal at $4 bucks, it just seems like a dogs with fleas
The U.S. housing market bust may not bottom until 2010, later than previously thought, and more home builders may fail before the housing market recovers, Moody’s Investors Service said in a new report.
While some housing indicators may bottom out around the end of this year, “we don’t expect the overall housing market to show any significant improvement until at least 2010,” Moody’s said.
http://www.cnbc.com/id/26959206
What happened in Midtown 4 Lucas? ..Do you have more info?
SLS, you seem to have a very good approach, but your formula or assumptions have to be wrong (Not sure where)
I can tell you that from a developer’s side, there is absolutely no way you pay off the bank with 34% closed and 75% pre sold, even if you keep the 15% deposits.
Can somebody tell me how to access the Short Sale or REO properties on MLS?
Thanks!
SLS said in Post #282: “In markets where pre-sales are allowed, the deposits are usually 20%. If buyers back out, the developers keep 15% and return 5%. Hence the 0.15 and you subtract those that actually closed. The result is a pile of money that is in escrow and I assume the 1st lien holder eventually gets it.”
Your “pile of money in escrow”, assuming 20% deposits, is one-half (50%) of those 20% deposits. The developer has spent the other half of the original 20% deposits. What is left in the escrow is the second 10% deposit, of which one-half is the “excess” that belongs to the “investor” who didn’t close.
The Escrow Agreement clearly ststes that the 10% (or 50% of the original 20% deposit) reamins in escrow until BOTH the developer and the investor signs a release of funds.
So, if the original 20% deposit totaled $100,000, $50,000 (10%) was spent by developer. The second $50,000 remains in escrow until released by BOTH developer and investor releases it, with $25,000 going to investor and $25,000 going to developer.
The “first” lienholder has no claim on the investors’ one-half of the escrow money. Theoretically, if the developer goes “tits-up” prior to releasing the escrows (each investor has his own), a claim could be construed in a Banko Court by the investor for ALL the funds in his individual escrow. (“I was racing to close on this condo and the developer went “bye-bye” so he couldn’t deliver.” It may seem like a stretch, however, Banko Courts aren’t bound to general norms.) FOR SURE, in a Banko Court, the investor WILL get his half or the money back from his escrow account.
I understand from a quite reliable source that a developer has to close on 70% – 80% of units (depending on projects financials) in order to “break-even” on the project. If this is accurate, how long can the lender sit and wait for it’s money? In the future, how long can they “juggle” an under-performing project around before the have to start writing it loan down?
This scenario sound familiar? CORUS = CO(ndos)-R-US!!! Look out below.
Regarding this new bailout being voted on tonight, what are its prospects for keeping the housing market artificially high? CNBC this afternoon had someone from Forbes saying the Senate’s plan will help out condo flippers. I’m waiting for this liquidity crisis to finally bring condo prices down to affordable levels (which after HOA and taxes is still far off), but if this plan revises terms to keep owners who could otherwise not afford their condos in them, then I really upset with the Senate.
Thoughts on the impact of the bill?
Thanks Raffi. Anyone know when the Icon at brickell will begin closing their units?
Shelly said: “Regarding this new bailout being voted on tonight, what are its prospects for keeping the housing market artificially high? CNBC this afternoon had someone from Forbes saying the Senate’s plan will help out condo flippers. ”
Who is pitching this nonsense, Gourge Perez? If all the filippers closed on their 2005 pre-construction condos (now finished or close to finished), they would have to do so using “false pretense” financing and you would have a new WAVE OF FORECLOSURES! NOBODY in their right mind would close on an “investment” condo unless the developer marked-down the final sale price by 30% to 50% and you would still have to find a legitimate lender who has not “blacklisted” Miami condos.
Don’t “walkaway”…..RUN!!! Admit it, you lost 75% of your deposit but YOU were not going to move into that $500,000 box with clapboard walls and a 5ft long Jacuzzi bathtub! Let these developers explain the walkaways to their lenders……..
Un-related
general norm is at least 80% closings before the developer starts getting his profits. however, during the boom, most developers had minimum skin in the game and mezzed up instead. thus, the pct. before the developer hit his gravy has undoubtedly been pushed up.
as for the second question, in the past, banks were pushing a host of forebearance remedies that allowed them to delay the day of reckoning. however, now the FDIC and OTS are pushing banks to declare loans in default notwithstanding the fact there still may be interest reserves or discretionary budgetary funds left to technically keep the loan current. if the loan’s in default, the bank has to set aside reserves which in turn more or less forces the bank to foreclose and/or sell the loan to an opportunistic player at a discount.
Auto sales have tanked. The debtor lifestyle is collapsing. Sorry, but I don’t like this bailout package either. We need a separate office to oversee the acquisition and disposition of these bad assets with the mandate to buy cheap and sell at a profit….without looking after the interests of the banks. Heck, just extend a line of credit to Warren Buffet at the fed borrowing rate and split the profits with the guy…he’ll buy smart.
the price you buy them at is the one key point…..
Shelley // Oct 1, 2008 at 1:15 pm
Regarding this new bailout being voted on tonight, what are its prospects for keeping the housing market artificially high?
0
If I could I would invest in the asset Repo business…
New car inventories keep rising…prices will have to come down, down, down. Earnings will plummet. Many people are underwater on their car loans. And used car inventories are increasing. Knock, knock. Who’s there? Repo man. Repo man who? Repo man for your house, your cars, your furniture, your entertainment center, your stainless steal appliances, and your cash.
As Warren Buffet said, he doesn’t use debt to finance his deals….debt might make you richer a little quicker than you would otherwise but it will make you poorer even faster…. I concur.
The bad credit card write offs in 2009 will be astonishing. I just saw a goofy congressman on TV stating he wanted to make declaring bankruptcy easier and include that in this bailout bill? Huh? Let’s all pay for the gluttonous consumption of these debt pigs? Get real!
Rentor Tom, I couldn’t agree with you more.
As far as keeping prices propped up…it can only do so in the extent that the inflation caused by the bill causes wages to increase. however, if a wage price spiral cannot be initiated it will actually worsen the house price decline….more money spent on gas with the same income = less money to spend on shitty condo.
I think a lot of people are just holding out for a few more months. When umeployment hits double the last recession rate, people will be losing homes and businesses in droves.
Speaking of repo men, the daily show did a bit on that…the repo man LOVED george bush…business was booming. I wonder if Aj’s BMW and flashy Macbook Pro have fallen victim to the repo man. He’ll getcha!
lala checking in from Chi-town, can I just say what weather and go CUBBIES!!!! and ok, grumble, grumble…go sox.
The recession is here or inevitable now. The media has hammered down consumer confidence like I have never seen before resulting in spooking the responsible consumers with savings. The situation is a concern but the shrill doomsayers of “depression” are not doing anyone any favors when the GDP numbers haven’t even indicated a recession yet. I just ask that reporters report accurately whether it is in housing or the economy overall. There are many responsible banks out there that want to buy these irresponsible banks’ assets. Let that happen.
The last time I saw the media way over-exaggerate the condition of the economy on the downside was during the Bush-Clinton election season. Clinton inherited an economy on the rebound. That will not be the case for the next president.
There are other mechanisms to unclog the banking system than just this bailout bill. There is no Armageddon if it doesn’t pass so people need to just stop the scare tactics. We need prudent reflection here since we don’t want to make a $700B mistake.
We are now in the 4th quarter of 2008. We will soon see the final capitulation of the hanger-on’rs in the Miami housing market. Pull up a chair and watch it unfold. This should be the last steep decline before the long drawn out descent to the bottom in housing prices for this market……………….
Lucas,
Could you pleaze tell why you continue to trash developments that are closing. People have challenged you on this subject. Instead of answering you just remove these postings.
I own a few condos that are closing and you have trashed them before the closing process is along. I know the market is bad, but I believe your trashing the units before closing and during just makes my investment go down much faster. This makes it harder for me to recoup my hard earned investments. Your website is being tauted as a source for condo investments information……..
I think it’s terrible you do this. I read and have heard that you do this on purpose because you have a ready list of buyers at wholesale price, and so you have an easy sale. If this is true I think your going to have even greater legel problems on your manos. I challenge you to explain yourself and not remove this posting.
2 points……….whats everyones obsession with AJ? leave the guy alone, his comments count too.
andddddd Jorge Munoz, what are you talking about? where in his post, not the comments, has Lucas trashed a development…he just posted graphs. if your condo happens to be low on the graph its not his fault, its your crappy condos fault hahaha.
lala
white sox? bite your f%^king tongue.
I agree with the constant AJ comments, and all personal attacks for that matter. I read this blog daily, and post occasionally; the childish bashing detracts from the helpful information that this blog provides. Plus, I value everone’s opinion here, whether I agree with it or not. Lets try to keep the personal stuff out of this.
Jorge, I didn’t know that Lucas response to any condo development had such great impact on the value of your condo’s.
number 2. Nobody told you to make such investments, and just because a Realtor in Miami wants to share information about the market (he can’t control), you label him as “trashing” a condo?. Theres something called an opinion, ya know?.
I’m sorry if your condos are not giving the returns you anticipated but those are just the risks attached to any investment. Just don’t blame it on a professional who likes to share his views on a market.
Hey Jorge, you’re funny because I feel that Lucas is a bit of a optimist and doesn’t trash condos ENOUGH. At one point he said that prices would hold stable at $400/sf! I remember because I was livid! Lucas please start trashing condos!
Also, using Jorge’s reasoning: He guys, Berkshire hathaway SUCKS!!! Don’t buy the stock! (If the stock goes down tomorrow, my plan worked and now I can buy a share (or two) tomorrow on the cheap.)
PMI Fall 2008 PMI U.S. Market Risk Index
Rank MSA Score
1 Fort Lauderdale-Pompano Beach-Deerfield Beach; FL A 99.5
1 Riverside-San Bernardino-Ontario; CA 99.5
1 Orlando-Kissimmee; FL 99.4
1 Miami-Miami Beach-Kendall; FL 99.3
1 Tampa-St. Petersburg-Clearwater; FL 99.0
1 Las Vegas-Paradise; NV 98.5
1 Los Angeles-Long Beach-Glendale; CA 98.5
1 Santa Ana-Anaheim-Irvine; CA 97.7
1 Jacksonville; FL 97.5
1 Phoenix-Mesa-Scottsdale; AZ 96.3
1 Sacramento-Arden-Arcade-Roseville; CA 96.3
1 San Diego-Carlsbad-San Marcos; CA 95.9
1 Oakland-Fremont-Hayward; CA 94.4
1 San Jose-Sunnyvale-Santa Clara; CA 87.1
1 Providence-New Bedford-Fall River; RI-MA 72.4
1 San Francisco-San Mateo-Redwood City; CA 71.6
Jorge Munoz // Oct 1, 2008 at 5:37 pm
Lucas,
Could you pleaze tell why you continue to trash developments that are closing. People have challenged you on this subject. Instead of answering you just remove these postings.
I own a few condos that are closing and you have trashed them before the closing process is along. I know the market is bad, but I believe your trashing the units before closing and during just makes my investment go down much faster. This makes it harder for me to recoup my hard earned investments. Your website is being tauted as a source for condo investments information……..
I think it’s terrible you do this. I read and have heard that you do this on purpose because you have a ready list of buyers at wholesale price, and so you have an easy sale. If this is true I think your going to have even greater legel problems on your manos. I challenge you to explain yourself and not remove this posting.
Ahhhhhhhh………………………………………. 1st amendment? heard of it?
–
As far as your “investments” learn the difference between speculation and investment.
Personally, you can choke on your “investments.”
p.s.
before 1997 NOBODY in Miami would have bought upside down.
Jcrimes,
I’m just happy to be in a city right now with enough history to go back to 1906! But I did put the CUBBIES in caps and the sox in lower-case soooooooooooo…GO CUBBBBBBBBBBBBIESSSSSSS!!!!! My dad’s advice- Sit tight. Look at the long-term. Your investment portfolio should be for life, not a few months, as well as your real estate investments. Look at this long-term. ANDDDDD Go enjoy the Cubbbbbbbbbbbbbbieeeeeeeeessss!! Well, that last part is from me!
or watch the vote…whichever…
So will there ever be a good time to buy a condo im Miami??? If so what is the timeframe…next year? I see prices below 200/sqft in some high end buildings in Brickell. Will prices go lower???
200 sq/ft in brickell is a time that i would say is right to buy, doesnt mean that it might not drop lower, but long term looking back, high end brickell should be well worth much more than 200 sq/ft.
To expand on Muir’s post. Here is a more complete list of the risk. “Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years. The PMI U.S. Market Risk Index scale ranges from one to 100 and translates to a percentage. For example, a score of 50 indicates a 50 percent chance that home prices will be lower in two years.” As you can see, some the risk that home prices will decline over the next two years in Columbus, OH is as near zero as you can get while Miami is as near 100% as you can get (they never est. 100% or 0%). The open question in two years really is not whether home prices will decline in the big bubble markets in two years, but by how much. As far as I know they are estimating the future prices in nominal dollar terms so in real dollar terms (over a period of years it compounds!) you will be even worse off. Clearly the numbers show CA, FL are by far the worst bubble areas with Las Vegas and Phoenix being regional bubbles. Maybe we can just cut out these areas from the US banking system and let them fail….just kidding.
Oddly, “Housing affordability also failed to improve this quarter, according to PMI’s proprietary Affordability Index(SM), which measures how affordable homes are today in a given MSA relative to a baseline of 1995. An Affordability Index score exceeding 100 indicates that homes have become more affordable while a score below 100 means they are less affordable.” So, despite the falling prices nationwide, homes aren’t really getting more affordable??? Need to look into this more and also it was an average so Miami may be getting more affordable while Columbus, OH might not.
PMI Fall 2008 PMI U.S. Market Risk Index
Rank MSA Score
1 Fort Lauderdale-Pompano Beach-Deerfield Beach; FL A 99.5
1 Riverside-San Bernardino-Ontario; CA 99.5
1 Orlando-Kissimmee; FL99.4
1 Miami-Miami Beach-Kendall; FL99.3
1 Tampa-St. Petersburg-Clearwater; FL 99.0
1 Las Vegas-Paradise; NV 98.5
1 Los Angeles-Long Beach-Glendale; CA 98.5
1 Santa Ana-Anaheim-Irvine; CA 97.7
1 Jacksonville; FL 97.5
1 Phoenix-Mesa-Scottsdale; AZ 96.3
1 Sacramento-Arden-Arcade-Roseville; CA96.3
1 San Diego-Carlsbad-San Marcos; CA95.9
1 Oakland-Fremont-Hayward; CA 94.4
1 San Jose-Sunnyvale-Santa Clara; CA 87.1
1 Providence-New Bedford-Fall River; RI-MA 72.4
1 San Francisco-San Mateo-Redwood City; CA 71.6
3 Edison-New Brunswick; NJ 35.1
3 Nassau-Suffolk; NY 29.4
3 Washington-Arlington-Alexandria; DC-VA-MD-WV 26.0
3 Virginia Beach-Norfolk-Newport News; VA-NC 25.4
4 Detroit-Livonia-Dearborn; MI 17.8
4 Minneapolis-St. Paul-Bloomington; MN-WI 14.8
4 Newark-Union; NJ-PA 14.4
4 Baltimore-Towson; MD 10.1
5 New York-White Plains-Wayne; NY-NJ9.8
5 Boston-Quincy; MA 7.7
5 Warren-Troy-Farmington Hills; MI 7.3
5 Portland-Vancouver-Beaverton; OR-WA 6.4
5 Chicago-Naperville-Joliet; IL 6.3
5 Atlanta-Sandy Springs-Marietta; GA3.5
5 Seattle-Bellevue-Everett; WA 2.3
5 Philadelphia; PA 2.1
5 Cambridge-Newton-Framingham; MA 1.6
5 Nashville-Davidson-Murfreesboro-Franklin; TN 1.6
5 Cleveland-Elyria-Mentor; OH 1.1
5 St. Louis, MO-IL <1
5 Milwaukee-Waukesha-West Allis; WI <1
5 Charlotte-Gastonia-Concord; NC-SC <1
5 Cincinnati-Middletown; OH-KY-IN<1
5 Denver-Aurora; CO <1
5 Columbus; OH <1
5 Austin-Round Rock; TX <1
5 Kansas City; MO-KS <1
5 Indianapolis-Carmel; IN<1
5 Memphis, TN-MS-AR <1
5 San Antonio; TX<1
Pittsburgh; PA <1
5 Houston-Sugar Land-Baytown; TX <1
5 Dallas-Plano-Irving; TX<1
5 Fort Worth-Arlington; TX <1
Un-related, Hugo P and others – Thanks for the comments.
Hugo P:
My scenario is worst case where the developer and the mezz lender are wiped out. So, it’s not a matter of the developer paying off the loan – it’s how much the bank loses (if any) once the property is REO and Corus liquidates what’s left for 30 cents on the dollar.
Un-related:
I’m still confused about the deposit. I fully agree that the investor gets back 5% of the original 20% down payment. And I think you are saying the bank may or may not get the 5% that is left in escrow. My confusion is about the other 10%. You say the developer gets that at the start. My impression was the bank had to agree to let the developer use that money for construction, and most of the time they didn’t. They bank required the developer to have more skin in the game. Otherwise, with the 60% 1st loan, the 10% mezz, and the 10% deposits, the developer has little at risk. All of the construction cost would be covered by others. No wonder there are so may condo developers. Does anyone know the “normal” way banks/developers handle deposits? If what Un-related indicates is the way it is, so be it. I really don’t know.
If we go with 0.05 vs 0.15 in the formula from before (0.6 = %Closed + (%Pre-sold – %Closed)*0.15 + (%Remaining*%Liquidate), Corus needs to sell 40% to ensure getting their capital back. If you assume the bank gets none of the deposit in the end, Corus needs to sell 43% at pre-construction prices to “eventually” break even. So far, most developments are achieving closing rates greater than 43%.
Just so everyone knows, during a recession what really gets hard are businesses with large existing inventories. Fortunately, a lot of the U.S. is reasonably lean on inventories (thanks information technologies) unlike the early 80’s or 70’s. What we know is housing has a historic inventory new & used and so does autos … esp. SUV’s and other large vehicles … new & used. These two areas will get hit hard during this downturn esp. when combined with the credit crisis. It is not going to be good for housing and autos.
Anyone have any info on when Tao at Sawgrass is going to start closings? I called their sales office a couple of months ago and they were quoting 1-bedrooms starting in the low $400s. I was floored. They have the nerve to ask $400,000 for a 1-bedroom in this market?!?
We will see a drop in consumer spending and money paying off debt instead too. South Florida could be impacted as people stay close to home instead of taking more expensive vacations. This will have some effect both on local buyers of condos and people buying second homes in the area.
SLS Asked: “My confusion is about the other 10%. You say the developer gets that at the start. My impression was the bank had to agree to let the developer use that money for construction, and most of the time they didn’t. They bank required the developer to have more skin in the game.”
SLS,
This comment applies only to the 10% (of 20%) of the deposit that the developer is able to spend. As all of the 20% deposit, usually collected from investor in two equal payments, is initially in escrow, the developed is able to withdraw 10%, or half the 20% deposit, as soon as the developer actually begins construction at the project site (site prep counts as “construction”). I believe the logic is that because there have been construction contracts issued and work has been started, some sort of financing is in place as well in the form of a construction loan, hence, the developer is contractually entitled to the “usuable” 10% (of 20%) of the investors’ deposits.
The “end product”, however. does not always materialize. An example is “Vitri”, a South Beach condo that was to have been built by Leview Bomelgren (sp.?). A construction crew finished a lot of site prep in 2007 and today you have a small forest of iron rebar arising from a muddy field surrounded by a chain-link fence. Those investors, in all probability, paid half of their deposit (10%) for this “piece of art”. The project has been cancelled so I would guess the second 10% of the deposits should be returned to investors.
I guess the same developer is planning on finishing “Marquis” as it is 60 stories out of the ground. Closings? Who knows.
Hey Lucas or Samir,
Do you have the party name in Miamidade.gov to look up deeds given at Ten Museum Park???? Thanks.
Thanks Raffi. I am seriuosly looking as I am not an investor but will be an end user.
dlr
i think it’s 1040 biscayne llc
dlr
search for “1040 bisc”
Samir patel, how low will prices go per sf in north beach (Miami Beach) where they are putting up all those new condos?
There has been some discussion about the “Big Six” ….Icon Brickell, Everglades on the Bay, Epic, Infinity, Marquis and Paramount Bay (also Mynt)coming online soon…..does anyone know when each will begin closings? Thx
why is infinity part of big 6? and why is mynt (anything on the river has nothing big about it). just would like to know how they got their name.
Actually AJ coined that name a few posts ago. Dont know why he called those 6 buildings as the big six. Probably because they are the last big projects still under construction? So what is wrong with Infinity being part of the big six? It is a very good, luxurious and prestigious project in my opinion.
I agree with Raffi that Mynt has no place among the big 6. Miami river buildings are not in the same class and league as the big 6.
Hey, Oppenheimer analyst Meredith Whitney agrees with my FDIC insurance idea…so does the senate now too. People need to realize that there is tons of cash out there, but people need confidence and so do the banks. That is exactly the purpose of the FDIC insurance….confidence that the bank will keep its promise to return your money to you when asked. Ultimately that is the key to banking stability … increasing the FDIC insurance limit restores that confidence and will significantly boost bank deposits and bank capitalization. This is more important than buying up banks bad assets with $700B. Simple, easy, and cost effective.
Srinivas, They are not putting up all the new condos in North Beach. I think you may be referring to Sunny Isles Beach which is between Bal Harbour and Fort Lauderdale. Many on this blog talk pricing per sq ft relating every building to each other. Each building is unique even though location may be similar. Now I do believe Trump 1 – 2 – 3 are basically the same. But overall where you see the lowest psf in this market is in the foreclosures. The newest buildings do not have the foreclosure scenario yet. I don’t expect you to see 30-50% of a new building in foreclosure. Enough has been said in the media that those who were worried about possible future forclosure would have just given up their deposits to the developers and walked away. Now it is up to those developers to sell at discount to public if they wish. I don’t expect to see 30-40% discounts on developer inventory to the general public. Maybe to investment funds looking for significant inventory but even they have to buy a mix of units with different views, etc. So their overall buy-in psf may be low but just like end-users they will pay premium for premium units in their package.
For now in the market for end-users I would expect pricing on new buildings to go back to preconstruction pricing and possible credits for closing costs, etc.
the FDIC increase in insurance limits is a bad idea. it props up banks that should otherwise fail, i.e., people will keep their money in a poorly run bank rather than move it to a better managed institution. not to mention RT, it’s not about the bank keeping its “promise” to you to return your money. rather, it’s the federal gov’t keeping a promise in case the bank fails.
mynt, icon, ivy etc.
what’s with the names of all these buildings? seriously, it’s ridiculous. someone should just take a dive and call their next project “perineum.”
The names don’t bother me as much as the prices they are trying to charge for units in these buildings.
Miami 2008, don’t let the prices bother you either. They’ll be down significantly once these buildings close some units and the owners can’t support carrying costs. The pricing on many of these units means that you must collect over $3000 per month (including HOA and taxes) in rent to break even on a 1/1. Who the heck’s going to pay that much to rent a 1/1 on the river? As a matter of fact, who the hell’s going to pay that much for a 1/1 anywhere? I can only see individuals paying that much for a 1/1 if it is in the Four Seasons, Espirito Santo, high-end SoBe units, etc. and furnished. And how many of these new owners will be end-users? Likely, very few. So if you like these buildings with trendy names, don’t worry. You will have your chance to purchase a unit in one of these buildings at a huge discount via short sale or foreclosure. Just be careful to check how the HOA is doing before pulling the trigger.
Samir Patel wrote: “Enough has been said in the media that those who were worried about possible future forclosure would have just given up their deposits to the developers and walked away.”
– Samir, while I respect your opinion, it has been my observation on the ground that people thought they should close and still come out ahead. I think that idea is changing. The number of desperate owners looking to rent is growing. It is/was hard for people to walk away from their deposits. People are coming to the realization that their investment condos will bleed cash for a long time to come. We’ll see how long before people throw in the towel. Stay tuned.
jcrimes – I have to disagree on the FDIC insurance limit. It have never been indexed to inflation and banks resisted increasing it because of the premium expense. Through creative titling you can increase the limits (and hence banks pay the extra insurance premiums) but it is a complete and total hassle for everyone including the banks…and confusing. NO bank can survive a bank run and that really is the problem right now. We need the confidence to protect the good banks at this time. The really bad banks will fail regardless but the ones that need just a bit of capitalization boost (actually many banks do!) or are in good shape (again no bank can survive a bank run, period) then we need this prevent a systemic banking collapse which would result in a certain depression as a result. Increasing FDIC insurance is the cheapest way out of this problem (not totally out but a huge help on credit). By increasing the limits and restoring confidence and credit it will prevent bank failures and hence prevent FDIC insurance payouts. Banks are pretty heavily regulated and increased vigilance is needed to prevent reserves (ratios, etc.) from getting so low. A combo of increasing FDIC limits and oversight will go a very very long way on putting out the fire. And just so you know, I don’t want o prop up bad banks, they will get absorb by others regardless (better than an outright failure).
but there is no general crisis of confidence by your typical depositor. the banks in the news are all losers (including wachovia) with their troubles well documented.
I’m hearing rumors that due to the bailout, government will refinance owners at 80% of the current market value of homes. Could this be true? If so, that is nauseating. What a great break for all of the prudent people to stood on the side, saving up 20% for something they could actually afford. Now all of those who lived way beyond their means not only get to stay in their homes, but get their principal reduced by massive amounts?
Please say it ain’t so.
jcrimes – There was panic lines at IndyMac printed all over the world media. That was very very unhelpful. I spoke to a bank manager (not IndyMac) about a month ago or so and he told me stories of lines and lines for days of people concerned about their accounts and FDIC insurance coverage. He said he had never seen anything like it before…and a real pain. It was distressing for all. Remember, this stuff happens at the margin and while the bad banks should go bye bye (and they will) the marginal banks failing could start a very very nasty domino effect that is simply not helpful and unnecessary. “Typical depositor(s)” are concerned….read the press there are tons of stories out there….there is real concern out there. IndyMac also had the unfortunate position of having many depositors of Mexican origin who are very distrustful of banks from their experience in Mexico. Bank deposit confidence is a very important foundation that we don’t want to crack in this environment. I know I have spent enormous amounts of time dealing with a dozen banks and re-titling acocunts…I suppose I should have just gone into treasuries. The psychological play here can be very devastating to banks that have healthy long term prospects but a short term capital hiccup.
I have to agree with RT on this one. my wife is a banker with one on the largest banks and the stories of people standing in line worried and/or withdrawing cash is amazing. A client literally wanted to withdraw 5M in cash! Of course, the branch doesn’t keep that much cash lying around, but this goes to show that confidence is extremely low even in the large stable banks.
I think I may have to change my handle to Miami2009…lol
Condo Vultures® – Market Intelligence Report
South Florida Foreclosures Top $14 billion As Lehman Pursues $91 Million In Problem Loans…ouch
Frank Paterno said: “I bought in a Tibor Hollo development and instead of the market going down gradually in the building, the market crashed overnight because of Lucas Lechagas disgusting comments about the project. Maybe I can testify against you.”
Winey-ass loser who flopped at the FLOPera! The market is on a one-way southbouth express just because you lost your appreciation, probably for a decade, you fricken whine. Hell, I bought from the self-proclaimed “Donald Trump of the tropics” and his building “valuations” are circling the same toliet bowl! At least I wasn’t stupid enough to close. Get over youself!
Would it be prudent to rent an apartment at the Opera Tower?
Dont get your figures above? closing sales for 500 Brickell as of May 2008 was 149 out of the 600 something units available? Any recent figures you can supply?
Tasha asked: “Dont get your figures above? closing sales for 500 Brickell as of May 2008 was 149 out of the 600 something units available? Any recent figures you can supply?”
The figures “above” show closings of 149 units out of 633. That equals 23.54% (Since MAY 2008)
If you are looking for “prettier” numbers call RCRS. I’m sure they will tell you they “sold out the building in 2005)!!
Tasha asked: “Dont get your figures above? closing sales for 500 Brickell as of May 2008 was 149 out of the 600 something units available? Any recent figures you can supply?”
The figures “above” show closings of 149 units out of 633. That equals 23.54% (Since MAY 2008)
If you are looking for “prettier” numbers call RCRS. I’m sure they will tell you they “sold out the building in 2005)!!
Vultures circling but won’t land on 500-B!
Hey stocks are back to 1998 levels!!! How long until housing goes back to those levels too??????????
So what happens to the remaining unsold units in 500 Brickell? How can the building afford maitenence etc if 75% of the building remains unsold?
[…] almost three months since my last Miami condo closing rate update. The last one was published on September 22, 2008. Unfortunately, there has not been a lot of progress in closings for most of the condo […]
So I was surfin the web and came across this old blog post! any one have any updates on there post!!! it would be neat to see how some of your post turned out or how some of what you think has changed!