Slums of the Future

The latest New Yorker has an article about Southwest Florida real estate by George Packer entitle “The Ponzi State.” I had to post it here as a follow up to my 2005 post My Experience with the Southwest Florida Real Estate Bubble.

Florida’s Foreclosure Disaster

In “The Ponzi State” (p. 80), George Packer traces the development of the foreclosure crisis in southwest Florida, and looks at how it has affected people at all levels of society. Florida’s economy, Packer notes, “depends almost entirely on growth—that is, on new arrivals and the wealth they generate in construction and real estate.” Gary Mormino, a professor of history at the University of South Florida, in St. Petersburg, tells Packer, “Florida, in some ways, resembles a modern Ponzi scheme. Everything is fine for me if a thousand newcomers come tomorrow. The problem is, except for a few road bumps . . . no one knew what would happen if they stopped coming.” “By 2005, the housing market in Florida was hotter than it had ever been . . . Home values around Tampa rose twenty-eight per cent that year,” Packer writes. “Flipping houses and condominiums turned into an amateur middle-class pursuit.” Alex Sink, the state’s chief financial officer, says, “Florida has always been susceptible to the Wild West mentality. If it’s too good to be true, we’re going to be involved in it.” The combination of underqualified buyers (“Anybody could qualify—I mean anybody,” Marc Joseph, a Fort Myers Realtor, tells Packer), insufficient regulation of mortgages by the state, and the failure of banks to do due diligence on properties and buyers set up Florida for a particularly hard fall. “Anyone buying and selling property in Florida in the middle of the decade must have known that the system was essentially a confidence game, that everyone involved was both being taken and taking someone else,” Packer writes.

Packer notes, “in a place like Lehigh Acres, near Fort Myers, where half the driveways are sprouting weeds, and where garbage piles up in the bushes along the outer streets, it’s already possible to see the slums of the future.” As Doug Bennett, chief of the Riverview bureau of the St. Petersburg Times, tells Packer, “Too many houses, not enough water, the economy’s terrible, no tourists. This is the capital of the low-wage jobs, and when things go bad people just have no safety net. It’s very unfortunate. This is the epicenter of everything that’s bad in America.”

House hunting? How to get MLS listings first

I have been working with several real estate agencies and brokers (such as Boston Realty News) to get them started blogging and using aggregators. Coincidentally, Ilyse and I have been looking for a house for a year. So I’ve become knowledgeable about how to get listings information.

The real estate market in Boston is becoming a buyer’s market but when a desireable property in a good location gets listed at the right price, it still sells very quickly. So it’s important to get new listings quickly.

The standard way to get notified of new listings that meet your criteria is to go to a broker’s web site, input your criteria (town, price, etc.) and sign up to receive daily emails. Of course I would rather receive listings by RSS but that is still hard to find. There are some brokers, like Ari Ben Harav who manually post their own listings on their blog, but no one that I can find is offering an RSS feed tied to MLS.

I did find a service through a local broker, Bradford Pratt, called MLS PropertyFinder, that consistently delivers listings information much sooner than the daily emails I get from other brokers. There are two ways to subscribe: a daily email and an application you install on your computer called PropertyMessenger.

PropertyMessengerThe PropertyMessenger application constantly scans MLS and instantly sends you anything that meets your search citeria. The notification pops up from a little pair of eyes that sits in your system tray.

PropertyMessenger is the fastest way to find out about new listings but I have also found that the daily email from PropertyFinder is the fastest if you don’t want to install an application or, like me, you sometimes turn it off to avoid the distraction.

Here’s a case in point. On December 14 a broker with Century 21 Adams in Arlington listed a house that is, in every way, exactly what we want. At 7:00 AM the next morning I got a PropertyMessenger email from Brad Pratt telling me about the new listing. I didn’t get notified about that listing from any other brokers until 2:30 AM on the 16th, nearly a day later.

The rest of the story is that when I had my broker call the listing broker, he was told there was already an offer that he expected the sellers to accept. Think about it. An offer was accepted on the same day the listing was posted to MLS. If I were selling a house and I got a decent offer the instant my house was listed, I think I would wait at least another day or two to see what other offers came in. Or perhaps the offer had already been made and esentially accepted before the listing was made. But the listing still had to go on MLS since as members of MLS, brokers are required to list their properties. Selling a property in one day sure looks good for a broker.

So I’ve learned the hard way that the best way to get listings first is to have a relationship with the broker who is likely to list the property you want. Then he or she will call you before the MLS listing is made. The listing broker keeps the 2.5% that would normally be paid to the buyer’s broker and the seller gets a quick sale.

My Experience with the Southwest Florida Real Estate Bubble

Lehigh Acres In 1975 my grandmother paid $1,500 for a quarter-acre lot in Lehigh Acres, a former cattle ranch sold off in little pieces to people all over the country starting in the 1950s. Think Glengarry Glen Ross.

A 1998 paper, Planning in the Wake of Florida Land Scams, described the development this way:

The original developer, the Lehigh Acres Development Corporation, was skilled at marketing but had never before developed land (Faulkner 1994). They emphasized the volume sales of unimproved homesites to out-of-town buyers, virtually ignoring community planning and even the basics of drainage. The demand for installment purchases of the early Lehigh Acres lots was phenomenal. Even though typically 40% of the purchasers defaulted on their payments, the lots were simply sold again, since no complicated foreclosure proceedings were required (Gould 1995). The development expanded in every direction. The result today is an unending landscape of quarter-acre and half-acre residential lots with a confusing grid system of over a thousand miles of discontinuous local roads.

This development approach created numerous problems including a rigid pattern of nearly identical lots and streets superimposed over the entire site (see configuration in Figure 6); a failure to provide even the most basic services such as water and sewer to most lots; an inadequately designed road network with few continuous arterial streets (despite the apparent grid); no reservation of land for schools, fire stations, and parks; an absence of employment opportunities, since sales techniques emphasized retirement living; little vacant commercial land remaining to serve future residents; and the destruction of most of the original wetlands by an elaborate network of canals. As Lehigh Acres has grown, the population mix has become younger, and more residents must traverse narrow and poorly constructed roads in their daily commute to jobs in the Fort Myers area. The number of commuters from Lehigh Acres is particularly high since there are so few jobs nearby.

As recently as 2003, the lot was assessed at $1,300. Then in 2004 it jumped to $3,400. And this year it rocketed to $19,500.

In 2004 I started getting weekly solicitations from brokers to list the property, from developers to buy it, and from “average people” with long stories about how they “longed to live in the country” or “struggled with the decision and have decided to relocate to Florida.” Those last were always offering about half of what the realtors were saying they could sell it for. The prices went from $7,000 in May 2004 to $22,000 in September to $35,000 in February 2005 to $40,000 in June.

When the lot across from mine sold for $55,000 in June, I called the buyer and asked him if he wanted to buy mine as well. He did and I sold it this week.

Lehigh lots burning up auction block
Jorma Duran
Posted on: Friday, August 19, 2005

— Investors claim empty lots in Lehigh Acres are the hottest pieces of property in Florida right now. More than 100 lots were auctioned off
today at Germain Arena in Estero. Some bidders say the prices they paid are outrageous, while others believe their investment will pay off in
the end.

No matter how fast the Lehigh property prices jumped, the numbers made sense for some. “The worst that can happen is that I sell them for a profit,” said investor Jay Suarez. Suarez, from Miami-Dade County, buys, sells and develops land all across Florida. He says two years ago the same lots sold for only a few thousand dollars each. “When you take a look at the growth between two years ago when you were buying something for $1,000, and now being able to sell it for $75,000– it’s amazing,” Suarez said.

In all, 128 pieces of Lehigh Acres land went up for auction, and all of them sold in mere minutes to the highest bidder. But the prices scared many locals away. Real estate agent Perta Niedermair says the lots were selling for outrageous prices – and she was quickly priced out.

With figures soaring to 10 times the price five years ago, Niedermair says people living in Southwest Florida wouldn’t think these lots are worth it. But those who normally buy and sell property on the east coast of Florida say it would be outrageous to not buy the plots of land. “Prices over there for something you pick up for maybe $40,000 here, over there go for $200,000,” Suarez said.

The land sold today ranged in size from a quarter to one-half acre. The auction company reports the lots sold 10 to 15 percent above market price, on average going for about $50,000 each.

Boston Housing Prices Getting Closer to Decline

Housing markets ranked by risk of price declines – Aug. 4, 2005

NEW YORK (CNN/Money) – Some of the nation's frothiest housing markets are at growing risk of price declines, according to the most recent survey from PMI Mortgage Insurance Corporation.

The PMI Risk Index is based on economic activity and other conditions that PMI thinks are predictive of home-price declines over the next two years.

Factors used to derive the index include home prices, employment conditions and the affordability of homes.

At a 55.3 percent chance, the index singles out Boston as the area most at risk for a decline. That's up from 53.4 percent three months earlier.

Home won't sell? Some cancel and relist

Here’s more evidence that the Masachusetts real estate market is softening.

Home won't sell? Some cancel and relist
Agents aiming for fresh appeal

By Kimberly Blanton, Globe Staff | July 22, 2005


To remove the stigma attached to a house that won't sell and make a fresh appeal to home buyers, some real estate agents reset the clock on the number of days a property has been listed — a practice critics liken to resetting the odometer on a used car.

Agents can cancel a listing and create a new one for the same house in the central database of Massachusetts homes for sale, the MLS Property Information Network. The ''new” listing is then dispatched, electronically, to agents who generate a ''hot sheet” for clients of new houses coming on the market.

''We see it everywhere,” said Patrick Lashinsky, vice president of California-based Zip Realty Inc., which makes regional MLS databases around the country available to customers, including home buyers. ''Agents know that if they're at the top of the list as being a new listing, that's when you generate the majority of your client traffic for the home you're selling.”

The number of canceled listings in Massachusetts has nearly tripled since 2001, a sign that one of the hottest real estate markets in the country is beginning to cool down, said real estate specialists. It ''tells you is the market is softening. Demand is declining,” said Karl Case, professor of economics at Wellesley College.

The practice of canceling and relisting a property, which shortens its days on the market, makes it difficult for analysts and economist to gauge the strength of the real estate market. ''I rely on that data,” Case said. ''I'd prefer they not do it.”

On June 30, Massachusetts houses sat on the market, unsold, for 70 days, on average, unchanged from June 30, 2004, MLS data show. But May home sales in Massachusetts were 11 percent below May 2004 sales, and agents are bemoaning a growing inventory of houses for sale in some Boston suburbs.

To improve information for its member agents, MLS Property Information Network and similar services in other regions, including the Washington, D.C., area, recently made it easier to determine total listing days, known as ''cumulative” days, to its listings. MLS Property's aggregate ''days on market” statistic continues to be calculated using the incomplete information for some houses.

MLS Property said 6.5 percent of all houses sold since January had been canceled and relisted with the same agent. ''That's very low,” said Melissa Lindberg, MLS Property spokeswoman.

Maggie Tomkiewicz, president of the Massachusetts Association of Realtors and a Dartmouth agent, said the practice is not widespread, because agents can look up a house's history on MLS and convey to a buyer how long it has been for sale.

''That's what they hire us for, to interpret the data and to know those things,” she said. Home buyers don't have direct access to MLS data; agents must look up a property for a buyer. Commissions for agents representing the buyer and seller in a transaction are based on a percentage of the sales price of the property.

Michelle Ferranti is ''shocked” that neighbor Christopher Daleo's house on Arbor Lane in Woburn has not sold. Another neighbor, Michelle Palumbo, says his four-bedroom home, with extras like underground sprinklers, a centralized vacuum-cleaning system, oak-spindled staircase and light fixtures purchased in Manhattan, is viewed as the best one on a cul-de-sac of similar houses.

It has been on the market since March 8. Yet, on July 9, it appeared as a new property on MLS, said Daleo's agent, Pam Dooley. She had canceled it July 8 and renewed it the next day, erasing in several keystrokes information that might cause house hunters to wonder why the house wasn't selling. ''When it shows up as new it catches people's eye,” said Dooley of Prudential Preferred Realty in Woburn. Her client, who is relocating to Alabama for a research position at a biotechnology institute, dropped his price five times. ''It's priced to sell,” Dooley said.

The number of MLS Property cancellations is rising, an indication that agents are refreshing listings on tough-to-sell houses or frustrated homeowners are pulling houses off the market because they can't get their asking price. MLS had 10,606 cancellations in the first six months of 2005 compared with 9,722 in the first six months of 2004, according to an analysis of MLS data by Bill Wendel, owner of The Real Estate Cafe in Cambridge. In the first six months of 2001, just 3,736 listings were canceled.

In a recent spot check of houses for sale on MLS in Middlesex County, Barry Nystedt, president of the Massachusetts Association of Buyer Agents, said one in four listings canceled between May 25 and June 25 was recreated by the same firm with a new MLS number. The problem for buyers is that if their agent is unfamiliar with a neighborhood, the agent ''may convey to your buyer, 'This is a new listing, let's go look at it,' when in fact it's not a new listing,” said Maribeth Boisvert, with Coldwell Banker Residential Brokerage in Shrewsbury.

Jonathan Cohen, who will relocate from New York to attend Harvard Law School this fall and was briefly house-hunting, said knowing how long a property has been for sale is essential when placing a bid. The securities trader said it is more important for houses than for securities, because ''every house is different, every neighborhood is different.”

MLS rules permit agents to cancel a listing if they and their client agree to cancel their sales contract. A newly created listing is assigned a new MLS number. John Breault, MLS director of customer support, said his organization doesn't control how agents do business. ''We just try to look at the data and make it as accurate as we can,” he said. In the past, agents had to dig into a property's history in the database to find cumulative days on market. Last year, MLS made cumulative days more visible. When members look up a property on the database now, they immediately see both the current number of days for a new listing and, next to it, cumulative days on the market.

Jim D'Angelo, Century 21 agent with Travis Realty in Billerica, said the strategy of canceling and creating a new listing worked for him in selling a Billerica split-level: The owner is scheduled to sign a purchase-and-sale agreement later this month.

He negotiated the sale in early July, days after canceling the listing on June 20 and putting the house back on the same day with updates to the interior. Since December, the price dropped from $434,900 to $398,900. ''After a house sits for a little while,” D'Angelo said, ''it gets overshown.”

Kimberly Blanton can be reached at
© Copyright 2005 The New York Times Company