By Steve

September 29, 2006 09:39 PM | Link to this

Banks have shielded themselves from a housing downturn by selling loans to hedge funds. They don’t stand to lose much.

Banks have also made their income statements look great by booking full payments on ARM’s when people are only paying minimum payments. Smoke and mirrors profits.

The little guy homeowner’s are the ones who will lose.

By Where are the cheerleaders?

October 2, 2006 09:06 AM | Link to this

Anybody hear from FL Renaissance, easyasabc, PBC Owner, or the other cheerleaders?

By TANC

October 2, 2006 09:30 AM | Link to this

Nat City isn’t buying the FL Real Estate Market…Nat City is buying a whole bunch of customers with low cost deposits they can use to fund investments in whatever part of the country they believe is most profitable. And, oh by the way, these purchases makes them the #1 market share leader in mortgage lending for the market area on top of that.

By Mike Fink

October 2, 2006 10:04 AM | Link to this

Bear comment for the day:

FRANK NOTHAFT, CHIEF ECONOMIST, FREDDIE MAC vs. DEAN BAKER, CENTER FOR POLICY & RESEARCH on the housing bubble (from CNN’s ‘Open House’):

http://transcripts.cnn.com/TRANSCRIPTS/0609/30/oh.01.html

Q: How low can this go?

NOTHAFT: Well, I think we’re going to see the market kind of bottom out in the first half of 2007 and then we’ll see some pickup in housing activity. And a very bright sign over the last two months is the fact that mortgage rates have come down about a half a percentage point.

BAKER: Well, the answer is terms of how low it can go is how high did it get? And historically — Bob Shiller (ph), you interviewed earlier, has looked back as far as the 19th century and has found that house prices pretty much track the overall rate of inflation.

We had this extraordinary run-up which he and I have called a bubble over the last nine years, where house prices increased by 50 percent above the rate of inflation. If you just look at the trend path, the answer at how low can it go, well, the trend is a 30 percent drop in prices.

WILLIS: Oh, my goodness. Are you saying that prices are going to drop 30 percent?

BAKER: I think that’s a ballpark number. And in some places, the places where we have had the biggest run-up, the Gulf Coast of Florida, parts of California, you might see drops as much as 40, 50 percent. Those are, in effect, the dot-coms of the real estate bubble.

WILLIS: And how long does this go on for, Dean?

BAKER: Well, a lot will depend on the path of interest rates. You know, in the case of the stock market, it took over two years to fully deflate. It could take even longer with the housing market.

On the other hand, if mortgage rates continue to rise — they’ve fallen recently — but if they go back up again, then we’ll see prices adjust much more quickly.

By easyasabc is back !

October 2, 2006 11:12 AM | Link to this

For all you bashers, cheerleaders, buyers, sellers, dreamers, have’s and have nots & realtors…..easyasabc is back from beautiful Southern California. Let me just say this, there is plenty of money out there! I tell you more of this later, but first…….i can tell there were people that were MAD AS HELL AND WAS NOT GOING TO TAKE IT ANYMORE while i was gone.

i saw there was 6 stories that were written, about 140 comments, i don’t count RCA repeats that he does, btw RCA, are you becoming a cross dresser blogger? And Rich R. provided about 22% of the comments. Looks like his mouth got dried up or he just didn’t have anymore b******t to talk about at the end of the week.

First let’s tell Jeff O. he is no gentleman. Poor Linda Rawls puts a story out, “Flashback”, and Jeff overstepped her within 15 minutes of one of his own stories. Who does the editoral and time schedule at the Post???? Jeff, give Linda a break, she had no one comment on her story. Linda, you will have to take a stand against Jeff. Get tough with him and start doing informative stories, not hippie stories on the real estate market. Linda, did anyone ever tell you that you that you looked like singer Juice Newtown (Queen Hearts)? Maybe you need a new hair style and look!

Now some business, the median price went down, yes we all expected that. If you looked at some chart that someone provided last week, i saw the last 9 Augusts, we had only 2 set backs. But the following years went up. So some people say look at history, i did and the forecast looks good. We never had two bad years in a row. Sales are down only because of the number of flippers who came in last year is less this year. So stay positive, people who reduce prices don’t make money. If there was so many great deals as some of these bashers who want to buy say, why are didn’t they buy ?????? Because they have NO MONEY ! What i heard is that the summer did not produce buyera at low prices, then go back to raising the prices. Our DOW is high, if we were at 7,000 mark, then i would have concern. Remeber, the best investment you can have is in real estate in the long run.

And let me also say this, no state politician can change the SOH, it takes an amendment change for the voters to do. Local tax laws can be change by county commissioners, so buyers and sellers and existing property owners, make them your target to reduce your property taxes in Palm Beach County. California has a 1% property tax rate. The county here can have that rate and still maintain a budget, and work on a fair tax rate based on properties add-ons, size, age, etc. Lets stop this merry-go-around.

Next….Carolina. For all those who love it or want to move there. Please go! Lower your price and sell quickly. It is still cheap there, and you get there before the rest of the world will discover it. It seems that Raliegh area will have 40 million people by 2010. Be happy with all that “sprawl” and all those new taxes that Raliegh politicians will give you to support all their new roads, schools, fire stations, etc. If i was Rich R, and thank God i am not, and knew how great Raliegh is by his standards, i would shut my mouth and let no one else know about it. I visited California again where i want to live in the future, but i am not telling the area. I don’t want the area’s secret to be let out. Anyway, with all the complainers leaving South Florida, it will be really nice again.

People have money! I have said this before, that even minorities in this country are doing better now that 10 years ago under Clinton. So all you sellers, the only color you need to look at is GREEN! Don’t be negative if a minority looks at your house. All group types of people have money in this world. I know Steve would hate to hear that. That poor white boy will have to watch the world advance while he pays rent!

Rich R., you had some people on your case while i was gone. And now you have “another” lot in Loxahatchee you have to sell? And you had a bunch of people thanking you in one day about how nice you were of helping them to buy in Raliegh. But i really want to know is about your girlfriend. Are you going to post her photo? What is her name? Is she a virgin ??????? I know many readers are waiting for these answers. But the most important question of all is….Is she holding ?????? That means, does she have money?????

Also Rich, you will have to stop talking with hookers or madems about real estate here. Your girlfriend will leave you, and you will then be spending more time here on thses blogs. There is a difference….Madem’s are not hookers, they are professional entertainment managers. Their cliental are doctors, lawyers, judges, athelets, actors and the very well to do. Hookers are street whores who do anything for a buck. Just think them as realtors! And the way some no name realtors are doing these days, we might find some of the female realtors out on Dixie Hwy soon. And like North Carolina has no hookers? Raliegh has a bunch of Gentlemen’s clubs. I bet when you are not on the blog, you take your lady friend there???? I know a madem who has a house in North Palm Beach between two judges. Could this be the same Madem ??????

I saw Bubba wanted to invest with Madem in the porn business. Let me tell you Bubba, if you don’t have money to buy real estate, you don’t have the money for the porn venture either. And if you make $150,000 and cannot support a home valued at $550,000, you have some serious money mangement problems.

And to TH, please tell us what you have. I believe you are renter looking to back to the days of home prices of 1960. Another have not!

RCA, stop using ladies names…..your style shows.

Steve…..no one is listening to you.

And then we have Tonya…..hey baby…how is it shaking? Still in town it seems.

There is alot more to talk about, hope to hear from all. I know i shaked some of your cages here. Jeff, don’t forget tomorrow is Tuesday, you need to cut Frank Cerabino’s lawn. And please have some substance in your stories, like doing interview reviews with experts in this area.

By Rich R

October 2, 2006 11:43 AM | Link to this

Well, it was getting very quiet in here.

Now easyasabc is back, everything will be ok.

Just too funny!

By Panic Gets You No Where

October 2, 2006 01:26 PM | Link to this

Prices dropping 40 -50% here in Florida? It seems that Dean Baker and his investors are looking to steal some property somewhere. See how he did mention lower prices in New York or Boston. Major cities tend to set the trend, not vacation or retirement hot spots. Dean Baker needs another job to afford a house here in Florida or in California for his retirement years. Don’t fall for that “panic” pitch. Banks are planning to lower intrest rates this fall. No one makes money selling low. Baby Boomers want it all their way…..this time they will have to pay the price or suffer through another cold winter! Then we all can start over again next year at higher prices.

By Jack

October 2, 2006 01:43 PM | Link to this

I’ve been reading this blog on and off for a little while, as a homeowner with some vested interest. Perhaps someone can answer a simple enough question, I remember reading a lengthy article not that long ago. How does the market arrive at a selling price for a home in a given community?

Beyond “Whatever someone is willing to pay”, I recall there are a number of factors that go into it, starting with the median income, whatever percentage of that dedicated to mortgage, taxes etc; factoring in interest rates. Additionally, that monthly rent can also be calcalated (and is interrelated) with a similar equation. I imagine somehow you can eventually arrive at a square foot cost along the way. It seems among this group it would be interesting to understand why median prices are one price here, another in California and another in say N. Carolina. Thanks in advance.

By postman

October 2, 2006 01:57 PM | Link to this

easy is just broke

By Rich R

October 2, 2006 02:09 PM | Link to this

The cost per square foot will depend on land cost, preperation of the land, impact fees, and the cost to build to spec/code.

The building codes have beefed up the construction cost.

I’ve heard $200+ per square foot to build in SoFla now.

NC is in the $75-90 per square foot.

For comparison purposes.

I bought in NC 16 months ago and paid $90 per foot, including land.

By Jack

October 2, 2006 02:21 PM | Link to this

Thanks, but like I said I was looking for more ‘theory’ and less ‘empirical’ answer. It seemed like there are a number professionals that might be able to direct me to a response a little more substantial.

By Reply to Jack

October 2, 2006 02:25 PM | Link to this

What real estate all comes down to is location, location, location. You cannot compare your house to a house across town or in another state. You have to compare your house within your neighborhood. You need to look at what sold in the last year, look at the add-ons, do a plus & minus in factoring what it would cost if you did add on or take away. Look at the median price within your area. Another factor people look at if they are intrested in your property is “what did you pay for it?” It seems with people i know who are trying to sell or wanting to buy, is looking at how many years has that owner been in that house? This SHOULD NOT come into factor. I would say the only time it should, if they are flipping the property. Most likly, you want to stay away from those sales. You have to pay the fair market within that neighborhood.

Costs building a home is based on the local labor and material costs. Some homes cost more per foot based on upgrades. It all depends on your taste of style and what you can afford. And there is the land cost. A two acre lot can be cheaper in Wellington than a 1/3 acre lot in North Palm Beach.

The median price that they put on the news is not a fair rule to go by. And with so many tricks that realtors are doing with showing recent home sales to customers also does an injustice of showing fair value.

Just always remember, real estate is about location, location, location.

By We are waiting Rich!

October 2, 2006 02:36 PM | Link to this

Where is her photo ???????

What is her name ???????

Is she a Virgin ?????

and….Is she holding???????

You are not ashame of her??????

What is her job ????

Is she a waitress you met at the local Waffe House in Raliegh????

Is she big and fat ??????

You know Rich, you don’t know what life is all about until you make it with a big, fat waitress!

Hey RCA/POSTMAN….shouldn’t you be doing some Yom Kippur prayers? Did you pay your rent?

Rich, don’t let us hanging here for your answers. Everyone in South Florida is waiting!!!!!!!

By Rich R

October 2, 2006 03:18 PM | Link to this

I’ll bet you’re just having a blast easyasabc.

Enjoy yourself.

We missed you.

By Jack

October 2, 2006 03:42 PM | Link to this

Thanks, however, a lot of anectodal evidence, maxims and rules of thumb, but not quite what I’m asking. I’m sure in most business schools, economics 101 and/or statistics 101 classes, the professor doesn’t quite present location, location, location as to how real estate markets work. I’d also be hard pressed to understand that you can compare neighborhoodwide, but not streetwide, townwide, or statewide, although not suitably framed to my question. I would bet that somewhere someone has calculated an equation using numbers that allow for a considered examination of ‘How does the market arrive at a selling price for a home in a given community?’ Specifically, what numerals are involved and where is the equal sign? For example, calculate the return after cost of owning rental property for 10 years, now for S&P500. So, if you can make more in the market why bother with real estate, or vice versa. I’m sure either way (the answer not being location, location, location), it’s a very simple calculation. Thanks

By Michael Fink

October 2, 2006 03:50 PM | Link to this

Jack,

Your probably looking for the ratios that govern housing prices; which is what started me thinking “danger” several years ago watching this housing market.

Anyway, here are the historical raitios that govern home prices:

Cost of rent ~= (approximately equal to) cost of ownership

and

Median income can afford median home price

As you look around S. Fl, you will see how skewed those number have become. People here have even argued with me that those numbers cannot be right. They are, they have held fast as long as we have kept records on home price data (except during housing bubbles in the past).

The bubble that we are in right now, because of its national scope, is unprecendented. We have never had a housing bubble like this before; especially not with the mix of factors we have here in S. Fl (insurance, taxes rising, SOH, toxic loans, etc). The biggest danger factor, imho, is the toxic loans. Way, way, too many people were put into 500K homes with 40K incomes. That should never, ever happen.

By Michael Fink

October 2, 2006 03:57 PM | Link to this

Jack,

Sorry, just wanted to post one follow up to your most recent comment.

RE, historically, has never been a great investment vehicle. The only reason it is at all useful is because of the tax advantages (you don’t get to deduct the intrest on your stock margins).

Anyway, typically RE apprecaites right about 1% above inflation. Its not a horrible investment, but not a great place to park money to see some big gains. What happened during the past few years here; probably will never happen again (because the fallout from this is going to be awful, and felt country/worldwide). People who bought properties to flip down here were not “investing” in RE. They were playing craps/poker, and using extreme amounts of leverage (often 100%) to play this game.

People are stupid, but not that stupid. If you could expect to beat the stock market by investing in RE; everybody would be doing it. :)

By TH

October 2, 2006 05:28 PM | Link to this

With Baby Boomers about to retire, and 40 percent of today’s 65-year-olds expected to live to at least 90, analysts have been speculating that many retirees will receive the shock of a lifetime when they run low on money and struggle late in retirement. A recent report on elderly debt indicates that already is happening.’

‘The average inflation-adjusted debt levels among elderly Americans have risen 77 percent since 1992, according to a study by the Employee Benefits Research Institute. The majority is mortgage debt. And in the hands of affluent seniors, it apparently doesn’t pose a threat. But the oldest Americans, those who can least afford debt, increasingly are holding debt at dangerous levels. ‘It looks like they are doing it because they are running out of money,’ said researcher Craig Copeland.’

‘ In the old days, before people started looking at home equity as a piggy bank, Americans tried to get rid of debt before retiring. They realized that without a regular paycheck arriving during retirement, it is difficult to handle the rising costs of everything from medical care to utilities, plus pay off debt.’

‘Bob Mecca, a Mt. Prospect financial planner, said he is counseling a client who is well off in his working years but spent too much for a retirement home 10 years ago and went into retirement with deficient savings. Now in his 70s and in poor health, he realizes he is running out of money and wants to find a job. ‘But it’s not going to be easy,’ Mecca said.’

By Mike Fink

October 2, 2006 06:00 PM | Link to this

TH,

Those people are going to bail out the PB housing market; so they better just get a job at 75-85 years old and suck it up!

The myth of the baby boomers buying all of S. FL, and driving up home prices.. Sorry to say, is just a myth. Every bubble area in the county has the same “dream”. All the rich people are moving here. Nobody is price sensitive. Blah, blah, blah.

The money does not exist; no rich baby boomer is coming down here to bail you out of the home you overpaid for.

Sorry for the “bluntness”, but I am just so sick of hearing all the BS about this bubble. :)

By TH

October 2, 2006 07:06 PM | Link to this

Hey Mike, No Problem..I got it off of Ben’s website if you catch my drift….I see you on there quite a bit.
I am not a real estate cheerleader by any means. I rent and it is much much cheaper than owning. (and i sock money away every month for the future downpayment when prices end up at the bottom). I am tired of hearing all the crap from the cheerleaders stating (THE BOOMERS ARE COMING) blah blah. My wife and I drove around for s** and giggles to various open houses around Boynton Beach and West Boynton areas yesterday afternoon. At one of the open houses in Cinnabar (off Gateway) we were the 2nd people there all weekend! Take it easy…

By To Mike Fink

October 2, 2006 07:09 PM | Link to this

You are dead wrong about this.

RE, historically, has never been a great investment vehicle.

People got rich in this country by buying and selling real estate. Why don’t you ask the Mafia.

Just because YOU do not have money does not mean everyone else is broke like you. You really do not know how rich some people are in this country. Not everyone is going out to pay $10 for a martini and $20 for a plate of pasta at City Place like you do. Not everyone is a real estate broker not selling these days like you.

For example, doctors are making $350,000 a year here for a salary.

Lawyers are charging $350 an hour and if it is bankruptcy law, they are charging $500 an hour.

Engineers are all in the 6 figures now that work up north and are ready to retire.

Then we have several Palm Beach County employees who take kickbacks for over $100,000 a piece when they make their decisions as purchasing agents for the county. They have plenty of money. Some of them have been doing this for over 10 years. They have skimmed a nice retirement bonus for themselves in their position as purchasing agents for the county.

If you want something, you just have to pay the price. No way are baby boomers who worked all their lives up north are going to stay there after all they ever did was dream of retiring to Florida. As soon as they sell their home, they will be here. The problem is that their houses up north are not moving either.

You are the one that is really in the dark about what goes on. I hope you suck it up when you are 80 pushing baskets at Publix. What goes around comes around and it will come around for you too.

By Michael Fink

October 2, 2006 09:13 PM | Link to this

Yes, people have gotten very, very rich buying and selling RE. And buying and selling gold/stocks/bonds/etc. Just because people get rich doing it does not make it a great investment vehicle. Lets just start with this statement: RE, historically, appreciates at about 1% over the rate of inflation.

That is a true, correct statement. RE makes an excellent hedge against inflation, but in general, is not a great investsment for a few reasons. It has very high transaction costs; very high upkeep costs, can easily be damaged/destroyed; and takes a long time to get into and out of.

Does this mean people should not buy RE? Absolutely not! You cannot live in a stock, bond, hedge fund, etc. :) RE provides a value beyond what other investments provide. That does not, however, change the fact that, as an investment, its only “par”, and perhaps “subpar” because of the transfer costs.

I am not sure what the point of the kickbacks comment is? Yes, if you steal/embezzle money, it makes it much easier to afford bloated RE prices. That point I will definately concede to you. :)

I do not work in RE, nor at Publix. Not sure where these comments come from either. I also am not poor; my HH income is several times the median income in PB County. I don’t get 100K kickbacks though, nor make 350K a year as a doctor. Yes, these people can afford to live here. But that does not address the issue at hand. The median income here is 50-65K (depending on whose numbers you take). To support our home prices, that number needs to double (at least, I would NEVER buy a 400K home with a 100K income, but that’s just me, I am pretty conservative when it comes to losing everything I have ever worked for).

You bring up a good point. The homes up north are not moving either, because this is a national RE bubble, not localized in just S. FL. That’s the thing that everyone needs to realize; RE is almost a zero sum game. Yes, people move to FL. But they need to sell their homes up north to do so. When they can’t sell them for bubble prices anymore, the prices down here drop as well. Most people are not going to own 2 homes in retirement.

Yes, the people making 250+ a year; its not a big deal. But that is such a TINY fraction of the homes sold on the market, it can almost be ignored as a statistical anamoly.

Oh, and BTW, to the previous poster, “Ben is my hero”. :)

By Juno Beach

October 3, 2006 05:50 AM | Link to this

Here some facts:

*Interest Rates are historically still very low and likely to go lower in the next 6 month.

*Inflation is very much under control.

*USA is still very much a growing country. It is mostly real demand that drives housing prices higher. Immgrants are comming from all over the world, many bring substantial wealth into the country.

*Additionally, all the large homebuilders such as Lennar and Toll Brothers have virtually stopped building for the time being cutting supply of new homes. The current excess inventory is already being reduced as we speak. That is a good sign.

The above fundamentals point to a soft landing in realestate, not a crash.

Many people are waiting for the realestate prices to crash because every other journalist and TV commentator tells them so. Well, journalists REPORT only, but they don’t PREDICT. They have seldom been correct about any prediction, not even the weather.

By to mike fink

October 3, 2006 06:58 AM | Link to this

this blog is filled with a bunch of renters, who bash the real estate market. i am not a cheerleader, i am not predicting the future, either.

By Michael Fink

October 3, 2006 09:31 AM | Link to this

I agree; when you look at it that way, you could forsee a soft landing.

However, I tend to disagree; I think that homes will once again be affordable, with median home price affordable by those of median income. That’s a “typical” market, and where I think we are heading. Median income could double, or median home price could be cut in half, but I just do not forsee any possiblity of everyone who does not already own a home being “priced out forever”. We have never had a RE boom like this before, and we have had awful RE crashes in the past. I think that our market is pointing towards a crash, but I do appreciate other’s points of view.

One of the strongest indicators to me is the ~3 years of inventory we have on the market right now. Even if there is not another home built, its still going to take years to work through all this inventory. Couple that with taxes/insurance, imho, S. Fl has the trifecta of bad indicators for the RE market.

The “blow that broke the camel’s back” to me is going to be when lending standards are tightened up. So many people were put into homes they could NEVER afford; lending standards in the past 5 years just went out the window. No doc, intrest only, stated income, etc, etc. That is going to help the market collapse; many of the homes “sold” were not really sold, they were just transferred to another owner to hold for a year until appreciation gave them a healthy profit.

Take a drive through newer developments in PB County. Many are empty; devoid of owners. I was in a development this weekend; standing at one home, I could see 6-8 homes for sale, all on the same street. I went in about 5 homes, 2 had never been lived in. These are not cheap properties; and were, one after the other, for sale. I have never seen anything like it; how many times can you go to an open house in a development and just walk from one to the other? Its like everything is for sale at one time in many of these newer developments.

Yes, I am a renter, and yes I bash the RE market. But not without reason; I think we are heading for a massive correction in RE, and just do not want others to be hurt, or at least not without having all the facts. IMHO, to buy a home in PB County right now; you would have to be crazy. We have years of correction ahead of us, and rent is a bargin compared to your monthly carrying costs on the same property.

Given the way that taxes/insurance is calculated, your going to suffer for a long, long time if you overpay for a house down here. If you neighbor pays 30% less then you 2-3 years from now; not only have you lost all that money, but you also have to go fight the taxing and insurance industries to revalue your home. That may be impossible, because its very likely if your reappraised your going to find your financed 120-130% of value, something no bank is going to like.

If you overpay for a home and get underwater, you are trapped. Your a slave to the home; you can’t sell it without bringing money to the table; can’t rent it for the carrying costs, and may not be able to live in it if life situations dictate you relocate.

By Doubtful

October 3, 2006 10:09 AM | Link to this

Mike Fink, you’re just making stuff up. Show me one study that says the average doctor in Palm Beach makes $350K, or that the average lawyer charges $350 per hour. And trying to justify housing prices for an entire county by citing some public employees that are taking bribes is one of the most ridiculous things I’ve ever read.

By Mike Fink

October 3, 2006 11:06 AM | Link to this

Doubtful,

Take a look at the name on that post again.. That was not by me, it was to me:

“To Mike Fink”.

:)

Also, I think those numbers are inflated, but, honestly, it does not matter. Who cares what doctors/lawers make, unless the whole county is comprised of people making 200-300K a year, home prices are way too high.

By To Doubtful

October 3, 2006 12:02 PM | Link to this

There isn’t a lawyer in Palm Beach that is charging under $350 an hour. If their specialty is bankruptcy it is $500 an hour. Every doctor has a contract and every contract is minimum $350K a year. Then doctors have a side business. They serve as expert witnesses. They charge $1200 an hour for their testimony as an expert witness and their minimum amount of hours is 4 for billing purposes even if their testimony is only 2 hours long. Lawyers still have to prepay all doctors their billing rates before they get their expert opinion on any case.

To Mike Fink - if you don’t believe me why don’t you ask your neighbors next door to you that are lawyers how much their billing rate is or the doctor across the street from you that has much cheaper property taxes than you. Yes, your doctor neighbor is making lot more money than you are these days.

The point is that in order to live comfortably here in Palm Beach you either have to make lots of money, legally or illegally or have it made and bring it down here with you.

Alot of you people live in lala land and should grow up. You really don’t know what life is all about.

Palm Beach County means graft and corruption. Get used to it. Don’t expect any politician to help you here. There is too much for them to loose personally than to help the average resident of Palm Beach County. They don’t need your votes either, they have that already set up for their benefit.

By just ask a doctor or a lawyer

October 3, 2006 12:34 PM | Link to this

The costs for attorneys and doctors are up there as someone said. Dentists alone start making out over $115k a year. Doctors who have specialities are making nice sums.

Too many people are lead around in life with “blinders” on. If you want the answer from the horses mouth, then call up a doctors office or a lawyers office for rates. Just remember with a lawyer, the first time is free, after that, you are on the clock! I know a HOA who wasted tens of thousands of dollars with lawyers and got nowhere in life against a homeowner who minds their own business. Now the snowbird neighbors will soon find out their HOA wasted their money this past summer because the HOA board members were just plain jealous of the homeowner.

Lawyers love to make money on both sides of the aisle.

By Mike Fink

October 3, 2006 12:42 PM | Link to this

I think you may have missed the point. It does not matter what they bill; or what they make. Its median price related to median income that I am comparing, not “one doctor” to “one house”. Yes, there are people who can afford these homes. That does not make them priced right (not even close).

Not sure what the corruption comments are supposed to illustrate? Just that the system is so messed up right now the only way to afford a home is to take kickbacks and sell drugs? :) If so, agreed.

By doubtful

October 3, 2006 02:21 PM | Link to this

Mike Fink, sorry I attributed that statement to you. To the person that did write it, I asked to to prove your statement. Go on the internet and show us a reputable study that says the AVERAGE Palm Beach Doctor brings home $350K, and the AVERAGE lawyer bills $350/hour. I don’t want to hear about what the top 5% make, I want you to show me the averages.

By TimeMatters/TimeSlips

October 3, 2006 04:45 PM | Link to this

To Doubtful:

It is across the board now in Palm Beach area, all attorneys are raising their billing rate for October 1st or have raised their billing rates to $350 an hour. That is common knowledge among all the law firms. The new billing rates for paralegals are $175 an hour which used to be $125 an hour. They do all the same work as attorneys except for litigate in court.

When a case is opened, the attorney will send you a letter with his or her rate and with his or her paralegal rate as well. You sign the form and send it back to the attorney and the lawsuit commences. When you get your billing statement for the month, it will show you how much time the attorney worked on your case and how much time the paralegal worked on your case. You can reduce your legal expense by requesting the paralegal.

Sorry, I don’t have a study for you. I just have thousands of documents that would support this data from hundreds of lawyers and doctors who I network with.

By Juno Beach

October 3, 2006 07:19 PM | Link to this

It is naiive to think that everyone HAS to be able to afford to BUY a home. Compared to other countries, Americans have historically spent only a little percentage of the montly paycheck on homeownership. Many countries in the developed world (Germany, United Kingdom, etc.) have had a fairly high renter/owner ratio of about 4:1. In other words only about 20% of the population own their home, the rest is renting.

Buying a home in those countries has become very expensive some 20 years ago with no end in sight. Don’t believe me? Just check the home prices in England. Years ago people considered the increases as “unsustainable” and what happened, they kept going up and up then took a breather for a few months and kept going up and up again !

Sure, here in the USA we are used to so many conveniences, such as cheap gas, cheap utilities, etc. but that just might come to and end.

People are schocked to pay $3/gallon at the gas pump. In other countries this would be considered a bargain and people would storm the gas pumps. Normal price of gas there is about $6-7 /gallon.

We live in an age of globalization and many things of the past will not necessarily apply in the future.

Florida has become a destination for people from all over the globe and will continue to do so.

My estimate is that home prices will bottom in the next 3-6 month.

By TH

October 3, 2006 08:06 PM | Link to this

3-6 months…ha…maybein 36 months..

By Mike Fink

October 3, 2006 08:51 PM | Link to this

3-6 months?

Sure, as long as prices are down about 50% by then.

:)

Timeframe is not really important, its the price at the end that matters. However, home prices are historically “sticky” on the way down. I think this downturn is going to bottom much faster though, becuase many people are in loans that they cannot continue to service. Therefore they have no choice; they must sell, or the bank will short sell. Either way, the comps will be set much more quickly on the way down, because of forced sales.

That’s my opinion anyway. I give it 12-24 months before we are at 50% of peak. Then I will start to think about buying again. As soon as cost of rent nears cost of ownership, I will jump back into the market.

By Doubtful

October 3, 2006 09:03 PM | Link to this

I would agree that the large law firms get $350 per hour or more. But of all the lawyers in PBC, only a small percent work for these big firms. Many work for small firms, or themselves, or for non-profits, or for the government and get nowhere close to $350/hour. So you cannot make a statement like “lawyers charge $350/hour” without qualifying it.

By TimeMatters/TimeSlips

October 3, 2006 11:26 PM | Link to this

To Doubtful:

I really don’t have to qualify that answer. It is given that non-profits and government jobs have lower wages in every occupation.

Don’t know what you are using for numbers to qualify small firms either.

Firms that have over 10 attorneys and under 10 attorneys which I will call small firms are billing out $350 an hour. Firms that have only one or two attorneys are also billing at $350 an hour. What I will qualify is that attorneys with 5 years or more experience anywhere small firm or large firm are billing at $350 an hour. The only time I saw under $350 an hour this past year was for the new lawyers just starting out after passing the bar. And they are being billed at $250 an hour at any firm.

I will argue that only a small percent work for big firms. Many firms have locations in other areas of Florida and just because the West Palm Beach branch has only 5 while the Miami branch has 50 plus does not make that a small firm.

In New York, small firms is anything under 10 attorneys, mid size is 11 to 50 attorneys and large is any firm over 50 attorneys.

Don’t kid yourself. There are sole practitioners here billing $350 an hour and no way do they match up to a polished attorney from New York.

Which is another point I want to make here. I keep reading here that $400,000 for medium price home is too much. There are plenty of people living here making over $100,000 a year. It is just not doctors and lawyers. Mike Fink writes that he would not pay $400,000 with $100,000 house hold income. More than likely a person buying a $400,000 home is selling a home in the $200K - $300K range and will have equity built up. So lets say for argument you have $200K equity and you need $200K mortgage and you are making $100K income. Do you know what $200K mortgage will cost you today? According to the mortgage payment last week at 6% your monthly payment will be $1199 a month. On $100K annual income which is $8,333.33 a month income, you are saying you cannot afford the mortgage. Mike Fink is not conservative, he is just not telling the truth. The old rule and the only rule is that you should only pay 28% of your income for a mortgage. For $100k income that means you can pay $2333 a month for a mortgage and at 6% mortgage rate that brings you to a $400,000 mortgage. So at $100K annual income and no equity at all, by all means you can afford a $400k house even if you have no equity.

Mike Fink either has serious money management problems, lots of legal bills, or a high maintenance wife if he cannot afford a $400,000 house on an income of $100k a year. Mike Fink is a big dreamer to think property will drop 50% here. Sounds like Mike is trying very hard to discourage people from buying here. I wonder why.

By Michael Fink

October 3, 2006 11:56 PM | Link to this

Here’s a calculator:
http://www.bankrate.com/brm/calc/newhouse/calculator.asp

I used 8000/mo as income (96K/yr), no other income. No down payment. 30 year loan at 6%. Homeowners of 5K/yr, RE tax of 8K/yr. No other monthly expenses (no car payment, no debt, etc).

Affordable home amount: 299K.

You tell me where my numbers are wrong. Also, this is from a site that is trying to sell a morgage, so they are being a bit more agressive then I would be. Also, assuming no monthly debt is obviously not the situation for many people. Just putting in a 500/mo car payment drops the affordable home amount to 216K.

So, feel free, there’s the calculator, tell me where my numbers are wrong.

If you assume no monthly debt, no car payment, and a annual income of 120K, you get 420K as the affordable home amount.

Your numbers are not “wrong” per se, but your not taking the huge tax/insurance burden into account. Remember, the same rule that says 28% for morgage also says 33% for total home expense. That includes all your taxes/HOA/insurance, and is definately going to be the lower of the 2 numbers.

Also, you forgot to take out the taxes on the 100K income numbers. Trust me; you don’t take home 8.3K a month with a 100K income. If only. :(

The don’t care if people buy or not. I just don’t want them to be “snowed” by the RE talk that has been so pervasive for the last 3-5 years down here. RE does NOT always go up. Interest only/pay option ARMs are for rich people, not as an affordability instrument. You will NOT be priced out forever (that’s my personal fav!); it’s impossible for that to happen, because that would mean the RE system is closed, with no new buyers entering the market.

By NET WORTH

October 4, 2006 09:14 AM | Link to this

Hey Mike

What is your net worth? You know

ASSETS - LIABILITIES = NET WORTH.

First of all, your car should be paid for. If you can’t afford the car today how are you going to afford it tomorrow? You are just wasting money leasing a car.

What is % of income you save on 100K annual income?

Did you ever take financial planning 101?

What is % of monthly income you spend on restaurants and entertainment?

What is % of income you spend on gambling in a year - lotto - racetrack - gambling cruises, etc?

Do you have IRA’s and 401Ks that are valued over twice your age? If you are 40 years old, do you have at least 80K in IRAs and 401K plans?

It does not sound like you built up your net worth or have any equity in your properties. Sounds like you just have big mortgages.

Tell me 3 things you do to help you save money or cut back on your bad spending habits.

Do you have doctor expenses or college tuition coming out of your income? What extraordinary expenses do you have that the average person would not have?

The worst thing you could do is buy $400K house with no money down. You should only buy what you can afford. Whatever price home anyone buys, they should have at least 20% savings to put down to buy it. You better have at least 80K to put down on that $400K home. And how long have you been making $100K a year? If you have been making that amount of money and have no savings, then either you are an idiot or you have a high maintenance wife.

By Mike Finks Money Problems

October 4, 2006 10:00 AM | Link to this

This must be “pick on Mike Fink Day”. I would think that someone who makes six digit income, should afford a home at least for $400,000. Mike, your numbers just don’t add up. Maybe it is that wife that you drove around with, and laughing at all the open houses in Boynton Beach, that is costing you money. I mean, something is wrong with your spending/saving if you cannot afford a house on your salary. Even with all the costs of the house, you would be ok. Something more to your story that you are not telling. And was it you who said that homes will drop 50%? Did anyone take notice that our economy is doing very well? Our DOW is at an all time high. What Mike Finks is predicting, is a total collapse of our nations economy. The day when homes drop 50% here in Florida, then i will have to see the DOW at 6,000, unemployment at 15%, and gas prices over $6 a gallon.

I just notice it was TH who wrote that he drove around with his wife laughing at open houses. Another loser who is labeled a “have not” by my standards. Yes TH, you will be watching from the outside as the “Boomers” will be moving in your house that you and your wife wanted, but could not afford because you ate too many meals out, and did not how to sacrafice and save to own property.

And someone wrote about gas prices over in Europe is higher. Yes that is true, but they have a better transportation system, that most people do use, they have 8 week paid vacations, education standards are better, lifestyle is better, and real estate is much higher over there…..but we are here, and you are not over there. So consider the real estate here now as a real bargin. Even the baby boomers of Europe will look here for our great real estate deals this winter.

And Mike Fink, you need to have someone advise you of why you cannot afford a $400,000 home on your salary. What i just heard is that the rent at City Place is skyrocketing. Try to eat out less if that is you problen why you cannot afford a home. I can’t imagine spending $25 on a plate of spaghetti at City Place.

By Mike Fink

October 4, 2006 10:17 AM | Link to this

It must be pick on Mike day; nobody told me.

Go run the numbers yourself. Tell me where I made a mistake. Don’t give me “gut feeling” that 100K income should be able to afford 400K home. Show me, tell me where my numbers are wrong. Use a different calculator; change the numbers, show me how to afford it. No interest only/negative am loans allowed. :)

Of course, if I put 80K down its affordable. Shoot, if I put 400K down, its even more affordable. :) But for this exercise, lets assume no down payment at all.

I don’t lease the car, its financed at a 4.9% rate. There is no reason to pay that down quickly; 4.9 is lower interest they your going to get on pretty much any loan anywhere. That will be the last thing paid off.

I am willing to pay 400K for a home, but not until price of rent = price of ownership. Right now its about double.

I am not predicting a 50% drop in housing prices countrywide; only in the massive bubble areas (S. FL, Arizona, Cali, Las Vegas). And yes, it will be devestating, and it may result in a serious recession. So much spending in recent years has been fueled by the crazy runup in prices; as they drop, this spending will evaporate.

By Mike Fink

October 4, 2006 10:18 AM | Link to this

It must be pick on Mike day; nobody told me.

Go run the numbers yourself. Tell me where I made a mistake. Don’t give me “gut feeling” that 100K income should be able to afford 400K home. Show me, tell me where my numbers are wrong. Use a different calculator; change the numbers, show me how to afford it. No interest only/negative am loans allowed. :)

Of course, if I put 80K down its affordable. Shoot, if I put 400K down, its even more affordable. :) But for this exercise, lets assume no down payment at all.

I don’t lease the car, its financed at a 4.9% rate. There is no reason to pay that down quickly; 4.9 is lower interest they your going to get on pretty much any loan anywhere. That will be the last thing paid off.

I am willing to pay 400K for a home, but not until price of rent = price of ownership. Right now its about double.

I am not predicting a 50% drop in housing prices countrywide; only in the massive bubble areas (S. FL, Arizona, Cali, Las Vegas). And yes, it will be devestating, and it may result in a serious recession. So much spending in recent years has been fueled by the crazy runup in prices; as they drop, this spending will evaporate.

By Mike Fink

October 4, 2006 10:21 AM | Link to this

It must be pick on Mike day; nobody told me.

Go run the numbers yourself. Tell me where I made a mistake. Don’t give me “gut feeling” that 100K income should be able to afford 400K home. Show me, tell me where my numbers are wrong. Use a different calculator; change the numbers, show me how to afford it. No interest only/negative am loans allowed. :)

Of course, if I put 80K down its affordable. Shoot, if I put 400K down, its even more affordable. :) But for this exercise, lets assume no down payment at all.

I don’t lease the car, its financed at a 4.9% rate. There is no reason to pay that down quickly; 4.9 is lower interest they your going to get on pretty much any loan anywhere. That will be the last thing paid off.

I am willing to pay 400K for a home, but not until price of rent = price of ownership. Right now its about double.

I am not predicting a 50% drop in housing prices countrywide; only in the massive bubble areas (S. FL, Arizona, Cali, Las Vegas). And yes, it will be devestating, and it may result in a serious recession. So much spending in recent years has been fueled by the crazy runup in prices; as they drop, this spending will evaporate.

Oh, and BTW, rent is dropping like crazy in CityPlace. We seem to be a bit below 60% occupancy (100-150 units open), and people are dropping rent quickly to get people in to stop the bleeding. I am moving out of my place in a few months, if your looking for a cheap CP rental; I will be happy to give you the name of my landlord.

By TH

October 4, 2006 10:50 AM | Link to this

And Pick on me day too. Too many people are full of denial and greed. I know many many people that took out HELOC’s for lavish vacations, cars, etc. Their household income was about 55-60K. Also, housing up north is not moving which in turn has an effect on other markets. The boomers are going to other areas of Florida, GA, SC, NC. Take a drive through those areas and look at all the retirement communities being built. I agree with Mike, Rent is dropping all over South Florida.

By Joe

October 4, 2006 10:51 AM | Link to this

Here’s an article from the Sun sentinel:

Housing prices, slumping after a five-year boom, are projected to decline in half of the nation’s metropolitan areas, with Florida, California and the Northeast among the areas hardest hit.

The forecast by Moody’s Economy.com, a private research firm, presents one of the starkest views yet of the housing slowdown that has been gathering force in recent months.

The West Chester, Pa.-based forecasting firm projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the first decline for an entire year in home prices since the Great Depression of the 1930s.

Median price declines on existing homes already are evident in South Florida.

Palm Beach County’s median price declined $25,400 to $386,000 in August, marking the first year-over-year drop in seven years, according to the Florida Association of Realtors. The August median for Broward County fell $24,200 to $362,800. It was the second month in a row that Broward’s median declined on an annual basis.

The 195-page national report, “Housing at the Tipping Point,” was obtained by The Associated Press before its general release today.

The report projected that 133 of the nation’s 279 metropolitan areas would see price declines. That is quite a contrast from the past five years when low mortgage rates pushed sales to five consecutive annual records and prices in the hottest sales areas skyrocketed.

But this year, the once red-hot housing market has cooled significantly. Some analysts are worried that the slowdown could become so severe that it could drag the entire country into a recession, much as the bursting of the stock market bubble in 2000 led to the 2001 slump.

The housing report said the biggest percentage price decline will be in Danville, Ill., where prices have already fallen by 18.7 percent from the peak in the second quarter of 2005 to a low-point in the first three months of this year. That setback occurred because of layoffs in autos and other manufacturing industries, which depressed the local economy.

The second biggest decline is projected to occur in the Fort Myers area, a fall of 18.6 percent from the peak in the final three months of last year to a low-point for prices that is projected to occur in the second quarter of 2007.

By MIkeG

October 4, 2006 05:47 PM | Link to this

Mike,

If you make 100k a year and can’t afford a 400k home, than that is pretty pathetic.

I make less than 100k and I own several properties around the nation. My father in-law built a two million dollar net worth off of 50k a year.

Real estate is a long term investment and it will rise and fall just like any other commodity out in the free market.

Taxes here are lower than most parts of the nation N.J has the highest prop tax in the nation, Texas has the highest property insurance in the nation.

And as to the Moodys report a 3.6% drop in prices is healthy for the market not devastating. My gut is telling me that you and Thomas AKA TH are little boys trying to compete in a mans world. Run home to mamma.

The market will go down but I don’t think it is going to go down that far unless we have an economic crises. And right now I don’t see that happening too soon. All the money that was made in Re in the last few years is being put into the stock market, Builders are starting to focus more on commercial and pulling back on residential. So keep on renting, theres no tax right offs in renting.

By Mike Fink

October 4, 2006 06:26 PM | Link to this

MikeG,

I posted the numbers up here, tell me where I am wrong? Tell me what number is entered incorrectly; go ahead and recalculate it.

A bank would love to lend me the money to buy a 400K home. And I am sure I could afford the payments. But why would I want to do that to myself? Rent is less then 1/2 the cost of ownership; and prices are dropping. You would have to be crazy to buy now.

I am from NJ, so I know all about the prop taxes there. :)

Tax writeoffs are helpful, but not when your paying 2X too much for the property. The numbers just do not work.

Go ahead, I posted the calculator; run the numbers yourself. Or use another calculator and post up your numbers, as well as the address of the calculator.

People down here have just gone crazy with the debt/income ratio. Sure, I could afford to buy it, but why would I? Until apprecation goes highly positive, or rent catches up, its just a losing proposition; as well as a very risky one. RE is a highly leveraged investment; leverage is great on the way up; and crushing on the way down.

By MikeG

October 4, 2006 07:13 PM | Link to this

Mike,

You do not make or lose money until you sell. And that goes for Stock and real estate.

Just because rent is 1/2 what it is to buy is a poor comparasion. Rent is usally always less that it is to buy. Look at this way to rent you sometimes need to put down first last and security. That can be substantial sometimes. I would much rather buy than rent.

Yes I agree I think prices will come down a little bit but not to what alot of people on this blog think it will. As an investor in realestate I did not like the crazy market of the last few years it was to frenzied and stopped buying a couple of years ago. Now I like that it starting to get back to Normal.

Im not saying renting is bad I just think your fooling yourself if think prices are going to come crashing down.

If you bought house tomorrow with the intention of living in it for awhile your are crazy not to buy now. Rates are still low, and what if prices only come down by a small percentage and rates continue to rise you will be exactly the same today as you would a couple of years from now.

A house I bought in California in 1997 for 300k was same monthly payment as a house that can be bought today for 500k. Why you ask because of the interest rate.

Now Im not re cheerleader I like this slow down it enables me to take my time and find property I really like. And yes if I find it I will buy because I buy Re for the long term. And in 30 years it won’t really matter what I paid for it today. Just that it will be worth more than what I bought it for.

By NET WORTH

October 4, 2006 08:07 PM | Link to this

Hey MikeG you hit it on the head about Mike Fink and TH allright. They are pretty pathetic mama boys.

You brought up an excellent point, you don’t make or sell money until you sell anything real estate, stocks, etc.

You don’t know the whole story about Mike Fink. He is not telling the whole story about his spending habits. I have been reading his comments for awhile now and I believe he has a serious gambling habit that is keeping him from saving money or buying a house.

I agree with you MikeG. I think Mike Fink and TH should also run home to their mama. They are a lost cause and I for one don’t want to waste time reading their comments anymore.

I enjoyed reading what you had to say MikeG. You should write on this blog more often. You have something good to read about, that is good advice. Thank you for telling it like it is - how REFRESHING!!!!!!!!

By Edward K.

October 4, 2006 09:02 PM | Link to this

Why all the bashing of Mike and TH? Sounds to me like “Net Worth” and “Mike G” are the same people. Everyone is entitled to their opinions about the market…Whatever happens, happens but if you ask me being a former long islander, it does’nt look good (housing) in NY or FL. BTW..TH and Mike Fink did not bash you all so why are you bashing them?

By real estate broker pbc

October 4, 2006 09:26 PM | Link to this

ro rich, i am a active RE broker in Royal Palm/Weellington and have semi retired to Murphy NC, and the price PSF is 125.00 today, i am selling in Murphy NC and it is busy, with Floridains getting away from high taxes/ins. no crime to speak of, 2.13 for gas, it is a good life, but i still keep a home there, have not tried a winter yet, but have been up here and back for 2 years, Fla market is dead, NC is steady, great for land investors and really booming and a fabulous place to live or retire and big cities an hour in each direction, ie. Chattanooga, Atlanta, Asheville, Floridians are tired of taxes, ins. and crime

By Rich R

October 5, 2006 03:55 PM | Link to this

I bought in March of ‘05, turn-key home.

3 BR, 2 1/2BA, 2 car garage, two story home on an acre.

I paid $150K; the home is just over 1,800 sqft (not including the garage). That comes out to $83 per square foot.

Builders are great with the upgrades, that’s a suckers play in my eyes.

I did the granite, slate, and other upgrades at a fraction of what the builder wanted.