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| Monday, March 31, 2008 |
| How Condo Fever Burned Investors in Florida |
ABCNews reports: How Condo Fever Burned Investors in Florida profiles Scott and Lori Pustizzi who spent a decade making smart financial moves - then undid all their hard work by speculating on a couple of Florida condos. That financing is crushing them. When they began in 2004 they had one manageable mortgage on their home. Now that they've had to buy the two investment condos, the monthly carrying costs for the three properties are more than Scott makes in a month.
With thousands of new condos sitting empty, desperate speculators are competing for buyers and renters. The Pustizzis have rented both units, but the rent covers just half their monthly payment. Scott says he can't raise the rent any higher because the market simply won't bear it. In one building another desperate speculator tried to steal his tenant.
And so a lifetime of hard work, aggressive savings and careful planning is disintegrating around them.
"For us it's almost like living a disguise," says Scott as he sits with Lori at the kitchen table of the home they love so much. "It's almost like here we are living with all this debt, but we're still trying to uphold the life that we lived." Pretending that things are still fine is a big part of their current problem. If they can't sell the condos can they sell their house? Would it be possible for them to move into one of the units and just rent the other? If they can't sell their house, can they get a better rent for it to help stem the monthly bleed? |
| posted by Boston Gal @ 11:28 PM *
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| 7 Comments: |
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A lifetime of (among other things) careful planning? Please. Sounds like they didn't plan on the housing market going anywhere but up, which was their first problem.
As an aside, I read the comments section on the news story's website. I felt badly for one of the commenters who's a condo owner in a building with several forclosures. I guess I never thought about it, but I gather that condo fees on forclosed properties just go unpaid? That's yet another example of how the responsible homeowner gets screwed by this mess.
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I think the part that kills me the most is this quote from Lori:
"We were just trying to jump a couple of steps to give our family, the security, the financial security that we knew that just going to work every day wasn't going to bring."
They were doing everything correctly, saved for their education, saved for the wedding, had a reasonable mortgage AND had good jobs. Then instead of just taking one risk with one condo, they bought two.
They weren't going for financial security, they were greedy.
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Yes, when condos go into foreclosure or when owners are having difficulty paying their mortgage, generally the condo fee is not being paid. This means associations with multiple troubled condos can get into trouble since it generally relies on all owners paying their monthly fees to operate.
Back in the mid-1990's when I purchased my condo, bankrupt condo associations were a big reason banks were practically giving condos away. When condo fees go unpaid condo associations have a hard time doing normal maintenance. This can lead to a big liability for the banks left holding the unit.
It also becomes a big problem for fellow owners in the association. Suddenly the elevator stops working, the heating system runs out of fuel, the lawns stop being groomed. The owners left suddenly have to start paying assessments to make up for the non-paying foreclosure units if they want to see services kept-up.
It has happened before, and likely will happen again if this downturn continues.
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"Now that they've had to buy the two investment condos..."
Boy am I glad I was never held up at gunpoint by a builder and forced to buy two condos like these inocent victims. They need a bailout, pronto.
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We were just trying to jump a couple of steps to give our family, the security, the financial security that we knew that just going to work every day wasn't going to bring.
Shades of Casey Serin and his "wage slaves" sneering. Now it's the happy wages slaves that are the only ones not getting crushed financially.
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Did anyone notice that they lived in a huge house as well? Their toddler son's bedroom is bigger than my living and dining room together, and I'm a doctor making $450K per year. Yet stories like these make me feel a fool for being responsible.
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I live in South Florida. Everyone (my 70+ year old mom and all her friends and neighbors and many of my friends and colleagues) were buying plots of land, condos and spec homes all over. I, being a converative, wise investor, just couldn't believe the stories. I couldn't understand the "deals" being offered. They seemed to good because I was accustomed to real bonfide mortgages. But somehow the builders/developer were in cahoots with lenders and mortgage brokers. They turned a blind eye knowing it was unsustainable just to sell some land or home or condo at a profit. Then the took the money and ran. I took several shopping trips with friends to see the deals. On the drives home I just kept saying, this has got to be a scam. It just can't work. But not one person I know listened. They greedily bought and are now in tons of trouble. So greed on the part of all the parties was the primary source, then foolish people who had not saved enough for retirement thought they found an easy was out. Nope. And now we honest tax payers are left holding the bag. As my ethics professor used to say "there ought to be a law".
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A lifetime of (among other things) careful planning? Please. Sounds like they didn't plan on the housing market going anywhere but up, which was their first problem.
As an aside, I read the comments section on the news story's website. I felt badly for one of the commenters who's a condo owner in a building with several forclosures. I guess I never thought about it, but I gather that condo fees on forclosed properties just go unpaid? That's yet another example of how the responsible homeowner gets screwed by this mess.