The Death of the “New Economic Model”:

As reported here at the VC, last March a realtor told the N.Y. Times that “South Florida is working off of a totally new economic model than any of us have ever experienced in the past.” The realtor also predicted that “a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely.”

Today, St. Joe Co., a leading real estate developer in Florida, announced terrible first quarter earnings. The South Florida condo market, meanwhile, is moribund.

More generally, over the last few days, Hovnanian, Beazer, Centex, and other homebuilders have also announced poor earnings and, more important, prospects. Even the Washington Post, which has been extremely lax in reporting bubble deflation (for example, carrying on article a week ago wondering what would happen “if the huge price increases of the
last five years suddenly come to a standstill,” as if they hadn’t already) has caught on.

Though prices continued to rise for a few more months, I officially nominate nominate March 25, 2005, when the Times saw fit to publish the comment noted above, as the peak of the bubble. (Others will no doubt be partial to June 12, 2005, when the Wall Street Journal carried a story about sellers’ market power, including an anecdote about an owner of an expensive San Francisco home who required purchasers to contractually agree to feed her backyard squirrels:

Indeed, when Susan Butler was negotiating to buy Ms. Gao’s San Francisco property, she was resigned to the feeding schedule. “At that point, I said, ‘Yeah, what the hell, I’ll feed the squirrels,'” she said. She signed a contract in April, paying $815,000 — or $116,000 over the asking price.”)

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