Record Drop in February - "2001 prices" will be bottom

As reported in the NY times today, February was the worst drop in history. This data is from same-home sales. It is clear that we are still nowhere near bottom.

As they report:


"Joshua Shapiro, chief United States economist for MFR Inc., said in a note to clients that “it is unlikely that we are anywhere near a bottom in nationwide home prices.” He estimated the index was perhaps two-thirds of the way through its ultimate total decline.

That would bring big city prices back to where they were in late 2001 or early 2002..."

Millionaires are 27 % fewer = less buyers for palm beach

With 28% fewer people able (even if good times returned today) to consider buying a home in Palm Beach, it is no wonder that the inventory continues to rise.

Add to that that the remaining people who could potentially buy in the Island of Palm Beach are reconsidering the widsom of buying a second home in (hurricane-prone, high real estate tax, eroded) Palm Beach then one has a good understanding of why there are so many little white for sale signs in front of Palm Beach homes increasig every month.

As quoted in the article:

"The financial crisis has taken a serious toll on millionaires, with their ranks falling 27% in 2008 from 9.2 million at the beginning of the year to 6.7 million by year-end, Spectrem Group found. That brings the total down to 2003 levels, when there were 6.2 million millionaires in the nation.

Ultra-high-net-worth households, that is, those with a net worth of $5 million or more, fell in lockstep, with their ranks declining 28% from 1.16 million to 840,000, as did affluent households, or those with a net worth of $500,000 or more. They declined 28% in 2008 from 15.7 million to 11.3 million.

“America has a lot fewer millionaires than when this economic crisis began,” said George H. Walper, Jr., Spectrem president. “In fact, the 2008 declines to 6.7 million, which reduced the millionaire ranks by 2.5 million households, shrinks this important population close to levels seen in the last recession. The culprit is not just the stock market, which we all know has dropped precipitously, but broad declines in the asset classes available to the nation’s wealthiest investors.” "

Palm Beach's eroded beaches

Along with the popping real estate bubble is the dramatic erosion of the beaches on palm beach. At high tide, there is virtually no beach left. Notice how all photos of the beach are of low tide (seaweed marks high tide line)?

Prime palm beach land value drops below $100 / sq ft

A very large (more than 100 x 100 ft) lot with a 1980's home recently sold for 2 million. This home is "in town" and "on the lake block" which is more expensive than other parts of the island on a per foot basis. Assuming that this size lot lends itself to being a tear-down, then the land value is well below $90 per square foot.

This may help sellers realize the simple caclulation:

home price = land value + structure value.

This sets the bar for home values.