Firm News And Events
From “All Around Wellington Magazine” November 2007:
“Today’s Real Estate Market… You Can’t Handle the Truth!”
I read the Realtor’s Rap with interest in the September issue. All that searching for an epiphany got me to thinking. You see, I have been practicing real estate law in South Florida for 22 years, and I can tell you that I have NEVER seen a market like this.
Right now, there is nothing happening out there that makes sense. I’m not here to scare you, I’m here to tell you the truth, although as Tom Cruise managed to elicit from Jack Nicholson over the strenuous objections of Kevin Bacon in “A Few Good Men”, you can’t handle the truth!!!!
I had the good fortune to attend a presentation given by Frank McKinney the other night at the Florida Real Estate Investment Club. For those of you who don’t know Frank, he is our own local “rock star” developer. He is presently developing a $135 million oceanfront mansion and is known for his long flowing blond locks and outrageous dress. Frank believes we are presently living through the “Great Real Estate Depression of 2007”, and the facts clearly bear him out.
There is a cute new website out there with the name ml-implode.com. The Mortgage Lender Implode-o-Meter, currently tracks mortgage lenders that have gone out of business since late 2006 or are about to go out of business. Their count of nationally rated defunct lenders is up to 161. That’s 161 residential mortgage lenders no longer in business since the end of 2006. The significance of that cannot be over-emphasized since 95% of them were sub-prime lenders. Removing the stated income and stated asset mortgages from the equation will result in only those with documentable income and assets and a credit score of 660 or better will be able to purchase a home.
Last week the National Association of Realtors(R) issued their August numbers. According to the NAR, home sales declined from 5.75 million units in July to 5.5 million units in August, a decline of 4.3% nationally. According to the same period last year, August actually declined from 6.31 million units to 5.5 million units or a total year over year decline of 12.8%. However, if you just look at Florida, that number is 26% and the price of a home dropped 6% here in Florida in one month. At the moment we are looking at inventory levels of 3 years or more. That means, it would take up to three years to use up the existing inventory and turn this back into a seller’s market from the present buyer’s market.
Not to be a downer, but Lennar, one of the largest homebuilders in the country announced their quarterly earnings on September 25, 2007. Fasten your seatbelts because this gets bumpy – revenues down 44%, new home orders down 48%, home deliveries down 41%, cancellation rate (people not closing on contracted homes) up 32% AND now for the biggie— Lennar Corporation LOST $513.9 million in the third quarter of 2007. Wait. Stop. Did you catch that??? Lennar Corporation, lost over one-half of one billion dollars during its third quarter of business operations!
Well, if that isn’t an Epiphany, I don’t know what is!!!
But that’s not all. Foreclosure rates are up 300% in California, and here in Florida, one in every 96 homeowners is in foreclosure. Once all of those properties hit the market along with our present inventory, we will truly reach the bottom of this market. Predictions are late 2008 to early 2009.
Getting back to Frank McKinney. He indicated at the Florida Real Estate Investors Association the other night, as far as he is concerned, it’s a great time to buy. Prices are down. Real sellers, as opposed to unhappy investors, will adjust their prices to fit market conditions. Lenders will work a short sale rather than own another property, all of which provides opportunity for those willing to take some risk and those who simply have to buy a home now. So, you can listen to the evening news, read the newspaper or buy into the conventional wisdom, or you can take a lesson from the dot com bust of 2001. When everything looks darkest, that’s the time to buy!
Attorney Alec Domb is also a licensed real estate broker and mortgage broker. A graduate of the University of Miami and Nova Southeastern School of Law, Alec has been married to childhood sweetheart Melody for 22 years. They currently reside in Versailles. If you wish to air your views with about the real estate market, please send an email through our contact form.