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Richard Michael Abraham

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FLORIDA HOME PRICES TUMBLE FURTHER

Posted under: General Area in Florida, Market Conditions in Florida, Home Buying in Florida, Home Selling in Florida  |  October 1, 2010 6:20 AM  |  4,594 views  |  12 comments
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FLORIDA HOME PRICES TUMBLE FURTHER

Just 5 years ago, the demographic researchers claimed a lion's share of the 75 Million Baby Boomers would choose Florida for retirement. Not likely anymore for many reasons.

The northern Baby Boomers can't sell their underwater or high end price homes and so, they won't be coming to Florida. Even tourism is way off. And foreclosures in Florida continue.

The job market in Florida is desperate. The young won't come to Florida. Seems the only jobs available are call center and telemarketing jobs, or a plethora of 100% shadowy commission sales jobs offering little hope of real earnings. There are no jobs for professionals or executives who wind up settling for low paying or even menial jobs. Unemployment will remain high in Florida. 

Florida, once economically based on tourism and construction industries, probably have lost these industries as value generators. More so with the construction industry. 

The housing market tells the story as home values keep plummeting. If you read the Realtor's ads, you'll always see their favorite slogan, "Now is the time to buy." Trouble is, they've been saying that for three years now, and every year the home values keep going further down. (The tax credit sales lifted prices slightly, but that's over now)  Anyone who purchased what they thought was a bargain price home a year ago, has already lost money.

Many Realtors now promote the position that prices have bottomed out.

But based on my research on the ground, I am projecting another 20% drop in home values in Florida in the next 12-24 months.

Prospective: Florida home values went up 125% from 1999-2005. They're now down about 55% from their highs, and so, unquestionably, home values in Florida would need to fall at least another 20%.

Because of the recession in the General Economy nationwide, a state like Florida is going to take the brunt of it. Shrinking tourism, the end of the construction industry, no jobs cannot earmark Florida as a vital state.

Crime seems to be rampant. City budgets lost their tax base and services have been greatly diminished.

My sense is Florida will continue to fall way short of the expectations and high hopes promised five years ago. In fact, evidence and research indicates that Florida could, under a worst case scenario, experience a 10-year period of stagnation, especially if the general U.S. economy continues to be lackluster.

Anyone considering buying a home in Florida should do their own research and I would strongly recommend holding off at least 12-18 months before even seriously thinking about it. As I indicated above, I forecast a further 20% drop in Florida home values in the next 12-24 months.

That means if you buy a home now for $250,000, in 12-24 months, it might be worth $200,000, or a $50,000 loss. 

Warmest regards,



Richard Michael Abraham

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By Rosemarie Tibbles www.rosetibbles,  Fri Oct 1 2010, 19:40
Wow, I hope your wrong about 20%. I must say this does not apply to all of Florida. We purchased a condo in Naples last year, and the prices have been holding steady. I am licensed in Florida and have been monitoring different areas, with different results.
By Voices Member,  Fri Oct 1 2010, 20:18
Hi Rosemarie, in Naples, prices fell 54% from 2007 to mid 2009. During the past 9 months, with the tax incentives, as you indicated, prices have remained stable in Naples. But now, tax incentives are over and unemployment, foreclosures, deficits, $ Dollar devaluation, along with the end of the stimulus money, will cause havoc economically, nationwide. Florida real estate values will be hard hit. With the FEDs incessant $ Dollar devaluation, along with the above issues, Florida home prices will drop significantly. I believe by 20%. Time will tell. Thanks for your comment. Richie
By MARK WEBER,  Sat Oct 9 2010, 10:28
Hi Richard,
I agree with some of what your saying but each city and even ever community is different now. You can't lump all of Florida into one box. I'm also in Naples and the tax incentive did little or nothing for our buyers. We deal with mostly cash buyers. So, the tax incentive is unimportant to our location and did not help stimulate more sales. The government and their deficits and $ devaluation is a huge problem. We have tens of thousands of home buyers with cash to buy a home in Naples and Florida that are waiting to see what happens this Nov. during elections. If Obama and his freight train of spending can't be stopped then we're all doomed. As far as out area, I'm sure you know Local Monitor, Inc. took Naples off the danger list for real estate investments but Ocala has been added and Orlando remains on the list. They use employment and other figures to analyze home values in over 300 US markets.

We had a $7.7 million dollar cash sale yesterday in Naples along with 60 other sales so far this month, most of them cash as well. You can see all of these closed sales in my blog from yesterday on my website at http://www.whitesandsnaples.com

I think you may be right about some areas of Florida like Ocala and Cape Coral coming down another 20% but Naples is already seeing increases in several communities like Pelican Bay (over 3%) and Marbella Lakes (over 6%) this year from last.
By Voices Member,  Sat Oct 9 2010, 10:48
Hi Mark, thank you for your comment. Of course I'm happy to hear the good news you report. Each area of Florida, in my view, will be different as it relates to the decline of home values. In general, the housing double dip is already underway nationwide. Depending on the area of Florida, I see home prices dropping 10%-30% more. I used 20% as an average for my article. Naples appears to have fallen 54% from its highs. My concerns relate to broken government, foreclosures, no lending, rising unemployment, dollar devaluation. The wealthy who have retained their wealth (few), of course, may pay cash in beautiful Naples. But overall, there will be significant price declines in all of Florida. Of course, this is only my researched opinion. Richie
By MARK WEBER,  Sat Oct 9 2010, 11:11
Hi Richard,
Thanks for the response. Totally agreed on the broken government part. Rick Scott has a home and office in Naples by the way. My stance on foreclosures is different than most. I believe the free market would have already absorbed most of them if government had let the flood gates flow which should still be the case - government interference with the free market system wont' do anything but prolong the agony. An unnamed official in the upper echelons of banking recently told me that there were lots of behind the scenes deals cut when the banks were bailed out. The had specific numbers on how many short sales and foreclosures they were allowed to let out per month. The people complaining about a long short sale process have no idea that the real reason behind the slow responses is government involvement.

I wouldn't say the people retiring and buying second homes in Naples are only the extremely wealthy. We also have police officers, teachers and retiring doctors. Most of the current buyers were not swept up in the market frenzy of 2004 to 2007. They see the opportunities now (40 to 50% reductions) and even if they aren't retiring for a couple years they feel their money is better kept in real estate than in the volatility of the market (I know we hit 11,000 on the DOW, but what goes up will come down at least a little). I see your a builder / developer like my father was. He saw several market fluctuations during his time. An interesting thing he said to me was that when things do turn it will make your head spin as to how fast it happens. Most people will be too slow to figure it out before prices have rebounded and average annual returns on real estate come back into play. -- But you're right, only time will tell. - Mark
By Voices Member,  Sat Oct 9 2010, 13:05
Thanks again Mark for your valuable insights. I think your stance on foreclosures is correct, and the current view, and that a full cleansing would have been best, rather than prolonged and protracted foreclosure dominance. My sense is we did not experience a "correction" cycle in real estate that used to be the 10%-12% drops. My sense is our Country has shifted down to a low level of standard of living e.g. the 50% plus drops in Florida, the joblessness, the underemployed. As far as the stock market is concerned, it's completely rigged and manipulated, and is rising just in time for elections. And I agree with you, Secretary Geithner made deals with the banks and made them rich again. In my articles, I have often said he was their inside man, a traitor to average Americans and will wind up making millions (billions) when he signed on with Goldman Sachs. Richie
By John Taylor,  Sun Oct 10 2010, 14:05
What is your opinion on the Reunion Resort properties, near Orlando? Ginn is gone and the area is very attractive for us with all the amenities offered.
By Voices Member,  Sun Oct 10 2010, 14:23
Hi John, I'm sorry but I do not share my opinions on specific properties. Richie
By Laura Roskelly, Realtor ABR, ASR, CSR, GRI, E-PRO, ASP,  Sat Oct 16 2010, 12:33
Nice overview but real estate is so local, you really can't generalize by state. Values are down, but there are pockets that are seeing a glimmer of hope.
By Voices Member,  Sat Oct 16 2010, 13:04
Laura, thanks for your comment. I hope we get more pockets with a glimmer of hope, of course. Richie
By Tammy Hayes,  Sat Oct 16 2010, 13:04
Home prices dropped significantly in the second quarter of the year 2010. Many areas are still struggling to come back. Plenty of short sales and foreclosures continue to hit the market on a daily basis. Even with the interest rates being at a record low, homes are still not selling. The lending standards have become much tighter.

The home buyer tax credit is over. This was a tool for supporting the housing marketing and prices. People are still out of jobs. The market won't come back until we get people back to work. The housing market is the worst it has been since the Great Depression.

Economists believe the housing market will not begin to recover until home prices fall far enough to revive demand. As for now, predictions are that the prices have not hit bottom yet. Most experts think they are going to drop more.

Moody's Economy.com chief economist Mark Zandi told CNNMoney.com home prices will fall between 5 and 10 percent more in some areas of South Florida. Zandi expects home prices to plummet 30 percent in 2010.
Robert Shiller, professor of economics at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, told Reuters that while he does not give quantitative forecasts, the futures market indicates the downward trend in home prices is far from over.

Will we see the prices continue to drop in 2011 and possibly 2012? We will have to keep an eye on the market.

Tammy Hayes, Realtor, Sandals Realty, Punta Gorda, FL - tammyhayesre@gmail.com
By Voices Member,  Sat Oct 16 2010, 13:08
Good for you Tammy. I try to write based on the facts, no spin. I can see you are just as open and hones. Thanks for sharing. Richie

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