The Perfect Storm: Real Estate In South Florida

South Florida Foreclosure & Real Estate News
MIAMI (CBS4) ― In 2000, the average price of a home in South Florida was $105,000. Today it's twice that amount, with twice the property taxes.

You could call it The Perfect Storm–hurricanes, taxes, inflation and greed. Combined, they have launched South Florida into a new super-wealthy economy. Many of you are adjusting to survive. If you can't adjust, you are likely leaving and being replaced just as fast by someone who can afford the new price for paradise.

"South Florida has always been built on, well not a ponzie scheme, but some kind of dream that may be mythical," said Dan Ricker, of the Watchdog Report. "You think about Coral Gables. George Merrick starts it and then it goes bust. We're a community of one major event after another but we renew ourselves and we almost don't even remember the past."

In the year 2000, it was the climax of a dot-com bust. Money was looking for the next big thing: Real Estate was it.

"Anyone that bought a unit could sell it for more than they paid for it," said Sol Genet, of National Title Insurance.

"It became the biggest fad, flipping," said realtor Peter Megler.

"Real estate became very liquid especially in the condo market. People would buy pre-construction pricing and that's before the building was out of the ground, and then they would sell the contract while the building was being constructed and for huge gain sometimes 200% gains," said Glen Daniels of Foreclosure.com.

In 2004, the average price of a home in South Florida went up $1,000 every week.

"People had so much money in this community, in the South Florida community, because they were making so much money from nothing in buying and selling real estate. Wealth was appearing that they were able to drive the consumer market place throughout South Florida," said Genet.

"People found their dream and were given a product to get into their dream. What were we doing? We were living beyond our means but someone gave us the vehicle to do it in," said Dennis Hearing, a short sale realtor.

"Almost any borrower that wanted it could borrow money. That just brought the financial fraudsters out of the woodwork," said Genet.

"People attacked in teams with the mortgage fraud. It was just rampant, there was no control--we're just at the tip of the iceberg right now," said Megler.

"'Please state what your income is.' What do you think I am going to write? I'm going to write $50,000. If that's what I need per month in order to get this loan, that's what I'm going to write down. And that was the simplest form of mortgage fraud and the most common form that we saw," said Genet.

The Perfect Storm started with greed and mortgage fraud that artificially drove prices. As prices went up, the storm grew. Property taxes connected to home values skyrocketing to record highs.


Then Mother Nature got involved.

"2004, 2005, established many records. And while we had seen busy seasons before, 2004-2005 turned out to be the time where the tracks seemed to cluster near Florida," said Ed Rappaport, with the National Hurricane Center.

Mother Nature's record run wrecked our expensive homes, hiking insurance rates on average 33%.

In 2007, South Florida was battered by a different storm–inflation. Gasoline went up 31%, electricity up 13%, milk 12%.

"It's been at least probably 15 years since we've seen this high inflation," said David Kelly, a University of Miami economist.

In the end, inflation topped 5%.

"The problem is the suddenness which it happened over the last two years. It's been a big problem," said Kelly.

"If there is slow change you can adjust much more easily. You can buy more fuel efficient cars, if you know prices are going to increase slowly over time, and work this into your wage demands when you negotiate job offers and so on. When it's surprisingly high in a given year, that's when it hurts you," said Kelly.

In four years that created 'The Perfect Economic Storm.'

That has left us a mess of foreclosures.

They were selling anywhere from $600 thousand to well over a million dollars, and now there is an active foreclosure in this building for $219 thousand," said Daniels.

In September 2007, the Miami-Dade Mortgage Fraud Task Forces had 15 members. Today it has 100 plus.

"It's going to be so massive that I really feel that the feds are going to have to step in just they way they did in the 80's to tackle the rampant cocaine production and money laundering and stuff like that. It is a different animal but it's just as big," said Megler.
80,000 homes on the market have values dropping like a rock and banks afraid to write loans because of it.

"When credit dried up, that last person holding the hot potato, holding that apartment building, holding that commercial building holding--whatever real property it was--held property that wasn't worth what he or she paid for it. It wasn't worth even the amount of money that they borrowed against it," said Genet.

And property taxes are now out of control. Or is it spending that's out of control?

"You can tax the people, but if they can't make the payments then your wiping them out, you lose your base and you're slowly spiraling into oblivion or financial oblivion because you're slowly killing the goose that gives you the revenue," said Ricker.

South Florida is no stranger to economic storms. In the 1980's, the storm was fueled by drugs. This time around it is greed. And this time around we are dealing with our biggest challenge yet that South Florida is now the epicenter of an affordability crisis in the state of Florida.

Caught In The Middle: Miami's Middle Class Exodus
 
MIAMI (CBS4) ―

For decades, South Florida has been proud of being a piece of paradise where you could raise a family, perhaps retire. In the last couple of years, calling the region home has changed dramatically, where more people are moving out than moving in.

The Bank of America building in downtown Miami was once known in the 1980's as the Centrust Tower when it eventually faced bankruptcy and a city in turmoil.

It still lights up the skyline, reinvented and thriving. Dozens of skyscrapers have popped up, and dozens more are on the way. The question posed is while this city appears to be headed to greatness, will the people who made South Florida still live here when all this is done?

Florida has been faced with more foreclosures in 2007 than 1980, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1990, 1991, 1992 combined. The year 2007 was a record.

In Broward County, foreclosures in 2006 were 8,995; in 2007, it was 23,476. For Miami-Dade County, there were 9,814 foreclosures in 2006; in 2007, there were 26,338.

Every week, inside our county courthouses, banks try to sell hundreds of foreclosed homes. Some of them are half off, most of them with little success.

ON THE EDGE

One foreclosure affects Cathi DeThomas.

"When we bought this house, we were to stay here for 10 years hopefully build enough equity with the improvement and sell it for a profit and hopefully have a little nest egg for retirement."

But now, foreclosure is what affects Cathi DeThomas, who took out an adjustable rate mortgage.

"They qualified me for the loan just by my credit score alone," she said.

Worried she would be priced out of South Florida, DeThomas took the mortgage.

In 2003, her Deerfield home appraised for $400,000; today, it's going for $250,000 and on the market for four months without a single offer.

"The idea of going into foreclosure, for me, from a midwestern viewpoint is 'you just don't do that'."

Despite her best efforts, she just missed her first mortgage payment.


"I don't think I'll ever have the possibility of owning a home down here again or anywhere else for that matter. And at my age, that is even more depressing because you know if I was my son's age it would be different. You can recover. You can build up again. You can give it another shot. But I'm at a point in my life where you don't get that many more shots."

DESPERATE TIMES

In April of 2005, the Miami-Dade Housing Authority created a list for anyone who needed affordable housing. Forty-thousand people signed up. Three years later, 25,000 on the list are still waiting for a phone call.

Cassandra is one of the lucky ones. "I never fathomed that we would find ourselves in this situation," she said.

Cassandra got help from the housing authority, where she was set up in Section 8 housing after a landlord stole their money and her husband lost his job in the construction market.

She added, "The situation is either here or our van. And we are a family of four and we can't very well stay in our van."

In a modest South Florida home, Cassandra is raising her family and losing sleep over it, "because it's not comfortable. This is not our house."

Ironically, Cassandra is living in a foreclosed home. The house is a bank- owned foreclosure.

"Any time between Monday and Friday, nine to five is the most nerve racking, because, of course, the city is open and operable."

The location, "New Locks", empowered by a community activist, Max Rameau, who views himself as a modern day Robin Hood.

He said "We're liberating units. We're not stealing anything. These places are locked up and enslaved and we are liberating them."

So far, Rameau has "liberated" a half a dozen foreclosures to struggling families. He has plans for dozens more despite threats from the law.

"I think the law, while the law certainly has some value, I think there are times when you can't obey the law. If slavery were legal, I think we would be obligated to disobey slavery. Now we have vacant housing while there are homeless people with children living on the street. I think we have obligation to make those units available."

Rameau added, "We need to take back land. We need to take back housing. And we need to take control of our own destiny and our own situation."

Cassandra added, "There are a lot of government entities that are set up and designed to help us but they don't really want to do that. Their hearts are not really there. They are just there for a paycheck and we found that out the hard way."

THE EXODUS

Then, there are those who fled to Greenville, South Carolina.

At a printing press plant about 100 miles southwest of Charlotte, North Carolina, dozens of South Floridians are hard at work.

Larry Kudeviz of Genesis Printing said, "I tried to stay in South Florida. I don't think anyone I talked to really thought I was going to move."

In 2007, during South Florida's record year for foreclosures, Larry Kudeviz decided he had enough.

"Listen. If you can't afford to live, and you can't afford to pay your taxes, and you're living week to week or less than week to week, you're not happy. You can't say this on camera, but you walk somewhere and you say hi and they say an 'expletive'. They grumble. But here you smile and everyone says hello."

Alongside Kudeviz is Heratio and Mario – both from Miami.

Kudeviz moved not just himself, but 120 jobs out of Hialeah. Employees were given the opportunity to follow him to South Carolina. Dozens did in pursuit of something they couldn't afford in Florida, the American dream.

Jorge Sierra is a Genesis employee and said, "I think we are going to find it. My wife is pregnant here. We are going to have a boy in South Carolina."

Jorge is earning as much as he did in South Florida. The difference: he can find a home he can afford.

Fritzi Barbour, a Coldwell Banker broker, showed what $182,500 gets a buyer: a 22,000-square-foot house with a backyard. She added, "And in our market, the average-priced home is around 186-187-thousand."

Is Genesis' exit out of South Florida just the tip of an exodus?

Barbour added, "It kind of started slowly and none of us realized it was happening until all of the sudden every broker that I know had people in their office out showing property to families from Florida."

Patrick Mason owns "Carolina Living," a magazine that markets to people from out of town. His research shows for the first time ever that Florida is now the number one exporter of people to South Carolina.

"People are seeking good value," Mason said. "They are leaving high cost regions and looking for reasonable cost regions."

Speaking about life in Florida's foreclosure capital, Kudeviz xplained, "South Florida has a real big issue. What's going to be of it? I don't know. I'm not a fortune teller. But I know I wasn't going to wait around to be a byproduct of what happened. I am going to make my own destiny."

Where American dreams are struggling, DeThomas said, "I don't think the middle class can survive here. Your nurses and teachers and postal workers, and all of our middle professional people who aren't upper management, it's like we don't have an option."

She reiterates a common theme in today's economy that people are caught in the middle.

"Every day it's getting worse. Every hour it's getting worse. It's getting harder and harder for people to survive. There are people who commit suicide over the same situation. It's just that serious."

By the numbers, South Florida appears to be in a state of metamorphosis. Its middle class is leaving, and quickly being replaced by a wealthier class. People may have to be wealthier not only to survive in South Florida, but to thrive.

The working class is either on the verge of losing everything, struggling to survive or just leaving. The gap will continue to widen between the have's and the have not's unless something is done to stop it.

Next week: A look at how South Florida became so unaffordable in a matter of four years, then, some solutions of how future generations will be able to live here.

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