Dennis Gartman, commodity trading supremo, weighs in on Tampa housing in The Gartman Letter:
"It was only a very short while ago.... perhaps a year or at most two... when the real estate market in and around Tampa-St.Petersburg-Ft. Myers on Florida's west coast was one of the hottest in the nation. "Snow Birds" from the US and Canada were buying houses and condominiums in the area with wild abandon. First homes, second homes... sometimes third, fourth and fifth homes... were being bought, not with the intention of living in them, but with the intention of selling them to a buyer at a higher price. This was rank speculation at its very worst, sponsored... or in the language of pseudo-psychology, enabled.... by the banks in the area, and from outside. Retirees were buying them; students were buying them; waiters making $20 thousand per year were buying them, hoping to sell to an unwary buyer at a price materially higher. Some, who were early enough to the great real estate party, did it several times... until the music stopped; the party was over and now comes the clean-up.
"According to reports we've read from the area, at the boom's height in the late summer of '05, there was but a 3 month supply of homes available to be sold at the sales rates enjoyed then. Using this sort of data, builders did what builders do: they built to meet the demand they saw at the time. When the first sales began to slow, and as new inventory was brought on line, the inventory figure leeched on out toward 6 months, and then toward a much more normal 12.... and then on toward a rather disconcertingly problematic 24! Now, it stands 27 and it is still rising, as sales slow even more and as inventories of new homes and condominiums that were on line are finished and made available.
"As is always the case in such frenzied markets, an institutional entity marked the high. This time it was the national home builder Hovnanian Enterprises who came into the Tampa-St-Pete market and bought entry into the market by buying the largest local home builder there... in August of '05. As one article we read, while on the ride home from Raleigh yesterday noted, Hovnanian was "the last one aboard the Titanic." Now, the margin calls are going out from banks to the buyers as buyers finally have given up making payments on properties they finally know shall not be sold at profitable levels for year... perhaps many years... into the future. Never a positive "carry" to begin with, now the homes and condominiums owned by less-than-fiscally assured "speculators" are being foreclosed upon, for there is nothing more that the banks can do. The margin calls are going out, but the margins are not coming in, and the banks shall be left with large sums of unwanted, probably un-rentable properties that they shall have to dispose of in some fashion. We shall watch how this process plays out in Tampa-St.Pete, for just as the area was ahead of the real estate game in the rest of the country, attracting "spec" buyers who were certain they could sell to yet another even more frenzied buyer, is now ahead of the rest of the country in the liquidation of those speculators. The only thing we know for certain is that through it all the lawyers will be the final winners. Of that we are certain."
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