Analysts are predicting Florida’s condo collapse will “drag the rest of the state into recession. Other experts scoff at that notion. But nearly all agree grim times lie ahead” for the future. Many have bought in the idea of making easy money flipping condos. Reality is “Orlando has 4,440 condos listed for sale; Miami has 23,000.”

A couple in South Florida is grappling with the decision to “walk away from the $117,000 deposit they plunked down on another investment condo” or “close on the one-bedroom unit, which is similar to others now on the marked for less than $585,000 they agreed to pay.” This after the couple flipped a South Florida condo three years ago.

“Just how many other speculators face the same dilemma in the nation's most glutted condo market will become clear during the next two years. That is when 25,000 new condo units, most of them rising in or near Miami's downtown, will flood an area already saturated with 23,000 condos listed for sale. An additional 40,000 units have been approved, but analysts doubt the majority will break ground.

Orlando and other Florida cities -- Naples, Fort Myers, Tampa and Sarasota among them -- also have huge condo gluts. With 4,440 condos listed for sale, Orlando has an unprecedented 29-month supply, and last month sales plummeted 64 percent lower than a year ago.”

“"Miami is the poster child for the condo bust," said Jack McCabe, CEO of McCabe Research & Consulting, a real-estate market-analysis firm located in Deerfield Beach. "There are probably only two cities in the world with more construction: Shanghai and Dubai. Unfortunately, there is going to be a lot of foreclosures . . ., and developers, lenders, title companies and real-estate companies will go under."”

You can read the full article at:
http://www.orlandosentinel.com/business/orl-condobust2707aug27,0,2001796.story

Michelle

The complete article can be found at:

http://www.msnbc.msn.com/id/20464621/

Pam

Credit card companies have reported that they have written uncollected payments of 4.58% during the first half of 2007. This is 30% higher than the same time period of 2006. Analysts said this is related to the subprime mortgage crisis and consumers being unable to “roll their mortgage debt into new and cheaper home loans.”

“Recent increases in credit card losses can impart be ascribed to a steady rise in personal bankruptcy filings since 2005. According to the Administrative Office of the US Courts, quarterly non-business bankruptcy filings have been rising since the first quarter of 2006.

Scott Hoyt, economist at Moody’s Economy.com said: “Consumer credit quality will continue to deteriorate as debt burdens and financial obligations rise, house prices continue to fall, credit standards are tightened, labor markets loosen modestly, and gasoline and other energy prices remain high.”

The complete article can be found at:

http://www.msnbc.msn.com/id/20464621/

Pam

We live in an unusual time as far as the economy is concerned. Example 1: the Federal Reserve has injected a total of 120.5 billion into the US economy in the last two weeks. (Here is an article about the latest injection of 17.25 billion: http://www.breitbart.com/article.php?id=070823142033.tdr8v597&show_article=1 .) The Fed has also cut its discount rate by .5% after having had one director say that such a cut would only come if the iconology were in dire circumstances.

Example 2: today's US stock market is down after having been trading higher this morning because the Bank of America announcement that it was injecting 2 billion dollars into Countrywide (which announcement caused the initial run up early today) may not be enough to save Countrywide from its bad lending practices. This concern was spurred by an interview with Countrywide's Chief Executive in which he stated that "markets are in 'one of the greatest panics I've ever seen in 55 years in financial services.'
Mozilo said he can see the U.S. economy slowing down enough to concern banking regulators about what will happen next." (Here is a link to that article: http://money.cnn.com/2007/08/23/news/companies/countrywide_ceo_outlook.reut/index.htm?postversion=2007082312 .)
(Here is a link to Schwab for that piece of information: http://www.schwab.com/public/schwab/research_strategies/market_insight/todays_market/schwab_market_update?cmsid=P-1454182&lvl1=research_strategies&lvl2=market_insight .) Also from Schwab: "Under the terms [of the deal with BoA], Bank of America will purchase $2.0 billion in non-voting convertible preferred securities yielding 7.25% annually. The shares can be converted into common stock at $18 per share, with restrictions on trading for 18 months after a conversion.

Although Countrywide must still deal with rising foreclosures and delinquent loans, Bank of America's action is helping to alleviate liquidity worries that have swirled around Countrywide, which is one of the nation's leading originators of home mortgages." Again, one wonders if it is wise policy to save a company from the consequences of its own bad lending practices.

Example 3: the Fed has announced that it will redeem 3 billion of T bills to increase its liquidity at its lending "window" where banks can borrow from the Federal Reserve. (Here is a link to that article: http://money.cnn.com/2007/08/23/markets/fed_tbill.reut/index.htm .) Odd times indeed. Mike

"Foreclosure filings rose 9 percent from June to July and surged 93 percent over the same period last year, with Nevada, Georgia and Michigan accounting for the highest foreclosure rates nationwide, a research firm said Tuesday."
...

The national foreclosure rate in July was one filing for every 693 households, the firm said.
"While 43 states experienced year-over-year increases in foreclosure activity, just five states -- California, Florida, Michigan, Ohio and Georgia -- accounted for more than half of the nation's total foreclosure filings," said RealtyTrac Chief Executive James J. Saccacio.
Nevada posted the highest foreclosure rate: one filing for every 199 households, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June.
Georgia's foreclosure rate was more than twice the national average, with one filing for every 299 households. The state reported 12,602 foreclosure filings, up 75 percent from June.
Michigan reported 13,979 filings in July, a 39 percent spike from June."
Here is a link to the whole article:

http://biz.yahoo.com/ap/070821/foreclosure_rates.html?.v=5

Mike