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I suppose there is a knife-catcher out there who will buy it at this still inflated price! Just kidding! Not bad price at all, wonder if it will set the market. Still, buying into a condo building with massive HOA problems is like being in a life raft with people what are only concerned for themselves and aren’t hesitant to turn to cannibalism. Desperate people do desperate things…
Heck, maybe I’d buy one just or a hurricane evacuation pad….
Renter Tom,
prolly wont be much of a hurricane pad since its two blocks from the bay. The Vue has the most problems out of all the buildings, but its in a good location (relatively speaking), one block from brickell ave. and 2 blocks from Mary Brickell Village, with a little paint job on the ugly exterior you got yourself a nice building. under 100k sounds good to me, you would just have to weather the storm of crap in that building for a few years.
Wow…this sold for $490,000 in 2006! That is quite a haircut. I just wish their were included pictures to see just how crappy the actual unit it.
It doesn’t surprise me at all, 1 br below $100k is the tip of the Iceberg.
South Beach already has 1 br below $100k hitting the market. The buildings are older and some of them don’t have parking but you can’t beat the south beach location, location, location.
The realtor could have put $50,000 as list price—its all subject to lenders approval. Very misleading–makes car dealers look almost legit with their small print
@Richard
the 1br below $100k in South Beach I’m talking about is bank owned.
I did look up other “11” line units in that building….there are others for sale under $120K if that is helpful.
Get ready folks… my guess is that we will see a lot of these in the near future.
Can anyone say $200psf average?
Guess I’m in the minority. I see MUCH steeper drops.
Can someone here explain to me what significance there is what it previously sold for when money was monopoly money, no doc loans ,104% financing ruled the day, straw buyers everywhere, Just what significance?
NONE.
At 100K would this unit cash flow positive at current rentals with 20% down?
Maintenance at $450 (796sq feet)
Taxes $7550 year (based on similar) = $630
Rents are asking, ASKING $1275
–
Please explain to me, just how on earth $99K makes sense?
–
Let’s assume that the country where these properties are located are NOT in two wars and NOT facing a recession/ depression.
–
Now, explain why this 99K is a deal.
Muir – You must not have been paying attention. Owners are supposed to chip in hundreds if not thousands of dollars to their rental condo each month. It doesn’t need to be cash flow positive! LOL LOL LOL You just need to make friends with your tenants…that’s priceless.
I’ll answer my own question so you can criticize my analysis and hopefully I’ll learn something.
Assume a 30% decrease in taxes to $5300.
Assume renting it for $1050
Make/break point is 50K for me.
–
Now taking into consideration a domestic deep recession, Europe’s Asia’s problems, HOA problems….
I would CURRENTLY still use the 50K as the make break point only because at some point you have to put it somewhere before the oncoming inflation (after the current deflation cycle) arrives.
However, as this goes lower, I could revise and go lower.
–
But 100K?
I thought investments were supposed to make money, NOT lose them.
Muir – I was being sarcastic and kinda rubbing it in on our long lost buddy and former (apparently evicted) real estate investment cheerleading resident, AJ…
renter tom, you must have a crush on AJ I’ve never heard someone talk so much about another person haha.
Sorry Tom.
Actually answered my own post before I read yours. I know your position on this.
Still, I just want those who answered on the poll to justify their answers.
I can’t see where my numbers and logic are wrong.
What is their logic if not speculation?
Unless they believe that an Argentine type hyper-inflation is just around the corner, in which case i’d like to hear about it.
But really, other than just pulling a number out of the air, how did they arrive at an answer, did it sound good?
More importantly, how will they know when it IS a good buy?
I agree that this is a sign of the times. There is absolutely no way that prices can remain artificially high in any real market, let alone this one. Stock market’s in free-fall, we might be in a recession, and credit’s tighter than my first girlfriend. Just think about how many people are out there now that want to buy, but are no longer qualified. The question now is when will the sellers and developers admit that this is the case and lower their asking prices or begin to accept the low-ball offers.
I tried to explain to this my realtor the other day but he didn’t seem to want to hear it and tried to convince me of otherwise, which kinda turned me off to him. If you guys remember, I’m planning on buying a condo soon for cash in the $500k range. I want a nice place to live for a while. Does anyone have any recent data that reflects how much sales prices are decreasing on average here in Miami? It seems like most of the steals out there are all REOs on sub-par units, but the average seller doesn’t seem to facing reality.
Muir… I agree with you 100%. Dead on with the $50K number.
Purchase price: Goes for $100k (forget closing costs for now)
Rents: Assume you can rent it at $1,200. $1.5/sf, should be OK for that area.
HOA: The $450 in the HOA fees translates into $0.56/sf. IF the HOA has no problems (not sure), this number should be OK for that building.
Taxes: Assume they come down and stabilize at 2% of the purchase price ($5k, $420/month).
Assuming all of this, you net $330/month ($1200-$450-$416) or $4k/year.
That’s a 4% return on the $100k.
The question is, who would buy this at a 4% return with the asociated risk that it might depreciate and the income could go down (vacancy, possible lower rents, HOA problems, etc)?
I would definitely not, but I do think that at these prices, you might get more some smaller foreign ALL CASH buyers who might want a second home and are running from the stock market.
That being said, I don’t think that there are enough of those to maintain these prices.
For me, it’s gotta get at least to an 8% return (your $50K ), so we can start clearing some inventory here.
Back to basics
DJ…. Amen
I had the same experience with my broker and she started to give me all this historic data from the peak days and convincing me I had a deal. Not biting. Made a decent offer for a new condo and wasn’t accepted. Let’s wait and see. Lots of sellers are still trying to sell at a profit and it just ain’t happening.
No one wants a loss, but it will start hurting soon and prices will adjust.
the problem(s) with sellers is that they are reacting, rather than anticipating. mainly, if i’m throwing something on the market now and i’m SERIOUS about selling it, i would price it at a level where i anticipate asking prices to be six months from now. instead, everyone follows the leader…however…the leader’s place ain’t selling in the first instance.
Check that…. just noticed I made a mistake in the taxes: If they stabilize at 2%, it’s $2k and not $5k. ($166/month)
This bumps the return to 7% and the price to $87K (8% return)
DJ – I’m sorta in the same boat but am perfectly fine with renting what I’ve got now since it is a great place at half the price! My thought is the capitulation will happen in this quarter. You’d have to be pretty thick skulled to not price to market after being hammered with all that is going on. But we have to remember that the denial out there is strong…very strong. People had already “cashed in” there real estate lottery ticket in their minds and are now psychologically anchored to those prices…they simply can’t face the reality of a loss instead since it would dash their mental dreams of retirement, etc. It really is a huge blow for many. But the burden of being bled each month with no end in sight will eventually get people to throw in the towel…you CAN’T beat the market….macro econ will win every time so it is better to go with the tide than try to drain the ocean (yep, that is an original quote…. 🙂 ) I really ought to be a guest host on Fast Money! LOL
Hugo, I dont understand your math. Where are you getting $87K? Also, dont you think a 2% tax rate is quite a bit of “wishful thinking”?
Muir, where do you get $7550 in taxes on a $100k condo?
Trying to learn here so dont flip out please. Thanks in advance.
SB
oh, and $450/month HOA is a tad absurd for a $100k residence too
the fundamental reason you are not seeing private owners price at a fire sale level is they cannot afford to do so. if you paid $300k recently for a condo now valued at $200k, you would have to write off $100k. most owners have no ability to do so. they have a shot only if the banks will allow them to short sale-but many banks are not pushing the short sales-they seem to prefer to take the property in foreclosure and then fire sale the unit. the only low sale prices i see in the listings seem to be REO. i have not seen many of the short sale listing actually close. thus you cannot blame the owners for not adjusting to the new market reality-its the banks that are in denial. most owners would run from their property if given the opportunity.
Muir & Hugo P,
Your calculations are wrong.
For a cash deal, the numbers for an investor would be:
Annual Revenue: +$14,400 (Rent @ $1,200/month)
Real Estate Taxes: -$2,000 ($100,000 @ 2%)
Tax Credit: +$600 (R.E. Tax Deduction of $2,000 assuming a 30% Tax Bracket)
HOA: -5,400 ($450/month)
Depreciation Credit: +$1,463 ($100k for 20.5 years & assuming a 30% Tax Bracket)
NET on Cash: $9,063 (or 9.1% on your $100k).
For a financed deal, the numbers for an investor would be:
Annual Revenue: +$14,400 (Rent @ $1,200/month)
Real Estate Taxes: -$2,000 ($100,000 @ 2%)
Tax Credit: +$600 (R.E. Tax Deduction of $2,000 assuming a 30% Tax Bracket)
HOA: -$5,400 ($450/month)
Annual Mortgage Payments: -$4,769 (30% down = $70k mortgage @ 5.5% for 30 years).
Mortgage Interest Deduction: +$1,245 (Annual interest of $4,149 & assuming a 30% Tax Bracket).
Depreciation Credit: +$1,463 ($100k for 20.5 years & assuming a 30% Tax Bracket)
NET: $10,308 (or 34.4% on the $30,000 down payment).
For an investor, the HOA dues may or may not be tax-deductible. The IRS allows certain expenses of the HOA but not all.
For a home buyer, if you include the tax credits for the mortgage interest and the real estate taxes, the monthly outlay is $860/month.
I am not suggesting that this condo is a good investment. You need to take into consideration vacancy, possible lower rents, HOA problems, repairs, headaches, etc.
All I wanted to convey is a complete financial picture of owning/investing in a rental property.
RAM, You are the smartest guy on this blog. I see and hear so much bullshit here. Mostly self serving personal opinions of people. It is rare to see hard facts presented like yours. Great job.
Folio No.: 01-4139-088-2420
Property: 1250 S MIAMI AVE 1111
Mailing Address: DEUTSCHE BANK NAT’L TRU CO TRS
4828 LOOP CENTRAL DR HOUSTON TX
77081-
Property Information:
Primary Zone: 6408 RAPID TRANSIT-HIGH DENSITY
CLUC: 0007 RESIDENTIAL- CONDOMINIUM
Beds/Baths: 1/1
Floors: 0
Living Units: 1
Adj Sq Footage: 796
Lot Size: 0 SQ FT
Year Built: 2004
Legal Description: VUE AT BRICKELL CONDO UNIT 1111 UNDIV 0.2257100% INT IN COMMON ELEMENTS OFF REC 23102-262 OR 22937-4474 1204 2
Sale Information:
Sale O/R: 24696-1536
Sale Date: 6/2006
Sale Amount: $490,000
Assessment Information:*
Year: 2008 2007
Land Value: $0 $0
Building Value: $0 $0
Market Value: $330,170 $330,170
Assessed Value: $330,170 $330,170
Total Exemptions: $0 $0
Taxable Value: $330,170 $330,170
*The market and assessed values are accurately reflected.Information related to this property’s exemptions and taxable values are being updated as a result of the recent passage of Amendment One and will be available shortly.
Here’s my question, if this unit sells at 100K tomorrow
How long is it going to take Miami Dade to take the taxable value from $330,170 to $100,000.
From what I’m hearing, you can’t make any assumption that the taxable value will correlate to the purchase price and that really makes it hard to make an investment thesis.
When condos were selling for $0 in the previous bust, what were they getting taxed at…. any ideas?
Pissed your an amateur.
Ram, Gables, SB
Monthly HOAs run around 43-50 cents.
My exact $450 I got from this site but is quoted elsewhere for units with same square feet (someone could just call and verify. 796sq/ft * 50 cents is $398 and not $450 but I have SEEN worse)
The taxes see above. (http://www.miamidade.gov/PA/)
Pissed. What is the mill rate? Common what is it?
Look at assessed value and multiply. Investment or living there? I calculated investment for my $7500.
Prove me wrong.
I PREDICTED a drop to $5300, thoughts?
Ram, $1200 / month?
Are rentals going up or down? Thoughts?
Renting it 365 / year? No leeway for downtime? Reserving anything for minor repairs?
Ram $2000 for taxes?! Show me the money.
SB, So what are HOAs running per square foot since you say it is ridiculous.
JL look above
OK Ram, Gables, SB
Show me the money!
Pissed don’t bother, out of your league son.
Do NOT get me wrong guys, I’d LOVE to be proven wrong cause am sitting on a shit full cash and if you convince me I would be REAL happy, let’s just use real numbers instead of wishing numbers.
Millage? Appraised value ?(JL nailed it and I posted on it with a prediction of a 30% reduction in appraised value)
Are rents going down? (This is easy to check and I do know the answer to this one)
Your are assuming occupancy of 52 weeks?
–
Let’s start with that.
Then we can get into other numbers. How many times a year can you rent? What are the buildings finances like?
–
No need to even mention the economy, let’s make believe that all is well.
Hugo, I think your original post was right on. Then you assumed a 2% on the sale. See JL my comments above.
Tom? Your numbers? I know your thoughts and we seem to agree, but how do you see the numbers?
Finally before lights out here are my original numbers:
“I’ll answer my own question so you can criticize my analysis and hopefully I’ll learn something.
Assume a 30% decrease in taxes to $5300.
Assume renting it for $1050
Make/break point is 50K for me.”
My question was:
“Guess I’m in the minority. I see MUCH steeper drops.
Can someone here explain to me what significance there is what it previously sold for when money was monopoly money, no doc loans ,104% financing ruled the day, straw buyers everywhere, Just what significance?
NONE.
At 100K would this unit cash flow positive at current rentals with 20% down?
Maintenance at $450 (796sq feet)
Taxes $7550 year (based on similar) = $630
Rents are asking, ASKING $1275
–
Please explain to me, just how on earth $99K makes sense?”
–
My numbers still hold up RAM.
Your numbers work only if the following assumptions are true:
“Annual Revenue: +$14,400 (Rent @ $1,200/month)
Real Estate Taxes: -$2,000 ($100,000 @ 2%)”
Your wrong on the second and the first I’d like to hear more about in a market with much more supply than demand.
Again everybody, if I am wrong I will CELEBRATE!
Just show me where if that is the case.
RAM you forgot to factor in the tax’s you would have to pay on the rental income 1200 x 12=14400 x 30%=4320. Let be realistic and say you deduct a few grand that’s still over 3k in taxes that must be factored in.
Another thing to point out is yes it would be fair to calculate the property tax’s as mill rate times the price you paid which is about 2% however that’s not how it works nor will it ever be like that because the state couldn’t afford such a hit so the mill rate will be multiplied by the their “market value” which is over 300k.
A third point due to the over building rents will most definitely over the next couple of years go down due to the inventory.
I want prices to go up as I am losing and will continue to stand to loose a lot of money but I am calling it as it is really. Nothing is an investment now, you will loose. Will prices go much lower I doubt it, you have to factor in construction cost not only rental cost as must of you do. It just wont be a good investment for a long while until prices stablize and rental prices increase but to think prices of a unit like this will drop below 50k is insane despite the fact the cost/rent ratio doesnt work out.
Muir,
O.K. Let’s use your numbers:
Annual Revenue: +$12,600 ($1,050/month)
Real Estate Taxes: -$5,300 (using your 30% discount)
HOA Dues: -$5,400 (again your number -$450/month)
R.E. Tax Credit: +$1,590 (30% Tax Bracket on $5,300)
Depreciation Credit: +$1,463 ($100K for 20.5 years @ a 30% Tax Bracket)
NET: +$4,953 (4.95% return on full asking price of $100K).
The analysis goes for any rental property. Not just this condo.
Again, “I am not suggesting that this condo is a good investment. You need to take into consideration vacancy/occupancy, possible lower rents, HOA problems, repairs, headaches, etc.
All I wanted to convey is a complete financial picture of owning/investing in a rental property.”
RG – FYI the income taxes are paid not on total rental income but on the net after expenses. Moreover, construction costs will not be a price floor on existing home inventory, it will only prevent new construction from coming online. You are correct that govt will be slow to mark down the assessed values. There is a ton of inventory and it will take years to work through that inventory and so the bottom is a long ways off. I’d buy my rental condo at $200/s.f. this minute, $250/s.f. wouldn’t be bad either, but $300/s.f. would make me think that I could do better….
RAM – You are looking at cash flow. From a wealth accumulation standpoint and assuming you do not hold this asset until you die, you should not include the “Depreciation Credit” as an expense since it will be recaptured when sold so it is just a temporary thing. Moreover, the entire purchase price can not be the basis for this depreciation since the purchase price includes items that can not be depreciated such as land which reasonably would be 15%-25% of the purchase price (all condos have X% undivided interest in the common areas which includes an interest in the land). So, the return on a cash flow basis is an inflated return until the asset is sold. Other than that nuance, good analysis and good job.
Wow Renter Tom, you are really smart!
RAM you factor in the depreciation credit, but then you keep it as profit? Buddy you’ll be spending 1.5% on maintenance on that unit trust me. You can’t just pocket it or pretty soon you’ll be a slum lord. You will likely spend more than that. Also this unit is likely a TRASH OUT meaning the insides are gutted. Copper pipes and wiring likely stolen. So you’ll be investing quite a bit at the outset. Also, rents are headed down baby. If you think otherwise you’re out of your mind. $1/SF will be the norm in 1 year. How do I know this? They built 66% too many condos (they were all non-owner occupied), purely for SPECULATION. There aren’t enough people in Miami to actually rent all these condos. The city’s population is 409K and there are currently 25 thousand condos for sale. Think about it. There aren’t enough renters plain and simple. Prices WILL fall below construction costs.
Also keep in mind if you look at case shiller the price crash in Miami didn’t start until July/August of 2007 so this is only 1 year in. And housing in Miami is in infinitely better shape than condos and has only fallen 50% of the way. So what do you think will happen to condos?
I guess you missed the “dont flip out” part…
Thanks for providing nothing to help me learn more. If you dont think 5.5% in HOA fees is absurd, Ive got a bridge in Brooklyn to sell you. Hope you enjoy being your own biggest fan. Thank you very little.
SB
Can anyone provide a link detailing the past condo bust where condos were going for $0. This sounds quite amazing to me.
If it is a shortsale that is not approved they caould have listed it for $50.ooo for that matter,does not make any difference unless theres a written set price from the lender it is all sheer speculation.
Like many of these posters, I think taking the old school real estate investment approach makes sense.
However, like many have also pointed out, there are a TON of variables out there that make it hard to really forecast how low prices will go (global recession, tight credit markets, stock market down, rising unemployment, hurricanes, Florida losing its status as retirement capital, etc). Just like we way overshot the fundamental values on the upside, I think we’re likely to overshoot them on the downside, as well.
And based on RAM’s analysis, I don’t think it makes sense to buy this thing at $99k if you’re only getting a 4.95% return (with some big assumptions: you make enough money to get the tax benefits, there are no maintenance costs, no vacancies at all, you paid cash, taxes will go down, rents will not drop).
When you can get 5% guaranteed on an insured CD, why would anyone bother with an investment like this?
RAM, TOM thx, that’s what I am talking about with the numbers.
Guys, it works better if we all try to help each other with info.
Each of us might have some knowledge the others do not have.
I’m here because I am interested in buying not talking down Miami condos.
My uncertainty is when to do so.
RAM // Oct 8, 2008 at 11:54 pm
Muir,
O.K. Let’s use your numbers:
Annual Revenue: +$12,600 ($1,050/month)
Real Estate Taxes: -$5,300 (using your 30% discount)
HOA Dues: -$5,400 (again your number -$450/month)
R.E. Tax Credit: +$1,590 (30% Tax Bracket on $5,300)
Depreciation Credit: +$1,463 ($100K for 20.5 years @ a 30% Tax Bracket)
NET: +$4,953 (4.95% return on full asking price of $100K).
The analysis goes for any rental property. Not just this condo.
Again, “I am not suggesting that this condo is a good investment. You need to take into consideration vacancy/occupancy, possible lower rents, HOA problems, repairs, headaches, etc.
All I wanted to convey is a complete financial picture of owning/investing in a rental property.”
–
Renter Tom // Oct 9, 2008 at 12:05 am
RAM – You are looking at cash flow. From a wealth accumulation standpoint and assuming you do not hold this asset until you die, you should not include the “Depreciation Credit” as an expense since it will be recaptured when sold so it is just a temporary thing. Moreover, the entire purchase price can not be the basis for this depreciation since the purchase price includes items that can not be depreciated such as land which reasonably would be 15%-25% of the purchase price (all condos have X% undivided interest in the common areas which includes an interest in the land). So, the return on a cash flow basis is an inflated return until the asset is sold. Other than that nuance, good analysis and good job.
what your analysis is also leaving out is that this building is a toilet. I toured it in 2004 when it was brand new and hated it then. it has only gone downhill since. a friend who recently moved out tells horror stories of squatters occupying vacant units. and it is now surrounded by taller buildings on all sides, so there will be zero view. it is competing with The Club and The Sail for “Crappiest Condo near Brickell.”
On the tax front, I think the County is going to have a tough time with the comps on these properties to come up with the taxable values because they are forbidden by state law from including “distressed property sales” in thier evaluations. How many downtown condo sales are not “distressed” (ie. not short sales, foreclosures…etc)?
RG // Oct 8, 2008 at 11:45 pm
“I want prices to go up as I am losing and will continue to stand to loose a lot of money but I am calling it as it is really. Nothing is an investment now, you will loose. Will prices go much lower I doubt it, you have to factor in construction cost not only rental cost as must of you do. It just wont be a good investment for a long while until prices stablize and rental prices increase but to think prices of a unit like this will drop below 50k is insane despite the fact the cost/rent ratio doesnt work out.”
It is unfortunate that you are losing money, I gain nothing from your loss and your integrity is apparent in calling it like it is.
I was writing something long about construction costs and selling prices when I realized it wasn’t important, if they are in a position where they have to sell, they have to sell.
Finally thx on these 2 points:
“Another thing to point out is yes it would be fair to calculate the property tax’s as mill rate times the price you paid which is about 2% however that’s not how it works nor will it ever be like that because the state couldn’t afford such a hit so the mill rate will be multiplied by the their “market value” which is over 300k.
A third point due to the over building rents will most definitely over the next couple of years go down due to the inventory.”
In Palm Beach downtown condo rentals have gone down quite a bit. Different market same principle.
Tom (post # 20)
I hear what you’re saying man. I’m fine renting for the time being as well, but I’m kind of at a point in my life where I feel like I need to own my own home. I’ll be turning 30 in a few months, and I guess I have sort of a psychological desire to own my first place. I’ve been pretty dead set on this for a while now, but the more I think about, the more I realize I cant let my own impulses dictate this decision. I guess now it’s just a matter of waiting things out until the best deal comes along. Hopefully it’ll be sooner than later.
Shelly stated “Can anyone provide a link detailing the past condo bust where condos were going for $0? This sounds quite amazing to me.” It sounds quite amazing to me, too….. amazing BS. Who is going to back up JL’s statement? Are any of you doom and gloomers (who are likely rolling around in laughter and greenbacks right now) already standing in the free-condo line? I heard that Mercedes Benz is giving away S-Classes to anyone who can pay the gas-guzzler tax and sales tax. They just don’t want to keep holding on to those depreciating vehicles any longer.
In all seriousness, if condos on Brickell went for $0 in the last bust, and this RE/condo bust is considerably worse, then owners shouldn’t be giving them away for free. The seller should be paying the buyer to take it. So forget free condos, let’s get payed to own one. Okay, I wasn’t serious after all.
DJ – I’m renting at 1/2 price without the asset price decline or HOA worries….. It is a great deal. I’m saving a ton! If you include the asset price declines, I’d save enough for a free condo in 2-3 years.
In fact, I was really looking to buy before deciding to rent but couldn’t put a value on anything to make an offer because of the uncertainty. After getting over the “must own” mindset, I decided to rent and am very very happy! When I decide to move, I won’t have the burden and expense of selling….it is a hassle with showings (if you still live in it at the time) and of course the commission. I’ll just move out, have cleaning lady do the final cleaning, and be done….so simple. Renting is the way to go in this market!
Renters are laughing all the way to the bank.
Scratch the wall? Not my problem, I rent. Landlord will repaint after I more out. Fridge not working? Call the landlord, have it fixed. Poor quality cabinets? No need to call customer service/carpenter and complain, I’m out of there in 8 months, what do I care if the cabinets look like utter shit. Low water pressure in the shower? Call landlord and fix it. If it isn’t perfect I’ll just deal for 8 more months. CEILING CROOKED (NEW CONSTRUCTION QUALITY SUCKS ASS)? What do I care, it’s not noticible, its not mine, I freaking rent!!!!
Do you see why renting is fun?
GT3 // Oct 9, 2008 at 9:59 am
Shelly stated “Can anyone provide a link detailing the past condo bust where condos were going for $0? This sounds quite amazing to me.”
A little off topic isn’t it?
So, if in 05 I had told you that in 3 years 400K condos would be asking 100K, I would have been nuts?
Oh, hindsight is 20/20.
Well guess what, I sold Dec 04.
–
Why not try answering just what would be a good investment price for this condo.
–
The numbers point out that 100K is too high.
Of course, it’s a free market and someone will buy which is fine by me: prices went up a rung at a time and will climb down the same way.
I mean what are YOUR numbers? At what numbers do you make a return that you can live with?
–
Provide details and not what your wishing rents and costs:
1. appraised value?
2. millage?
3. rentals?
4. rentals going up or down?
5. HOA monthly assessments? (real numbers, not what makes sense)
–
Really I want sales, those are the new comps for me.
Renter Tom said: “DJ – I’m renting at 1/2 price without the asset price decline or HOA worries….. It is a great deal. I’m saving a ton! If you include the asset price declines, I’d save enough for a free condo in 2-3 years.”
The “Rah! Rah! Let’s Go Condos” crew will overlook the truth in your statement because “the truth” hurts (or kills) in this market. You use the words: “I’m renting”, “great deal”, “I’m saving”, and “I’d save” in four short sentences. These are foreign concepts to the “crew” and may be the primary reason for today’s reality. That, and we don’t need a 50-story “memorial” to a “developer-borrower” (wait until this designation becomes a standard description) on every corner.
You know what makes be really upset? There is a person I met who was telling me about their real estate troubles trying to get a short sale through the bank. This foreign couple is getting a divorce and had made a combined income of $300K-$400K. They HELOC’d and credit card debt to the hilt living a lifestyle of world travels and fine wine. This lady just kept rattling on telling me things she just shouldn’t have. Then I find out she has money hidden away (substantial money) which must be in a foreign account that she won’t access until after the short sale goes through so she is anxious (and surprisingly upset) for the bank to approve the short sale. I had to bit my tough listening to all this crap. They are going to stiff the banks for over $500K (I really don’t know the total other than that is the least amount). Meanwhile she drives around in her expensive BMW with prefectly manicured hands, etc. planning her next world trip! Unbelievable. It make me sick. I think this may amount to mortgage fraud or some other financial fraud since they must have had to fill out some forms regarding the short sale…… Hiding assets and then “bragging” about it is very very sickening.
You couldnt pay me to live in the future housing project called “Vue”. I value my life too much. Might as well call it Cabrini-Green.
Cabrini-Green
Composed of 10 sections, built over a thirty-year period, the last newly constucted in 1962. The construction reflected the “urban renewal” approach to United States city planning in the mid-twentieth century.
At first, the housing was integrated and many residents held jobs. This changed in the years after World War II, when the nearby factories that provided the neighborhood’s economic base closed and laid off thousands (sound familiar????) At the same time, the cash-strapped city began withdrawing crucial services like police patrols, transit services, and routine building maintenance (sound familiar???). Lawns were paved over to save on maintenance, failed lights were left for months, and apartments damaged by fire were simply boarded up instead of rehabilitated and reoccupied (already happening at ” Vue”). Later phases of public housing development (such as the Green Homes, the newest of the Cabrini-Green buildings) were built on extremely tight budgets and suffered from maintenance problems due to the low quality of construction (sound familiar?).
Residents lived with substantially subsidized rents (Vue will eventually become section 8 housing and people will buy the units to rent to people on welfare). However, many neglected their units and vandalized common areas both in and around the buildings. This behavior resulted in most law-abiding residents with any financial resources moving out, leaving behind the extremely poor, petty criminals, gang members, and drug dealers.
Unlike many of the city’s other public housing projects like Rockwell Gardens or Robert Taylor Homes, Cabrini Green was situated in an extremely affluent part of the city (so this can happen even in NICE AREAS).The poverty-stricken projects were actually constructed at the meeting point of Chicago’s two wealthiest neighborhoods, Lincoln Park and the Gold Coast. Less than a mile to the east sits Michigan Avenue with its high-end shopping and expensive housing (The future of Vue).
. The buildings’ proximity to these affluent areas made Cabrini-Green a lucrative site for illicit drug sales (this can’t happen in Miami because drugs are not a problem here, right???); in the absence of other employment opportunities, intense competition in this underground economy fostered gang formation and violence. Specific gangs ‘controlled’ individual buildings, and residents felt pressure to ally with these gangs in order to protect themselves from escalating violence.
During the worst years of Cabrini-Green’s problems, vandalism increased substantially. Gang members and miscreants covered interior walls with graffiti and damaged doors, windows, and elevators. Many residents urinated in the hallways which were rarely cleaned. Rat and cockroach infestations were commonplace, rotting garbage stacked up in clogged trash chutes (it once piled up to the 15th floor), and basic utilities (water, electricity, etc.) often malfunctioned and were left unrepaired. On the exterior, boarded-up windows, burned-out areas of the façade, and pavement instead of green space—all in the name of economizing on maintenance—created an atmosphere of neglect and decay. The high “open galleries” were enclosed with steel fencing the entire height of the building to prevent residents from throwing garbage over the edge, from falling, or from being thrown off (giving the visual appearance of a large prison tier, or animal cages, which further enraged community leaders).[6]
Mark here – I’ll leave you to do further research, but eventually Cabrini-Green became the murder epicenter of Chicago and the US. There were snipers that would kill police that came to investigate crimes so eventually it became Jungle Rule.
Have a nice day condo buyers.
Also, the peak of the violence was in the 70s and 80s only ten years after some of the newest construction. So if Vue was built in 2004 it has like 6 more years to go…
There are 31 Pending Sales right now at the Vue, 27 have closed this year. There are 323 units in the building, theres 122 current Foreclosures in the building. The even numbers face Brickell and have a premium over the odd number units that face the other side. I have had closings with financing in the building so its not only cash buyers like at the Jade. I think the location with Badrutts downstairs, Segafredo and Mary Brickell within walking distance make it great and affordable. Any of these units with 10K in them (renovate kitchen to stainless steel and granite countertops and hard flooring) look really nice. The lobby is actually very nice and if I was a young professional this would be a great building to live in. You willnot pay 5K in taxes for a 100K place, as more and more of thse comps come in at 100K you should pay $1800-2500 and you can contest your assesments with the deeds. My analysis points that the current prices do make sense as I always multiply the rent by 100 and if the asking pice is less than that then I run the numbers. So I take into consideration number of Pending Foreclosures and look at the whole pipeline rather than only take in Comparale Sales and NOI/Cap Rate Once the biulding sells most of the foreclosures the building starts turning over as every time an REO sells that condo association gets back any owed maintenance fees from 6 months Prior to the Sale Date. If you close Foreclosures you see how little the Bank actually nets, its pretty bad.
If this sells for 85K it probably owes 2007 and 2008 taxes plus it has to pay 5% commision, plus they pay for closing, plus they pay the outstanding maintenance fees due to get the estoppel letter. The Bank probably nets about 60K (not taking into consideration what they are spending in the Loss Mitigation Dept and legal fees for the Foreclosure, eviction costs, rekeying, property trash out) for this Ninja Loan they gave with probably zero down for $490K. Whsat I find the hardest to understand is not why someone would pay $490k for a 1 Bed at teh Vue (Since it is pretty obvious they were juicing it and walking away with cash at closing) but how could the banks be so careless in the lending. Now everyone asks why the economy is so bad and howcome their balance sheets are so toxic? These are prime examples.
so if one rule of thumb I used to hear before everything Brickell Condo went to hell was that a building with 20% of it’s units on the market was in a ‘distressed’ situation.
so what does this say when 38% of units at Vue are in FORECLOSURE????
and how many buildings in spitting distance of view are in the early stages of closings? (though not too many lights on at night in these.) not to mention how many sites within a 200 foot radius of view are now just breaking ground?
Wow. Years from now early 2000’s Miami will be a case study of how to screw up royale.
Renter Tom said: “They are going to stiff the banks for over $500K (I really don’t know the total other than that is the least amount). Meanwhile she drives around in her expensive BMW with prefectly manicured hands, etc. planning her next world trip! Unbelievable. It make me sick. I think this may amount to mortgage fraud or some other financial fraud since they must have had to fill out some forms regarding the short sale…… Hiding assets and then “bragging” about it is very very sickening.”
Like I posted, I was “victimized” by one of these alien frauds (FOUR $500K+ foreclosures in THREE MONTHS!). A real potentate! In the instance of this particular breed of scammer, it would be nice if the “bank” could forced these crooks into involuntary bankruptcy. They would be forced to list their assets with the Bankruptcy Court and, if they lied, subject to Five Years in a federal prison and seizure of the un-disclosed assets.
About the BMW, I’m “guessing” it’s a lease!
Great data Alejandro
Alejandro Diaz Bazan // Oct 9, 2008 at 11:54 am
“There are 31 Pending Sales right now at the Vue, 27 have closed this year. There are 323 units in the building, theres 122 current Foreclosures in the building. The even numbers face Brickell and have a premium over the odd number units that face the other side. I have had closings with financing in the building so its not only cash buyers like at the Jade. I think the location with Badrutts downstairs, Segafredo and Mary Brickell within walking distance make it great and affordable. Any of these units with 10K in them (renovate kitchen to stainless steel and granite countertops and hard flooring) look really nice. The lobby is actually very nice and if I was a young professional this would be a great building to live in. You willnot pay 5K in taxes for a 100K place, as more and more of thse comps come in at 100K you should pay $1800-2500 and you can contest your assesments with the deeds. My analysis points that the current prices do make sense as I always multiply the rent by 100 and if the asking pice is less than that then I run the numbers. ”
–
There’s agreement on taxes. But today, right now, they are $7500
I calculated a 30% decrease but long term, your number looks closer than my $5200.
Again, you are talking about a 66%-80% decrease in assessed value.
The other side of the coin though, rentals, I disagree.
Seems rentals are ready for a strong decrease.
I was using $1050 month. That seems real for what this building is. So, today you get your $1250. In 6 months? A year? Will you still get $1250?
If I move towards your number foe taxes and keep my rental then 70K seems make break.
Where do I report these people???
Sup Guys,
I was in Bombay and Goa having a jolly good time. Loved every minute of it. Cant wait to go back.
I read an article in a local Newspaper called “The Hindu” while I was there. Here is an exerpt of the Journalist’s coversation with his friend from Lehman Brothers. A brilliant article I might say.
For those who are not familiar with some of these Acronyms in the following article, here is the explanation:
1) IIM = Indian Institute of Management, something in the likes of a Harvard or Wharton MBA program
2) One Lakh = One Hundred Thousand
3) EMI = Equated or Equal or Easy Monthly Instalments
4) RBI = Reserve Bank of India
5) INR = Indian Rupee
The bursting of the speculative bubble in the U.S. housing market has
destroyed billions of dollars in investor wealth across the world,
crippled the banking system, expunged close to a million jobs…and
India has not been spared either. With banks failing by the day,
definitely, these are uncertain times for the financial services
industry. While many people who have lost their jobs are faced with
permanent shrinkage of their lifestyle, others in the industry are
going through the trauma of not knowing if and when their turn would
come. Who is to blame?
Flashback to year 2003:
Rohit (name changed to protect identity), a good friend of mine and
someone who was officially considered to be a genius with an IQ of
150+, graduated from one of the leading IIMs . Rohit managed to make it
into the New York Headquarters of the most sought after firm that had
arrived on campus for the first time — Lehman Brothers — a top U.S.
Investment Bank (then). On joining, he was assigned to Lehman’s
mortgage securities desk that dealt with Collateralised Debt
obligations (or CDOs).
Following is an extracted transcript of a chat session I had with
Rohit back in 2004:
Me: So man, you must feel like you are on top of the world.
Rohit: Yes dude, the job here is amazing, I get to interact with
people around the world, investment managers who want to invest
millions of dollars
Me: Great…so tell me something interesting. What’s your job all about?
Rohit: You know there is a great demand for American home loans, which
we buy from the U.S. banks. We then convert these into what is called
as CDOs (Collateralised Debt Obligations) . In plain English, this
refers to buying home loans that banks had already issued to
customers, cutting them into smaller pieces, packaging the pieces
based on return (interest rate), value, tenure (duration of the loans)
and selling them to investors across the world after giving it a fancy
name, such as “High Grade Structured Credit Enhanced Leverage Fund”.
Me: Wow! I would’ve never guessed that boring home loans could
transform into something that sounds so cool!
Rohit: Hahaha…actually we create multiple funds categorised based on
the nature of the CDO packages they contain and investors can buy
shares in any of these funds (almost like mutual funds…but called
Structured Investment Vehicles or SIVs)
Me: Dude, you make your job sound like a meat shop…chopping and
packaging. So, in effect when an investor purchases the CDOs (or the
fund containing the CDOs), he is expected to receive a share of the
monthly EMI paid by the actual guys who have taken the underlying home
loans?
Rohit: Exactly, the banks from whom we purchased these home loans send
us a monthly cheque, which we in turn distribute to the investors in
our funds
Me: Why do the banks sell these home loans to you guys?
Rohit: Because we allow them to keep a significant portion of the
interest rate charged on the home loans and we pay them upfront cash,
which they can use to issue more home loans. Otherwise home loans go
on for 20-30 years and it would take a long time for the bank to
recover its money.
Me: And, why does Lehman buy these loans?
Rohit: Because we get a fat commission when we convert the loans into
CDOs and sell it to investors.
Me: Who are these investors?
Rohit: They include everyone from pension funds in Japan to Life
Insurance companies in Finland.
Me: But tell me, why are these funds so interested in purchasing
American home loans?
Rohit: Well, these guys are typically interested in U.S. Govt. bonds
(considered to be the safest in the world). But unfortunately, Mr.
Alan Greenspan (head of Federal Reserve Bank, similar to RBI in India)
has reduced the interest rate to nearly 1 per cent to perk up the
economy after the dotcom crash 9/11attacks. This has left many funds
looking for alternative investments that can give them higher returns.
Home loans are ideal because they offer 4-6 per cent interest rate.
Me: Wait, aren’t home loans more risky than U.S Bonds?
Rohit: We have made home loans less risky now. In fact they have
become as safe as U.S Govt. bonds.
Me: What are you saying, man? What if the people who have taken these
underlying home loans default? Then the investors would stop getting
the EMIs, and their returns would take a hit. Wouldn’t it?
Rohit: Boss, may be some will default, but not definitely more than
2-3 per cent. Moreover, we have convinced AIG (a leading insurance
company) to insure our CDOs. This means that even if there were big
defaults,the insurance company would compensate the investors.
Me: that’s amazing. What are these insurances called?
Rohit: Credit Default Swaps.
Me: Definitely you guys are the most creative when it comes to naming.
Rohit: Thanks.
Me: And why has this AIG guy insured millions of home loans?
Rohit: See man, the logic is simple. Home prices in the U.S always go
up. In fact over the last three years alone they have doubled. So even
if someone defaults paying the EMI, the home can be seized and sold
for a much higher price. So there is no risk. Insurance companies are
actually competing to insure this, because they can earn risk-free
premiums.
Me: No wonder investment managers from all over the world want to put
money in your CDOs.
*A global financial cobweb started getting built around the American
dream of purchasing a home and it rested on the assumption that “home
prices will keep rising”. As demand for the CDOs started growing
across the global investment community, the investment bankers (like
Lehman) who were meant to sell these instruments also started
investing a significant portion of their own capital in these. I guess
after selling the story to the whole world, they themselves got sold
on the seemingly foolproof concept. Gradually the markets for CDOs and
Credit Default Swaps started expanding with traders and investors
buying and selling these as if they were shares of a company, happily
forgetting the underlying people behind these products who took the
home loans in the first place and on whose capacity to repay the
loans, the safety of these products depended.
As Wall Street firms like Lehman were churning more and more home
loans into CDOs and selling them or investing their own money, there
was a pressure on the banks to issue more loans so that they can be
sold to the Wall Street firms in return for a commission. Slowly banks
started lowering the credit quality (qualification criteria) for
availing a home loan and aggressively used agents to source new loans.
This slippery slope went to such an extent that in 2005, almost anyone
in the U.S could buy a home worth $100,000 (45 lakhs INR) or more
without income proof, without other assets, without credit history,
sometimes even without a proper job. These loans were called NINA —
“no income no assets”.
The U.S. housing market went into a classic speculative bubble. Home
loans were easy to get, so more and more people were buying houses.
The increased demand for houses caused the price to increase. The
rising prices created even more demand, as people started to look at
homes as investments — investments that never went down in value.
When I touched base with my friend Rohit in late 2005, he was on cloud
nine. During the previous one year, he managed to buy a home in Long
Island (a posh area near New York City) worth almost a million
dollars, and got himself a Mercedes. All this was interesting to hear,
but what shocked me was that although he was earning close to $20,000
a month (that is what CEOs in India make) he was not able to save
anything because his lifestyle expenses where growing faster than his
salary.
Unheeded signals
In late 2006, Mortgage lenders noticed something that they’d almost
never seen before. People would choose a house, sign all the mortgage
papers, and then default on their very first payment. Although no one
could really hear it, that was probably the moment when one of the
biggest speculative bubbles in American history popped. Another factor
that lead to the burst of the housing bubble was the rise in interest
rates from 2004-2006. Many people had taken variable rate home loans
that started getting reset to higher rates, which in turn meant higher
EMIs that borrowers had not planned for.
The problem was that once property values starting going down, it set
off a reverse chain reaction, the opposite of what had been happening
in the bubble. As more people defaulted, more houses came on the
market. With no buyers, prices went even further down.
In early 2007, as prices began their plunge, alarm bells started going
off across mortgage-backed securities desks all over Wall Street. The
people on Wall Street, like Rohit, started getting calls from
investors about not getting their interest payments that were due.
Wall Street firms stopped buying home loans from the local banks. This
had a devastating effect on particularly the small banks and finance
companies, which had borrowed money from larger banks to issue more
home loans thinking they could sell these loans to Wall Street firms
like Lehman and make money.
Everyone got into a mad scramble to seize and sell the homes in order
to get back at least some of the money. But there were just not enough
buyers. The guys who had insured these loans thinking they had near
zero risk (e.g. AIG) could not fulfil the unexpectedly huge number of
claims. The best part was that since these insurance policies (credit
default swaps) could themselves be traded, multiple people had bought
and sold them, and it became so tough to even trace who was supposed
to compensate for the loss.
The global financial cobweb built around mortgages is on the brink of
collapse. Firms, large and small, some young some as old as a 100
years have crumbled as a result of suing each other over the dwindling
asset values. Lehman’s India operations, that employed over a thousand
staff, is up for sale and many of the employees have been asked to
leave. The Indian stock market has crashed almost 50 per cent from its
high (and so have markets around the world) as the Wall Street giants
sold their investments in the country in an effort to salvage whatever
is good in order to make up for the mortgage related loss. Hedge
funds, pension funds, insurance companies all over the world have lost
billions in investor’s money. Many Indian B-School graduates with PPOs
(pre-placement offers) in the financial sector (India and abroad) have
either received an annulment or indefinite postponement of joining
dates. IT firms that built and maintained software for the U.S.
mortgage industry or the related Investment Banks, have shut down
their business units, laid-off people or transferred them to other
verticals.
Fragile system
For all the hoopla over the sharp and sophisticated people on Wall
Street, the current financial crisis has exposed the fragility of the
system. Wall Street is blaming the entire episode on people who could
not repay their home loans. But the reality seems to point towards the
stupidity of people who lent all this money, financial institutions
that built fancy derivative packages and in effect facilitated
billions in trading and investments in these fragile low quality
loans.
The U.S. Govt is planning to grant 700 billion dollars to the Wall
Street firms to compensate the financial speculators for the money
that they have lost. Isn’t this like rewarding greed and stupidity?
The head of a leading Investment Bank has stated, “This is necessary
to sustain financial ingenuity. We don’t want to spend this money on
ourselves. We just want this money to go into the market so that we
can carry on trading complex securities, borrowing and lending
money.” (Yeah…right, so that one can act as if nothing had happened
without analysing too much into it). The real question is: Who is
going to compensate the common investors across the world who have
lost their wealth in the resultant market meltdown? (either directly
or through pension funds).
After being unreachable for a month now, finally I heard back from my
pal, Rohit, saying he is back in India to take a break from the roller
coaster ride that he had lived through. After Lehman’s collapse he has
lost his job and probably the house that he had bought by taking a
hefty loan. I really don’t know whether to feel happy for him, for
getting an opportunity to learn a lesson or two from the experience or
to feel sad for him for losing his job. May be I’ll get a better sense
of things once I meet him next week,
The Smart Money was spot on the money at $125.00 per square foot. How many crazies on here said that The Ace was crazy.
Well who’s crazy now!
Keep yer powder dry there will be a flood of Condo’s at the $125.00 per square foot in the not to distant future.
The Smart Money
People have to understand the tough psychology involved here for an owner to price their units to sell in this market. By doing so, many owners now would have to admit to themselves that they are 3x the fool on the property.
1) Fool move#1- Not reassigning your condo contract early on to somebody else for a possible small profit/loss or break even when it seemed the market was turning.
2) Fool move #2- Closing on the condo thinking that by doing so, you could do better than receive your 5% deposit back while forfeiting the other 15% by not closing.
3) Fool move #3- Not selling soon after closing thinking it couldn’t go down more than 20% of your closing purchase price.
It’s extremely tough admitting you f’ed up 3x on one deal.
This puzzles me…A unit at Emerald at Brickell hit MLS a day or two ago:
Unit 1607 1/1 listed at 700K and 733 HOA about 863 $/SF or so. WTF! Is this person mad? Why would a RE Agent even entertain this listing at this day and age???
JL – As I previously posted people are psychologically anchored to the “lottery ticket” price of their condos then ever before, the denial is uber strong.
The capitulation in home prices has just begun……..
JL said: “People have to understand the tough psychology involved here for an owner to price their units to sell in this market. By doing so, many owners now would have to admit to themselves that they are 3x the fool on the property.
1) Fool move#1- Not reassigning your condo contract early on to somebody else for a possible small profit/loss or break even when it seemed the market was turning.
2) Fool move #2- Closing on the condo thinking that by doing so, you could do better than receive your 5% deposit back while forfeiting the other 15% by not closing.
3) Fool move #3- Not selling soon after closing thinking it couldn’t go down more than 20% of your closing purchase price.”
Your “FOOL MOVES” #2 and #3 are precisely that. You are equally dead from being hit by “falling knives” no matter the greedy motivation you had. You are definitely “stupider” if you “closed” hoping for the best!
Your “FOOL MOVE #1”, in most cases, was a FRAUD perpentrated on you as a Buyer by the “Developer/Borrower”. They would NOT LET YOU SELL OR, IN ANY WAY, TRANSFER “YOUR” CONTRACT. I wanted to dump a pair of losers bought in 2005 (for a “REAL” reason) in 2006 for a 50% deposit LOSS and was basically told I would be sued and would lose the entire 100% if I even made a proposal to that effect. When they finally opened a “re-sale” program, they would not list for less that 2005 price paid and almost 8%.
Think this is bad? You should see the 900 Biscayne, Met 1, etc. contracts. It is “close or lose 100%”. I have even heard of Cornerstone’s lawyers sending out letters saying: “Close or else we will charge you, or sue you for, liquidated damages of $100+ PER DAY! (A month later, they voluntarily gave the sh*t-hole project back to the bank!)
One thing that I haven’t heard about anywhere in the media is that fact that stocks are mostly owned by older people, that is older people (those nearing and those in retirement) own a very high proportion of the total stocks outstanding compared to the 45 and under crowd. Why, well they are the ones with accumulated assets. Hence the recent stock market declines are going to hit the older population the hardest and we’re seeing that decline cause old people to bail out of the stock market to preserve their wealth which is causing a further decline. Hence, I think the market is going to get oversold because of this disproportionate ownership of stocks by old people who don’t have the buy and hold outlook of 20-30 years. Just a thought on who owns what and the psychology behind it. The declines to a 30 year old is a worry but to a 65 year old it is a true panic.
interesting commentary on the rental market here:
just saw a 2B/B unit I was looking at in 2004 (unit was brand new at the time and had never been lived in) and was priced at $1900 (I offered $1800 and they wouldn’t budge) now on the market for $1500. (and I bet I could get them down to $1250 today!)
Th Bank just approved unit 505 of Loft Downtown @ $110,000 . Still looking for a buyer that close before October 23. This will be the lowest sell in this building.
Thanks Mark.
Is already on the MLS. Is been there for a while for $130,000 and when the bank finally approved the buyer couldn’t get financing. So now the bank went down to $110,000 in order to close on or before Oct 23 or there is a penlty to be paid.
Renter Tom said: “Hence, I think the market is going to get oversold because of this disproportionate ownership of stocks by old people who don’t have the buy and hold outlook of 20-30 years. Just a thought on who owns what and the psychology behind it.”
The psychology may be: An Obama – Pelosi – Reid Market may take to Dow back to 1,000. You only think the market is bad now. It’s currently being driven by million-share sales by mutual funds because of investor redemptions. AThe big dose of socialism doesn’t work – ask the Japanese (a 35,000 Nikkei in early-1990’s. Never saw 20,000 again.)
There is a foreclosure coming up at Aqua. A large 4,000 square foot townhouse for 200 dollars a square foot. Also I heard about a view available on the beach for same price per square foot. People appear to be losing their jobs rather quickly and the money they have in the condo they cannot pull out.
Is there anywhere that you can view all of the foreclosure listings?
Listen, the rents at vue will eventually reach the level that section 8 housing government vouchers pay? I think it’s $800/month for a one bedroom. hope you like the “vue” of getting stabbed in the eye and heart by a lil’ wayne look alike.
section 8 voucher program (aka the future of “vue”)
Under the voucher program, individuals or families with a voucher find and lease a unit (either within a specified complex or in the private sector) and pay a portion of the rent (based on income, but generally no more than 30% of the family’s income). The PHA pays the landlord the remainder of the rent, subject to a cap referred to as “Fair Market Rent” (FMR) which is determined by HUD. FMR is determined by several factors, including:
the geographic area (city or county) where the unit is located (generally, a unit in a metropolitan area will have a higher FMR),
the unit size (in terms of the number of bedrooms; generally, the more bedrooms the higher the FMR, while a studio apartment would be at the low end), and
whether the owner or tenant will pay utilities (generally, FMR is higher for units where the owner pays utilities).
The landlord cannot charge a Section 8 tenant more than FMR, even if the landlord does so for non-Section 8 tenants in similar units.
In addition, landlords, though required to meet fair housing laws, are not required to participate in the Section 8 program. As a result, some landlords will not accept a Section 8 tenant. This can be attributed to such factors as:
not wanting the government involved in their business, such as having a full inspection of their premises for HUD’s Housing Quality Standards (HQS) and the possible remediations required[1],
fear that a Section 8 tenant will not properly maintain the premises,
a desire to charge a rent for the unit above FMR,
unwillingness to initiate judicial action for eviction of a tenant (HUD does not permit a landlord to change the lock or cut off utilities as a means of evicting a Section 8 tenant, even when state law does permit such).[citation needed].
However, other landlords willingly accept Section 8 tenants, due to:
a large available pool of potential renters (the waiting list for new Section 8 tenants is usually very long, see below),
generally prompt regular payments from the PHA for its share of the rent, and/or
a perceived higher quality of tenants, since a tenant can be permanently removed from the Section 8 program if s/he damages the rental unit and/or fails to pay his/her share of the rent.
Whether voucher or project-based, all subsidized units must meet HQS, thus ensuring that the family has a healthy and safe place to live. This improvement in the housing stock is an important by-product of this program, both for the individual families and for the larger goal of community development.
In many localities, the PHA waiting lists for Section 8 vouchers may be thousands of families long, waits of three to five years to access vouchers is common, and many lists are closed to new applicants.
Yeah Yeah Yeah Yeah
Miami, uh, uh
Southbeach, bringin the heat, uh
Haha, can y’all feel that
Can y’all feel that
Jig it out, uh
Here I am in the place where I come let go
In Miami the base and the sunset low
Everyday like a mardi gras everybody party all day
No work all play okay
So we sip a little something leave the rest to spill
Bein’ jolly at the bar running up a high hill
Nothin less than nil, we’re addressed to kill
Everytime the ladies pass, they be like (Hi Will)
Can y’all feel me, all ages and races
Real sweet faces
Every different nation, Spanish, Haitian, Indian, Jamaican
Black, White, Cuban, and Asian
I only came for two days of playing
But every time I come I always wind up staying
This the type of town I could spend a few days in
Miami the city that keeps the roof blazing
Party in the city where the heat is on
All night on the beach till the break of dawn
Welcome to Miami (bienvenido a Miami)
Bouncing in the club where the heat is on
All night on the beach till the break of dawn
I’m going to Miami
Welcome to Miami
Is it me or is the new AJ crazier and brokier?
Muir,
I was using $1,000 a month for a one bedroom at the Vue as my figure, which these units with upgraded kitchens to stainless steel and ceramic or wood floors would easily get occupied with a small vacancy rate at $1000 a month. I have been at the Vue at night and there is a lot of activity with Badrutts next door, mary Brickell Village and Segafredo. Anyone who actually lives in the building can start to see its turning around, there is a valet now and you see much activity at night. I think it looks and feels like a great building for young professionals, you can walk to work and to entertainment and $1000 a month is affordable to live in a nice one bedroom in the City, especially if you have to drive to Kendall from Brickell during rush hour, you would make up the difference in gas not to mention the amount of wasted hours you would actually loose on the drive. I live in the Grove and I always drive a couple of times a week to go to mary Brickell for dinner or to Segafredo, I would like to have access to all these within walking distance. While Brickell 3 years ago was regarded as ultra luxury thanks to this ridiculous construction boom it has become a real city where you can walk to work and walk to entertainment
Thanks for the info Alejandro.
Ok, I’ll revise upwards to 65K-70K as logical.
You are at 85K.
After today though, with the Market tumbling and the MSM using the word “crash” in prime time TV, it would seem that my 50K makes sense.
If things get worse, by the by, look over IMF report today, then I revise downwards.
Someone wanted to see condos for close to 0.
They may yet see something close to that, but there is no telling.
If we go hyper-inflation then a 1/1 in the view will sell for 1 mil (but a gallon of milk will cost $100)
–
Some people REALLY hate the building (besides Mark)
I’ve never walked inside of it or really looked at it.
You mentioned some scary numbers: “There are 31 Pending Sales right now at the Vue, 27 have closed this year. There are 323 units in the building, theres 122 current Foreclosures in the building. The even numbers face Brickell and have a premium over the odd number units that face the other side. I have had closings….”
How will this effect surrounding buildings, Emerald, Jade, etc…
Toms post #67 is the same buzz happening all over the internet. When people liquidate their stocks, what are they going to do with that money? Re-Invest in plunging commodities? Keep it under the mattress and lose it to inflation? Buy a hard and tangible asset like RE? What do you guys think? I think buying up RE outright with all cash and renting might get you the same returns as leaving the money in a CD. The pool of renters is swelling like a tidal wave and will remain so for the next 3 years due to squeaky tight credit. But ofcourse this is not for everyone. If someone does not have a stomach for being a landlord, he should not get into this.
Lot of smart guys seem have joined this blog. OK, can someone answer this?
The Universe is always a zero sum game. A loss somewhere is a gain elsewhere. So what happened to the Trillions of Dollars that were robbed from the investment firms all over the World from 2003 to 2007 who bought the dubious mortgage backed securities? All those who sold their props between 2003 and 2006 should be the beneficiaries of all that cash. Where is that cash now? What happened to it? Was it ploughed back into the RE market or invested in stocks, commodities?
Was that the same cash responsible for DOW to climb to an all time high of 14,000 in October 2007?
AJ – There are tons of better real estate investments than these Miami overpriced condos. You’re much better off investing in an apartment complex than owning a condo and being a landlord. Right now, gold is still seeing a flight to preserve wealth speculation when you compare its % move to other metals. India is getting slammed so they won’t be buying up a lot of gold like they did. Cash or treasuries is where people are keeping their money for the 3%-5% guaranteed return. Makes sense. There seems to be a comprehensive deleveraging of all assets. The last thing I would want to get stuck with is a declining illiquid asset with no buyers like a Miami condo which is not on illiquid but has very high transaction costs and very high holding costs. People need cash so they are cashing out what is easiest to sell….stocks being one of them both for cash and second for wealth protection. The old people are bailing big time with a click of a mouse (well for those that can operate a computer)….
The Universe is always a zero sum game.
That doesn’t apply. If your reserve requirements are low the money multiplier is high. Hence $1 becomes $40 in lending power….. Simple banking economics….which is why no bank can survive a run on the bank.
However, we are seeing runs on mutual funds, hedge funds, whatever so there are tons of sellers and not a lot of buyers (afterall who has the cash after those “investment” condos bleed cash). Just like housing, there are more sellers than buyers at the moment so the only way to attract a buyer is to lower the price and that is what is happening at the moment. Am I worried? Nope, not really since the price today will not be the price in 20 years. I am concerned however….on how it affects growth going forward and of course the human suffering that this will all cause. I hope those irresponsible people who caused this realize that people will die because of this…..in poor countries thousands if not hundreds of thousands will die of starvation, poor nutrition, etc. Very sad and we all have a responsibility to conduct ourselves ethically since when we don’t other get hurt.
The good news is, as a renter, I can sleep worry free all night long……. 🙂 And I can always buy later when I want to, unlike people who own now and are trying to sell.
AJ physics is a zero-sum game in real-time. Macro-economics does not work in real time and what you are seeing right now might be the zero summing taking place on a macro level.
You ask the question what happened to the trillions of dollars that were “lost” by Investment Banks or maybe it can be asked what happened to the trillion+ recent “loss” of equity in the Stock market or housing market
What if you are looking at it all wrong? What if leverage and financial engineering for the past 7 years made it look like we had trillions of gains in housing and stocks and banks, when in fact the emperor had no clothes and right now, we are seeing that?
Is there really a “loss” if the temporary gain was based on a fabrication and illusion? Imagine the SEC allowed 40:1 overnight leverage for stocks… guess what, the market would go from 8,000 to 80,000 pretty fast. But then let’s say they brought the leverage back to 2:1. The 80,000 would come right back down to 8,000. Going from 80,000 to 8,000… could you say anything was really lost or can you say the gain was never real and the “loss” is the market taking valuation back to reality.. ie. taking it back to a zero sum game? Is the Dow going from 14,000 to 8,600 a “loss” or better described as going to a valuation for companies when institutional leverage is brought back to normal.
Not that long ago, if you went to a bank and tried to get a loan, they would assess you, your needs, your history and your ability to pay and they would loan you a maximum of 1 unit equal to what you could pay back. ie. if you are worth 1 unit, you would get loaned 1 unit keeping things in a zero sum game.
Somewhere along the line, a person that was worth 1 unit was allowed to borrow 2 units and near the end, people that were worth 0 units were allowed to borrow 5 units. All the while through financial engineering and obfuscation it appeared that banks were generally still loaning 1 to 1.
Now what’s happening is that every institution is being called out on their books. You can’t tell me you are 1:1, you have to prove in the marketplace that you are 1:1. And fair or not, a lot of institutions at this point are holding things that the market is valuing way less than 1:1.
Miami condos… were they really worth what they were selling at 3 years ago or were they artificially propped up by free money loans and now the zero sum game is happening? Think about that.
It really is simple. Say I bought a condo for $500K in 2004 and in 2005 I say it is worth $900K and try to sell it for that. If someone buys it for $900K then I now have that $900K but if no one buys it for that price and the only offer is for $520K…then where did the $380K go? Nowhere, it never existed except in my mind.
Likewise, a share of GE last month is pretty much the same thing now but there are just not a lot of people out there who want to buy it, there is not a big market for it at the present. Big deal if you weren’t going to sell it right then what do you care what people are willing to buy and sell it at right now? Likewise you can’t really say a company is worth the last sale price multiplied by the number of outstanding shares (the company market cap). You can’t value an entire company on the spot price of one share bought and sold at the margin….I guarantee you that if all the shares came on the market all at once the real market cap would be substantially lower.
You must always look at the underlying asset/value of your investments, not the last market price at the margin. Again, if you buy quality assets, then sit back and relax.
There is another reason Miami is not selling….. In my Humble and Ignorant Opinion
I recently visited Miami with a view to purchase, however, albeit on short notice, out of 4 real-estate agents, not 1 would show me a property ‘of the cuff’. Given sellers are so desperate, why is it you need to book an appointment 4 days in advance? Why can you only see properties on a Saturday? Why are the agencies closed on the weekends? Why do the agents charge 6%????!!!??? Do they have post boom arrogance?
Obviously im from a different world where agents show you properties the same day, where commission is 2% where you don’t need an appointment, and that’s in a market that booming. For instance, you can ask the doorman which apartments are for sale and not only will he tell you, he will give you the keys to have a look when you walk in off the street…
BTW, i dont include Lucus in this who was more then willing to help, however, he was to busy with other clients, maybe because he is the only decent realtor in Miami? The others are so depressed they cant even be bothered to show you anything!
From what i saw in my few days there, lots of empty buildings, way over prices and no one making an effort to sell. Out of 3 properties i wanted to see – the realtors listing them refused and tried to show me other properties if I waited a week!
Anyway, glad i didn’t invest, i feel terrible for the owners, but your economy is in dire straights. It could be years before you get the investors back – thats assuming prices are reasonable, real-estate agents actually do their job and the economy bounces back – physiologically, its a mess and will need years of therapy…..
If I was selling, id do it myself and not list it with anyone, agents are not worth 0.5% let alone 6%!
P.S if you want foriegn investors to buy second homes – push south beach propeties, nothing else looked interesting
I dont know how relaxed Id be to pick up stock right now, after Lehman brought zero into the equation it really reminded me that you can only loose 100%. I really thought it was a goode deal at $3.60 the Friday before it went bankrupt. Everyone was expecting a market rally after the bailout, then nothing, everyone was expecting a market rally after the Fed rate cut, then again nothing. Can you imagine what it would do to unemployement ig General Motors or Ford go down. The Volatility index is in historical highs and the market has chrashed, every time I turn on the News I only see Disaster on Wall St and How is it going to affect you and a bunch of talk hosts criticizing the greed of Wall St.
Plus the FDIC will need and will get a bailout when more small to mid size banks collapse, that is one thing that the govt cannot let happen in the US, bank deposits need to be covered
AJ, what are investors putting money into? Physical gold you dimwit: http://www.ft.com/cms/s/0/8de8c988-90d1-11dd-8abb-0000779fd18c.html
NOT OVERPRICED MIAMI HOUSING PROJECTS
Buy stocks now. The market is oversold and there will be a huge reversal on options expiration week. If you want a good buy and hold investments now is the time to buy Ford stock. Buy when the streets are red with blood.
Also, the market is way oversold in the near term. In the long term the market is going down further, but expect to see ford at $35/share by 2015 if they don’t go bankrupt (and I don’t think the govt will allow that).
Hey RT, what I find amazing is AJ’s ability to rationalize his dumb mistake. He refuses to tell us the price/sf he bought at now because he doesn’t want to be made to look a fool. Of course he’ll eventually reveal to us what an astute investor he is in the future once he is sure prices bottomed. I’m sure he’ll then say “I bought at $125/sf”. Yeah right!!! What building is he even in? Plaza? I’m going to check sales history, I’m sure recent sales are already lower than what he paid. Good thing all RE transactions are public!
There will be a reversal next week….but the response to GE coming inline makes me less sure. In this case I wouldn’t recommend knife catching, but if ford falls to $1-1.5/share then I’m buying.
Also, I’m buying AUY (been buying for a while). If I lose money I’ll admit to it unlike AJ.
The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity where excessive leveraging and bubbles were not limited to housing in the U.S. but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: an housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.
Translation to AJ: buy Miami real estate
German forces have invaded Poland and its planes have bombed Polish cities, including the capital, Warsaw.
The attack comes without any warning or declaration of war. Britain and France have mobilised their forces and are preparing to wage war on Germany for the second time this century.
Translation to Polish AJ of 1939: buy Polish real estate
I have been looking at Ford for a while now…If it goes anywhere near $1 I’m in!
Now that I have some spare cash, since the Miami condo purchase is on hold for a while.
Dubai Dude: How are things in Dubai? I heard that the housing bubble there is going to make the Miami bubble look like a minor correction.
About the stock market, it is going to get worse before it gets better. There is a lot of money on the sidelines and the rebound will be HUGE. We will probably set a one day record for number of points gained. Then it will go down again and slowly come up over the years.
I would not touch Ford, GM with a 10 foot pole. They are more toxic than the sub-prime mortgates issues in Miami to starbucks employees.
If you must put your money into the stock market, go with companies that have solid earnings/revenue like GE, AAPL, MSFT, WalMart, etc.
AJ (Post #82): Miami has a net population loss. So there will NOT be a flood of people waiting to rent. People who want to rent are already renting. People who cant afford to live here are leaving for cheaper places up north.
About buying it outright and renting to make money vs putting it in a CD….that is incorrect. Given the current property tax, insurance rates, HOA, renting out a condo will result in a loss. You will be in the red every month. The risk of “assesments” is also high given the high level of empty condos that dont pay HOA fees.
The days of buying real-estate as investment are over. The party ended in 2005.
With the stock market bust of 2000-2001 and now this bust in 2008, we are going to lose an entire generation of investors. I know people who have been wiped out by this mess. I will be putting more money in my savings account than I will be putting in the stock market. Actually that is what the country needs right now….people who save their money.
Alejandro Diaz Bazan:
I would like to talk to you about REO properties. where can I reach you?
JL,
Spot on. Zero Sum is a concept applicable in Physics, not Wall st.
In any case, I am happy when I see the Dow, Hang Seng, FTSE, Sensex, Nikkei etc get cut in half. This concept of getting something for nothing has to change.
My question, how come smart people defend the practice of running up share prices based only on a companies ability to produce future profits and dividends and nothing to do with current ground realities? It is the same as running up RE prices expecting a furure increase in housing prices.
Those who invested in oil when it was $140 or $120 or $100 are getting pasted. Those who are investing in Gold will get pasted too.
Only two things in the world matter to people. Food and shelter. Everything else is a speculation.
By the way, I am planning to securitize the ability of a country to produce the food grains and meat. I am starting an exchange soon. Any Takers?
carbonblackcab – This multiple asset deflation is taking its toll. What asset is safe? ALPACAS!!! I hear you can fit them with little booties to prevent the neighbors below from complaining. You can also teach them to be toilet trained like those cats. They fit perfectly in those studios and one bedroom condos….and if you get one of those three bedroom condos you can legally label them and their wool as “range free”. They are great to snuggle up to in the cold winter (no need for heat) and if it gets really cold you can pull out your light saber ala Star Wars V and crawl inside to prevent freezing to death just in case. They also look great in bonnets.
Other than Alpacas and FDIC insured cash/treasuries I’m still looking…..
Back on topic – anyone know what the actual HOA dues are for a 1br at the Vue? I see ones listed for $450/mo. and others around the $700/mo. mark. Wondering if they jacked HOA dues recently due to all the non-paying units…
What?!!
No takers on the 99K condo?!!
Shame on all of you!
Muir – The apalcas produce softer wool when they have direct ocean views….. so this unit would just make for a better apalca slaughter house then alpalca farm….hopefully it has restaurant grade appliances to handle all that apalca meat!
🙂
Awesome Tom!
Okay AJ, you already bought RE months ago so you WERE SCREWED. I’ve been buying gold for years. It’s up 22% this year. SO WHO’S DUMB?
Agriculture, energy, etc will be back with a vengence. Trust me. The amount of money base we are creating now is insane. INSANE inflation is coming.
Treasuries down even when market is down for the last 3 days, what does that tell you?
ford is completely different than GM. GM is a finance company. Ford still makes cars. See ford fiesta ford kuga ford mondeo. Fiesta gets 56 mpg on gas alone. That’s better than the prius and it will cost as much as a smart car (which gets like 35 mpg). Ford will be back.
great now we have Mark (not zilbert) trying to convince us to buy ford stock hahaha. what happened your real estate gig finished? I would buy anything but stock or hold cash, huge inflation is coming so it will all be worth nothing, maybe real estate wont be such a bad choice. you gotta buy something gold, land,etc. cause in 3 yrs. the dollar of today will be worthless.
If there is inflation stocks perform poorly, but they do no become worthless. Stocks are a portion of a company.
Ford stock will perform better than Miami RE. I just bought 10K shares at 1.87. That’s a 4th of a position. If it goes lower I buy another fourth. Also, I am telling you what I am doing not to convince you but to inform you. That way if I’m right, you’ll know (and we already know AJ is wrong).
AJ
with all due respect, please take an introductory finance class.
Mark (Not Zilbert) // Oct 10, 2008 at 12:37 pm
… I’ve been buying gold for years. It’s up 22% this year. …
Agriculture, energy, etc will be back with a vengence. Trust me. The amount of money base we are creating now is insane. INSANE inflation is coming.
Treasuries down even when market is down for the last 3 days, what does that tell you?
—
raffi // Oct 10, 2008 at 12:45 pm
… I would buy anything but stock or hold cash, huge inflation is coming so it will all be worth nothing, maybe real estate wont be such a bad choice. you gotta buy something gold, land,etc. cause in 3 yrs. the dollar of today will be worthless.
—
—
Humor me, aren’t you both saying the same thing and arguing only about what to do about it?
If I were not for the possibility that gold could be declared illegal for financial transactions, I’d buy more.
Keep thinking about 007s’ Goldfinger and his smuggling gold cappers (youngsters here would not even get it)
Second point.
I do not doubt that hyper-inflation is a possibility (see post #14, my own)
Yet, I’d like to time this right. Deflation could be around for a while.
Whoever asked about the $0 condo may get to see something close as we head into a strong recession/depression and few can afford taxes/HOA fees.
THEN massive inflation.
Could be the squeeze play that take most out.
—
Thoughts?
Back to “condos”! The following opinion piece showed up in today’s Miami Herald, submitted by Ricardo Wolf of Wolf Intl. Realty. I don’t agree with the “nanny state” approach to HOAs.
http://www.miamiherald.com/opinion/letters/story/720265.html
The interesting portion of the article reads:
The next shoe to drop in real estate
A significant issue is unraveling in today’s world of real estate that could bring the U.S. real estate market, along with the insurance and banking industries and what’s left of our economy, to its knees.
“Today’s most alarming issue is no longer units being foreclosed on but rather condominium and homeowner associations going broke. A growing number of condo associations are being faced with 30-60 percent in defaults on monthly association fees. For the most part, these units are all headed toward being foreclosed on by lenders. However, lenders are successfully dodging the huge expense of association fees, property taxes and other related costs of ownership by not foreclosing on nonperforming loans for periods of 12 to 18 months.
Some owners are living in their units without paying their mortgage, association fees, assessments or property taxes. This burden has been handed over to condo associations, which are not-for-profit organizations, and their unsuspecting residents……”
Another alarmist! Another down day on Brickell Avenue!
I seriously doubt the HOA payments will bring the economy to its knees….how myopic. Sure Florida has a bunch of condo problems and there is a fair number in some level of distress. Cali, LV, Phoenix too but the VAST number of condo HOA’s outside these bubble markets are fine. Silly. If it gets bad then drain the pool and close off some common areas….hardly Armageddon.
Also, the article’s author needs to note that these buildings have a ton of problems and the lack of HOA payments are just one of them. Nothing a little Section 8 can’t fix….
the interesting thing about the HOAs is that bankruptcy won’t solve the problem. for them, costs (at least the no frills line items) are relatively fixed and immutable…simply, as the article suggests, it’s the revenue side of the equation that’s killing the HOAs.
all that said, the deterioriation in several buildings because of HOA issues is clearly evident. bayview lofts on normandly isel and ocean blue in mid beach look like shit these days. bentley bay on west ave ain’t looking too great either. as for brickell, we all know the story.
“Some owners are living in their units without paying their mortgage, association fees, assessments or property taxes. This burden has been handed over to condo associations”
So how does this work? If the Bank doesn’t evict, can the HOA evict? If not, can a user stay in the unit in perpetuity without paying anybody?
JL – Yes, condo HOA’s can foreclose since the debt is a lien on the unit. Not sure about the priority in FL though first mortgage might get first dibs. Also, foreclosure can be expensive. It might get the bank moving but if the unit is upside down on the mortgage, not sure what order the HOA gets in the amount owed.
I warned of this issue month ago. When Freddie extended the forclosure process to 320 days (on homes too) I knew that they were doing this to not have to recognize the loss and in effect become insolvent. When all is said and done many will have lived in condos and houses (see cook county) for 2-3 years for FREE. This includes insane AJ.
Renter Tom said: “Not sure about the priority in FL though first mortgage might get first dibs. Also, foreclosure can be expensive. It might get the bank moving but if the unit is upside down on the mortgage, not sure what order the HOA gets in the amount owed.”
I know for a fact that the HOA is not “first in line”. When that landlord (owner) got foreclosed on the initial foreclosure of which I was also a “John Doe” defendant had the HOA of the building as a defendant as well. I am sure that the bank drops the HOA, as they did me, as a defendant.
I have heard that the HOA can file a lien on the non-paying owner pre-foreclosure. Once it’s foreclosed on, the unit is in the hands of the bank.
Remember $125.00 per square foot; you heard it hear first.
The Smart Money
IRS
FL
Mechanics lien
1st
2nd
3rd
HOA lien (can be foreclosed)
–
liens that cannot be foreclosed
—-
do not hold me to it
jcrimes,
I have utter contempt and disregard for the finance and economics majors or the brats from Harvard or Wharton who fcuked us over good and proper. Back in 2003 and 2004 I predicted that the housing bubble is set to pop. At that time I said it is going to happen (pop) in 2007 and recover in 2009 (albeit I was off by a year, I should have said 2008 and 2010, but I was right about the bubble though) . It is not a bad prediction at all considering that the assholes at the Lehman brothers were still lending to subprime credit holders as late as 2006. So who cares about a finance or economics degree when I am doing better than the cnut Rohit (post #62) who lost his million dollar Long Island home and is jobless now or for the matter of fact, most of the armchair commentators here.
And by the way, the biggest arsehole of the century Alan Greenspan is an Economist. That should tell you.
The Ace // Oct 10, 2008 at 5:57 pm
Remember $125.00 per square foot; you heard it hear first.
—
$90 sq/ft you heard it here first.
What happens afterwards, I do not know. Maybe 0 sq/ft or $1000 sq/ft.
Depends.
Little bit of stress there AJ? We should make all debts collectable by the IRS where the IRS gets 40% to pay down the US deficit. That will get people to pay up! Deadbeats, scammers and stupid banks, oh my!
The good news AJ is your cash position is up from 10% to 18% of your portfolio, the bad news is the rest of your portfolio is down 40%!
FWIW,
It still looks like there is a lot of margin debt out there in the market. Things can’t bottom till margin levels are flushed down to historical lows IMO. ie. when a market crashes you get margin calls setting off other margin calls until very little margin is left. If you only look at NYSE margin debt in this page (2nd chart, last data point was Aug. 2008) it seems to show Margin debt in August 2008 was 2x that of the levels seen in the NYSE bottom of 2002/2003.
Since August 2008, the overall market has dropped about 25% but I get the feeling that margin debt did not get chopped 50% in that same timeframe to take it to the same levels seen in the bottom of 2002/2003.
http://www.marketoracle.co.uk/Article6734.html
AJ
you may have utter contempt for those that practice “high finance” (and that contempt is not entirely misplaced) but financial theorem and fundamentals of valuation still hold. the cornerstone of finance and valuation (other than a dollar today is worth more than a dollar tomorrow) is that value is a function of today and “tomorrow.” your earlier question does away with the latter part of the equation entirely.
AJ should be the Fed chairman. What will be your first act as chair AJ? Back the currency with Miami Condos. Each Dollar is worth 1/500,000 of a Miami Condo. Forget the gold standard. Condos are money. I want in on the condo standard!
AJ’s enormous popularity could then be parlayed into his bid for the 2012 presidency. All hail AJ the financial genius!
BTW, who takes a trip to India for 1 week (the flight is 2 days each way)????
My first act as Fed chair would be to back the currency with M3 convertibles. Each dollar is worth 1/80,000 of an M3 convertible. We would borrow more M3 convertibles from the EU nation of Germany to print more money and prevent inflation.
Look at AJ in the news: http://www.miamiherald.com/news/southflorida/story/719958.html
Hey Mark (not Zilbert),
I question your: “Back the currency with Miami Condos. Each Dollar is worth 1/500,000 of a Miami Condo. Forget the gold standard. Condos are money. I want in on the condo standard!”
You sure about this? Wouldn’t this validate the bravado of Gourge Perez. Since he will own thousands of condos for a decade or more, he can be the “king” of a ghost town!
RAM, your numbers are like those from the email claiming the $85 bill bailout for AIG is better spent on the people because it would result in 200 million people getting $425k ea. MATH IS WRONG.
Is actually $425 per person in that case, and in your case:
“For a financed deal, the numbers for an investor would be:
Annual Revenue: +$14,400 (Rent @ $1,200/month)
Real Estate Taxes: -$2,000 ($100,000 @ 2%)
Tax Credit: +$600 (R.E. Tax Deduction of $2,000 assuming a 30% Tax Bracket)
HOA: -$5,400 ($450/month)
Annual Mortgage Payments: -$4,769 (30% down = $70k mortgage @ 5.5% for 30 years).
Mortgage Interest Deduction: +$1,245 (Annual interest of $4,149 & assuming a 30% Tax Bracket).
Depreciation Credit: +$1,463 ($100k for 20.5 years & assuming a 30% Tax Bracket)
NET: $10,308 (or 34.4% on the $30,000 down payment).”
Sums up to $5,539, which is actually 18% return on the $30k, and now lets talk reality:
use the 30% tax discount suggested ($5300 annual tax) and you’re down to 7.5% which is a much more realistic scenario. And now you go out and try to get a 5.5% interest mortgage and you might have a not so exciting deal with plenty of risks.
No matter how you look at it the outcome is always similar, with 5% return on investment if things go smooth. Your claims of 34% returns are the reason we are in this mess. getting people overexcited with numbers that you obviously cannot compute yourself. thanks for wasting our times with nothing
JFK -Bombay Non-Stop takes 14-16 hours each way. Not two days! East bound, you simply add a day to the date. Probably that is why you think the journey takes two days silly coot. In the same breath, West bound, you subtract a day to the date and for example if you leave Bombay at 1 am on Friday, you reach JFK at 7 am on the same Friday, making it a 6 hour trip!! Have you been asleep in school geography class when they are teaching you Latitude, Longitude, International Date Line etc? Oops mea culpa, you must be a natural born American, the Worlds poorest Geographical Knowledge holders. Sarah Palin anyone?
Thanks Unrelated! You know why.
The October surprise? For those who followed the Chicago politics of Odumbo, no surprise at all. We’ll soon be more corrupt than a banana republic if he gets elected, country be d*mned. I prefer country first.
Can anyone in here tell me what is the procedure i need to follow to request a 5% or is it 10 % that I may be entitled to recover from my original 20% deposit. Do I need a lawyer to do this? Thanks.
Can I simply write a letter to the escrow agent for this and do i also need to contact the developer?
Tom,
I consider myself fiscal conservative and a social liberal. The Rep’s are no more fiscal conservatives. They are worse than the tax and spend Dems. I am voting Dem as I think the Reps have permanently damaged the reputation, respect, capability of this great country in the eyes of the World. So give a chance to the Dem guy. You might get taxed a bit but at least you will gain the respect of the rest of the World.
“Reps have permanently damaged the reputation, respect, capability of this great country in the eyes of the World.”
– Why would I give a frickin’ hoot about THAT issue determining who I vote for? That is so lame. Tell you what, you can pay more tax. All the liberals who wish to have taxes increased can voluntarily pay more tax to the IRS and the IRS will accept. So why don’t you and all these liberals simply put their money where mouth is and voluntarily pay more tax? Oh that’s right, they are hypocrites that simply want to control other people’s hard earned money and spend it as they wish and give it to people who don’t help themselves with even getting a free high school eduction or GED my money so they can sit at home watching cable TV and getting obese to cost us even more in health care expenses. Let’s just remove all motivation to take care of yourself and have the federal government issue diapers and employ federal worker diaper changers? The federal government should get out of the charity business once and for all. Charity only works to really help others when charity is local. If you were ever REALLY involved with charities you would know that. Just ask anyone who works at a welfare office….they have seen and heard it all. We need workfare, not welfare for able bodied individual. Lastly, we will see capital flight from the US under Obama policies, plain and simple.
The federal government is so generous to the point that we really the only country with obese poor people in poverty… My goodness, wake up!
Uhhh, Mark Zilbert, I think you need to tone it down a bit. Sarah Palin and Cindy McCain are both USSS protectees and if you keep this up, you’re gonna get a knock on the door. I do not know what your obvious psychological problem is, but mental health counseling is highly recommended.
“The federal government is so generous to the point that we really the only country with obese poor people in poverty… My goodness, wake up!”
Renter Tom has a point. It’s a little odd getting panhandled by a guy talking on his cellphone asking for a dollar.
Another thing I find odd are bleeding heart liberal types in Hollywood ranting about having “the wealthy” put in their fare share. If you are a wealthy Democrat and feel the tax laws are unfair, then why not do the right thing now and start sending in 50% of your income to the IRS. The government will gladly spend it.
Nobody’s stopping Roseanne, Bill Maher, Spielberg, J. Lo et al from giving away 50% of their income to the Federal Government, so why don’t they if that’s the “right thing” to do? Is it perhaps that the Roseanne and Bill Maher types prefer talking about the right thing rather than doing it? It’s annoying to hear these deluded individuals ranting about ” “The rich aren’t paying their share” when they can voluntarily contribute more themselves to make things “right” and do not. Hypocrisy at it’s best.
Let’s give businesses a tax break and Hollywood a tax hike.
JL – Don’t forget about all the 20 somethings with cell phone bills that are multiple times the cost of a health insurance plan then complain when they need medical care. Give me a break. We do need some health car reform to make health care attach to the person and make it portable across state lines. The historic reasons for why employees provided health insurance is interesting to read about and where good intentions distorted the market and continue to do so today. To the pan handlers, you need to sell your gold teeth first.
CLARK asked: “Can anyone in here tell me what is the procedure i need to follow to request a 5% or is it 10 % that I may be entitled to recover from my original 20% deposit. Do I need a lawyer to do this? Thanks.
Can I simply write a letter to the escrow agent for this and do i also need to contact the developer?”
Who is the developer and does the “Default” paragraph in your Purchase Contract note the “excess deposit” (above 10%). If so you should be entitled to 25% of your deposit (or 5% of purchase price). So, if your 20% deposit was $80,000 you should get back 20%.
To retrieve it you need to contact the developer and request it. The escrow company will not give it back unless they get a release signed by both the developer and you. (There should be one-half of your 20% in the escrow, so the developer and you should “split the proceeds”.
If your contract says you should get it back and developer says “no”, then I would get a lawyer but you don’t need one unless that happens.
you guys have a point regarding the behavior of some welfare recipients in this country, but the majority of people on welfare do not game the system and do not abuse the system. issues both inside and outside of their control tend to put people into the lowest rung of the financial caste system. providing a work incentive which helps them to move up a wrung has been shown to work-it did during the great depression and could be implemented again during this crisis.
but if you have issues with poor people getting welfare, you should also have issues with the rich people getting welfare as well. why do so many wealthy corporations find themselves in such dire straights today? where is the cash they made during the past decade? have they never heard of a rainy day fund to keep from falling to the bottom of the totem pole? tens of billions of those dollars went to bonus pay over the past few years-keep that in mind when you hear them ask for more capitalization dollars. and the current argument that we have to rebuild wall street to save main street is not completely true. who stands to lose more in standard of living, the multimillionaire financier with a couple of mansions and yacht, or the waitress who rents a house with two room mates? if things continue to go bad, we may well see the answer in the new tenants who move into brickell area over the next year. many of the rich have seen their wealth cut in half in the past year, many of the average joes of the working world are worth exactly the same today as they were last year-whatever their paycheck is on friday.
gables – I don’t defend either one. But there are millions more on welfare than the fat cats on Wall Street (who now are less fat and no longer able to afford their mortgages). The abuse of welfare and the wrong incentives have been permitted to fester for decades and decades. Only workfare will get us to transition out of this dependent mess. Moreover, welfare needs to be unpleasant to get people off. The scams are endless including disabilities, etc. By the way, need that free scooter chair? Come on, it must end and end today. Wake up! If you don’t bother to help yourself by getting a high school education or a GED, then I’m sorry but there should be NOTHING the federal government will provide for you until you go back and apply yourself. The federal government dependents need to be removed from the system at all levels. It is sickening to watch the waste that is financed by borrowing from our children’s futures. The federal government needs to enact some tough love since apparently the benefits are so high they sap incentives to provide for oneself. I know several case workers and the stories they tell are crazy…just stand in line at the grocery store and see what people on welfare are buying and wearing…they spend like they don’t know the value of a dollar, certainly they don’t know the value of an earned dollar. I don’t want my tax money to go to give these people food and shelter so they can just sit around all day planning drug deals and other hustling. Enough is enough…tell them they must get a legit job like the rest of us or go live under the bridge.
Listen, the only person that is worthy of a vote is Ron Paul. However RT you must realize that this bullshit war costs 100x more than any welfare the govt distributes. For that reason I think Obama deserves the vote. He’ll spend less. I don’t agree with either, but we will go bankrupt faster with the war monger McCain. Take a look at govt war spending charts. They went vertical during the Reagan, Bush I and Bush II administrations. During Clinton the spending went horizontal. Now Clinton didn’t really have a surplus (because that excluded unfunded liabilities- welfare and SS), but at least he wasn’t a profligate spender like that jackass Bush II.
I wish it wasn’t a choice between bad and worse, but people are too dumb to vote for Ron Paul so this is what we get.
Please read this RT:
http://www.warresisters.org/pages/piechart.htm
The unfunded mandates are killers. While I think the Iraq war did cost way more than anticipated, it did contribute to rallying the terrorists and terrorists to be to fight us there versus training, planning, and attacking the U.S. here. I know, we’ll never know the costs of the “what ifs” regarding whether the U.S. would have been hit with WMD over the last 7 years or not. But I do know, the world is safer from this type of thing, a lot safer. It is and was tough and financially was far larger than expected however, the dividends haven’t started to be paid out from this “investment”….I will give it time to see if our long term presence (like in South Korea) pays dividends and ultimately a safer world. You can’t be serious about voted for what would be the most liberal and biggest spender ever are you? The guy has ZERO leadership or real political experience. He’ll be cured up in the fetal position under the deck in the office to the side of the Oval Office once the responsibilities hit the fan. If he does get elected, I can’t wait until 2012 when the same condescending statements and tone are used against him after he actually has a record….it is easy for him without much of a record to simply sit back with 20/20 hindsight and say how he would have done things….just wait, I can see the economic disaster coming under this arrogant guy once the decision responsibility lands on his shoulders….it will be ugly and out of control. I already know of some really dumb*ss things they did in the campaign (the young staffers are all show and no go) that foreshadows the idiocracy to come from Odumbo. I wish it weren’t so, but it is what it is and I can see it coming if he is elected..arrogant stupidity is worse then just stupidity since you still think you’re right when you’re wrong. At least with McCain I know he won’t screw it up during these challenging times and might actually get some fiscal restraint going.
JL and Tom,
There is a fundamental weakness in your argument. Infact most Republicans are unaware of this.
Firstly, Tom, you advocate fiscal discipline. You tell the people to live within their means, not over spend, not borrow and cash is king. Then how come you are defending the current administrations charge to the credit card mentality.
Are you Rep’s that naive that you actually believe that the Tax cuts in the past 8 years have been paid for? I have news for you. The Trillion Dollar War is charged to the Credit Card. The tax Cuts are charged to the credit card. All the earmarks, Pork, 840 Billion Bailout, 25 billion car company bail out are all charged to the credit card. The 80+38 Billion AIG bailout is charged to the CC. I will go on and On. Do you believe one minute that the 10 Trillion Dollar national debt that we incurred since the past 8 years came about magically?
So basically you are saying, I want my tax cuts no matter what, I dont give a shit about my children or grandchildren, whose futures I am mortgaging so that I can have a good time now. How selfish is that? You are basically selling the next generation to slavery to the Chinese so that you can have your money fix.
I think there is a fundamental diff between the Dems and the Reps. The dems tax and spend. But they tax you and spend after the money is in the coffers. The Rep’s just charge it. I would take the first option. Thank You.
And believe me all of you. Listen carefully. During the boom, they said housing can never go down, America can never do no wrong. Well, the house of cards came crashing down. They also said, the massive Wall st. firms are too big to fail and guess what, they did.
The day of reckoning will be here. All it takes is the just one country say, china or South Korea or India or Saudi Arabia to dump their US treasury bond holdings. The whole World will follow suit and overnight, the dollar you have in the bank will be worth 5 cents.
But the funny thing is the “experts” keep telling us, that the rest of the World will never resort to such a thing. America is too important, Too stable, too this and too that. Sounds familiar? So go ahead and hoard that cash. Vote the Rep’s too to help you save those dollars for you by not taxing you but borrowing from all and sundry for day to day expenses. They will bankrupt the country into indebtedness and make that cash worthless.
AJ – The government already taxes too much….just look at total taxes throughout history. The problem is on the spending side, not the revenue side you silly liberal. Why don’t you help out the revenue side and pay the IRS twice the amount of tax you owe? Put your money where your mouth is or shut the heck up.
——————————–
jcrimes // Oct 10, 2008 at 1:29 pm
AJ
with all due respect, please take an introductory finance class.
– I second that motion….
I hate to be associated with AJ, but he does have a few points (I feel like I’m agreeing with that idiot Jim Cramer).
The govt should not increase taxes. It should drastically end war spending. Bin Laden’s goal was to BK the US govt just like he BKed the soviet union. He has defeated us. The “terrorists” have won. We are now BK fiscally and morally. The world knows it.
We need to close the German, Japanese, Iraqi, Turkish, etc bases.
We need to end this missile defense bullshit. It is just antagonizing Russia. MAD only works if both sides are ASSURED see? If we continue along this path we will have a new Cold War.
End these BS wars. RT you know what a joke this war on terror is. It’s just another way to steal your money. In this case it’s war profiteers.
Eliminate the dept of education, dept of homeland security, NASA, and many other bureaucracies…
Cut the federal income tax by 100%.
The End.
Also, we need to go onto a “condo standard” as AJ advocates. Gold has not value. Condos do. (BEING FACETIOUS)
A large 2 bedroom in the 05 line @ the Santa Maria I was infomed just sold for $820,000 from a bank sale. 05 line is direct bay and city with 2,580ft. Same unit sold for around $489,00 in 2000, so we are getting closer to 2001 prices it appears.
Saw a couple of condos in the Gables.
If it’s any news, confirmation, consolation or any other emotion, it can not be worse in Brickell!
Absolute clusterf*%k.
10 Aragon is a POS, Gables Marqui will rival the Vue in % of foreclosures….
(wrong forum but: Pinecrest / Palmetto house prices tumbling hard.)
——-
Jorge
RAM “For a financed deal, the numbers for an investor would be:
Annual Revenue: +$14,400 (Rent @ $1,200/month)
Real Estate Taxes: -$2,000 ($100,000 @ 2%)
Tax Credit: +$600 (R.E. Tax Deduction of $2,000 assuming a 30% Tax Bracket)
HOA: -$5,400 ($450/month)
Annual Mortgage Payments: -$4,769 (30% down = $70k mortgage @ 5.5% for 30 years).
Mortgage Interest Deduction: +$1,245 (Annual interest of $4,149 & assuming a 30% Tax Bracket).
Depreciation Credit: +$1,463 ($100k for 20.5 years & assuming a 30% Tax Bracket)
NET: $10,308 (or 34.4% on the $30,000 down payment).”
Sums up to $5,539, which is actually 18% return on the $30k, and now lets talk reality:
use the 30% tax discount suggested ($5300 annual tax) and you’re down to 7.5% which is a much more realistic scenario. And now you go out and try to get a 5.5% interest mortgage and you might have a not so exciting deal with plenty of risks.
No matter how you look at it the outcome is always similar, with 5% return on investment if things go smooth. Your claims of 34% returns are the reason we are in this mess. getting people overexcited with numbers that you obviously cannot compute yourself. thanks for wasting our times with nothing”
—
Right, that’s what we were talking about!
Of course, the $1200 is optimistic, declining market, $1050 much more likely.
Also, lets take into consideration some unrented time.
How about %0.5 towards upkeep (jezz, that’s like what? $500 towards paint and calking after the last tenant leaves)
The 5% IF everything goes smoothly becomes %___?
Also it was already pointed out that you are not going to deduct the entire amount of the sale price as this includes land (not sure about this, I’m not an accountant)
—
Frankly, it just seems to me that this 100k condo when speculation is removed from the equation (greater fool down the line hypothesis) is worth 70K tops.
—
Now, IF there were to be some financial problems, just saying “if” (guys noticed that fine subjunctive of “be:” “if there were”) Anyways, what was I saying? Right! Now, just saying here, if there were any financial problems and/or crisis, or, heaven forbid, if the country were engaged in a war (or two, again, knock on wood. No dummy! Not your keyboard) Well, if these things were true, well…. My goodness! I think you would have to price in some risk, no?
Just saying…..
Mark(Not Zilbert), I almost always agree with you…However, Obama clearly says he will INCREASE spending and INCREASE taxes. So, I don’t understand why you would vote for this guy??? US is heading into a depression and the fool wants to increase spending and taxes. Wrong! The lesser of the two evils is McCain. now what is sad is that out of the 250M or so people in the US the best we could do for our next President is one of these two…Shame on us all. One wants to rob from the rich and give to the poor(yeah right) and the other is an old man who may just forget he is the president one day…wtf. God help us.
Look as far as renting a condo for profit forget it. I owned multi-family dwellings in NYC and the amount of dead beat renters, property damage, etc will kill all your profits even if you make a small positive cash flow. One condo, one tenant spells disaster if the renter defaults on his rent. You will have to hire a lawyer to evict, repair the damages when finally evicted and then find a new tenant. Ok if you have a multi-family building where the majority is paying, but one condo, I don’t think so.
That being said I will eventually purchase a place in Miami…I just love it down there.
Miami2009 // Oct 11, 2008 at 9:56 pm
“Look as far as renting a condo for profit forget it. I owned multi-family dwellings in NYC and the amount of dead beat renters, property damage, etc will kill all your profits even if you make a small positive cash flow. One condo, one tenant spells disaster if the renter defaults on his rent. You will have to hire a lawyer to evict, repair the damages when finally evicted and then find a new tenant. Ok if you have a multi-family building where the majority is paying, but one condo, I don’t think so.”
BUT, BUT that’s NOT what the TV TOLD me!!!
–
If I were president, I can guarantee you sh*t would CHANGE…and that won’t be just a slogan. The goal would be to eliminate 1/2 the non-military government jobs, simplify taxes so you don’t need to waste smart people on the tax code so they can be employed in a field that actually creates wealth (under Obama you’ll need to hire someone to do your medical bills and requests just like taxes! oh yeah!), and basically keep the federal government out of your life as much as possible. A hybrid conservative/libertarian…and NO LIBERAL!
Tom, Dont do a Sarah Palin on me. You did not answer a single question that I posed and instead you hide behind some crazy ass idea that I need to go to a school of economics. Why am I not surprised at all?
About two years ago when the Smart Money first stated on this blog that Condo’s would fall to $125.00 per square foot all we recived was ridicule, now it would seem that we are stating the obvious.
The Smart Money has NEVER been wrong so listen up you morons: Keep yer powder dry (for idiots that means “cash”) and stand fast in the ranks (for morons that means don’t go catching falling knives).
When the Smart Money declares that it loves “Anticote Steel” (for stupids that’s code) jump in with both feet and all guns blazing.
There’s blood on the street folks but wait for the guts and entrails.
The Smart Money
From 10/10 NYTimes article
“Mr. Shiller, a leader in the field of behavioral economics, believes that bubbles and crashes are a kind of social epidemic. “Ideas become contagion,” he said. When housing prices were rising quickly in the early part of this century, he said, “people misinterpreted the meaning of the price increase. The theory that housing prices could only go up began to sound plausible. It became a thought virus. And people believed it was true rather than realizing it was a thought epidemic.””
You might see a plaque one day in Museum/Bicentennial Park that reads. Welcome to the Biscayne Wall… a product of the 2005 Housing thought epidemic.
AJ, if you’re young and a Democrat, that proves you have a heart. If you’re older and a Republican, that proves you have a brain.
Enough with the Obama vs. McCain/Democrat vs. Republicans – I can read this stuff on realclearpolitics or dailykos… I sure as hell don’t visit a Miami real estate blog to read about it…
Most of the stuff written here is pretty insightful and despite their escalating distaste for each other RT vs. AJ provides a pretty good ‘Crossfire-style’ of opposing views… something rare in today’s media.
I’m interested in more about what it will take to realistically be cash-flow positive in Miami… Long-term I intend to relocate there (American/Venezuelan couple – Miami is in the middle), and it would be nice to get my hands on an affordable property and attempt to rent it cash-flow positive until I return from my current overseas location. I figure I’m ok with both exit strategies – if I find a good long-term tenant/string of tenants, than I purchase another property when I return – else I move into mine.
But this blog has been the best place I’ve found on the net for realistic opinions from both sides of the fence as well as some good ‘expert’ opinions/information on the realities of being a 1-condo landlord.
Mike, you are right. every once in a while the blog gets hijacked by important but off topic issues. thats the price you pay for having an active and usually intelligent blog. while the views here are diverse, and people sometimes go overboard against one another, most have valid points. it is important to remember there are usually no right or wrong answers to these issues-the answer depends entirely on your point of view and agenda.
my concern right now is the impact of the recent economic crisis on condo and RE behavior in miami. does anybody have data on sales activity over the past month? curious whether the crisis has slowed down the buying even more. also curious whether the stock losses have forced banks and owners to significantly discount prices? anybody have any hard data over the past months activities? maybe lucas has some updates?
Gables’
“my concern right now is the impact of the recent economic crisis on condo and RE behavior in miami. does anybody have data on sales activity over the past month? curious whether the crisis has slowed down the buying even more. also curious whether the stock losses have forced banks and owners to significantly discount prices? anybody have any hard data over the past months activities? maybe lucas has some updates?”
–
Just too early.
–
ok, let’s try again
Muir,
“Frankly, it just seems to me that this 100k condo when speculation is removed from the equation (greater fool down the line hypothesis) is worth 70K tops.
—
Now, IF there were to be some financial problems, just saying “if” (guys noticed that fine subjunctive of “be:” “if there were”) Anyways, what was I saying? Right! Now, just saying here, if there were any financial problems and/or crisis, or, heaven forbid, if the country were engaged in a war (or two, again, knock on wood. No dummy! Not your keyboard) Well, if these things were true, well…. My goodness! I think you would have to price in some risk, no?
Just saying…..”
—
Is that what you want to talk about?
Muir…yeah i know I watched the same TV show…lol
RT for president!
Now back to RE…With the financial sector being hit so hard, will Brickell RE be hit hardest?
So which is the best condo to look for a rental? I wouldn’t mind renting awhile before I buy. Maybe Biscayne area.
Maybe 900 Biscayne? Ten Museum? Opera Tower? Quantum?
Looking for the best views, amenities, and easy parking, but also a good deal.
AJ – Maybe you got your money from Tony Rezko et al. for your condo like Odumbo too? hehehe
Anyway, I think this credit crisis will hurt condo prices more than anything else. Banks were already pulling back from mortgage on these condos and with limited funds to lend, there are much more attractive alternatives to lend to. For a buyer, going to a cash only market without financing would be wonderful, but it would be an economic distortion and cause a severe negative price over correction which is something that should be avoided. I am convinced as a posted last month that we will over correct on the down side, I just don’t know by how much. On a positive note, banks will start to lend to one another this week but on a negative note they won’t lend on that condo you have your eye on so I guess the condo impulse purchase and “condo hoarding” (perhaps related to cat hoarding) will no longer be enabled by the banks and so the next time you’re in the grocery store checkout line and see an attractive condo on the impulse buy display rack next to the National Enquirer, your credit card will be declined if you try to buy it!
P.S. There really is a fascinating psychological theory behind cat hoarding and why it is that almost all cat hoarders are middle to older aged women. The condo hoarding theory where you can’t just buy one (ummm, AJ?) is still under development but we do have a pretty good insight into this psychological disorder.
hahaha! Love The Ace!!!! That guy is awesome. So cryptic, so third person!!!
lets get some opinions here, “since everyone is so smart.” The so called “busy season” for selling properties is coming up pretty soon and we will also have a new president. what do you guys expect from the “busy season” will it be active or dead as a doorknob? I’m gonna have to say busy buying up foreclosed properties.
Loved the Wallstreet reference too!
Dead as a doorknob. You people are aware the miami had the biggest HOUSING BUBBLE of them all. It didn’t start to correct until April 2007. That’s HOUSING. What do you think is going to happen to CONDOS? There’s not enough renters for all these properties.
Here’s a quote for all you:
“North woods not your style? Head south to Florida, where everything you’ve heard about the collapse of the condo market is true. In 2006, 9,800 condos were sold in the Miami area. Last year that number dropped to 5,700. Through the first four months of 2008, sales totaled just 1,100, and there’s currently three years’ worth of back inventory.
In the state’s small towns, you’ll find golf-course condos starting at about $200,000. In big cities, such as Miami and Fort Lauderdale, high-rise apartments with water views start between $300,000 and $400,000 — and that’s still a steal. Thanks to over-speculation, from 2002 to 2005 nearly 40% more homes were built in Florida than there were people to occupy them, says Bill Pittenger, chief real estate economist for Seacoast National Bank.”
Source:http://www.kiplinger.com/magazine/archives/2008/08/vacation-homes-on-sale.html
Ace
i’ll be a weenie…it’s anacot steel.
-blue horseshoe
Raffi – New president, old president, what can they do? As I had previously posted, any “solution” will be short termed and ineffective causing more problems then it solves. You think people will actually be going on vacation??? LOL
Gotta read (about south “Flo Rida”) http://calculatedrisk.blogspot.com/2008/10/recent-home-buyers-underwater.html
I am so glad I didn’t bite in ’06 when my RE agent told me the 325K Neo Vertika 1 Bed loft on the 10th floor with a beautiful view of the MetroRail was the best deal I was ever going to get in Miami…lol
Oh, make that x-Re Agent!
Unrelated
Thanks for your help on my question about return of my deposit. The development is Everglades On the Bay -Cabi Developer. I cant find any Default paragraph anywhere in the contract. However. on the first page in bold print it does state in two different paragraphs that ( 1 ) The first 10 % can and will be used for construction purposes and ( 2 ) That the other 10% can also be used for construction purposes “if” and only if the developer both applys to the state requesting such and also that their request and approval from the state be sent and notified to the purchaser. I never received any such notice and I dont know if the developer did indeed apply for that. So, I guess my question is- do you think I am still entitled to that 25% of purchase price refund if they never applied for that second request from the state of florida. Thanks in advance.
Condo hoarding is not a disorder. Just an addiction.
AJ you should see a specialist about that….that and your genital warts.
Moving on, did people like my article from today’s CR ? Pretty amazing stuff!
Your future neighbors at “Vue”: http://www.youtube.com/watch?v=UDAaevTq51I&feature=user
make ludicrous offers to sellers to soften them up. Never offer less than 50 percent less than asking price. Then wait 2 months and go in for the kill and get it for 40 percent off of asking price.
Blue Horseshoe Techniques
That video was funny but even the rappers are doing better than wall street and realtors .A sign of the time .
Interesting article:
http://southflorida.bizjournals.com/southflorida/stories/2008/10/13/story7.html?b=1223870400%5E1713968
Any feedback on Opera Tower as a rental? Moving to Miami and want to get a feel for the town before I buy. Probably 6 months. I probably would not buy there, but for a short term rental seems easy to move in.
Any advice on the building? Easy to park?
Thanks very much.
Re brian #192
I advise you to look across the street from Opera Towers at Grand condominium at 1717 No Bayshore Dr which is housed on floors 10-42 of megastructure with Doubletree Hotel
Also adjacent to Marriott.
Contains several restaurants dry cleaners Wachovia branch-or will it soon be wells fargo-so you dont have to face the muggers at an outside atm-lol
See Doubletree website for pictures amenities etc.
Grand units are LARGE with 1 br AC living space from app 1000 -1100 sq ft and 2 brs 1400-1800 ac sq ft which likely dwarf OT floor plans.
Since building was constructed back in mid 1980s rents could be in line with OT units that were much more costly to complete.
And yes some of the water views are outstanding..
There is a bulletin board where owners post notices of rent/sale units located adjacent to the mailroom left side of lobby..
CLARK said: “I cant find any Default paragraph anywhere in the contract. However. on the first page in bold print it does state in two different paragraphs that ( 1 ) The first 10 % can and will be used for construction purposes and ( 2 ) That the other 10% can also be used for construction purposes “if” and only if the developer both applys to the state requesting such and also that their request and approval from the state be sent and notified to the purchaser. I never received any such notice and I dont know if the developer did indeed apply for that. So, I guess my question is- do you think I am still entitled to that 25% of purchase price refund if they never applied for that second request from the state of florida.”
Try doing this: CALL the Escrow Company to which you wrote your deposit checks. If there is money in your escrow account, tell them in writing (a fax will do) that you are having a problem with the developer and you do not want any funds released without your written approval. That should tie the funds up.
The project IS registered with ths State as it is over 100 units and you must have gotten a Property Report upon purchase. Some of these developers (900 Biscayne, Met1, Marina Blue, etc.) tell you “NO” when you request the return of the 25%. If there is no Default Paragraph in the contract (which really surprises me), you may need to call a lawyer to get your 25% back (maybe sue for reasons yet discovered for all of your deposit back).
But, FIRST….TIE UP THE ESCROWED FUNDS. It’s easy, it’s chic and IT WORKS!
I swear, CNBC is behind curve and should just listen to me! LOL LOL Per my earlier post of BIC (leaving out Russia) that is exactly what was just talked about on CNBC…..they said it is not BIC, forget about BRIC since Russian is too risky….. 🙂
Here’s how to do it, in case some of you forgot:
—-
KENT PORTER / The Press Democrat
Della Ramsey of Santa Rosa couldn’t resist purchasing a two-bedroom condominium, which was reduced from $245,220 to $99,900. “I was like ‘wow.’ . . . If you could do it, you had to do it,” she said. After spending $7,000 on upgrades, such as painting and new appliances, she was able to rent it almost immediately.
….
The condo will net her about $500 a month after homeowner fees, taxes and insurance, a solid return on an investment Ramsey plans to hold onto until Sonoma County’s housing market turns around.
“With home prices going down, down, down, I was thinking, I had this money sitting in the bank not earning a whole lot of interest. And if you buy low, the market’s eventually going to go back up,” Ramsey said.
Tumbling home prices are drawing a growing number of investors back into Sonoma County’s battered real estate market. Today, roughly a third of all buyers are investors who don’t plan to live in the home they purchase, up from about 10 percent last spring when the buying spree began, according to local real estate agents and mortgage brokers.
Along with first-time buyers seeking an affordable home to live in, investors are helping drive a surge of sales at the lower end of the region’s housing market.
While the credit crunch has made it harder to get a mortgage, investors are hunting for deals created by an unprecedented wave of foreclosures in Sonoma County. Two out of three home sales involve properties in foreclosure or short sales, where homeowners sell for less than they owe on a mortgage, according to Bay Area Real Estate Information Services, the county’s multiple-listing service.
Sales growth at lower price ranges is beginning to cut into the glut of distressed homes on the market. But the pace must continue before the housing sector can pull out of its downward spiral, analysts said.
“All these have to go away before the market can stabilize,” said James Madison, a foreclosure specialist at Coldwell Banker with three decades in real estate.
Still, the return of investors is a sign that the housing market may be beginning to emerge from its worst downturn in more than two decades. Sales have increased for five consecutive months, compared with a year ago, and investors are betting that prices of distressed properties have hit bottom.
With houses in move-in condition selling for under $300,000 and condos going in the low $100,000 range, many investors can realize positive cash flows from rents after mortgage payments and other costs.
“The condo will net her about $500 a month after homeowner fees, taxes and insurance, a solid return on an investment Ramsey plans to hold onto until Sonoma County’s housing market turns around.”
First, housing isn’t going to “turn around” anytime soon.
Second, why not just put the money in the bank with a CD that earns 5%….seems a lot less work and is guaranteed. Any additional return is simply not worth the risk and work. Put the money in a CD and instead of all the time rehabbing and dealing with renters (plus vacancy costs, etc.) spend HALF that time working at Wal-Mart and you be many times ahead!
Well we disagree Tom.
All condo investors should copy this and paste it to their laptops/pc/mac.
–
“Now we’re getting into the numbers where you can actually get some cash flow. Appreciation is the gravy. But that’s not why you should buy property. An asset is something that produces a return,” said Michael Morrongiello, a real estate investor in Sonoma.”
–
From the same article as above. #196
–
Miami has a ways to go
Same article:
“Morrongiello said some investors who bought as prices soared during the housing boom that peaked three years ago got burned because they only bet on rising values. Their monthly financing costs far exceeded the amount of money they could ever hope to pocket from rents. ‘That’s what got them in trouble. They were speculating,’ he said.”
—
I give it 6 months before Miami realizes this.
That $500/Month will be wiped out soon as the tenant she has stops paying rent and it takes 6 months + to evict…lol
You guys go from one extreme to the other.
I post over a dozen times: 9 11 14 26 28 30 31 43 46 60 80 115 128 160 164 172 + others, with numbers to show that at 99K this condo stinks.
Through this article I point out an example of what COULD make sense. I did not see the property or neighborhood.
Jeez.
But, these things DO make sense:
1st “Now we’re getting into the numbers where you can actually get some cash flow. Appreciation is the gravy. But that’s not why you should buy property. An asset is something that produces a return,” said Michael Morrongiello, a real estate investor in Sonoma.”
–
2nd “Morrongiello said some investors who bought as prices soared during the housing boom that peaked three years ago got burned because they only bet on rising values. Their monthly financing costs far exceeded the amount of money they could ever hope to pocket from rents. ‘That’s what got them in trouble. They were speculating,’ he said.”
–
My point is that it will take a while for this to be the “norm” thinking in Miami.
But, there we will get, whether one likes it or not.
–
Muir – My point was return must reward the risk taken. You can do just as well with far far far less risk and less work than residential real estate rentals of an illiquid asset. Just my opinion. But then again, I would HATE to be a residential landlord … no way would I have the tolerance for the nuisances involved let alone the worry. But that is me.
Muir said in # 196: “Della Ramsey of Santa Rosa couldn’t resist purchasing a two-bedroom condominium, which was reduced from $245,220 to $99,900. “I was like ‘wow.’ . . . If you could do it, you had to do it,” she said. After spending $7,000 on upgrades, such as painting and new appliances, she was able to rent it almost immediately.
….
The condo will net her about $500 a month after homeowner fees, taxes and insurance, a solid return on an investment Ramsey plans to hold onto until Sonoma County’s housing market turns around.”
Muir, I think the lady did the right thing for several reasons. First, the potential for future appreciation from her price level is far greater in Sonoma County CA than it is in Miami-Dade. The primary job market potential there is currently far better than here. Average income levels there have always been higher.
Secondly, the $99K Vue sale is one condo in a building that sucks. The speculative nature of the 2004-05 market here was the only reason why that ubit was ever priced anywhere near $400K. Now, there are 10,000 more available and the $400K will get you 2-3 bedrooms with water views, in a way better building AND there will still be 10,000 empty units around. As AJ’s spiritual advisor, Reverand Wright, would say: “Miami’s chickens haven’t come home to roost….YET!” (When they do you will have to carry an umbrella because it will be raining chicken poop.)
Tom,
Sad. Very sad. After trying to beat down the housing market with every scare tactic and excuse that you can find, now you are resorting to silly excuses such as it is too much work to be a landlord? Do you want to be like a welfare mama sitting on your arse and watching TV and not working for anything? Oops, sorry, you already do that. Watching CNBC 24×7, surfing the net and responding to every post on the MCI in a nano second. Pathetic!
Miami 2009,
Most of your posts are well thought out except a doozer here or there like #200. I have been a land lord for 10 years, 2 in New York and 2 in Miami. Never once did I have a problem with my tenants. I do my homework before I rent out. I check the precedents and antecedents of my tenants thoroughly and not just their credit history and salary. You want to rent out your house to the first loser that comes along, you do deserve what you get. Otherwise landlord who follow due diligence almost never have any trouble.
Tom,
Man, you can not find a more conservative person for investments than me.
I have 2 safety deposit boxes. PMs and cash.
I have 2 money market deposit accounts (FDIC insured)
No stocks, mutual funds.
Oh, and here’s the kicker Renter Tom, I rent, I do not own. I live in Jupiter Island.
I do not invest oversees, and this is why:
http://www.belfasttelegraph.co.uk/breaking-news/world/europe/icelandic-assets-seized-to-repay-british-savers-14000851.html
So much for BIC
–
That’s me. As you see, I believe that I may be more conservative than you are.
Now, whereas the 99K Vue condo is a joke (even without a crisis) what makes you think your approach or mine is safe?
Hyper-inflation could wipe me out quickly. I own physical PMs, but those could be outlawed.
Read Un-Related’s post and what I will add on that area. Since it seems a good comparison.
California’s unemployment rate for August 2008 was in the category of 7%-9.9% while Florida is in 6%-6.9% category with the U.S. rate at 6.1%.
Thanks AJ, I am single-handedly moving the entire US housing market downward…. What a joke, but thanks for the compliment. Actually, I have been too bullish and not bearish enough. NY prices are coming down too.
Not working for anything??? Well, its good to be retired at 35! 🙂 🙂 🙂 Being a residential landlord is not something that I am interested in, some people like it, but when you examine the lost opportunity costs, it just isn’t worth it esp. in this market. Again, pick up a basic finance and econ book AJ…. As I previously stated my focus is on preserving and accumulating wealth, not keep busy work chasing my own tail and really getting nowhere AND taking on a lot of risk to do so….not smart, not wise.
Ok, I got curious about the article.
What would make another condo a better buy?
Went to US census and Realtor.
—
From US census 2006
In labor force (population 16 years and over)
77,176
64.7
65.0%
+/-4,302
Median household income (in 2006 inflation-adjusted dollars)
56,556
Median family income (in 2006 inflation-adjusted dollars)
71,476
Per capita income (in 2006 inflation-adjusted dollars)
28,744
Families below poverty level
(X)
6.5
Housing Characteristics – show more >>
Estimate
Percent
U.S.
Margin of Error
Total housing units
65,274
+/-2,488
Occupied housing units
59,082
90.5
88.4%
+/-2,439
Owner-occupied housing units
33,993
57.5
67.3%
+/-2,034
Renter-occupied housing units
25,089
42.5
32.7%
+/-2,509
Vacant housing units
6,192
9.5
11.6%
+/-1,437
Median value (dollars)
589,900
(X)
185,200
+/-11,251
———————————–
From Realtor.com (today)
condos for sale : 225
rentals: : 1
———————————–
1 (That’s right 1 rental)
———————————–
No comment.
Tom, You are retired at 35. No contest, that has been established. But how many years ago was that? You sound like an old, bald, paunchy, bespectacled man who hoards cash under his mattress. Tell us it is not true.
Gosh, thankfully, the World is made up of all kinds of people. Unlike you I am actually very uncomfortable when cash starts piling up. I always keep between 10-15 thousand in cash for emergencies. Any accumulation over that will start getting me very edgy. I see cash lying in the house or in a bank deposit as a your second car sitting in a garage – losing value by the minute. So I put it in real estate. Not commodities, not stocks. They are too risky.
When I do invest in RE, I almost torture myself and everyone around me to make sure that I am getting the best possible deal or nothing at all. I dont throw money at anything impulsively.
The one thing everyone holding dollars should be afraid of, both in this country and around the world is that one day the dollar would be worth a Peso. Anyone who argues other wise is a moron just like those who said the tech stocks, the housing prices, the Oil and other commodities, the stock market etc will never go down.
So go ahead and pick up a 2.5 million dollar condo for 800K dollars while the going is good. When the dollar plunges, at least you will have a hard asset.
If you need to and you can stomach the downward spiral and carrying costs, make sure you use a buyers agent. If you use a regular real estate agent they can repeat everything you say to the home seller. (like a frigin dumb ass paraquet No confidentiality with these real estate worms. I even know of one scum real estate agent that was offered a kickback if the realtor made it possible for an investor/owner to default on a unt. That type of scum should go to jail. Anyone know how to report the guy, what are your thoughts?
By the way, every RE investment I made is still on tops. Way way on the top. Nothing lost their original value. If I had kept cash in the bank or under the mattress, I would have been a poor, very poor guy right now.
New York
House in 1999
Co-op in 2001
Miami
Condo in SOBE 2004
Condo in Downtown 2008
AJ – I assure you I look more like Matt Damon then what you were looking at in the mirror as you described yourself and I still have yet to hit my 40th! So, I got a lot of working years left and can choose what I want to do when I want to do it. By the way, you really do need to bone up on some financial books…. Here is some free advice, and I do give a lot of free advice to friends and family only upon request, you are too concentrated in real estate, you need to diversify your investments my friend. Owning mainly rental properties which are subject to things that are out of your control and are illiquid is not wise. For example, what if real etate property taxes doubled? Guess what, if you don’t pay them the govt can have your property sold to satisfy the debt. That is just one example. And with respect to cash in interest bearing accounts or treasuries…..they have been doing fine. My concern with US dollars is the value that they represent and so far it has been OK. Thankfully with cash you can always convert it to something else if you want. With illiquid assets that is hard to do quickly if you want to get the best price. And with respect to “When I do invest in RE, I almost torture myself and everyone around me to make sure that I am getting the best possible deal or nothing at all.” I have to ask what type of qualified and informed opinion do those people have? Most people are usually affirming of people’s decisions even if they disagree with them. With me I’ll tell it the way it is if you want or I will be more diplomatic if you want and phrase it “if I were buying X I would want to make sure that A,B, C were OK before doing so, etc.” or “it may be helpful if you reread such and such before making that decision”. Had to cut the beach run off early tonight since the rain was coming…..not a nice weather today at all…later.
I don’t know, the two Miami condos might pull down any positives on the two New York one’s. It depends on where those two NY properties are located to see how much they will decline from the peak. All will decline from the peak but NY property in good locations on or before 2001 should hold up to purchase prices fine from back then, but the opportunity costs may outweigh whether it was a wise investment. Real estate has high transaction costs that often times suck up a heck of a lot of price appreciation. I for one wouldn’t want to buy an illiquid asset with a historic inventory oversupply and declining in value every day with high fixed costs, high transaction costs and using leverage to do so. Just doesn’t make sense for the meager POTENTIAL profit…the risk is too high for such little reward.
Listen peeps. Did I not call the market bottom (see post 92)? I don’t know how high the market will go,but my thoughts are 10500 to 11400. If we get anywhere near 11000 sell into the rally. Short retail and durables. This rally can go one week or 3 months. You’re on your own.
About real estate. You would have to be trapped in cryogenic stasis to miss the bottom. The bottom will be when prices in nominal terms level out bet continue to decrease in real terms. At that point you have 2-3 or more years to find a perfect unit an buy. I defy any of you morons to find and example of a v shaped recovery in housing? That’s because it has never happened before. Keep your powder dry as The Ace says.
Muir – You must be older retired to have those investment positions. I just calculated my housing costs (rent plus utilities) and the annual cost is 0.7% of networth (might get closer to 1% with stock price down LOL). Maybe I am too conservative! Eeeecks.
AJ bought early and he will lose quite a bit of real money. If he wants to buy and hold well hell, inflation will make him whole in nominal terms eventually. AJ is like a guy that bought gold in 1980…well it only took 28 years and now that guy is whole again. It will take about 6-10 years for AJ to be made whole, but in the meantime we’ll be able to own TWO condos of similar quality for the same carrying costs. We’ll be the winners. AJ will be the winner in his own puny brain.
Also, I disagree with a buyers agent comment. What you should do is bribe the sellers agent. buyers agent and sellers agent get 3% each thus they are looking to make you pay the largest price possible. now if you offer the sellers agent money, like say the 3% on top of the 3% they are getting from the seller, well they might just insert some little thoughts into the ignorant seller’s head (LIKE: “TAKE THE DEAL, BEST DEAL YOU’LL GET!!!!”)
Also, the housing recovery may come sooner if they hold the Space Olympics in Miami: http://www.nbc.com/Saturday_Night_Live/video/clips/digital-short-space-olympics/656361/
Tom,
How did you retire with 1.5 million at 35? Did you work for it or was it given to you by your daddy?
AJ so we are getting a whole foods in 30 months and a Space Olympics in perhaps 1000 years? Exciting times to buy Miami real estate right???
To: JCRIMES,
Get with the program, Anacot Steel was the code 7 years ago.
The Smart Money
Ripley: How long after we’re declared overdue can we expect a rescue?
Hicks: [pause] Seventeen days.
Hudson: Seventeen *days?* Hey man, I don’t wanna rain on your parade, but we’re not gonna last seventeen *hours!* Those things are gonna come in here just like they did before. And they’re gonna come in here…
Ripley: Hudson!
Hudson: …and they’re gonna come in here AND THEY’RE GONNA GET US!
Ripley: *Hudson!* This little girl survived longer than that with no weapons and no training.
[to Newt]
Ripley: Right?
[Newt apes a salute]
Hudson: Why don’t you put her in charge?
Ripley: You better just start dealing with it, Hudson! Listen to me! Hudson, just deal with it, because we need you and I’m sick of your bullshit.
AJ,
Your post #204: I have been a landlord for more than 25 years, and I never had any problems with my tenants.
As you stated, you have to check your tenants thoroughly.
Renter Tom,
I have been investing in RE in various countries and I never suffered any loss or backlash, on the contrary I made and still make some good money.
It doesn’t matter in what markets you invest, you only have to do it in a professional, savvy and wisely manner !
Check out the second pic
http://wolf.ok.ac.kr/~annyg/picture4.jpg
–
Oh, the silliness of it all.
p.s. Tom, we are 12 years difference.
CEO — Chief Embezzlement Officer
CFO — Corporate Fraud Officer
BULL MARKET — A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET — A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING — The art of buying low and selling lower.
P/E RATIO — The percentage of investors wetting their pants as the market keeps crashing.
BROKER — What my broker has made me.
STANDARD & POOR — Your life in a nutshell.
STOCK ANALYST — Idiot who just downgraded your stock.
STOCK SPLIT — When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER — A guy whose phone has been disconnected.
MARKET CORRECTION — The day after you buy stocks.
CASH FLOW — The movement your money makes as it disappears down the toilet.
YAHOO — What you yell after selling it to some poor sucker for $240 per share.
WINDOWS — What you jump out of when you’re the sucker who bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR — Past year investor who’s now locked up in a nuthouse.
PROFIT — An archaic word no longer in use.
Renter Tom,
My experience: I think a good diversification for an portfolio (size $ 5-10 mil.) is:
40-50% RE, 30-40 % stock market, the rest cash/money market.
Renter Tom,
Concerning portfolio size: To be precise, I speak of equity and not of total assets value.
AJ – Where did you get $1.5M from? You can’t retire on that! Multiply by four and you’re in the ballpark. I worked my arse off and started several small businesses….while going to highly selective and competitive grad schools (yes, I have more than one graduate degree) full time. I have had the fortunate experiences of doing many things in many fields. My focus for the financial aspect of my life is to preserve and accumulate wealth. I plan to do some more traveling with an eye on having 2 maybe three personal but modest residences (probably condos because of the lock and leave lifestyle). But for now renting is really great….1/2 price! Why would I ever buy with that kind of deal? Regardless, I really wish there had not been a real estate bubble then could buy, but then again I wouldn’t have come across such great rental deals….I could never have decorated my place like the pro that did the condo…everyone that walks in says “wow” literally.
RT, I was about to say…I hope you didn’t retire on 1.5 million. That’s 3 years of spending for me.
Mark (Not Zilbert),
Sorry, you are not worthwile debating.
Well contradict that post. Let me repeat it for you:
350 years of data from the netherlands (A VERY SMALL AND LAND LIMITED COUNTRY WITH A POPULATION EXPLOSION OVER THE PERIOD)
See visionary, my theory is that you have a brain that is puny. It is so small that you can only think in 2 dimensions. You cannot free your pathetic mind to think outside the RE paradigm. Well lots of losses and dying poor and broke will repair that.
worthwhile
Visionary,
I agree with your portfolio diversification. That is a good bet. But personally I am a bit shy of stocks. I would rather own the whole business or company than a share of it and keep it limited.
Hey AJ. WHy don’t you tell us what price you bought at? AJ is like those guys that found bigfoot. Why not just show us bigfoot. OH yeah, that’s right, because is was a hoax. Just like AJ getting a good deal is a hoax!
Besides, nobody commented on the UK seizing Icelandic assets. For the the investors holding overseas stocks, I’d have thought they’d have said something.
–
http://www.belfasttelegraph.co.uk/breaking-news/world/europe/icelandic-assets-seized-to-repay-british-savers-14000851.html
mark(not zilber), what do you think is a good buy tomorrow considering that the markets are expected to be up? I’m planning to long Dow and some tech stocks
Well Mark.
Obviously you are mistaken.
From your own article:
“Adjusted for inflation, the index shows prices rose only 0.2 percent in the 3 1/2 centuries since the bubble.”
See?!!
Real Estate does go up.
For all the haters and perpetrators,
Eat your heart out.
1999 Long Island House:
Paid 169K
’06 Peak 525K
Present valuation 450K
Play 281K
2001 New York 1 BR co-op:
Paid 90K
’06 Peak 290K
Present valuation 245K
Play 155K
2004 SOBE 1/1.5 High Rise Condo in a Full service building with Bayviews and all ameneties:
Paid 210K
’06 Peak 365K
Present valuation 275K
Play 65K
(Actually this building has just 2 foreclosures among the 200 flats! that is just 1%. Combined with an excellent management with very low HOA and never more than 10 flats on the market for sale and never more than 3 flats available for rent, common perception is that the rates will not go down any further in this building due to overwhelming number of end users who live here.)
2008 Downtown 2/2 with a gadzillion dollar water views in a Luxury Building:
Ahhhh! dont you all want to know. As I said before, In spring 2009, I would complete one year of buying this dream flat. I will announce the price I paid and the current valuation/last sale price of a similar unit. We’ll see who has the last laugh.
Mark (Not Zilbert) // Oct 13, 2008 at 9:15 pm
“Who buys stocks in iceland???”
—
Who buys stocks in China?
I mean, China would never seize US assets right?
I mean, I’m just saying, we get along right.
I mean, countries do respect each other and it’s not like the US and China have had any animosity, right?
—
B: They love us right?
R: Oh, you dropped that already
I: No problema there (I mean it’s not like nuclear Armageddon could ensue there, we even ship armaments)
C: Oh, yeah, that’s covered
–
It’s like another old trading partner Iran (with the Shah, that is)
Could have been BRIIC
In a deflationary environment cash is king.
Even with inflation.
Mark said (#236): “I’m planning to long Dow and some tech stocks”
Mar, Use some foresight and save some money. NO tech stocks until mid-2009 at the earliest. Why? Because if the world is actually into, or going into recession, the first business cutbacks are IT-related equipment. Intel is already worried about losing $15 Billion in sales for 2009. If you don’t like integrated oil companies, look at refining or oil services shares. They got killed last week, up today, but oil “issues” are not going away. Demand and pricing may be down compared to the last year but, exploration and refining are not going away. Just an opinion. Do your research.
AJ – Assuming a 6% commission, that’d be a $60K haircut on the first three alone effectively erasing any “gain” on the SOBE property. The two Miami properties are going to drop at least 10% more. And as far as the gadzillion dollar view, get a finance book, there is no such thing as a gadzillion except in fairy tales and housing bubbles (LOL). I think that if you cashed out the two Miami properties you’d loose money but let’s just say you’d break even with NO RETURN on your investment….lost opportunity costs. Let’s also add in that you admitted you have to subsidize your renters’ so subtract that from all four too so now we’re eating into the NY properties in both the subsidies and the extra 10% price declines in the Miami properties that is probable so let’s say that is $50K decline and another $20K for subsidies. That’s $70K off the NY properties taking down those gains to $366K. Now what are the subsidies for the NY properties over the years? $50K leaving a current gain of $316K? Now subtract $70K for a 10% decline in value of those two NY properties and you’re down to say $250K??? The key is going to be the price appreciation since you have to subsidize the rents. The gains aren’t “real” until you cash out assuming you can in this environment. I think your numbers don’t reflect the net. So you focus on the gain on sale but ignore the transaction costs and costs to subsidize the rents…common error, but an error nonetheless. You’d have been much farther ahead if you had cashed on in late 2006.
Renter Tom,
Regarding your post 226, curious to know what kind of businesses did you start?
Yes, I would have been better off cashing out in 2006. But I need these places for future.
My 5 BR 3 bath 1/2 acre lot house on Long Island is needed to live and conduct my biz.
The 2/2 in Miami will be for my future living.
As I am not a great fan of 401K and other dicey future investment ideas, I invest in RE to take care of my future income. The SOBE and the NYC props are paid off and I am making serious cash from them after expenses. So even if the prices fall further (which may or may not happen), I am OK with it. No regrets ever on my RE purchases.
Hey AJ, names please. That way I can check sales history.
Let me explain why:
I bought a penthouse unit at Setai for 200/sf. See, yiou can check if I’m lying by looking at sales history. See??
How about: I bought a luxury penthouse unit at 200/sf…see can’t be disproven
About tech stocks. If I was buying I would be long INTC and APPL. I would sell if I even made 10%. Tech stocks will be the first to go if bad news arises. INTC at $16 to buy and hold isn’t bad. I would buy and hold appl at $80. Buy and sell before the end of the week if the news stays good. New macbooks at 1 pm Eastern time. This will move the stock (usually down – but I don’t know).
I like one sided trades (like soros):
Shorted tlt above 99. Long potash @ $80 (PE WAS 12 a that point). Ford at $1.87.
Julian Robertson had some tech picks here is part 1: http://www.cnbc.com/id/15840232?video=888731806&play=1
Oh yeah: AUY 1/4 of a position at $9, 1/4 at $7, 1/2 at $5.30. I will break even on this trade tomorrow. this is my one buy and hold
Oh yeah and I bought a bunch of $9 calls on uyg on friday.
Some guy who changes his handle once a week asks me to prove something to him!!?
AJ – You’re too heavy on real estate. Also, did you know in some tax advantaged retirement plans (which you should check into) you can hold real estate, it doesn’t have to be only stocks, bonds and cash. You should hire a flat rate fee certified financial planner to give you a review and plan recommendations. You want someone who won’t be the guy that sells you the stocks or mutual funds and who will take the time to interview and really go over all of your finances. It’d be worth the $500-$1000. That’s just my opinion based on what I know. My guess is you made the more prudent NY purchases then later bought into the real estate hype like a lot of people and decided to buy more which would explain the two Miami purchases which really ought to have been dumped or still should be dumped esp if you can at least break even which would make it psychologically easier to do. I personally would be uncomfortable tying up so much of my net worth in real estate…over the long term a diversified portfolio performs best since we don’t know what will and will not perform or even survive over 50 years. Moreover, the only return going forward on most residential real estate will be rental income, not asset appreciation so any reliance on the latter would appear to be misplaced. Lastly, even though you may own some real estate without a mortgage, there is an opportunity cost to that money which needs to be factored into the equation. I almost always only borrow money if it is cheaper than the ability to self-invest….for example why would I borrow money at say 7% when my cash is only earning 3.5%-5% in the bank right now? One exception would be a 30 year fixed mortgage at under 6% …. that is historically cheap money and will possible inflation picking up in 3 years….really cheap money!
When did this blog become about buying stocks???Why are we talking about AAPL, INTC, and AUY?
Focus people, there are plenty of blogs out there for you to discuss the future of tech stocks BUT THIS IS NOT IT!!
Hugo P said: “Focus people, there are plenty of blogs out there for you to discuss the future of tech stocks BUT THIS IS NOT IT!!”
Fundamentally, you are right, however, permit me to point out one connection which proves Miami condo investments will financially kill almost anybody. Jim Clark, the founder of Netscape, is a majority partner in the developer that built “Blue” and “Marina Blue”. Got his fortune in tech stocks and is blowing it in Miami condos. End of story.
I think when you’re talking about condos as investments you also need to compare that investment to alternatives. My post was simply to point out the importance of diversification or long term investing….diversification is important and also asset allocation. How heavy should you be in your residential real estate investments? It is an important question.
Un-Related, Renter Tom:
I completely agree with the fact that other investments should be discussed as alternatives for Miami Condos and all of that input is very good, but I don’t understand how that translates into number of shares some people are buying now and at what price, i.e:
“Oh yeah: AUY 1/4 of a position at $9, 1/4 at $7, 1/2 at $5.30. I will break even on this trade tomorrow. this is my one buy and hold”
Hugo P,
I absolutely concur with you !!
HUGO P any luck on 188th st.?? How about a beautiful PENTHOUSE 2 story with 2 parking??Decorator ready in one helluva nice building.If your interested I can hook you up.1700 sq. ft. 2/2.
All eye’s & ear’s:
I keep interested, but these prices are just insane and Artech hasn’t even started closings.
What building is your unit in? Do you own it or are you brokering it?
Either one…I’m looking to buy myself.Just happened to see this one and thought you might be interested.It will go for UNDER $250 a sq.
All,
call your congressman, senators, etc. They Fed is about to lend up to 1 TRILLION dollars with
no collateral to the Europeans and nobody is saying a word about it. Since they are legally able to do this
there has been no bru-ha-ha over it because the voters have no say in the mater.
http://www.federalreserve.gov/newsevents/press/monetary/20080929a.htm
US banks have to put up collateral to get loans from the FED. The government hasn’t done
squat to help the electorate here but they loan a trillion dollars to the Europeans through a backdoor!
This is a moral outrage! People should be rioting in the streets yet their is barely any coverage.
“It will go for UNDER $250 a sq” and “AAPL, INTC, and AUY “are the same to me.
Speculation.
Not investments.
“not that there is anything wrong with that.”
Muir… not speculating, this is actually a place for my own. Not sure about alle eye’s and ears.
Also, if we you are reading this blog and don’t want to know what people are willing to pay for cndos, then perhaps you should go read another blog…
What building? Do you have the listing info?
Whether for investment or as a place for your own, don’t over pay in either case….
Hugo P // Oct 14, 2008 at 10:37 am
Muir… not speculating, this is actually a place for my own. Not sure about alle eye’s and ears.
Also, if we you are reading this blog and don’t want to know what people are willing to pay for cndos, then perhaps you should go read another blog…
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Tom said it best:
Renter Tom // Oct 14, 2008 at 10:43 am
“Whether for investment or as a place for your own, don’t over pay in either case….”
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No, I’ll hang around exactly for that reason. To see what people SAY they are willing to pay.
What people pay I’ll know from the property appraiser’s office.
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On investment versus speculation:
Is there a return and if so what is it? Or, are profits perceived from some future expected sale?
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On living in it. That’s cool. Unless you want to sell it, then what you paid is important.
Otherwise, no, many people lived upside down in the 90s in Cali.
Tom,
My 2/2 has a 30 year mort at 6.1%.
LI home 15 year mort with 5.5% which I am going to be paying off very soon.
Right now I will maintain status quo until the turbulence is over.
Bubble–I agree–where are the people? The younger generation should be out on the streets as it is their futures and their kids futures that this will effect–in the 60’s they would have been protesting. Now they sit behind computers and blog–the goverment dosen’t SEE that we need to tell them enough is enough. We need to ‘bail out’ our own country and keep our hard earned money in the good ole USA.
vivalv,
Its incredible what the FED is doing and under the radar of the mainstream media. Who is going to regulate how that trillion dollars is spent in Europe? How do we know its not getting kicked back wall street? Where is the accountability?
Everybody should stop what they are doing and read this:
http://www.federalreserve.gov/newsevents/press/monetary/20080929a.htm
HUGO P it’s the building across the street Eastside
I just like to show AJ what’s up when it comes to making money consistently.
Don’t really like the Eastside building… ugly building
HUGO P I know what you mean.It’s only got 39 suites and there in pretty good shape so far.Nice unit and the price is not bad.I was just thinking about you.There will be LOT’S more.
See, that’s why I’m not buying tech (moves down first and worst)
New macbooks –> Stock moves down as I predicted.
INTC announces after earnings. You can get decimated by that trade. Peace out
News for my smart buddy AJ and visionary:
Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, causing the rally in the stock market to “sputter.”
“There are significant downside risks still to the market and the economy,” Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television. “We’re going to be surprised by the severity of the recession and the severity of the financial losses.”
The economist said the recession will last 18 to 24 months, driving unemployment to 9 percent, and already depressed home prices will fall another 15 percent.
…
“The stock market is going to stop rallying soon enough when they see the economy is really tanking,” Roubini added.
hahah! Thank god I don’t own real estate!
that’s it I’m buying downside protection. This rally is WEAK.
I dont give a sh*t about renter tom or AJ, can you both shut the hell up already. if AJ wants to buy property let him, if tom wants to rent for the rest of his life so be it. get over it! both of you are probably full of sh*t anyways, renter tom is prolly a 20 year old kid in front of the computer who has nothing better to do and AJ probably has one condo and works full time to pay for it. this is called miami condo investments not lets see who has a better retierment plan. idiots.
Raffi – Wow. Part of the debate are condos good investments for things like retirement plans. Usually you have good posts, must be stressed a bit….I know the stock market declines are not pleasant. Peace out.
Raffi, you forgot about the new a**hole in the bunch, Mark (Not Zilbert). What kind of a**hole posts 3 different times in 1 minute. These guys just like seeing their web-name on this site. Get a life or a job (or a real job if you claim to already have a job). BTW, Raffi’s right… this is Miami Condo Investments . Com, not Investments . Com. Do any of these wanna-be-economists realize that any individual with half of a brain doesn’t give a crap about what some anonymous blogger is posting on this site? We go to financial blogs, Yahoo Finance, Bloomberg, CNBC, etc… We come here for talk about investment condominiums in Miami. And we don’t come on to see you guys tell one another how happy you are that some poor fool got burned on a pre-con deposit or is in foreclosure. Karma, folks…. karma.
Raffi and GT3 both have a point. But I am surprised at Raffi’s outburst. His first so far.
If housing bulls like me and housing bears like Tom do not exchange barbs here, what else would be the content on this blog be like (?) I wonder.
By the way, all those who are complaining that this blog has no place for anything else other than strictly condo related talk, when did the last you guys even blogged here condo related talk or not? I rarely see contributions from them. Raffi, I have not seen a post from you for a while.
Tom, I cannot believe I got bunched together with you. Talk about strange bedfellows.
Well AJ, what I posted regarding having too much exposure to real estate and possibly having an independent CFP review your wealth profile would be worthwhile and was an honest suggestion despite disagreeing on where real estate is headed.
Guys can’t we all just get along? People like AJ,RT and Mark(NZ) make this blog interesting and fun to read. The real credit goes to Lucas for having a free and open blog!
Lucas,
Are you going to give me any credit for being right about this whole thing?
Wasn’t it me who has been on your blog since last year saying miami condo and house prices would fall back to 2001 levels and once again be 100-150 a sqaure foot.
I was saying it before Renter Tom. Give me some credit playah!
Well well well, the 30 year fixed rate mortgages are skyrocketing! 7% by the end of the day? Mortgage rates will drive down prices during this quarter of capitulation…as the 30 year fixed rate mortgage goes up, up, up condo prices will go down, down, down…
This is a huge development.
P.S. Christopher@HousingFEAR – although there are few haters out there, I’ve just been restating the obvious while looking forward. Sooo many people are looking backwards with blinders on.
One observation, we are going to see a continuous and tortuous pull back on credit particularly with respect to consumer spending and other unsecured debt. This will be long and drawn out, not an overnight event. While we will not be reverting back to a “cash economy” it sure is going to FEEL like it since we had grown accustomed to being able to pull more and more future purchases into the present with easy and cheap credit. This reversal will be painful and cause unemployment to rise significantly around the world. Moreover, credit that is available will become more expensive as the risk is being priced into lending and the uncertainty regarding the future ability of borrowers’ ability to repay this debt becomes larger.
Come back next year and reread this post…it will be eerily correct.
Interesting article about foreign buyers coming back into the US market, focusing primarily on Miami and a few other areas.
US real estate in bargain territory
Is now the time to snap up a holiday or investment property in the US?
The rate of forced sales suggests the answer is yes, although the strengthening US dollar and uncertain capital gains mean it’s not quite a foreign buyer’s bonanza.
Already, 2.2 per cent of all US homes are in the foreclosure process, according to foreclosures.com. The Wall Street Journal predicted this week that there could be 1 million foreclosed properties on the US market by the end of the year.
“So far this year, 748,381 homes — or 46 per cent of the foreclosures — have gone into the possession of the banks … because no bidders were interested in them at auction,” the Journal reported.
“With the banks’ inventory piling up as the properties fail to sell, the banks will likely have to discount their prices more in order to unload the homes, real estate experts predict. Such discounts could continue to drive the broader real estate market lower.”
In downtown Detroit, one of the cities hardest hit by the slump, properties that would have fetched $100,000 ($143,000) a year ago are now being forcibly sold by banks for $5000. But Detroit is affected by other factors, such as increasing crime and urban decay, making capital gains difficult to predict.
Surprisingly, Florida ranks high among the states with significant rates of negative equity and foreclosures, and not just in the poorer areas. Fort Lauderdale and Coral Gables in west Miami have a surplus of large family homes in urgent sales.
“There are good bargains everywhere,” said agent Chris Crystal. “The most appealing (properties) to foreigners appear to be those on South Beach, as that is the part of town that is most know throughout the world.
“(However) there are many opportunities in less transient neighbourhoods as well – Coral Gables, Coconut Grove – where locals have over-extended themselves.”
Crystal said the upper end of the market had not been affected by the slump as much as the entry-level range (about $US500,000). Two years ago, the type of houses now in this price bracket were fetching $US700,000.
Finance was difficult to obtain, said Crystal. Buyers seeking a US mortgage would need a 35 per cent deposit. Taxes are about 2 per cent of the purchase price and maintenance fees about 1 per cent a year. A $US500,000 property would typically return $US3000 to $US3500 a month in rent.
Although predicting a return to previous prices is difficult, Crystal said “it may only be three to five years before prices return to their peak values, which is where the investor gets his greatest return on investment.”
Crystal added a warning: “There are a lot of condominium projects in downtown Miami selling for 50 per cent off. I wouldn’t touch them. The buildings are so empty that maintenance becomes an issue. These projects should be for institutional investors only.”
“I expect the bottom is very near,” said Fort Lauderdale agent John Sabia. “It is expected that foreclosures will continue to rise into early 2009 and then begin to trim and decline as we move through the year.”
California also had high rates of foreclosures, but mostly in the lower socio-economic towns between Merced and Stockton, inland from San Francisco.
Meanwhile, in more salubrious Santa Monica, foreclosures were low, but the overarching depressed economic mood was still having an effect. “There are some very good buys,” says agent Simon Salloom. “This is the best I’ve seen it since 2000. It’s definitely a buyer’s market. The ratio of rent to prices is good.
“It could still go down a little more, maybe 5 or 10 per cent. But if we do go down, I expect it will go back up real fast. Once the credit market thing figures itself out and we get a new President, I think things will really get better. I feel we’re at the epicentre of the storm right now.”
“There is an opportunity to buy quality right now,” said west Los Angeles agent Jason Sturman. “There are a lot of properties on the market and still a lot of buyers, but our biggest problem right now is the lack of financing. It’s becoming more difficult for people to get loans. So people coming in with cash have a tremendous advantage.”
Sturman recommended new or recently built apartments in the $US400,000 to $US700,000 range. This section of the market had the highest volume and the lowest investment costs.
He said the prices would stay low through 2009, and would not rise until banks were able to start lending again.
http://www.theaustralian.news.com.au/story/0,25197,24499702-5018055,00.html
Tom , you seem to be a successful day trader with stop orders all over the place.
I don’t have the intelligence or temperament for it, congratulations.
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Has anybody bought a condo at the courthouse?
I’ve gone a number of times and watched but everything went back to the judgement holder.
I do remember in 2000 that you could pick up a condo on the cheap.
Anybody?
Muir – Nope, I’m the opposite of a day trader…in this environment need ot keep abreast of what is occurring since we’ve seen dramatic moves with a real possibility of a systemic meltdown and I don’t want to be caught flat footed…..staying ahead of the curve and monitoring macro factors what will control and chart the course going forward.
“I expect the bottom is very near,” said Fort Lauderdale agent John Sabia. “It is expected that foreclosures will continue to rise into early 2009 and then begin to trim and decline as we move through the year.”
……..what a realtard statement…..seriously, price declines lag the foreclosures so even by thus dude’s own account foreclosures will continue through 2009 which means prices will continue to slide through 2010.
I dont mind the discussions back and forth but it does get annoying when every single post becomes the same dialouge between the same two people. I read this site everyday and read all the comments, I only give my opinion when I have a valid one that has not been already stated. other than that no complaints on my part. by the way we need a new post if possible, thaks Lucas.
Bah! Okay no more stock market posts. About that posted article- did you guys notice they make a claim and then NO EVIDENCE TO BACK IT UP. Roubini said this is going to be the worst recession in 40 years. Condo prices started dropping in April 2007. Even RT is being hella optimistic here. I’m hoping that the market can find a bottom by July 09′ (when I want to buy a unit cash), but I’m thinking I will have to sign another lease until July 2010. Even then it will probably be too early. You guys should read about cognitive dissonance.
I apologize to you Raffi and GTA3. I was rude. I’ll try not to go off topic. I’m a big mouth I know.
“Buyers seeking a US mortgage would need a 35 per cent deposit. Taxes are about 2 per cent of the purchase price and maintenance fees about 1 per cent a year. A $US500,000 property would typically return $US3000 to $US3500 a month in rent.
Although predicting a return to previous prices is difficult, Crystal said “it may only be three to five years before prices return to their peak values, which is where the investor gets his greatest return on investment.””
—
———–> 4 lies in less than one paragraph.
—
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Hey anybody here successful at a foreclosure sale?
Muir
you won’t see much action on the foreclosures. In large part, it’s due to the fact that the judgment creditor/bank can credit bid all the way up to its judgment. considering this amount is usually far greater than the value of the property, there is little incentive for third parties to bid.
the interesting point is that the banks are sending morons to these auctions whose sole function is to credit bid all the way up to the judgment. if they were smart, they’d put someone in there that would bid a number strong enough to recover some of the judgment, but low enough to garner interest from outside parties, and thus, avoid a situation where the bank takes over the properties. just another sign that banks have their collective heads up their collective asses.
if you’re interested in a property, i’d show up to the auction with a hard equity lender and ask the bank’s rep whether he’ll bid less than the full judgment. not sure what the response will be, but if you find something you like, it’s worth a shot. maybe banks are becoming less dumb.
Jcrimes, why bid less when they can unload 40 billion/mo of these properties at full price onto fre and fnm. There is also another 700 billion [at any one time] that they can unload onto Uncle Sam.
We won’t see Miami Condo Deals until the govt buys the properties then unloads them saddling themselves with the loss.
But let me add, once the govt unloads them the losses (and the deals) will be insane. Could you imagine a company that has no concern about its own solvency? That’s how the govt auctions will look. They don’t give a darn how much they (taxpayer- ie you) lose.
Thx JCrimes.
That is exactly what I’ve seen in Palm Beach courthouse. I assumed it would be the same in Miami, that is why I asked.
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Thx, Mark(Not Z). Your second post is something I’ve thought about, dare say it, dreamt about. You are the first person who has said it out loud. (sure others have thought about it)
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Patience, I tell myself every day.
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Race between to SP500 at 650 and a condo that makes sense as an investment (-$75 sq/ft.)
It’s not a dream. It’s going to happen. You think the govt is going to just hold onto empty condos for 5 years while vandals steal the copper piping? Just holding them while people tear these things up? Unlike homes, there is a condo association to answer to. They will be flipping their shit! They’re going to DUMP units on the market. Maybe they’ll call it homes for the middle class or have another stupid name for it, but they will dump the properties nonetheless.
The fed. govt. has already set up at least five real estate liquidation offices including one in Ft. Lauderdale…. The plans were announced a month or so ago.
jcrimes said in #291: “the interesting point is that the banks are sending morons to these auctions whose sole function is to credit bid all the way up to the judgment. if they were smart, they’d put someone in there that would bid a number strong enough to recover some of the judgment, but low enough to garner interest from outside parties, and thus, avoid a situation where the bank takes over the properties. just another sign that banks have their collective heads up their collective asses. ”
This isn’t only going on in residential foreclosures. A great example was the Bankruptcy Court’s botched auction of the Breakwater-Edison Hotel in SoBe. The lender hired a major broker to act as a “stalking horse” bidder. The “stalking horse” was more efficent than “Big Brown” and left everybod in their dust. Real productive…a real productive waste of time. The friggen place is still half-gutted and the same cabal is going to try again!
un-related…correct me i’m wrong, but i don’t think the broker was acting as a stalking horse. rather the broker brought in a stalking horse for the auction (was the secured lender the stalking horse and allowed to credit bid up to its loan amount?).
The New York Times
October 16, 2008
Home Prices Seem Far From Bottom
By VIKAS BAJAJ
The American housing market, where the global economic crisis began, is far from hitting bottom.
Home prices across much of the country are likely to fall through late 2009, economists say, and in some markets the trend could last even longer depending on the severity of the anticipated recession.
In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them.
Adding to the worries nationwide are rising unemployment, falling wages and escalating mortgage rates — all of which will reduce the already diminished pool of would-be buyers.
“The No. 1 thing that drives housing values is incomes,” said Todd Sinai, an associate professor of real estate at the Wharton School at the University of Pennsylvania. “When incomes fall, demand for housing falls.”
Despite the government’s move to bolster the banking industry, home loan rates rose again on Tuesday, reflecting concern that the Treasury will borrow heavily to finance the rescue.
On Wednesday, the average rate for 30-year fixed rate mortgages was 6.75 percent, up from 6.06 percent last week. While banks are moving aggressively to sell foreclosed properties, the number of empty homes is hovering near its highest level in more than half a century.
As of June, 2.8 percent of homes previously occupied by an owner were vacant. Nearly 1 in 10 rentals was without a tenant. Both numbers are near their highest levels since 1956, the earliest year for which the Census Bureau has such data.
At the same time, the number of people who are losing jobs or seeing their incomes decline is rising. The unemployment rate has climbed to 6.1 percent, from 4.4 percent at the end of 2007, and wages for those who still have a job have barely kept up with inflation.
In New York and other cities that rely heavily on the financial sector, economists expect that job losses will increase and that pay heavily tied to year-end bonuses will decline significantly.
One reliable proxy of housing values — the ratio of home prices to rents — indicates that in many cities prices are still too high relative to historical norms.
In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody’s Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.
The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade.
It increased the most on the coasts and somewhat less in the middle of the country. Economy.com’s calculations show that while it remains elevated in many places, the ratio has fallen sharply to more normal levels in places like Sacramento, Dallas and Riverside, Calif.
The current housing downturn is much more national in scope and severe than any other in the postwar period, partly because of the proliferation of risky lending practices. Today, foreclosures are running ahead of the downturn in the economy, a reversal of previous housing slumps.
“We are in uncharted waters,” said Brian A. Bethune, an economist at Global Insight, a research firm.
Colleen Pestana, a real estate agent in Orange County in California, said many people losing their homes in Southern California used to work at mortgage and real estate companies. Many of them bet heavily on real estate by upgrading to bigger houses every few years. Now, many are losing their homes.
At the same time, Ms. Pestana said, her clients who are looking to buy are having a harder time lining up financing. One of her clients recently had to give up on a home after the lender that had offered a pre-approved loan changed its mind — a frequent occurrence, according to real estate agents and mortgage brokers.
“I am working harder than I have ever had to work to get a deal together and keep it together,” said Ms. Pestana, who has been a real estate agent for seven years.
To cushion themselves from potential losses if homes lose value, Fannie Mae and Freddie Mac, the mortgage finance companies that the government took over in September, have increased fees on loans made to borrowers who have good but not excellent credit records, even those who are making down payments as big as 30 percent.
Those higher fees are generally invisible to borrowers because banks factor them into mortgage interest rates. While the national average rate for a 30-year fixed-rate mortgage is now 6.75 percent, according to HSH Associates, mortgage brokers say the rates for many borrowers in the Southwest or Florida can be as high as 8 percent, especially for so-called jumbo loans that are too big to be sold to Fannie Mae and Freddie Mac. (Those loan limits vary by area from $417,000 to roughly $650,000.)
Higher interest rates result in bigger monthly payments, pricing some potential buyers out of the market. For example, monthly payments are $2,700 on a 6 percent 30-year, fixed-rate loan of $450,000. If the interest rate rises to 7 percent, those monthly payments jump to $3,000. All things being equal, when rates rise prices generally fall.
This month, Fannie and Freddie canceled a fee increase that would have applied to markets where home prices are falling, but the companies still have many other fees in place. In an effort to help drive down rates, the Treasury Department has announced plans to buy mortgage-backed securities issued by Fannie and Freddie. The government also recently increased the amount of loans the companies can buy and hold.
Still, those efforts will take time to have an impact and it is not clear whether they will be sufficient to get banks to lend more freely, especially in areas where jumbo loans make up a bigger percentage of lending, like New York and parts of California and Florida. Economists say that prices in those places will probably fall further.
In some of those places, price declines are being driven by a sharp increase in sales of foreclosed homes.
Hudson & Marshall, a Dallas-based auctioneer that holds sales for lenders, reports that banks are accepting prices that they refused to consider just 12 months earlier. In a recent auction of 110 foreclosed homes in the Las Vegas area, for instance, the auctioneer’s clients accepted 90 percent of the bids submitted by buyers, up from 60 percent a year earlier, said David T. Webb, a co-owner of the company.
Single-family home prices in Las Vegas have already fallen 34 percent from their peak in the summer of 2006, according to the Standard & Poor’s Case-Shiller home price index. Prices in San Diego have fallen 31 percent since late 2005.
While those declines have been painful to homeowners in those cities, economists said the quick decline might help the markets reach bottom faster than in previous housing cycles, said Edward E. Leamer, an economist at the University of California, Los Angeles. In a previous boom, home prices peaked in the Los Angeles area in 1990 but did not hit bottom until 1996. Prices remained near that low for more than a year before starting to climb again.
“In some areas of California, we are really at appropriate levels,” Mr. Leamer said of current home prices. But he added: “The risk is that we are going to get some overshooting, meaning that prices will be lower than they ought to be.”
In Florida, Jack McCabe, a real estate consultant, said that while some cities, like Fort Myers, are showing tentative signs of a rebound, others like Miami and Fort Lauderdale are still under pressure. Two homes on his street in Fort Lauderdale that sold for about $730,000 apiece in 2005 recently sold for $400,000 — a 44 percent decline.
“The rocket has run out of fuel, and now it’s plunged back down to earth,” he said.
Jcrimes said: “un-related…correct me i’m wrong, but i don’t think the broker was acting as a stalking horse. rather the broker brought in a stalking horse for the auction (was the secured lender the stalking horse and allowed to credit bid up to its loan amount?).”
I stand corrected. I meant to convey what you said but came up short. The wording of the Court-ordered auction rules wasn’t exactly clear. I guess they didn’t want to say: “The broker is sending in a bidder who will try to shill a sale and, by the way, he will be wearing a grocery bag over his hear to maintain his confidentiality!” ROFLMAO!
Truth:
1. One reliable proxy of housing values — the ratio of home prices to rents — indicates that in many cities prices are still too high relative to historical norms.
In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody’s Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.
The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade.
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2.“The No. 1 thing that drives housing values is incomes,” said Todd Sinai, an associate professor of real estate at the Wharton School at the University of Pennsylvania. “When incomes fall, demand for housing falls.”
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Excellent article
“Hudson & Marshall, a Dallas-based auctioneer that holds sales for lenders, reports that banks are accepting prices that they refused to consider just 12 months earlier. In a recent auction of 110 foreclosed homes in the Las Vegas area, for instance, the auctioneer’s clients accepted 90 percent of the bids submitted by buyers, up from 60 percent a year earlier, said David T. Webb, a co-owner of the company”
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I went to one of these.
A circus type atmosphere, guys in tuxes with whistles, clapping girls, blaring sounds from multiple speakers.
Save your time if you ever wondered and had not gone.
–
Man of man! “visionary” and AJ must not be too happy. Surprised visionary posted the article before I did.
Does anyone know the conforming loan limit on Miami condos? Is is 415K? The reason I ask is because the interest rate on Jumbos is now a whopping 7.65%!!!! This will crush prices above the conforming loan limit.
Any info RT?
Hi guys,
I am a contact holder at Icon. Looking for a way to get out. I know that there are several lawsuits that have been filed against Related. Does anyone know the attorneys who filed the lawsuits.? Any information will be appreciated.
Waverly Unit 2501 was listed yesterday for $332,500. About $150K – $175K below fare value even if it was a distress sale. I had a CASH offer on that same unit fourteen months back. We are now in a very different market but with all considerations that unit should have been listed near $500K and they would have received an offer very close to that.
Of course I started calling the listing Agent as soon as the unit was listed. Every half hour throughout the day I called to leave her a message letting her know I had two offers. As the afternoon came around and I had not heard from her I put those two offers together figuring I would have them signed and ready to submit.
Then last night I received a call from the Agent’s assistant. He said thank you for calling about the property but it is already in contract. I questioned how the offer could have been accepted by Wells Fargo so quickly and asked why the Agent representing the property did not take calls all day? Calls that may have been possible offers higher than the one accepted. I was told it was in contract and that’s all he could tell me.
The list price is criminal as is the way they handled other possible offers that may have been higher.
Wells Fargo is a publicly traded company and we all know the issues that have caused their value to drop. It seems now they are letting Bozo Agents represent their REO properties, price them (suspiciously) below market and then quickly accepting offers without regard to getting the most possible.
I called Wells Fargo this morning to ask how and why they would accept an offer $150,000 below another possible that might have been made. I was told they have nothing to do with the property at this point and that they assigned the file to US Real Estate Network who then assigned the listing to Miami Property Networks Corp.
The Wells Fargo Rep told me to contact the listing Agent with any questions I might have.
Right, question the person who I feel is not acting in the best interest of her client.
In my opinion that would have got me nowhere and she would not want to talk to me.
So I figured I would call the Broker of her company. I called the office number on the listing sheet and was told I have the wrong number. Again I called back and again I was told I dialed the correct number but it was not the company I was looking for. I then looked up the web site and called the 1-877 number they had listed. I was able to speak with the Broker who got more defensive with each question I had regarding the list price and the offer that was so quickly accepted. He basically told me he had nothing to say and he hung up on me. Now I feel he too is part of the problem.
After that call I contacted the local Real Estate Association to make a complaint. Yada, yada, I know that goes nowhere fast. I was told a form would be sent to me by mail and I would have to complete the form and send back to file my complaint. Forms in the mail? how ass backwards and time consuming is that?
The moral of my story is that unless you are the Buyer on these SUPER deals we’re all getting screwed.
Wells Fargo and the other mortgage companies that hold these bad mortgages owe their shareholders and the US tax payer some accountability for the unnecessary losses in cases like this.
They screwed the consumers on the way up and now they are screwing the consumer on the way down, damaging values and taking further losses due to their negligence.
Responsible Agents need to stand up to protect our business.
Good post Mr Waverly.
IG
i can put you in touch with someone if you’re interested. good lawyer. drop me an email address if you’re interested.
Mr Waverly
i can relate. i was trying to buy a unit a few months back at one of the premium buildings in south beach. unit came on line and was instantaneously under contract. pretty obvious to me that the realtor had an inside deal with somebody at the bank and the purchaser. no other way to explain how it went to contract in less than an hour (not to mention, the mls price started off at one number and then was relisted thirty minutes later for a significantly reduced number and then went to contract at the lower listed figure).
Mr Waverly, no offense, but you have to either already own a condo or be a real estate agent (as in your case) to care about this. The way I see it the money is already stolen from the tax payer/treasury purchaser with the passing of the bailout – the big heist has occurred. These mini heists are just the redistribution of a small portion of the big theft.
These guys buy the unit at WAY BELOW CURRENT market value – WAY BELOW CURRENT MARKET VALUE COMP is recorded
These guys then resell the unit at BELOW CURRENT market value at a tidy profit – BELOW CURRENT MARKET VALUE COMP is recorded.
End result is fair value moves LOWER.
Well, that’s fine by me. Let this common crooks fight over the scraps. It helps me out because it moves the market to where it needs to be sooner rather than later. Sorry broham.
EVEN BETTER NEWS MY PATIENT FRIENDS:
CHECK THIS OUT!
January
3,544
February
3,984
March
4,240
April
4,480
May
4,271
June
4,598
July
4,531
August
4,808
September <<<——- BAM!!!!
5,886
Those are Miami-Dade forclosures (many of which are CON-dos)
jcrimes,
Email me at [email protected]
Mark (not zilbert)
Your report on foreclosures is not surprising, in fact if there were not so many delays getting those properties through the process there would be A LOT MORE.
Yes, I am a Realtor and no offense taken.
I am very clear on where the market was and how it got there. I am also very clear on the current market and where it is heading. I sold my primary residence in early 2007 and have rented since. I do have six other properties all purchased between the last five to eight years and all were long term investments.
Believe me I am not one of those Agents that adds any fluff to the market or values. In fact the opposite and pre 2007 most of my Realtor friends never wanted to discuss real estate with me because I was to “negative”.
As the markets imploded in the last month it was no surprise to me at all. I am positioned well, I did right by my clients and most importantly I gained their respect as a Realtor.
I have no problem with the market correcting, even over correcting as it will. My problem is with those unethical Agents scamming the system and then the Mortgage Companies crying for government assistance.
Mr Waverly…
AMEN
I went through the same thing last month with a unit in Brickell…
Hey Lucas or Samir or any other realtor on here…..do you happen to know the code name for Capri South Beach on miamidade.gov???
Thanks to you both.
Auction could set price floor for condo-clogged West Palm
…For example, a one-bedroom unit that was priced at $337,000 will have a minimum selling price of $95,000, or $142-per-square-foot, a 72 percent discount.
A two-bedroom, two-bath unit that was going for $560,000 will be offered for $160,000, or $163 a square foot, a 71 percent discount. Other units are being offered at discounts ranging from 42 percent to 70 percent.
…”They are marking down to where the bottom is and to where these units are now affordable for the majority of Palm Beach County’s workforce,” McCabe said. Still, he said, “People are going to take a look at it and say, ‘My God. Is that really where the market has gone?’ ”
…Earlier this year, Wood Partners toyed with the idea of a bulk sale to investors, but the offers came in too low. Wood Partners rented about 60 percent of its unsold inventory as apartments, but decided it had to do something more aggressive to get sales moving again.
————————————
Surprise, the idea of taking your bulk inventory and renting it out “until the market turns” is not working out so good in real life. Last I heard, weren’t’ there a lot of “bulk” funds chasing the same dream?
That’s OK, at least the managers of these like minded “bulk buying” funds will still get paid their fees. That’s all that matters. Somebody needs to buy the yachts this year at the Boat Show.
JL, I was just about to post that article. My grandfather who lives in West Palm called me tonight to tell me check that one out.
How dare you JL! AJ and “Visionary” will weather this storm. STAND STRONG. STAND PROUD AJ. Who cares that people will be buying two or perhaps 3 condos for the price of your one condo! Your one condo is “the best” and has “the best view”.
BTW, my grandfather is the man. I know this isn’t a stock blog, but he was all psyched because he bought 30k shares of Exxon today and sold it for $5 profit/share. Kudos to the old timer for still buying and selling like he’s in his prime.
Being the optimistic sort, I’m getting concerned that I am starting to agree with Roubini’s unfolding of events more each day… That means a real nasty recession, high and prolonged unemployment, substantial reduction in consumer spending, and, of course, at a minimum an additional 10% price cut on real estate on average in the U.S. which could very well mean a 20%-30% further price decline from today’s prices in South Florida. Even car sellers are demanding more money for down payments.
I’ve already seen a listing for new construction for under $300 beach front condo in Sunny Isles Beach. That may become the norm sooner rather than later or never.
The good news is, I probably can get a good deal on a new vehicle. It is hard for me to justify spending more than $50K on an everyday use vehicle. I’d like to stay with American, whatever that means now, but nothing really seems worth considering. Any thoughts?
Mr. Waverly,
That is a real travesty. I was eying line 01 in Waverly for the past 4 years. I remember even this year when line 01’s are listed for 850K but mostly averaging 650K -750K. That is the super best line in the building or any building on the bay from Bentley to Flamingo.
That would be an excellent buy for anywhere between 400K to 500K. The kind of views of Downtown Miami from that unit and the Biscayne Bay are non existent anywhere else in the World from Sydney to San Francisco. Some lucky bastard got that flat.
Now tell me Renter Tom, would you laugh at this guy who bought this flat? Would you tell him to wait till the bottom comes?
I have been saying this for the past one year. Dont wait for for some bottom. Look around, be ready, hit it when you can to get a deal of the lifetime such as this. RT, you can wait a life time even if America goes into a great depression but you wont be able to buy line 01 in Waverly for 332K, inside deal or not.
Mr Waverly, If you can find another such deal. please let me know. I have a buyer ready to drop 400K all cash for line 01 or line 02 in Waverly.
Why not you huh? If it’s such a great deal why don’t you buy it AJ? You’re so full of it.
RT, get the cadillac CTS. Why?
One of the top 3 brands in Dependability (long term quality) http://www.jdpower.com/autos/ratings/dependability-ratings-by-category/entry-premium-vehicle
2008 Motor Trend Car of the Year
http://www.motortrend.com/oftheyear/car/112_0801_2008_cadillac_cts/index.html
Beautiful Car (LED light tubes – first of its kid) – exterior and interior
Good gas mileage (go to fueleconomy dot gov)
If you want to get an American car then this is it. It destroys the infiniti gs , the lexus is, the audi A4, and dare I say the BMW 335….well probably not that far but as the Motor Trend article discusses it gives it a run for the money.
I drive a 2008 M3, but if you want performance you can wait for the 2009 CST V — 550 HP — pure American muscle baby!
RT get the 2008 Cadillac CTS – motor trend car of the year, good fuel economy, gorgeous car, cadillac and CTS top JD power dependability rankings. I had a post with links but lucas won’t let me post it.
“Waverly Unit 2501 was listed yesterday for $332,500”
I’m trying to jog my memory on this. The Waverly Condo Conversion happened around 2002 and that unit would have been offered by the developers at around 300K back then I think. Anybody remember?
For a domestic, I agree you can’t go wrong with the 2008 Cadillac CTS… as long as GM stays arond long enough to honor their warranties.
Make sure it’s a CTS-V.
Miami Herald
Posted on Fri, Oct. 17, 2008
Condo panels fume about bank inaction
By MONICA HATCHER
He frequents the pool at The Venetia condo building. He leaves his Jaguar with the valet. He uses the gym. He’s also behind on his mortgage and isn’t paying his condo association fees.
Neither is his lender, and the association’s board worries the bank is delaying foreclosure to avoid paying dues as well.
Sharon Dodge, president of The Venetia’s association, angrily told a crowd of South Florida condo dwellers at a meeting this week that 134 units were not paying maintenance fees in the 382-unit building. Of those, at least 35 are in the hands of lenders who aren’t playing fair.
”Something needs to change!” Dodge said, drawing rowdy applause from the crowd that sat beneath chandeliers in the Loews hotel ballroom in Miami Beach.
The unpaid accounts have resulted in higher association fees for everyone and crippling special assessments to cover large one-time expenses like roof repairs. Less than a year ago, The Venetia had to slap an $8,000 special assessment on homeowners because, at the time, roughly a quarter of them were delinquent.
South Florida’s foreclosure crisis might be dealing its toughest blow to the hundreds of thousands of homeowners who live in condos. High foreclosure rates have made it difficult for many associations to make their budgets and provide services like cable, lawn care and pool maintenance.
The higher dues are squeezing homeowners already struggling to stay current on their bills.
`DEATH SPIRAL’
Mortgage lenders are drawing the wrath of condo owners as catalyst and culprit of the fallout.
”We are in a death spiral,” said Miami Beach Commissioner Jerry Libbin, who hosted Wednesday’s meeting with state Reps. Julio Robaina and Luis Garcia.
”It’s the foreclosures that are not happening, the banks that are not taking the actions that they should be taking that are causing additional assessments to be foisted on good condo unit owners,” Libbin said.
At the root of the problem, Libbin and the condo boards say, is a state law that seems to give banks incentives not to foreclose on delinquent borrowers in their buildings.
Upon taking title to a unit through foreclosure, a lender must pay condo associations 1 percent of the original mortgage amount or six months of unpaid maintenance fees, whichever is less. After the initial sum, the lender then starts making full monthly payments like other unit owners.
Dodge and others claim lenders are dragging out foreclosures to avoid complying with the law.
IDEAS
The town-hall meeting gave residents a forum to vent and a chance to propose changes to the law. Robaina, chairman of the Select Committee for Condo & Homeowners Association Governance, has vowed to introduce legislation in Tallahassee next spring to address the problem.
One proposal would let boards sell delinquent accounts like counties sell delinquent property taxes by auctioning certificates. That would let them collect past dues immediately.
Others included letting associations collect rent on leased units when fees are unpaid and giving condo liens the same priority as tax liens, meaning an association would be paid from sale proceeds before a lender.
”The association pays to preserve and protect the bank’s collateral while they sit on their hands for months or years without taking steps to foreclose,” said Ken Direktor, an attorney with Becker & Poliakoff, a firm representing condo associations. “We are providing services for the benefit of the bank. Why shouldn’t they pay for it? . . . They are getting a free ride.”
Direktor also proposed requiring lenders to pay a greater portion of past-due assessments as they take longer to foreclose.
`THIS MESS’
The suggestions reflect a growing sense of despair among condo owners who find themselves going up against lenders who are benefiting from a $700 billion bailout. Robaina said he was initiating discussions with South Florida’s Congressional delegation about whether any of the rescue funds could be directed to the battered condo communities, many of which were at the center of speculative buying during the boom.
”It’s time for us to start negotiating that money be used for you,” Robaina told the crowd, “because it’s your tax dollars and the public sector needs to be considered before giving it to the private sector that got us into this mess.”
There were no bank representatives at Wednesday’s meeting. But in an interview, Marc Ben-Ezra, an attorney who files foreclosures statewide for lenders, said he was not aware of lenders deliberately stalling foreclosures to avoid condo fees and warned against enacting laws that could make lenders more averse to financing units to new buyers.
”If the mortgage holder knows they could be wiped out due to a much smaller association lien, the lender wouldn’t lend in those buildings. If they make it too risky for lenders to lend, their property values are only going to go down further,” Ben-Ezra said.
Anthony DiMarco, a lobbyist for the Florida Bankers Association, said banks have been put in almost a no-win situation when it comes to condos.
“On the one hand, we are working with homeowners and also being encouraged by the government to keep them in their homes, and, on the other hand, we’re being told we’re not foreclosing fast enough. So what are we supposed to do?”
He added that the current law requiring banks to pay only 1 percent or up to six months of past due payments was a compromise reached in the early 1990s that still seems fair.
”I don’t understand, personally, why the bank who lent somebody money is responsible for someone who didn’t uphold their end of the bargain,” DiMarco said. “Once we take it over, that’s fine. We should pay going forward. I don’t know why if you lend money, you’re somehow responsible for something somebody else didn’t do.”
How can I find out about the HOA of a condo building. In particular Roney Palace in SOBE. I am actually looking to make a complaint about a certain owner, so I would need to find out who the board members are. Thx.
Again “visionary” posts a negative article. I commend your “vision”. You should have the foresight to realize this is a rock and a hard place situation for condo owners that can only lead to lower condo prices. I love to hear about associations taking it up the rear.
Thanks for the suggestions on the Cadi…will look into it!
And as for silly AJ, why are you mischaracterizing my position in your 321 post? Clearly, this unit was not sold at MARKET prices (30%-35% off according to Mr. Waverly who seems to have a very good pulse on the building). Of course, if you can buy something significantly below market prices and what you perceive to be the price floor, it is worth reviewing as long as the HOA is stable and not in severe crisis since the money and hassle involved with a totally failing HOA might turn your condo dream into a condo nightmare as you walk past the frustratingly terrible condition of the common areas every day…and of course the special assessments etc. And according to JL, the prices are back to 2002 conversion prices which were pre-significant bubble prices. I don’t know what the s.f. of this unit is either, but from the info, it may be a decent buy with minimal possible further substantial decline…but I would need more info to evaluate it….the “on sale” price of 35% may look cheap if they were “selling” for twice a realistic value price which would mean another 15% off would be needed for example since over the past few years people that were close to the market lost pricing perspective like the frog in the pot of water that was warming on the stove…..by the way, has anyone ever done that to a frog? Just curious if the old saying was true.
By the way, housing starts are still “plummeting” lower (which is a good thing) which indicates that home builders can’t build these things and still make a profit. As I had previously posted cost of new construction will not be the floor or provide any price support in this market since existing homes will sell for what people can afford, not for wha they cost to build since that is a sunk cost and irrelevant to the purchase decision with sooo many homes in the sales inventory…and growing and growing and growing.
Also, copper prices, which is one tea leaf in seeing into the future, are half the price of just a few months ago. Clearly this one tea leaf points to a very nasty and prolonged worldwidre recession….you can stop hoarding pennies now (which are mostly zinc anyway).
Pace park resident in the news: http://www.tcpalm.com/news/2008/oct/15/rising-cost-crack-cocaine-allegedly-leads-fort-pie/?ref=patrick.net
another pace park resident (FFW to 40 seconds):
http://www.youtube.com/watch?v=65aPDJtEkKY
Mark (N Z) It breaks my heart to see a dead animal on the side of the road but that F#cker I would have backed over and let the weight on my RR rest on top of him.
Mark – Regarding the video, I believe that gentleman should have stayed in school and gotten his high school degree and stayed off drugs…
Just another day in M-I-A….
When the Waverly went condo back in the day, I recall a lot of RE people feeling those prices were outrageous and that had to be the market top so careful about pricing. What looks cheap now was looking outrageously expensive 5 years back. Is the pricing correction going to take us 3 years back, 5, 10 years?
JL,
I do not think that Waverly line 01 was ever sold at 300K when it was converted to condos back in 03. For a 2/2 Ultra Lux building (at that time) on SOBE with such un matched views and location is considered overpriced at 2003? 01 and 02 are direct bay premium units.
What happened to the combined 01-02 on 36th floor owned by some football star on the market for 1.9 Mil? I checked to see the taxes on it and it is a whoping 25K per year. The unit is spectacular though.
In the same breath, what will be the price of direct bayview 2/2 in the shitty Mirador (with apologies to Candela) soon going to be? They were asking 599K for those in spring 2008.
YOU HAVE TO READ THIS ARTICLE. I don’t know how many arguments I’ve had with friends in the last 3 months about my thoughts on Ivy league students and how these huge financial firms would go straight to them because they are “so smart” hahahaha i love this article, It says everything I think, except for the smoking weed part.
Lahde Quits Hedge Funds, Thanks `Idiots’ for Success (Update1)
By Katherine Burton
Oct. 17 (Bloomberg) — Andrew Lahde, the hedge-fund manager who quit after posting an 870 percent gain last year, said farewell to clients in a letter that thanks stupid traders for making him rich and ends with a plea to legalize marijuana.
Lahde, head of Santa Monica, California-based Lahde Capital Management LLC, told investors last month he was returning their cash because the risk of using credit derivatives — his means of betting on the falling value of bonds and loans, including subprime mortgages — was too risky given the weakness of the banks he was trading with.
“I was in this game for money,” Lahde, 37, wrote in a two-page letter today in which he said he had come to hate the hedge-fund business. “The low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government.
“All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other sides of my trades. God Bless America.”
Lahde, who managed about $80 million, told clients he’ll be content to invest his own money, rather than taking cash from wealthy individuals and institutions and trying to amass a fortune worth hundreds of millions or even billions of dollars.
“I do not understand the legacy thing,” he wrote. “Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.”
Request for Soros
He said he’d spend his time repairing his health “as well as my entire life — where I had to compete for spaces at universities, and graduate schools, jobs and assets under management — with those who had all the advantages (rich parents) that I did not.”
He also suggested that billionaire George Soros sponsor a forum in which “great minds” would come together to create a new system of government, as the current system “is clearly broken.”
Lahde ended his letter with a plea for the increased use of hemp as an alternative source of food and energy that segued into a call for the legalization of marijuana.
“Hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products,” he wrote. “Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term.”
`Innocuous Plant’
He added, “The evil female plant — marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country.
Lahde said the only reason marijuana remains illegal is because “Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other addictive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers.”
Lahde graduated from Michigan State University with a degree in finance and holds an MBA from the University of California, Los Angeles. He worked at Los Angeles-based hedge fund Dalton Investments LLC before founding his own firm two years ago with about $10 million.
Lahde wasn’t available for comment. A woman at his firm, who asked not to be identified, confirmed the authenticity of the letter.
AJ,
I’m trying very hard to recall, but I think the Waverly converted in the high 200’s to low 300’s per sq. ft for the 01 line.
I believe unit# 2501 was probably being offered at a conversion of $350K or under. It definitely was not $400k or over. Anybody here remember what $ sq/ft. the Waverly went for in 2002/2003?
When it converted, I remember a lot of people who were lifers in SoBe (and people renting in the Waverly) being shocked at the pricing. It seemed to be $50 sq/ft. more than most were expecting. ie. expectations were closer to $250 sq/ft when the conversion was first announced as the Waverly was/is not a high end building.
AJ if these prices and 2003 sentiments surprise you… that should tell you how dangerous this market is and how little history there is for these current prices. Maybe there is some new paradigm now for SOBe real estate, but then again, maybe the last 5 years were just an illusion and we’re going back to the tried and true SoBe paradigm.
Renter Tom,
There goes Sunny Isles… There goes the superyacht market… There goes the Jet Market…
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/16/AR2008101604270.html?hpid=topnews
JL,
I am not surprised. My 1 BR in NYC costed me 90K in 2001. At that time I thought it was OK, not cheap or not expensive. Actually I got it below market value. It should have been valued at 125K at that time. Many 1 BR’s at that time were selling for 160K and I thought it was outrageous (similar sentiments echoed by Waverly conversion pricing). Now my co-op went up to 270K in peak and now hovering at 245K. I dont think it is outrageous now. If I had to buy my NYC flat now at 245K or 225K right now, I will probably do so. 7 years of history is short? Maybe. Do you want my flat for 100K or 150K, I dont think I can sell it for that. I would rather sit on it for as many years possible and just collect rent. It helps that I paid off the mortgage too.
What is outrageous is that someone who paid 300K for line 01, listing it for 850K all the past 3 years.
Raffi thank you for that. That is the single best thing I have read in months.
Chicago which was not a big bubble market is starting to see some good sized declines too. Per an earlier post and exchange regarding the Chicago Spire (not looking good for it):
Spire architect stops work in money dispute
October 17, 2008 at 5:44 PM | Comments (1)
The Chicago Spire is back in the news, and not for selling another of its expensive condos.
There are new questions about whether the skyscraper, which would become the tallest building in America, is going to get built.
A firm associated with project architect Santiago Calatrava has filed a lien with the Cook County Recorder of Deeds against developer Shelbourne Development Group Inc., saying he is owed $11.3 million on the project. Separately, architectural firm Perkins+Will has filed a lien seeking $4.8 million in payment.
The developers of the Spire, 400 N. Lake Shore Drive, have said more than 30 percent of the units in the 2,000-foot-tall building are sold, but they also have acknowledged being in a “slowing-down phase,” and the site has been quiet.
News of the liens was first reported by Crain’s Chicago Business. Representatives for the Spire, Calatrava and Perkins did not immediately return telephone calls for comment.
Breaking News (or breaking the bank news) the consumer is taking dive:
The University of Michigan/Reuters index, which has been measuring consumer confidence since 1952, said Friday that the index fell to 57.5 in October compared with a reading of 70.3 in late September. This was the largest monthly decline in the history of the survey. Economists surveyed by Reuters had expected a reading of 65.5.
the latest scam in the RE industry is probably what occurred in the Waverly unit. Appraisers now undervalue the unit, and the RE agent convinces the bank that is a valid price. Bank bureaucrats will then approve the sale. Agent contracts and closes quickly on the unit, and then resells (can we still use the term flip?) for a profit at a slightly higher price. You know the unit was scammed if sale records appear within the next year. Short sellers have tried the same thing, but banks drag and deny many of these sales. But they seem to have less checks and balances once the property is REO.
Does anyone know the code name for Capri South Beach in the miamidade.gov records???
Appreciate the help.
DLR
Do you want out of your condo contract, check out this novel argument:
http://www2.tbo.com/content/2008/oct/09/na-buyers-sue-to-cancel-downtown-tampa-condominium/
Those of you that know local history may know where Miami’s historic landfills and waste disposal sites are located and what has become of those areas.
Waverly 2501 contracting somewhere near the list price of $332,5000 should not suggest that is where the market value is. The 01 and 02 lines have 62 total units not including the PH level unit. Current delinquency reports for those lines shows only one unit late (#1602). That unit is owned by a couple who owns three other units in the building and they have defaulted on all. During 2008 the only two units that went delinquent on maintenance and into foreclose or short sale were units #2501 and #2802. Unit 2501 was owned by a guy who had three units at Waverly and another at Murano, he lost all of them. Unit 2802 was owned by someone who just got in over his head. That unit was sold this past August at $515,000. With only one unit currently in distress position it shows the other 61 units to be pretty solid and not about to fold like a bad deck of cards. Unit 2501 would be in contract today at $470,000 to $510,000 without question had the Agent representing it did her job.
I spoke with three Agents yesterday that had buyers who would have paid close to $500K for the unit..
It is a crime that the unit is being sold at $140K ish below value. The Agent and Appraiser is cheating Wells Fargo and Wells Fargo is cheating their shareholders.
Some Banks like WaMU and Countrywide are pricing their REO’s currently under market value and they are all selling the first week they get listed for full asking with multiple offers. Yet they are tunring over their REO inventory in a declining market thus reducing their exposure and writing off losses. I think its very smart since they are not carrying the assets on their balance sheet for several months and it is the complete opposite of cheating their shareholders…
When you compare settlement statements it is much better for a bank to get rid off their assets and stop the losses, than have an asset manager fighting to get a little more and the REO ends up sitting on the market for 6 months on their balance sheet and adding the property taxes, maintennace and possible liability (Many Foreclosures get vandalized) of carrying the property for a longer time
Alejandro
Countrywide, Wells Fargo , IndyMac and Wamu already have proven their stupidity, incompetence and negligence. Their stock values speak loud and clear to that. . During 2006 and 2007 I made calls warning each of them on specific fraud mortgages that they were about to fund and they ignored the warnings, funding hundreds of thousands over the actual value. As the owners started to default in the fourth quarter of 2007 each of these companies again ignored the warnings to move the units to foreclosure or short sale ASAP. They lied to their shareholders and it was business as usual as the whole thing was about to implode. Now that these companies are on their knees begging for bailouts or filing for bankruptcies they are dumping the units, possibly most at the best prices they can get but some of the others are being sold far below even a distressed sale value. In the case of Waverly 2501 it is criminal and again those companies are allowing it.
Can someone please explain why the banks that have foreclosed on the condo units are not responsible for paying the HOA? Aren’t they now the owner?
Reason #2,387 to NOT LIVE IN BRICKELL:
so this morning they have shut down brickell avenue for the SECOND TIME THIS MONTH to all traffic on a saturday morning so they can have yet another “march for Timmy” or some stupid cause like that.
what a great way for the city to treat those who are actually helping to absorb the insane oversupply of condos. one wakes up to enjoy a leisurely morning, and can’t get their car out due to the insane traffic snarls this causes.
if you’ve already bought down here, you are screwed. have Uncle Sucker bail you out. if you haven’t bought down here but are thinking to, don’t bother. unless you don’t mind being trapped in your unit every time the city wants to close the streets yet again.
what a third-world dump—-
To “Brickell=dump” – It is not a “March for Timmy” but “Race for the Cure”, to create breast cancer awareness. It is important cause to many people and 15,000 people were expected to participate. The walkers/runners that you saw in a pink t-shirt are breast cancer survivors.
The Race for the Cure is done in multiple cities, not just Miami.
This is the type of community involvement you want in a city! Stop complaining and go outside and join the cause!
While I am all for helping charities and all….but the “show” that some charities put on are silly and do little for their “cause”. When the “cause” really just becomes “awareness” it is all “show” and no “go”. Dr. Obvious says breast cancer is terrible and research is needed to help develop more effective treatments and preventive measures so why the need to build additional “awareness”? Just donate money….putting effort into a “cause” by walking is a tad silly to me and just save everyone money and just donate. Just think if instead of providing additional police, street department services etc. by the city, they just donated that money instead??? Sooo much ridiculous spending on charity fundraising administration. Of course anyone that complains about the traffic problems this is causing should be summarily silenced and shot on sight….just because people don’t like the inconvenience this event causes doesn’t mean they are insensitive to breast cancer patients or are pro-breast cancer “renting at plaza on brickell”. I know, let’s wear pink and that’ll make breast cancer go away…….silly corporations…
I also have first hand knowledge to one national charity and what they spend on offices and personnel to have a local presence for “awareness” and fundraising….it is shocking. Many charities are now really businesses that do little for the actual cause and a lot for administration…. Donate locally to charities you know and also donate your time to them too.
Alejandro, What about due diligence by the banks?
Mr. Waverly,
I am with you on this bro. I think it was a criminal act of negligence on part of the agent, appraiser and the bank.
Before all the bottom feeders start opening the champagne, let me temper their enthusiasm a bit. One swallow does not maketh a Spring. As Mr. Waverly pointed out, just two units out of the 61 flats in lines 01,02 are distressed. The others will hold. Eventually prices of Line 01 will settle for between $475K and $525K not withstanding any recession or deppression. But Lines 03 to 14, is a fair game.
By the way, Mr. Waverly, what is the status of the combined 01-02 on 36th floor listed for 1.9 Mil, owned by some football star?
Jon the A,
I have been wondering and asking the same the thing. FloriDuh has some stupid ass rules which completely boggle me.
Can anyone help me set up a bank so that I can avoid paying HOA’s on my units? How much minimum initial capital do I need to start a online bank out of my garage?
Brickell = Dump,
I have been crowing about this major problem in Brickell for a while. Brickell denizens argue that their n’hood is “established” (dont know WTF that means) and that makes it great. Yeah, try and get out and about in the established neighborhood.
There is just one – ONE arterial road connecting Brickell to the rest of the outside World, which is US 1 or Brickell Avenue. As it is that road can become a nightmare and clogged up at the bridge when events are taking place at AAA/Bicentannial Park/Performing arts center. If the bridge had to be opened for a passing barge or boat, then all hell breaks loose.
If you think traffic is bad now, wait until the all new 15,000 units in Brickell get filled up. People living in Brickell and Brickell Key would be cursing their everyday existance and commute to anywhere (or nowhere).
I have been saying about the above problems for a while. This is a new angle I have never thought about, until mentioned by you – giving the one and only arterial road for marches and demonstrations, thereby essentially shutting down Brickell. How stupid is that no matter how noble the cause is?
AJ, if you want, I’m sure you can buy 2201 for under $475K right now (asking 509K). Floors and counters look upgraded.
“combined 01-02 on 36th floor listed for 1.9 Mil, owned by some football star?”
If that’s Shockey’s unit, you better get that unit scrubbed up and down for various communicable diseases before moving in… absolute biohazard.
AJ said:
“Before all the bottom feeders start opening the champagne, let me temper their enthusiasm a bit. One swallow does not maketh a Spring. As Mr. Waverly pointed out, just two units out of the 61 flats in lines 01,02 are distressed. The others will hold. Eventually prices of Line 01 will settle for between $475K and $525K not withstanding any recession or deppression. But Lines 03 to 14, is a fair game.”
Can we hold you to this quote in one year??? 🙂
Also, regarding the foreclosure laws regarding HOA fees, it has all been posted before which is when a bank forecloses, it is only responsible for 6 months or 1% of the foreclosure amount, whichever is less. Hence, the bank benefits in the HOA fee sense by waiting two years, but at the same time, the lost monthly mortgage payments eclipse the savings in HOA fees. Banks ARE responsible for the HOA fees once it takes title to the condo, but have limited responsibility for back fees as I just stated. Hence, the HOA lien on the property is limited once it is foreclosed. Pretty simple concept.
I’ll remember the quote RT. I’ll be sure to mock the shit out of AJ in one year.
In regards to the one way out of brickell….the plan is to close off that area escape from new york style. Hope you’ve got a glider that can take off from the top of a sky scraper to escape!!!
But seriously, just another reason I will never buy a dump in brickell. Miami Beach is the only real estate worth considering. I don’t know too much about sunny isles though….if RT vouches for it, then it must be terrific.
JL,
I will pass the 2201 onfo onto the interested party. But their budget is 400K for a 2/2 with a great views. Thats why the loss of 2501 for 332K to someone is especially painful.
I hear you about the shockeys unit. I saw the pics of the unit and not impressed. I wonder if it is still on the market and who would pay 1.9 mil for that, assuming that anyone can buy 01 and 02 at sub 500K a pop and combine them into a beautiful single unit after spending another 100K.
Tom,
I dont get it. Are you implying that I am overly optimistic about line 01 settling at 475-525K? If so Yes, I think a relatively higher level 01 in a decent shape should not fall below 475K unless it is a distressed peoperty on a fire sale.
15,000 breast cancer survivors all dressed in pink marching down your one arterial street on a saturday morning blocking you from taking your car out…. hmmm, that one’s just too easy to rip on. it is annoying as hell every time Brickell is shut down to accomodate another march. if this city wants people in large numbers to move downtown, they need to cut this crap out. (or prepare for the residents you desire to opt for Coral Gables, Coco Grove, Miami Beach, etc. instead.) I considered buying on Brickell Key, but trying to get out of there and onto 7th St (the only way to go West) is getting more and more difficult with the increasing traffic.
I agree that every time that Brickell drawbridge is raised the already nightmare traffic on Brickell is brought to a complete standstill for sometimes up to 15 minutes– totally unacceptable. can’t even begin to imagine what it would be like if these new condos were even 25% occupied.
anyone know when that Irish Pub at One Broadway is supposed to open??
If I lived in Brickell, I would simply take a nice walk…maybe to Novecento for a Mojito!
Mark (Not Zilbert) – Sunny Isles Beach is fine…maybe it isn’t a “happening place” like other areas like South Beach, but for now, for me, for renting, have enjoyed it so far. I do need to explore more areas though before making a purchase decision, but all indications are I’ll have years to decide…. 🙂
I do think there will be (is) a global recession with few, if any, economies that won’t take at least a bit of a dip. The asset declines have touched nearly every asset class and with money being printed like it is, truly ballooning fed debt….and more “stimulus” coming (I guess it is a way to condition everyone to be a ward of the fed govt), inflation (as in U.S. dollar devaluation) won’t be far behind… So far, I have been ahead of the curve by a year or two, so now will plan on where to invest or otherwise park my cash. Right now, the concern over devaluation holding cash seems to outweigh other concerns. It really is too bad we had a commodities bubble since we are still not all the way down yet to park some wealth for protection. Where oh where should all my cash go…….not in residential investment real estate that is for sure, an owner-occupied home is on the horizon but no rush, need investments….and I know I am not the only one looking…..
RT
“I do think there will be (is) a global recession with few, if any, economies that won’t take at least a bit of a dip. The asset declines have touched nearly every asset class and with money being printed like it is, truly ballooning fed debt….and more “stimulus” coming (I guess it is a way to condition everyone to be a ward of the fed govt), inflation (as in U.S. dollar devaluation) won’t be far behind… So far, I have been ahead of the curve by a year or two, so now will plan on where to invest or otherwise park my cash. Right now, the concern over devaluation holding cash seems to outweigh other concerns. It really is too bad we had a commodities bubble since we are still not all the way down yet to park some wealth for protection. Where oh where should all my cash go…….not in residential investment real estate that is for sure, an owner-occupied home is on the horizon but no rush, need investments….and I know I am not the only one looking…..”
—
Are you me?
In case you are do tell what you decide.
—
from Muir #115
“I do not doubt that hyper-inflation is a possibility …
Yet, I’d like to time this right. Deflation could be around for a while.
Whoever asked about the $0 condo may get to see something close as we head into a strong recession/depression and few can afford taxes/HOA fees.
THEN massive inflation.
Could be the squeeze play that take most out.
—
Thoughts?”
RT,
–
Tom,
…I have 2 safety deposit boxes. PMs and cash.
I have 2 money market deposit accounts (FDIC insured)
No stocks, mutual funds.
Oh, and here’s the kicker Renter Tom, I rent…
Now, whereas the 99K Vue condo is a joke (even without a crisis) what makes you think your approach or mine is safe?
Hyper-inflation could wipe me out quickly. I own physical PMs, but those could be outlawed….
and from #239
Muir /Oct 13, 2008 at 9:33 pm Vote:
I”n a deflationary environment cash is king.
Even with inflation.”
—
and from #14
…Still, I just want those who answered on the poll to justify their answers.
I can’t see where my numbers and logic are wrong.
What is their logic if not speculation?
Unless they believe that an Argentine type hyper-inflation is just around the corner, in which case i’d like to hear about it.”
—
So we both are sitting on a pile of cash.
How come I do not have the warm fuzziness?
—
What indicators do you look for.
In the end, JL is the one that could be laughing at us?
Ok, unlikely, but there’s a point there somewhere, which you make better than me in 367.
EMERGING MARKETS
Russia falls further
Equities slide 7%, bringing the RTS stock index’s year-to-date losses to 71%. Goldman Sachs slashes forecast for Russia’s growth.
– Looks like Sunny Isles Beach will either be a safe haven for Russian money trying to escape Russia or few Russian buyers soon……
Muir – I know of several people in the same boat. One friend wants to partner up on something but we haven’t found that “something” yet (plus I’ve been busy)…he’s got multiple times my wealth and I’ve sorta given him some “sage” advice that has been spot on. There is a lot of cash out there……well for those that were in cash before the crash.
Hey…are there 25 thousand Russian buyers? how about another 5800 Russians a month for all the foreclosures? sure are a lot of Russians!!!! Are there Russians for all the people in Miami getting laid off? Wow… funny, I’ve never met someone who speaks Russian in Miami. These must be magical Russians.
What about the Germans? Euro is now 1.35:1. Looks like they missed out on the buying opportunity. Better buy now before the euro goes 1:1????
What about the oil rich Arabs???? Oil is now $72/barrel…might have to do some belt tightening. After all, they’ve got quite a few multi-billion dollar projects going on in their homelands to pay off….
I’m off to the gym….
Muir says “So we both are sitting on a pile of cash. How come I do not have the warm fuzziness?”
Welcome to the club.
Even before the threat of hyperinflation or inflation was anywhere on the horizon, I get extremely uncomfortable when cash starts piling up. That is why I go and park my money in RE when ever I have overflow cash and when a good deal comes up with cheap money financing. If inflation does kill the dollar, my mortgage balance will look like pittance.
So the following options are not attractive,
1. Bank deposits give piss nothing and are high risk value erosion options.
2. Stocks are extremely risky
3. Commodities? Look what happened to oil – down 51% since July.
You are not the only one in such a dilemma. Most people who exited the stock exchange and are looking to park their cash somewhere. RE seems to be the only logical place.
Listen Grand Theft Auto 3 and Raffi banned us from talking about things other than condos. You’re breaking the rules RT!!!!
Infrastructure, alternative energy and commodities are the next bubble…already in formative phases…gotta have a good story. The story is growth in China. That story will return in 6 months to 12 months. BTW china just posted the biggest trade surplus in its history. It’s growth is still insane. Japan is now their #1 trade partner (used to be the US). I am still a believer in decoupling. I’m sure many of you disagree though.
Anyways I’m banned from talking about it by Raffi and GTA3. So no more!
You can get a 5% CD http://www.bankrate.com
What a tool you are AJ. Listen, just don’t comment. We assume that your answer is always RE. Always. Always.
AJ said: “You are not the only one in such a dilemma. Most people who exited the stock exchange and are looking to park their cash somewhere. RE seems to be the only logical place.”
– I would disagree that RE, esp. residential RE, is the only logical place. It is a declining asset and worse, it is illiquid. History clearly shows that residential RE that one purchases as a completed home, is a terrible “investment” as it does not produce much if any “income”. It is stagnant. Stocks have eclipsed residential real estate and the RE bubble is a past performance that can be guaranteed to NOT be an indicator of future performance. So far, inflation hasn’t appeared as we are seeing broad deflation esp as energy prices plummet. There is a concern that, if the fed does take liquidity out of the market soon enough when the economy turns the corner, then yes inflation will be a more prominent risk….that is a few years down the road. Right now, cash in 3-5% interest account fully FDIC insured is KING. My concern is regarding an outlook 2 years+ out and by then I will have countered whatever inflation boogie man is out there, and right now RE doesn’t look like my choice. This is just my opinion and am putting my money where my mouth is and also I don’t have a vested interest in that my portfolio isn’t already stuck in illiquid RE…
– Well, at least the headline says “in decades” instead of “ever”….that’s positive, right?
Recession could hit South Florida hard
Between the real estate downturn and the national credit crunch, South Florida may soon face the worst recession in decades, analysts say.
Projected graph….I would have thought the way down would be about 1.5 the number of years on the way up….but then again I’ve been guilty of being too bullish and optimistic. And with this credit crisis and huge pull back of available mortgages…and rising unemployment…well, this graph could happen….. Any comments?
3.bp.blogspot.com/_wFWqWIH-WFU/SPnTDZ-G-pI/AAAAAAAAGLw/EmInfXSfe00/s1600-h/housing_projection.jpg
Click on my name for graph….
Waverly Unit 3601 has a value today of about $1.5 mil. Taking away any distress the unit has double the value of a high floor 01 or 02 line = $1.1 mil + the value of the upgrades $200K, (even thought he spent close to $400K) + 9.5 ft ceilings $50K + the status and luxury of a large PH level unit $150K.. = a fair price of $1.5M in this market. The list price of $1.9M was from at the start of 2008 when the market still had some push in it. If listed today at $1.650 a fare price would be $1.5M
Tom, Muir,
Why not buy land. No monthly HOA recurring expenses and the yearly taxes are minimal. If you can afford it, buy a waterfront lot. It will never ever let you down.
And dont forget, you are paying 1099 taxes on the interest on your CD’s, effectively reducing the already meager returns.
Mr. Waverly,
Thanks for the update on 3601-02.
RENTER TOM……what do you know about ZILLOW.COM?????? or anybody else that may have any ideas.
AJ said: “And dont forget, you are paying 1099 taxes on the interest on your CD’s, effectively reducing the already meager returns”
Yes, obviously. But fortunately only federal income tax and no Florida income tax. Those that have their primary residence say in NYC pay the NY state income tax (and NYC income tax if there is one?) and federal income tax and also the high real estate taxes on their Florida residence. The meager returns are better than 30% loss in stock market right now or real estate condos in Miami. At present the return of capital versus the return on capital is important. With low federal funds rates the govt will be encouraging money to be invested in places other than bank deposits….which was what happened when money got pushed into real estate in 2001+. When you have very low interest rates below the inflation rate you get capital allocation distortions that will harm the economy over time. We seem to be wanting to repeat that again now….
Buying a lot is not a bad idea per se, the problem is like any asset purchase, at what price? If it is already an inflated price which most are then it is a bad investment. Your up front price determines what your investment performance will be. If you have studied land development and housing prices you will understand that land prices are what really gets inflated in real estate bubbles since the actually cost of constructing the building does get out of whack that much. Understanding that basic point, I would suspect land prices are still bubbly at this point in time.
Zillow.com is a helpful resource, even if imprecise.
I am in the market for a new car and had been negotiating with the porsche dealer on a 09 C2S with PDK (semi auto gearbox). They were offering 12K off MSRP ($103k). I almost pulled the tigger on the deal ,but decided not to. I walked away. Now I am seeing 08 Porsches with a few hundred miles going for 30K below MSRP. I can get an 07 Porsche with a few thousand miles for almost 50K off. I will wait a year and get a low mile 09 C2S with PDK for 30-40K off next year.
The ferrari market is in similar situation. The cars that commanded 100K premiums are not available at MSFT. Used F430 coupes/spiders are available for 50-75K below the August 08 price. The high end car market has collapsed. There were too many over leveraged buyers who bougth these cars….cars they could not afford. People who purchase Condos as a 2nd home/winter home/etc fall in the same category of these high end car buyers. That market has collapsed and will remain in that state for a while.
This being an election year complicates matters. Wealthy people will be waiting to see who will be president. If obama wins, the wealthy will pay more taxes and that will affect their spending habits. I think people are not going to make any significatn financial decision until after the elections are over. After that, we will be on a slow road to recovery.
No matter what, Miami condo’s are not going to appreciate in value (adjusted for inflation) anytime soon.
Typo in my previous post: The first sentence 2nd paragraph should be:
The ferrari market is in similar situation. The cars that commanded 100K premiums are now available at MSRP.
waiting: Zillow.com is not very accurate. In my area, it shows prices below what the houses sold for even though the sale happened about a month ago. They were off by 50K. i.e 50K off from the last sale price which was in Aug 08.
Zillow does give you a ballpark number for the pricing and it is useful for that.
zillow does a nice job of collecting geographic info so that you can see price by area well. i have noticed a significant decrease in the number of listings on zillow in the past few months. their price estimates are scatterbrained at best, but on some units you can see actual sale price history which is informative for those of us without more detailed RE access points. zillow was sold as a new way to show and sell properties and thus had a bias towards estimating price increases. they have had difficulty properly showing the crash and maintaining a clientele which wants to sell at the highest price. not sure if they will switch and cater to bargain shoppers in the near future.
carbonblackcab – The auto industry is in free fall….. easy credit is killing them worse than condos! There will be a glut of gently used ultra lux cars for sale soon, if not already. It is going to fall hard and quick. And it is indicative of where condo prices will be going. The over leveraging by people that are/were “wealthy” or aspiring to be wealthy with the appearances surprises me. As a prolific saver I just can not comprehend the spending habits of these people…I just can not wrap my mind around that kind of thinking, I just can’t. Some of these people may lose it all.
What will hit the auto industry even more is that they had improved quality across the board so most people can own the same car for 10 years without a lot of trouble. The need for replacement vehicles will be limited mostly to styling changes, they already have the power and techno stuff. The biggest hope of the auto industry is electric cars…which if they can make gas cars significantly economically obsolete that is their best hope.
I agree with #388. In 10 years, there may not be any pure petrol driven cars anymore. Probably a shift to all electric is the only way to save auto industry. I think it will happen. Have you guys seen the 109K all electric Tesla? Absolutely mind blowing. Even the Dodge EV electric sports car. If they can cut the price to half or less (which will definitely happen with technological advances in the next 10 years) All the millions of gas cars would be replaced and imagine what that would do to the economy and the auto industry.
AJ – I agree. The streets will look a lot different in 10 years since, if done right, electric cars should make gas cars economically obsolete like a 10 year old computer. The key is improved battery technologies and their are several major advancements coming, esp the nano anode technology that will give current lith ion batteries the same size and weight 10x’s the charging capacity which would allow the Telsa sports car to get 2,500 miles per charge versus the current 250 miles. Amazing and is one of the few tech advancements to get excited about…including of course the new MacBook Pro’s…
Another car advancement coming is the solid “foam” tire technology that uses just a little bit of air to adjust ride comfort but otherwise does not need air. No more need for lugging around the weight and space of a spare tire….. And of course fewer roadside assistance calls, fewer accidents, fewer traffic jams caused by tire problems, lower insurance rates, less people maimed or killed….Simply changing tire technology will save a ton of money.
In the meantime, condo prices will continue to decline… 🙂
1. Does ANYONE know the code name for capri south beach on the miamidade.gov website?? I want to look at the closing prices.
2. My financial advisor says I should park alot of my cash in tax-free municipal bonds? Since we have such a savvy board here, I would like to hear your thoughts.
Well, you know that some municipalities are defaulting on the debt right? An entire county in Arkansas defaulted. If you like fixed income and you have hundreds of thousands or millions I would buy preferred shares of Goldman Sachs or MS or a commercial bank paying a 6-10% coupon and then short the common shares. That way you get protection from stock price movement and you get the 6-10%
Zillow laid off a quarter of its workforce last week BTW
Re: Graph in Post 377:
Keep in mind that the graph is based on national data. Add to this the rampant fraud, over speculation, over building, alta A and ninja loans, sputtering global economy and strengthening US dollar and South Florida real estate prices could easily drop another 50%.
Renter Tom,
Construction costs have dropped dramatically here in the MidWest. I wonder if eventually it will trickle down to SFL. I am a custom home builder and I just finalized a contract for a new home to be comstructed for 575K, that’s a ton of loot for Omaha, Ne. The small local banks have no problem giving construction and perm loans if you have 700 fico and 10% down. This particular home the bank appraised at 635K. They said that was even after a 5% forward looking depreciation. The banker was surprised that our costs had dropped that much. Costs and the fact that our margins are now 8% instead of 12-15% have really pushed down the cost of new construction around here. I am participant here because we are going to buy a place in or around Miami in the near future.
CB
Clark/Un-Related.
I have seen a copy of the contract for the Everglades on the Bay and the version I saw does have a Default section in Paragraph 13 which basically states that if the purchaser fails to perform any of the Purchasers obligations under the agreement (including closing payments) then you’re in default. The same section also states that should you be in default after having paid 15% of the purchase price then the seller will refund to the purchaser any amount which remains from those payments after subtracting 15% of the purchase price.
I also noticed that Paragraph 7 covering the completion date/pre-sale contingency states that the Residence will be substantially completed not later than September 2008 subject to delays caused by acts of God, lack of materials etc. As we’re now in mid-October and still haven’t closed, does this mean that you have a case for cancelling the contract?
Sorry if this is a double post.
–
Renter Tom /Oct 18, 2008 at 7:58 pm Vote:
“Projected graph….I would have thought the way down would be about 1.5 the number of years on the way up….but then again I’ve been guilty of being too bullish and optimistic. And with this credit crisis and huge pull back of available mortgages…and rising unemployment…well, this graph could happen….. Any comments?”
–
I’ve seen this graph before and it has always caused me to pause and think.
To answer your question, yes, it could.
–
Here’s something from the FED from 2003.
A warning of a RE bubble in 2003 from the FED!
http://www.frbsf.org/publications/economics/letter/2003/el2003-06.html
It attempts to answer your question different ways.
Here’s a snippet:
“One of the convenient features of the house price/rental value ratio in Figure 3 is that it lends itself nicely to simulations. Therefore, we can answer the question of how far prices have to fall in order to force the house price/rental value ratio back to its long-run average. An instantaneous correction would require house prices to fall by 11% to restore the long-run relationship between house prices and rental values. However, such an abrupt correction would be unprecedented for the U.S. house price series.”
–
Again seems laughable this was from 2003; nevertheless, the study is, in my opinion, indispensable for RE investments in SFH/multi dwelling. Really goes to your question.
–
I’ve always thought of 1997 as the year to measure against.
The change in once in a lifetime exemption occurred first, before repealing Glass-Steagall Act, before Greenspan’s dinners with George….
With no crises to deal with, I would have said take 1997 and add inflation.
Or take repeal date of Glass-Steagall Act and add inflation.
Of course, with the FED actively lowering interest rates with the stated intention by former FED members of making anything but stocks unattractive( http://seekingalpha.com/article/100125-three-reasons-for-bear-fast-money-recap-10-15-08 ) who knows what will happen.
(If anyone can point out where the FED has a written chartered mandate to prop the NYSE by lowering rates to “1/2% or a tenth if needed to make the market more attractive” I’ll give them $500.)
–
The 2003 Fed study is a great read.
–
thx for your answer to my q.
AJ, I appreciated you answer also.
Just a rendom comment about the market.
No one can really predict what is coming, at least until one of the 2 presidential candidates is elected. Their vague plans to resolve the housing issues are, well, vague.
I believe we still have MANY more years of declining prices. (HELP ME EXPAND THE LIST BELOW)
1.All the inventory is slowly passing from individuals hands to institutions. The latter are trying to minimize their loses creating a bottleneck as more properties are going into their systems than what they are unloading. BAD FORMULA. They are already overloaded with property and are yet to pocket many more. Being such big institutions… By the time their foreclosure and short sale NEGOTIATORS realize this, their portfolio of properties will have, maybe, tripled. THEN IS WHEN THEY’ll SLASH PRICES!
2.The banking (CREDIT) industry, in my opinion, will take its good time, to forget the unbearable burn they went through. They wont let another one happen, not in a long shot. NOT EVEN WITH $700 Billion!
3.Everyone’s credit history is now messed up making it even less likely for these banks to ease they’re already strictly overseen underwriting and extend credit. NOW, ORDINARY PEOPLE CANT BUY CHEAP HOUSING!!!
4.AND THERE ARE, i already lost the count, OF NEW UNITS COMING INTO THE MARKET!
MY FRIENDS, I SEE A LOOOONG and BUMPY RIDE AHEAD OF US BEFORE WE START SEEING SOME PRICE INCREASES.
“Construction costs have dropped dramatically here in the MidWest. I wonder if eventually it will trickle down to SFL. I am a custom home builder and I just finalized a contract for a new home to be comstructed for 575K”
Custom builder, what would have been the price at the height of the market circa late 2005?
Response from AJ: “But but but….you guys won’t have my view!!! You only live once, why be patient and rent now when you can OWN? Umm, what about all the wealthy Russians??? Umm, real estate has never gone down in price….”
It is my belief that municipal bonds are not a good place to be generally speaking right now. Like Mark said many have and will default. It also depends on the yield, it would take a huge yield to make me consider them. And another thing you have to consider is the prospect of inflation. If the government keeps on throwing money at the crisis then we will see a debasement of the dollar until it reaches the point where the Fed will have to raise rates much much higher. Remember, Helicopter Ben is an expert on the Great Depression and he has said he would be willing to drop dollars from a helicopter to keep the system going. The question is can he print money fast enough to counteract the natural credit tightening and deflationary forces?
Williams is auctioning several condo’s Monday. Those Jade taxes and HOA fees are over $3,000 a month–add a mortgage and wow—sorry AJ but I am changing my name to renter richard
Richard. I think there are several “Jade” condos. Which ones are you referring to? I know the two Jade’s in Sunny Isles Beach are expensive….Jade Beach and Jade Ocean….don’t know how closings will go for these two buildings, they look nice, but sooo expensive!
Go ahead and jump in, there is plenty of rentals available and room for a Renter Richard!
900 Biscayne…..I have counted all the deeds given since the first closings on May 1, and there have been approx. 170 granted out of 500 total units according to Miamidade.gov….In your opinions, how do you think 900 is faring?? It has been almost 6 months since closings began….do most buildings finish the majority of their closings in this time, or is it normal for the closing process to take place over a much longer period of time than 6 months???. Would sure like some feedback to see if I am in for some problems here at my building. Thanks all.
Brickell=Dump,
I’m sure Kendall never closes its streets to raise money for worthwhile causes, why don’t you go live there? You sound like more of a cachunka suburban kind of dwellar to me, you’ll probably be happier there. I live on Brickell and have to disagree about the one arterial comment as well. You have Brickell Bay Drive, South Miami Avenue and SW 1st Avenue and I use them as alternatives 70% of the time. There’s actually a whole pattern of streets that tie in to adjacent areas you can use if you know about them.
It actually heartens me when events like “Race for a Cure” are held and makes me feel I almost live in a real city…how many people bitched in Chicago when they held the Chicago Marathon last weekend? Very few I doubt. 2 hours inconvenience is a silly reason to bitch.
As a pedestrian though, I must admit that no it is not a consistantly rewarding experience yet, but as we have discussed this topic ad nauseum on this blog, and I think we can all agree it is headed in the right direction as are the other areas of downtown.
I have little compulsion to comment on this blog anymore since it’s been hijacked by some very dominant people who beat down and personally insult anyone who dares to contradict their opinions, but I did want to add my 2 cents on this topic since it is dear to my heart.
Will the real AJ please stand up, please stand up, because I can tell whoever is commenting on his behalf is not him in any way, shape or form.
I agree, the argument about Brickell being poorly communicated or prisioner of the river bridges is absolute bs. brickell condos go all the way to rickenbacker cswy. there are many different ways to avoid traffic. get on s. miami avenue, 7th street, easy to hop on I-95 and cross the river at 70 mph if you wish. but yes, brickell=dump please stay away from brickell, probably best for all of us.
LaLa,
Welcome back. We miss you (At least I do). So please don’t stay away.
Lala,
I missed you too. I am also tired of all the negative people on this blog.
dlr,
That makes it 34% closing in 6 months. That is a very poor showing. I think, when a building closes 2/3rd (66%), it can start functioning. Popular opinion is that construction loans get paid off when the building gets sold between 70% – 80%. At this rate, Terra Group is in serious trouble with 900. It is such a pity especially because 900 is such a fantastic building.
If 900, which is in the same class as the Super Six Ultra Lux buildings has such a problem, even though it has (and will have ) 8-12 month head start compared to the Super Six yet to open, I cannot imagine the Super Six buildings faring better (more than 34%) than 900.
Brickell=dump,
You may want to get out of dodge tomorrow for when Barrack comes to Bayfront Park, or hole-up, whichever…There will be massive chaos and traffic tie-ups then…G** D**n city living…
Thanks Aj and Visionary, I’m feeling forclempt, talk amongst yourselves:p I’ll keep reading at least…
AJ
please do not refer to Icon as part of your super six. any building that has eastern island inspired columns at the entry way belongs in disney world and nowhere else
900 while nice, can’t avoid this market nosedive. The big picture issue is what’s going to happen when Icon Brickell flops. That will really shake people up.
I checked out the 3 “JADE” units being auctioned off by Williams Auction today at 430pm…still trying to figure out if the price is worth it. #908 had the best layout…but a view of the parking lot. #2309 and #1503 are the same layout..just mirror images of each other. Both have bay views…but 2309 is still “developer ready”…no flooring…mirrors in the bathroom…light fixtures, etc.
According to Williams’ website…the last auction at the Jade for a 2/3 went for $405k. At first this price sounded low (compared to the 1.4mil previous sale price). But when you factor in the 1300/mth in maintenance…the 12-15k/yr in taxes…will cost more than 30k minimum (assuming no mortgage). I think its safe to say it is nearly impossible to obtain a mortgage at the Jade…which only leaves cash buyers to the rescue. I for one have been sitting on the sidelines for years…I really like the Jade..and could easily afford a mortgage on 400k…and now the irony is I can’t get financing! (with 20percent down and 800+Fico score).
Many on this blog argue as to when the bottom will be formed in the Brickell/Downtown Market. I think there is no way we will have a bottom until banks start lending money again! The only sales occurring are “CASH”…and with the declining stock market/bank failures….people have a lot less of that too!! lol
Here is a Bank United Blacklist:
DATE CONDOMINIUM REASON ADDRESS
01/14/08 50 Biscayne High Investor Concentration & declining market value Miami, FL
08/28/07 600 Biscayne High Investor Concentration & declining market value Miami, FL
08/28/07 1650 Biscayne High Investor Concentration & declining market value Miami, FL
08/28/07 900 Biscayne Bay High Investor Concentration & declining market value Miami, FL
01/14/08 1800 Biscayne Plaza Declining Market Value Miami, FL
01/14/08 500 Brickell Declining Market Value Miami, FL
01/14/08 1390 Brickell Key Declining Market Value Miami, FL
01/14/08 1001 Center Declining Market Value Miami, FL
01/14/08 1800 Club Declining Market Value Miami, FL
10/22/07 Allure High Investor Concentration 200 Sahara Ave Las Vegas, NV
08/28/07 Altos de Miami High Investor Concentration & declining market value Miami, FL
01/14/08 Asia Declining Market Value Miami, FL
01/14/08 Atlantis Condo Declining Market Value Miami, FL
01/14/08 Avenue Declining Market Value Miami, FL
01/14/08 Axis on Brickell Declining Market Value Miami, FL
01/14/08 Bay Lofts Declining Market Value Miami, FL
01/14/08 Bayshore Place Declining Market Value Miami, FL
01/14/08 Beacon Declining Market Value Miami, FL
06/03/99 Belle Plaza Efficiency
01/14/08 Biscayne Tower Declining Market Value Miami, FL
01/14/08 Blue Declining Market Value Miami, FL
01/14/08 Boulevard Condos Declining Market Value Miami, FL
01/14/08 Brickell Bay Club Declining Market Value Miami, FL
01/14/08 Brickell Bay Tower Declining Market Value Miami, FL
01/14/08 Brickell Biscayne Declining Market Value Miami, FL
01/14/08 Brickell City Center Declining Market Value Miami, FL
01/14/08 Brickell Commons Declining Market Value Miami, FL
01/14/08 Brickell East Declining Market Value Miami, FL
01/14/08 Brickell Forest Declining Market Value Miami, FL
01/14/08 Brickell Harbour Declining Market Value Miami, FL
01/14/08 Brickell Key Declining Market Value Miami, FL
03/10/99 Brickell Key I
01/14/08 Brickell Mar Declining Market Value Miami, FL
01/14/08 Brickell on the River High Investor Concentration & declining market value Miami, FL
01/14/08 Brickell Park Declining Market Value Miami, FL
01/14/08 Brickell Place Declining Market Value 1865 Brickell Ave Miami, FL
01/14/08 Brickell Place Declining Market Value 1901 Brickell Ave Miami, FL
01/14/08 Brickell Place Declining Market Value 1915 Brickell Ave Miami, FL
01/14/08 Brickell Place Declining Market Value 1925 Brickell Ave Miami, FL
01/14/08 Brickell Station Declining Market Value Miami, FL
01/14/08 Brickell Tennis Club Declining Market Value Miami, FL
01/14/08 Brickell Townhouse Declining Market Value Miami, FL
01/14/08 Brickell View Declining Market Value Miami, FL
01/14/08 Brickell Vista Declining Market Value Miami, FL
01/14/08 Bristol Tower Declining Market Value Miami, FL
01/14/08 Capital at Brickell Declining Market Value Miami, FL
09/16/05 Captiva – F BKU Exposure Met 26% 10700 66 St, Miami, FL
01/14/08 Carbonell Declining Market Value Miami, FL
07/11/07 Carriage Hills Pending Litigation: Breach of Contract 127 Briarwood Circle, Hollywood, FL 33024
01/14/08 Cima Condos High Investor Concentration & declining market value Miami, FL
01/14/08 Cite Declining Market Value Miami, FL
01/14/08 City 24 Declining Market Value Miami, FL
01/14/08 Club at Brickell Declining Market Value Miami, FL
01/14/08 Commodore Bay Declining Market Value Miami, FL
01/14/08 Coral Station at Brickell Declining Market Value Miami, FL
01/14/08 Costa Bella Declining Market Value Miami, FL
01/14/08 Courts Brickell Key Declining Market Value Miami, FL
01/14/08 Courvosier Courts Declining Market Value Miami, FL
01/14/08 Cynergi Declining Market Value Miami, FL
08/17/07 Delray Estates Condominium Does not meet guidelines
10/22/07 District at Green Valley High Investor Concentration 215 & Greeen Valley Pkwy Las Vegas, NV
01/14/08 Downtown Lofts 4 High Investor Concentration & declining market value Miami, FL
08/12/04 Eliot House Condominium Engineering report
01/14/08 Emerald at Brickell Declining Market Value Miami, FL
01/14/08 Empire Towers High Investor Concentration & declining market value Miami, FL
01/14/08 Epic-Dupont High Investor Concentration & declining market value Miami, FL
01/14/08 Espirito Santo Plaza Declining Market Value Miami, FL
01/14/08 Everglades on the Bay High Investor Concentration & declining market value Miami, FL
01/14/08 Filling Station Lofts Declining Market Value Miami, FL
01/14/08 Flagler First Condo High Investor Concentration & declining market value Miami, FL
01/14/08 Fortune House Declining Market Value Miami, FL
01/14/08 Four Ambassadors 1 Declining Market Value Miami, FL
01/14/08 Four Ambassadors 2 Declining Market Value Miami, FL
01/14/08 Four Ambassadors 3 Declining Market Value Miami, FL
01/14/08 Four Ambassadors 4 Declining Market Value Miami, FL
01/14/08 Four Seasons Hotel & Tower Declining Market Value Miami, FL
04/06/99 Golden Bay Club 65% Investor
01/14/08 Houses of Brickell Declining Market Value Miami, FL
01/14/08 Ice Declining Market Value Miami, FL
01/14/08 Ice 2 Declining Market Value Miami, FL
01/14/08 Icon Declining Market Value Miami, FL
01/14/08 Imperial Declining Market Value Miami, FL
01/14/08 Infinity at Brickell Declining Market Value Miami, FL
01/14/08 IOS on the Bay Declining Market Value Miami, FL
01/14/08 Ivy High Investor Concentration & declining market value Miami, FL
01/14/08 Jade Residences at Brickell Declining Market Value Miami, FL
06/14/99 Kenland Bend South 42% Investor
03/10/99 Lake Beach Condo High Investor Concentration
11/16/04 Lakewood Village High Investor Concentration
01/14/08 Latitude on the River High Investor Concentration & declining market value Miami, FL
01/14/08 Loft High Investor Concentration & declining market value Miami, FL
01/14/08 Loft II High Investor Concentration & declining market value Miami, FL
01/14/08 Lofts on Brickell 1 Declining Market Value Miami, FL
01/14/08 Lofts on Brickell 2 Declining Market Value Miami, FL
01/14/08 Los Suenos De Brickell Declining Market Value Miami, FL
01/14/08 Lyghte Miami Condos Declining Market Value Miami, FL
01/14/08 Lynx High Investor Concentration & declining market value Miami, FL
01/14/08 Madison High Investor Concentration & declining market value Miami, FL
10/22/07 Manhattan Condos High Investor Concentration E. Serene Ave Las Vegas, NV
01/14/08 Marina Blue High Investor Concentration & declining market value Miami, FL
01/14/08 Mark Declining Market Value Miami, FL
01/14/08 Marquis Miami High Investor Concentration & declining market value Miami, FL
01/14/08 Mary Brickell Village Declining Market Value Miami, FL
01/14/08 Mayfield Declining Market Value Miami, FL
07/31/07 Meridan at Hughes Center Condo BKU Exposure Met Las Vegas
08/28/07 Met 1 High Investor Concentration & declining market value Miami, FL
08/28/07 Met 2 High Investor Concentration & declining market value Miami, FL
08/28/07 Met 3 High Investor Concentration & declining market value Miami, FL
01/14/08 Metropolitan Declining Market Value Miami, FL
01/14/08 Midtown Miami Declining Market Value Miami, FL
01/14/08 Mint at Riverfront High Investor Concentration & declining market value Miami, FL
01/01/01 Mirage Condominium Pending Litigation: Structural
01/14/08 Neo River Lofts High Investor Concentration & declining market value Miami, FL
01/14/08 Neo Vertica High Investor Concentration & declining market value Miami, FL
10/22/07 Newport Lofts High Investor Concentration 903 S. Casino Center Blvd Las Vegas, NV
01/14/08 New Wave Declining Market Value Miami, FL
03/01/06 Nu River Landings Will not subordinate 511 SE 5 Ave, Ft. Lauderdale, FL
01/14/08 Oasis on The Bay Declining Market Value Miami, Fl
01/14/08 One Broadway Declining Market Value Miami, FL
01/14/08 One Miami Declining market value Miami, F
01/14/08 One Miami West High Investor Concentration & declining market value Miami, FL
08/28/07 One Miami High Investor Concentration Miami, FL
01/14/08 One Plaza Declining Market Value Miami, FL
10/22/07 One Queensridge Place High Investor Concentration 9101 W. Alta Las Vegas, NV
01/14/08 One Riverview Square High Investor Concentration & declining market value Miami, FL
01/14/08 One Tequesta Point Declining Market Value Miami, FL
01/14/08 Onyx 2 Declining Market Value Miami, FL
01/14/08 Opera Tower Declining Market Value Miami, FL
01/14/08 Overtown Miami High Investor Concentration & declining market value Miami, FL
01/14/08 Palace Declining Market Value Miami, FL
10/22/07 Panorama Towers High Investor Concentration 4525 Dean Martin Dr Las Vegas, NV
01/14/08 Paramount on the Bay Declining Market Value Miami, FL
01/14/08 Paramount Park High Investor Concentration & declining market value Miami, FL
01/14/08 Parc Lofts Declining Market Value Miami, FL
10/22/07 Park Avenue Condo High Investor Concentration 15-91 E. Agate Ave Las Vegas, NV
01/14/08 Park Place Declining Market Value Miami, FL
01/14/08 Platinum Declining Market Value Miami, FL
01/14/08 Plaza on Brickell Declining Market Value Miami, FL
01/14/08 Point at Brickell Declining Market Value Miami, FL
01/14/08 Point View Declining Market Value Miami, FL
01/14/08 Pompeii Declining Market Value Miami, FL
01/14/08 Premiere Towers Declining Market Value Miami, FL
03/23/99 Provincial Gardens 50% Investor & Weekly Rentals
03/20/99 Pyramids of Key Biscayne Foreclosures
02/23/07 Q Club Condo Hotel BKU Exposure Met 505 N Ft. Lauderdale Beach Blvd, Ft. Lauderdale, FL
01/14/08 Quantum on the Bay Declining Market Value Miami, FL
10/22/07 Regency Towers High Investor Concentration 3111 Bel Air Dr Las Vegas, NV
01/14/08 River Breeze Declining Market Value Miami, FL
01/14/08 River House Lofts High Investor Concentration& declining market value Miami, FL
01/14/08 River Oaks High Investor Concentration & declining market value Miami, FL
01/14/08 Riverfront High Investor Concentration & declining market value Miami, FL
01/14/08 Riverfront Wind High Investor Concentration & declining market value Miami, F
01/14/08 Sail Declining Market Value Miami, FL
03/10/99 Sail Boat Cay High Investor Concentration
03/10/99 Samari Lake East High Delinquency
01/14/08 Santa Maria Declining Market Value Miami, FL
03/10/99 Seacoast Towers High Investor Concentration
03/27/06 SIAN Ocean Residence Condo Does not meet guidelines 4001 S Ocean Drive, Hollywood, FL
10/22/07 Sky Las Vegas High Investor Concentration 2700 Las Vegas Blvd. S. Las Vegas, NV
01/14/08 Skyline Mary Brickell Village Declining Market Value Miami, FL
01/14/08 Skyline on Brickell Declining Market Value Miami, FL
01/14/08 SMA Declining Market Value Miami, FL
01/14/08 Soeil Miami Declining Market Value Miami, FL
10/22/07 Soho Lofts High Investor Concentration 900 Las Vegas Blvd S. Las Vegas, NV
01/14/08 Solaris Brickell Bay Declining Market Value Miami, FL
01/14/08 South Miami Ave Condo Declining Market Value Miami, FL
01/14/08 Summit Brickell Declining Market Value Miami, FL
01/14/08 Star Lofts Declining Market Value Miami, FL
06/03/99 Sunset Harbour Pending Litigation: Unsafe Balconies
01/14/08 Ten Museum Park High Investor Concentration & declining market value Miami, FL
08/02/99 The Carriage House Litigation
11/10/04 The Jade Condominium BKU Exposure Met
02/24/03 The Mark on Brickell Bay Pending Litigation: Structural
01/01/01 The Palace Condominium Pending Litigation: Structural
08/09/07 The Resort at Singer Island BankUnited exposure met 3800 North Ocean Drive, Riveria Beach, FL 33404
03/10/99 The Village of Kings Creek Condo High Investor Concentration
01/14/08 Three Tequesta Point Declining Market Value Miami, FL
10/22/07 Turnberry Place High Investor Concentration 2877 Paradise Road Las Vegas, NV
10/22/07 Turnberry Towers High Investor Concentration 222 Karen, 322 Karen Las Vegas, NV
01/14/08 Two Tequesta Point Declining Market Value Miami, FL
01/14/08 Uptown Lofts Declining Market Value Miami, FL
03/23/99 Vanderbilt Gulfside 70% Investor
03/13/07 Venetian Bay Villages Condo 67% Investor concentration/65% delinquency on HOA dues. 2280 San Vital, Kissimmee, FL 34741
01/14/08 Villa Brickell Declining Market Value Miami, FL
01/14/08 Villa Magna Declining Market Value Miami, FL
01/14/08 Villa Regina Declining Market Value Miami, FL
03/10/99 Village at Hawk’s Cay
03/23/06 Villagio Condo in Port Orange BKU Exposure met for Investor and Second Homes Port Orange, FL
01/09/08 Vue at Brickell Foreclosures and declining Value 1250 S. Miami Ave Miami, Fl 33130
01/14/08 Wind By Neo High Investor Concentration & declining market value Miami, FL
01/14/08 Yorker Declining Market Value Miami, FL
jcrimes,
Icon is super only because of the gargantuan number of units (I think 1600) it is about to dump on the market. Other than that there is nothing super about it.
Epic & Paramount Bay are nice looking though. Infinity, Everglade and Marquis look alright.
DLR,
Does 900 feel even 10% occupied in terms of foot traffic right now?
AJ
Epic is legit. I will buy one of the river loft units before it’s all said and done (unless something better on the beach becomes available)
Mike K:
While prices are low, why don’t you borrow on “hard money” terms (say, 15% interest) for a couple of years and then refinance (on conventional terms) when banks start lending again? There must be some “hard money” lenders out there….for someone like you with $30K and great credit. Wouldn’t you be ahead of the game? Sure, much higher debt service for a couple of years but you’d probably pay double the price 2-3 years from now.
Mike K:
Sorry. I misread your post. With 20% cash down ($80K), however, it should be even easier for you to get a high interest acquisition loan for the $320K balance assuming, of course, there are “hard money” lenders out there for individual condo purchases.
I think there does need to be more “positive” posts that highlight the wonderful features of some of these condos and a real shot at what prices (per s.f.?) that will make them a good buy. There are some great buildings, but as nobody can deny, many were way over priced like most Florida real estate. So perhaps, we should all agree that the bubble has burst and concentrate on where prices will realistically land for a particular building and highlight the buildings amenities and what the cost is of those amenities in HOA dues.
I’ll start, new construction on the beach in Sunny Isles Beach at $200-$300/s.f. will have me interested…
I would also like to know more about the “$0” priced condos from the other real estate bust and what were the factors in that and what condos/houses got that low.
JL….I believe there are only 37 full time residents, so to answer your question, the place feels deserted.
RT
the $0 condso was a function of several things…somewhat in the following order
1) back in the 80s, preconstruction sales requirements prior to funding of the construction loan were significantly reduced. e.g., you could have a 40% presales requirement for a building. couple that with the fact that the presale deposit wasn’t today’s typical 20% of the purchase price. thus, inventory was coming out of the ground at an increased pace with no guarantee that end users would actually show up.
2) prices boomed, end users couldn’t move in
3) banks ended up owing significant inventory once people realized the demand simply wasn’t there (while others just chose to walk away)…now the banks were on the hook for HOA/mnt and taxes for all of this inventory. some buildings were literally fully owned by the banks.
4) massive drain on capital forces the banks to purge the inventory at any cost. some banks collapsed, others merged.
RT,
I know you are a big fan of McCain, so posting this clip of what great things McCain has done during the S&L crisis. I respect most of your opinions, but this one, you are so wrong.
http://www.keatingeconomics.com/
Samson:
I have thought about possibly getting “Hard Money” financing…would you recommend any places/persons to contact in this regard?
In my humble opinion: Once this deflationary (de-leveraging) period ends…we will encounter a severe (and possibly hyper) inflationary period. While paying 15 percent on a mortgage might seem high now…I think its only a few years (if not sooner) away from being the norm. With the inflation…assets prices will rise…but only on a “Nominal” basis (won’t have any additional purchasing power). My 400k condo at the Jade (purchased today) might be worth 600k in 3-5years from now…but only b/c it will cost $100 for a Big Mac, and $50 for a Soda…
Touché Roger, see:
http://www.youtube.com/watch?v=1RZVw3no2A4&feature=iv&annotation_id=event_597487
RT
“So perhaps, we should all agree that the bubble has burst and concentrate on where prices will realistically land for a particular building and highlight the buildings amenities and what the cost is of those amenities in HOA dues.
I’ll start, new construction on the beach in Sunny Isles Beach at $200-$300/s.f. will have me interested…
I would also like to know more about the “$0″ priced condos from the other real estate bust and what were the factors in that and what condos/houses got that low.”
-answer-
from jcrimes
“2) prices boomed, end users couldn’t move in
3) banks ended up owing significant inventory once people realized the demand simply wasn’t there (while others just chose to walk away)…now the banks were on the hook for HOA/mnt and taxes for all of this inventory. some buildings were literally fully owned by the banks.
4) massive drain on capital forces the banks to purge the inventory at any cost. some banks collapsed, others merged.”
–
For #1 to Greenspan, easy credit, mania….
Just fill in the blank.
Does it sound similar?
—
Tom
From my experience on a building I saw today in Miami:
1. Original builder died of a heart attack.
2. Next builder finishes the condo high-rise
3. This builder goes bankrupt mid sales.
4. The bank, Lehman Brothers, takes ownership.
5. Yes, Lehman Brothers goes belly up.
6. Today:
a) Broker who used to represent 2nd builder and then sold units for Lehman, does not know “who bank is now” thus no offer could be offered, believes will be sorted out.
b) Mgmt company is “very worried” about consequences of Lehman’s collapse.
c) building is running a deficit of 30K a month (under 120 units)
—
This building is doing much better than many in Brikell. How low could it go for?
$50-125 sq/ft
Just too unpredictable.
—
The trend graph is your friend, you can be right at 100s of different price points.
So how lucky does anyone feel to predict an exact bottom point?
–
I really just do not know, and believe that no one else knows.
But just how much downside is there if I miss the exact bottom? Not much I guess.
RT,
Your video is deliberately misleading. I’m an independent conservative and I recognize unbalanced GOP spin when I see it. Your video places all the blame at the Democrats’ and Obama’s feet despite the fact that equal blame falls on the current Republican administration and McCain (including the McCain campaign’s superlobbyist who received $2 million in GSE funds).
Banks did not go bust because GSE guarantees were worthless (they aren’t) or because banks made subprime mortgages. They are going bust because they are choking on over $55 trillion in dodgy credit default swaps, zillions of dollars in neg-am loans and alt-A mortgages, ridiculously high leverage ratios, Greenspan-enabled high octane liquidity injections, and a slew of crazy, off balance sheet “investments” enabled by the repeal of Glass-Steagall. The chief cheerleaders were Bear Stearns, Lehman Bros, the National Association of Realtors, George W, and Schumer, et al. Main Street, Wall Street and 1600 Penn Ave share the blame with Congress, the REIC and the GSEs.
This is not a D problem or an R problem it’s an all-American problem created by a pervasive free-lunch mentality.
Mike K.
If there is a hyperinflaionary period then a more liquid asset than housing would make sense: gold. Unless you are buying a single unit to live in.
In real terms housing will be a terrible investment. If you are looking for tenants during such a period expect payment in the form of canned food
Muir – Crazy story on that building for sure! I agree that missing “the bottom” by even a year won’t make much of a difference especially in real dollar terms, esp. if one is a cash buyer then high mortgage interest rates would only serve to drive condo prices down. The much bigger danger, as the second builder in your example shows, is to be a knife catcher in this environment. The caution flag should be waving for anyone that wants to use a lot of leverage without their own savings/capital to back up a buying decision. It is the people that levered themselves with little cushion/savings that are getting killed. I for one am still going to wait this market out…in the meantime I will be banking $35K-$40K per year by renting (more with price declines factored in)……..When living in a beautiful condo is on a 1/2 off sale, why buy?
“In real terms housing will be a terrible investment. If you are looking for tenants during such a period expect payment in the form of canned food”
…or in Obama vouchers.
Was at the auction today for Jade units. IMO…the peeps that won overpaid drastically.
Unfortualtey, one guy I bid on himself twice to up the price. He ddin’t seem to smart and out of towner so I guess he really wasnt aware of the real situation and was prob skwed by the higher sold prices before.
Eveyone else got jacked. 675k, 575k and 350k…the higher went to ther units facing the bay and the lowest went to the one facing the parking lot which wasn’t such a great view and wasn’t that impressive IMO.
So add the 5% premium and havign to pay all the lcosing costs it’s not a good deal at all.
I think the people that won weren’t very skilled or knowledgable of the true market. HOA fees run 1200+ for the unit plus the taxes are assesed super high in these units and I don’t see Miami -Dade reassesing these quickly.
To give you a comparision the Mark units which is next to JAde 2 of them sold for 90k and 120k. Granted not in the same leaugue but it gives the true value of what I think is fair price and Jade with a higher premium but not that much higher
I loved it that some realtors were congratulating the winner of 908 who won at $350k saying he got a great deal. How far from the truth is that! It’s a good deal if you think that the unit was discounted from what it sold before. But the realit is what it sold before is a falacy! It’s was not a real number so it’s irrelevant. What it sold before is garbage. Those #’s don’t mean shit. It’s what it sold before past tense. This is real time so the #’s need to be adjusted.
Either way my 2 sense..if you bought n this auction today for Jade you got burned. If you bought JAde in the hey day you were idiot or were just mislead by a a market that was fooling most of us.
Either way best of luch we’ll prob see you in foreclosure soon cause you will overpay once you factor in HOA/Taxes and Mortgage.
Mike K.
As for hard money lenders, I’ll look around. And I’m no economist, but if during the coming hyper-inflationary times you predict a big Mac goes from $5 to $100, then your $400K condo goes to $8M. No?
It doesn’t consistently work like that. We would get a new currency within 6 months. It is likely a law would be passed to denominate all debts in the new currency. This is what has happened historically.
The best kind of situation for debtors is severe inflation but not hyperinflation (a period like the 70s). In this situation it is entirely possible that housing continues to fall as purchasing power erodes. People can’t demand raises like in the 70s so more and more money will go to paying for food and energy (like in developing nations). Less money will be left for housing…
$350K at JADE is a steal…$200 per square foot….I lived there for two years and it is a beautiful building……908 won’t have a bay view, but you use the same gym, pool, concierge as the folks that paid big bucks…..you can also file to get the taxes lowered as several folks have been successful in doing this year.
Mike K
give me a contact email and I can put you in touch with several hard equity lenders
Interesting Article. Looks like MB is getting a new tenant soon.
Kennedy Funding Closes $10.14 Million Loan for Waterfront Commercial Space in Miami
Last update: 11:40 a.m. EDT Oct. 20, 2008
MIAMI, Oct 20, 2008 /PRNewswire via COMTEX/ — In the midst of the nation’s worst credit crisis, the Hackensack, NJ lender closes loan for space in 60-story condo tower overlooking Biscayne Bay
Kennedy Funding, one of the nation’s largest direct private lenders, has closed a $10.14 million loan to 888 Biscayne Enterprises, LLC. The loan is for the acquisition of the four-story commercial space in the recently completed Marina Blue Condominium building overlooking Biscayne Bay at 888 Biscayne Boulevard in Miami, Florida. The unfinished commercial space is comprised of four stories (three floors plus one mezzanine) and totals 44,000 square feet. Included with the commercial space are two terraces for outdoor seating and 185 dedicated parking spaces (50 more than required for the space) in the condominium building’s multi-level garage.
The borrower is an experienced commercial developer with a track record that includes numerous commercial real estate purchases. Relying on an excellent credit history, the borrower has consistently secured financing through traditional sources — mainly bank loans — for past purchases. Enter the credit crunch and economic uncertainty of 2008, and even such an exceptionally strong borrower would find it impossible to close a conventional loan. It took Kennedy Funding of Hackensack, New Jersey, to bring immediate action and fund the deal.
While the Miami real estate market, like many throughout the country, is suffering, prime waterfront properties have done a better job of holding onto their value. The upscale residential portion of the Marina Blue condominium tower is more than 90% sold and occupied.
After detailed analysis of the market, the property, the collateral and other relevant factors, Kennedy saw sufficient potential in the commercial space to approve the $10,140,000 loan to 888 Biscayne Enterprises, LLC.
“It’s unfortunate that other lenders will completely rule out a type of development or an entire geographical area without considering specific circumstances and situations,” notes Jeffrey Wolfer, President and Co-CEO of Kennedy Funding. He continued, “A closer look at this property, the buyers attracted to the residential units, the commercial spaces in the areas immediately surrounding it, and we were able to close the loan quickly. With the nearby arena, performing arts center and the site for the new Miami Art Museum, the area is really going to be spectacular.”
Wolfer went on, “Virtually no one is closing loans any more. Even on deals where the collateral is strong and the developer’s credit is excellent. That’s why more and more borrowers are coming to us sooner. They know we don’t just stop lending on certain types of projects or in certain areas. We dig deeper — we don’t make a decision until we look at and evaluate the specifics.”
Kennedy Funding is a pioneer in the category of “situational lending,” providing loans of $1 million to $100 million or more with commitments in as little as 24 hours and closings in as quickly as five days. As the leader in direct private lending, Kennedy has extensive experience in funding in a wide range of business sectors. Unlike the methods used by many traditional lenders, Kennedy sees each borrower as unique, evaluating each situation individually.
Specializing in commercial real estate bridge loans for domestic and global clients, Kennedy provides up to 65% loan-to-value for land acquisition, development, refinancing, construction, bank workouts, bankruptcies and foreclosures. Across the nation and around the world, Kennedy has produced funding for conventional and unconventional projects, often succeeding when other financial institutions cannot.
http://www.kennedyfunding.com
SOURCE Kennedy Funding
http://www.kennedyfunding.com
Run bulls run!!!!
America’s Next Foreclosure Capitals
Matt Woolsey, 10.20.08, 4:00 PM ET
Desperate to stop the tide of foreclosures plaguing Florida, the U.S. Department of Housing and Urban Development launched its Neighborhood Stabilization Program on Oct. 16, which will give the Florida government $540 million to buy troubled properties and turn them into rentals.
But taking foreclosed homes off the market isn’t enough to prevent more havoc on the Florida economy. Expect already high foreclosure rates in Jacksonville, Naples and Miami to increase by 14% to 15% next year thanks to bottomless home prices and job loss.
“It’s so far from recovery,” says Doug Duncan, chief economist of Fannie Mae (nyse: FNM – news – people ). He says the ability to sell a home in the Sunshine State is not related to price, especially in the condo sector. “You can drop the price to zero and not sell a brand new property because there’s no one there to buy it.”
As a result, many would-be sellers confronting rapidly falling prices are opting to walk away from their homes.
It’s not much better in California, home to five of the top 10 cities on our list, including Fresno, Santa Cruz, Merced and Santa Barbara. Here, foreclosures are expected to rise between 11% and 14% next year. Job growth figures are better than in Florida, and new housing permits have begun to bottom out, cutting into supply. Even though prices are down, transaction activity has surged 17% in San Diego, 21% in Los Angeles and 32% in Sacramento from last year, according to Radar Logic, a New York-based research firm.
“We’re starting to see signs of a bottom in some places in California,” says Scott Hoyt, a senior director of consumer economics at Moody’s (nyse: MCO – news – people ) Economy.com. “Those places were the first places to crash. Now they’re further into the foreclosure cycle. It looks like permit activity is starting to bottom out.”
Behind the Numbers
In compiling our list, we looked at the country’s 50 largest foreclosure markets based on mortgage write-off rate. This measures mortgages that have fallen in value or dropped to zero as the result of foreclosures. In Miami, Fla., for example, the 2008 mortgage write-off rate was 6.2%, meaning that $6.20 of every $100 of the overall mortgage market has evaporated due to foreclosure. Data come from Moody’s Economy.com and Equifax (nyse: EFX – news – people ), a credit research firm.
Moody’s then provided for each area 2009 forecasts based on job loss and the expected number of ensuing delinquencies and defaults.
Occupational Hazards
Jobs are an obvious factor: the less income people have, the less likely they can afford their mortgages.
In Miami, Fla., and Jacksonville, Fla., projected job growth is expected to drop .4% and .3%, respectively. In other spots, including Santa Barbara, Calif., and Oxnard, Calif., job growth is expected to be flat.
At present, numbers from the Bureau of Labor Statistics and Moody’s suggest that peak to trough, the macro economy will shed a net of 1.3 million jobs. That’s bad news for the year ahead. Worse: Even when indicators like credit quality and job growth start to improve, there’s usually a lag of a few months before it shows up in housing.
Throw in plummeting prices and some places will feel the hurt more than others.
“Declining house prices with ongoing job losses [means] the housing cycle is still deteriorating,” says Hoyt. “Yes, we may be getting toward the bottom on construction activity, but we’re not there in terms of price or credit quality.”
In July, the Case Shiller Index fell 17.5%; year-over-year prices in Las Vegas and Phoenix fell almost 30%.
“That was my worst fear,” says Duncan. “Traditional foreclosure factors like job loss in the private sector look like they’re going to peak at the same time as the peak of non-traditional factors like price declines.”
In Depth: America’s Next Foreclosure Capitals
“Neighborhood Stabilization Program on Oct. 16, which will give the Florida government $540 million to buy troubled properties and turn them into rentals.”
That’s awesome. That should be enough to buy almost 1/2 of Icon Brickell and turn it rental.
Just found out about this…
http://www.federalhousingtaxcredit.com/index.html
Not really a lot of financial help, but it does help to close the gap for people considering buying a unit soon….
Hey guys, I really need a place to live, and I very seriously thinking of buying over renting. I figure that If i rent for a year and burn $12k-$20k it will be the same as buying a place and taking a deprecation lose from the slumping real estate market.
At first I was thinking about buying some on Brickell Key – but I feel that I could try to minimize my chances and losing money on my investment if I buy something in 33139 zip code. Can anyone shed any light on the differences between depreciation prospects between Sobe and Brickell Key?
thanks!
I’m not making this up… from the Mondrian southbeach website.
…bar and cabanas for private rental, and surrounded by lush gardens hung with hammocks and landscaped into a labyrinthine trail with lounge areas, secret pathways and “kissing corners.”…
Now that’s an amenity -secret pathways and “kissing corners.” -, sounds like the Woods behind my junior high school.
Oweee ouch:
http://www.nytimes.com/2008/10/16/business/economy/16housing.html?_r=1&em&oref=slogin
sign me up!
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Around the pools, gardens and bay, MONDRIAN South Beach makes playful use of space with multiple outdoor living areas. A large swimming pool is adorned with an oversized custom lamp by plunge pools, a pool bar and cabanas for private rental, and surrounded by lush gardens hung with hammocks and landscaped into a labyrinthine trail with lounge areas, secret pathways and “kissing corners.”
From the Moodys refernced in NYTimes article posted by Tom:
“In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody’s Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.
The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade.”
—
Something I mentioned 430 posts ago!
🙂
Tom & all
Tom, I found the graph for Miami Case Shiller
http://www.data360.org/dsg.aspx?Data_Set_Group_Id=1940
I’m sure Un-Related will have a comment about this:
http://www.cbs4.com/business/the.related.group.2.845221.html
“After months of litigation, the judge tossed the suit after The Related Group proved they had been paying back the deposits. “
From Angels post
“While the Miami real estate market, like many throughout the country, is suffering, prime waterfront properties have done a better job of holding onto their value.”
Exactly what I have been saying all along.
Salivating at a prospect of buying at $150/sf? You have a good chance of doing that in Interior Brickell , Miami River and Midtown. Try the waterfront condos with bayviews, even one, two or three years from now. Nothing is going to change. They will be as exclusive to aquire as they have always been.
Thanks for the info AJ. Your hopes won’t move prices one bit buddy boy. Check back in a year.
Speaking of Mondrian South Beach, the lobby and pool areas are nice but the hotel rooms are absolutely hideous…..they ruined the place with their choice of designer.
And by the way LUCAS of SAMIR or anyone else, I’m still hoping someone can provide me with the code name on Miamidade.gov for capri south beach….ANYONE???
jcrimes – my email is: [email protected]
send me the info and i’ll make some calls…curious to know the terms…
Mark (not Zilbert): I agree with you on most of your posts! The only reason I would even consider buying something at this point is for my primary residence. You mentioned previously we would just switch over to another form of currency… I don’t see that as an option this time around due to globalization. China and Russia hold over 1 TRILLION in foreign currency (OUR CURRENCY)…and might be pissed if we just hit the reset button.
I feel it is now time to OWN something for one reason: SECURITY! When the sh*t really does hit the fan…I want to know my housing is taken care of. I want to lock in a monthly payment with a bank NOW (lets call it 3k a month)…so that in 10years…when a cheeseburger also cost 3k….i will basically be living for the price of a meal. In Severe inflationary times…its always best to lock in pmts (b/c money now is worth more than money in the future – 1st Rule of Finance). I also recently PURCHASED a car rather than leasing. I’m also looking in to buying original paintings…limited edition watches (only the ones who make their own movements)…and possibly gold. I really don’t know how else to position myself for the storm…
I know this board is supposed to be about Real Estate…but the economy/asset prices/real estate…are ALL RELATED.
dlr,
Why the interest in capri south beach? They dragged out the build for over 3 years… I can’t imagine the workmanship being good when you have that many sets of construction people going round robin on 1 project. They were shooting for $1,000 per sq ft so anybody that bought preconstruction in for some pain.
Study: Real estate future bleak
South Florida Business Journal
The future of the real estate industry is fairly bleak, according to a new report by the Urban Land Institute and PricewaterhouseCoopers LLP.
Experts suggest that real estate markets in the U.S. will hit bottom in 2009, but there will continue to be drop in property values, along with additional foreclosures and delinquencies.
The report suggests real estate values will drop 15 percent to 20 percent from their mid-2007 peak.
“Only when property financing gets restructured will pricing recorrect so we can find the floor, and this transition could wipe out companies and people,” said one respondent interviewed for the report.
Financial institutions will continue to be pressured into moving bad loans off balance sheets, using auctions to speed up the process. Investors will be discouraged until the “bloodletting” is over, the report stated.
And, while cyclical real estate markets always come back, it’s not going to happen anytime soon, said Tim Conlon, partner and U.S. real estate sector leader for PricewaterhouseCoopers.
The main beneficiaries of this downturn are cash-rich offshore buyers, whom the report predicted will continue to take advantage of the weak dollar, and will buy trophy properties in major cities.
One silver lining: Interviewees agreed that, eventually, savvy investors will be able to cash in on the inevitable recovery, which some see occurring as early as 2010.
“Money will be made on riding markets back to recovery and releasing properties, not on financing structures,” the report noted.
Among property sectors most promising for investment, apartments take top position in the report, with distribution/warehouse coming in second.
Congratulations Lucas for your Wall Street Journal mention today! I read this site daily and find it very insightful. Thanks for all your hard work keeping this forum alive.
Beach Guy – link for 456???
Renter Tom –
http://online.wsj.com/article/SB122462886870956193.html
What a puff piece.
Oh but it does make a good point. Perez is buying at less than replacement cost (building cost).
It’s funny that in the article it notes that he has underestimated and misjudged already (may have to buy 1000 units!). Does this not lend creedence to the fact that he will be wrong again? This guy is going to get burned trying to rent all these overpriced units out because:
1. This is going to be a doozy of a recession.
2. As I have already pointed out there are more condos than actual people to live in them.
3. Rentals are unlikely to be cashflow positive (he’ll have to pay HOA, taxes and mortgage) and he’ll eventually be unable to roll over short term debt or get new loans.
I thought the article was very good but it failed to address many important issues. The fact that Related has a couple of Billion in backing to buy distressed prperties means that they will control the condo associations in these buiuldings and can manage to run them efficiently, so every dollar they save is going to profit from the rental rates. THat would also mean if these sales get recorded for the bulk price the property taxes in these buildings in theory should go down which is an issue that no one is adressing. Given those two factors he will have control to create a market bottom as Related has a good sales staff that can be on site to do the rentals. Add to that that contract holders for preconstruction lost 20% and his profit margins in the development budget where somewhere around 25-30% (getting the numbers from a generic development budget). So he will be buying in his buildings for Cost minus 20% (lost deposit) it seems like a good deal for his hedge fund partner and the fact that Related controls the management of the building gives them a lot of power. So Related is going to Profit from both the Boom and the Bust…. Very Good Business Plan
dlr is right. The Marcel Wanders design of the Mondrian rooms is straight out of a horror movie. The Ring I style mirrors and other psychedelic nightmares. If it was not a hotel and actual apartments that people would live full time, I can see every room srtipped up, gutted and redone by owners.
“Dean Adler, chief executive of Lubert-Adler, also doesn’t see a conflict, but notes that the purchase of Related condos was the exception, not the rule. “That is not the intention of the partnership,” he says. “Every deal that we’re looking at now is unrelated to Related.”
What a bunch of bullshit… let’s see how many units in ICON they end up buying..
And, the buy to rent argument is defused with the costs as we have proven with some properties here in this blog… Economics don’t work different for Related, renting just don’t make sense at these prices.
I bet that we will see the future purchases having significant reductions and we will see him buying at under $200/sf.
And… ANYBODY SAY NEW POST???
Great work Lucas… keep it up!
hugo p
i whined about that a few months back. how could any investor in a distressed fund want to pick up his partner’s units on the front end? the conflict is so ridiculously obvious. it’s akin to the fed buying distressed assets, not at today’s market values, but rather, held to maturity value.
Regarding the WSJ Perez article…
Anyone who believes Perez is buying these condos because they are a “good deal” is an idiot. I don’t think Perez is that stupid. Most of the money in that “vulture” fund is not from him. He’s using other people’s money to help prop up the values in his own buildings, as well as the Miami condo market in general, by keeping this additional supply off the market.
If keeping these units as rentals was such a “good deal”, they why does Perez have to sell these units back to “himself” at all? Why doesn’t the Related Group just form a rental division and keep the units? I believe the reason is what I stated above: he’s unloading the risk onto the investors in the vulture fund rather than his own company.
Perez is supposedly a billionaire. If so, why doesn’t he use some of his own personal money to buy up these “deals”, and hence keep all the profit to himself? The answer is because he knows these aren’t “deals” and he’s better off using the fund’s money to buy these poor investments.
The “below replacement cost” reason for investing is absolute nonsense. Any investor buying because something is “below replacement cost” is destined to lose money. It’s not about “replacement cost”. Smart investors would invest based on cash flow and investment fundamentals – not some B.S. “replacement cost” model. It might cost a million dollars to build a huge castle out of dildos. That doesn’t mean that you are getting a “good deal” if you buy that castle made of dildos for $500k just because it’s “way below replacement cost”.
The “replacement costs” are all tanking, anyways. Land (the biggest component) is going for a third of its peak value (if that). Commodities are all tanking. Soaring unemployment puts downward pressure on wages. There is an oversupply in almost everything that you could possibly build. We’ve got more than a decade’s worth of excess supply in building. Again – replacement cost is a stupid measurement of an investment’s worthiness. The cash flow that the unit should produce is the only measure an investor should be looking at in this market.
BFG, no one really knows for sure what the cash flow is going to be, so there is no way to create an accurate 5 year pro-forma, there are too many variables in the Downtown area. Is there demand to live in Brickell? Yes there definitely is but at what price for a One Bedroom??? $1100, $1000? $900? So it will not be until all these units hit the market in the next 6 to 8 months where we will know a somewhat constant rental rate. Add to that the uncetainty of how deep the recession is going to be, will unemployment stay in the 6% range or will it go up to 9%? DO you compare it to net Replacement Cost???? If so then you have to disount the land 60%-70% as there is no demand for empty lots to develop as no one would get a construction loan right now. Also note that when some of these projects cannot close 50% of the building they will have to get taken over by the Bank and they will have to get liquidated in a bulk sale to some Blackrock type huge fund who I guarantee you will buy them for 25 cents on the dollar and rent them out to resell them for much more and while we will see it and read about it those 80% discounts will not trickle down to the end users. I saw a One Bed at Neo Vertika looking into the Pool for $111K, and the apartment had multiple cash bids and went under contract right away. All the Banks need to free up their balance sheet right now and the worldwide market is having a liquidity crisis. Most Banks in the US are currently insolvent as they have written off their losses from non performing loans. WHatever salvage value they get to record on their balance sheets on these REO’s right now is great for them. I could go on to argue that if you find the right deal (either a seller that lost 60% his savings to retire which he had in a Mutual Fund over at Merrill or some Bank like WaMu’s Loss Mitigation Department that is currently just liquidating every asset they have for a lower price) now is a great time to buy. LIke Warren Buffet says be Wary when others are greedy and be Greedy when others are scared….
A goood rule of Thumb is i you follow the Case Shiller or another Real Estate index, in a market downturn you should buy for about the same price as the last market bottom adjusted for inflation. This time around in Miami ther was more overdevelopment than before so the market should overcorrect so you should buy at what that property would have sold for in about 1988-89 or 1997-98 which were about the past 2 market bottoms. Or at least that is the Rule I use. WHen the market is picking up I just Multiply the Monthly Rent times 120 to see if it makes sense.
EXCELLENT POST BFG. ABSOLUTELY GREAT. THANK YOU.
Alejandro said : “Like Warren Buffet says be Wary when others are greedy and be Greedy when others are scared”
Market bulls have been using that line since Dow 13,000. Any little dip in the market and all the permabulls start exclaiming “there is blood in the streets – smart money is buying now”. Then at Dow 10,000 “we’ve hit bottom – now is the time to buy!”… and so on. Warren Buffett is a smart man – but that does not make him right. The multi-billionaire Carl Icahn is a smart man also. Didn’t stop him from buying a buttload of Yahoo and WCI stock before they both tanked. Being right most of the time doesn’t make you right all of the time. And lately, some of the smartest investment minds in the world have been the ones who have been making some of the dumbest decisions.
Just because a bunch of people are panicking and selling does NOT mean that its “time to buy”. I wish it were that simple – but it isn’t. I don’t deny the general philosophy of it – just that using that attitude to figure out in advance when we’ve hit bottom in any given market is too simplistic not a very reliable way to time the market. It’s undoubtedly a “better” time to buy than it was a few years ago. However, that doesn’t mean that right now is a buying opportunity not to be missed. I think once we reach bottom, we’re going to stay there a while. So I’m not too worried about “getting in before it’s too late”. The bottom in the real estate market should be pretty obvious once we’re there. And in the Miami area, there is no way we’re “there” yet.
I’m not saying that there aren’t real estate investments out there that make sense right now – just that you’d better take a conservative old-school approach to making your decision. The “replacement value” method is a very poor strategy.
I think Walmart will be a non starter the way things are going.
I will only believe if the Terra Group – McLatchy deal goes through this December.
The 4 Miami Herald parcels, Terra contracted to buy from McLatchy for 190 Million seems like a deal before the crisis. Terra wanted to flip it immediately to the Indiana developers who in turn would build the City Square with Walmart as the anchor.
Compared to the BDB’s $11 million purchase of the Bayview Market 7.35 acre lot located 2 blocks West just 4 years ago, this Terra – McLatchy $190 Mil deal seems exorbitant and unjustified in the present financial meltdown. The 4 lots are close to water but not waterfront. I really wonder if Terra will go forward and buy these lots before December 31 (the deadline for the deal to expire), especially as they are in big doo doo with the 900 doing so poorly and the Quantum North Tower closing only 50%.
Alejandro & BFG;
Alejandro,you said the following:
“A goood rule of Thumb is i you follow the Case Shiller … in a market downturn you should buy for about the same price as the last market bottom adjusted for inflation. This time around in Miami ther was more overdevelopment than before so the market should overcorrect so you should buy at what that property would have sold for in about 1988-89 or 1997-98 which were about the past 2 market bottoms. Or at least that is the Rule I use. WHen the market is picking up I just Multiply the Monthly Rent times 120 to see if it makes sense.”
There are multiple posts from Tom and me on Case Shiller index graphs.
It seems you have excellent data, good reasoning and come out with 100% wrong conclusion.
Show me a graph on Case Shiller were we have hit the 1997 bottom adjusted for inflation.
You wont.
Because it doesn’t exist.
–
Finally, BFG points out something I mentioned before: so what if you miss the exact moment when bottom is reached?
BFG:
“It’s undoubtedly a “better” time to buy than it was a few years ago. However, that doesn’t mean that right now is a buying opportunity not to be missed. I think once we reach bottom, we’re going to stay there a while. So I’m not too worried about “getting in before it’s too late”. The bottom in the real estate market should be pretty obvious once we’re there. And in the Miami area, there is no way we’re “there” yet.”
–
The only argument to buying anything right now is something, that to my knowledge, I was the first to bring up; hyper-inflation. (Though it should be pointed out that we are midst a major deflation)
But even following that thread of logic, condos in Miami do not make sense. Might as well buy farmland in the Mid-West somewhere.
–
BFG – Great post. I agree that construction costs are irrelevant now since they are sunk costs and new construction has ground to a halt…exactly because prices are below construction prices. Most people don’t understand that land costs are the big driver and those have plummeted and labor and materials are coming down, yet still no new construction since prices will be below even the lower land, labor, and material costs.
Muir – Unfortunately, farmland got bubbly too with the commodities bubble and ethanol push, otherwise that is where a good chunk of my money would have been invested in, too bad you spilled the (soy)beans! LOL
Hi everybody,
I’m a Journalism student at FIU, and am currently working on a project concerning foreclosures in Miami-Dade. I would like to speak to families who have lived through foreclosures and ask them a couple of questions about how it affected them and their family as a whole. If you fit this description, and would like to help a student out, I would greatly appreciate it. You can e-mail me at [email protected].
Thanks in advance for your help.
Kassie.
Kassandra – Please be sure to tell the WHOLE story of those that ripped off the banks too. The foreclosure victim stories aren’t reflective of what really went on. Don’t make the mistake that CNN did with the scammer (not a victim) in the article if you click on my name. Seriously, please report the whole story, true victims, those who fell on hard times, those who made bad purchase decisions, those who committed mortgage fraud, those who lied on loan applications, those who put no money down, those that bought multiple properties, the felons that were mortgage brokers….the who gambit.
I do not think that anyone who calls himself an investor… would buy in today’s market.
The first thing that needs to come down in order for this market to be “desirable” once again is the outrageous property tax on these units…
Property Taxes are out of touch with current market conditions and are just a reflection of the government taking advantage of an erroneous credit access policy.
Until taxes drop substantially, no serious investor will come into the market!
Remember, the government is not the solution; it’s the problem! With their high taxes, they are in the way of both investors and renters!