The house across the street from mine is for sale. Occasionally, a real estate agent stops by with a client. But it’s not producing results — the house has been on the market for almost a year.
The home next to it just went up for sale, too. So did the house two units down on the other side — the sign says “For Sale by Owner.â€
Is that all? Hardly! Two out of four houses around the corner are for sale … another couple further down my road … two more near the entrance to my development … and scores more throughout the neighborhood.
In fact, a broker just told my neighbor that 47 out of the 325 homes in my community are up on the Multiple Listing Service. That’s more than 14%! Throw in the FSBOs sprinkled here and there, and it’s probably closer to 20%.
It gets worse: Before listing his house, my neighbor sat down with three different real estate agents. One agent said he sold 30 houses last year. So far this year, he’s sold three.
Homes that were worth $600,000 to $650,000 earlier this year are now going for tens of thousands of dollars less. I’ve heard one flipper is willing to take about $500,000 just to get rid of one such property.
In other words, I live at ground zero of the real estate bust. It’s unfolding before my eyes every day. But it’s not just my little enclave …
The Same Trends Are Sweeping
Through the Region and State
In September, here in the West Palm Beach-Boca Raton, Florida metropolitan area:
- Sales plunged 53% from the same month a year ago.
- Median prices dropped 9% to $365,500. That’s almost $35,000 in equity vaporized in just 12 months.
- Inventory is off the charts. In June 2005, my zip code had 150 homes with at least 2 bedrooms and 2 bathrooms for sale between $100,000 and $500,000 on realtor.com. This past week, there were 620!
That last fact blows my mind — that’s a 313% rise in inventory over 16 months. Check out the chart. Sure, some of the jump is probably because more expensive properties are having their prices slashed. There may be a few multi-family or commercial properties mixed in there, too. But overall, inventory has basically tripled throughout this part of sunny South Florida.
And here’s the fallout: Foreclosures are going through the roof!
Just-released stats from RealtyTrac show Florida took the lead for the most foreclosure filings nationwide — a whopping 40,136 in the third quarter alone. That’s a 55% increase from the second quarter.
Keep in mind, the country as a whole didn’t fare much better: U.S. foreclosures jumped 17% quarter-over-quarter, and 43% year-over-year.
The Fed Should Not
Walk Away Scot Free!
I know you hear a lot of talk that the housing market has hit bottom … that it’s all blue skies from here … that we’re getting a soft landing.
Recently, Alan Greenspan weighed in, saying the “worst may well be over.†Never mind that the former Federal Reserve Board Chairman pretty much created the housing bubble in the first place. How?
First, Greenspan slashed interest rates to ridiculously low levels, and kept them there far too long. Then, he praised adjustable rate mortgages at the worst possible time. And he denied there was a bubble at all by saying we had a few areas of housing “froth.â€
Now Greenspan says it’s all over, and we’re supposed to believe him? No way!
All around me, I still see desperate flippers stuck with homes and mortgages they can’t afford …
I still hear everyday homeowners grumbling about how unaffordable their loans, taxes, and insurance bills have become …
And I see “for sale†ads morphing into “for sale or rent†ads. That tells me that homeowners are stuck with two or more loans, and they’re trying to generate at least some income from properties they can’t sell.
I read in the local newspaper that home auctions can’t even get the lowest prices sellers are willing to accept. One example: A property that listed for as much as $725,000 couldn’t garner a $500,000 bid!
This is the legacy of the housing bubble. This is what the Fed’s reckless monetary policy has wrought. This is what happens when your economy becomes utterly dependent on asset booms [Editor’s note: See Saving American Savings].
Am I angry? Darn right I am!
Houses never would have gotten so ridiculously unaffordable if Fed policymakers had raised rates sooner to curtail rampant speculation.
Mortgage standards never would have gotten so ridiculously loose if regulators hadn’t twiddled their thumbs while lenders threw long-standing practices out the window.
Loan fraud, appraisal inflation, and other shady practices wouldn’t have skyrocketed to the unbelievable levels we’re seeing now if more resources had been dedicated to ferreting them out months or years ago.
Now there’s no telling how many people’s lives will be ruined by delinquencies and foreclosures.
I wish the worst was over in housing. I really do. But I don’t think it’s here yet, nor do I expect it anytime soon.
Until next time …
Mike
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