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November 2006
Mobile-home millions?
Here’s an intriguing investment strategy, courtesy of the Sellsius Real Estate Blog: Invest in waterfront mobile homes.
Exhibit A: Briny Breezes, Palm Beach County’s only oceanfront trailer park. Owners there are entertaining offers that value their properties at more than $1 million each.
Sellsius bashes Zillow.com (everyone’s favorite punching bag these days) for undervaluing Briny Breezes homes given the big offers on the table. According to Zillow, most of the Briny Breezes properties are worth less than $200,000 each.
But in Zillow’s defense, the highest sale in Briny Breezes was $290,000, according to Realestat.com. And nothing has sold in the town since July 2005.
And it’s worth noting that Cyberhomes, another online valuation tool, doesn’t even attempt to value Briny Breezes properties.
Beating the numbers ‘til they confess
The Florida Association of Realtors says Palm Beach County prices stabilized in October, rising $100 from September, but prices remain way below October 2005 levels. Meantime, the National Association of Realtors reports a 3.4 percent price drop from a year ago.
In the categories of information overload, analysis paralysis, and beating the numbers ‘til they confess, check out Zillow’s report on home prices. Contrary to the NAR and FAR consensus, Zillow claims prices are rising. It says values nationally rose 4.8 percent from the third quarter of ‘05 to the third quarter of ‘06.
And in Palm Beach County, Zillow says prices rose by 3.2 percent in the third quarter, with single-family homes valued at median of $347,387 and condos worth $205,821.
But tell that to the sellers of these houses, who got less than they paid for:
Property: 370 Maddock St., West Palm Beach
Last sale: $255,000 in September
Previous sale: $345,000 in March
Price drop: $90,000
Property: 2663 Ravella Lane, Palm Beach Gardens
Last sale: $375,000 in September
Previous sale: $405,000 in July 2005
Price drop: $30,000
Property: 2419 NW 30th St., Boca Raton
Last sale: $405,000 in October
Previous sale: $435,000 in January 2005
Price drop: $30,000
Property: 1318 S. M St., Lake Worth
Last sale: $203,500 in September
Previous sale: $231,000 in August 2005
Price drop: $27,500
Property: 102 Half Moon Circle, Lantana
Last sale: $340,000 in October
Previous sale: $342,600 in February 2005
Price drop: $2,600
Permalink | Comments (101) | Categories: Jeff Ostrowski
Auto sales latest victim of housing slowdown
Here’s the latest unexpected consequence of the housing slowdown: Car sales are dipping.
Today’s Wall Street Journal (subscription required) reports that auto makers are sweating the combination of the housing slowdown and rising interest rates. Borrowers with adjustable rate mortgages are seeing their payments rise, leaving less cash for cars.
“In addition to California, big dealer groups say south Florida, Arizona and other areas where home values are down are also seeing declines in vehicle sales,” the WSJ reports. “The impact of the housing slump is likely to be hard on the Big Three because slower housing starts cause builders to defer purchases of pickup trucks, which are Detroit’s most profitable models.”
Permalink | Comments (59) | Categories: Jeff Ostrowski
No housing bubble, just a soufflé
Bubbles burst, soufflés flatten. So says University of Central Florida economist Sean Snaith, who denies that the housing market is in a bubble.
He prefers a culinary analogy: Snaith sees the run-up in housing prices as a soufflé, which rises until it’s done, then loses some hot air. Here’s his analysis of the housing soufflé, from UCF’s latest Florida economic forecast:
“The housing soufflé reached its peak in 2005. It has subsequently come out of the oven and has been cooling significantly. Housing starts will continue to fall off in 2007 and 2008, as mortgage rates continue their slow climb and housing inventories are finally sold off.
“This has been a fundamentals-driven expansion in the housing sector (as opposed to a speculative bubble), and, as long as the fundamentals remain solid, the soufflé will not collapse. There is no sign that the demographic, macroeconomic, and financial underpinnings of the housing market will completely dissipate. In terms of prices, there will be some cooling, and the highest points of the soufflé are now settling. As we look beyond 2006, the loftiness of the soufflé will continue to give way, as mortgage rates rise. Barring any reversals in the ingredients of the soufflé, the talk of a national housing bubble will just seem like a lot of hot air.
“Some economists’ dubious predictions of a housing-induced recession are being proven wrong. Currently, the most pessimistic predictions expect prices to fall 10 percent to 20 percent in some areas. If these predictions come to pass, it would hardly be indicative of a bubble bursting. If the Nasdaq had only fallen by 10 percent to 20 percent from its peak, would we be referring to it today as the dot-com bubble?”
Affordability: Same story, different quarter
Little change on the affordability front, according to the National Association of Home Builders’ latest Housing Opportunity Index.
It says the typical Palm Beach County family could afford 28.8 percent of the homes that traded hands in the third quarter. That’s down from 29.9 percent in the second quarter and 30.5 percent in the first quarter.
NAHB says the Palm Beach County median home price rose slightly to $290,000 in the third quarter from $286,000 in the first (it includes condos and single-family homes, which aren’t combined in Realtor reports). And it says median family income remains at $64,400.
In the Treasure Coast, NAHB says the typical family could afford 21.5 percent of the homes that sold in the third quarter, up from 20.5 percent in the second quarter but down from 22.7 percent in the first quarter. That’s based on a median home price of $247,000 (down from $250,000 last quarter) and median family income of $54,600.
Both areas rank among the least affordable regions in NAHB’s study of 200 metro areas.
Bay City, MI, was the nation’s capital of affordability: 90 percent of homes sold there were affordable to a typical family. Los Angeles, where fewer than 2 percent of homes were affordable, remained the least affordable housing market.
Permalink | Comments (57) | Categories: Jeff Ostrowski
When builders hold fire sales
Eve Samples’ story in Sunday’s paper detailed how Lennar unloaded its last few homes in a Martin County development for big discounts.
The practice raises a number of prickly questions, including this one: How will the tax man appraise identical homes that sold for much different prices?
Mark Andersen, one of the residents who paid Lennar full price, wondered if, in addition to paying more for his house on Fleming Way, he would get stuck with a far bigger tax bill each year.
But Assistant Martin County Property Appraiser Mike Fribourg told Eve his office will use a formula that assigns a similar market value to homes of the same model in the same development.
It gets tricky, Fribourg said, when potential buyers walk away from deposits in large developments, and builders discount prices by that forfeited amount.
“That gets to be a real difficult analysis,” he said. “When a developer has pocketed a $50,000 deposit from somebody else and they only need to make $250,000, is the sale price $250,000 or is the sale price $300,000?”
Permalink | Comments (28) | Categories: Jeff Ostrowski
New online pricing tool adds to confusion
Web sites that estimate the value of your homes are all the rage these days, but good luck making sense of the valuations offered by Zillow.com and Cyberhomes.com.
I looked at five homes for sale in Palm Beach and St. Lucie counties. The results:
319 N. Lakeside Dr., Lake Worth
List price: $525,000
Cyberhomes value: $571,626
Zillow Zestimate: $520,048
Palm Beach Property Appraiser: $430,065
4198 Saint Lukes Lane, Jupiter
List price: $335,000
Cyberhomes value: $397,683
Zillow Zestimate: $312,378
Palm Beach Property Appraiser: $250,000
624 Pine Lake Drive, Delray Beach
List price: $649,000
Cyberhomes value: $704,781
Zillow Zestimate: $651,981
Palm Beach Property Appraiser: $432,303
515 N. County Road, Palm Beach
List price: $125,000,000
Cyberhomes value: Not available
Zillow Zestimate: $51,514,364
Palm Beach County Property Appraiser: $56,039,392
6770 NW Daffodil Lane, Port St. Lucie
List price: $254,900
Cyberhomes value: $349,965
Zillow Zestimate: $319,910
St. Lucie County Property Appraiser: $263,800
Notice a pattern? Cyberhomes is quite generous in its valuations. When I looked up my own crib, though, Cyberhomes’ estimate was $88,000 below Zillow’s.
Permalink | Comments (16) | Categories: Jeff Ostrowski
Good news and not-so-good news
Bob Graeve of Illustrated Properties asks me to report some good news about the local housing market, so I’ll oblige.
First piece of good news: Mortgage rates have fallen to an eight-month low, Freddie Mac reports. The average 30-year fixed-rate loan this week cost 6.24 percent.
Second piece of good news: Florida unemployment rates are falling. Palm Beach County’s rate dipped to 3.2 percent in October.
As for the not-so-good news: Housing starts fell to a six-year low, the Commerce Department reported today.
Even more bad news: The supply of homes for sale still far outweighs the demand for homes. For some ugly numbers, check out this chart posted by Palm Beach hedge fund manager Doug Kass. It shows homes for sale and sold in central and northern Palm Beach County.
Permalink | Comments (51) | Categories: Jeff Ostrowski
Another unsatisfied auction customer
In another report from a disgruntled seller whose auction failed, Tom Minnehan of Tequesta relates this experience:
I read the article on selling homes by auction with great interest. I tried to sell my home in Tequesta Pines on Sept. 23 by auction. It was a fiasco.
The same local auctioneer quoted in the article convinced me that selling a home by auction was “the wave of the future” — as she stated in The Post’s article. My share of the advertising budget was $3,500 (there were three other properties being auctioned that day). For my share, all I saw was a color brochure that she mailed out. I was promised that there would be a media blitz to stir up interested buyers.
She put one little ad in The Post that was lost under “Auctions” instead of under “Homes for Sale.” On the day of the auction, I had about 20 people in my living room; two were bidders. The others were local real-estate agents trying to learn how an auction works. I was very embarrassed in my own home about the entire proceedings.
My home was listed for $450,000, and the advertised opening bid was $275,000. The closing bid was $281,000. It was a reserve auction, so I was able to turn down the bid, but I feel that the whole process was very unprofessional, with no positive results. I wrote the president of Illustrated Properties about my concerns on Sept. 25, more than six weeks ago, and he has yet to respond. I guess being a small fish in a large pond doesn’t warrant his response.
I feel that there should be some kind of refund of my original deposit of $3,500 for the poor performance of this company. Needless to say, I would not recommend to anyone trying to sell a home by auction. As a final note, despite the excellent and professional efforts of my realtor with Illustrated Properties, my home still has not sold.
Permalink | Comments (49) | Categories: Jeff Ostrowski
Housing, the wealth effect and holiday shopping
Economists call it the wealth effect: The value of your stocks or house rises sharply, and suddenly you’re in the mood to spend.
This phenomenon emerged during the stock bubble of 1999 and 2000, then returned during the real estate boom that peaked last year. Now, the question is, will falling home prices turn us into Christmas scrooges?
I’m looking for homeowners who are feeling the backside of the wealth effect. (The “poverty effect”?) If this applies to you, please e-mail me at jostrowski@pbpost.com or phone me at 561-820-4581.
Permalink | Comments (74) | Categories: Jeff Ostrowski
No Talk and No Action
Why won’t developers talk to their buyers?
We constantly hear from buyers who say they can’t get anything out of real estate developers when condominium projects fail to get built on time.
Here, people have thousands of dollars tied up in these projects, and yet there are no reasons given for construction delays, no regular updates on the progress of lending or construction.
So then people call this newspaper.
It makes for great stories, sure. But frankly, there is something seriously wrong when people can’t get answers on their own. And these are people who in some cases have given developers thousands of dollars in deposits.
What we’ve got here is a failure to communicate, in a very big way.
If only there were a means that would allow developers to keep in touch with buyers. Letters seem so old-fashioned. I’m thinking something electronic, quick and easy.
I’ve got it. The Internet!
But click on the Web sites for Palladio Terrace or Opera Place, and you won’t find anything helpful about these unbuilt West Palm Beach projects. There’s nothing about Palladio’s lengthy delays, for instance, or about Opera Place’s cancellation.
The only method that seems to get people answers are nasty letters sent from lawyers. Or lawsuits, such as last week’s lawsuit against the developers of Palladio Terrace in West Palm Beach. That’s too bad. When the developers of 550Q decided to can the West Palm Beach condo, they notifed buyers immediately. (There’s nothing on the Web site about the cancellation, but at least they managed to get in touch with buyers somehow.) One buyer I spoke to said she was so pleased she promised herself she’d look to buy with 550Q’s developer if the project came back to life.
Is there a lesson here?
Permalink | Comments (2) | Categories: Alexandra Clough
The $182 million agent
Palm Beach agent Cristina Condon handled sales worth $182 million in 2005, making her the nation’s fourth-most productive agent.
That’s according to The Real Estate Top 200 list in Saturday’s Wall Street Journal. Condon, an agent at Sotheby’s International Realty, trailed only agents in Southampton, N.Y., Menlo Park, Calif., and Honolulu.
Condon credits her success to “working a lot and getting lucky.”
“I’ve been doing this for 24 years, so you build a clientele,” Condon says.
It didn’t hurt that she had a blockbuster January 2005. In that month, she sold three Palm Beach mansions: 1960 S. Ocean Blvd. for $33.6 million; 1290 S. Ocean Blvd. for $32 million; and 615 N. County Road for $24.9 million.
Condon wouldn’t say how much she made in ‘05. She’s hoping for a big year in 2006, too. She’s listing Donald Trump’s $125 million mansion at 515 N. County Road.
Permalink | Comments (3) | Categories: Jeff Ostrowski
Fewer sales mean smaller profits for brokers
Real estate brokers’ bottom lines are taking hits from the slowdown.
Last week, Realogy, the largest broker in the nation and in Florida, said its third-quarter profit fell to $87 million from $227 million a year ago. Realogy, formerly part of Cendant, owns Coldwell Banker Residential Real Estate, the biggest broker in Palm Beach County, and franchises the Century 21, Coldwell Banker, ERA and Sotheby’s brands.
And yesterday, ZipRealty, the California-based brokerage that runs an office in West Palm Beach, said its third-quarter profit fell to $622,000 from $2.85 million a year ago.
Builders have been taking hits, too. The latest: Hollywood-based Technical Olympic saw its shares plunge after a lender demanded payment of money owed by its Transeastern Homes division. Transeastern’s local projects include Thoroughbred Lakes, Victoria Grove and Versailles, all along State Road 7.
Permalink | Comments (38) | Categories: Jeff Ostrowski
Snowbirds no more
Buffalo attorney Allan Lipman is urging New York snowbirds to claim Florida as their home state.
The big reason, of course, is soaring property taxes. Florida residents are eligible for a tax cap under the Save Our Homes amendment to the state constitution.
Lipman’s Web site teaches snowbirds how to become residents of the Sunshine State. He says the switch is a “no-brainer.” After all, they not only get the property-tax cap but also residency in a state with no income tax and, starting Jan. 1, no more intangibles tax on investments.
Permalink | Comments (42) | Categories: Jeff Ostrowski
You had us until the ‘good time to sell’ part
Unable to get much “positive” play in the press, the National Association of Realtors is taking matters into its own hands with a new ad campaign.
“It’s a great time to buy or sell a home,” blares NAR’s full-page ad, which appears in today’s Wall Street Journal and USA Today and will run in Sunday’s New York Times, Washington Post, Los Angeles Times and Chicago Tribune.
NAR makes a strong case that it’s a good time to buy, at least. Among the ad’s arguments: Mortgage rates remain near historic lows, the record inventory of homes for sale “won’t last” and “prices overall have stabilized.”
None of that sounds like good news for sellers, though.
Permalink | Comments (7) | Categories: Jeff Ostrowski
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