Update On A Condo Using the O' Boyle's "Fast Dutch Auction" and News About Price Changes In The Past 2 Months

A few days ago, I laid a post here titled, "3 Key West Home Sellers Use The "Sally O' Boyle" Method To Try and Move Their Homes".

There are over a dozen comments on it already, and what really pleased me is Hal O' Boyle, husband of Sally O' Boyle, wrote a response in Key West the Newspaper also. (Click here to read Hal's online version in KWTN. Hal's piece is titled "Free OFMP, Get Yours Now")

The Fast Dutch Auction

Anyway, I finally have a name for what I called "The Sally O' Boyle" Method. This is the way to quickly develop interested buyers to call you about a property you are trying to sell. Hal calls it a "Fast Dutch Auction" and he gave props to local Real Estate muse, Curtis H. Wild, who drummed a great maxim into both Hal's and Sally's heads when they were learning Real Estate. That saying is,

"There is a price at which

that house will sell today"

Is there ever! And as Hal aptly explains in his column, "...that price, by definition, is the market price."

Hal is talking about a price that is not artificially propped up by appraiser fraud, loan fraud, government fraud, NAR manipulation of the MLS, government offices reporting "false data",etc.

The real market will tell all sellers who are still in denial what buyers will bear in these times of double digit unemployment, mushrooming foreclosures, tighter lending, new appraiser rules, growing "stealth inventory" on insolvent banks books, and so on.

The market does not lie. Government statistics lie. The NAR lies. Vested interests in the FIRE Economy lie. All this fraudulent interference artificially props up markets, but the market always wins out over time because of the moral hazards introduced and the unintended consequences of those moral hazards restore equilibrium by chopping off more heads the next go round of bubbles.

To get back to sanity, people are saving more than ever in the past decade and they are beginning to actually live below their means. And credit is tight right now, real tight, and it's going to get tighter. (I'll explain why credit from lenders is about to evaporate for many banks and how it's going to further affect housing later this coming weekend.)

That said, Hal (and I infer his wife Sally thinks the same way) and I and many an observer of Key West and Florida Keys Real Estate believe the "bottom" is not here.

If A Bottom Were Here, Would We Not Be Seeing A Rise On Most Price Changes For Real Estate?

Let me give you a stat right off the top of my Excel spreadsheet, and this is an eye-opening stat which is growing daily to the minus side, or devaluation side:

Out of 160 price changes on Lower Keys properties since the first week of June when I started my Excel Spreadsheet, only 3 of them were increases in price from the original listing price. The other 157 Price Changes were decreases in price from the original listing price!

And then there is all this "stealth inventory" on developers's and banks's books still being carried at "mark to fantasy" pricing which isn't factored into the hidden deleveraging by the high rollers. Nor does this stealth inventory show on the MLS. Yet every once in a while, a developer of lender has to offload one unit at what they consider and insane price, but a price which is really closer to what the market will bear at this time.

(There's a developer out here with a row of ultra-expensive condos which have not been lived in since 2005 when they were built. A friend of mine told me the developer recently filed for Chapter 11. His plan to come out of bankruptcy was to sell one of these units at a time at a devalued price and then take the money from the sale to keep current on his taxes, insurance, and carrying costs. The judge threw the filing out of the court telling the developer, "That ain't no plan. You're simply living on hope. File for Chapter 7." My bet is these condos will eventually auction off for less than what they cost the developer to build.)

When you got everybody in the FIRE Economy and the US Government using every trick in the book to keep prices artificially propped up, while Price Change after Price Change shows "lowering" of prices from the "listing price", well, you can say with assurance, housing has not bottomed in the Keys.

More proof that sellers are now in the panic mode

As Hal points out, I am noticing more people using the "Fast Dutch Auction" method just by observing my own Excel spreadsheet which is now 2 months old. (I haven't missed a day in two months of painstakingly typing in all the data.) The picture developing from my data not shared with buyers by the local NAR is getting oh so sharp and clear. And what I see is direct manipulation of the data by FIRE Economy teat suckers wanting to reinflate the Bubble.

You think the powers who control MLS data would list every price change of every house for "browsers" on all their online MLS search data bases? Dream on. Hell no, these are the same "advisors" who flogged people to buy homes during the maniacal buying panic of the last three years of the Housing Bubble. These people are trying to save some face. Another bad down year in Real Estate and we'll halve the Realtor Corps again in the Keys. The local NAR can't have that.

That's why I started my own Excel spreadsheet: to help citizens understand why housing is still too expensive and non-affordable. And by showing incremental price changes and the amount of price changes, tire kicking buyers can get the idea it makes way more sense to rent now and save money. I want to help people stay out a market which has not fully let out all its excess.

I'm not saying there aren't any deals out there. I am saying, however, the market for more than 95% of properties has a long way to go before reaching bottom

That said, I found one new Fast Dutch Auction type of deal today. I'll post about it next week.

What I want to do now is revisit the first of my examples from my post a few days ago. The exact words will be highlighted in violet. And then I'll add this week's price change:

Here are the original words I wrote for this Santa Clara condo unit . . .

Example 1

In our first example, a condo seller has been dropping his/her price by $5,000 every week. Here's the scoop:

MLS #111141

This is a 2 Br/1 Ba Santa Clara unit.

Listed 1st week of July, 2009 for $179,000

Price Change 7/9/09: $174,000

Price Change 7/15/09: $169,000

Price Change 7/21/09: $164,000

Price Change 7/27/09: $159,000

And by the way, the owner of this reverse auction unit paid $162,500 for it on 5/1/02 . . . so the seller is trying to sell at a lower price than what they paid for it seven years ago. We'll keep our eye on this one and see if it falls another $5,000 next week.

I printed all that just a few days ago on 28 July 09.

Here's the latest update, and as you can see, the seller did not even wait six days this time to make his/her next Price Change. Now the change has come only three days later:

Price Change 7/30/09: $154,000

This is a prime example of the O'Boyle's "Fast Dutch Auction". And trust me, I'm seeing this type of selling develop with high end stuff in the millions of dollars right here and now, not just low priced condos.

I see no bottom at this time. I don't forsee it next year. We're going to a place we've never been before in Real Estate, except for maybe the Florida Real Estate Crash of 1928. If you think prices can go no lower, take a chill pill. What's the rush to buy when 157 reductions are showing in the past two months with only 3 higher price changes in that same time. Oh by the way, 2 of those 3 price increases were for brand new "Affordable Housing" up on Stock Island. I kid you not.

Is this the crazy world of Arthur Brown ("Fire") or what?

Caveat Emptor,

Rock

Why I Didn't Lose Money During the Housing Crash, the Credit Crisis, and The Recent Market Crash

One of my investment thesis since I became aware of the Housing Bubble in 2002, which I was sure was going to lead to a Credit Crisis, has been to buy companies which supply necessities and which pay increasing dividends.

I also adhere to the thinking of Dr. Jeremy Siegel who advised investors in his latest book, The Future for Investors, to re-invest all dividends back into the solid companies I buy.

Here's a prime example of one of the companies I or my girlfriend invested in during the Housing Crash, the Credit Crisis and the recent most market crash:

Name of Company: Suburban Propane Partners, LP
NYSE Stock Symbol: SPH

As Suburban Propane supplies gas to more than 1/2 of Key West via bottled propane, I dug into their financials to see if I should buy "something I know" and something I figured would be a "necessity" during any major Recession or Depression.

On Jan. 17, 2008 I bought 100 shares for my girlfriend's Roth IRA. We paid $39.96 per share (and that's with the $9.95 trading fee figured in too.)

Now get ready. We're going to have another one of Rock's "The Beauty of Compounding" lessons in real life.

How Exponential Growth Works For You

Below, you will see a small table showing what those hundred shares are worth today without accounting for any dividends.

Date: 1/17/08

Amount of shares purchased: 100

Share Price: $39.96

Original cost for all 100 shares: $3,995.94

Value of same 100 shares at close of market yesterday: $4,588.00

Gain on 100 original shares: $592.06

Percentage gain: 14.82%

Okay, so the original 100 shares have gained 14.82% in just 18 months. I'll take that kind of gain anytime, especially when passbook savings across America are lucky to pay you 1/2% at this moment. (You might get 2% on your money if you can stash $10,000 in a CD).

Anyway, let's get back to what happened to these 100 shares of SPH with dividends paid out and reinvested (Our online brokers does not charge us to reinvest dividends).

Below, I list the $dollar amount of the dividends and that will be followed by the amount of fractional shares those dividends reinvested in . . .

You will see a slow exponential growth take place right before your eyes.

2/8/08 - $76.30 1.9210 fractional shares bought
5/13/08 - $78.99 1.9290 fractional shares bought
8/12/08 - $83.08 2.2280 fractional shares bought
11/10/08- $85.39 2.4440 fractional shares bought
2/10/09 - $87.90 2.2230 fractional shares bought
5/12/09 - $90.26 2.2500 fractional shares bought

Notice that the amount of the dividend increased every single quarter. One reason is the total amount of shares owned is increasing quarterly and compounding at an ever increasing rate due to exponential growth. Another reason is Suburban has been increasing its dividend quarterly (although by a half-cent for the past five dividends, still it all adds up) since it started trading on the NYSE a few years ago.

You might wonder, "Why was the largest odd lot of fractional shares bought in November of 2008? Should the fractional shares bought not be increasing every quarter?"

No. And the reason is this: On November 10, 2008, due to the market crash, Suburban Propane shares closed at $31.91 per share. Hence, the dividend paid had more "buying power" when it was reinvested.

For instance, on May 12, 2009, Suburban Propane shares closed at $41.50, or almost $9.50 higher than they were back in November. Hence, eventhough there was more dividend monies to buy fractional shares this past May, those fractional shares cost more money.

(If this doesn't make sense to you, leave comments below, and I'll help you out with basic dividend reinvestment investing.)

How We Doubled The 14.82% Gain By Reinvesting Dividends For 18 Months

That said, with all these "free" fractional shares taking an elevator to "Compounding Heaven", what do you think about this total gain on these original 100 shares of Suburban Propane?

1. The original 100 shares have grown to 112.9950 total shares owned

2. The original cost for these 100 shares was $3,995.94 (including trading fee)

3. Yesterday, SPH shares closed at $45.88 per share

4. In that my girlfriend owns 112.9950 shares, we multiply that by $45.88 per share to find out these shares are worth a total of $5,184.21.

5. Total gain at this time (were we to sell all 112.9950 shares) would be $1,188.27

6. Total percentage of the gain in just 18 months is 29.74%

Now, we might wake up Monday and find out a Black Swan event such as the CEO of Suburban Propane was photographed buggering children or snorting cocaine and the stock could take such a hit, we'd be out of all gains. But then again, another dividend period rolls around in August, and if the shares were cheaper, our 112.9950 shares would have more buying power. Meaning, once this hypothetical scandal passes, and Suburban started ascending the elevator again, our compounding would be all the more extraordinary.

Just remember this little lesson when people tell you you can't make money with Buy and Hold in the stock market any longer. That's a load of rubbish.

We're up 30% in the last 18 months on just this one stock. We have many others just like it. We diversified into "necessities" of life stocks.

And by the way, during those 18 months the Housing Bubble hit full tilt boogy, the Credit markets crashed, and the stock market almost lost 60% since its October 2007 highs.

And here we are. Invested in stocks which pay dividends, which have increased dividends yearly and sometimes quarterly for years, and invested in companies which supply necessities of life such as electricity, propane, pipeline shippers of oil and natural gas (I love these), consumer staples, etc.

You gotta eat. You gotta drink. You gotta shower. You gotta use electricity to read the Internet and turn on your lights.

Water, Oil, Gas, Electricity, Food, Razor Blades. You use them everyday in modern life. Why take chances with insolvent banks, satellite radio, tech companies, green companies, etc., when the tried and true is still outperforming those companies dependent on discretionary spending?

Simple macro-economic thinking has helped us beat the markets by wide margins. And when you toss in other hedges such as our 2003-2005 American Gold Eagle (Proof) coins, we have enough money to put down a sizable downpayment on a home somewhere other than here...hell, we could buy a house for cash in certain areas of this country. (On average, our real gold coins have gained more than 300% since 2003 to 2005, accounting for the rise in the price of gold and the numismatic ratings on these coins).

That's it for today's lesson. And oh by the way, when I discuss stocks here, know that these stocks we own are in Roth IRAs. None of the dividends are taxed. And whenever we wish to bring this money out in our retirement years, we do so with no taxes taken out for the gains.

On top of this, we can use any amount of our Roth IRA money for a downpayment on our first home purchase as long as the account was open for at least 5 years. (Both are). This downpayment money will not be taxed, nor is there any penalty. And unlike the normal Roth IRA distribution rule of legal withdrawals from age 59.5 years old, we could take out as much Roth IRA money as we need for a downpayment before we hit that age.

In that I do not believe we've seen the bottom of the Housing Crash, I will not be thinking about touching this Roth IRA money before I hit 59.5. I just hit 57 a few weeks ago. I'll just keep feathering my retirement account with $100 weekly. Same with my girlfriend.

That said, would we rather be in an upside down mortgage on a house decreasing by double digits for the past three years? Or would we rather be sleeping like babies, letting our money multiply faster and faster through dividend reinvestments in companies which won't be going out of business even in a Depression?

What do you think?

Caveat Emptor,

Rock Trueblood

p.s. Do I think the stock markets could go down hard from here? Absolutely. And I'd be surprised if they don't tank again. But I'm not selling. Read the following link to one of my favorite Jeremy Siegel articles of all time titled "Beware The Growth Trap". When markets go down and you are positioned in great "Orphans and Widows" stocks, it pays to let their dividend reinvesting compound even harder.

And while I'm at it, be sure to view the 8 part series I laid on here a few days ago titled "How Simple Arithmetic Shows Us Exponential Growth Cannot Be Perpetual Without Running Up Against Finite Resources." It is a brilliant look into the "Law of 72" which shows us how compounding exponentially works against us (such as when you borrow money from banks or credit card companies). But what isn't explained in this lecture is how to turn compounding around to favor you. And you do this by "saving" and "investing". End of story.

Business/Economic News for 31 July 09

How Simple Arithmetic Shows Us Exponential Growth Cannot Be Perpetual Without Running Up Against Finite Resources

I hope you will enjoy this 8 part series lecture with Dr. Albert Bartlett as much as I did. Just watch the first five minutes of Part 1 and see if you can follow along. If you can, you will savor the remainder of Part 1 and the other 7 parts of the same lecture.

This lecture shows you the problem with exponential non-stop growth without thinking critically about a finite set of natural resources.

You need to watch the whole series and think about the naysayers who tell you Peak Oil, overpopulation, Global Warmth, rising sea levels, etc., are nothing to worry about.

Drill, Baby, Drill, is not the answer.

Just watch how one great teacher takes simple math and shows you why you should always question Authority and Mainstream Media sources. Especially interesting is how the good Professor, Dr. Bartlett, shows you without any question why Peak Oil is going to end our profligate ways of wasting Energy.

I only wish this series was given today, so the good professor would throw in some comments about the Global Credit Crisis and the Housing Crash which his simple Arithmetic . . . used inherently by many an astute blogger (and posters on Motley Fool's old Misheldo board) . . . helped untrained Economists to fortell what was going to happen to this Country with unchecked and unregulated exponential EZ Credit and fractional banking.

Part 1




Part 2




Part 3




Part 4




Part 5




Part 6




Part 7




Part 8

Business/Economic News for 29 July 09

3 Key West Home Sellers Use The “Sally O’ Boyle” Method To Try and Move Their Homes

A week ago, in my blog post "Advice to Landlords Looking for Solid Renters", I wrote the following words:

I live in a giant condo with 218 units. Since living here, I've watched as more of these condos empty due to foreclosure, walkaways, or the landlord is unable to attract new renters.

A few years ago, Sally O' Boyle, a Realtor who now lives in Costa Rica but who keeps her rental management business going via cellphone wrote some of the best advice I ever read right as the Housing Bubble was beginning to burst. She said, and I'm paraphrasing here, "If you want to sell your home quickly, here's what you do. Drop your price $10,000 a week until your phone starts to ring off the hook."

Earlier this morning I found several examples of sellers here in Key West who seem to have adopted Sally O' Boyle's method of finding the "right price" which generates action from possible buyers.

Example 1

In our first example, a condo seller has been dropping his/her price by $5,000 every week. Here's the scoop:

MLS #111141

This is a 2 Br/1 Ba Santa Clara unit.

Listed 1^st week of July, 2009 for $179,000

Price Change 7/9/09: $174,000

Price Change 7/15/09: $169,000

Price Change 7/21/09: $164,000

Price Change 7/27/09: $159,000

And by the way, the owner of this reverse auction unit paid $162,500 for it on 5/1/02 . . . so the seller is trying to sell at a lower price than what they paid for it seven years ago. We'll keep our eye on this one and see if it falls another $5,000 next week.

Example 2

This next one is a beautiful millionaire's home in Old Town Key West located in the 900 block of Southard Street. Here's the data:

MLS #110290

It's a 3 Br/3 Ba. Punch in that MLS number on my favorite Key West MLS website and look at the photos. This is a gorgeous house in a most desirable location in Key West. This is a dream home.

Anyway, the place first listed at the following price. As I was not aware of this place until the price changes started, I don't have the exact day it came on market, but the Key West MLS website claims it has been on market 161 days, or half a year. Thus, I probably missed a goodly amount of price changes before I started picking up on this one in my personal Excel spreadsheet:

List price: $1,495,500

Price change 6/15/09: $1,205,000

Price change 6/24/09: $1,155,000

Price change 7/6/09: $1,100,000

Price change 7/13/09: $1,175,000

Price change 7/27/09: $1,150,000

So, since the middle of last month, this property owner dropped the price by the following increments: $50,000 . . . $55,000 . . . $25,000 and $25,000 yet again. Those drops are much faster than $10,000 a week which Sally recommends, but with such a high priced base, this homeowner probably get's fewer calls due to the shrinking pool of millionaires who can afford this type of manse.

Oh, and let's see when this current owner bought this place . . . and for what price:

Last Sale 9/26/06: $1,020,000

So the current owner is $130,000 to the plus side if they can sell this mansion today at $1,150,000.

Will he the seller get this much? I hesistantly doubt it when large price changes are happening this quickly. Think about the larger picture, the seller has shaved off $155,000 in just six weeks? Wow, that's a major crew cut.

Secondly, notice when he bought this place: September 2006, or right around when Case/Shiller were announcing Real Estate was finally topping in the USA. (And a year after I had announced the top in Key West Real Estate.)

However, and this is a big however, the owner has recently made renovations. According to the MLS entry:

Old Town living at its best! This is a charming 3/3 that has been recently updated and renovated with new kitchen with granite and stainless GE appliances, Dade County pine and heart pine flooring, tankless hot water and much more. There are two bedrooms and two bathrooms on the first floor with living room and a wonderful kitchen set off from the pool area. Upstairs there is a third bathroom and a large great room that's built for entertaining as well as two lofts that serve as bedroom/study. The great room leads to a large private rooftop garden overlooking the pool and a delightful porch overlooking the street. Great location just a few blocks from downtown.

If you open up that MLS entry, you can look over the photos of this beautiful home.

Secondly, and most importantly, this home is one Gary Thomas, my favorite "value" Realtor in Key West, has covered on his blog. Click here to see what Gary said about this home a few weeks ago.

Gary is one of three Realtors in this town that I would ever entrust my hard-earned money to. You can tell, if you've read his blog for just a few months, he really has an eye for the high end market that I am priced out of. I respect his views on Old Town "Value Buys", but I love differing with him.

Gary liked this one a few weeks ago and I have to defer to his knowledge about luxury homes newly renovated, but I still have this feeling this one is going to sell at a lesser value than today's asking price.

Needless to say, this is going to be one of the most interesting expensive homes we (both Gary and I) will be covering if and when it sells.

Let's look at one more before I go:

Example 3

This next one is in the 300 block of Olivia, just south of Whitehead Street.

MLS #111005 (and MLS #111955) . . . no reason given why it holds/held two MLS numbers . . .

List Price 6/10/09: $475,000

Price Change 6/16/09: $465,000

Price Change 7/7/09: $449,000

Price Change 7/14/09: $439,000

Price Change 7/21/09: $429,000

This home seller is now doing exactly as Sally recommended. So, unless this thing has gone under contract, we'll be looking for another price reduction in the next day or two on the local MLS.

Oh, I forgot to mention when the current owner/seller bought this place and for how much:

Last sale 5/13/04: $609,000

So this seller is already upside down to the tune of $180,000 after owning this home for five years. I'd say there's a fire lit under this seller, wouldn't you?

Caveat Emptor,
Rock Trueblood

Business/Economic News for 28 July 09

The Last 10 "Just Listed" Homes In Key West Prove Real Estate Has Been A Losing Battle In Building Wealth Since 2003

Anybody with half a brain and willing to search the Internet in 2003 for contrarian advice knew that Real Estate was a giant Bubble blowing.

Unfortunately, the Mainstream Media was in denial during the worst years of the Housing Bubble excesses

Even in Key West's local rag, "The Key West Citizen", we saw local Realtors and other teat suckers on the FIRE Economy Pig telling us time and again why Real Estate would never go down.

Indeed, most everyone in this town in 2003 would have you believe there wasn't even a Bubble blowing, that Key West property was only assuming its natural destiny of much higher prices. The reasoning behind these audacious claims were many, and some of them are being dusted off today during this new claim of a bottom: "Everyone wants to move to Key West. We are only a 4 mile long by 2 mile wide island. Get in while you can. Prices will continue to double every 3 to 5 years. Demographics and population growth is on your side."

Back during the manic buying of the Housing Bubble, there were few sage voices in the wilderness who were calling out against the insanity. I know of several honest local Realtors who were cautioning their clients not to buy. I knew another blogger from this island who once had a Wall Street background warning against the "irrational exuberance" we were seeing in Key West Real Estate. And I met and befriended many a sage writer (Michael Shedlock for one) on Motley Fool boards who were not fooled by the biggest Ponzi Scheme of all time being erected under the noses of the American people.


Purchases since 2004 flash forward to 2009

I've been telling readers of this blog for the past few months that my personal Excel spreadsheet of Key West MLS data, which I go to great pains updating every week for the past two months, is now showing me more and more homes and condos bought in the year 2003 are now upside down. That is, more than 50% of homes/condos bought in 2003 and going back on the market today are listing at 2009 prices less than what they last sold for in 2003.

To say this claim of mine has touched a raw nerve is much the understatement.

I've actually two locals stop me this past week and tell me this claim cannot be right. They disbelieve that houses and condos bought 5 years ago (2004) are almost all upside down and when coming on the market today are asking prices less than where they were purchased in 2004.

I patiently explain to them what I have said several times here, "90% of all Key West properties (and almost 100% of all condos) bought anytime during 2004 are now worth less today . . . and that figure is only not higher because many of the same properties which are asking more had extensive renovations."

These people asked me to show them more proof. They are like 99% of all Key West workers who are believing some bottom is forming: they will only disbelieve the "green shoots" story that so many FIRE Economy poobahs are pushing today if they can see data to prove the "bottoming" pushers in the Mainstream Media and Academia are wrong.

So, today's blog is addressed to these two new readers of this blog. Welcome aboard, and please read the archives. But now, let's advance my observation that buying a house/condo in Key West from 2003 through 2008 was a losing proposition.



More home listings are still falling in value and are trending downward below 2003 prices now

It was only this week I noticed that the majority of Key West properties bought in 2003 and coming on the market today are listing at 2009 prices which are lower than where they last traded hands in 2003.

This is something I've been predicting would happen as more and more shadow inventory sold at foreclosure puts pressure on pricing, while more people default on their mortgages and credit cards while yet more of these same people lose their jobs.

I also predict prices will continue to plummet as even more people lose jobs, fewer people up North are able to sell their homes and move to Key West, and consumers continue to default on credit card payments and go bankrupt in ever accelerating numbers.

In short, why will Housing "recover" now when the pool of eliglible buyers for these unaffordable units continues to evaporate?



Let the numbers do the talking

So, every once in a while, I think I'll do a little exercise whereby I find 10 of the last listings of used inventory (not brand new condos or townhomes) and simply post their new listing prices vs. when they were bought and at what price. By doing this, more locals will have a better understanding that all this table pounding by local members of the NAR over the years has been nothing more than their usual desire to line their pockets with your hard earned money.

Soon, I will subscribe to the Key West Citizen online. I will take quotes from Regina Corcoran's column over the years extolling one and all to buy, buy, buy at the exact wrong, wrong, time of the market top. I will resurrect the quote from a local Realtor who claimed we would never see Key West homes sell for less than $600,000 again. And we'll take actual quotations from bigshot developers and Realtors throughout the Keys who kept telling us "It's different this time," and who urged everyone in Key West to buy as the Bubble inflated and deflated.

By the way, I'm having problems accessing the county government website this morning, so I am using "Last Sale" data supplied by Zillow. (I for one think Zillow "Zestimates" are a bad way to try and figure out a property's worth in these days and times as Zillow blows the "comps" in many cases by comparing apples to oranges. But their "last sale" data is for the most part uncompromised.)

Also, I'm not going to print the addresses, etc. You can access an MLS online with dozens of Key West Realtors. Simply punch in the MLS number I will supply here. Where there are photos, I'll go ahead and add those to my list here.


Here are ten of the most recent listings of lived in inventory:

Example 1

MSL #111266
Listed 7/24/09 at $425,000
Last Sale 11/17/06 at $600,000

Says on the MLS that this home for sale is "Realtor Owned". Well, the Realtor who paid $600,000 for this home just 2 years and 8 months ago is probably wishing he/she never drank the local NAR Kool-Aid.

This Realtor is trying to unload this house at a price which is about a 30% discount to where it was last purchased.

Tell me again how Real Estate never loses value, Mr. or Mrs. Realtor

Example 2

MLS #111267
Listed 7/24/09 at $350,000
Last Sale 12/20/06 at $465,000

That's a Merry Christmas present from 2006 which quit giving value to this homeowner. This one is 25% off from it's purchase price just 2 years and 7 months ago. (Don't make me go searching the Key West newspaper archives for local NAR ads telling you how it was never a better time to by Real Estate back then.)

Tell me again, David Lareah, why Real Estate would perpetually boom from 2006.

Example 3

MLS #11268
Listed 7/24/09 at $399,000
Last Sale 9/18/03 at $448,000

This is one of those Golf Club townhomes. It's down 11% from it's Sep. 2003 purchase price.

I'll bet we'll see it eventually drop to $299,000 or below. Regardless, if this seller can unload this place at their ask of $399,000, they will still have to pay that 6% commission, or $24,000 grand, to the Realtor(s).

By the way, I knew an agent who booked bands at Sloppy Joe's. He lived in Maryland. He bought one of these townhomes while he was down here watching one of his acts. He got the idea back in 2003 that a Golf Club townhome would be an excellent "investment". He bought at $550,000. He was recently foreclosed upon.

(Note: I am skipping over the next two listings. One, MLS #111251, is at 901 Flagler for $3,250,000. I cannot find any 901 Flagler on Zillow. My guess is 901 Flagler, a corner location, may have an older address on Reynolds. I'll look into this one more closely when I can access county records, but at the same time, if memory serves, this is one of the massive renovation projects I've seen in the Casa Marina area. And massive renovations make a same address "comp" no longer valid. The Flagler place might just have more value than a normal depreciated home. (For more on great values in Key West Real Estate, be sure to see Gary Thomas's great blog on hidden gems in Paradise. He's quite credible and a great read.)

(Also, the next in line was MLS #111256, a brand new, still under construction home up on Summerland Key. No need to investigate the previous price on something which has never sold.)

Onward.

Example 4

MLS #111259
Listed 7/23/09 at $218,500
Last sale 2/24/05 at $635,000

That is what I'd call "Equity Wipeout".

That's close to a 65% drop in pricing!

And check this out: this is another of these Golf Club townhomes such as the one above which was bought in late 2003 for only $448,000. Can you imagine one of these places rising $187,000 in value between September 2003 and February 2005?

There's a testament if there ever was one for "irrational exuberance" in Real Estate!

Example 5

MLS #111261
Listed 7/23/09 at $325,000
Last Sale 5/19/05 at $635,000

Here we go with another one in the 50% loss range. And this one comes with a transient license so you can rent it out on the short-term.

Is it a great value now?

Is the Pope Jewish?

But go ahead, knock yourself out, become a landlord and try to make money in a Recession where room rates in Key West have come down this year, not gone up.

Nevertheless, how would you like to be the seller who drank the National Association of Realtor's Kool-Aid in 2005 and who four years later is sitting on a 50% loss (and more if they used creative financing such as Interest only loans, Option ARMageddon loans, etc.)

(Sorry, no photo for this listing at this time)
Example 6

MLS #549274
Listed 7/22/09 at $500,000
Last Sale 4/21/04 at $550,000

This one is only down 9 to 10% in 5 1/4 years. Not bad. But remember, the listing price is the first price it "lists" at today. This listing is up in Sugarloaf Key.

This entry has no info other than it's address and that it has 3 Bedrooms and 2 Baths. Still, using other sales in around this home, I'll be surprised to see it drop its asking price several times from $500,000.

(We'll keep an eye on this one and see if my hunch proves true.)

The thing to point out here is the last time this property traded hands was in 2004. And here were are in 2009 and the new listing price today is under the price from 2004 by 9 to 10%.

Real Estate always goes up. "If I say it enough, it will maybe happen," said the Kool Aid drinkers to the Scam Artists.

Example 7

MLS #111239
Listed 7/22/09 at $459,000
Last Sale 5/24/05 at $812,000

This home is in the very desirable "Meadows" neighborhood between White and Eisenhower Drives. Still, when the tide goes out, all boats, big and small, find themselves lowered accordingly.

This one is about 44% off its 2005 sales price.

That's a lot of equity to lose and you were to hold onto this property, I'll bet you would not see that $812,000 price you paid in 2005 by the year 2020.

(And in fifteen more years, we'll have a better fix on just how fast the sea level is rising, making many Key West properties all the more less valuable.)

Example 8

MLS #111245
Listed 7/22/09 at $1,795,000
Last Sale 3/20/08 at $1,565,000

This is my favorite dream home out of the ten I am talking about on this blog today. And were I a Bankster who made off with millions of scammed dollars in unwarranted bonuses built on bilking foreigners and Americans out of their money and tax money, I'd retire here in a heartbeat, build a big fence around the yard, install a security cams all over the property, and hire some Blackwater goons to protect me from the growing angry mobs.

But I am not that sociopathic or psychopathic Bankster, so, my question is who will buy this place?

Who can get the financing for this place at this time when Prime and Jumbo loan defaults have almost doubled in less than one year?

Banks have tightened credit. Lenders are not giving out loans to "preferred" borrowers as freely as they used to. Even Commercial Real Estate has begun to crash all over the USA. Hence, big spenders ain't getting the money they used to get from the Big Lenders.

For this place to sell, a cash holder with an Optimist Streak must step in. Or someone with a huge downpayment and a family member in a bank will need to come in here and buy this property at a higher price than what it sold in 2008.

My guess?

The current homeowner sitting on this beautiful property with an imagined 15% gain is going to be very lucky if he/she can unload it at March 2008 prices. It did say in the MLS description that this house recently saw its kitchen renovated. I don't know if it was by the current owner or done a few years ago. Still, I don't see a $230,000 wanted gain happening simply because a kitchen was renovated on an already expensive home. I don't for one minute think the current owner will get his/her just listed asking price.

More so, I believe this beautiful home will drop by hundreds of thousands of dollars if it can't move within a year's time. Mark my word, the coming tsunami of defaulting Prime and Jumbo loans and Option ARMs mixed with the "Stealth Inventory" on banks books and not shown on the MLS are going to take its toll on the high end homes . . . homes which just started to seriously implode in price a few months ago.

We'll keep an eye on this one.

(Sorry, no photo for this entry at this time)
Example 9

MLS 549282
Listed 7/22/09 at $169,900 (Bank Owned)
Last Sale (not counting the sale back to bank) 12/29/04 at $500,000

This is one of those "Smurf Village" quadplexes. Although no photo for the exact address of this listing is shown, we all know these townhomes looked the same when they were first built.

In all fairness, the description for this home mentions:

Nice unit with new bathrooms and kitchen, renovations complete in 2005, Jacuzzi on front deck. Tile floors. Property is bank owned, and priced to sell

To which must add in fairness the following thought:

If the home was bought in 2004 for $500,000 and it was extensively renovated (let's say another $100,000 was tossed into it), does this not add more credence that most Key West homebuyers who bought in 2004 are now upside down on their mortgages? (There was a time about 12 to 18 months ago when maybe 20 of these quadruplexes were "Short Sales" and it seemed like every other one was "Realtor Owned".)
The bank took this baby back from the Renovating homeowner. And the bank is trying to unload it at $169,000 which is a b-i-i-i-i-i-g loss on their books (especially if the bank was stupid enough to have lent 120% LTV so the last owner could do renovations.)

But for our purposes, let's be conservative and say the last owner had $550,000 in this place.

Let's see. This would mean the bank is sitting on a 70% loss, paying taxes and maintenance and insurance, while waiting on a buyer to snap up this "deal".

As I just said in another recent blog post, this is the Bizarro World Smith Barney saying of,

We lose money the old-fashioned way . . .

We buy high, we sell low

This one might sell at it's listing price. Still, it doesn't negate the fact that someone over paid for the property in the first place, then renovated it (most likely hoping for a flip) and got stuck right when the market starting turning South in 2005-2006. (I called a market top in 2005. Case/Shiller claims it happened in 2006 using median pricing . . . which I know can be manipulated by the NAR).

Okay, so this one might be, maybe, possibly, be a value to someone out there. Not me. But there might be someone in our workforce who considers this Smurf Village Renovation a much better price than say one of those new"Affordable Homes" which are built on Stock Island and going for $299,750 and which are actually going UP in price at the developer's discretion.

I say this one sells at or near it's current price. And a few years from now, the new owner will unload at an even cheaper price.

Example 10

MLS #111237
Listed 7/21/09 at $145,000
Last Sale 9/29/04 at $350,000

This is one of those smallest of units at Las Salinas condos, a one Bedroom/one Bath with less than 500 square feet of space. You could put five prison cells into one of these, but six would be too big.

There are so many vacant Short Sales units in Las Salinas and there are so many more foreclosures coming, that I would caution all "investors" and wannabe homeowners to not even consider buying here without first investigating complaints from people living in Las Salinas. (Owners and renters are extremely agitated over parking issues at this time.)

I predict these condos will finally descend to and possibly go lower than their brand new prices when they were first built in 1991. I also firmly believe that the current "good" owners who are current on their condo fees will soon be faced with "special assessment fees" to take up the slack on all these units which are going into Short Sale.

This is all just my opinion, but we shall see how it all plays out.

Regardless of what I think, Example #10 was bought in 2004 and at today's optimistic price (in my opinion) of $145,000, this still might seem like a "bargain" to some blue collar worker who isn't savvy and hasn't done his/her homework.

More on condo living come September posts to this blog . . . but for now . . . if you're out there looking at Key West properties, be sure to just look over these 10 examples, notice how 9 of them are now at much reduced losing prices, and remember back to 2004, 2005 and 2006 when everyone you know in this town, especially Realtors, were pounding the table to buy, buy, buy Real Estate or you would be priced out of the market.

Tell that to the last owners of 9 of these properties I've highlighted today.

As always . . . Caveat Emptor,

Rock Trueblood

Sarasota Herald-Tribune Reveals Results Of Their Epic One Year Investigation Into Housing Bubble Fraud – Part 2

The Herald Tribune in Sarasota just completed and reported on an investigation they made into property flipping in Sarasota and Manatee counties on Florida's Gulf Coast.

It's the second installment of this series, the second, third and fourth paragraphs prepare you for the level of the insanity caused by many well connected flippers on the West Coast of Florida, many of them industry insiders from the FIRE Economy.

This paragraph reads:

More than 100 properties from Palmetto to North Port doubled in price in a single day during the recent real estate boom. Proposed condos -- no more than ideas on paper -- flipped two or three times before anyone moved in.

Some investors bought up dozens of houses within a few blocks. Within weeks or months, they flipped them at a profit.

A yearlong Herald-Tribune investigation has found that many of these sales cannot be explained by shrewd deal-making or as an innocent consequence of the real estate boom. Instead, they were manufactured by property flippers who found ways to drive up housing prices so they could make money at the community's expense.

Now I had heard stories of people camping out in front of offices for new housing developments and condos up that way, but I never heard the stories where properties doubled in price in a single day!

That right there smells of fraud. It reminds me of the dotcom days when insiders whose firms were dealt new shares of an about to launch IPO, would see those shares rocket 100 to 200% on the first day of trading, all inspired by investment banksters pump and dump schemes. And that's what much of the Housing Bubble Ponzi Scheme was: a pump and dump of properties which overvalued by insiders who knew the "pump" prices were unsustainable.

The article continues,

The Herald-Tribune examined more than 3,000 property flips that occurred since 2000 in Sarasota and Manatee counties. Based on interviews with more than 100 investors and real estate professionals and a review of thousands of pages of deeds, mortgages, foreclosure filings and other public records, the Herald-Tribune found:

At least 37 groups of property flippers operated in Sarasota and Manatee counties. The groups bought hundreds of properties worth more than $350 million and sold them to associates for inflated prices.

The flippers identified by the Herald-Tribune -- and the people who ultimately bought their properties -- have so far defaulted on more than $450 million in mortgage loans. Their defaults account for $1 in every $13 lost to foreclosure in Sarasota and Manatee counties from 2005 through 2008.

I am going to venture that the same types of groups of "flippers" existed in Key West because I have noticed time and again in records from the Court House and on the MLS that certain townhomes in certain neighborhoods and certain condos all seemed to have been bought up by Realtors and other of their ilk during the same time frame.

But getting back to the story, one must marvel that 37 "groups" of property flippers operated in two West Coast counties during the Bubble and so far, the properties they once controlled are now 1/13^th of all defaults in those two counties, meaning the defaults relating to the 37 flipping groups are now worth $450 million in belly up mortgage loans. That's some serious coinage vaporized by crazymaking money chasers.

So how did you organize a flipping group back then? What kind of upstanding citizen did you want to lead your group which would try to manipulate prices in certain neighborhoods?

Nearly 40 percent of the people involved in questionable flips in Sarasota and Manatee counties were industry insiders -- real estate agents, developers, lawyers and mortgage brokers. Of the 37 groups discovered by the newspaper, 21 were organized by real estate agents or mortgage brokers.

Most flipping circles were organized by a leader who either recruited investors on the promise of easy money or conspired with friends and associates to sell properties at inflated prices. Some of these investors did not realize they were buying properties at inflated prices; others willingly lied about sales prices to obtain mortgages that more than covered the actual purchase.

Some of the people who organized or participated in flips were considered leaders of their profession. One was recognized as one of the top 50 Re/Max real estate agents in the world. Another won multiple awards from the Mortgage Bankers Association of Florida. Some flippers identified by the Herald-Tribune were seen as key clients by local banks and were allowed to pick their own appraisers or had loan approvals expedited to quickly close deals.

Pillars of the community became leaders or participated in these manipulative flipping rings such as:

• One of the top 50 Re/Max Real Estate Agents in the World
  
• Another sociopath won multiple awards from the Mortgage Bankers Association of Florida.
  
• And others were preferred clients of banksters whose FDIC insured "deposits" were tossed freely to the rich and influential. The well connected didn't have to wait in line for loans.
  

Let's call this what it really is: Crony Capitalism used to commit fraud so as to enrich the Oligarch of FIRE Economy greedheads who have no conscience.

Not all the flippers were FIRE Economy sharks feeding on clueless buyers. As the article points out, there were many a flipper wannabes:

The Herald-Tribune found that some of those involved in flips were nothing more than naive investors. They paid far more than they could afford believing they could sell the houses before the bills overwhelmed them.

Others were irresponsible speculators who bought house after house with little or no money down and no clear way to pay their mortgages if the houses could not be resold.

Flipping schemes uncovered by the Herald-Tribune were so common that some investors who participated believed they did nothing wrong.

They viewed flipping as a legitimate financing tool, an easy way to demonstrate that property had increased in value so that banks would lend money against the equity. Banks fed that belief by approving deal after deal.

Ain't that the truth. All those taxi drivers, strippers, hotel workers and the deadbeat husbands and boyfriends of hard-working waitresses, bartenders and strippers were all dabbling in Real Estate after the dotcom crash ripped their faces right off their skulls. You'd think they would have learned in 2000 a hard earned lesson . . . but 99% of them who lost money in the stock market fell for the "Real Estate always goes up" mantra that became an established and supposedly incontrovertible fact by the local and national NAR.

The wealth destruction fallout from the dotcom bubble was nothing compared to what the Housing Bubble crash has wrought and is still bringing us daily. Just think of the trillions of dollars in side bets, i.e. derivatives, still hidden off banks's books and which could absolutely bring the whole world into a giant Depression should the FASB not have given banksters a reprieve last Spring by changing accounting rules. Were the banks still marking to market, well, every other bank in this country would be bankrupt or insolvent, and there would be none of this magical accounting where banks are now showing profits.

This article from the Herald Tribune should be enough to make you want to read the entire series of pieces in their investigation. I'll continue to spotlight them here.

Here is the link to read the latest installment. This piece was orinally titled, "Flipper's toll: On Gulf Coast, half a billion in defaults"

Caveat Emptor,

Rock Trueblood