Fort Myers: ‘Perfect Storm’ for Foreclosures
EmailPresident Barack Obama takes his pitch on the road today to Fort Myers, Fla., an area hit hard by unemployment and rising foreclosures. My younger brother Les lived in Fort Myers many years ago, and I thought it was such a lovely place so I was stunned to hear that. I went online to check www.realtor.com for Fort Myers — or more precisely, Lee County, which includes Fort Myers, Lehigh Acres, Cape Coral, Bonita Springs, Boca Grande, Estero, Pine Island and Sanibel and Captiva Islands. The entire county isn’t devastated — there aren’t many foreclosures on tony Sanibel and Captiva; thank goodness for small mercies — but in some other areas, I found houses that cost less than cars. A number of the bank-owned properties were being handled by a real estate agent named Lynn Rhinehart, of Quest Realty Solutions. I caught her at home in Cape Coral Monday afternoon, in fine chatty form. Lee County, she explained, became a "boom place like Vegas." House prices were growing by an incredible (but unsustainable) 30 percent a year from 2004-2005 and 2005-2006. "It was awful," Rhinehart said. "It put buyers in [a] frenzy." It put builders in [a] frenzy as well, Rhinehart says. Contractors became so busy they were begging subcontractors to come from elsewhere to work for them. And they came in droves. "Have hammer, will travel," Rhinehart said. What those subs discovered is that it was a nice community, a nice way of life, so they brought their families and settled in. "They were making good money, working seven days a week, 12 hours a day," Rhinehart said. Many couldn’t have qualified for a loan under the old conservative lending rules, she says. But at the time, lenders were handing out " low doc " and " no doc " loans to anyone who could , as Rhinehart put it, "prove they had a heartbeat and a credit score over 600 . It was a perfect storm." Add to that some of those subcontractors graduated into contractors, putting up their own subdivisions and offering deals because the competition was so fierce. Plus, they had to live somewhere, so they were buying, too. House prices were flying upward and Rhinehart says it scared many people into jumping on the bandwagon at more than they could comfortably afford, because they were afraid that if they missed the moment, the prices would go even higher. Then, the bottom fell out. "In September of 2005 we woke up one morning and the phone didn’t ring anymore," Rhinehart said. "It was like someone went to the garage, found the real estate breaker and turned it off. We’ve been looking for that breaker ever since," she said with a sigh. In the boom times, builders would let buyers put down a $1,000 deposit and not pay in full until the house was finished. But homes that had been started in the boom were worth much less than the contract price in the year or so that it took for that home to be built. "If you signed up at [the] end of ’05," Rhinehart said, “by the time the house was ready it was worth $30,000 or $40,000 less than you agreed to pay. The builder says, ‘your house is done, let’s close.’ But the appraisal comes in $40,000 under the contract price and the bank won’t lend the full amount, so you can’t close without that $40,000 in cash. It made it awfully easy to walk away when you put down just $1,000." And apparently that’s what buyers did, in droves.
"Builders got armloads of [houses] back, they were sitting on 30, 60, 90 houses," Rhinehart said. "Small little guys who three years before were subcontractors for somebody else. It was awful, watching prices drop, people making lower offers that the builders wouldn’t accept even though prices were still tumbling." Those builders and subcontractors and the buyers have gone now, she says. Those who are left are trying to make the most of a very bad situation. Still, the area doesn’t feel like a ghost town, according to Rhinehart. Some blocks may have four or five foreclosures, but others are still intact. It’s sad to see people lose their homes and move away, but if we need an upside, there is one… sort of. Prices are so low, Rhinehart says, that out-of-towners are starting to come in, looking for deals. "Places that would have sold for $180,000 a few years ago may be listed for $80,000," she said. "Some are new, most are new-ish, but some have never been lived in." How are these new breed of buyers paying? With cash, Rhinehart says. "I never saw so much cash," she said. "When you get to $50,000, $60,000, $70,000, they can pay in cash." Rhinehart says it’s "heartbreaking" that the people who lost homes can’t take advantage of the market change – “if you lost your house you just shot your credit in the butt; it’ll be years before that’s forgiven," Rhinehart said — so it’s out-of-towners scooping up the deals. With a certain resignedness, Rhinehart says that for her and her business partner (her stepson), business is good because they handle a lot of bank-owned properties. This may or may not be a good sign, but some houses have sold for more than the asking price. Prices have gotten so low there are multiple offers. The house pictured at the top is in Cape Coral; it sold in May of 2005 for $190,000. When it went on the market recently for $70,000, there were six offers on it. The house pictured here was purchased in 2005 for $385,000, and received 14 offers when it went on the market for $116,900. Cape Coral assessed it at more than $220,000. It sold last December for $134,000. Rhinehart says she doesn’t know what the president has in mind for the economy, but she hopes whatever it is, it works. Will she go see him Wednesday? "No," she said. "I’m going to work tomorrow. I’m hoping to sell two more houses." That’s probably the best stimulus of all.
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GREED
n.
An excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth.
Posted by: Isn't it obvious? | February 10, 2009, 12:09 pm 12:09 pm
Hernando County is 5th in the state of Florida for foreclosures. Guess my area is as glamorous as Ft. Myers, that’s why we are ignored. The owner of the house I have rented since 2007 was served foreclosure papers (at our residence) on December 31, 2008 at 8:15 am. Happy New Year!!!
Posted by: Robyn | February 10, 2009, 12:27 pm 12:27 pm
It is tragic to see so many people loose their dreams. I believe that one thing that we must do is to provide better education to our children so that the future generation will not fall for false promises of the good life without work and expect to ride the speculative wave of finacial crooks.
Posted by: Steve, Livonia, MI | February 10, 2009, 12:28 pm 12:28 pm
its unconsionable that the banks behind these mortgages are made whole while the owners are left bankrupt and homeless. If the mortgage is paid off via the TARP then the original homeowner should retain ownership
Posted by: jon | February 10, 2009, 12:42 pm 12:42 pm
Too much greed can be bad but without it, we would have the same economy and lifestyle now that we had in Biblical times. This article proves that demand for these homes will pick back up once the price drops to reasonable and sane levels, not when gov’t artificially props up the price. When speculation drives prices past 4 percent rise per year, a bubble forms and it becomes unsustainable. Florida has had real estate booms and busts going back to the 1920s. They will have more booms and busts in the future. Trying to regulate greed (or stupidity) to iron out the peaks and troughs is impossible. There will always be peaks and troughs as there has been for 1,000s of years. There’s nothing anyone can do about it and socialism will only insure that everyone get’s the trough, not the peak.
Posted by: Jason | February 10, 2009, 12:54 pm 12:54 pm
WOOHOO!!! YES!!!
Congratulations Media you did it all of your doom and gloom about how bad the economy and really estate market is has finally really Screwed up the economy big time!!! Now some of your homes are in foreclosure too I’m sure, aren’t you happy!!!! YEA!!!
http://TheCommentDepot.com
Posted by: YES!!!!!!!!!!!! | February 10, 2009, 12:59 pm 12:59 pm
At REALTOR.com we agree education is a critical component to the real estate transaction for both buyers and sellers.
Thanks to the REALTOR® Association of Greater Fort Myers & the Beach MLS, we now display data that shows the actual sales prices of homes in Ft Myers & Cape Coral within 24 hours of a sale.
In addition to the rise in local foreclosures, the median home prices in the area dropped by 31% in Q3 2008.
Like many, we’re hopeful leaders throughout the country come together quickly to lead us towards the rebound we all need.
Posted by: Julie Reynolds | February 10, 2009, 2:52 pm 2:52 pm
If these homes are selling for the 1998 price, then this market is probably at the precipice of recovery. If not, they will probably continue to languish. Look at the chart on that blog, it shows the recovery from the last 2 booms in the 70s and 80s, both booms ended with home prices returning to pre-boom levels. I would expect at least the same this time time around, considering that there will be no funky loans to get things going again.
Posted by: RH | February 10, 2009, 3:30 pm 3:30 pm
http://thelastgoodidea.blogspot.com
Posted by: RH | February 10, 2009, 3:31 pm 3:31 pm
Tragic, but that area appears poised for a rebound, others are far less lucky.
Posted by: John J. | February 10, 2009, 4:48 pm 4:48 pm
I don’t think we should bail out homeowners. Sorry, but just because they got in over their head and fed into the frenzy, doesn’t mean they deserve a free ride. I sure didn’t and should I be punished? I have always rented, but could have easily bought a home during the craziness. I didn’t.
Posted by: GOP is pure evil | February 10, 2009, 4:59 pm 4:59 pm
Maybe if the GOP was willing to nationalize health care, people would have more money to spend and better credit scores so they could legitimately buy houses.
Medical bills are the #1 debt in America. Somehow the GOP has blinders on when it comes to this. Millions have lost their health insurance and all it takes is 1 injury to bankrupt someone.
Think about it: Instead of bailing out homeowners, nationalize healthcare. The extra money in people’s pockets would create another economic boom. Alot of 3rd world countries have better health care than us and higher life expactanies.
Posted by: GOP is pure evil | February 10, 2009, 5:04 pm 5:04 pm
I have a feeling that the likeness of Bin-laden are laughing their butts off at our economy and thinking that they have accomplished their goal…remember when they said, “We will attack their economy!!?” Greed is evil. There is no way an economy can sustain with the way the greedy investors, marketers, tax collectors, etc. were insisting on raising the costs of everything to make a buck off the backs of those whose jobs and incomes could not support the such demands. Remember this era when and if we Americans survive this fiasco. Never fall prey to marketing strategies or media psychology, again. Never pay higher prices for these home again. It was a gimmick from the get-go. Street Greed will blind one’s ability to think logically. I get sick to my stomach thinking about so-called financial advisers who spoke on network news media claiming “Now is the time to invest or buy homes or stock.” In hindsight, I see that they couldn’t read or forecast the economy any better than the average person. I don’t think their MBAs aren’t worth the paper it’s written on. ABC-Disney should fire these so-called misleading, incompetent advisers.
Posted by: PLAKPDER | February 10, 2009, 6:03 pm 6:03 pm
PEOPLE NEED TO STAY IN THEIR HOMES AND FIGHT PROTEST THESE FORECLOSURES FIGHT DON’T LEAVE FORCE THE BANKS TO DEAL WITH HOMEOWNERS
Posted by: donna trent | February 10, 2009, 7:57 pm 7:57 pm
Let’s see who gained from this circle of greed:
1. The realtor made more if the house sold for more. 2. The bank made more if the loan amount was larger. 3. The appraiser got more jobs if he kept on appraising properties higher and higher.
4. The property-flipper (investors) the more homes they bought the tighter the supply which push prices up more.
Who was caught holding the bag:
1. Legitimate homeowners who lost value in homes
2. Towns and cities nationwide who lost tax revenues.
3. Business that depends on sales of household items anything from food to lawn mowers to home improvement stores.
4. Schools/fire depts/police depts and anything else that depends on tax revenue to sustain operations
Posted by: repubswrong | February 10, 2009, 8:39 pm 8:39 pm
The article doesn’t adequately address the damage done by firms like First Homes. Their programs centered around selling multiple entry-level starter homes to unqualified investors. Droves of these investor-grade homes were built in less desirable areas like Northeast Cape Coral and Lehigh Acres.
Read more about the Southwest Florida real estate market at http://www.gulfreturns.com/
Posted by: The Citadel | February 11, 2009, 7:24 am 7:24 am
My parents warned me of the pitfalls in housing related to the Great Depression and I passed that on to my Children who intern purchased homes far beyond their needs and far above actual value and are currently in the process.
So much for teaching.
We all must learn the hard way,suffering is not a direct result of transition. Love Grandpa
Posted by: Grandpaknew | February 11, 2009, 11:11 am 11:11 am
Fortunately, we now have greatness, intelect and leadership in the Oval Office. We may have to tighten our belts a little longer, but hope is on the way. And, for all of you hardliners who think you’re pulling your own weight… remember it took deceit, corruption, racists State Troopers, hanging chads and the Supreme Court to put the most inept, flawed and criminal Administration in power and they’re to blame for ALL of our problems!!!
Posted by: Lesley | February 11, 2009, 11:44 pm 11:44 pm
To Donna Trent: Let’s see now..while you are knocking the Realtor, appraiser, etc. is it because the values went up on your home that you are upset with them. You don’t know real estate…supply and demand. Your home is worth what someone ready, willing and able will pay for it; therefore, if your home escalates in value during the good times then drops are you counting your “loss”? It’s only lost value, if you sold or are selling it. When you buy stock and it goes up and down and up and flats then drops to you go around screaming “I’ve lost!” You don’t have a loss or gain until the day you sell it. FL has experienced overwhelming escalation due to people willing to pay the price. Only if you are selling in this market have you really lost.
Posted by: Helen | February 21, 2009, 1:36 pm 1:36 pm
It’s time to start “living within one’s means”. I lived in Fort Myers most of my life and I witnessed many people buying homes they could have never really afforded. It boils down to GREED….plain and simple. These people had a sense of “entitlement”. They were living like doctors and lawyers yet some of them didn’t even have a high school or any college education. I could never figure it out until things beagan to fall apart. I don’t believe we should be helping people stay in their homes. They need to find alternative housing that fits within their budget.
Posted by: Christina | February 23, 2009, 11:09 pm 11:09 pm
Also, to repubswrong, you are dead on right about First Home Builders. They are a major contributor to this fiasco. It pretty much started with them as far as I’m concerned. Oh how I could not stand their arrogant *beep*s. They ruined Lee County with their crappy houses.
Posted by: Christina | February 23, 2009, 11:14 pm 11:14 pm
The vast majority of the Cape Coral foreclosed homes presently on the market were the result of greedy, dishonest scammers that took out the loans for the specific purpose of ripping off mortgage lenders.
When the realter mentioned that some of these homes have never been lived in it is because the house was not being purchased as a place to house a family, instead, the house was being used as tool to defraud mortgage lenders.
One of the most common Lee County & Cape Coral frauds was the cash back at closing scheme where fraudsters would find a house for sale for say 200K but write the contract at 280K and then use the 200K house as collateral for a 280K 80/20 or 100% loan. When the 280K loan closed, the seller would get their 200K and the fraudsters would get the excess 80K and disappear without ever moving in to the house and without ever making a single payment.
The lenders should have had better underwriting in place to protect them from the fraudsters but they didn’t and now the lenders need a bail out but this does not in anyway mean the criminal frauster theives deserve to keep these homes.
Careful analysis of the defaults also reveals the vast majority of the fraudulent defaults were loans taken out by illegals from Mexico & Central America (this is all those subcontractors that the realtor in the article was talking about.) Moreover, if you compare the huge number of Lee county foreclosures against the tiny number of sheriff evictions for foreclosures, you will realize that over 90% of the foreclosures in Lee county are on VACANT homes.
Therefore, before you allow yourself to be suckered into some sort of bleeding-heart fool worried about the poor little homeowner getting foreclosed on, educate yourself on the facts. In doing so, you will learn the victim on these foreclosures are the lenders and even more so, the investors that bought the lender’s Mortgage Backed Securities. Your own pension plan or even your own little old grandmother may have been a buyer of these MBS bonds who in turn have now suffered huge losses while the fraud perpetrating scammers laugh all the way to the bank with their tax free mortgage fraud proceeds.
Posted by: SteveP | February 26, 2009, 12:54 am 12:54 am
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Sarah
http://www.craigslistdecoded.info
Posted by: Sarah | March 3, 2009, 8:53 am 8:53 am
really very nice comments.
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Posted by: mojji | August 10, 2009, 1:49 am 1:49 am
The current age represent the busy life of everyone because everyone going to earn more and more money for their rescue in future, at this time if your house in on a good location than u may sale it and take other home on a middle place and get some money for your expenses. Its the time to take decision.
Posted by: Jordan Sync | August 25, 2009, 8:57 am 8:57 am
When the realter mentioned that some of these homes have never been lived in it is because the house was not being purchased as a place to house a family, instead, the house was being used as tool to defraud mortgage lenders.
Posted by: Jordan Snyc | August 28, 2009, 7:37 am 7:37 am
You people need to start blaming the first and foremost cause for all of this: EASY MONEY. Where does easy money come from – The Central Bank which sets the base interest rate. The Central Bank in the US is the “independant” Federal Reserve.
It is that group of bankers that cause each and every boom to bust cycle we’ve had in this country since the early 70′s.
We the people need to learn that we don’t have a truly free market; if we did the interest rates would have climbed with the demand for more loans/money, thus we would have avoided or skirted this issue.
Time to get rid of the Federal Reserve and let the lenders themselves set the interest rate based on the true market (and risk).
Posted by: anonymous | December 22, 2009, 8:20 pm 8:20 pm
We need to get some more litigation in place to help boost the housing industry. I heard that there is a 15 year surplus of open homes and people going homeless, what kind of mess is this?!
Posted by: real estate fixed? | November 12, 2010, 6:23 pm 6:23 pm
That is so hard when entire areas of real estate are hit hard like that. It affects so many people and the long term consequences can be devastating for individuals to recover from.
Posted by: Real Estate Reggie | January 28, 2011, 6:23 pm 6:23 pm
Thank you for posting this story, Vicki. I think that Florida and California have been hit especially hard with the housing market crisis. Even as my husband and I peruse real estate in Utah, we are finding so many short sales and foreclosures on the market. Thanks again!
Posted by: Find Homes in Utah | April 20, 2011, 2:13 pm 2:13 pm
I can’t believe that prices were rising that quickly! 30%? That’s unreal. I’m also surprised that new construction was going, even after people realized that the housing market was going downhill. Sometimes people don’t realize that they’re building a very unstable foundation I guess.
Posted by: Gary | June 9, 2011, 10:31 am 10:31 am
The efficiency gains from the assembly line also coincided with the economic rise of the United States
Posted by: Dylan Congleton | January 18, 2012, 12:31 pm 12:31 pm