Ponzi Schemes always end so quickly. Poof, and it's all over, and the bagholders look around and wonder what the heck happened. Why did the good times end so suddenly? Come on everyone, let's keep the party going! Anyone? Anyone!
Here's a great WSJ report about bubble-epicenter Naples Florida. Read the whole report. And cringe. Only the really, really stupid (think Greg Swann) don't understand what's happening all around them now.
Baaaaaaa!
Speculators helped fuel Florida's housing boom
NAPLES, FLORIDA
In 2005, this once-sleepy retirement haven on Florida's west coast was arguably the hottest housing market in the country.
The frenzied run-up prompted economists at banking concern National City Corp. and the economic consulting firm Global Insight Inc. to label Naples "the most overvalued" housing market in the U.S. in the second quarter of 2005, a dubious honor it retains.
Today, prices are dropping, the number of unsold homes on the market has swelled to more than twice the national average and investors are scrambling to unload their properties.
But it's increasingly evident that investors and speculators here and elsewhere played a greater role than previously thought in pumping up the real-estate bubble -- especially near the end of the run.
At the peak of the Naples market in 2004 and 2005, as many as 50 percent of buyers may have been investors, local real-estate agents say.
"This market downturn came out of nowhere, like a snowstorm," he says. "It surprised everybody, especially the people making mortgage payments."
January 09, 2007
A mass speculation, a classic ponzi scheme, and a rush for the exits - The Naples Florida Housing Boom and Bust
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14 comments:
Man, that Ms. Dresner ho really got her ass blasted wide open in that article.
"This market downturn came out of nowhere". . .RIGHT!!! aparently no one in Naples (or elsewhere) reads the blogs or for that matter a decent newspaper. . .I am still amazed that people here in San Diego don't "get it" that the housing market has tanked big time - I ran into one nice middle aged couple over the weekend who are thinking of selling their downtown condo, and said, "the one upstairs appraised at 850K last year, so we think we will list at that.". . .of course I didn't have the heart to tell them that the same unit downstairs is on the market for 699K and has been there for four months!!!. . .sheeple indeed.
The boom didn't happened everywhere. The bust won't happen everywhere either.
prices will fall in all places where the supply of homes has increased and demand for homes has either decreased or remained constant.
Where the boom happened a bust will follow. Some will get burned, those that got in late. Some will have made a killing, those that got in earliest. Most will come out where they started having "lost" a lot of money on paper.
"This market downturn came out of nowhere, like a snowstorm." - Apparently, this man has never heard of the Weather Channel. Or this blog.
Part of me wants to see these jackasses get badly burned for their greed and speculation. These people are the reason I have had to postpone buying property even though I can afford it easily at what should be "normal" prices. ($300/sq. ft. for a condo conversion?!?! WTF?@!@#) The other part knows that everyone except a select few suffers when these kinds of things happen. Whether through tax increases to support the "newly created poor" or an impact on the economy that makes good jobs tougher to find.
I think I just mostly want this over so that we can return to a time when a house was a home first and a savings account/investment second.
Don't forget all the increased property taxes due to the REIC. This housing bubble was a terrible thing right up there with the dotcom bubble.
The Fed will be pushing on a string now.
"The boom didn't happened everywhere. The bust won't happen everywhere either."
I agree that this makes sense but I don't feel confident that it will hold true. The bubble was irrational and the unwinding of this bubble will very likely turn irrational too. That's the nature of bubbles.
So although it would make sense for non-bubble areas not to decline, I could also see a scenario where the national news becomes so consumed with stories of bursting bubbles and what a terrible 'investment' real estate is that even buyers in non-bubble areas would become skittish.
I'm not saying that I believe that this will definitely happen but I do believe that there is definitely a risk that the deflation of this bubble turns irrational and infectious.
I wouldn't feel confident buying real estate anywhere right now, even in areas so far unaffected by the bubble.
I don't think Swann is really that stupid. He's got his RE cheerleader suit on, and is screaming "GO HOUSING BUBBLE!"
real estate 101 said...
"The boom didn't happened everywhere. The bust won't happen everywhere either."
that's like saying stocks that don't go up in a bull mkt don't get hurt in a bear mkt. doesn't work that way.
that's like saying stocks that don't go up in a bull mkt don't get hurt in a bear mkt. doesn't work that way.
No that is kinda how it works actually.
Wow, you mean I can finally buy a retirement home in Naples, Florida? I fell in love with that place, and Bonita Springs in 1976 as an airman at Homestead AFB outside of Miami! Always loved it, too expensive in 1976 so what is so different now? Even if that $800,000 house falls to $350,000 by Naple's standards of employment that is expensive. Not a lot of high paying jobs there.
As far as Florida goes? Let us wait and see what this hurricane season does to reduce supply. Two good Cat Five storms in Miami, Naples, Palm Beach, would pretty much eliminate most of the oversupply don't you think? Then prices will jump, as they did after previous storms. I can't believe how much they still want to live in New Orleans!
Foxwoodlief,
Exactly. This is why I have posted several times that the "median income to median house price" argument doesn't apply in places like Florida, Las Vegas, NYC, etc.
People will buy "overpriced" homes/condos because they want to live in a particular place or have a 2nd home be it on the beach or on the strip or near a ski resort.
There are millions of people worldwide who will plunk down $500K on a home or condo without batting an eye. And theb go do it again next week in another part of the world. It's the reason a condo in Aspen costs millions of dollars even though the median income for Colorado is $40K. Sometimes fundamentals are just not applicable.
In Las Vegas MGM Mirage is building City Center. It will be a city within a city sort of thing with hotels, condos, shopping, office buildings etc on the strip. The cheapest condo available is $500,000 for a studio. $500K for a studio when the median income is blah blah blah says HPland? No way!!
Doesn't matter what the median income is. The people buying these condos are not the median income earners. They are the SoCal trash who want to tell their other SoCal trash friends they have a condo on the strip. They are Asians who gamble $10K a hand like it's $0.25. They are executives who live in LV and want a strip condo as well.
I remember back in 2000 when the first luxury condos were being built at Turnberry. The starting prices were $200K. I thought to myself, that is crazy for a 1 bedroom condo when for the same price you can get a 3000 sq ft home in the burbs. The final phase is selling now and the very same units go for close to $1M and is 85% sold. Sometimes fundamentals just don't matter.
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