"Flipped In Florida" - For Sale Sign On Almost Every Other Home

Discussion in 'Wall St. News' started by ByLoSellHi, Mar 26, 2007.

  1. Pay special attention to what is happening to property taxes on these homes that 'speculators' bought. There's no mention of insurance rates, but I can only ponder what that additional burden must be.

    Flipped in Florida -- Selling in a Housing Bust: John F. Wasik

    By John F. Wasik


    March 26 (Bloomberg)
    -- There's something about Florida residential real estate that attracts speculators like an alligator to an easy meal.

    Abundant sunshine has been known to distort investors' perception of the laws of economics from the 1890s to the present. With tens of thousands of properties languishing on the market, the quick profits seem to have evaporated.

    The experience of Beth and Fabrizio Faieta, who have bought five homes in the Fort Myers-Naples area over the past few years, provides a tale of what happens when home prices sour.

    The Faietas aren't your typical Florida ``flippers'' who had hoped to buy and sell properties within six months of purchase, though. They said their holdings were intended to be long-term investments. Yet as the market stalled, buyers were scarce and expenses rose, and they were forced to sell.

    Homes are plentiful in southwest Florida. There are for-sale signs on almost every other property on the most desirable road that embraces the graceful, white-sand beaches of the Gulf of Mexico. Local newspapers carry four or more sections of real- estate advertising.

    When the Faietas arrived in the Fort Myers area from Massachusetts 2 1/2 years ago, homes were in high demand in the Sunshine State. ``We had to put in offers the same day we saw them or they were gone,'' says Beth, who was a part-time real- estate agent in Massachusetts.

    Lower Asking Price

    One of their investments, a three-bedroom home in Bonita Springs, was bought from an owner who had to sell. With 4.62 percent financing in September 2004, they bought it for $260,000. The house originally listed for $395,000.

    Although they have had no problem renting the Bonita home -- my family and I leased it -- with the slack market, they have had trouble selling it on their own. They recently signed on with a local real-estate agent and have reduced the asking price of almost $400,000 to $359,900.

    Like so many formerly torrid markets, southwest Florida home prices are in retreat. Prices fell 2 percent in the fourth quarter of last year in the Naples area and more than 1 percent in Fort Myers after more than doubling in value over a five-year period, according to the Office of Federal Housing Enterprise Oversight, the watchdog agency for the mortgage companies Freddie Mac and Fannie Mae.

    ``We purchased the house with the thinking that we would like to keep it long term,'' Beth says. ``I am not happy to sell it. I am also not happy that we are putting our other properties up for sale.''

    Boom-Market Curse

    When buyers abound, few investors think about the long-term costs of holding properties. Yet a rapidly rising market that brakes suddenly, combined with unique local conditions, presents pitfalls.

    In Florida, as in most coastal areas in the southern U.S., the wave of hurricanes in 2005 led to skyrocketing homeowner insurance premiums. Some insurers even stopped selling policies and dropped coverage in storm-prone states.

    For the Faietas' Bonita property, that meant an initial premium of $999 for their single-level house about a mile from the Gulf rose to $1,407. Beth expects it to climb even more in August. Another home they own in Naples had rates rise from $2,400 to $7,400.

    A boom market also translates into higher assessed property values, which push up real-estate taxes.

    Economic Pressures

    The Faietas paid a bargain $1,200 in property taxes for their Bonita house in the first year of ownership. Last November, the levy was $3,768. The dramatic increase in taxes is front-page news for all Florida residents now, particularly those who were originally drawn by the lack of a state income tax and relatively inexpensive housing costs.

    As if skyrocketing insurance and taxes weren't enough to give Florida home investors cold feet, the market is glutted with properties.

    Within sight of the Faietas' property are three similar homes for sale. According to the Naples Area Board of Realtors, there are 11,000 houses on the market -- an 18-month supply -- and more than 2,900 homes under construction in neighboring Lee County.

    The flippers who at one time accounted for as much as 50 percent of purchases in the Fort Myers-Naples area have largely retreated to the sidelines, responsible for no more than 2 percent of sales, according to Homesmartreports.com, a home information service in San Juan Capistrano, California.

    Quadruple Whammy

    A combination of slower sales, higher mortgage rates, large inventories and cash-strapped flippers being forced to sell is tilting the balance to buyers now.

    Doug Brunner, a real-estate agent at Downing-Frye Realty Inc. in Bonita Springs, says: ``Two years ago, it was common to see sales contracts written at 90 percent of the original list price. Now it is common to see listings reduced by anywhere from 20 percent to 33 percent before an offer is made.''

    While housing starts and existing-home sales both unexpectedly rose in February, don't expect a quick turnaround. The supply of homes for sale increased almost 6 percent last month, creating a supply of 6.7 months, according to the National Association of Realtors, a Chicago-based industry group. With almost 3.8 million homes on the market, that's still a hefty inventory to be absorbed.

    Nationwide, the possibility exists that as many as 1.5 million more homes will come on the market from foreclosures of sub-prime mortgages.

    In the interim, that means healthy discounts for patient buyers, and more pressure on long-term investors such as the Faietas to sell their properties.

    This is a pattern being repeated all over the country from California to Massachusetts as investors who piled into the home market discover the painful realities of the supply-demand curve.
  2. blast19


    Fuck the investors and speculators....I've got no pity for them. I was in Bonita Springs last year I think and 2 out of 5 houses, quite literally were for sale. I was yelling at my wife, "HOLY SHIT, look at this!" It was incredible.

    I used to live on Marco Island, about 2 years ago. I went back to visit last year and on the road from Highway 75 to the 41(?), about a 5 mile stretch, was wall to wall packed with new home construction...Naples is a stupid joke. It's really like Real Estate gone wild down there...was down there recently and it's quiet and dead compared to what it was.

    There is also a law in Florida that if you own a 2nd home there and retain residence in another state, which a lot of people do I think, they can jack up your property tax to whatever they want...it's different for residents and people who own property there but retain residence elsewhere.
  3. S2007S


    yep, thats how it is here, nearly everyone has a second residence in florida or vice versa, I have no clue, but seems that when it gets toooooo cold they have to run to warm weather.... they usually leave in Sept-Oct and come back around April.
  4. S2007S


    Nationwide, the possibility exists that as many as 1.5 million more homes will come on the market from foreclosures of sub-prime mortgages.

    WOW, who would have thought.

    ARMS resetting. Foreclosures skyrocketing yet for some reason everything is perftec....... And they said the market bottomed 4 months ago, WTF are they talking about. How much of a fool do you have to be to believe that. ITS NOT OVER.
  5. blast19


    My curiosity is whether or not THEY'LL EVER find people to buy those foreclosed houses in Sacramento, Los Angeles, Bonita Springs, etc. I have a feeling there will be a lot of deserted tract homes for a while.

    I don't know if you guys know places like Bakersfield, but the only reason EVER to move there was dirt cheap housing...housing there is pricier now than in LA probably...so what the fuck kind of incentive would there ever be to buy the homes that are going to be foreclosed on there.
  6. blast19


    Also, that foreclosure statistic makes me curious because that's subprime which is only subprime...not all Alt-A loans. The speculators were more Alt-A loans...poor people with bad credit are subprimers for the most part. I think we'll see worse than they see.

    Remember last week when they said there wouldn't be any problems...now it's this. In 3 months maybe we'll get the full answer.
  7. No two ways about it. However west of 41 is still expensive as no to-morrow. In Olde Naples, Moorings, Vandy Beach ect. it's still 1.5 for anything beyond your basic 1400sq ft. cottage.

    The drill is simple. Well to do white folks who value safety and good schools are being shoe-horned into super pricey neighborhoods. Everyone else is living on the wrong side of the tracks with blacks, hispanics and trailer trash whites. Sub-prime mortgages for sub-prime humans living in sub-prime areas. Brazil.

    I was looking through the Sun-Sentinels 73 page RE insert yesterday. It looks like SFO's in Broward are rising in price while condo's, particularly units not on water are being squashed. I've oft wondered how condo's could sell for more than homes in the same area. It appears the market is pricing out that inefficiancy.

  8. jem


    they cant jack your taxes up to whatever they want. Is your Fla property eligible for a homestead exemption? If it is you get a small deduction on your taxes and a cap on your prop tax bill. It cant rise by more than 3% a year.

    If you can not take a homestead exemption then you pay the same property tax rate as any other non homesteaded property owner.
  9. blast19




    "All across the country, homeowners are complaining about runaway property taxes. In many places, sharp increases in home values are to blame. But Florida's snowbirds are angry about something else -- an unusual dual-bracket tax system. Florida allows municipalities to set the taxable value of properties at different levels for permanent and seasonal residents. There have been cases of snowbirds paying property taxes 10 times as high as those of permanent residents living nearby.

    Records of the St. Lucie County Property Appraiser show, for example, that one permanent resident of Jensen Beach pays $271 a year in property taxes on a 408-square-foot mobile home built in 1984. Four houses away, a seasonal resident from Pennsylvania pays $3,007 for a 420-square-foot mobile home built in 1987, the records show. The two lots are nearly the same size, according to the records."
  10. The Legislature is going to pass a new sales tax that in exchange will cut property taxes by 50-70%. That's one reason why sellers have been raising prices on SFH's the past few weeks.

    I'm homesteaded so taxes aren't an issue for me but without relief I'll never be able to move. The taxes on my home for a new buyer would be about 6x what I pay. Since my taxes aren't portable I too would pay more even if I downsized....

    #10     Mar 26, 2007