TooFarTampa
SoWal Insider
Curious, Bobby, at what price point are properties moving right now, in your experience. mid or late 2003, mid 2004 ...?
-
Trouble logging in? Send us a message with your username and/or email address for help.
-
Hello all! We will be performing a website & forum update soon. You may get logged out so now is the time to make sure your email address in your account is correct - go to your account to check it and update it now. Send us a message with your username and/or email address if you need help.
UF Survey on Real Estate
- Thread starter GoodWitch58
- Start date
That article doesn't address what I think to be the single biggest risk to housing prices ... lending standards and availability of money to be lent.
Everyone can see it happening in subprime ... there is barely a subprime market today, as everyone has raised their minimum FICO score and eliminated all the "exotic" type loans. Many people suspected that this would happen, but the speed at which it is occurring is UNREAL. Economic events usually happen at glacial speed, but this has been a steamroller.
Most analysts on TV say that it is contained to 'subprime'. I suspect that a more correct statement is that it is contained to "exotic" loans, which means we'll see the impact in pricey neighborhoods as well as entry level.
So, I guess I see the dominos falling like this:
(the first 4 have already fallen): RE market boom cycle ends; subprime loans default; secondary market that buys those loans dries up; lending stardards tighten on subprime; the more exotic alt-a and prime loans start to default (I/O, Neg ARMS, ect.); secondary market for exotic loan investment disappears; lenders significantly tighten all loan products while they lick their wounds; housing prices begin to fall such that the "median" homebuyer can afford the "median" home with the mortgage products that are available; the next time you go to apply for a loan you find yourself looking across the desk at a stern banker with a pile of pay stub rather than at a 22 year old kid with a wink and a smile in a strip mall.
Everyone can see it happening in subprime ... there is barely a subprime market today, as everyone has raised their minimum FICO score and eliminated all the "exotic" type loans. Many people suspected that this would happen, but the speed at which it is occurring is UNREAL. Economic events usually happen at glacial speed, but this has been a steamroller.
Most analysts on TV say that it is contained to 'subprime'. I suspect that a more correct statement is that it is contained to "exotic" loans, which means we'll see the impact in pricey neighborhoods as well as entry level.
So, I guess I see the dominos falling like this:
(the first 4 have already fallen): RE market boom cycle ends; subprime loans default; secondary market that buys those loans dries up; lending stardards tighten on subprime; the more exotic alt-a and prime loans start to default (I/O, Neg ARMS, ect.); secondary market for exotic loan investment disappears; lenders significantly tighten all loan products while they lick their wounds; housing prices begin to fall such that the "median" homebuyer can afford the "median" home with the mortgage products that are available; the next time you go to apply for a loan you find yourself looking across the desk at a stern banker with a pile of pay stub rather than at a 22 year old kid with a wink and a smile in a strip mall.
Last edited:
Bobby J
Beach Fanatic
I do not really feel this pertains to the SoWal market. Especially 30A Area. Majority of the buyers can close cash if they need to. I still am seeing some competitive loans out here.
SHELLY
SoWal Insider
Oh but it does. The care and upkeep of SoWal/Destin area is totally supported by service workers (many of them barely getting by on meager wages) who depend on subprime mortgages and refi's. Additionally, lots of the visitors and even some high-powered residents' well-being is teathered to the real estate/retail/tourist market whose care and feeding depends on the availability of easy money and cheap labor.
It may be true that folks with "means" are in a better position to sit on properties and absorb losses as the market "corrects"....but that can also mean they are in a better position to leave their money on the table, walk away, and add the property to the growing inventory too.
.
Last edited:
And how about all of the flippers that are sitting on properties and leveraged to the hilt, waiting for the market to turn? I'm going to go out on a limb and guess that none of them paid cash or put 20% down on a 30year fixed.
I actually think that in this market correction, both the filthy rich and the dirt poor will come out at par. It's the middle class and the upper middle class that are over leveraged (and need a constant supply of easy money) and it all could come down like a house of cards.
My antidotal story: The country club that I belong to, several families have "quit' since the first of the year (walking away from a substantial upfront fee), and the wives are suddenly going back to work. The entire time I've been there, I can't remember anybody ever leaving until now. People have been living beyond their means, and acting like the easy money would always be there ... its time to pay the piper.
I actually think that in this market correction, both the filthy rich and the dirt poor will come out at par. It's the middle class and the upper middle class that are over leveraged (and need a constant supply of easy money) and it all could come down like a house of cards.
My antidotal story: The country club that I belong to, several families have "quit' since the first of the year (walking away from a substantial upfront fee), and the wives are suddenly going back to work. The entire time I've been there, I can't remember anybody ever leaving until now. People have been living beyond their means, and acting like the easy money would always be there ... its time to pay the piper.
Last edited:
Bobby J
Beach Fanatic
Really hard to get a read on it. Often in the real estate section people post comments that seem across the board. It is almost as if they get their info from MSN.com. In some areas the market was way under value and it will go only go back to 2005. In some cases it was already too high so it may go back to 2003. It is impossible to get an exact read on an entire market. I know we are selling Real Estate. I know it will be better then 2006. I know it is not as bad as many of these boards portray. The season is just starting and their are allot of folks in town wanting buy Real estate in SoWAL. Price it right and they will come.
Bobby J
Beach Fanatic
This debate has been going on since 1980. It seems "we" workers always find a place to live.
SHELLY
SoWal Insider
In the 1980's and early 90's a bunch of kids from NJ or NY would crowd into a Mom & Pop motel in Destin or PCB and work at the bars and resturants, make a good bit of cash, pay minimal living expenses and head back up north when the season ended. Life was good.
In the early 80's there was not very much between where Destin ended and PCB began except for Seaside and some really great seaside towns. Living was cheap and locals were able to easily fill the jobs. Life was good.
Silver Sands opened in the early 90s and things took off from there. More and more service-worker-sucking businesses popped up as working-class neighborhoods were bought up and turned into "upscale" subdivisions and condos.
Lower income service workers were forced out of the South Walton County area to more affordable areas like FWB and PC which also experienced a retail/restaurant boom of their own--providing service-sector jobs so folks living in those towns didn't have to commute for hours on steamy, dangerous, traffic-clogged roads only to make a few shekels more per hour.
In the last 5 years the disappearance of affordable housing in SoWal has made it a no-man's land for low-paid service workers. With the increase in property prices, gas prices (again), insurance, property taxes, and stagnant wages, FWB and PC are also finding it difficult to fill all the jobs.
I've lived through 1980 here...it IS different this time. Unless someone can turn back the clock, the chances of businesses finding enough good, reliable and affordable people to fill all the current and growing number of service sector jobs that support life and tourism in SoWal will be impossible.
Last edited:
Mango
SoWal Insider
Shelly, I would be curious to know how many subprime mortgages were made in the Sowal market. I would be be willing to bet an extremely small percentage. I never personally did retail subprime loans myself (did not like working with that type of Borrower), but did buy them for Banks a looong time ago, and the majority of subprime loans were made to individuals purchasing in low income neighborhoods, or owned a house free and clear (inherited) and had credit issues, etc.
I do not see Sowal as being that type of market.
Perhaps in less expensive markets like Fort Walton Beach or north of Sowal, but not sowal.
Subprime loans should really be band-aid loans until they can qualify for prime mortgage.(Yes, I know, you'll say that brokers just wanted to do the loan, who cares if they pay or not)
The folks who do have these types of mortgages in the service industry who took them in the last 3 years (since 3/1 arms were mostly offered, 30 yrs were available, but why take it if you plan to clean up your act so you can refi) will be the ones to get hurt trying to refinance now.
Before that, there should be sufficient equity to refinance into a prime loan considering if they paid on time, and have no other major derogatory credit issues. I am still betting though, that they are a small minority of the working class. It's not like you saw this huge influx of service workers migrating to the area to work over the last 3 years.
I have some friends who work at HSBC, and I am going to see if I can get some information from them regarding where the largest defaults are occurring. I would be willing to bet in the Florida market it will be the Miami -dade area as opposed to the sowal/destin.
Last edited: