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December 2006
Appraiser pushes portability
As part of his drive to get Save Our Homes “portability” on the ballot in November 2008, Palm Beach County Property Appraiser Gary Nikolits has taken his petition drive online. Download a form here, and read Nikolits’ Q&A here.
Portability would be good for longtime homeowners who want to move, because it would let them take the Save Our Homes break with them. It wouldn’t be especially good for commercial property owners, snowbirds and renters, because it would further shift the tax burden onto them.
Here’s how it would work: Say Nikolits figures your home’s total market value at $400,000, and your assessed value, thanks to the Save Our Homes cap, is $200,000. If you move to a $600,000 home, you would apply the $200,000 gap to the new home’s value, which would make the assessed value $400,000.
So instead of paying property taxes of roughly $12,000 on the $600,000 home, you’d pay about $8,000 based on the valuation of $400,000.
And forget about downsizing your way out of taxes. If you move from the $400,000 home to a $100,000 home, the break would max out at 50 percent of the new property’s value.
Nikolits’ proposal would limit portability to $400,000 of assessed value. That means the biggest beneficiaries of Save Our Homes couldn’t take massive breaks with them. Just look at Ocean Boulevard in Palm Beach for some juicy gaps between market value and assessed value:
Attorney Bob Montgomery: $14 million
Rush Limbaugh: $12 million
Tampa Bay Bucs owner Malcolm Glazer: $11 million
Developer E. Llwyd Ecclestone: $10 million
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Have we hit bottom? November numbers say yes
Palm Beach County home prices took a big dip from their November 2005 peak, the Florida Association of Realtors said today. See single-family figures here, and click here for condo numbers.
The median price for an existing single-family home sold in November was $370,400, down 12 percent from $421,500 a year earlier.
Home sales plunged 45 percent in Palm Beach County, with 525 homes sold last month compared to 952 sales in November 2005.
However, there were signs that prices might have hit bottom. November’s median price was up slightly from October’s median of $365,600.
“We still have a bunch of inventory, and until it’s absorbed, prices are going to be soft,” said Bob Graeve, an agent at Illustrated Properties Real Estate in Palm Beach Gardens.
Click here for Graeve’s graphic analysis of inventory and sales in central and northern Palm Beach County.
In the Treasure Coast, prices dipped only 5 percent from a year ago. The median price for Martin and St. Lucie counties was $247,600, down from $261,000 a year earlier but up slightly from $242,400 in October.
Condo prices held steady. They rose 8 percent in Palm Beach County and were flat in the Treasure Coast.
The price drops weren’t confined to Florida, according to figures released Thursday by the National Association of Realtors. The median existing single-family home price was $217,200 in November, down 3.6 percent from a year ago.
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A spark of life for new homes
New-home sales bounced back a bit in November, the U.S. Commerce Department reports. The number of sales was up 3.4 percent from October, although sales remained 15 percent below November 2005.
Prices spiked to $251,700, the highest median price since April’s $257,000.
This story from Bloomberg credits lower mortgage rates and builder incentives — and it also notes that builders fired 53,000 workers in the past two months.
The Commerce Department doesn’t break out numbers by local markets, so the report offers no insight for new home sales in Palm Beach County and the Treasure Coast.
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Top real estate stories of ‘06
In case you’re wondering why I opted for a career in print rather than broadcast, listen to Douglas Rill’s radio show on WJNO 1290-AM at noon Sunday.
I’m scheduled as a guest on the live hour of real estate talk. Rill, owner of Century 21 America’s Choice and onetime candidate for property appraiser, wants my picks for the biggest real estate stories of 2006. Since the suspense is killing you, here’s my list:
Big Story 1: The housing slowdown
Call it whatever you want — a correction, a bursting bubble, a return to normalcy, a regression to the mean. The fact is that after record-shattering levels of appreciation and sales volumes in 2004 and 2005, prices dipped and volumes plunged in ‘06. Builders are slashing jobs, agents are looking for new careers, foreclosures are rising and homeowners are recalculating their net worth with less optimistic numbers.
Big Story 2: The insurance squeeze.
Homeowners insurance premiums soared in 2006. I talked to numerous State Farm policyholders in recent months whose premiums doubled or tripled. Imagine how bad it would be if a hurricane had hit the state in ‘06.
Big Story 3: The property tax gap.
Soaring prices turned property taxes from afterthought to major headache. Wags have a new name for Save Our Homes: “Slaves to Our Homes.”
Big Story 4: Technology delivers information.
Once upon a time, a homebuyers did research like this: Walk into the office of a Realtor, who pulls out his MLS book and reads off what’s available. How quaint. Today a buyer or seller does research like this: Go to Realtor.com to look at listings. Go to Keyes.com or another broker with IDX to look at everything on the MLS. Visit Zillow and CyberHomes for value estimates and comps. Click on the Palm Beach Property Appraiser’s site for the tax bill you’ll pay WITHOUT the Save Our Homes break. Go to Bankrate.com to check mortgage rates.
Big Story 5: Job market holds strong.
Technology wasn’t the only good news in ‘06. There was also a record-breaking job market in which unemployment hovered at a microscopic 3 percent in Palm Beach and Martin counties. You can argue about the quality of the jobs being created here, but it’s hard to have a full-fledged crash when you’re at full employment.
Big Story 6: Mortgage rates stay low.
In another piece of promising news, mortgage rates stayed near historic lows. The average 30-year fixed-rate loan costs 6.13 percent, according to Bankrate. You can talk about the desperate borrowers who have to refi out of adjustable-rate mortgages, but it’s hard to have a full-fledged crash when rates are barely above 6 percent.
Big Story 7: Affordability crunch.
True, prices are down, but homeowners insurance premiums are up. The affordability squeeze has countless Palm Beach County homeowners obsessing about moving to Port St. Lucie, Jacksonville, Atlanta, Charlotte or Nashville.
Big Story 8: Auction craze.
Now that it’s hard to sell a home, the auction bandwagon is getting full. Seller beware.
Home building slowdown contributes to rising jobless rate
Jobless rates rose slightly in Palm Beach County and the Treasure Coast in November, an increase state officials blame in part on “weakness in residential construction.”
Home builders have been cutting workers as they build fewer homes. The latest cuts came from DiVosta Building Corp. of Palm Beach Gardens, which said this week that it will lay off 218 construction workers early next year.
But there’s some good news for those workers: Commercial builder Dan Catalfumo says he contacted DiVosta to let it know his Palm Beach Gardens company, Catalfumo Construction, needs workers.
“We could hire 20 people tomorrow,” Catalfumo says. “We are constantly hiring.”
In recent months, the new hires have included construction workers who haven’t had to interview for a job in more than a decade, Catalfumo says.
One worker was so nervous for his interview that he “was about to wet his pants,” Catalfumo says. Danny says he tried to put the guy at ease by telling him to take off his jacket and tie and drink a glass of water while Catalfumo left the room for a few minutes. When Danny returned, the guy explained he wasn’t comfortable in job interviews but was good at his job. Catalfumo hired him.
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2007 outlook: Even the optimists are pessimistic
Even the optimists aren’t exactly optimistic about the South Florida real estate market for 2007.
David Lereah, chief economist for the National Association of Realtors and chief cheerleader for the housing market during the boom, predicts more “pain” in former boom markets such as South Florida and California.
“They will have a more prolonged correction that they’re going to have to go through,” Lereah said in a conference call this afternoon.
On the other hand, Lereah says the pain will affect only part of the country, while areas such as Georgia, North Carolina, Texas and New Mexico will continue to see price increases in 2007.
In the same call, National Association of Home Builders Chief Economist David Seiders pointed to a “substantial housing correction,” although he doesn’t think the slowdown will drag down the national economy.
On to the pessimists, who also are putting out their predictions: In a study for Fortune magazine, Mark Zandi of Moody’s Economy.com (click on No. 32 for Palm Beach County info) predicts Palm Beach County prices will fall 3.7 percent in 2007 and will dip another 1.1 percent in 2008.
BusinessWeek also offers a pessimistic outlook: “Housing booms are short and exciting. Housing busts, on the other hand, are long and painful. So don’t put much faith in those oft-heard assertions that the worst is already over.”
Meantime, Christian Weller, an economist at the Center for American Progress, a liberal think tank, likewise sees more pain in the housing market. He predicts a “continued slowdown” that will sap homeowners’ wealth and kill construction jobs.
“The housing market is still much-overvalued,” Weller said today.
And for the final word from the pessimists, the Center for Responsible Lending predicts that nearly a fifth of the subprime loans made in the last two years will end in foreclosure, which the group says will top “the worst foreclosure experience in the modern mortgage market.”
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Good news: We’re No. 205
In an intriguing analysis of property tax bills, the Tax Foundation looks at 775 counties and finds Palm Beach County’s tax burden ranks 205th.
That’s based on a median tax bill of $2,207 — and just behind the not-so-lofty real estate market in LaSalle County, Ill., where the median home value is a mere $114,500.
Topping the list is New York’s Westchester County, where the typical tax bill is $7,337.
Martin County’s median bill is $1,958, ranking 236th. St. Lucie County’s typical tax bill is $1,607, ranking it 345th.
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Going private
Realogy Corp.’s brief run as a publicly traded company looks likely to end soon. The company, which was spun off by Cendant earlier this year, says it’ll be sold to Apollo Management, marking yet another high-stakes private equity deal.
Realogy is the largest real estate broker in the nation, state and county. It owns Coldwell Banker Residential Real Estate, Palm Beach County’s biggest broker, and Corcoran Group, which has five offices in Palm Beach County. Realogy also franchises the Century 21, ERA, Coldwell Banker and Sotheby’s International Realty names.
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Bubble babble for the holidays
At the risk of adding to the crass commercialization of Christmas, here’s a shopping idea that’ll satisfy both the real estate bulls and bears on your list.
For the bulls, there’s a collection of T-shirts from Renaissance Creative of Jacksonville. The slogan on my favorite reads, “Media Hype Runs Amok!”
And for the bears, there’s t-shirthumor.com’s Mr. Hou$ing Bubble, whose motto is, “If I Pop, You’re Screwed!”
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Save Our Homes: New study, same problems
A new study from Florida TaxWatch takes a look at Florida’s wacky property tax system and reaches the same old conclusions:
Save Our Homes, the constitutional amendment passed by Florida voters in 1992, has done nothing to rein in government spending.
Rather, Save Our Homes mainly has divorced voters from the budgeting process because their tax bills are going down, so long as they don’t move.
Save Our Homes is a tax shift that moves the tax burden from longtime homeowners onto more recent buyers and onto renters and owners of stores, office buildings, warehouses and apartments.
Making the Save Our Homes tax break “portable” would create more problems.
TaxWatch left out one of my favorite unintended consequences of Save Our Homes, which was pitched as a way to keep little old ladies from being taxed out of their homes: High rollers like Greg Norman, Jimmy Buffett and Rush Limbaugh are enjoying some of the heftiest tax breaks.
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Builder layoffs continue with 218 job cuts at DiVosta
In another symptom of the slowing housing market, DiVosta Building Corp. says it will lay off 218 of the 552 workers at its Palm Beach Gardens headquarters. (Read story here.)
The laid-off workers include 87 journeymen, 58 laborers and 50 apprentices. They’ll lose their jobs between Feb. 16 and March 1, DiVosta tells the Florida Agency for Workforce Innovation.
“We’re trying to match our work force to the construction pace,” said Beth Cocchiarella, spokeswoman for DiVosta parent Pulte Homes (NYSE: PHM, $32.91).
Meantime, the National Association of Home Builders’ confidence index took a slight dip in December, with builders rating buyer traffic as “poor.”
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The art of auctions
After writing about how a West Palm Beach homeowner’s real estate auction fell flat, I read with interest an economist’s look at how auctions work in an entirely different marketplace — art.
In Talking Prices: Symbolic Meanings of Prices on the Market for Contemporary Art, Dutch scholar Olav Velthuis describes the good and bad of art auctions.
The good: Auctions by Christie’s and Sotheby’s are high-profile and lucrative, with Picassos fetching as much as $100 million.
The bad: In spite of the hype about openness and transparency, auctions aren’t always models of straight dealing. If a piece sells at auction for less than the seller’s reserve price, the auction house might contact dealers in hopes of finding a buyer. Bid rigging remains a nagging problem, auctioneers sometimes invent phantom bidders and buyers have been known to pay high prices simply to prop up the value of their other holdings by the same artist.
Art and real estate auctions differ in a couple of notable ways. First, real estate auctions carry a stigma, while art auctions ooze glamour. Second, real estate brokers are scrambling to gain a foothold in the auction business, while art dealers who run galleries look at auctioneers as predators and “parasites,” Velthuis writes.
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And you thought 2006 was a slow year
The National Association of Realtors expects 2007 to be another sluggish year for home sales and home prices.
In a forecast out today, NAR predicts ‘07 home sales will fall 1 percent, following an 8.6 percent decline for ‘06.
And NAR predicts existing home prices will rise by 1.0 percent in 2007, following 2006’s 1.6 percent appreciation
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Stabilizing the patient
First came the National Association of Realtors’ Pending Home Sales Index on Monday, which said activity (down 13.6 percent) is “stabilizing.”
Then came the Associated Press, which sees “stabilization” in Toll Brothers’ fourth-quarter profit drop of 44 percent.
Let’s ponder. If 60 is the new 40, “way down” is now a synonym for “stabilizing.”
If you were lucky enough to buy TOL at $22 back in July, you’re feeling plenty stable. If you’ve been holding on since last year’s high of $58, though, your portfolio’s a little destabilized.
In other stabilization news:
Mortage rates are stabilizing, aka falling, Bankrate reports.
State Sen. Jeff Atwater hopes to stabilize Citizens’ rates, aka keep them from skyrocketing again.
The Miami Dolphins’ playoff hopes are stabilizing, aka near-death.
The Florida Gators’ hoops team is stabilizing after losing two games.
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Skyscrapers in Clewiston?
In 50 years, rural Hendry County will look as suburbanized as Wellington and Port St. Lucie. That’s according to a study released today by 1000 Friends of Florida.
The study predicts “an almost continuous urban strip extending from eastern Fort Myers to West Palm Beach.”
Of the state’s 67 counties, 1000 Friends predicts Glades, Hardee, DeSoto and Hendry will change the most. Glades and Hardee will have at least 14 times as much urban development as they do now, the study says.
Hendry County, home of Clewiston, borders Palm Beach County’s western edge. Hendry is best known as headquarters of U.S. Sugar. It’s also perennially suffers from the state’s highest unemployment rate.
Thursday update: Read the Post’s coverage of the study here. And click here for the St. Pete Times’ story.
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Don’t like the short-term news? Look at the long term
The National Association of Realtors’ Pending Home Sales Index says the number of contracts signed in October is down 1.7 percent from September and down 13.6 percent from October 2005.
The optimists at NAR insist the market is “stabilizing.” But if you’re still feeling pessimistic about the short-term direction of the housing market, we’ll point you to a more reassuring measure of home prices.
According to the Office of Federal Housing Enterprise Oversight, American home prices have quadrupled since 1980. Here’s the state-by-state breakdown:
State: Increase since 1980
Massachusetts: 626%
New York: 555%
California: 551%
District of Columbia: 545%
Rhode Island: 511%
Florida: 388%
National Average: 303%
Mississippi: 145%
Kansas: 144%
Louisiana: 140%
West Virginia: 131%
Oklahoma: 99%
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