Florida property boom unsustainable - Atlanta Fed

[UpInArms]

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-11-07T205749Z_01_N0796442_RTRIDST_0_ECONOMY-FED-HOUSING.XML

WASHINGTON, Nov 7 (Reuters) - Soaring property prices have pushed parts of the Florida housing market into white-hot territory, but the gains are not sustainable, the Atlanta Federal Reserve said in its latest quarterly economic survey.

The Atlanta Fed, whose district includes some of the frothiest property markets in the country, has persistently voiced concern over rampant price rises.

"The supply of new housing now becoming available in Miami exceeds what was built in the past decade (9,152 units) and does not include another 212 projects encompassing 57,392 residential units that developers have proposed throughout the city," it noted in an article from its EconSouth magazine.

<snip>

The U.S. central bank worries about the durability of the housing boom. Consumers have used higher home values to finance continued spending despite stagnant wages, and policy-makers fear a dip in the housing market as the Fed raises interest rates could hurt consumption and sap national growth.

...more...

[OldLeftieLawyer]

1. My prediction

This so-called "housing boom" is gonna go so bust just as soon as this new bankruptcy law gets its claws firmly embedded. People who have been using their credit cards to get cash (you get better rates from the Mob, I hear) are no longer going to have any out, the interest-only mortgages are going to blow up in everyone's faces, and the banks will foreclose.

There goes the boom as the banks do their best to shuck these properties and start making even more money from them.

There was never a boom - there were only gullible buyers who didn't read the fine print or lift their heads up high enough to sniff the air and discern what was coming.

This new bankruptcy law is so horrendous, I'm not sure the general American public understands what's in it.

[madaboutharry]

2. Math is my weakness, can you

tell me how these interest only loans work? It sounds like a very scary thing to me, but I don't really understand them or why people would get one. My thinking is that they get you into a house you would otherwise never be able to afford.

[400Years]

4. you pay only the interest

you never pay anything against the principle (al?) so you will never pay the property off.

[rkc3]

5. You only pay interest - no principal. It results in a far smaller

payment and, I believe, it assumes you are only staying in the house for a short time and will sell the house at a higher price than when you bought it.

And it can put you into a bigger home.

[Maraya1969]

6. Sounds like a lease to me. When you sell you have no equity.

I guess the profit from the increase in house value is your money in the end.

[rkc3]

7. That's the only thing I can think of - I have heard a large number of

people and companies buying homes in areas like Miami only to sell them weeks/months later. It's almost like a pyramid scheme to prop up the housing market - but people must be making money on this or they wouldn't be speculating like they are.

[hatrack]

39. It's 1925 all over again

This has been going on in Florida for eighty years and then some - the Bigger Idiot school of wild-eyed finance.

Some things never change.

[FlaGranny]

47. Some places are enacting

regulations about sales of new condos - that you can only buy one. They won't sell you another one unless you sell the first one.

The mobile home park I live in has a similar rule. We can only own one property - unless we are trying to sell it and have moved to another one in the park. That's to keep out people trying to buy out our homes to use in the rental market. It also makes for a more stable community.

[henslee]

63. Seems like there are ways around that... take it in a corp. name, etc.

[FlaGranny]

79. There was an article not too long ago,

locally, about the situation. I don't believe a property can be purchased by a corporation.

[OldLeftieLawyer]

8. Bingo

And therein dwells the illusion.

It's all play money, since it's never really "in hand," only figures on a page somewhere. The buyer never builds any equity in the house.

Traditionally, mortage payments were "PIT," that is, principal, interest, and taxes, each item worth a certain, fixed percentage of each month's payment.

It was small, but the homebuyer began building equity in the house immediately.

These "interest-only" loans scare me, too. Think about balloon payments.

[LostinVA]

45. I have a fixed percentage mortgage -- thank Goddess!

Our mortgage guy tried to talk us into an interest-only loan, so we could get "a bigger house." Iw as like: I'm not stupid, I plan to live in this house for at least 10 years, and I DON'T WANT A BIGGER HOUSE! I barely have time to clean and take care of the yard as it is.

[OldLeftieLawyer]

48. That's what we've always done

What are people thinking with these scary mortgages? I guess they're thinking "investment," and not "home for a long time."

Personally, I wouldn't want to live like that, so tenuous and always watching to make sure I didn't miss the crest of the selling wave. It's can't be fun.

Sometimes bigger is better, but it's all in what it costs. Good for you (and the Goddess........)!

[LostinVA]

50. I also got a REALLY good rate

And the only thing that can change are the taxes.... yup, scary. People just don't think. I own the house, it doesn't own me (hopefully!).

[Writer]

72. We have a second mortgage that's interest only...

But we've been overpaying to cut down on the principle. We have a 3/1 as our first mortgage, but we want to move closer to the highway after I finish graduate school within a year. In synthesis, we have been building equity much more rapidly than with our former 30-year fixed.

Some of these less stable loans carry greater risks, but you must be smart about your payments.

[maryallen]

64. Unless the buyer puts down large down payment,

in which case, equity is established.

Furthermore, the buyer chooses lower monthly payments for a specified period, probably planning to sell within 5 years.

A lot of people who took out interest-only loans got them for 3-4%, so even if they go up after the alotted lock-in period, they're still not doing as poorly as those who took out 13-17% mortgages during the late 70's.

[elsiesummers]

66. Interest only can be ok in some circumstances: a real life example:

My husband is on a co-op board and they okayed a couple using an interest only loan to buy a $425K co-op.

The couple are Doctors - residents - with a total income just over 100K but a future expected income of $450K annually. They put 20% down but went with interest only since it will be another year before they move on to higher paying jobs. He actually researched their expected income prospects before okaying them. Even with their student loans just one of them should make enough to cover their payments.

In fact, I had no idea income could be so obscene. Their expected monthly take home income will be around 25K A MONTH. That is sort of amazing, don't you think?

Overall, I agree with you about interest only loans, but I think that some of the supposed speculation is not as bad as people think. Sometimes the reason people go for interest only or ARMs with balloons is they expect to pay off the loan in it's entirety in less than five years. I think those that are expecting an always up market with intsant equity will be disappointed. Those people who squeezed into too much house may lose their home. That really is a poor decision though and this seems to be a country in which we allow people, for better or worse, to make bad decisions and fail miserably.

Another example where a statistic than could be viewed two ways is my own. We have two properties. On our primary residence we owe MORE than the value of the home (though it is a reasonable fixed rate) so we are renting from the bank. This sounds pretty horrifying even to me, but I know that on our other property we have 75% equity and 25% mortgage.

Yes, I think there are people who have gotten themselves into trouble trying to squeeze into homes they have no hope of paying off. My SIL just told us of friends who sold a 250K house and used the 100K in equity to pay off credit cards and car loans, then bought another house with a 300K mortgage and ran up their credit card bills again.

I also hope Bush never gets his tax reform passed because it will permanently slow the Real Estate market - especially on those over 400K+ McMansions - and most Americans have their net worth in their homes - so will kill retirement prospects for many many Americans (and we will all end up paying for this). People will not want to own real estate in cities where the cost is already high and their mortgage credit is reduced plus they won't be able to deduct their property tax or local and state income tax. It's sort of like Bush is aiming a bullet at the real estate in places like NYC and Boston or anywhere with high income and property tax. This will reduce the tax base of metropolitan areas and encourage renting over ownership - creating slums where there were none before. It's really bad news - and will permanently dammage the real estate market - as if his administration hasn't already done enough permanent dammage.

It's one thing to have a real estate crash and another to make tax laws that prevent real estate from ever coming back from a crash. I hope the Bush admin becomes so ensnared in fighting the scandals that they can't move forward on their tax agenda.

[Freddie Stubbs]

9. That is what people are gambling on

But if the price doesn't go up (or increases) they are up the creek.

[UpInArms]

11. that and the mortage interest deduction on taxes that is about

to be jerked.

[shanti]

58. they'd better NOT let that mortage interest deduction go

there will be an uproar the likes of which you've never seen! homeowners COUNT on that to help pay their taxes.

[UpInArms]

65. related: US tax panel urges mortgage interest deduction cut

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-11-01T134653Z_01_N01416371_RTRIDST_0_ECONOMY-TREASURY-TAXES.XML

WASHINGTON, Nov 1 (Reuters) - A blue-ribbon panel appointed by U.S. President George W. Bush will recommend voiding most tax deductions and lowering tax rates to make the U.S. tax system simpler and more efficient, its chairman said on Tuesday.

"We're going to eliminate almost every deduction presently in the tax code," the panel's chairman, former Florida Republican Sen. Connie Mack, said in an interview on Bloomberg Television.

The panel, which was created in January, 2005, will present its recommendations to Treasury Secretary John Snow later in the day. Snow said on Monday he expects to review the proposal and forward it to the White House by the end of the year.

The panel would lower the ceiling of mortgages on which taxpayers could claim deductions for interest to between $400,000 and $425,000 from around $1 million, Mack said. The panel will also suggest providing a credit -- as opposed to a deduction -- for mortgage interest.

...more...

[elsiesummers]

67. They also propose eliminating the property tax deduction.

These two things combined will permanently reduce the value of real property - so that after the crash/slow down value will never bounce back.

They are not looking at the long term consequences of what they propose.

[UpInArms]

68. They don't "care" about the long term consequences

Their goal (imho) to to create a feudal system in the USoA - that means that they need to facilitate the bankruptcy of the middle class.

[elsiesummers]

71. That may be part of it, I think it's aimed at Blue State Residents

It seems to me like some of the highest property taxes and income taxes are in Blue States or around urban centers.

I think it's a direct hit at Democrats in their pocket books.

Since I live in New York and pay property tax in both NYC and near Albany, plus husband pays income tax in NYC - yeah I'm really really REALLY pissed off about the tax plan.

The Democrat on the Blue Ribbon panel was John Breaux (a yokel who says "bidness") and it seems like there is a strong pro-rural/anti-urban bias to the tax plan.

[UpInArms]

73. I live in a rural area and the policies of the mal-administration

are affecting rural red voters as well as urban blue voters.

The discontent out here has been growing by leaps and bounds.

[Demobrat]

15. Yes.

People get these loans for two reasons. Either they are hoping for a quick profit- or they can't qualify for anything else. In the second instance, the idea is that once the house appreciates to the point where they have 20% equity they can refinance into a regular loan.

[MADem]

62. Plus, you get the tax break in the interim, and boost your credit rating

Call me old fashioned, but I like to actually OWN if I am paying!

It's fancy rent, with a kickback, IMO!

[Gormy Cuss]

12. How interest-only works

Interest-only loans mean you don't pay any principal at least in the first few years of the loan. That does make your "affordability" level higher. For some people it makes the difference between being shut out of the market and being able to buy.

The benefit for consumers is that if you live in an area with rapid appreciation you will be building equity even though you aren't paying principal. Say you buy a 100K house with no money down and an interest-only mortgage. At the end of one year you'll still owe 100K. If the local market is appreciating at 10% a year, the house is now worth 110K and you've got 10K in equity. Had you waited it out to qualify for a traditional mortgage, you now have to qualify for 110K , not 100K.

If it appreciates by 10%/year for five years, you will have a house worth about $160K at the end of 5 years. You'll still owe 100K, but you have 60K in equity. You may now refinance for a traditional loan at a better rate because you have more than 20% equity in the house.

Problems arise when the market doesn't appreciate (because you don't build equity) or worse yet, when the prices decline as happens when there are many foreclosures. Then you would have a house worth less than the amount of the mortgage and that's bad for several reasons, including that the mortgage company could call the note and force a sale. You then will have an outstanding debt and no home 'ownership.'

There are other issues, such as whether the tax advantage of mortgage interest deduction outweighs the additional cost of more total interest due and PMI costs, for example.

[bunny planet]

16. I had an interest only loan for awhile. There is a lot of

misrepresentation here on DU about interest only loans. You can pay towards the principle every month if you want to, in fact you should, Say you owe 700. per month interest only on a 200K house, if you pay $900. per month, 200 comes right off the top of the principle and the rest goes towards the interest portion. Where people get in trouble with these loans is of course, when they can't afford to prepay part of the principle each month and only pay the interest portion, which is all that is required of them during the interest only period of the loan. At the end of a certain period of time, in my case it was after the first five years of the loan (which was tied to the London Bank rates, LIBOR, not an American index rate), the loan would convert to a regular variable rate principle and interest loan at the current interest rate. If interest rates were much higher by then, and I hadn't paid down the principal at all, then in fact I could ostensibly be stuck with a large increase in the monthly payment due with now principle and interest payments.

A lot of realtors get interest only loans knowing that they will pre-pay principle but get a lower interest late than a conventional rate loan. The trouble is for people who can't qualify for a regular principle and interest rate loan because they are trying to buy too expensive a home, they are offered interest only loans because the minimum payment (interest only) is much lower, if they don't pre-pay principle. It is not true that they can ONLY pay interest, it is up to them how much principle they want to pay monthly during the interest only period of the loan). So it's not the loans that are problematic, it is the fact that people are encouraged to take them out to afford too-much house without the ability to pre-pay down the principle.

[OldLeftieLawyer]

24. You can pay your credit card bill every day, too,

online, and never have a balance. But people don't do that.

People get mortgages they can afford, and, in this market, they can barely make their interest-only payments.

You can pay more on anything anytime, but the problem isn't one's willingness to do that, as you did. The problem is that people are buying inflated properties at prices that really are beyond their financial capabilities.

[bunny planet]

31. Agreed.

[LostinVA]

51. Exactly -- everyone I know who has these loans do it

because they want more house than they can afford. And, most of them have NO IDEA that the payment's gonna balloon. I told a colleague who's recent divorcee that, and she poo-pooed me, bought a house about 30% more than she could afford. THEN, she sat down and looked at stuff... and freaked out. She's actually converted to a fixed %, but she lost alot of money already on fees, etc., and her rate wasn't as good as it would have been if she had done that in the first place. This isn't a stupid lady, either.,, she just wanted a house in-town and on a golf course. Now, she spends so much on her mortgage that she can't afford to play golf!

[elsiesummers]

69. Many people do pay off credit cards every month...

There is actually a lot of misinformation about this. Specifically, there are different types of people with different money management styles (savers versus spenders) and the way they use credit is quite different. There are in fact a substantial percentage of the population who pay off their credit cards in their entirety, always, and the credit card companies call them "deadbeats" because they can't make any money off of them. (IIRC this is in the 20% range).

I actually keep a running credit on our credit cards - so they'll never hit us with an interest charge. We use credit a lot for the points or cash back. This is not as uncommon as you think. I am not alone but part of a significant portion of the population.

Citibank has a card (which I don't have) that pays 5% cash back on gas, groceries and pharmaceuticals, which I should get, and plan to apply for. My parents actually have two of these, one in each of their names, so they can get two $300 checks per year - the maximum per card -and they do because of drug prices. They live off their social security only, use credit cards regularly, and still pay their cards off in full each month.

There are many people who live this way, but we don't hear about them as much because they are not a media story.

There is also a group of credit users who only make minimum payments - and this group is the most likely to fall behind.

Then there are the people in the middle, who sometimes pay them off, then run them up again.

When we hear about the "average" amount people owe on credit cards it doesn't show the whole picture. People who owe on credit cards actually owe a lot more than the average of $8000+ per household because they are being averaged in with people who don't owe anything on their cards ever.

The picture of credit card users is far more varied than most believe because the averages don't tell the story.

For more info, I believe Ben Stein wrote an interesting article on this - about the "deadbeats" and "revolvers". Also, there was a really good "Frontline" on the credit card industry on PBS - which told a lot about the good and the ugly side of credit cards and may have a transcript online.

[Birthmark]

3. A real estate bust in Florida?

Impossible! That could never happen! :sarcasm:

[OldLeftieLawyer]

10. All we can do now

is to pray that it breaks off and floats to Cuba.

heh heh heh

(After, of course, we've rescued all our DU FL friends.........)

[bunny planet]

32. Do you really want me to float off to Cuba OLL, I live in Fla-la-la.

:(

[OldLeftieLawyer]

33. NO!

I'll carry you out myself, dammit!

And then I'll even let you drive the steamroller:

[bunny planet]

34. LOL

[1monster]

13. In my county alone, we have so many new developments going in that

we will need to triple the number of schools from twenty-six to seventy-four in the next ten to fifteen years.

The big boy developers have come to town proposing developments of four and five thousand houses to twenty-five thousand houses. Their bought and paid for county commissioners roll over, sit up, and beg, "YES! Please!" completely disregarding their planning and school boards.

But the housing boom is already starting to go bust. There are three times as many houses up for sale now than there were at this time last year. Seller's market waning. Buyer's market developing...

[riskpeace]

17. You Must Be My Neighbor

Panhandle here, and I could have written the same post....

[QC]

18. Where in the Panhandle?

If you don't mind my asking.

[riskpeace]

55. Panama City area

nt

[QC]

60. Same here.

It's insane what houses are going for here while incomes still lag, and they're still building more and more and more. I fear that this place will soon be nothing but soulless concrete boxes full of 100-year-old millionaires. Pity--this used to be one of the most beautiful places one could imagine.

[BamaGirl]

78. Another neighbor

:hi: from Dothan. Housing prices have gone nuts all through this area. I want to know where the heck these ppl are working!?

[1monster]

75. Northeast. Florida's First Coast.

The care nothing about the social and environmental cost developers are going to continue "developing" Florida until there is no Florida left. All we will have is concrete, steel and beach erosion from one coast to the other.

[bleedingheart]

14. people have been encouraged to ignore their common sense

(of course there are those individuals with no common sense)

I am not perfect and will openly admit that I have made some dumb financial moves in my life but when buying a home I truly believe that some people take leave of their senses. In the latest housing boom...I think that a lot of people just ignored common sense and that feeling of "this has to be too good to be true"...

I know of many people with interest only loans and those who have taken out even more loans to fill those homes up with more stuff....and a lot of them have done so without seeming to understand the mess they may be getting themselves into....and like you I think they are not going to fully fathom the danger of the new bankruptcy law until it is way too late.

[OldLeftieLawyer]

19. I'm mystified, frankly,

by the cavalier attitude I've seen in people who do not have the financial resources to sustain the life they think they've built around themselves. I spoke with a lot of people about the bankruptcy law before it went into effect, and no one seemed to understand that, ultimately, it was going to come down on them.

I just don't understand it. Has our populace just been dragged so far away from reality, with all the hidden, flag-draped coffins, the lies about WMD, the false assurances from the White House that never turn out to be true, that they now live within the same kind of bubble as that ratbastard in the Oval Office?

In all my long life, I've never seen such a strange disconnect. Sometimes I feel like I'm the only sane one.

Remember the old - and true - warning: "If it sounds to good to be true, it is"?

[Dave Reynolds]

21. Too many people believe the pResident

when he says the economy is strong, and getting stronger. They also have Greenspan's alleged replacement saying there is no housing bubble, and we have a vibrant economy, blah blah blah....

And some folks are just eating that poo up like candy...

[bbgrunt]

59. I feel the same way. But this is the throwaway economy.

People don't expect anything to last anymore. They just throw away perfectly good things and get new ones.

Living in a college town is very revealing. At the end of every term the streets are filled with discarded, still useful items. While dumpster diving at the end of a term, a friend of mine once found a discarded jar filled with small change that added up to about $20. I guess it was just too much trouble to take it to the bank.

I think the mentality has led us to look at our fellowpersons as being throwaway too--no wonder so many are going berzerkers.

[Raster]

44. the bankruptcy bill is a return to indentured servitude...

you will now owe your life to MBNA, after all, they wrote the bill.

Once again I say that any person in Congress that voted for this travesty is not a servant of the people and is unworthy of our vote or trust. Anyone.

[OldLeftieLawyer]

49. Take a bow, Jim Moran, (D), VA

My fucking Congressman was the guy who practically wrote and shepherded this bill through the House.

Let me tell you a little about our Congressman - who no longer gets my vote, even though he doesn't need it - and see what you think:

When he was Mayor of Alexandria, VA, he got caught taking bribe money from people who wanted the parking lot contract with the city.

So, of course, he ran for Congress and was elected.

His third marriage - two dirty divorces preceded this one - produced a beautiful little girl, who, at the age of two, was diagnosed with a rare brain cancer. President and Mrs. Clinton came to Alexandria to visit the Morans, made sure all sorts of NIH help was made available to the little girl, and, miraculously, she was cured.

Moran, by way of thanks, then voted for Clinton's impeachment. Did I mention that he was then in the process of leaving this third wife and this afflicted child who was just getting over her cancer treatment?

With three divorces, he was in solid debt, just flat broke. So, he got - quite magically - a $250,000 personal loan from MBNA. Interest-free. Then, because he is a diligent and conscientious Representative, working only for the good of his Northern Virginia constituents, he went to work on this bankruptcy bill for MNBA, a Delaware corporation (where Louis Freeh is now a senior vice-president, by the way).

Did I mention that the loan was forgiven, Moran married a millionaire real estate lady, and now they live in her great big house overlooking the Potomac?

Take a bow, Jim Moran, one Democrat who will never get my vote again.

[raccoon]

54. Thanks for sharing that about Jim Moran.

Just goes to show that Democrats (or for that matter any other party) can be just as corrupt as any Republican. Corruption is equal opportunity.

[Ezlivin]

61. Republicans can be just as corrupt as any Democrat

You would never read that on Free Republic.

Proving, once again, that we possess rational, open minds.

...Democrats (or for that matter any other party) can be just as corrupt as any Republican.

[OldLeftieLawyer]

74. I never thought of that,

and you're completely right.

I never go to Free Republic, though. I went once. I got scared. What if stupidity is contagious?

Oh, how can you not look at what Moran did and still blindly follow some bullshit party line?

Did I mention that he's gotten into hot water more than once for making anti-Semitic remarks?

Our Democratic Congressman. I hope he retires soon and enjoys his next career with MBNA.

You watch.

[LostinVA]

57. I was, frankly, shocked he did that

I always wished he was my Congressman, not Virgil Goode.... until he did THIS.

[flvegan]

20. I wrote a policy today on a home here in Tampa

Where the house was bought just over 1 year ago for $240,000 (improved property, new construction). The owner is refinancing for $355,000. No improvements seen in the title search, and this property is the only collateral.

Maybe they put in a solid gold pool, or something...

I'm seeing tons of this right now. However this one was so odd, I alerted underwriting counsel to the possibility of an inflated appraisal (another hot black market around here).

Crazy.

[OldLeftieLawyer]

22. What's the point of this?

Weird story you tell. The refinancing is reflecting the market value, right? So, if the market goes bust, as I'm assuming it will, what happens to the policy?

Why would people do this? I'm drawing a blank here.

[flvegan]

25. Sorry, I should have been more specific

Title insurance policy.

I was making note to the crazy escalation as of late in the market.

[OldLeftieLawyer]

28. Oh

Oh, I see.

It's still nuts. All of it is funny money, fake. Except real people are going to get badly hurt.

Thanks.

[teryang]

23. Florida housing prices are not that high for a reason

Florida housing prices were somewhat flat for quite a while. Recently there have been substantial price increases. Whether these prices are reasonable to pay is all relative. One thing to keep in mind is that people move here from all over the country if not the world. Part of the attraction is that relative to major markets up north, florida residences are dirt cheap. In spite of the huge price increases on a percentage basis they are still relative bargains. Anyone who visits here from up north realizes this.

The problem with increased prices however is that the Florida worker is looking at what he can afford to pay on the miserable pay scales in this state. Florida residences are relatively inexpensive because they reflect the relatively poor economic conditions here. Thus if you come to florida looking for a way to make a living, buying real estate more easily affordable three years ago is a major risk. If you come to Florida with a pension and the $800,000.00 you got from selling your piece of junk home in the northeast, you can buy a much better new one here for about 250 to 325K depending on the area. Apparently, the 450K and up condos beachside respond to a very different world market for these properties and may be completely unaffected by ups and downs in the market.

Florida jingo for the less fortunate on a car vacation:

Florida, come on vacation, leave on probation, commit a violation, stay for the duration, enjoy your incarceration in the Sunshine State.

[Catfight]

27. I think teryang hit the nail on the head. I work here in Florida and

sold my house right when the market started to be a sellers market. I didn't make a killing, but I did okay. Now I can't afford anything in my price market unless I over extend into debt-land. I come from the old school, equity is a good thing and interest only loans are trouble. But I have to say, it seems like the market in florida for interest only loans might be the way to go because someone will buy your house at a profit. It's all very confusing and depressing. I'm hoping for a bust in the market, that way I might be able to afford something. Very interesting topic indeed.

[SW FL Dem]

35. That may be true in some parts of FL

Here in SW FL, a basic 2200 sq ft 3BR/2BA home on a 1/4 acre or smaller lot will cost you between 500,000 and 1,000,000 depending on where it is located. My neighbors just sold theirs for 780K.

[teryang]

43. I agree

It does depend on the region. South Florida prices are completely different. The price ranges you discuss are hardly for the working class market. Properties in that range are available to those who are affluent and relatively immune to the economic changes. Similar to our oceanfront properties.

[cosmicdot]

26. this just all sounds too mindful of 'buying stock on margin'

from American history class, and the causes of the Great Depression

"Through the miracle of buying stocks on margin, one could buy stocks without the money to purchase them"

[OldLeftieLawyer]

29. That is EXACTLY

what it is.

I remember my legal mentor - who had been Harry Truman's White House counsel - explaining stocks on margin, and how it made a lot more sense just to go to Las Vegas and bet everything on one throw of the dice.

Never. No way.

But, there's another problem going on here, and I think it's that people now see their homes as investments. That's relatively new thinking.

[LostinVA]

52. This is EXACTLY what this is -- I said that when these loans

first became "hot" -- 1929 all over again....

[wakeme2008]

30. In Tampa ppl are building "sold out" condos

that the buyers never plan to move into the units just "flip" them once built and "make a killing" on the flip..

Problem being the good old banks are the only ones with $$$$ in the game.


Does this sound like something that happened under Reagon.....

[Starbucks Anarchist]

36. How does that work exactly?

Are they flipping after a period of only a few months? Wouldn't the equity gain be minimal, or am I totally missing the objective here?

[Catfight]

37. I looked at a townhome in tampa that was listed for 219k over a year ago.

It was less than a year old. You can go on the public record site to see what they initially paid for it, they bought the townhouse for 105k. Once I saw that I said forget it. My question is, how can you pay top dollar for something and make a profit later down the road? If I purchased that smaller townhouse for 219k and kept it for over five years, who's to say it'll be worth that then? What if the economy bust? Economist state America can't withstand another terrorist attack financially yet we're told we're still not safe from that happening. It's all too risky for me, I'll just sit and wait until this era of irresponsibility and gluttony are over. It can't sustain forever. What goes UP must come DOWN.

[DoYouEverWonder]

46. Here's an example

a friend of mine bought a vacation cabin down in SW FL for about $75,000 less then 2 years ago. The same cabin is selling for $175,000 now.

If you buy into a condo at pre-construction prices, the market has been going up so fast, that by the time the place is built you can make a 25 - 50% profit on your investment. Unfortunately, this sort of thing is completely unsustainable and there are already signs that this bubble is about to burst.

[Starbucks Anarchist]

76. No kidding.

Thanks for the info. :hi:

[carolinalady]

38. Similar situation here on the NC coast

Two years ago when we moved here you could still but an oceanfront lot for 50K. Now the same property is half a million. There are trailers that are selling for 250-400K. A bunch of developers bought properties and started building duplexes all over the place-selling each half for 450-750K. 5 large condo complexes including 3 of them with multiple high rises are being built. The problem is no one is buying. In the last several months there have not been 20 properties sold. I am going to take a wild guess here but that leaves about 300-400 on the market. Somebody's gonna get burned. To add to the misery, New Hanover county is now doing their 7 year tax reassessment and a lot of those old-timers can no longer afford the taxes on the properties they have had for years.

[LostinVA]

53. I lived in Wilmington, NC, for a long time

I moved because of prices and Bertha and Fran. Man, do I wish I had bought some property in Brunswick Co. down by Shallotte then! ARRGGHHH!

(I see you're in Carolina Beach -- I remember when that was the "cheap" place to live!)

[Sacajawea]

40. Large tax increase from last year to this....

I have a 1/4 acre undeveloped lot (but with houses nearby I think - I've never been there) in the Ft. Myers area. In 2004 it was valued at $15,468 and the taxes were $450.55. Just got the 2005 tax bill. The lot is now valued at $37,272 and the taxes are $781.07.

Maybe now would be a good time to sell it. I don't know about such things at all. Any thoughts, anyone?

Just my $0.02 worth (actually, my $781.07 worth).

[Solon]

41. No shit, and neither is the "American Way of life"...

Having two cars, a house on 1/2 acre of unariable land, 2.5 kids, and a dog is also unsustainable, tell me something I don't know.

[Sancho]

42. Remember the 70's....

at one point, I had 3 houses (2 rented) when mortgage rates were 13% and no one could get a loan....and I didn't plan on being a landlord! I still think the attraction for much of FL is avoiding state income taxes and property taxes. Many don't care about the price of the house as long as the taxes can't go up. The flipping does occur and we see it driving up prices, but there are still a lot of retirees heading south who don't want to pay for NY and WI schools now that the kids are grown. As long as that happens, there'll be pressure on the market.

[LeahD]

77. I think property taxes in FL are rather high....compared to my state. n/t

[Ganja Ninja]

56. It's unsustainable for the near term.

But for the long term imagine how the retirement of the baby boom generation will effect the housing market in florida.

[Yavin4]

70. There Is A Bigger Problem Here

If your neighbors have a bunch of these interest-only mortgages and they go bust, then the real value of your home goes bust as well.