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Merrittk92

Could this happen to Norfolk?

25 posts in this topic

Not just for Norfolk but for the Hampton Rhoads area.

Miami Condo Glut Pushes Florida's Economy to Brink of Recession

From Bloomberg.com

"Florida is the epicenter for all the problems that exist in the housing industry,'' said Lewis Goodkin, president of Goodkin Consulting Corp. and a property adviser in Miami for the past 30 years, who also foresees a recession. ``The problems we have now are unprecedented and a lot of people will get burnt."

Is this something that we are now approaching or is this something that we have taken steps to avoid?

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Florida, even during the highest points of the construction boom, has always been citied by rational people as being overbuilt. Las Vegas was another area frequently mentioned. HR doesn't have a condo glut, there is a bit of slack there now, but its nothing to be concerned about, certainly not what is going on in the aforementioned places. The amount of inventory that has been built here is a drop in the bucket compared to what has happened in some other places. HR didn't have much of a condo inventory at all prior to the last 5 years, and in many ways was playing catch up with other metropolitan areas.

But make no mistake, the housing market in the U.S will remain soft overall for the next 12 months while the weaker borrowers and lenders get weeded out. I still expect that most HR neighborhoods will still see assessment increases, but at a decreasing rate. In reality, the housing market will just be a bit below 20-yr trend lines, but will look comparatively weak to the last 5 years. There are going to be people who get burned big time on this, including some big hedge funds (Bear Sterns has already felt the sting) and other investment banks. Derivatives markets for the bundled assets, which include the ARMs and other creative lending tools, are sitting on a bit of a knife's edge right now. None of the hedge funds or investment banks that hold the vast majority of these instruments want to sell, because if they do, they risk sparking a big panic sell-off and further driving down prices (again see Bear Sterns). But those who sell first will probably get out in better shape than those who wait, it's a classic prisoner's dilemma. If they do start to sell, and if the rating agencies continue to downgrade the assets, then there could be larger ramifications, including a couple of big names that go bust. That said, the vast majority of people who took out ARMs and other non-traditional mortgages are not going to default, and those types of loans still make up a minority of all loans types, though not insignificant (est. I saw is that about $700B in loans are now in negative equity, though that doesn't necessarily equate to default. In fact, loan officers would prefer due everything they can not to default on a property right now because of market conditions and the costs associated with doing so any in case). The final result of all this will be that banks will have to tighten loan requirements because buyers of their derivatives will demand a higher risk premium than before, and that economic growth overall will be moderate for the next 18 months, but no recession barring some great calamity.

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We should have listened to that great prognosticator, Tel!

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Comparing Miami to Norfolk is like comparing apples to oranges. In order for us to have a condo glut our condos would've had to gotten off the ground in the first place. All of this "announced" capacity never actually materialized. GT is just getting off the ground, the condos in Hilton were slashed, the condos is Fort Norfolk slashed, Spectrum stalled, and everything else under construction or finishing now has been mostly spoken for. Unlike other markets, our market responded immediately to indications of a slow down. A lot of developers still vividly remember the office glut around here in the 80's and I think that helped their thought process a bit. We slammed the brakes on early enough to where we'll experience little to no negative effects now.

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Apples and oranges indeed. I believe at one point as many as 100,000 units were cancelled or delayed in construction in Miami. That market was so drastically-over-speculated that economists and real estate pros have predicted this back to the beginning of their condo boom. I think we were just playing catch-up, even if we slightly exceeded our grasp (a little extra inventory, a little extra numbers of condos, but certainly nothing approaching the scale of Miami/south Florida).

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I think the biggest issue will come in with the lack of jobs coming to the area to keep the condo market going. That honestly will be Hampton Roads biggest issue.

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I think the biggest issue will come in with the lack of jobs coming to the area to keep the condo market going. That honestly will be Hampton Roads biggest issue.

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I think the housing market began to cool late last year in the United States because of mortgage rates which have risen again, plus the housing market was a bit too overbuilt, not just in Miami and Norfolk, but also in Orlando, Tampa, Jacksonville, etc. Florida is the poster child for everything being overbuilt, and the market has cooled a lot in Florida. Gainesville, home to the University of Florida, has not experienced one bit of overbuilding, they are not expanding much, or as wildly as the other areas, developers should look at Gainesville as one prime example.

The majority of people buying condos are single professionals, young couples with small children or without children, and empty nesters. Developers look at the kind of statistics that help them predict how many condos to build over time, as a lot of young people now begin to have families and their parents begin to become empty nesters, that should change in a decade or so. A lot of new permits in a few years are going to be houses or mansions instead of condos.

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Someone say my name?

Florida has something to the effect of 100,000 condos coming online in Miami, which makes for some 10+ years of inventory.

Norfolk has a good amount of condos as well, but no where near as many as Florida.

Credit Suisse and a few others have reports saying that they expect 5% of all current mortgages to wind up in Foreclosure. That's 2.5 million more homes. There is currently record numbers of empty homes and homes for sale.

Many, many, many people bought homes that they can't afford. They told themselves everything would be okay, because the media echoed the same thing. As long as prices continued to increase at an unsustainable rate, then they would be okay, because the extra value in the property would save them. But now we are at a point where it requires a 6 figure household income to afford the median house in the Hampton Roads market (using housingtracker.net as the source), which isn't realistic.

Everyone expects the retirees to save them. This is true for every region. But the thing is, retirees have to sell their existing house for enough money to cover the condo. The investors who unknowingly bought all these fraudulent garbage investments are getting burned, and now they are pulling out, and the result is that credit is going to dissapear. Credit Suisse said they expect $100 billion more in losses, similar to the Bear Sterns CDO fallout. You know, where the $20 billion in mortgage debt turned out to be worth cents on the dollar?

Our gov't is already stepping up to start bailing out the rich people loosing all this money. Seriously. Numbers like $1.2 trillion dollars are coming up.

It's a huge mess. It's so bad for America it isn't funny. Consumerism gone wild, debt gone wild, and the end result is loss of faith and respect in the US Dollar.

www.ml-implode.com has some numbers... subprime mortgage companies that I believe issues HALF of all subprime loans over the past two years or so are now out of business, this way they can't be sued for all the garbage paper they pushed thru.

On the topic of Norfolk... go to UHauls site, and plug in a rental from Norfolk to Raleigh, and Raleigh to Norfolk. It's about 2.5 times more expensive to rent a truck to go from Norfolk to Raleigh as the other way. This is believed to be a metric as to determine which way people are headed. In or out of a city. By this metric, you could say that more people are leaving Norfolk than coming.

Come on guys, who are we kidding. Low cost of living was the primary positive point to Hampton roads. Now that is removed for the time being.

Housing was a mania. Flip this house and all those TV Shows. People at the water coolers, all the get rich quick stuff. It can only last so long. Our country, as a whole, for all people, has a negative savings rate over the past two years. As a whole, people spent more than they made.

Yes, the stock market is doing good, but there is alot of bad news behind it. It sort of defies logic.

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I think the housing market began to cool late last year in the United States because of mortgage rates which have risen again,

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I have a question: Do you think this bubble/too much inventory thing will cause prices to go down, or will prices just fall a little and wages catch up in a few years?

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Well what I find interesting about the apartment idea is that the rents probably won't go through the roof. What we really have is a case where developers can offer lower rents than people can pay on a mortgage because the condos were so overpriced in the first place. Many of the places on Boush are on craigslist for less and less every month...

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I have a question: Do you think this bubble/too much inventory thing will cause prices to go down, or will prices just fall a little and wages catch up in a few years?

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Those are interesting points. I do think we'll see some short term drop in assessments--too many for sale signs these days, and the market psychology is almost disastrous right now. But our area is only somewhat overpriced. There's a baby boomlet coming into the labor force very soon, and I would guess that it would create something of a market for apartments in the larger cities, but maybe not here.

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I have a question: Do you think this bubble/too much inventory thing will cause prices to go down, or will prices just fall a little and wages catch up in a few years?

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Those are interesting points. I do think we'll see some short term drop in assessments--too many for sale signs these days, and the market psychology is almost disastrous right now. But our area is only somewhat overpriced. There's a baby boomlet coming into the labor force very soon, and I would guess that it would create something of a market for apartments in the larger cities, but maybe not here.

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I believe that as my generation gets older, there will be a huge glut of property from the boomer generation dying off. There is a huge boom in population, and as we move past it I believe it will create that much more inventory.

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Since the news never reports anything... here is what I've read from the bubble world. Basically, many of the investors are no longer buying new debt. They are now aware that much of the debt they've invested in isn't good. When a broker gets a $60K household into a $400K loan, chances are it's not going to end up so hot. The brokers often use stated income (lie about income, it's okay, everyone does it) to get the numbers to work. Many of the loans have teaser rates, so the people can afford them for a while, then the loans will adjust. The thought has been, perhaps often encouraged by realtors and brokers, is that the house will continue to appreciate at 10-20% a year,and when the loan comes due to adjust, the person can just refinance. Since the value would (logically) be so much more, there would be plenty of equity. Except, it doesn't work this way. It's a huge ponzi scheme, that assumes new first time buyers will come along and pay a stupid amount for a house, which would help the move up cycle.

But now the investments are turning majorly sour. They based it all on computer models, that evidentially never had any thought of foreclosure, or the property values going down, being factored in. We saw this with the ~$20 billion dollar implosion of the Bear Sterns CDO funds a month ago or whatever.

Alot of the fools had the idea that AAA and prime loans would not be affected. This isn't true, and now quite a bit of the financing for prime and AAA loans is cutting back. What this means is alot of people can no longer get financing for their loans. Even people with good credit. So this will help kill the market. Subprime is bloody, I think 1/2 of all mortgage brokers that made loans in 05/04 are out of business now, or some sort of serious trouble.

You see the ads on websites. $500K loans for $1100/month* and stuff like that. I pointed it out in the Pilot that every advertiser of loans on their real estate page (all local companies) had some sort of shady stuff listed. Stated income, no documentation, etc. The main reason these are popular is because people are buying too much house, and any hiccup in employment will send em to foreclosure.

The national % of missed payments on subprime loans is insane. The statistics are staggering.

You all may think I am reptetitive... and sure I'm a bit jealous and upset that people like me who make good money would pretty much be robbed, left holding the bag, if we bought anything out there now... but what really gets me... is this stuff is all right there. I mean, amature people on a website tracked down real numbers, real figures, and all the evidence to all the fraud and abuse that led to this stuff. It's going to really hurt our economy, and a number of people will walk away with hundres of millions and billions of dollars, all from this bizzare ponzi scheme.

ODU economists or whatever they call themselves couldn't see this. The news media ignored it forever. They still won't tell the real truth. They only cite slanted sources, like the National Association of Realtor's David Lehrah... he was always positive. Then he quit, now he tells horror stories. I mean, it's a huge fleecing. Sure fools deserve to get hurt, but in the end it's really going to mess things up.

There was no justification for 100% increase in home prices in the Hampton Roads market in 3 years. None.

So I used to have a web hosting company, and a customer of mine has some sorta real estate site. I didn't really pay it much attention, until we were shuffling some servers around. It turns out that this guy specializes in REO. That is "Real Estate Owned." It's the industry term for bank owned properties. Well, his site always had like 5 or 10, maybe 13 listings at a time. I always shrugged and figured it was the bottom of the barrel type stuff, and in neighborhoods that were pretty much rehab type stuff. Well now when I look at it, it's PAGES of homes that are owned by the bank. And some of them are expensive. Most of them look overpriced. This isn't HIS fault, it's because at this point, the banks aren't willing to lower the prices. I've seen comments by others that some of this is so that various groups can keep big numbers on the books while they jump out. But I've NEVER seen any sort of inventory like this as far as REO, in my hosting of this guys site which goes back to 2002 or something:

http://www.williecolston.com/listings/index2.php3

Anywho, I can harp on it forever... but in the end, it's all going to unravel then EVERYONE will see that the house of cards is coming down.

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Anywho, I can harp on it forever... but in the end, it's all going to unravel then EVERYONE will see that the house of cards is coming down.

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2. What is the expected fallout (please be specific) from "the house of cards coming down" and everything "going to unravel for EVERYONE"?

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My sister has been in the mortgage business for 20+ years (works for the bank that buys the paper from the local broker). We had a long conversation Friday afternoon. She said this is just like the junk bond crash of the '80s -- securitized debt that should have never been sold, bought by greedy people that wanted above market returns

-- the laws of human nature haven't been revoked, just like worthless companies in the the '80s weren't suddenly credit worthy. Will some hedge funds get burned? Yep, oh greater fool. Will some folks lose their homes? Sorry to say it, but yes.

This will all shake out. Right now, NO ONE is buying loans. They will -- with some due caution. The guys with navel rings will go back to the used car lot when their mortgage brokerage folds. Wait 180 days, and if you are credit worthy, you won't see a lick of difference. If you are selling a house, and it is priced right, you might wait a week or two longer for an offer. Other than those effects, not much -- except several years of caution.

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It was all just a get rich quick ordeal. Like playstations 3's before christmas, in Florida people camped out to get hold of condos to flip.

I think we are up to 5 million empty houses nationwide, and financing is dissapearing rapidly. Go to some of the mortgage insider sites like brokeroutpost.com, and pick thru the message forums looking at the people talking about how so many people that used to qualify... there just aren't people willing to lend money. This turns into contracts falling thru. But mind you, many times when the contract falls thru -- the sale is still counted as a sale for the monthly figures. You have to go back and look at the revised figures from the past to figure out what the difference between "Sale" and "closed" is...

Condos are kind of silly, realtors have been running some line that young unmarried professionals should buy them... of course, they are priced higher than what the median HOUSEHOLD income would buy for a simple one room... lipsticked in the latest fashions, which costs little to nothing over yesterdays fashions... It's apartment living, only you are stuck. The young professional needs to be ready to move to other markets when the job opportunities come. Condos are supposed to be cheaper than houses, unless perhaps you are at the top of granby tower or some other REAL ammenitiy. Hardwood floors, granite countertops and stainless steel appliances aren't luxury, they are common... an absolute sign of the bubble times.

The idea of buying and selling in a 2 year timeframe, and coming out ahead, is going to get squashed. Normally the transaction fees of the realtor would eat any profits.. 5 to 7 years is what you would consider.... but people forget so easily.

It's Christmas day, and many of the investors who bought the playstation 3s aren't going to sell them for their dreaming price. Their huge gains for little to no work aren't going to materialize. Like a game of musical chairs, those stuck with investment properties are now probably stuck without a chair. They can go to forclosure, and when debt is forgiven they get a 1099 form from the IRS, taxes on the forgiven amount of the loan.

If you think about it, it's really stupid. Lumber is down what, 40% now? With an endless supply of cheap illegal labor, prices of homes should have gone down if anything. Like plasma TVs.

Supply and demand. Demand was driven by people who shouldn't have been given loans, but the industry turned their head the other way, so they could make a quick buck. Now they all go out of business, run with their huge profits... and the people that bought the homes are stuck. Then comes the gov't + big corporations with the taxpayer funded bailout for the idiots. Privatize the profits, publicize the risk.

Arrrgh

Sometime soon, the median household in Virginia Beach will be able to buy the median house, without taking on HUGE amounts of debt among skyrocketing health, food and energy costs and a fairly unstable employment market.

That is, $60K median household income for the city to $180K median house price (really it's more, about $200K, due to 10-20% down payment).

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"It was all just a get rich quick ordeal"

What is "it" and what is "all"?

I know you are happy that market conditions continue to unfold, and that prices are edging down slightly. However, if they have gone up 50% in four years and go down 5-10%, owners are still way, way ahead.

Interest rates for mortgages remain very competitive and while it is now harder to get a mortgage, that cycle will eventually run it's course and we will be back to where we should be.

Condo's remain highly attractive to empty nester's who have the means to afford the quality, the convenience and the location. Harbor Heights is filling up and before we know it Granby Tower will be coming out of the ground with hundred's of more units, adding to the growing synergy of business and residential and retail development in downtown Norfolk.

If it were so easy to build less expensive housing with the supposed lower price of lumber and cheaper illegal labor, why aren't those houses being built with the developers still able to get rich?

"Sometime soon", you dream? Soon never comes to negative thinkers.

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This sounds like good news.

Hampton Roads likely to avoid recession over mortgage mess

From the Virginia Pilot

"In Hampton Roads, the strength of commercial development has offset part of the downturn in home-building, Pearson said. Also, "we've had a nice rebound in tourism."

"Hampton Roads, however, ranked 96th among the nation's 100 largest metro areas in prevalence of foreclosures, with one foreclosure for every 787 households. That compared with one filing for every 42 households in Denver and one filing for every 54 households in the Atlanta area, Realty-Trac said."

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Sometime soon, the median household in Virginia Beach will be able to buy the median house, without taking on HUGE amounts of debt among skyrocketing health, food and energy costs and a fairly unstable employment market.

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