Saturday, February 28, 2009

Mortgage tax deduction to get cut dramatically under Obama tax increase on the wealthy

True to his word, taxes are going up on those able to consider buying a single family home in Palm Beach.

While mortgage is only deductable up to 1.1 milllion, there will be a large loss for those in the upper income brackets, making the true monthly cost of owning a home rise by 20% :


"The tax increases would raise an estimated $318 billion over 10 years by reducing the value of such longstanding deductions as mortgage interest and charitable contributions for people in the highest tax brackets. Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments.


The changes would be phased in gradually over the next few years. For the 2009 tax year, the 33% tax bracket starts with couples with taxable earnings of $208,850, when adjusted for personal exemptions and various deductible expenses. A taxpayer in the top bracket paying $1,000 of mortgage interest, for example, would see a tax break worth $350 reduced to $280."

Wednesday, February 25, 2009

Taxes to rise for wealthy

As quoted in the NYtimes on 2/26 and on 2/28:

"The combined effect of the two proposals, on top of Mr. Obama’s existing plan to roll back the Bush-era income tax reductions on upper-income households, would be a pronounced move to redistribute wealth and reimpose a substantially larger share of the tax burden on the most affluent taxpayers."

"And Mr. Obama’s tax plan would affect people — mostly those with high incomes — who work for hedge funds or private equity firms and pay only a 15 percent capital gains tax rate on much of the money they take home. Now, they would pay ordinary income tax rates, as much as 39.6 percent, on everything."


A large part of the housing bubble was certainly due to the tax cuts on the wealthy. As these will now be reversed, there will be les money to support high home prices for "second home" destinations.

Monday, February 23, 2009

Single family homes on palm beach for ....Under 1 million??

Well as this article in the Palm Beach Post points out, homes can be found for under 1 million . This is the lowest price range for tear-downs. As the previous level was 2 million, this does not bode well for overall values.

Saturday, February 21, 2009

Palm Beach homes go for $305 - $646 per square foot

Palm Beach County has terrific transparency for home sales and assessed values from a great website:

http://www.pbcgov.com/papa/aspx/GeneralSearch/GeneralSearch.aspx



From the palm beach county tax records of transactions, it is clear that current price per square foot is NOT anywhere near the $1000 / sq ft that is quoted by real estate agents in palm beach:


$544 per sq. ft. 695 S County Road (Dec. 2008)

$438 per sq. Ft. 280 Orange Grove (Dec. 2008)

$357 per sq. ft. 402 Primavera (Jan. 2009)

$366 per sq. ft. 2267 E Ibis Isle (Dec. 2008)

$646 per sq. ft. 166 Everglades (Nov. 2008)

$561 per sq. ft. 4 Lagomar (Oct. 2008)

$305 per sq. ft. 222 Cherry Lane (Oct. 2008)

Evans Report for Palm Beach Home sales is wrong

Every seller is prepared to sell for fair market price.
Every buyer is prepared to buy for fair market price.

So, what is the market doing in palm beach? What is fair market price in palm beach?

According to the recently released "Evans Report" as reported in the palm beach daily news, the median sale price jumped up more than 10% in 2008 when compared from 2007.

Huh?

How can the Hamptons, Fisher Island, Aspen, Manhattan, Europe, Russia, South America, Asia all be going down (let alone Boca Raton & Jupiter & Palm Beach Gardens), and the Island of Palm Beach is supposedly going UP?


I did a back of the envelope calculation:

We are talking about the "average" home in palm beach. Something that might sell in the 2-50 million dollar range.

The problem is that 3 gazillion dollar transactins closed in early 2008. BEFORE the DOW collapse. Before the bank meltdown. Before Palm Beacher Madoff's scandal.

So, of the 3 transactions that went for 95, 68, and 81 million dollars each, that represents a total sales of $244 million. Divide that by the remaining 101 reported transaction and you have an "extra pad" of 2.3 million per sale. so, subtract 2.3 million from Evans padded number of 3.875 and you are left with 1.6 million.

Now, if 2007 had average sale of 3.5 million according to Evans, then we have a year to year drop of.....about 40%.

Palm Beach Post Reporter smells rats out the inflated Palm Beach home market

What a breath of fresh air. Independent journalists do exist in south Florida.

If you look at the amount of revenue newspapers (especially the glossy and "shiny" ones) generate from the real estate industry, it is no wonder that any "reporting" is skewed to the newspeak that the real estate agents and their enablers would like to perpetuate.

So, along comes the Palm Beach Post reporter Jeff Ostrowski who correctly points out the fundamental flaw of the very incorrect "report" that the real estate lawyer (i.e. makes money from doing closings referred by real estate agents) Les Evans, author of the "Evans Report."

fourth quarter (i.e., after the dow tanked) plummeted. Not just dropped.

Friday, February 20, 2009

The Hamptons Half-Price Sale of Mansions

The Wall Street Journal reports today that Hamptons homes are going for 50% off.


...."There were properties that were overvalued more than in your wildest imagination, they were being built and sold for double the price in a couple of years," says Paul Brennan, regional manager for Prudential Douglas Elliman Real Estate. Then last summer, he says, sales stopped. Now, "it is blacker than anyone thought it was going to be." In Southampton, the number of fourth-quarter sales plunged 45%, according to The Real Estate Report Inc...."

....Prudential's Bridgehampton office, Broker Lynda Ireland spends much of her time now dealing with offers from individuals she calls "investors." "They are putting $1 million to $1.5 million offers on homes that are $3 million to $4 million," the 25-year Hamptons resident says....."

Wednesday, February 18, 2009

Skewed report claims Palm Beach homes values rise in 2008

The Palm Beach Daily News reports today that an analysis of home sales reveals that median single family prices have gone up. Huh?

First, that is "median" as compared with "mean". The median is the number at which half of the homes sold for less and half sold for more. The mean is actually what most people understand as the "average". In other words, mean is created by adding up all home prices and divide by number of sales.

There is a reason why they report only "median" an not "mean": 3 gazillion- dollar properties skewed the market upward in 2008 (like Trump's 100 million dollar home ) dramaticaly as they report:

"As listed in The Evans Report, the median and average sales prices for single-family homes could be skewed by three exceptional sales in 2008: 1236 S. Ocean Blvd. for $81.5 million in April, 60 Blossom Way for $68.5 million in June and 515 N. County Road for $95 million in July."

So, if one factors OUT these three outliers then we have a tremendous DROP in mean and median sales prices for 2008.

Second, condos are a better indicator fo the market as condos tend to be more similar in price, size and condition than the tremendous variety of single family homes. Condos dropped in median price by....27%....!!!!!

"....Another concern is that the median sales price for Palm Beach condominiums dropped 27.3 percent from $825,000 in 2007 to $600,000 in 2008, Evans said...."


The palm beach home market clearly dropped in 2008 and for 2009 is already down further. Good buying opportunity if you don't mind buying "on the way down"

Tuesday, February 17, 2009

Palm Beach Island homes selling BELOW assessed values

Most homes for sale on the Island of Palm Beach Florida are Listed for 50% above the assessed price.

The assessed values are generated by Palm Beach County and are based on recent sales, square foot, lot size, and the specifics of the construction. Because there are no state income taxes in Florida, local governments rely heavily on high property taxes. Consequently, homeowners do whatever they can to try to keep this assessed value as low as possible.

Now, we can see that homes are actually (2009, not 2008) selling for BELOW this assessed value.

Some recent ones are:

A three-bedroom, 3.5-bath home at 402 Primavera Way in Palm Beach $2 million on Jan. 14. *** Assessed Value $4.13 ***

280 Orange Grove - Sold Dec. 2008 - Sold for just over one million ***Assessed Value $1,600,000 ***

301 Garden - Sold Dec. 2008 for just over 2.5 million *** Assessed Value $3,000,000 ***

Monday, February 16, 2009

Bernie's Victims on Palm Beach and more mansions on the market

CBS News reports on the Palm Beach victims and their pending home sales on Palm Beach

"Madoff's Palm Beach Victims: "Our 9/11"
CBS Evening News: Mansions Go On The Market As Madoff's Neighbors Cope With Their Losses"


The terrible cruelty is that this crime that Bernie carried out comes on top of the terrible general state of the market, meaning that many will never be able to recoup their losses.

Luxury market in Palm Beach in Dramatic Downturn

The Palm Beach Post reports today that beyond the shuttering of luxury boutiques on Worth avenue (Dior, etc) the high-end homes in the region are plummeting in price:

".....the high end of the economy no longer lives in its own little fantasy world. A year ago, private jets were still selling, mega-yachts were moving, and home prices in the town of Palm Beach were soaring (even as prices in the county of Palm Beach were tanking).

Now, though, mansion sellers like Dru Schmitt have slashed prices. Schmitt sold his 23,000-square-foot palace in Boca Raton in January for $12.9 million, after originally listing it for $24.9 million. The deal was recorded at $10.9 million......"

Sunday, February 15, 2009

Second wave of mortgage bubble yet to arrive


Watch CBS Videos Online


60 minutes shows how a second type of risky mortgages, the Alt-A and others are going to appear in 2009 and 2010.

New Jersey Circling Vulture blog in NYtimes

The NYtimes today has an article about a blogger in New Jersey who provides excellent detail about homes for sale in a very upscale neighborhood. Too bad we do not have a similar one for palm beach.

It can be found on page 11 of the Sunday Business section

His link to his blog is

http://www.circlingvulture.com/

Palm Beach Daily News self-censors 40% drop in home price

The Palm Beach Daily News ran a good article on February 10 and 11 2009 about a spec home in a very nice part of the islannd of Palm Beach Florida that recently sold down more than 40% form its peak asking price. The title was:
"Has the recession reached Palm Beach? Home sells for millions less than peak asking price"
By MEGAN V. WINSLOW
Palm Beach Daily News Staff Writer

Wednesday, February 11, 2009


Now the title was been changed to "Palm Beach home at 756 Slope Trail home sells for $5.96M"

I guess that the real estate professionals whose advertising keeps the "shiny sheet" afloat were miffed by a bit of honest reporting and had it changed.

The link to the revised page is found at
http://www.palmbeachdailynews.com/news/content/business/2009/02/10/SLOPE0211.html

Wednesday, February 11, 2009

Its official: Palm Beach Daily News admits palm beach real estate orices in free-fall

http://www.palmbeachdailynews.com/news/content/business/2009/02/10/SLOPE0211.html

Today, the Palm Beach Daily News ("the shiny sheet") reports that single family hoes on palm beach island are finally seeing prices drop fast. This home, as an example, was a knock down in a great location with premium new constuction. It sold for......60 cents on the dollar from the peak asking price. This is in line with other recent sales. As other owners begin to realize that prices need to come down at least 50% from 2006 peak, they will begin to sell.


"Tuesday, February 10, 2009



Daily News Photo by Ruth Cincotta
(enlarge photo)
George L. Ford III's Mediterranean-style house at 756 Slope Trail has sold for $5.96 million. The buyer is Christopher Dacamara Orthwein.

Last week's sale of a new island home at a discount of more than $4 million off the peak asking price could be a sign of the times — or a sign the price tag was initially inflated, real estate professionals associated with the deal said.

Novice developer George L. Ford III's Mediterranean-style house at 756 Slope Trail sold for $5.96 million, down from a $10.3 million peak in December 2007, about the time it was first openly marketed.

The five-bedroom, 61/2 bath residence is situated atop a hill next to the town's historic Art Deco-style water building, and it overlooks the Palm Beach Country Club golf course.

According to the warranty deed, the new owner is Christopher Dacamara Orthwein, son of Adolphus Busch Orthwein, former vice president of operations for Anheuser Busch Cos.

Michael Montgomery, of Jeffrey A. Cloninger & Associates Inc., represented Orthwein in the sale, and Scott Gordon, of Fite Shavell & Associates, represented Ford.

Gordon said the poor economy might be to blame for the price reduction.

"I think it's just the times we're in right now," he said.

Gordon said the price started at $8.9 million before rising to $10.3 million and then dropping to the final asking price of $7.99 million.

A year ago, Ford had a "much better offer" but turned it down, Gordon said, declining to elaborate.

In retrospect, the home might have been priced a little bit above the market, Ford said."

Tuesday, February 10, 2009

Moody's Economy : Palm Beach home prices will settle at 62% down from 2006 peak

Moodys technical website economy.com now predicts that prices in South Florida (Broward andPalm Beach counties) will settle in late 2010 after prices have fallen 60% from the peak (2006) prices.

This is beginning to be reflected in recent home sales (January 2009 home sales on Plam Beach Island): Prices are DOWN from their 2006 peaks and falling fast as more inventory comes on the market on the island.

From Blockshopper.com :
" Mr. Abony Lorne Abony bought a four-bedroom, 6.5-bath home at 695 S. County Road in Palm Beach for $3.5 million from Cement Pond Holdings, LLC, on Dec. 30.
Cement Pond Holdings, LLC, paid $7.8 million for the property in April 2006. The 6,426-square-foot home was built in 1953."


Now, he is paying 44 cents on the dollar from the Peak (2006) so what looks like a "steal" is actually a seller realizing where the market will end up (i.e., down 60% from peak 2006 prices) and selling now, rather than race to the bottom over the next 2 years with the other homes that are coming on the market every week on Palm Beach island.

Friday, February 6, 2009

Palm beach home prices and real estate must follow economic laws

Economy Shed 598,000 Jobs in January
Rate Rises to 7.6%, More Than Forecast
NYtimes

Job losses were once again spread across both manufacturing and services industries, reinforcing the picture of an economy contracting at
+++++

As is widely reported, the economy continues its terrible downturn. Yes, palm beach homes and palm beach real estate agents continue to believe that sellers should expect to turn a hefy profit on homes they purchased duting the bubble (after 2003). After Madoff, Dow collapse, etc etc, now the jobless rate is increasing. Sellers should realize that things will not sell at those high prices

Thursday, February 5, 2009

The link to the NY times article is here:

Last Bastion of Bubble Pops

From the NY Times:
 It is clear that the last of the overpriced bubble-fueled bastions of real estate has popped.   Like manhattan, the Hamptons, now Fisher Island has collapsed.   These enclaves were thought (by the owners and their enablers) to be immune from the downturn.  The "Europeans" "new yorkers" "South Americans" and others would always be ready to spend eve inflate prices.


Now this might finally begin to sink to the brains of those palm beach home owners who think that a home bought in 2004 is worth more now than when they paid.