Sometimes, to understand what’s happening somewhere, you need to be there in person to really see things with your own two eyes. And that’s what I’ve been doing in Miami over the last few days.
Construction cranes are everywhere from Miami to Boca Raton. Call it Tower Mania… call it Condo Mania. Any way you look at it, the buildings going up right now will have the biggest trouble from buyers walking away. Speculators (who the realtors told us were not a big problem) are now rushing to unload their units.
Here’s what my investigation of this over-speculated vacation home market revealed:
Prices in 2006 were down about 10% from 2005. So far in 2007, prices are already down another 5% to 10%. The newest buildings are the ones with the most units for sale. It’s common to find a recently completed building with about 15% of its units (or more) for sale on the MLS.
Many new projects that have been announced are not getting off the ground because sales are simply not there. And all those waiters I met in Miami restaurants in 2004/2005 that were getting their real estate licenses… well let’s just say they’re looking for a new profession again.
Over-built, over-speculated, over-financed and over-done. This is the Florida market right now (I’ve heard that the Naples, Florida area is even weaker than the east side of Florida). For those looking to buy for personal use or investment, hold off! The best deals are yet to come from what I can see.
After all, in the fourth quarter of 2006, 4.95% of all U.S. homeowners with home loans missed a payment and 14% of borrowers with adjustable rate loans (ARMs) were behind on their payments, according to the Mortgage Brokers Association. The situation will not turn around magically as many realtors hope.
I continue with my prediction that the hard landing in the U.S. housing market, which is now affecting lenders, will have significant negative effects on the U.S. economy.
NEWSFLASH — Insiders of the largest U.S. mortgage lender, Countrywide Financial, sold $90.1 million of their shares so far in the first quarter of this year. I guess they saw the writing on the wall. My bet is that these insiders see harder times ahead, explaining why they are selling stock in the company they work for at an accelerated rate.