June 05, 2007

Florida condo bust: Buyers vs. builders and here come the lawyers

It's amazing when you see someone walk away from a $340,000 deposit rather than close on the condo. Shows you what the place is really worth (or not worth)

Anyone want to guess what % drop we'll see on Florida condo prices?

As Condos Rise in South Florida, Nervous Investors Try to Flee

As dozens of condominium towers conceived during Florida’s real estate boom near completion, investors who snatched up units in the preconstruction phase in hopes of turning a quick profit are increasingly trying to break contracts, even walking away from fat deposits.

“Motivated” sellers are flooding online forums like Craigslist with advertisements for condo units still months or years from being finished. And lawyers have been inundated with calls from people hoping to avoid closing on units they bought during the speculative craze of 2004 and 2005.

“I get two or three of these calls a day,” said James Ryan, a lawyer in Boca Raton who said he had 40 clients looking to get out of condo contracts. One, Mr. Ryan said, abandoned a $340,000 deposit rather than close on a $1.6 million unit that lost its appeal as the market faltered.

The numbers suggest that it will only get worse. In Miami-Dade County alone, 8,000 new condo units will be completed this year and nearly 12,000 more in 2008.

But demand has dropped markedly, and people who thought they could “flip” condos — buying, then selling for a steep profit before construction is done — are parting with that fantasy. After years of stunning price increases — 25 percent in the West Palm Beach-Boca Raton area, for example, from March 2005 to March 2006 — condo prices have started dropping.

37 comments:

Anonymous said...

50%

Anonymous said...

I heard it from a great source in the know, it's low level chaos down there now.

Anonymous said...

99.99%. Every condo will be going ofor $3.

Anonymous said...

Good. Greedy morons deserve to lose their $.

Anonymous said...

Here is what I don't understand...
Is the buyer with the huge down payment very very very rich or did he borrow the $300,000+ for the down payment?

Hard to imagine someone walking away from a down payment that large.

Mammoth said...

Huge condo construction boom going on in Seattle right now.

But, of course this sort of crash can't happen here, right..?

unomyname said...

As we approach the event horizon (on the housing front as well as many others) this just seemed appropriate (many thanks to Alice Cooper):

Welcome to my nightmare,
Welcome to my breakdown,
I hope I didn't scare you.
That's just the way we are,
When you come down!
We sweat laugh and scream here,
Cause laugh is just a dream here,
You know inside you feel right at home.

Anonymous said...

Have condos ever been a good investment long term anywhere?

Anonymous said...

Someone mentioned Seattle.

My girlfriend lives in Ballard. I live in Minneapolis, and am considering relocating. She rents, and wants to buy. Is it worth buying a condo in Seattle? It seems pricey/inflated there compared to Minneapolis.

I love kiyosaki said...

Uh, sorry to disappoint you all but Florida beach property is HOT HOT HOT!

http://tinyurl.com/2s4bzj

There is no crash, it's called "a correction" and will produce great buying opportunities for the smart investors.....

BTW some of your posts are so angry and violent, you really need to take some anger management classes. Who REALLY is the one in denial, you angry bitter renters?....
Anyway I won't hold it against you. I will indeed sell you one of my condos for 20% profit....

Anonymous said...

From Fla- It is getting really bad here. Neighbors would pull all the equity out of their homes and put deposits on these condos. They have no money, they have no more credit, their own homes will be lost also.

Anonymous said...

One interesting tidbit from a lawyer I know in Florida that has several clients doing just this.

If the builder goes into default - much easier to get your money back (assuming the deposits are in escrow) if you want OUT.

Marky Mark

Bitter Renter said...

Huge doesn't begin to describe the condo building boom in Portland. Everyone I talk to can't figure out who is buying these overpriced boxes of air.

Anonymous said...

The whole housing crash is not a surprise to anyone with any common sense. Most of the "professional analysts" are clueless trend watchers who assume that the present trend will continue indefinitely. Cities and Counties hire "planners" who couldn't plan their way out of an outhouse and who ignore major factors that influence the demand for housing. If the net population inflow into an area is 1,000 families a year, do not the planners have an obligation to limit the number of building permits issued to approximately that number of units? If the median income in the area is $40,000 per year it does not make any sense to issue permits for thousands of houses that would require an income of $250,000 to afford the monthly payments. If the number of vacant units is rapidly increasing to a 2 or 3 year supply, does it make sense to build more units? This has degenerated into a build it and they will come mentality. When they do not show up or can not afford the prices, the whole plan collapsed. The collapse was delayed by the use of teaser loans with a 1 per cent interest rate for the first 3 or 5 years. What happens after the teaser rate expires and the monthly payment is suddenly $500 to $1000 per month higher. Foreclosures, bankruptcies and homeless people. No one saw this coming? Bull---t. Appraisers used to do cost, market and income approaches as a check on the value. This also stopped years ago. Now there are so many houses that can not be sold that the owners are desperate and renting these out for far less than their monthly costs. This is depressing rents and further reducing the demand for homes to buy when it is far cheaper to rent.

The regulators are clueless too. Some of the major fraud reporters have been appraisers who found sales that sold for $50.000 to $100,000 more than the house was previously listed for and had the ability to recognize what had happened (fraudulent sale and cash back)and the integrity to report the fraud. Some multiple listing services would allow homes to be withdrawn and relisted as new listings thereby hiding the fact that they had been for sale for a long time and had not sold. Canceled contracts to buy were also not included in the sales figures thereby misreporting the actual number of homes sold in the area.

The review appraisers who had previously been in a position to find and idenify these fraudulent sales were eliminated either to cut costs (the official reason) or because they were killing too many deals by insisting that the appraisal report the actual fair market value of the property.

It is sickening to see the number of cases of outright fraud that were perpitrated by greedy brokers, loan officers, and loan brokers who figured that the risk of losses would be passed on to the buyer of the loans or that real estate never goes down so there will never be any losses. This fiasco has resulted in the bankruptcy of dozens of mortgage lenders who were unable to buy back the failed loans and the unemployment of thousands of people involved in these deals.

It is kind of poetic justice except that thousands of innocent people will also suffer.

I wonder if the city and county officials in Florida, California, Nevada, and other boom areas have learned anything yet and changed their policies to preclude this from happening again? Probably not.

On top of everything else, Peak Oil will bite many of these owners in the a-- as gas gets more expensive and people can no longer afford to commute 50 miles or more each way to work. The market value of these homes will collapse even further and there could easily be abandoned subdivisions in some of these areas even though the homes are only a few years old. The NAR, local officials, and corrupt people involved can be proud of the disaster that they caused by looking the other way as these events occurred so they could collect their commissions. The credibility of the Real Estate Brokers has been destroyed to the extent that people are deciding to sell their properties without using brokers since so many of them were not looking out for the interests of the persons they were supposed to represent, the sellers.

Anonymous said...

Pensacola beachfront penthouse condo, mid june of 2005 $3mil.

Sold (not sure of actual date)

Just saw same condo June 2nd, For sale 1.45m!!!!!!!!

Adam Smith said...

Anonymous said:

It is sickening to see the number of cases of outright fraud that were perpitrated by greedy brokers, loan officers, and loan brokers who figured that the risk of losses would be passed on to the buyer of the loans


And those buyers included Asian and Chinese investors who bought CDOs from Wall Street.

Seems somewhat fair that we sell them "toxic" investment paper on Wall Street, while they retaliate by selling us poisonous dog food and toothpaste.

Welcome to Bush's unregulated world-wide swap meet and flea market. ;)

Anonymous said...

All the so-called experts tell us about what happens when a $250k loan re-adjusts. Example: the new payment goes from $750 to $1000 or $1250 a month based on a $250k loan.

Problem is, so many loans are so much more than the example of $250k

People have loans of 200k to 1.5mil or more!....what's that gonna be like?

Anonymous said...

You sound like children crying not fair. The evil Chinese invested money and the evil Bush allowed people to invest and of course everyone who makes money must be cheating at the expense of the poor. What a bunch of socialist garbage.

Instead of sitting at home day after day blogging, try going out there and doing something so that you too can make money. How boring to do nothing but play Monday morning quarterback.

Anonymous said...

Hard to imagine someone walking away from a down payment that large.
------------------------------

It is difficult to imagine until you realize that they were still on the hook for 1.3M more (condo under contract for 1.6M)!

buy_high_sell_low said...

Huge doesn't begin to describe the condo building boom in Portland. Everyone I talk to can't figure out who is buying these overpriced boxes of air.
------------------------------------

It will be interesting to see if those south water front condos will really fill up. Thought I saw mention in the O that a developer wants to build another one just north of the marquam (sp)bridge

Anonymous said...

All the so-called experts tell us about what happens when a $250k loan re-adjusts. Example: the new payment goes from $750 to $1000 or $1250 a month based on a $250k loan.

----------------------------------

My arm adjusted from 1215 to 1493 after 5 years at the fixed 1215. Ouch right? Wrong. In 2002 I made $62K. In 2007 I make $105K. I think I'll be OK even with the new payment.

It's not all doom and gloom out there folks.

Ron said...

I love kiyosaki

You also love fairy tails!

Anonymous said...

Anonymous said...
Pensacola beachfront penthouse condo, mid june of 2005 $3mil.

Sold (not sure of actual date)

Just saw same condo June 2nd, For sale 1.45m!!!!!!!!

June 05, 2007 4:14 PM

-----------------------------------

Address? I find a 50% cut very hard to believe. If it's true, please provide evidence. If not, stop with the bullshitting.

Anonymous said...

Buyers vs Builders and here come the Lawyers

When the tulip bubble popped in 17th Century Holland, everybody flooded the courts. Debtors to get their debts nullified completely, creditors (often one and the same) to make sure they got every florin from their debtors.

The courts threw up their hands and told them to settle it themselves. I think everybody accepted a few pennies on the dollar coming and going.

I also think they were able to settle like that because 17th Century Holland had no hereditary caste of Lawyers.

Debtors to get out of paying a single penny...

Creditors to make sure they got every penny from those who owed them...

And the Shysters promising both -- for a retainer fee, of course.

Jeff said...

Florida real estate is a disaster right now. Too many houses were sold to investors who are now dumping them on the market all at once which is causing bloated inventory. Sellers are refusing to lower their prices because they think their 1962 cinderblock rectangles are actually worth what they are asking for them and the insurance rates are obscene so even if they wanted to rent out their "investments" they would be losing money because the insurance is going up faster than reasonable rents.

I live in the Panhandle of Floriduh (not by choice) and there were planned condo towers on just about every other block. They put up their fancy signs and cleared the lots back in 2004-05 but those lots are still empty today and many of the projects are for sale or are being auctioned without ever breaking ground. Some that were started are having a hard time selling all the units. If it's a bad year for hurricanes, the market will completely implode.

Anonymous said...

$350,000 deposit on $1.4M condo unit in FLA

Condo prices crater 30%

Walking away from $350,000 deposit 1 year later.

Priceless!

Don't worry Fla flippers.. you can still play the Chinese stock market with the remaining capital.

Anonymous said...

"And those buyers included Asian and Chinese investors who bought CDOs from Wall Street."

hahaha those asian sure are SUCKERS!

Anonymous said...

Anon June 05, 2007 3:49 PM

Sorry, I didn't get that. Could you repeat it, please.

Anonymous said...

"Instead of sitting at home day after day blogging, try going out there and doing something so that you too can make money."

Yeah, go all make a lot of money to support China and all those 20 million illegals that Bush is fighting so hard to give a citizenship. Don't forget that most of those 20 million worked in construction during the housing boom and now need the welfare provided by taxpayers. Also work hard to support the Saudi's oil, who walk holding hands with Bush, like two girlfriends, through the White House gardens. How romantic! How's that price of oil doing for you?

So work hard to support Bush's friends: China, Mexico, Saudi Arabia, India, Iraq, Israel. Work hard to pay a lot of taxes, so Bush can transfer all to his cronies and those countries. Spin that wheel harder, sheeple...harder!

Anonymous said...

Supply-side easy money voodoo repuli-scheitt-stain policy makers have a way of biting themselves. These perpetraitors that origonated these toxic loans without a wimper of regulation or a want or a care for any regulation, so at the end of the day, they sodomize themselves. In other words its called self induced cannabalism. It stems from greed, and stupidity,and sickness. Mostly sickness.


What is so comical is that people in socities have laws that are made to make things run smoothly, like stop lights in the city for instance, but clearly the supply siders think or thought that the corporate lenders needed no such laws. As a result, Can anyone say the bush built scheitt sandwich commeth, prepare? Man, I sure can.

Need a good person on ground in S Fla said...

What? You mean Florida is not a tropical paradise? Miami is not a booming internationla culture and center of business and thus assures constant 10% increases in housing prices? What florida is really a poor state and Miami has the lowest median income of any metro? But wait the Miami Realtors and Papers sez there are thousands of south american and european gazillionares that can't immagine a better place than Miami to live in and pay 1 million for a two bedroom condo! Ah the fantasy. Its a shame that Miami generates very little good up close informatuon (unlike say Phoenix. Cali, Dc) becuase its probably the worst bubble city--poor ingnorant population, bad govt, service economy yet booming specualtor driven prices. Not enough smart people down there to generate stories or good blog entries, let alone aford ! million condos.....Good riddance on them, some of these fliipers may now have to consder the whole getting a job thing.....Really, its shame there are few people with brains donw there cuase the miami bubble is really a great story of idiocy, greed, esay money corruption and delusion.......

Anonymous said...

The condo in question is east of Pensacola, Destin area 14th floor. June 18th 2005 ** listing price of $2.95mil TWO years almost exactly FSBO asking 1.55mil

Update: it never sold and owners are in big trouble

They bought at high peak and it was a vacation home!

Anonymous said...

To the Anon with the girlfriend who wants to buy in Seattle:

Oh my goodness, unless she can handle a 50% reduction in the future price of her purchase ( and, what the heck, some people can handle that and do not care), she should absolutely NOT be buying RE now.

Seattle prices have inflated 200 - 300 % since 1997. And it is one of the highest areas in the nation for option ARM and dangerous alt- A loans ( in the top 10).

On top of that, it's recent run -up has been very dependent on the California market which, as we know, is set to plummet.

This is a very bad time to buy.

Anonymous said...

Anonymous said...
The condo in question is east of Pensacola, Destin area 14th floor. June 18th 2005 ** listing price of $2.95mil TWO years almost exactly FSBO asking 1.55mil

---------------------------------

No you said it **SOLD** for $3M and it was listed for $1.5M today. Listing for $3M and selling for $3M are two separate things. Your implication is a loss of $1.5M in value which is not quite true.

If I list my Honda Accord on craigslist for $100K and 2 years later drop the price to $15K, it doesn't mean I lost $85K on the car.

Anonymous said...

The Minneapolis condo market is crashing/ crashed too. See story -

http://www.twincities.com/business/ci_6069485

Anonymous said...

The owners bought at peak in 2005 for 2.95m

Today they are selling or at least trying to for 1.55m

That's what I meant by it sold you wanker!

Would you like there frickin phone number?

Anonymous said...

Figures you would be driving a Honda Accord