-
Feb 27, 2008 11:54 pm US/Eastern
-
Digg |
Facebook |
E-mail
|
Print
The Perfect Storm: Real Estate In South Florida
MIAMI (CBS4) ―
In 2000, the average price of a home in South Florida was $105,000. Today it's twice that amount, with twice the property taxes.
You could call it The Perfect Storm–hurricanes, taxes, inflation and greed. Combined, they have launched South Florida into a new super-wealthy economy. Many of you are adjusting to survive. If you can't adjust, you are likely leaving and being replaced just as fast by someone who can afford the new price for paradise.
"South Florida has always been built on, well not a ponzie scheme, but some kind of dream that may be mythical," said Dan Ricker, of the Watchdog Report. "You think about Coral Gables. George Merrick starts it and then it goes bust. We're a community of one major event after another but we renew ourselves and we almost don't even remember the past."
In the year 2000, it was the climax of a dot-com bust. Money was looking for the next big thing: Real Estate was it.
"Anyone that bought a unit could sell it for more than they paid for it," said Sol Genet, of National Title Insurance.
"It became the biggest fad, flipping," said realtor Peter Megler.
"Real estate became very liquid especially in the condo market. People would buy pre-construction pricing and that's before the building was out of the ground, and then they would sell the contract while the building was being constructed and for huge gain sometimes 200% gains," said Glen Daniels of Foreclosure.com.
In 2004, the average price of a home in South Florida went up $1,000 every week.
"People had so much money in this community, in the South Florida community, because they were making so much money from nothing in buying and selling real estate. Wealth was appearing that they were able to drive the consumer market place throughout South Florida," said Genet.
"People found their dream and were given a product to get into their dream. What were we doing? We were living beyond our means but someone gave us the vehicle to do it in," said Dennis Hearing, a short sale realtor.
"Almost any borrower that wanted it could borrow money. That just brought the financial fraudsters out of the woodwork," said Genet.
"People attacked in teams with the mortgage fraud. It was just rampant, there was no control--we're just at the tip of the iceberg right now," said Megler.
"'Please state what your income is.' What do you think I am going to write? I'm going to write $50,000. If that's what I need per month in order to get this loan, that's what I'm going to write down. And that was the simplest form of mortgage fraud and the most common form that we saw," said Genet.
The Perfect Storm started with greed and mortgage fraud that artificially drove prices. As prices went up, the storm grew. Property taxes connected to home values skyrocketing to record highs.
Then Mother Nature got involved.
"2004, 2005, established many records. And while we had seen busy seasons before, 2004-2005 turned out to be the time where the tracks seemed to cluster near Florida," said Ed Rappaport, with the National Hurricane Center.
Mother Nature's record run wrecked our expensive homes, hiking insurance rates on average 33%.
In 2007, South Florida was battered by a different storm–inflation. Gasoline went up 31%, electricity up 13%, milk 12%.
"It's been at least probably 15 years since we've seen this high inflation," said David Kelly, a University of Miami economist.
In the end, inflation topped 5%.
"The problem is the suddenness which it happened over the last two years. It's been a big problem," said Kelly.
"If there is slow change you can adjust much more easily. You can buy more fuel efficient cars, if you know prices are going to increase slowly over time, and work this into your wage demands when you negotiate job offers and so on. When it's surprisingly high in a given year, that's when it hurts you," said Kelly.
In four years that created 'The Perfect Economic Storm.'
That has left us a mess of foreclosures.
They were selling anywhere from $600 thousand to well over a million dollars, and now there is an active foreclosure in this building for $219 thousand," said Daniels.
In September 2007, the Miami-Dade Mortgage Fraud Task Forces had 15 members. Today it has 100 plus.
"It's going to be so massive that I really feel that the feds are going to have to step in just they way they did in the 80's to tackle the rampant cocaine production and money laundering and stuff like that. It is a different animal but it's just as big," said Megler.
80,000 homes on the market have values dropping like a rock and banks afraid to write loans because of it.
"When credit dried up, that last person holding the hot potato, holding that apartment building, holding that commercial building holding--whatever real property it was--held property that wasn't worth what he or she paid for it. It wasn't worth even the amount of money that they borrowed against it," said Genet.
And property taxes are now out of control. Or is it spending that's out of control?
"You can tax the people, but if they can't make the payments then your wiping them out, you lose your base and you're slowly spiraling into oblivion or financial oblivion because you're slowly killing the goose that gives you the revenue," said Ricker.
South Florida is no stranger to economic storms. In the 1980's, the storm was fueled by drugs. This time around it is greed. And this time around we are dealing with our biggest challenge yet that South Florida is now the epicenter of an affordability crisis in the state of Florida.
(© MMVIII, CBS Broadcasting Inc. All Rights Reserved.)