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'Game over' for FL flippers counting on rising rents to bail them out.


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2007 Jul 17, 3:54am   17,909 views  87 comments

by HARM   ➕follow (0)   💰tip   ignore  

flopper's dilemma

Thanks to Ben Jones at the Housingbubbleblog for posting this delicious, glorious link.

Life is sweet for North Port renters
A massive supply of vacant homes in the city pushes rents downward and prompts owners to offer incentives

"...with hundreds of houses, condos and apartments for rent in North Port, not every owner has been able to find a tenant. So rents are plummeting, and so are rental standards.

"We're talking to people we would not have considered two years ago," said Linda Haese, who is trying to rent two new 1,800-square-foot houses. "These are people who don't have deposit money, but are willing to put $25 aside every month. As long as they don't have a criminal record, we're willing to say OK."

"Why should tenants renew their leases when they can rent a house for about the same price?" Black asked. "I am told that apartment occupancy is down to 80 percent."

Black explained that 80 percent to 85 percent is the break-even point for apartment owners. He said owners do not start kicking off serious profits until occupancy passes 90 percent.

...Everyone contacted by the Herald-Tribune acknowledged that rents are plunging.

"Rents are coming way down because of supply," said Karen St. Pierre, a rental specialist with ERA Advantage Realty. "A 1,800-square-foot house without a pool that rented for $1,400 a year and a half ago is now renting from $900 to $1,000 a month."

That represents a 36 percent drop and has created a wave of resentment among investors, who have seen their taxes and insurance bills move rapidly in the opposite direction.

"Some owners are going crazy," said Noone of Sun Coast Real Estate. "They say they need the higher rent or they'll go bankrupt."

...Haese said she is not making money at that level, and she would like to sell, but the market is glutted with houses for sale.

"I think it will be five or six years before I can get out," she said.

But for people looking to rent houses in North Port, the situation could not be better.

They are being offered new houses with swimming pools at ridiculously low prices.

"It makes much more sense to rent than to buy right now," said Black the Port Charlotte appraiser. "A renter will pay 60 percent of what it costs to own."

Game, set, match.

Marin & the Bay Area "Fortress" aside, could this be a preview of coming attractions for long-suffering JBRs in Kalifornia? Or is the Flipper State completely immune to the laws of supply and demand, as the REIC Koolaid crowd continues to insist?

Quite a change from just a year ago, no?
Reflexivity's a real bitch. And she has a sister named "deleverage" who's even nastier.

Discuss, enjoy...
HARM

#housing

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81   sa   2007 Jul 19, 7:28am  

Another thing they talk about CEO pay based on performance.

How do you judge the performance of:

Oil companies executives when prices go from $20/barrel to $70/barrel.
Financial companies when they were slicing CDO tranche.
Home Builders during housing boom.

82   FormerAptBroker   2007 Jul 19, 7:47am  

HARM Says:

> Q: Which decade in the U.S. saw the highest wealthy
> individual and corporate tax rates?
> A: the 1950s (individual brackets for millionaires went
> as high as 91%).

> Q: Which decade saw the least unequal distribution of
> wealth and greatest gains for the middle class?
> A: the 1950s

> Coincidences? I think not. If “redistributive taxation” is the
> only way to get the job done, I say, let’s give ‘er a whirl
> before admitting defeat.

Every country in the last couple thousand years has had an unequal distribution of wealth with the exception of a country founded just over 200 years ago by a bunch of immigrants from Europe who welcomed more waves of immigrants from Europe and let them have free land as long as they moved west killing any native people that got in their way. Just like every other country in the last couple thousand years this new country was moving toward an unequal distribution of wealth after 100 years. The rapid progression toward the huge unequal distribution was slowed in the first part of the second 100 years by two big wars and a lot of government debt and social programs. In recent years the unequal distribution of wealth has increased and there is no way to stop it (since very few working class people vote and most never even bother to vote)…

83   HARM   2007 Jul 19, 8:14am  

FAB,

I'm not yet convinced that extremes in wealth disparity is *always* an historical inevitability. It's not happening to the same degree in Western Europe & Oz, which granted, do have much higher voter participation rates and much stronger public support for social programs. In the end, a very unequal distribution of wealth and power, is IMO, very unhealthy and a seriously destabilizing situation for any society.

If tinkering with the tax structure can help reverse that a little, I'm open to at least trying first.

85   OO   2007 Jul 19, 9:13am  

EBGuy,

things look much better (from our perspective of course) for raw land. They are simply not moving, except a couple of cheap lots ($500K-600K) in good school districts. Gilroy, Morgan Hill, Almaden are just sitting with no movements, not even one transaction. 5 lots that I have been monitoring in LG, Cupertino foothills went into escrow (priced below $500K - 1.1M, all are priced significantly cheaper than comparables)

I continue to argue that the banks have not shut down the tap. For someone with a decent credit score and high paying job (as of now), he can still borrow 90% or even more in BA. Job market is the key. When the job market goes, the foreign cash injection into BA will start to go too, because elites in Asia are essentially making money from middle class spending in America. Once American consumption shuts down, Asia will hurt badly as well.

86   Vicente   2007 Jul 19, 10:32am  

Man I hate to bring up the UNION word, but I mean really, are employees these days all frightened sheep? So terrified that they might lose their jobs they take any abuse management will heap on them?

Then go home and once in a while pull a level in a secret ballot, that a POLITICIAN *PROMISES* them will redistributed the wealth? Come on, we all know most of this money goes to the IRS flunkies, accountants, and tax lawyers anyhow, it doesn't help you one damn bit.

Quite simply, yeah you worked for Home Depot under Bob Nardelli and put up with that crap, you got what you deserved. Organize a wildcat strike, or a union, do something. Even if it's just speak up at a company meeting about compensation. Sure I'd ask why I'm not getting a raise this year if the CEO just got 300 mill in stock options. Where do you think the manager's salary comes from, from YOUR labor. If they start forgetting that maybe it's time to remind them.

Geez! I'm trying not to use the P word here.

87   Different Sean   2007 Jul 19, 2:23pm  

Vicente Says:
Man I hate to bring up the UNION word, but I mean really, are employees these days all frightened sheep? So terrified that they might lose their jobs they take any abuse management will heap on them?

Yes.

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