Boom of condo crash loudest in Miami (how mortgage fraud helped create the bubble) [View All]

[El Pinko]

This story is a bit dated (in fact, the Orlando Sentinel has already taken the piece down, so I had to link to a blog that has it still up), but it is extremely illustrative of the kind of fraud that created all the illusory rise in housing prices. The whole article is really worth a read. Back in 2005, I told my stepdad, a GOP pig, that I thought houses were way overvalued and that it was a speculative bubble bound to crash big-time, and he insisted "they're not overpriced if there are people willing to pay that much. That's the wisdom of the "free" market - it always knows best and sorts out the winners from the losers" or some such bilge. I'm sure he still believes that, and doesn't think this fraud-ridden industry needs any regulation...




Multiple construction cranes fill the skyline off Brickell Avenue in downtown Miami, where the nation's most glutted condo market can be found. Orlando has 4,440 condos listed for sale; Miami has 23,000. (SUSAN STOCKER/SOUTH FLORIDA SUN-SENTINEL / August 7, 2007)


http://thehousingbubbleblog.com/?p=3323

Boom of condo crash loudest in Miami

.....

Many told a similar story: They had a friend who made $100,000 flipping a new condo, and they planned to ride the same wave of escalating prices. All they had to do was put down $60,000 on a $300,000 pre-construction unit and resell it when the value climbed to $400,000 -- before the building opened, and before closing and mortgage payments, maintenance fees, insurance and taxes kicked in.

That meant anyone could risk $60,000 and pocket $100,000 without actually buying anything.

.....

From 2001 to 2005, Beschel said his group bought about 50 pre-construction condos, sometimes 10 or 12 at a time. They would pay about $300 a square foot and, once the building sold out, return the condos to the developer, who would resell them at $350 a square foot. The difference between the original contract price and the new one -- $100,000 on a 2,000-square-foot unit -- would go to Beschel's group, minus a commission.

"The developer would take his commission, and we'd take our profit and everybody was happy. When the market was cranking, it was a brilliant business model," Beschel said.


This was standard operating procedure throughout the condo canyons of Miami's Brickell avenue...