Greetings, everyone.
Today I was breezing through the comments to Ben Jones's latest blog "Grown Men Are Crying in Florida."
Down in the comments section was this vignette about two home buyers who got in over their heads down in the Florida Keys. I've taken the liberty of editing his exact comments into shorter, easier to read paragraphs.
Comment by florida keys guy
2008-03-25 12:12:38
Everytime I hear someone utter the phrases “new paradigm”, “new economic model” or just simply “it’s different this time”, the hairs stand up on the back of my neck - time to run screaming. The end to this disaster is not ‘just around the corner’ - it’s just begun.A couple of anecdotes to reinforce this.
In 2002, the wife and I bought a condo in the middle keys for $250,000 (to actually live in full time - imagine that). By 2004, a short 2 years later, the real estate market here was going crazy. Property taxes were going up, insurance was going up and property values were going through the roof.
Our condo complex, once a stable and quiet place, was changing to something we weren’t comfortable with. We put our place up for sale, and were astonished when some 30 something year old mortgage broker from Chicago (who cheerfully admitted he had no intention of living in, or even visiting the Keys) paid nearly 700K for the unit we had paid just 250K a couple of years earlier.
In 2007, we noticed our old place on the market for 950K, where it languished for the entire year. Early in 2008, it vanished from the MLS, only to appear as a bankforeclosure at 850K.
I guess the $1000 per month condo fees were bleeding the bank (the fees were only $475 when we sold), so they have now dropped the price back to 650K - were it now sits without any apparent offers.
It will be interesting to see at what price they finally unload it - I’d bet it (Rock: he means he bets it will be under) was under 400K at least.
We know of a marine mechanic who in 2004, against our advice, purchased a home in the Keys, at the peak, for 700K after selling his previous home for nearly a 400K profit. Instead of thanking his lucky stars for the windfall, banking it, and renting (like we are still doing) until the smoke clears, he went on a real estate buying spree (some RE agent convinced him that it was the ONLY way to wealth).If he makes more than $75,000 per year I’d be surprised, yet he purchased FIVE properties, no money down (we checked the property records), for nearly 3 million dollars. Sadly, he burned through his entire 400K windfall trying to service nearly $25,000 per month in debt, then compounded his troubles by getting a $350,000 HELOC from Countrywide in 2006 to attempt to ride out this ‘temporary’ market downturn.
All his original money plus the 350K HELOC money is now gone, and he is (unsurprisingly) just now entering foreclosure.
When I look at all the idiotic ‘Save The Homeowner’ bailout plans being put forward, I realize how well and truly we are screwed. This will take years to fully resolve. Sigh.
