Miami: "The Biggest U.S. Condo Glut"

Reuters: "Glacial sales pace could spell disaster for Perez"

Three weeks ago the Miami Herald had an interview and feature story on the slow closing rate and growing financial concerns at Icon Brickell. Now Reuters is weighing in on Miami's condo conundrum: "The once-booming real estate market that made Jorge Perez a billionaire is crumbling around Miami's 'condo king' in what may be the biggest U.S. condo glut." Interviews with distressed property buyers and Miami realtors offer words of encouragement for Perez but little in the way of optimism. Of the 1,640 luxury condos in Icon Brickell, only 18 units had closed as of March 18. That's 1.09%. Put another way, if you multiplied by a very conservative median sales price of $500,000, that's roughly $9,000,000 in value for units closed compared to a total project value of $820,000,000. Adding insult to injury, "New rules from lending giant Fannie Mae, which buys mortgages from banks, have been anything but helpful when it comes to providing potential condo buyers with end-loan financing."

Luxury Boat Market Capsizing in Florida

Business Has Quadrupled for Nation's Largest Boat Repo Company

In May 2008, HB.com profiled the lone beneficiary of the weak Florida boating market: National Liquidators, the nation's largest marine repo company. At the time, company officials said they had repossessed boats double-stacked on six 400-foot docks in Fort Lauderdale. Fast forward ten months and National Liquidators is leasing four additional boatyards to keep up with the influx of speedboats, crusisers, sailboats and even a few megayachts. "We're busting at the seams," says one NL Recovery team member. The AFP article puts the parallels between the Florida housing and luxury boat markets in perspective: "The easy credit that fueled the real estate boom also brought carefree spending and no-money-down loans for maritime toys. Boats tend to lose their value more quickly than cars, so many owners soon owed more than their boats were worth. The economic slump pushed prices still lower, but the bills kept rolling in." 

Short Attention Span Theater

When Going Gets Tough, The Unemployed Go to Real Estate School

A local news affiliate in Southwest Florida says "More people are starting to turn to real estate as a way to make money." Not to be overly cynical, but there are a few problems with this story. A.) WINK-TV doesn't back up this claim with any hard enrollment numbers. B.) The reliable source identifying this emerging trend is the owner of a local real estate school ("When the economy gets tough, people start coming back in to the business.") and C.) Just last June we were being told that 40,000 Florida Realtors had left the business while many of those still clinging to their RX300s were turning to yoga and meditation courses with some dude named Chappy to maintain their sanity. Basically when the market collapsed and Realtors actually had to work for a commission, many started leaving the business altogether. But WINK dangles this story in front of the unemployed Southwest Florida masses complete with a bar graph showing record home sales and new students anxious to (cue the industry cliché) "get in on the ground floor." Don't local news teams have anything better to peddle than false hopes in a dying industry? Ah, yes, mass hysteria and paranoia...only 2 months and 14 days until Hurricane Season!

Large Builders Battling Foreclosure Deals

Analyst: "I don't know how the builders are going to compete"

The rising tide of foreclosures means bad news for large homebuilders from California to Florida. The Wall Street Journal takes a look at several Pulte, Centex, KB and Lennar communities where the large builders are trying to sell new homes for 20-40% more than comparable existing homes in some stage of foreclosure. The Pulte home pictured is on the market for $149,900 while Pulte is trying to sell similar homes for $214,990 in the same neighborhood. A Pulte spokesperson makes a pretty weak case for buying new: "Our brand-new homes appeal to the buyer who wants up-to-date features, a chance to make their own selections like carpeting and paint colors." But isn't buying a new home in these neighborhoods in this environment almost akin to buying a new car? It's going to lose 30% of its value the second you're handed the keys, so why take the risk?

Foreclosures Like "A Child With Measels"

From Homestead to Miramar, Abandoned Homes Are Everywhere

Some local governments in South Florida are finally addressing the problem of unsecured, abandoned homes according to the Miami Herald. And if recent foreclosure numbers are any indication, they've got their work cut out for them: over 4,000 in Fort Lauderdale since November 2007 and over 2,200 in Homestead in the past four months alone. Broward economic development official Gus Zambrano uses this analogy: "It's pretty much like a child with measles. It's all over the place. We tried to map the dots and connect them to find some sort of pattern, but this is just something that's impacting every neighborhood, new and old." Neighbors like Jose Casanova describes the joys of living next to an abandoned home, "People have stolen everything here, even the electric wires. People stay in the house, they play loud music and light candles. They go into the neighbors' yards to get water from their hoses."

Florida Is Just One Big Ponzi Scheme

"Florida is lying awake at night like a terrified cardiac patient"

That, today from our friends up in Canada, or at least one of their veteran reporters currently residing in Washington DC. Neil Macdonald, fresh off a vacation to sunny Southwest Florida, returns to our nation's capitol brimming with cynicism and palpable disdain for the Sunshine State. "Swindled and beaten bloodier than most states by the economic crisis, Florida is lying awake at night like a terrified cardiac patient, praying the angina will pass. The confidence games here were ruinous. The housing fraud was industrial-scale. The economic shortsightedness bordered on lunacy." Macdonald soaks up the beauty of Florida first in Lehigh Acres ("Particularly striking is the newness of it all. Some of these homes — pastel orange, blue or green — have never been occupied, yet the windows are smashed, the appliances have been ripped out and the yards are a tangle of garbage-strewn brambles.") and then Cape Coral ("A vast, rambling place with no core and ghost towns on its edges.") where the inability today of local governments to even provide basic services (towing cars, picking up trash, etc.) leaves Macdonald suggesting a new slogan for Florida: The Ponzi State.

Florida Self Storage Business Emptying Out

Floridians Walking Away From Homes & Self-Storage Units

You would think with all of the foreclosures and home downsizing going on across the state that the self-storage business would be booming. It's not. "Storage by nature is temporary; people move things in for a couple of months, and it's not always because of a happy occasion," writes the Sun-Sentinel's Arlene Hatchell. Hatchell interviewed owners of several South Florida storage facilities who all reported revenues flat or down compared to last year. 10 years ago, the Sarasota Herald-Tribune declared "As more and more people move to Florida, the self-storage business is booming." And that strength continued through the housing boom in 2005 when Florida had the nation's third-largest self-storage network with 2,293 facilities. Now those days are over. Many Floridians are abandoning their storage units the same way they are walking away from their foreclosed properties. That trend is reflected in the growing number of on-site auctions of self storage unit contents. A St. Pete company dedicated to exactly that, Storage Protection Auction Services, reports a 20% increase in business statewide. 

Chinese Drywall: Enter the Townhouse

Southwest Florida Scourge Spreads to the Treasure Coast

In the 1973 kung-fu cult classic Enter The Dragon, Chinese-American martial artist Bruce Lee infiltrates the lair of an evil crime boss in order to take him down. Hollywood studios should take note of a potential blockbuster screenplay developing in gated communities throughout Florida: the invasion of nefarious sheets of sulfuric Chinese drywall. Call it Enter The Townhouse. The story surfaced in late 2008 and was originally thought to be confined to communities in Southwest Florida; however, the Palm Beach Post confirms an East Coast invasion in Palm Beach County and along the Treasure Coast. "The Florida Department of Health has documented 119 complaints about Chinese-made drywall in Florida. Of those, 17 were in Palm Beach County and the Treasure Coast, including five homes on a single street in Stuart. Preliminary studies have not concluded that the drywall creates immediate health concerns. Homeowners, however, have blamed it for allergy-like symptoms, including headaches, dry eyes, tightness in the chest and bloody noses." Chinese drywall is dishing out bloody noses? Bruce Lee would be proud. To be sure, there will be a sequel to this blockbuster...tentatively titled Enter The Lawsuits. 

Ex-KB CEO Facing 415 Years in Prison

Options Scheme Allegedly Bilked Shareholders Out of Millions

AP is reporting that former KB Home CEO Bruce Karatz has been indicted on "multiple counts of fraud and other crimes related to a stock option backdating scheme" and now faces up to 415 years in prison if convicted on all charges. KB Home has built dozens of residential communities throughout Florida, many concentrated around Orlando, Jacksonville and Southwest Florida. In an interview three years ago with The New York Times, then-CEO Karatz remained bullish on the outlook for KB and housing in general. "I believe we're going to have very strong demand on any historical basis; not as good as it was a year ago, but still very strong. And big home builders are going to be able to operate very well. I don't think there's going to be any significant price depreciation." A few months later, Karatz was forced out of the company over the options scheme. Considering the 50% price reductions in several Florida markets, Karatz's crystal ball proved to be a little fuzzy. The share price of KB Home has followed a similar trajectory since that NYTimes interview. (KBH chart)

10 Reasons To ACT NOW!!!

I was driving down Calle Ocho last week and saw this portable billboard for some condo project in Coral Gables. The "You've Gotta Buy Now!" approach may have worked in 2004, but this is 2009. "You've Gotta Find A Job!" and "You've Gotta Put Food On The Table" are more pressing concerns for most Floridians today. I just uploaded the photo to Facebook and a friend replied..."I need at least 4 Reasons." So I told him I would round out the Top 10 for him. So here they are...

4. Buying Florida real estate is more exciting than high stakes poker.

5. These are "New Condos"...a rare commodity in South Florida!

6. This is "Affordable Luxury"...whatever the hell that means.

7. No state income tax in Florida! (Also no jobs, but why nitpick?)

8. Don't put off to tomorrow what banks won't lend you today.

9. The project has a killer website.

10. If they sell out, maybe they'll take down that garish billboard. 

Video: Foreclosed Home "Trash Out"

Brickell Mega-Condo Now Major Headache

Herald: Related Seeking Relief On Several High-profile Condos

That, according to the Miami Herald's Matthew Haggman, who recently interviewed Jorge Perez, Related Group CEO and developer of over 5,500 new construction high-rise units in downtown Miami. Of those 5,500, none is more over-the-top or potentially problematic as the 1,640-unit ICON Brickell. Haggman says ICON is "a sumptuous $1 billion glass-and-concrete city within a city that includes three soaring towers, a pool the size of a football field, 1,640 condos, a boutique hotel and five restaurants. It is Florida's most spectacular condo, Pérez's masterpiece, his legacy. And, now, it may be his undoing." Pérez uses the front-page Herald ink to promote ICON, where only 30 of the first 400 people who contracted to buy have actually closed on their units, and to appeal for help from his lenders. According to Haggman, "Pérez is seeking relief not only for ICON, which alone accounts for $700 million of his debt, but for Trump Towers in Sunny Isles Beach, Oasis in Fort Myers, City Place South Tower in West Palm Beach, 500 Brickell in Miami, and the under-construction Trump Hollywood in Hollywood."