2008 Florida Housing market Thread Jan - Mar (Naples, Estero: credit, loans)

[CJFlorida]

Originally Posted by kdzgon

I presume you were referring to this lead sentence: For the first time since the Depression, more Americans ages 75 and older have been leaving the South than moving there, according to a New York Times analysis of Census Bureau data.

But, right within that article are these statements (emphasis mine):

From 1995 to 2000, another Census Bureau survey of migration patterns found, for the first time slightly more people ages 85 and older left Florida than settled there.

From 2004 to 2005, a separate Census Bureau survey reported a slight gain in migrants 75 and older to the South.

The reversal appears to be driven in part by older people who retired to the South in their 60s [10 - 15 yrs earlier], but decided to return home to their children and grandchildren in the Northeast, Midwest and West after losing spouses or becoming less mobile.

“As the numbers increase of people in their early to mid-60s that move from the North to the South, we would also expect the numbers of people 75 and older that move from the South to the North to subsequently increase as well,”

William H. Frey, a demographer at the Brookings Institution, said, “The South, and Florida especially, has been a magnet for yuppie elderly: younger seniors with spouse present and in good health. “These are a catch for communities that receive them, because they have ample disposable incomes and make few demands on public services,” he continued. “The older senior population,[the ones moving back North] especially after 80, are more likely to be widowed, less well off and more in need of social and economic support.”

Calvin Beale, senior demographer of the Economic Research Service at the federal Department of Agriculture, said: “After age 75, as health diminishes and/or widowhood occurs, there is some measure of return flow back to areas of origin, or wherever a caretaker-minded son or daughter lives. And this means a net outflow from the South.”

So, I'm sorry - I don't see how this article in any way shows any great evidence of a situation that will have significant impact on the market, especially as a result of low retirement savings. These statistics are nothing more than evidence of a natural progression in life. As demonstrated in this article, in large part it's a numbers issue - an aging population will result in higher numbers of individuals returning to their families when they need more care. If anything, this article points out what I said: people relocating to Florida can afford to live there.

Guess we will have to disagree on this issue. It was the first time since the depression this phenomenon was seen.

Last time I checked, people went through the "natural progression of life" from 1930-2000 also....yet the outflow of the elderly did not happen during that time period.

There is not a flood of wealthy retirees coming to Florida to buy all this real estate priced at double its true value.

Many companies are switching their defined pension packages, there is no law that says a pension has to remain in the form it was when you worked there. The number of pension plans insured has dropped from 100000 to 30000 in the past 10 years. Companies are preparing to get out or greatly reduced these plans. No retiree from a non-government job can really count on their pension being there forever.

Also, other costs have gone up....gas, energy, insurance, property taxes, etc. Children and grandchildren need more help financially. Some young family has to be able to afford to buy the houses up north before they can move down here.

The squeeze is just beginning, pension or no pension.

[GregTraub]

I remember having a debate with CJ not long ago about the whole median income being the best fundamental to determine where prices will settle.

Link - Ye-s-s-s !!!! I bought a House !!!
Starts around page 2.

Prices will continue to be pressured downward until inventory levels return to normal, Whether this happens before or after CJ's prediction of 110, depends on how much new inventory comes on the market. I personally think if the builders completely stopped building ridiculous numbers of homes after 04'-05' prices would still be hovering at or near "the peak". There is just a huge glut of over-inventory that is causing this downward price spiral.

I will conceed that the low fed rates probably gave extra incentive to builders to keep building. I also conceed the fed is making a recovery for housing much harder with their recent rate drops. If they hadn't done their 2 recent drops mortgage rates would probably be in the 4's right now, making payments for new home mortgages and refinances much more affordable at today's prices. More of my thoughts on the recent fed cuts on this thread... FEDs cut Rate by 0.5 Points

[Wild Style]

Originally Posted by GregTraub

I remember having a debate with CJ not long ago about the whole median income being the best fundamental to determine where prices will settle.

Link - Ye-s-s-s !!!! I bought a House !!!
Starts around page 2.

Prices will continue to be pressured downward until inventory levels return to normal, Whether this happens before or after CJ's prediction of 110, depends on how much new inventory comes on the market. I personally think if the builders completely stopped building ridiculous numbers of homes after 04'-05' prices would still be hovering at or near "the peak". There is just a huge glut of over-inventory that is causing this downward price spiral.

I will conceed that the low fed rates probably gave extra incentive to builders to keep building. I also conceed the fed is making a recovery for housing much harder with their recent rate drops. If they hadn't done their 2 recent drops mortgage rates would probably be in the 4's right now, making payments for new home mortgages and refinances much more affordable at today's prices. More of my thoughts on the recent fed cuts on this thread... FEDs cut Rate by 0.5 Points

you have overlooked the forest forest for the trees. People are not buying because prices are to high. They could purchased homes before because of lax lending practices. Now that lax lending practices are out the window people can't qualify for these high prices. So guess what that means? Prices are going to come down, period. By how much is anyones guess, but until home prices match real wages it will continue to tumble.

[CJFlorida]

Originally Posted by Wild Style

you have overlooked the forest forest for the trees. People are not buying because prices are to high. They could purchased homes before because of lax lending practices. Now that lax lending practices are out the window people can't qualify for these high prices. So guess what that means? Prices are going to come down, period. By how much is anyones guess, but until home prices match real wages it will continue to tumble.

Thanks wildstyle. I have no idea what the big mystery is here....prices are way too high. Interest rates, portability, fresh coat of paint, and on and on and on. All this is just a waste of time.

Prices are too high no matter how you look at it. Historically, based on income, based on what you can rent a comparable house for, based on the inflation of other living expenses, based on historical lending standards...based on everything that matters.

Anyway we can fast forward time 2 years so we can skip right to the eventual outcome?

[GregTraub]

Originally Posted by Wild Style

you have overlooked the forest forest for the trees. People are not buying because prices are to high. They could purchased homes before because of lax lending practices. Now that lax lending practices are out the window people can't qualify for these high prices. So guess what that means? Prices are going to come down, period. By how much is anyones guess, but until home prices match real wages it will continue to tumble.

I say potatoe, you say Potato. We both agree prices are coming down, not much can stop that at this point. We just disagree on what factor will play the biggest role in determining WHEN the prices will stop falling and how low they will go.

[fof5]

And that could be just the start. Brace yourself: Home prices could sink an additional 25% over the next two or three years, returning values to their 2000 levels in inflation-adjusted terms. That's even with the Federal Reserve's half-percentage-point rate cut on Jan. 30.
While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch (MER), who until recently had expected a much smaller slide.
Shocking though it might seem, a decline of 25% from here would merely reverse the market's spectacular appreciation during the boom. It would put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation. There's a recent model for this kind of return to normalcy after the bursting of a financial bubble. The stock market decline that began in 2000 erased most of the gains of the boom of the second half of the 1990s, leaving investors with ordinary-sized returns.
Why might housing prices plunge violently from here? Remember the two powerful forces that pushed them up: lax lending standards and the conviction that housing is a fail-safe investment. Now both are working in reverse, depressing demand for housing faster than homebuilders can rein in supply. By reinstituting safeguards such as down payments and proof of income, lenders have disqualified thousands of potential buyers. And many people who do qualify have lost the desire to buy. "A down market is getting baked into expectations," says Chris Flanagan, head of research in JPMorgan Chase's (JPM) asset-backed securities group. "People say: I'm not buying until prices are lower.'" He predicts prices will fall about 25%, bottoming in 2010.

[CJFlorida]

Originally Posted by fof5

And that could be just the start. Brace yourself: Home prices could sink an additional 25% over the next two or three years, returning values to their 2000 levels in inflation-adjusted terms. That's even with the Federal Reserve's half-percentage-point rate cut on Jan. 30.
While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch (MER), who until recently had expected a much smaller slide.
Shocking though it might seem, a decline of 25% from here would merely reverse the market's spectacular appreciation during the boom. It would put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation. There's a recent model for this kind of return to normalcy after the bursting of a financial bubble. The stock market decline that began in 2000 erased most of the gains of the boom of the second half of the 1990s, leaving investors with ordinary-sized returns.
Why might housing prices plunge violently from here? Remember the two powerful forces that pushed them up: lax lending standards and the conviction that housing is a fail-safe investment. Now both are working in reverse, depressing demand for housing faster than homebuilders can rein in supply. By reinstituting safeguards such as down payments and proof of income, lenders have disqualified thousands of potential buyers. And many people who do qualify have lost the desire to buy. "A down market is getting baked into expectations," says Chris Flanagan, head of research in JPMorgan Chase's (JPM) asset-backed securities group. "People say: I'm not buying until prices are lower.'" He predicts prices will fall about 25%, bottoming in 2010.

Wow, I guess Merrill Lynch is reading the housing blogs....they said all this stuff over a year ago.

And that 25% is national. The drop in bubble central Florida will be much steeper.

[Mike Peterson]

May be a silly question but why should we take what Merrill Lynch and JPMorgan Chase say seriously?

Between them they took about $13 Billion in mortgage hits. If they didn't see that coming why should we think they can forsee what is coming next?

[CJFlorida]

Originally Posted by Mike Peterson

May be a silly question but why should we take what Merrill Lynch and JPMorgan Chase say seriously?

Between them they took about $13 Billion in mortgage hits. If they didn't see that coming why should we think they can forsee what is coming next?

You are right about Lynch/Morgan. I am sticking with the two housing bubble blogs that got me to sell for a nice profit in 2005, use the money to buy gold at 400, got me out of the stock market at 14000, and now have me renting in Palm Beach County for less than half of what the guy across the street is carrying his house for.

So I agree, Lynch and Morgan have no credibility with me. So far, the blogs I have been listening too have been amazingly accurate and I have no reason to bail on them now. Their forecasts going forward have huge drops coming all over Florida.

But each of us is free to decide who we think is right.

[fof5]

I haven't seen any 25% decline where I am if anything my home value has increased.

FL didn't help things any,I own a lot on a lake in Rotonda Lakes I purchased in 01,taxes were 200 they quickly peeked at 1100 in 06 and now back to 500,tax ass value went from 17,00 to 97,000 at it's high back to 36,600.

I currently live in PA and will wait till FL corrects it's mistakes before building on the lot.