Cash Is King In Florida Home Sales

WSJ: "Where distressed sales have soared and prices have plunged."

"Bargain-Hunters Descend, Cash In Hand" writes Nick Timaros at the Wall Street Journal, and the spotlight is on Florida where all-cash home sales have been historically more frequent considering the percentage of foreign buyers. However, Timaros writes, "a number of cash buyers these days, in Florida and elsewhere, are also investors scooping up distressed properties and affluent families seeking relatively inexpensive vacation homes." Incredibly, the decision seems to be something of a "flight to quality" for some buyers disappointed with comparable returns in the stock and bond markets. Cash will continue to dominate for the foreseeable future, especially in South Florida where "a glut of condos that eroded home prices has triggered tighter lending standards, including 50% down payments even for individuals with spotless credit." Condo Vultures' Peter Zalewski puts it in perspective, "The all-cash buyer is basically the only one doing deals today because the financing just doesn't exist. It's virtually impossible to get a loan."

Teens, Adults Partying in Foreclosed Homes

$75,000 In Damages to Lee County Home Owned by Wells Fargo

Remember when you were in high school and keg parties were usually confined to the basement of some cool classmate's home? Well the abundance of abandoned homes in several parts of Florida is bringing both teens and adults out of the basement and into the friendly confines of empty bank-owned properties ripe for partying and vandalizing. A foreclosed Lee County home (Google map) owned by Wells Fargo was the latest stop on the Foreclosure Party Tour, and 17 people have been arrested so far. According to the Naples Daily News, "Windows remained broken, huge holes were punched in walls throughout the structure, graffiti and expletives were spray painted on the walls and ceilings and two Budweiser beer cans were hung on a living room wall. The house remained unsecured. A Coldwell Banker sign was posted at the entrance to the dirt driveway, but the real estate agent could not be reached for comment." These morning-after photos are a pretty sickening reminder of what some "adults" are capable of doing to private property. 

How The Crash Will Reshape America

Can The American Workforce Become Nimble Again? 

Richard Florida, author of The Creative Class and The World Is Spiky, writes a compelling analysis of "The Crash" in the current issue of The Atlantic. Florida says one lesson learned has been obvious for years, "Americans have been living beyond their means, using illusory housing wealth and huge slugs of foreign capital to consume far more than we’ve produced. The crash surely signals the end to that." The second, more subtle lesson, he says, is how the rush to home ownership and the current foreclosure crisis has made the American worker "less nimble" and more likely to be held hostage in a home they can't sell in a region of the country with a non-diversified local economy and few job opportunities. Unfortunately many regions of Florida resemble that description, while the regional hubs of innovation like Austin, Boulder and the Research Triangle continue to grow and attract those workers who aren't tied down to an underwater home they bought in the last five years. 

Obama Plan Means Zip For Most Floridians

Average Homeowner Unlikely To Benefit Under Federal Program

The bailout bonanza keeps on rolling, and yesterday's foreclosure relief plan was trotted out under the guise of helping millions of underwater homeowners nationwide. But upon closer analysis, the plan will only benefit a very small percentage of Floridians. The plan is full of incentives for loan modifications but principal reductions don't factor into the bailout equation. According to the Wall Street Journal, "Some analysts say the administration isn't doing enough to encourage lenders to write down loan balances instead of just reducing monthly payments. Recent studies by Credit Suisse and others suggest borrowers are less likely to fall behind again on their mortgages if both their principal and interest payments are reduced." South Florida mortgage banker Louis Spagnuolo likens this package to TARP 1 and TARP 2, "Three or four months down the road, they're going to see this doesn't solve the problem, and then we're going to have stimulus package No. 2." Investment bank UBS summed up Wall Street's reaction to the plan with this headline, "Obama Speaks. Market Listens. Sells Off."

North Miami Condo Wins Insurance Suit

$20 Million Verdict Against Aussie Insurer Over Wilma Damage

Do you remember Hurricane Wilma? It's a distant, bad memory for many South Floridians but a lingering, costly one for some North Miami Beach residents and the Australian insurer that denied the HOA claim for $5 million in damages in the wake of Hurricane Wilma. The insurer, QBE, originally blamed the damage on the residents for "poor maintenance" and refused to pay the claim. Now a jury has awarded the HOA over $20 million for the structural damage which resulted in the two-building condo complex being condemned by Miami-Dade officials. The HOA's attorney declared victory for the "more than 1,500 residents of the two 17-story towers are middle-class, many senior citizens who don't have a war chest to take on a larger insurer." Much like the Florida real estate prices, shares of QBE are down sharply from their all-time highs of 2007. 

Hello Cruise Ship...Goodbye Grandma!

Company Announces Cruise Ship Condos Will Set Sail from Florida

A Florida-based company is taking the cruise ship condo concept in a new direction that may appeal to some seniors who love cruises and cruise ships...enough to spend the rest of their life aboard one. According to the press release, "Waterfront Lifestyles International, a boutique maritime lodging company, is currently taking reservations for retirement condos on a mid-size cruise ship that will make monthly cruises to the Bahamas." But unlike most cruise ship condos where buyers maybe spend a few weeks a year on board, residents of the 300-foot Alegria will be there for life. For Florida condo residents familiar with the mind-numbing minutiae and headaches of dealing with fellow residents and homeowners association rules, this floating, full-time condo concept is a little frightening. It's hard to imagine never being able to get away from your neighbors when you're always bumping into them up on the Lido Deck or down at the prime rib buffet line. Still, if you're undeterred, ready for a lifetime cruise and anxious to learn more, here is a link to the company's website. 

2009: Foreclosures Go Commercial

Coming Soon To A Florida Strip Mall or Warehouse Near You

If 2008 was the year of the residential foreclosure in Florida, 2009 is setting up to be the year of the commercial foreclosure. Just like ARM, HUD and now TARP, go ahead and get used to hearing the acronym CMBS (commercial mortgage-backed securities), because these are the firms with the most exposure to Florida's commercial real estate sector and the greatest incentive to bring foreclosure suits against managers of once-booming, now-empty strip malls and warehouses. Just like South Florida homeowners, many of the current managing firms paid top dollar for these properties between 2004 and 2006. The South Florida Business Journal reports that over $17 billion in CMBS loans are outstanding with South Florida properties and roughly 20% of those loans are already in some state of delinquency.

25 Random Things About Mr. Market

When Houses Are Like Beanie Babies...Just Eat the Homebuilders

While the majority of "25 Random Things" posts on Facebook are trivial and annoying, Rick Aristotle Munarriz at The Motley Fool compiled a clever list called "25 Random Things About Mr. Market" which takes a few deserving blows at the housing industry, big builders and mortgage brokers. Case in point, item number 7.) "More to the point, I have a modest proposal. Eat the homebuilders. Why wag the demand tail when the supply head still doesn't get it? Force a moratorium on new construction that is not under contract for a year or two. The developers will hate it, but it's in their best long-term interest." He then adds, "We still have years of excess inventory to work through, created by failed condo flippers and leveraged owners of several vacant properties. Houses have become like Beanie Babies, with everybody dumping their collections at any price."

Empty Condos in Downtown Miami

Some Recently Completed Projects Have Closing Rates Under 5%

Miami Condo Investments posts some great bar graphs for anyone following the closing rates of recently completed high-rises in Downtown Miami. Four of the five buildings that began closings within the last three months all report closing percentages less than 5%. The four buildings are Infinity at Brickell (21 units or 4.59%), Everglades on the Bay (31 units or 3.95%), Epic (12 units or 3.33%) and Icon Brickell (15 units or 0.84%). These four projects combined added over 3,500 residential units to Miami's already bloated inventory downtown, so it's staggering that only 79 units had closed according to this report. The one exception is The Ivy with 219 closings or 43.8% of the total units. 

All Eyes on Southwest Florida

Homeless & Unemployed Ecstatic Over Presidential Visit

Presidential visits are nothing new to Southwest Florida. During his eight years in office, President George W. Bush would frequently fundraise at the waterside mansions of his friends in Naples and Fort Myers. At the time, most local residents were oblivious to the looming housing bath. The housing sector was booming, the NAR was preaching the joys of home ownership and construction jobs were abundant. Fast forward to 2009 and some areas of Southwest Florida look like a bomb went off. (Check out the slide show in yesterday's New York Times article on Lehigh Acres.) In 2004, Southwest Floridians regularly camped out for the chance to put down deposits on new homes and condominiums. Today in Fort Myers, homeless people like Roy Hendrix are camping out to see the president. "I get to see the president of the United States, in my town,'' said Hendrix, 51. "That's better than any rock concert or the World Series.''

Tennessee...Meet Squatter Mary

Video Segment On This Growing (And By The Way Illegal) Trend

An NBC affiliate out of Chattanooga sent a crew to Miami to find out more about the trend of homeless people moving into foreclosed homes. Can you imagine how they drew straws in the Newsplex for that plum assignment? "OK, I need someone to go down to Miami and interview homeless people who are living in foreclosures? Now they might be armed and dangerous, because they're living in these homes illegally, so you'll have to take extra precautions. Anyone? Anyone?"  Mary, the homeless woman interviewed justifies, her law-breaking this way, "I had to squat, because I felt like no one gave a squat." HAHAHA...Get it...she decided to "squat" because...never mind, it's too complex a play on words. Actually, Squatter Mary's tagline is more succinct than the real alternative, "I decided to squat, because South Florida is filled with abandoned homes the banks can't get off their books because the credit squeeze is keeping anyone with less than an 800 FICO score from getting a mortgage while local officials are already on the record saying "There are no actions on the city's part to stop this," so I just moved on in." 

Editorial: A Bad Bank Is A Very Bad Idea

Taxpayers Queue Up To Eat Trillion-Dollar Debt Sandwich

CFA Rolfe Winkler offers a sobering assessment of the current administration's proposal to create a "bad bank" to absorb trillions of dollars worth of toxic mortgages. To illustrate his point, Winkler uses a Miami condo, bought at the height of the boom for $1 million, which is today worth roughly $500,000. "The government might buy the million-dollar loan for close to a million dollars - even though the condo itself is still worth just $500,000. But that's no longer the bank's problem," Winkler says. "Since taxpayers now own the asset, they take the half-million dollar loss. While government reports suggest the bad bank will spend $1 trillion to $2 trillion to buy toxic assets, Goldman Sachs estimates that $4 trillion may ultimately be needed. And banks are likely to sell their most toxic trash to the bad bank, meaning the public's losses will be massive - certainly hundreds of billions of dollars, based on current fair value estimates." A very bad idea, indeed.

As Rich Retrench, So Goes the Servant Class

When Conspicuous Non-Consumption Becomes Trendy in Jupiter

Or Palm Beach, or Bal Harbour, or any number of Florida playgrounds for the uberwealthy. USA Today goes cross country examining how the rich are spending less, and the impact it's having on sales of luxury condos, private jets and gigayachts. Special emphasis is placed on the parallel pain in housing and retail: "Neiman Marcus, citing a tough sales climate, said this month that it would cut 375 jobs...Macy's said it would close 11 stores. And in Florida, two affiliates of Ginn Cos. filed for bankruptcy as two of its high-end housing developments ran into trouble. Unemployment in luxury retail and the construction industries is soaring. The unemployment rate in the construction industry is 15.3%, vs. 9.4% in December 2007." Conspicuous non-consumption is in vogue these days according to Bentley dealer Graham Cox. "'The wealthy still have the wealth,' Cox says. 'It's the image you project in a bad economy of driving a nice car when your friends or colleagues may be losing their businesses.'"