A Simple Look at Key West MLS Data: "I Hear Housing in Cuba is Cheaper?"

"I Hear Housing is Cheaper in Cuba?"

Hello friends,

Just a very quick update on Key West by the numbers as scooped from today's MLS Listings . . .

But before plunging into the quick data look, I want to explain the reason I and other bloggers are focusing on housing is primarily one of self-interest. We don't wish to engage in Schadenfreude . . . except in the instances where arrogant developers are about to have their come-uppance.

If I could wave a wand and take away the pain from all co-workers, friends and acquaintances who bought Real Estate at a time I was trying to tell them . . . politely . . . that they would be sorry soon enough for their rushed purchases . . . I would certainly do it.

My reasons for following Real Estate so closely is this is a once in a lifetime wipe out of wealth. This is bigger than the Stock Market meltdown in 2000. Housing has been trumpeted . . . incorrectly . . . to be the one safe "investment" bet, the American Dream.

The Housing Crash is leading to a Crash in Credit Markets. The Crash in Credit Markets is leading to a Crash in Hedge Funds. Hedge Fund Crashes will lead into Crashes on Wall Street. Wall Streets woes will lead to pain on Main Street.

This is big.

This is history in the making.

We should pay close attention to what is happening right now so that we never repeat these mistakes again in our lifetimes.

The lessons you younger readers are about to learn here should be indelibly stamped upon your frontal lobes. This hard earned knowledge should be called upon anytime you have someone offering you outsized gains with promises of a lifetime of EZ riches all built on Crack Cocaine Accounting.

Smarten yourself up. Learn from this wipeout of wealth. Teach your children what you learn.

Better yet, struggle to keep your wits and good credit standings intact. Live below your means. Cut back on expenditures and save money.

Think like an businessman or businesswoman. All this pain will lead to once in a lifetime investments for those of us who are saving to buy assets for pennies on the dollar.

This is why I follow the Housing Crash so closely.

Everything happening today will affect our economy, our Country, our planet and our local lives. To live through this, we must sharpen our thinking and learn from our mistakes.

That said, here is the data which tells you how it is down in Key West as far as Housing goes.

I am not going to make any other comments. The data will speak for itself. Have a great evening. Get out there and enjoy your life.

History of the Past 14 days in Key West Real Estate Dealings as Shown by the Key West MLS

(July 12, 2007 through July 26, 2007)

Sales of Home or Condos: 0

New Listings Added to Inventory: 44

Price Reductions: 39

Price Increases: 0

Removed from Inventory: Don't know, but I will follow this from now on

Number of Houses for Sale in "Old Town": 268

Number of Condos for Sale in "Old Town": 244

Number of Houses for Sale in "New Town": 142

Number of Condos for Sale in "New Town": 175

Number of multi-Family Homes For Sale: 30

Number of Key West Duplexes For Sale: 36

Total of Key West Housing For Sale: 895

Parcels of Vacant Land for Sale: 146

Key West Commercial Property For Sale: 112

Key West Business Opportunities For Sale: 25

Guesthouses/Hotels for Sale: 19

Restaurants/Bars for Sale 19*

* In an earlier blog this week, I mentioned Croissant de France as a Restaurant not showing in the MLS. It is there now in the Restaurant/Bars sections of the MLS. It has an asking price of $5,950,000.

Disclosure: These numbers are subject to change if the caretakers of the MLS have done sloppy work. I have found several entries under incorrect headings. For instance, in the case of Bars/Restaurants For Sale, I count only 13, not 19 as stated. The other six listings are guesthouse or empty building properties with no restaurants or bars or licensing for such attached to them.

Lastly, this inventory is not all there is for sale. Again keep in mind what I pointed out in earlier post this week "Key West Bargain" about "hidden" inventory. (I list 6 reasons why MLS invenotry is not all there is for sale down here. Look under the subheading "There Has Never Been a Better Time to Buy a Key West Home!")

Scottsdale, Arizona Housing Inventory Up Like a Giant Sized Er . . .

I know some of you are thinking,

"Can I click on that picture to make that thing bigger?"

Scottsdale, Arizona Housing Inventory Up Like a Cialis Overdoser . . . or Somethin' Somethin'

Just browsing some online content when I came across a short piece in USA Today about Scottsdale, Arizona's inventory of unsold homes for sale.

This is the part which blew my mind:

Some sellers on Scottsdale's tony north side who have homes priced over $1 million are having to shave several hundred thousand dollars off their asking prices, but most are still selling in less than 40 days, says Karina Magana, an agent at Help-U-Sell Desert Vista Properties.

That's impressive, considering there's a record 45,175 single-family homes for sale in this bedroom community of Phoenix. When sales peaked in Scottsdale in March 2005, there were only about 2,900 homes on the market. "We've gone from an all-time low to an all-time high in supply," Deuitch says.

Still, the sales volume at the top end of the market isn't enough to make up for the skidding sales for homes priced below $700,000. Compared with May of last year, single-family-home sales in Scottsdale overall are down nearly 23%.

And I thought Key West's 500% or more inventory growth in the past two years was large? And I thought our Real Estate Cartel was impressive in its Sunny Day Real Estate outlook all the time?

Five things I took away from this short blip on housing news in Scottsdale:

1. Scottsdale's housing inventory has risen 1600% in two years time. Despite this, expensive homes have held steady in the minds of their rose colored sunglass wearing Realtors.
2. Home sellers in Scottsdale's most expensive homes are having to cut prices on their asking prices by a hundred thousand dollars here, a hundred thousand dollars there, just like in Key West. As the article states, most of these expensive homes are taking only 40 days to sell. Why, this is even called "impressive" by an agent at Help-U-Sell Vista Properties. (And you think my Sunny Day Real Estate allusions sound funny?) If this is what Scottsdale Realtors call holding steady . . . i.e. shaving hundreds of thousands of dollars off your home price to make it sell in 40 days . . . then all of them can find work in Key West as spinmeisters for our local NAR.
3. Scottsdale homes in the sub-$700,000 range are the ones selling the slowest. Maybe, just maybe, it will one day enter the minds of potential buyers this is why the "median" home price is flat or rising. What I mean is the wealthy are the last hanging fruit on the Real Estate tree. If more $1,000,000 homes are selling for $750,000, while fewer $750,000 homes are now selling for $600,000, then of course, the median will stay in favor of the NAR spinmeisters who want everyone to believe "There's never been a better time to buy Real Estate."
4. Meanwhile, and this is worth repeating, overall inventory has grown 16 times in two short years. As the president of the Scottsdale Area Association of Realtors said, ""We've gone from an all-time low to an all-time high in supply." But this is no need for alarm, right?
5. Actual home sales for all Scottsdale homes are off 22.7% year over year.

Question to those of you who think for yourselves: What is wrong with this picture of slowing sales, growing giant sized inventory, and the shaving of prickly $100,000 pricing here and there for upper end housing which is keeping the mythical median prices at flat or slowly rising levels?

Answer: It's like having having a giant cactus for an erect penis. You can't spin the outcome into anything good.

Key West Bargain?

(click on photo to see a future Key West Realtor ad)

Hello friends. Rock coming atcha from out of the blue in the Watchworld.

For all of those wondering when is the time to buy Key West Real Estate, let me assure you, it is not now.

When is an "Original" price in the MLS not the first asking price by the seller?

Realtors and sellers alike are now playing this game with listings whereby the homes which are not selling at just reduced prices are suddenly taken off the market. There are several benefits for listing, de-listing, and re-listing the exact same property so as to keep the unknowing and shrinking flock of Snowbirds from figuring out this game of 3 Card Monte.

Case in point:

The complex where I rent was For Sale in 2005 for only $5.5 million.

When I moved in to my place in September 2006, the new asking price for the whole compound of three cottage style homes, with a smaller cottage in back and community shared swimming pool was $4 million.

In the MLS listings, you did not see Original Price: $5.5 million, Reduced Price: $4 million because my landlord took the complex off the market before re-listing at $4 million.

Recently, my landlord took my $4 million listed housing complex off the market in April or May of 2007. He then changed Realtors.

He told me before he listed the new price he would be asking $1.95 million for the complex. A few days later, it was officially listed at $1.885 million in June 2007.

So in a few months time, the asking price was shaved by more than a cool $2 million, yet this price reduction never showed in the MLS listing. On top of that, there was a previous drop of $1.5 million asking price and that reduced price never showed in the listings.

So what was the last thing showing in the MLS for this property?

You got it, $1.885 million with a start date for Days on the Market in June 2007. Nowhere is there any mention in the MLS how many real reductions have taken place. Nor was there a true accounting for Days of the Market which by this time would have shown over two years on the market.

Now what?

Last week, after only one month on the market at this new price, our complex was taken off the market again. The brand new Realtor sign has been removed.

To make the "math work", you would have to drop the price on this complex by over another $1 million so that your rentals could help you cover your mortgage for the whole shooting match. Of course, if you are a dumb rich kid who isn't in the market to make money or buy sanely, come on down, buy the whole shooting match, and open up an Animal House campus of your own. Just give me my two months notice so I can move to a cheaper place which is bigger. (A future blog will show photographic proof of the new realities of renting in Key West. There truly hasn't been a better time to rent in this town in my 17 years of living here.)

"There has never been a better time to buy a home in Key West!"

Is the local chapter of the NAR kidding?

We have a loooooooooooooooooooooooooong way to fall in pricing.

It's not prospective buyers sitting on sidelines who are on Ecstasy.

Happy Day Real Estate aside, demand for Key West condos and homes only hit the skids in mid-2005 after years of above normal appreciation, and 5 to 6 years of super-leveraged appreciation. There is a whole lotta excess to be squeezed out of this market yet. (A tip of the cap to Led Zep for my lame attempt to combine imagery from "The Lemon Song" and "Whole Lotta Love".)

Today is July 24, 2007. Not a single house or condo has sold on this island proper since July 12th. If you batted 0 for 12 in baseball, you'd be benched.

Seven homes or condos have sold since July 1st. That's it. And as Dave Barry would say, "I'm not making this stuff up."

Think about it: twenty-four days of July have elapsed. And only seven condos or homes have sold all month. Woo hoo! This is a sign the market is bottoming?

Maybe the Real Estate Cartel isn't on Ecstasy. Perhaps they are sharing a hookah filled with crack. I don't know. Although recently, the Key West Crime Report carried a story about a 59 year old Real Estate Agency owner who was arrested for DUI. Her husband, a local lawyer, tried to intervene on her behalf . . . but the cops didn't listen . . . and off to jail she went. So alcohol abuse is still on the table as to what is making these crazy people tick.

The Key West MLS is showing a slowing down of inventory growth. On the other hand, sales are declining more quickly than inventory growth. Hence, sellers who cannot sell at the price they want . . . or make that . . . the price they need . . . are taking their homes off the market to play to the Realtor's hopes of jump starting sales again by making housing more scarce.

The problem with all this stinking thinking by Realtors is this: home ownership is not a commodity need. It's simply a want. If I want to live with a roof over my head, I don't need to buy an overpriced home or condo. I can rent.

Still, with sales only averaging 26 to 30 homes or condos a month in Key West for the first 7 months of 2007, we are looking at enough remaining inventory in which it would take an easy 36 months at the least to sell it all. My guess is we have enough inventory to take 5 years to sell off.

Yes, I see 410 houses in Key West listed on the MLS today. I also find 419 condos on the market via the MLS. But what the average web surfer/potential buyer is not taking into account is the "real" inventory floated for sale in Key West.

Here's the rub on real Key West inventory:

1. Massive amounts of new condo/hotel conversions are on the market and not showing on the MLS rolls. We are talking hundreds of extra dwellings which have price ranges of $1.0 million up to $3.0 million. If you want an idea of what is missing from the MLS, go no further than the top of the island where the old Holiday Inn once resided. Look at all those brand new empty condos and the high rise parking garage which was built to accomadate hundreds of cars. None of these units are on the market's MLS rolls because this is new construction being sold by local developers at their development-o-rama offices at Fleming and Simonton.

More simply, all one must do is view the big mounted posters on easels in the development-o-rama windows to see for yourself that there are four or five developments with hundreds of new built condos with no mention of them in the MLS rolls.

2. We have hundreds of do-it-yourselfers with "For Sale By Owner" signs in front of their place. As most of you know, FSBO's do not show up on the MLS. (A few months ago, I traveled up to Venetian Drive where out of 14 houses in a 2 block stretch, 3 were for sale with a Realtor sign out front, and 3 had "FSBO" signs out front. That's almost 50% of houses in that 2 block run are up for sale. A Realtor friend of mine in Atlanta tells me that when 10% or more of houses in any block are up for sale, you have a distressed market.)

3. And let's not forget all the businesses, condos, and homes for sale by Realtors who are discretely not showing their hands on the MLS. As an example, take Croissant de France, one of Key West's oldest and most established restaurants/bakeries. It's in the Key West Sunday paper with a $5 million plus price tag. (Wishful thinking, but ain't gonna happen with anyone who studies this sour Tourism Recession.) That's a big notable restaurant which isn't showing in MLS rolls.

4. Certain out of town "Seller" realtors are repping big homes and businesses down here which don't show on our local MLS rolls or in the Key West Citizen. I've seen one famous bar advertised in the Wall Street Journal classifieds. I've had people tell me they've seen Key West condos for sale in their local newspaper classifieds. Keep in mind that many gated and planned communities do not allow homeowners to plant "For Sale" signs in their front yards (think Truman Annex). The same can be said for all high rise condos. Many times, the seller is an out-of-towner who is attempting to sell their badly timed purchase of Key West Real Estate in a Northern newspaper to people who don't know what is going on down here.

5. Certain homeowners are not planting FSBO signs in their yards and are instead opting to market them via the internet only. Many are using Craigslist. The amount of Florida Keys Realty on Craigslist for rent and sale is growing leaps and bounds as the new Craigslist heading for the Florida Keys is less than one year old. (If I were a code enforcement agent trying to curb illegal rentals in the Keys, I'd certainly find enough miscreants in a month on Craigslist to keep me busy.)

6. Furthermore, foreclosures, auction represented homes, and bank owned homes in Key West are not showing up on MLS rolls.

At this moment, Realty Trac is showing 59 homes in pre-foreclosure. This means 59 owners of Realty are at least two months behind on their mortgage payments.

Six homes are about to be auctioned off by lenders in Key West on the Court House steps.

And 65 homes or condos are now back in the hands of the banks who lent the shaky borrowers money to buy a place they could not afford.

So, that's 130 "distressed" properties not being shown on MSL rolls in this town.

(Memory pause: Last year this time, I was a subscriber to Realty Trac. I could actually puruse the listings minute details, but soon thought it was a waste as I realized this Crash has many more years to attain its old historical median. Still, at that time, only 12 or 13 homes were in pre-foreclosure . . . most of them at the Key West Golf Club. None were being auctioned off. And maybe 5 or 6 were in the hands of banks.)

The take away from this small bit of trivia and snippets is this: Key West Real Estate's Crash is only in inning 2, maybe 3, of a 9 inning game which may go into extra innings.

Just keep in mind that Japanese Real Estate peaked in 1990 and went down and sideways for the next 15 years. Today, Japanese Real Estate is only back to 1981 prices. This means if you bought Japanese Real Estate back in 1990 (at their Housing Bubble top) you'd still not be back to your purchase price seventeen years later. And one more thing, even if prices do get back to 1990 prices, you still haven't figured in what normal inflation would have done to those 1990 dollars spent on your initial purchase. (I wonder how one says "Oh my aching scrotum" in Japanese?)

You say a Real Estate Crash can't happen in Florida because everyone wants to retire here? Better Google the great 1928 Florida Real Estate Crash which preceded our nation's Great Depression. There are mansions on the mainland of Florida which still haven't gotten back to their 1928 inflation adjusted values.

Sic Semper Greedheadus

And as I have predicted in the past, the butt-sucking moneyed class of gluttons who want all of Key West to themselves is about to be spanked hard . . . just like the Roaring 20's Cigar Smokers who bought Florida Real Estate in 1928.

(In due time, I will be speaking out on an interesting development in expensive Key West Real Estate which I have been observing for the past month. Something major is afoot in that big money bets are going awry. I can't believe the Key West Citizen hasn't run a front page photo with story showing how the mighty are beginning to fall. I will place photos on this blog soon to back up my observations and opinions about how Prime money is beginning to implode . . .)

Realtors down here keep pounding the table to buy Real Estate now. The same ad running in every Sunday paper keeps inaccurately stating that Key West Real Esatate goes up in price year after year. My answer is, "Why say one thing in print ads, when data is showing prices are rapidly falling while sales have hit Deadman's Curve at 120 MPH?"

All those unlisted and unsold condos taking up valuable Real Estate . . . who is going to buy them as "investments" when the numbers simply don't work?

Since the Housing Boom has gone Bust, people with a few candle powers of brain cells have quit listening to their emotions, greed glands and especially those cheerleaders from the Real Estate Cartel who look at potential buyers as just a commission check. With the bust finally taking up headlines in hometown papers all across America, potential buyers have gone back to doing elementary school math on the back of envelopes before rushing into a lifetime purchase which makes no sense whatsoever.

Rule No. 1 in purchasing a business or home: If you can't do the math, find somebody who can 'splain it to you.

Here's an example of stupidity in advertising: a "beach biz" is on the market for $69,000. This would get you 1 of only 25 vendor licenses for all of Key West. This vendor biz is located on Smather's beach.

This particular business sells blow up life preservers, cheap flip flops, sunscreen, etc. The nice woman owning this business is out there at Smathers Beach every single sunny morning of the year. Let's say, 300 days out of the year.

Now her Realtor says in the ad:

Profitable business on Smathers Beach. The Beach Store grosses over $40k/year with a net of over $30k. This turn-key business includes a City of Key West Mobile Vendor License permitting rentals, sale of retail goods and food sales. The City of Key West only issues 25 of these Mobile Vendor Licenses; they rarely become available. Comes with two parking spaces and over $10k of inventory including a custom painted & outfitted truck, rafts & chairs, and a generator & air compressor. Work by the beach with no boss, no fax machine and no corporate middle manager telling you what to do every day!

I'm going to be very generous here and estimate her inventory, truck, generator and other salable assets don't even hit the $8,000 mark. I don't care what the ad says, I can eyeball what's she's got and a lot of it is inventory which is not moving. It's dead inventory. In fact, in all my years of passing this Step-van truck on my daily jaunts at Smathers, I've never seen this woman in the process of selling one single thing to anyone. But I digress. The ad says she nets over $30,000. I'm willing to bet dollars to doughnuts that she's lucky to net even $30,000 this year with the way vacancy signs in front of hotels, motels and guesthouses have become the norm.

Okay, for illustration purposes, I will be generous and say she nets $30,000. Divide that by 300. She nets about $100.00 per day.

Now who in their right mind will pay this woman $69,000 for a business on a stretch of skanky beach with muck on the shoreline, polluted water, and which depends on a declining tourist base of disappearing lower and middle class tourists while only netting $100 a day? Tourism numbers, year over year, have been declining since 2003. (I wish the Chamber of Commerce would could break down bed tax numbers on hotels and motels to show what is happening to weekenders from the mainland.)

There are fewer hotel rooms on the island due to condo/hotel conversions . . . and way fewer cheap rooms for people who would venture to Smathers where one would also have to ignore the usual "WARNING" signs about fecal colliform bacteria being at above normal levels. (I don't know about you, but I am mystified by literate or aliterate . . . I did not say illiterate . . . people who ignore such in your face red warning signs and who wish to bathe in sewage.)

You net $2,500 a month, and you still have that loan to pay off on your business while paying rent or a money sucking mortgage on an overpriced place to live in the Keys? Hell, my ex-roomate pays more on insurance and real estate taxes on his Key Haven home per month than this Beach Biz nets. And there are plenty of $500,000 condos for sale right across from Smathers (and those are the cheap ones) which have monthly maintenance and tax fees which are $1500 and up. So how would a retiree live off just $2500 net every month? You think they can "build" the business as tourist numbers decline?

And with hotel to condo conversions, you are gambling against the trends of marketing to upscale tourism which our boneheads in power are trying to force on the Keys. Hoity toity tourists don't spend their day at Smathers. They charter boats, the spend time at their pool, and they don't mingle with lesser mortals who would spread a towel at Smathers, Higgs or South Beaches.

Even more, lower and middle income people are opting for cleaner beaches and cleaner waters elsewhere where more affordable motels and hotels beckon, and the proof in the pudding is how many businesses everywhere in this town are For Sale today. Look at the numbers for Monroe County's population exodus. People are not moving to the Keys . . . we see our population decline year after year since 2005. Yet this poor woman has this idea sold to her that her business should fetch $69,000?

Her realtor had to be the one selling her on this totally misconceived price.

And her ad has been running in the Key West Cititzen's paper since last Autumn?

The only way to sell her business is to start dropping her asking price.

I'll put it like this: only a retiree who is bored staying at home will buy such a business. And how many retirees can afford $69,000 for an overpriced business in a declining tourist market today? Well, that pool of potential Baby Boomer buyers is declining weekly now as their Housing Miracle wealth up North continues evaporating into thin air.

I have to wonder about this woman's Realtor: how long does one keep running the same ad, same price, and keep seeing the same results of No Sale before they decide to drop the asking price? Nine months of ads and that business is still on the market. Nine months of watching the Real Estate market further deteriorate and you can't see it's time to drop your price? Doesn't make sense to me. And the same can be said about many Key West properties which have been on the market for over a year now which show no reductions in price. The homeowner and Realtor are crazy not to experiment with lowering the asking price . . . especially when the MLS listings are loaded with "Reduced" prices falling like prices in a Wal Mart flip chart commercial.

The most overused expression by Key West Realtors

"Everybody wants to move to Key West."

Yeah, but if they can't sell their homes back in BF, Kansas, how can they "afford" to go way out on a limb to buy a full time residence or "investment property" in Key West which is still today extremely overpriced when you figure in mortgage payments, maintenance fees, insurance and taxes?

And let's not mince words here: Key West is being eviscerated of its charm as developers push the glut to shorelines, making us look more and more like Anywhere, USA. We can't swim in our polluted waters. The government keeps expanding sanctuary boundaries to help cut back on overfished species. Tourism is down, way down, from just five years ago. And one great business after another goes down for the count. (Valladares Bookstore, the Deli, Dennis Pharmacy Lunch Counter, etc., R.I.P.)

My retort to the Key West Real Estate Cartel is "So where are all these people who absolutely must own Key West residences? Why hasn't one single buyer bought in the past two . . . almost . . . three weeks?"

The rotten sub-prime fruit has been smushed into the ground by pushers of mortgage fraud rioting at the base of the Consumer tree. The easy Alt-A fruit has been picked and churned in Lender's blenders. The Prime fruit requiring the ladder is beginning to rot on the tree. There isn't any more easy fruit to shake from the Borrower Tree. It's gone. The tree is bare, and this season, and next season, and many seasons to come, the harvest shall be skimpy.

As condo and home prices do not bottom in Key West . . . and as more panic ensues . . . I predict what I see in the stock market every day after a "Dead Cat Bounce": mass dumping of overbought assets.

Changing and mixing metaphors and analogies, the picture isn't any better.

Sub-prime stuff was simply the fuse which ignited the Housing Bomb.

The explosives packed into the bomb are the Alt A and Prime owned properties. It's the stuff the nouveau riche had been buying hand over wine glass back in 1990 through 2005. The big hunk of C4 packed into this bomb . . . i.e., housing which was in demand three years ago when high rolling developers decided to mow down hotels and put up expensive $1.2 million 800 sq. ft. tubes to resell to the unshorn sheeple with new money . . . is now exploding outward in slow motion . . . like that famous scene from the movie "Zabrinksi Point".

My latest prediction which I will flesh out in another blog soon . . .

Prediction: very soon, before this year is up, the game will end or turn against a greedhead or two who has destroyed the charm and charisma of Key West. And I'm refering to local greedheads, and not the outsiders such as Cay Clubs which my buddy Cayo Dave talked about in his blog post of May 14, 2007 . . . "Has Cay Clubs Bit Off More Than It Can Chew?" (Click on red highlight, and when Dave's blog opens, scroll down to the May 14 post which I can't directly link to today.)

Mark my words. A hard rain's gonna fall on local developers. And as Jimmy Cliff sang in one of the best reggae songs of all time, "The Harder They Come, the Harder They Fall, One and All."

Buy Key West Real Estate here and now? Don't delude yourself. Don't save a greedhead's ass. Save your own.

Save money, go fishing, get together with the few old friends who haven't left town for upstate New York, the mountains of Carolina, or the desert in Santa Fe, and party like a rock star when prices return to a mean which is 50% or more below this summer stupor of falling sales prices and stalled sales.

When some of the big developments blow down, it's going to take out all Real Estate in this whole town. We will see massive government layoffs as the tax base shrinks. (I'd like to see County Mis-Manger Tom Willi keehauled off a schooner in the Bight.) We will see many more businesses go bankrupt. We will have old timers remebering, "This is what it was like when the Navy pulled out of Key West in the 70s."

In the stock market, I have seen the unthinkable happen dozens of times to formerly stalwart, impregnable and arrogantly run companies such as Tyco, K-Mart, Winn Dixie. Brokerage analysts cheerleading those companies were as wrong as today's Key West NAR cheerleading housing on the way down. What we are waiting for in Key West Real Estate is an Enron or Globalstar type collapse where the company never comes out of bankruptcy. What we want is to buy a condo or house for 30 cents or less on the dollar. What we want is to chase the Destoyers out of our town's real wealth, i.e., it's cherished slices of Old Key West which weren't shrink wrapped in hermetically sealed blister packs for the masses waddling off cruise ships, airplanes, and doorsteps to Humvees which make our narrow streets impassable.

Make no mistake: We have bigshot local developers with dollar signs for eyes about to have their heads fed to the sharks down here. One family of developers who own controlling interest in one of our biggest local banks has to have such tight sphincters at this time that atoms could fuse in their rectums. My question is how do we harness this free energy?

Hence, it's never been a better time to fill the cooler, head out on the water, and forget all the lies from the Key West Real Estate Cartel and all the problems the Big Shots are facing. They created their own Big Lies so as to enrich themselves. But karma is coming back like a huge drill sergeant's steel toed boot about to kick them in the ass.

Caveat emptor,

Rock Trueblood

The American Myth About Home Ownership

(click on photo for a bird's eye view)

Be A Man, Buy a House?

I came across an interesting Forbes piece on the Internet this morning. The title of it was "Don't Buy That House".

Among the amusing items I found was this gem from the cheerleading NAR of the time (the 1920s) . . . which makes David Lereah's recent pep rally soundbites seem a bit, well, tame.

Homeownership has been touted as civic responsibility, "moral muscle" and a bulwark against communism. A 1922 pamphlet from the National Association of Real Estate Boards even promised that it would put the "MAN back in MANHOOD." Over the years, it has been claimed that homeowners vote more, join more voluntary associations, take better care of their residences and have better-educated kids.

That one made me laugh out loud.

Back in the 20s, there was no Viagara. But there were cigars and homes to buy to make a man feel more "manly." Whoever was in charge of the NAR at the time didn't use a legendary spinmeister economist such as David Lereah. Instead, he (women had no positions of authority in those days) had a copywriter who knew how to sell without a bunch of numbers involved. And the two of them probably smoked big cigars over every line of copy just to make sure they hit that one emotion which really sells: fear.

Go for the penis instead of the throat. Go for flag waving patriotism in your copy. To buy a home is the American thing to do. To rent is to possibly show your neighbors (and women) that you are a limp dicked Communist.

What bullshit! But it is brilliant copy, it really is. It hammers at the fears of men with low self-esteem with an insight Sigmund Freud must have admired. That copy sold a load of homes in the 20s. (And if you know how the run up in Real Estate during the Housing Bubble of the 1920s added to the good feel of "The Roaring 20s", you would also know that Real Estate crashed in Florida in 1928 . . . one year ahead of the biggest stock market crash of all time.)

While the nascent NAR was urging men to become more American and manly by buying a home . . . they got help from the lenders: the Roaring 20s was the decade where EZ Credit was established. People financed washers, RCA radios, cars and more for the first time.

And here's another fact about American brainwash in the 1920s which was never a myth . . . The Roaring 20s indelibly stamped on frontal lobes of American consumers that one question which still prevails today: "How much is the monthly payment?"

For Roaring 20s homes, a special new product was invented for men with bigger ambitions of Manhood: the Adjustable Rate Mortgage. EZ Credit was the Viagara and Cialisis of the Roaring 20s. So much for having a nation of big swinging dicks owning homes, farms and stocks which they soon lost to foreclosures, bankruptcies and margin calls.

I'm going to give Forbes some props for bringing up the following factoids at the end of their article:

What about all the social benefits attributed to homeownership? It turns out that many of the supposed benefits of ownership are likely due simply to family stability, for which homeownership is an excellent proxy.

For instance, while it is true that the children of homeowners have scored better on standardized tests than the children of renters, there's little to suggest that ownership per se is the cause of better performance.

"Some research has suggested that it isn't whether parents own or rent, but the mobility of the household," says Rachel Drew, a research analyst at Harvard University's Joint Center for Housing Studies. In other words, it's likely that families who stay in one place for a long time (renting or buying) are doing better by their kids than families that move often.

"All of these things we say are benefits of homeownership in the U.S. I think would also be benefits of long-term rental tenancy," says Bourassa.

Certainly there are plenty of stable, wealthy, well-educated places in Europe, at least, where homeownership is far rarer than it is in the U.S. Nearly 70% of all Americans own their own homes; only 34% of the Swiss do. Thriving cities like Hamburg, Amsterdam and Berlin have rates of ownership of just 20%, 16% and 11% respectively, according to the United Nations.

So if something in your gut--or on your bank statement--tells you that now is not the right time to buy, resist the pressure. There may be no place like home, but there's no reason you can't rent it.

I can buy that. A feeling of "rootlessness" is not good for any kid who is bounced from school to school on a regular basis. And which child would grow up with fewer problems: a kid living in an apartment or home rental where the parents are not in debt and are putting away money to further the education of the child? Or a child stuck in the suburbs in a home where ma and pa are now working two jobs to keep the exploding ARM paid and the sheriff from nailing a Foreclosure notice to the door?

Screw the NAR: I'm Comfortable With My Manhood . . . And I Rent

As an adult with no children, I am not locked into staying in just one rental for the sake of my kids either. (Not that I think moving from one rental to another in the same town would be detrimental to children's health as long as they had the same schools and friends to keep.)

And today, renting makes more economical sense than buying a home. Read the whole Forbes article to get a sense of what they are explaining in common sense terms or read my blog where I said the same thing in much lengthier words.

To which I will add: I'd rather save a ton of money by renting. I'd rather take those savings from renting and re-invest them in safe dividend paying stocks, with gold, silver and oil as hedges. And if things ever get tight, I can always find a cheaper rental to live in without destroying my credit.

Furthermore, I will not be renting a house a hundred miles from my workplace.

It may sound un-American, but I'd much rather live in a old Berlin house rental or upper floor Seattle or Prague warehouse apartment rental than live in an American suburb where there is no culture . . . other than that which I can find on my TV . . . and where I struggle to meet the exploding payments on my ARM.

Screw the American Mondo Condo Shopping Mall Hell

Americans put down European living all the time. Usually, these very critics have too often never traveled outside our borders.

I once rented an apartment in downtown Frankfurt, Germany for three years and I cherish those memories of living in early 70s Deutschland. I saw The Who, Led Zepellin, Deep Purple, Pink Floyd, name a great band of the era, just steps from my apartment's door. I owned a Norton 750 Commando Motorcycle which took me to Heidelberg, Munich, Berlin and to countries like Scotland, France, Denmark, etc. I was immersed in culture.

More often than not, I'd buy a monthy "Eurail" pass which allowed me to hop on any train going anywhere. Sometimes, I and a couple of friends would get drunk in a good downtown bar at the beginning of our 3 or 5 day pass, go to the Hauptbahnhof, and simply jump on the first train leaving to see where it would take us. It was magic. Wake up stone sober in say Dusseldorf and run around that city for the day. Or find out you are in Switzerland at the border as your passport is checked.

Forbes mentions Berlin.

I pulled guard duty once in Berlin. That city was the swingingest city in Europe at the time, more so than London or Paris, IMO. And this was a city which was surrounded by Russian troops. Yet the people in West Berlin lived like there was no tomorrow.

The very best symphony I ever heard in my life was in West Berlin, 1971. That's where I heard Dvorak's "From the New World" symphony. To this day, I hold that piece of music as my favorite classical music work because it takes me back to West Berlin.

The Forbes article states that only 11% of my beloved Berlin's current population owns their home. Who cares? Berlin is alive and jumping. Berlin is the city I think of as the new "Capital" of Europe. If I moved there, I would be able to walk or catch a Strassenbahn (electric streetcar) to the incredible art galleries, stores, concert halls, beer halls, coffee shops, and outdoor political rallies and festivals (like Oktoberfest, Fascing (sp?) and the world's biggest Dance Music festival) which make the City fun, young and vibrant. I could spend years just losing myself in lengthy walks of its streets to stop and view inspiring architecture.

On the other hand, one of my visions of hell (I am an atheist, so I am speaking of hell from a contextural view) would be for me to be "stuck" in a $500,000 American suburb or exburb house (which cost me $550,000 a few years ago) and where the closest culture center is the indoor mega-mall.

That mega mall would have maybe one or two outdoor cafes where you could buy a watered down beer and which overlook a 50 acre parking lots. Or maybe you would overlook the nearby Interstate. The closest thing to an art gallery would be the Crafts Connection Poster and Frame Store. My only connection to music would be the salesmen at Sam Ash playing the same metal riff over and over. The only coffee shop would be a Starbucks. And the closest cinema would be the indoor multiplex showing "Diehard 12", "Star Wars 15", "Home Alone 4", and "Scary Movie 7".

When I think of Mega Malls in the burbs, I think of Mojo Nixon's 80s Anthem, "Burn Down the Malls".

America has been so dumbed down that we believe it's a dream to "own" a house miles away from where we work. We are constantly brainwashed to become a good little homeowner miles from nowhere in a development which has no soul.

The NAR's current campaign, "Now is a great time to buy a home," is nothing more than big cigar smoking men . . . and women . . . with vested interests in the Real Estate Cartel patting your head, whispering, "Now be a good little consumer and buy a home." Pat, pat, pat. "Credit is tightening up, but you can use your credit cards for a downpayment." Pat, pat, pat. "And don't pay no never mind to the ARM which kicks in a few years from now. By then rates should be lower, and as you know, home prices always go up." Pat, pat, pat.

The NAR doesn't care a bit about how indebted we might become in our chase of the "American Dream". Their job is to sell homes so they can line their pockets with your hard earned cash. So they lull you to sleepwalk into buying a home which you really cannot afford . . . unless you become their girly man or dumb blonde who never questions their authority.

Note to the NAR flacks: more and more Americans are waking up to the fact of a newer reality - their home owns them.

The more Americans admit their recent home purchase is the biggest mistake of their lives, the more people are adding to the misery index. It's not the naysayers on overpriced housing who are un-American. It's the Real Estate Cartel pushing Liars Loans, overpriced homes, and developments with no longterm planning who are undermining America.

People don't really relish the thought of a one or two hour commute to and from cookie cutter homes. But the NAR doesn't discuss this in thir adverts or billboard ads. People move way the hell out into nowhere because they fear not being able to afford the American Dream which keeps moving further out and farther away.

"Where do you live?"

"Over the mountain pass in that new sub-division which is cheaper than housing near here."

Who wants to live where no one knows your name, where neighbors don't know neighbors . . . unless they are reporting you for breaking Homeowner Association rules such as flying a flag from your lawn, parking a pickup truck in the driveway, or seeing your kids ride bicycles without crash helmets on?

Screw that Home Owners Association Hell

Give me a rental in a garret of an home built in the 1700s in the great city of Berlin which is an accessible, inspiring, cosmopolitan and freethinking vibrant city and society. Or let me find another spacious Key West rental which allows me to almost never need a car as I walk to work and bicycle around town. My neighbors in either locale do not and would not think the less of me for actually, heaven's forbid, renting a place.

Today, we still have Americans biting on "Now is a great time to buy a Home. " But deeply ingrained in that thinking is the American myth that home ownership is a right, that it is a dream to chase at any cost, that it really is a measure of your worth . . . male or female.

Screw Hours of Commuting to and from Work

To the NAR I say you can keep your two to four hours of daily satellite radio listening in your car added to an eight hour day on the job just so you can afford that overpriced, ball and chain, sleep/eat cocoon in the suburbs or exburbs.

No question about it NAR, NHA, and Lenders, you can keep your home in "Misty Meadows - Putting the Magic Back into Homeowning" (as the billboards on the highway describe that place to which you hope to sell me into indentured slavery).

So I sign off with an old adage to members of the Real Estate Cartel: you can fool some of the people some of the time, you can't fool all the people all of the time.

I got my manhood right here. Shake, shake. And my money spent on rent saves cents.

Thankuvurymuch,

DJ Rock has left the building

David Lereah - R.I.P.

David Lereah . . . Busted!
Former Number 1 Shill for the National Association of Realtors is Gone, But His Legacy of Horrific Predictions and Observations Live On in Infamy

We the people who did not listen to David Lereah . . . the former Chief Economist for the NAR . . . are now saddened to see him go.

Looking back, Mr. Lereah was the absolute best Contrarian Indicator on Real Estate during the blowing of the Housing Bubble: anything David encouraged "investors" to do, you only had to take the opposite view to make money.

It is now accepted by most economists and observers of Real Estate that the market top for housing was during the Summer of 2005 . . . or the same year the No. 1 Shill for the NAR released his first Real Estate book.

Like a color blind person calling an Ace of Spades rose hued, Lereah issued his initial book with a title of “Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them”. I swear to you, I am not making up such an ill conceived title. (Click on the title to see the Amazon PR).

The cover of the book (below) shows a house rising in the air to give the impression Real Estate investments always go up. (If you open up the Amazon links highlighted in red, you will be able to Zoom in on the book cover.)

By 2006, Wavy Davey had to be sweating hydrochloric acid as he was looking like the planet's biggest fool in print who purported to be a Real Estate expert. At the beginning of 2006, Homebuilders were reporting increased inventory with fewer building permits issued. Not only this, housing bubble blogs began publishing one story after another about the misery in rising foreclosures, declining prices, and always, the stories about inventory exploding to highs not seen in years.

Lereah knew all this. He had his hands on the inventory reports from all around the nation . . . and he knew how inventory did not include all the new housing by builders who in early 2006 were reporting declining revenue and losses in income while unsold inventory was piling up.

Lereah also knew how median home prices from sales was being distorted by incentives, above 100% financing, sales back to a developer at the developer's top price (by canceled depositers), and pre-contract appraisals which were still being pushed by lenders . . . not market prices . . . to make appearances that all was still well in Real Estate.

Lereah was privy to all this insider business of smoke and mirror numbers reporting. He was one of the biggest cheerleaders blowing smoke out his ass. He continued to distort the data he released while saying it was untainted to make things in Real Estate look better than they really were.

David Lereah did not care for the real truth. The Truth, you see, did not sign his fat paychecks.


Enter David Lerah . . . Less Enthusiastic Illusionist and Title Changer

Eventually, the market turned so much against Lereah's ill timed book release, that a cover up of his Big Mistake had to go into effect. What to do?

While eyes were diverted, David Lereah and his publisher changed the title of his 2005 book to reflect a somewhat more somber view of Real Estate from 2006. Mind you, the same illustration of the floating house still graced the cover.

The new title in 2006 for the exact same book release of 2005 adopted a less loud claim that the boom would continue throughout the decade. Still, Lereah's new title for the same book had what was now less a confident claim . . . and more like a hopeful claim . . . the boom would not bust. Hence, the new title became: “Why the Real Estate Boom Will Not Bust - And How You Can Profit from It: How to Build Wealth in Today's Expanding Real Estate Market”

Way Behind the Smart Real Estate Bloggers and Message Board Posters, Lereah Begins His Backpedalling to See if He Can Go Back to Meet the Pack as it is About to Lap Him

Finally, in April 2007, Lereah seeking to cover his tracks on one of the worst calls in history with a diversionary title change added in for good measure, launched his newest, bestest, back pedaling title, “All Real Estate Is Local: What You Need to Know to Profit in Real Estate - in a Buyer's and a Seller's Market”. With this new title, Lereah actually owns up to the thought that, yeah, there might actually be something like buyer’s markets where prices are decreasing instead of there always being a seller’s market where prices always go up in Real Estate La La Land.

This title was the funniest “Whoops! There It Is” moment in non-comedy categories for the year in my book. It was David’s last coverup attempt on blown calls which he might sprinkle with sugar before he exited . . . not stage right or stage left mind you . . . but quietly out the back door of the NAR’s Ivory Tower.

I would think anyone who listened to this bloviating Phd. (Piled higher and deeper . . . definitely in Lereah’s case) will now consider that so-called “experts” in all asset bubbles have vested interests in keeping the respective bubbles alive. I hope anyone who lost money listening to Lereah’s incessant misinformation and disinformation will now use their anger as a lesson to never trust anyone in authority without doing your own due diligence on what the experts proclaim is fact.

As I will keep reminding you on this blog, any stranger who has vested interests in keeping Ponzi Schemes alive should never be listened to. Never listen to a stranger who looks at you as their next paycheck or commission check. Do your own due diligence on the biggest purchase of your life. Deal with lenders, builders, appraisers and Realtors from a position of strength by self-educating yourself.

Last, always get promises and deals in writing. Never accept the word of anyone . . . including family members, your Church elder, or the guy next door who can put you into a house at the very best price. Remember, the "experts" know only as much as you don't. Educate yourself, ask questions, and make other parties on deals put down in writing what they are telling you.

Embarrassed, Discounted, Downgraded as an Expert by All, Lereah Had to Quit or Face Making the NAR Fire Him

In Lereah’s case . . . his writings could not back away from the facts in 2007 that housing was busting. In fact, in one of his last published pieces from the NAR’s Ivory Tower, he had to ring the bell that median prices were probably coming down .07% . . . or less than 1% in 2007. This admission surely had to embarrass Mr. “Why the Real Estate Boom Will Not Bust” . . . and it wasn’t long after this confession Mr. Lereah quit his job as Chief Economist of the NAR.

Although Mr. Lereah was granted a Phd. in Economics from the University of Virginia, I am sure Thomas Jefferson would not have recognized anyone with such sycophantic desires to please their master to be worthy of a doctorate from his beloved university. President Jefferson was always a freethinker, and he called things as he saw them. He would have seen through Lereah as easy as other non-college graduates (such as myself) who sought the Truth. Jefferson would have recognized the fraud Mr. Lereah represented, and most likely, Jefferson would have expelled Lereah for breaking the University's Honor Code.

Hence, I will always think of David Lereah as a "mister" at best and the slimiest kind of analyst/lapdog prevaricator at worst.

In David’s dis-honor, we place this last image firmly in the ground as his tombstone. I wish this image would expand, but if you have a big enough screen or a mouse with a magnification feature, use it. The quotes from Lereah are worth reading for one last laugh out loud for the "Most Incompetent Economist in the Early 21st Century" claim:

Good-bye, David, we hardly knew ye. But what we knew was quite enough.

Miami Dade-Broward's Housing Boom Turns Bust: Will Lower Taxes Ignite Home Sales?

Over the Next 18 Months Miami Will Add 20,000 New Condos

Miami Dade-Broward's inventory of housing for sale has exploded in the past year.

Last month 76,000 "pre-owned" homes were For Sale in that area. Just one year ago, that inventory figure was only 50,000 homes For Sale.

Real Estate observers know that the 20,000 "new" condos which will come online in the next 18 months will not be added to official MLS inventory as new homes and condos are sold by developers, not individual homeowners. Hence, inventory rolls will not automatically rise another 20,000 properties. Still that new hidden inventory will be out there along with all the other new homes which have been on the market for over two years now and which are still not on the inventory rolls.

However, as more foreclosures take place (and foreclosures all over Florida are skyrocketing) and as new owners of some of these condos are forced to walk away from their deposits . . . we can be sure that some of these newer units will add to the glut of already existing homes for sale.

Will Tax Cuts for Housing Get the Market Moving Again?

Florida's state legislature is under pressure by builders, Realtors, lenders . . . in short . . . the whole Housing Bubble Cartel . . . to lower taxes on Real Estate. These vested interests of the cartel believe lower taxes will get sales moving again.

My thought is this: if I feel I cannot afford a $500,000 home in the changing rate environments of today (long term rates started going up last week as Fed chief Ben Bernake is now signalling that bailing out Real Estate interests is not America's main interest, but controlling inflation by propping up the dollar is) I will surely not care if Florida Real Estate taxes go down tomorrow.

The main problem with Real Estate is it is too overpriced.

The average man and woman in Florida has not seen their wages and salary keep up with the exploding price of Real Estate. So something has to give.

Either Florida wages and salaries will have to double overnight so we can all afford to begin looking at what is overpriced housing today, or the people who really want to sell their homes will have to lower prices to a realistic point where possible buyers might begin to look.

Jack McCabe, housing analyst, recently gave his thoughts about this magic bullet of lower taxes which the Real Estate Cartel hopes will kill the Housing Crash beast:

Analyst Jack McCabe, who is advising large vulture investors on bulk deals, said big investment groups aren't as worried about tax rates as individuals -- saying such costs can be spread out across big buyers' portfolios.

Last week McCabe announced the completion of the first market-corrected deal he's worked on since the slowdown began. While short on specifics, McCabe said a multibillion-dollar private investment fund bought a substantial block of newly built condominiums from a publicly-held home builder in Florida. His investor client, he said, was chosen because of its ``ability to close quickly in an all-cash transaction, noncontingent on financing.''

Currently, he said the market is too sick to recover from a tax reduction alone. A big property tax cut may reignite buying now, he said, but would effectively create a false bottom.

''Meaningful reduction will slow down the correction cycle but the correction is still inevitable,'' said the Deerfield Beach analyst, who has warned for some time about too much construction going up too fast. ''The market is so sick it will take a while to cure this,'' he said. ``This is not a head cold, it is more like pneumonia.''

But such doomsayers also believe the market is poised for brighter days ahead. McCabe says that barring calamitous hurricanes, the market will have righted itself by 2010 -- just as the first baby boomers turn 65.

''No one is more bullish on Florida long-term than me,'' McCabe said.

It's such thinking that prompted corporate raider Carl Icahn to announce last week that he would continue efforts to buy Bonita Springs-based WCI Communities....

All I will add to McCabe's views is this: it all comes down to Economics 101, the Law of Supply and Demand. When there is too much demand, prices go up. When there is too much supply . . . as we see today all over America with housing . . . prices have to come down.

There is no other way to get Real Estate sales moving again other than for homeowners to "get real" with their pricing today. The longer the sellers continue to drip, drip, drip in their price drops, the longer their pain of waiting for a buyer to come along.

I believe many sellers will soon be caught with their pants down and their skirts up as the Federal Reserve focuses on keeping inflation in check by not lowering rates. And if the Fed Chief raises rates just 50 basis points (one-half of one percent), we will see just how many homeowners were standing naked when the small tide of buyers are sucked out to sea.

Mark my words: one healthy rate increase will end all illusions that Real Estate is a smart "investment". It will also suck money out of our stock markets. But if Bernanke has to decide between keeping bubbles alive or propping up the US Dollar and killing inflation, my bet is he'll raise rates. (And just two months ago, I was one who felt like he'd try and save housing by lowering rates.)

If this prediction turns true, more people will be knocked out of the dream of buying a home at today's prices as lenders will further tighten their rules for borrowers.

Fewer qualified borrowers will mean more inventory building on the market.

As McCabe said about Real Estate's growing inventory and declining sales, "This is not a head cold, this is more like pnemonia. Unlike McCabe, I don't see any bottoming in Real Estate by 2010.

I believe we will see further pain and dropping prices in 2010.

This might take 15 years or more to correct.

My advice to sellers: figure out where you want to be in 5 to 15 years. If you want to move today, drop your price. If you have to take a hit in capital gains or perhaps take a loss on a sale, ask yourself what is more important: getting on with your life with a shred of sanity, or having to do a daily gut check wondering if you can induce someone to look over your overpriced home?

If you want to get on with life, drop your prices.

If you want more of the same indecisiveness which will drive you into a funk, keep sitting on your house you no longer want to live in and continue to refuse to drop your price.

It's that simple.