Have a Florida condo? Can you afford a $100,000 or higher special assessment for new safety standards? 
After the collapse of a Surfside Building on June 24, 2021that killed 98 people, the state passed a structural safety law that is now biting owners.
Not only are insurance rates soaring, but owners are hit with huge special assessments topping $100,000.
New Florida Law Roils Its Condo Market
The Wall Street Journal reports New Florida Law Roils Its Condo Market
Condo inventory for sale in South Florida has more than doubled since the first quarter of last year, to more than 18,000 units. While the sharp rise in Florida home insurance costs is driving some to sell, most of the units on the market are in buildings 30 years or older. Under the new law, buildings must pass milestone structural inspections no later than 30 years after they are built.
In Miami, about 38% of the housing stock is condos, the highest of any major metropolitan area in the U.S., according to Zillow. Of those buildings, nearly three-quarters are at least 30 years old. For those that have large repairs looming, many owners are scrambling to sell before Jan. 1 when building reserves must be fully funded to be in compliance with the law.
“I think this is just the beginning,” said Greg Main-Baillie, an executive managing director at real-estate firm Colliers, who oversees 40 condo renovation projects across the state.
Owners are struggling to find all-cash buyers because mortgage lenders are increasingly unwilling to take on the risk associated with these units. “It’s not the buyers that aren’t qualifying,” said Craig Studnicky, chief executive at ISG World. “It’s the buildings that aren’t qualifying.”
State law previously allowed condos to waive reserve funding year after year, leading many buildings, including the nearly 50-year-old Cricket Club, to keep next to nothing in their coffers. Now, about 40 units in the building of 220 are listed for sale but are seeing little interest.
“These units are practically being given away,” said Sari Papir, a retired real-estate agent who has lived in the Cricket Club with her partner Shaul Szlaifer since 2018. “Even if we found a buyer, what could we buy with the pennies we’d receive for our unit?”
Some are worried developers may already be purchasing condos in the building for a potential takeover, where a developer tries to gain control of a building to knock it down and build a newer, more luxurious one. These condo terminations are happening up and down the state’s coastline. While the rules can vary by building, if enough people vote to sell their units, the others have to follow along.
No Way to Escape the Assessment
Those who cannot sell and don’t have the special assessment, will be evicted and their units seized for whatever the Associations can get for them.
South Florida listings have doubled in the past year to over 18,000. Few of those units will sell, and those that do sell will be at a huge haircut.
The Journal noted the plight of Ivan Rodriguez who liquidated his 401K to buy a condo for $190,000. He then faced a $134,000 special assessment. Eventually he sold the unit for $110,000.
Got the Insurance Blues?
Auto insurance is up more than 20 percent from a year ago. In many places, private home insurance isn’t available at all. Consumers are steaming.
On February 17, 2024 I asked Got the Insurance Blues? Auto and Home Insurance Costs are Soaring
Car insurance is on an amazing run. For 13 straight months, insurance is up at least 1.0 percent. For 20 straight months car insurance is up at least 0.7 percent.
Home insurance, if you can get it at all from any private insurer, is also rising at a fast clip.
If you live in a flood zone, hurricane zone, or fire zone, insurance may be very difficult to get.
Proposition 103 Backfires, State Farm to Cancel 72,000 California Policies
Citing wildfire risk, State Farm will not renew policies on 30,000 homes and 42,000 business in California. Blame the state, not insurers.
On March 26, I noted Proposition 103 Backfires, State Farm to Cancel 72,000 California Policies
Proposition 103 limited the annual increases of insurance companies. State Farm responded by cancelling 72,000 policies.
The Idiot’s Response
Carmen Balber, the executive director of Consumer Watchdog, said “The industry is not going to start covering Californians again without a mandate.”
“That is why we think the legislature needs to step in and require insurance companies to cover people.”
Force companies to cover people. What a hoot. The insurers would all leave and everyone would be on the “FAIR” plan.
Think!
Think carefully about where you want to live. And if it’s a condo, you better be prepared for huge special assessments.
And most of all, know your builder. For discussion, please see America’s Homebuilder: D.R. Horton Homes Falling Apart in Months
Of course lots of condos couldn’t be further in terms of structural risk than the tragic one that kicked off this knee-jerk legislative reaction that was, undoubtedly, demanded by our elected representatives’ paymasters in the insurance lobby.
16 tons and what do you get? Another day older and deeper in debt. I see nothing much has changed since the company town era, whether mining for coal then or racist binary machine code digits today. At least coal was a productive energy source.
Should try to get a loan for the HOA, if possible. I’ve seen that many of times when the HOA needs money for hurricane-related repairs such as to pay for the insurance deductible.
Granted, the prime rate now is around 8.25% so its not cheap to borrow money, but banks would be willing to lend money to condo HOAs in South Florida.
Better to get a loan and then have the HOA quarterly assessments or fees to cover the loan payments instead of just pushing a $100,000 special assessment on each unit.
Another option is for the owners to get HELOCs if they can’t qualify for a reverse mortgage. That is is if it their retirement home and do not want to move.
Musings on the Nature of Technology
Recently I have been on a four-day hiking trip, completing another 80 km (~50 mile) stretch of the 1171 km National Blue Trail running across my tiny country. This gave me plenty of time to tune into and ponder on the many podcasts I downloaded previously, but never had the time to listen to. One of them was a pretty long one, but it was definitely worth the time; every single minute of it. Out of the many concepts and ideas thrown out there the one that really captured my imagination was the distinction between regenerative and degenerative technologies. While this might sound abstract and theoretical at first hearing, nothing could be further from the truth. As you will see, this dichotomy explains a lot about our past, present, and yes, our future too. https://thehonestsorcerer.substack.com/p/musings-on-the-nature-of-technology
Elon Musk the ‘techno messiah’ was created for the purpose of convincing the herd that technology can solve everything … the future is clean green and awesome!!!
As we can see with Jeff Green … this is quite effective…
However the truth is the exact opposite – technology is The Problem. And it is driving us over a cliff to extinction.
The worst culprit? https://en.wikipedia.org/wiki/Haber_process
We use finite substances … to grow enough food … to support 8B+… with no plan b for when the finite substances become too expensive…
Duh
How does one price a unit based on the lump assessment fee? Is the lump sum first discounted by the interest rate and time until payment, and then subtracted from the value of the unit prior to the request for the lump assessment being issued? It would seem a lender would require a large down payment or proof of funds in the amount of the lump assessment. And then how does one determine the risk of ADDITIONAL lump sum payments being needed in the near future? This is a situation that could ripple through the financial world very quickly.
I think a few well set fire sales would help
make insurance payout
The insurance payout on Surfside was about $1B. Next to that $100,000 per unit is not that much to avoid another such event. (15000*100000 = $150 million).
Mish … I posted a comment. It was accepted. Some other reader clicked thumbs up on it. I hit refresh and the comment was flagged as spam?!?!? I hit refresh again and now the comment is missing altogether?
WTF?
Condo? NOPE. Not me.
All the disadvantages of both renting and owning with NONE of the advantages of either.
I couldn’t afford a single family home. I had to make a decision to buy a condo or be a renter. I chose to buy a condo. Agree that associations are the ultimate PITA but still better than being a renter. I sold the condo and made over $130,000 profit. Now we’re having a SF home being built and paying cash.
I always get frustrated to hear people talking about profit when owning homes. In most cases it is usually an illusion.
I am going to be conservative with some of the numbers… let say your expenses were as follow:
Mortgage: $300,000
Interest: 3%
Down Payment: $60,000
Annual Expense
Property Taxes: $2500
Home Insurance: $1000
HOA /Condo Fee: $3000
Other Costs: $1,000
In 10 years, you would have incurred around $192,000 in expenses and still owe around $182,000 on the home. Believe me or not, a more accurate price to gauge the breakeven point is $192,000 + 182,000 + 60,000= $434,000.
If you are lucky enough to have no major expense, no increase in condo fee and hired your spouse as real estate agent then you are definitely breaking even if you were to sale your $300,000 home at $430,000 and this before we account for this little thing called inflation.
We are fighting against a system designed to keep us down while giving us an illusion of success. Nowadays we have to work at least twice as much as our parents to gain a modicum of their “success”
If you were lucky enough to have made real profit then tip of my hat to you.
To do an accurate assessment you would have to factor in how much she would have paid in rent those 10 years and also how much she could have earned in investing instead of having the money tied up in the condo.
I’m glad you mentioned inflation because housing inflation has far outpaced the general inflation rate in the last several years. If she never owned, she would have missed out on benefiting from the last 4 years of crazy house price appreciation.
“you would have to factor in how much she would have paid in rent those 10 years”
True…but renting provides flexibility as to changing circumstances whereas RRE “ownership” (not really true when mortgage debt remains huge) is a pretty illquid asset.
100% agree. The home you live in isn’t an investment, it’s an expense of living just like cloths and food. If you’re lucky you may break even.
A rental property is an investment.
House flipping is speculation.
That is all…..
It’s not just South Florida. My wife and I own a condo that was built in the 1970s that will pretty much have to be purchased in cash. It’s in a great location right on the ocean north of Daytona Beach, the last development on a barrier island before a state wildlife preserve. I think the land is worth more than the condos. Fortunately, we have been able to rent it out and we got it at a very low price.
You have a major problem. Sea level rise since 2010 has averaged anywhere from 6-8 inches on the gulf and Atlantic coast up to south Carolina.
A foolish man built his house on sand. The rain fell, the torrents raged, and the winds blew and beat against that house, and it fell—and great was its collapse!
Quick to cast blame for the California mess, but who’s to blame for the even worse mess in Florida?
I bet all those people made a voluntary choice to live in a condo, something I would sooner die than agree to do.
True life story of condo ownership nightmare from a few years ago. Took place in Sarasota, FL a few years ago. Article explains what can happen when a major structural defect affects the building. It also explains the powers of an HOA to evict & foreclose on owners unwilling or unable to pay a huge special assessment to fix the building. Most condo reserve funds for repairs are extremely underfunded. Trying to get a group of people to agree on a course of action is like herding cats. I read that it took weeks and a ton of arguments for owners to agree on a color scheme for a new paint job on the Surfside condo prior to its collapse.
https://www.sarasotamagazine.com/home-and-real-estate/an-unlikely-heroine-steps-in-to-save-crumbling-dolphin-tower
There are also many types of condo buildings. The ones with the most problems are the ones that are built like apartment buildings. Our condo was in a building with 4 units. We had our own garage that went directly into our laundry room. We also had our own entrance door. We didn’t have any common areas. Our type of condos still have issues but not the same as high rises.
The HOA President quit when the owners did not want to fund the special assessment for the repairs.
The repairs were based on the professional engineers report.
About 3 years later the condo collapsed in Surfside (north Miami Beach), Florida.
You can read the timeline in various news reports by major media outlets like NY Times and Miami Herald.
This is what happens when the current/ previous owners vote to defer maintenace for literally decades. It’s very easy to garner damned near 100% consensus to not raise HOA/condo rates now so money is available for repairs later. I’m experiencing this very thing with my home (located in within an HOA). We bought in 2020, and last year it was determined that all of the culverts (roughly 15) in my subdivision are past thier useful life (they are galvanized pipe and are pushing 50 years old). Total replacment cost is between $300k – $500K. There are 30 lots in the subdivision so at the very least I’m looking at about $10k. When we looked at the house I simply didn’t notice all of the culverts (most are small 2 foot pipes). Shame on me for not paying closer attention. Lesson learned.
This isnt an issue with just HOA/condos either. How many homeowners who don’t live in a HOA/condo community set aside money for repairs/maintenace? Almost none since most Americans can’t come up with $500 to cover an emergency.
Don’t be too hard on yourself.
Virtually no one would drive around all the local streets checking culverts for how much useful life they had left. Even if you did, you would be very unlikely to guess the replacement cost accurately or even realize you were responsible for their replacement cost.
Where I live in Florida, we have septic despite being in the city. The EPA (or whatever group oversees the environment) claims that’s causing higher levels of pollution in the canals and wants us to connect to the sewage system. Quoting a cost to the homeowners in the range of 30-40K each. I went to a meeting a just laughed at them and told them to prove we were the cause of the water pollution and then show us the bids for running sewer lines and connecting homes because absolutely no one is going to vote for it.
If you hire an engineering firm, they may be to recommend “rehabilitation and relining” of the culverts which will extend the useful life and it may be the more best solution based on a cost/benefit analysis of the culverts.
Another matter is the HOA can take out a loan to pay for this, as I’ve been in HOAs that have taken out loans to pay for major repairs or projects instead of passing a massive special assessment.
The HOA fees went up naturally because of the loan payments.
I’ve noticed a lot of owners (age 62 or older) get reverse mortgages for at least 10% of the equity or value of their home just to cover operating and maintenance costs (or holding costs) ranging from replacing a 25 year old HVAC unit to paying or property taxes and insurance.
I know the board has had at least three engineers look at at the culverts (one is a resident). Most of the piping is badly deteriorated with many being crushed 50% or more from thier original diameter. In a few cases the water has redirected under the pipe vs through it, further exacerbating the problem.
Culverts are mostly out of site out of mind. As long as the water drains and the road isn’t collapsing no one pays them any mind.
Hey-All you can eat buffets aren’t cheap! priorities
Lol…..I guess so.
Homes last an average of about 75 years. Yet people generally pay about the same for a 70-year young home as they pay for a 10-year young home. Ditto for condos. Depreciation, depletion, and amortization principles are not being followed.
Somewhat more to this then what you have written.
Starters there are no time limits on a home as there still are homes standing that predate American revolution with mortise and tenon joinery with wood pegs.
Longevity depends upon how a building was maintained over its’ existence.
Some townships have special categories for Historical districts and homes where they back off on compliance issues so as to allow Historically significant homes to be protected architecturally.
Older homes predate much of current zoning requirements. That being based upon age of Home. As consequence setbacks from property lines are grandfathered in and supersede any current compliance requirements.
Health department compliance can also be affected as to number of bathrooms and other septic requirements.
Even buildable lots as long as they have single and separate deed with Tax receipts. Thus what current Zoning might not allow, an older piece of property is still a Buildable lot.
Condos and subdivision private community HOA are another category as to legalities.
There are many ways to beat the system but it takes dealing with knowledgeable people in the Building Industry to accomplish a desired end.
In this click and search world we live in people spend more time researching buying a Toaster oven then they spend doing due diligence when purchasing probably their largest item in a lifetime. Their own Home.
You cannot build the same population density on a sand foundation as you might on a rock foundation. Miami (sand) will never have the same population density as NYC, no matter how many marxist sh@theads write comments here.
Miami gets regular tropical storms and tidal surges into sand. NYC gets far fewer tropical storms, it has a snow /ice season, and it has a solid bedrock foundation.
Miami condos are built on sand, and will get flooded because of tropical storms. Storms are not a question of if, but when. The type of home constructed must reflect that.
Insurance is supposed to cover RISK, not CERTAINTY. There is zero RISK of hurricanes hitting Miami, the odds are 100%. Sand cannot support the same weight as bedrock. Buildings must be sized and constructed accordingly.
Yes, good points. Depreciation would have to consider local factors that affect housing longevity. A well-built, well maintained, single-story brick home in favorable climate will probably last longer than less well-built homes subjected to regular hurricanes, earthquakes, and such. Only 1/3 of homes standing in 1920 are still standing today, so the odds are long. Some homes do last a century plus though. Caveat emptor.
Yes. Buyer beware. Cheap condos are cheap for a reason. Condo fees and taxes are known but will increase. As Mish noted special assessments are unknown upfront and can bite hard.
Some older condo towers in Myrtle Beach are getting hit pretty hard as well.
Condos are a bad idea. Whenever your investments or personal property depend on the actions of a group of other people, you are taking extreme risk. People are risky.
But as for 30 year old condos, even a single family home owner is faced with big repair bills when the house reaches a point where it might fall down on you. And they all do eventually. They are made of wood, and people don’t keep up with the maintenance.
“They are made of wood, and people don’t keep up with the maintenance.”
Very true. Properly maintained a home should last a very very long time. Something as simple as keeping the gutters cleaned and discharging 6 feet away from the foundation will prevent all sorts of costly repairs bills. It’s amazing how many homes I drive by and see plants growing out of the gutters.
Most don’t know the 1st thing about maintaining a home. It’s alot of work and money.
When media tells us a story about all of “Florida” but then obsesses over Miami and pretends all the other areas are the same — you know the article is poorly researched.
Miami is made up of ex-New Yorkers (especially NYC) and wealthy Latin Americans. The NYCers are the ones who elected Andrew Cuomo, Deblasio, and Eric Adams — ran their city into the ground, and then fled from their own stupidity. The city that never sleeps managed to sleep walk into bankruptcy. Then they moved to Miami.
Latin Americans in Miami are basically laundering money away from their corrupt governments. Sorry, no one owes infinity taxes. If a government acts like a banana republic, people are going to launder money and get it away from the clowns. This applies to the USA as much as Latin America.
Miami is a sand bar with some coral reefs holding the sand in. When (not if) there is a tropical storm, the sand shifts. No one in their right mind is going to build an expensive high rise on a sand pile — its not the same geography as NYC’s granite bedrock.
The Latinos understand this. The native Floridians understand this. New Yorkers are still trying to understand why sand does not make for the same foundation as granite.
New Yorkers also don’t grasp that marshland and mangrove fields exist for a reason. Mother nature put them there to protect against tidal and storm erosion. They should never be filled in and built on top of. Florida man has understood this for decades, New Yorkers seem to think hurricanes rarely ever hit NYC thus they won’t hit Florida either? Huh?
Insurance companies are now setting premiums to reflect idiots building McMansions, filled with expensive appliances and art, in the middle of a flood zone.
Insuring a concrete brick house (what Floridians tend to live in) is going to have a very different cost than insuring a mcmansion built on “recovered” marsh land.
The geography and weather of southeast Florida is very very different from NYC. Is this really a surprise?
Wow “Miami is made up of ex-New Yorkers (especially NYC) and wealthy Latin Americans.” I have always thought those were not the only people living there. Gonna have to “fact check” that whopper
Check the population changes over the last decade or two, and then go f#ck yourself.
I have to assume by your emotional outburst of a comment that you are a moron ex-NYC who ruined your city, then moved to Miami without thinking geography and weather through. In short, you are the problem.
I complimented the Latinos and long time Floridians who aren’t stupid enough to build a heavy building on sand. And I support their efforts to keep wealth away from banana republic Marxists like you.
I used to live in Miami in the early 1980s. A popular bumper sticker was “Happiness is a Canadian headed north with a New Yorker under each arm. I was so sick of hearing how they did things “up north” and I myself escaped NY during the reign of Cuomo the Elder.
My other favorite bumper sticker was “Will the last American leaving Miami please bring the flag”.
Fact check –
https://m.youtube.com/watch?v=IYNp9SW0NYA
You obviously don’t know much about geology, engineering, Miami demographics, Latins, New Yorkers, Miamians, insurance or apparently anything else. If you’re going to comment, know what the hell you’re talking about or keep your mouth closed.
If you think you can build the same high rise on sand versus on bedrock, then you are not worth arguing with.
I lived in both places (NYC and Miami) and unlike you I can tell the difference between sand and rock.
.Meanwhile fort Myers beach continues to rebuild, on sand…
margaritaville on sand.
I guess Florida is a state where woke and condos go to die….
The funny thing are the people that kept saying “everyone’s leaving NY, CA, IL and moving to Florida, Texas, etc” are now complaining about the high cost of FL, TX, etc.
Lol.
I’m way head of the curve, “everyone’s leaving America“….will be the next big thing. Got an apt this year in Europe. Got exit strategy?
“Bitcoin is the exit strategy”
Michael Saylor
I hear the next hot spot is south western Utah.
It’s paradise if you have extra wives.
And a gambling addiction since Las Vegas is not too far away.
The dog rides on the roof rack. Better than getting put down by Dakota Barbie.
The next hotter hot spot has already been identified: FL-AL-MS-TX-NM-AZ. The question after that is, how much wealth will be lost on southern real estate and how fast are people going to move to the NEW south: Carolinas-GA-Arkansas-Missouri-OK-CO-UT, while the old south withers and floods. .
The old south withered a long time ago, between 1863-1976
Up until recently, Florida and Arizona were boom states. MS and AL were always MS and AL so no one wanted to live there. NM is apparently a crime center. Climate change and the slowing effects of massive debt have only become killers of states in the last 30 years, no?
Missouri is a Midwestern state. In addition, it’s not growing and getting jobs like Arkansas.
Its north of the new “100-110 degree belt.” It’s south enough.
For years and decades, to get reelected (many retirees have nothing else to do), condo Boards have kept assessments well below where they should have been. At least 25% of all condos between Miami and Orlando have underfunded reserves. Now, owners pay the price that they should have been paying proportionately over many years. – What’s worse, perhaps, that Florida Legislation allowed the underfunding of Reserve accounts.
I give up.
Brutal but idea that people escaped to Florida for a cheaper lifestyle is over. Considering HOAs and insurance, I expect a lot of moving vehicles the other way
On to the next disaster in waiting. Anywhere in our US borders is under attack or will be under attack.
By cannibal immigrants!
I have it on good authority they prefer the flesh of white conservative babies between 3-18 months
“Some are worried developers may already be purchasing condos in the building for a potential takeover, where a developer tries to gain control of a building to knock it down and build a newer,”
America in a nutshell:
You have a building about to fall down. Someone wants to replace it with a newer one which at least has a shot at not falling down. And that makes “people”, of all things: “worried”……
Can’t make this up…. Lock Limit Idiotopia, here we are!
Florida has always been a state of, by and for land developers. Developers of course want to maximize profits and that means paying for the political campaigns of those willing to minimize regulation while building to the minimal standards that they can get away with. That is coming back to kick the ass of those who trusted the integrity of the building community. Note the State did not increase the building standards, just the inspection requirements. Never buy in Florida unless you know what you are doing.
Case in point is “Inverness Villages 4” development which was built with no stormwater control system and no paved roads. These are new homes built within the last few years. https://floridapolitics.com/archives/643940-citrus-county-community-faces-109000-per-lot-assessment-to-pave-streets/
It always amazes me how everything cycles. Florida is the place to move, the inexpensive homes. Well, that changed quickly. Now, we see high-hazard areas becoming impossible to afford because of outside influences, like weather, causing insurance to explode higher in cost. The ripple effects could make real estate harder to maintain for everyone.
Inflation in all areas, no matter the asset. It is ripping the hearts out of us; there seems to be no safe space.
HOA’s, Condo’s, buying half a duplex, brownstones, mobile home parks, etc.
When you do not own the land and give partial control of your property to someone else this is what results.
Buy your land and buy your own home and don’t give anyone else a say in what you do.
It’s insane to me that people buy a condo in a high rise building and share responsibility for upkeep with 100 other people. Why would any rational person do that? Your entire financial future is being controlled by someone else.
Nope, not for me. I’ll stick to my single family\multi-family home rental strategy for retirement investing where I own 100% of everything outside of any HOA.
Sometimes you cant live 3 hours away from a city center where your job is (and where single family houses aint). I had a condo in a 42 floor unit for 7 years who had an emergency assessment for the (crumbling) balconies. Wasnt fun but not everything can be predicted.
“It’s insane to me that people buy a condo in a high rise building and share responsibility for upkeep with 100 other people.”
Not fundamentally any more so than buying a car dependent on roads kept up by others to be useful… 40 acres and a mule which don’t need roads to get around, is no doubt nice and all. But it’s not a particularly efficient way of geograhically organizing a complex society of 300+million people.
What, OTOH, IS idiotic: Is living under a government so totalitarian that anyone’s “entire financial future” is being tied up in something as cheap to slap together as four walls, a floor, a ceiling and some wires and plumbing.
A car is just a means of getting about. Not one’s “entire financial future.” Similarly, a home is just a place to live, and to store some stuff.
As soon as a car, or a home, or a pair of socks… becomes the “entire financial future” of any meaningful number of people: That, in and of itself, is what is the problem. Any follow-on problemette which may derive from that, is at most a roundoff.
Most people’s finances are tied up in their resident.
And most people could save more and actually get a decent financial future, but most do not and prefer newer cars, eating out and other non-necessities.
The people who refuse to save, in the richest country that has ever been, are the problem, I agree.
I am a financial advisor for a living (I advise low income people) and can absolutely guarantee you that nearly everyone who is poor is poor by choice.
So yes, most people’s financial futures are tied up in their homes. It’s wise to make sure it’s not entangled with someone else making huge decisions on it.
“Most people’s finances are tied up in their resident.”
Meaning: Their finances are tied up in a decaying manufactured good; which becomes less and less valuable, year in, year out. As it sits there 1) decaying in the weather, and 2)becomes more and more outdated due to technological improvements.
No different, at all, from: “Most people’s finances are tied up in their cell phone.”
THAT is the problem. When a fairly rapidly decaying, real-world depreciating CONSUMABLE, is what “Most people’s finances are tied up in”, of course people will only get poorer and poorer year in, year out; as their erroneously labelled “asset” decays and depreciates. Exactly as has been the case in America for 50+ years by now: People get poorer and poorer, no matter how many arbitrary LDVs and HTCs and GBDs and VFTs and GDPs the junta and their captive idiots insists are “going up!”
It makes not one whiff of difference whatsoever, that a totalitarian junta and its central bank manage to sucker economically illiterate simpletons into uncritical, blind faith in a fallacy so trivially obvious as the for-children-only fairytale that “but, but, but homes appreciate! We the Morons-onTeeVee, have deemed and decided and felt and judged that they are an asset!!!!!”
They’re not. Assets are defined by their use as higher order goods applied in the production of lower order goods. “Homes” don’t produce anything; no matter how many dumb people can be indoctrinated into blind faith in the productivity of wall fungi. Homes are a textbook consumer good. They provide the consumer good labelled shelter. And their ability to do so, declines over time as they age. Ergo, they depreciate. Always and everywhere. No different from a cell phone. Or a pair of socks.
Since they depreciate: The only way to maintain the simpleton classes’ favorite delusion; that they instead, of all idiotic things, appreciate; is to make up for their depreciation, plus any delusional “gain”, by transferring value created by other people and other organizations, to the braindead simpletons sitting there with their “finances tied up” in a decaying consumer good being used up.
The above is currently accomplished by 1)a debasement process in which the real value represented by freshly printed money is being handed to contribute-nothing, connected banksters. Who then get to turn around and collect statistically risk free rent, by handing it, minus a cut, to the simpletons-in-thir-shacks classes.
As well as by 2)banning more competent people from building higher quality shelter for lower prices. which would be the simplest thing in the world to do for anyone even remotely competent; where it not for various junta enforced bans on competence at anything. This is how, for the past two years, Iphones have been a similarly “appreciating asset”, per simpletonomics. In Russia. There is, literally, NO difference between that, and houses in America.
Of course: As anyone with even the most minimal of economic literacy; or for that matter even just a functioning brain; quickly realizes: Neither printing money nor banning Iphones in any way creates any new value. Hence, sum total, no matter how much the simpletons blindly believe their “home” has “appreciated” as a result of bans and printing and interest-rate lowering and implied backstops, the sum total of wealth has not increased one iota. Instead, it has only decreased, in lockstep with their home’s decay and depreciation.
The simpletons may temporarily feel better off. Since the above described forced wealth transfers have burdened others with the cost of maintaining the delusion. Those “others” inevitably being those who create something which can be redistributed: As in productive, value creating people and enterprise. Those are the ones who have been forced to hand wealth to the simpletons-in-shacks, such that the latter can continue to keep their childish delusion about wall fungi somehow creating wealth for them alive.
But this has only resulted in America’s once-were productives having become burdened by the cost of keeping a class of rent-seeking, unproductive, leeching simpletons in deousional splendor, that they are no longer able to remain neither competitive nor productive anymore.
Which is the exact reason why America, as of today, is neither competitive nor productive. At anything at all. Instead being reduced to nothing more than a totalitarian, kleptocratic terror state in free fall, where everything is falling apart and noone is competitive, nor even useful, for anything.
I’ve never been a fan of buying something that is part of an association – it’s bad enough that as a home owner you have to pay rent to the government in perpetuity. Now multiply that by ‘buying’ a small section of a large building? No thanks.
All buildings crumble eventually. The difference is when you own your own building (and the land beneath it) you can control the rate at which it crumbles.
When a person takes personal responsibility for their own home, and the maintenance for it, neglect is much rarer than when they have no responsibility for it.
The problem is a lot of people don’t take care of their homes or properties. The majority of people live like pigs and don’t care about maintenance nor cleanliness.
So I suppose you don’t invest in stocks or bonds either? Both of those are also “buying something as part of an association”, and trusting the management to take care of you.
I invest in stocks in a limited way, in companies with a good track record.
I’m not suddenly going to be assessed a 100k fee for owning a stock, like you can with a condo.
I invest primarily in real estate and manage a 1.2 million portfolio for my and my mother.
I have far greater control (and returns) with real estate than I do with either stocks or bonds.
This would be an example of inflation not caused directly food and energy costs, but instead caused by government regulations, owners not doing enough checking into their property when they bought them, and increasing climate change costs/hurricanes. This is not your father’s inflation, making you wonder if 100% effective in the 1970s interest rates can solve this problem.
In the case of Florida condos it’s not just you checking on your own maintenance….it’s the failure of everyone else to check on their own maintenance.
If I own a single family home and don’t do the maintenance, I suffer. If I buy a condo and my neighbor doesn’t do his maintenance, I still suffer.
It’s insane to buy a condo and trust someone else to manage your maintenance. When your neighbor can destroy your investment through bad decisions, that’s a bad investment.
As a former condo owner, most of the assessment went for building staff, routine maintenance and common insurance. There is lots of regulation to cover idiot neighbor’s water leaking into your place. Sometimes government isnt entirely wasteful.
It’s common area maintenance that hasn’t been done, not individual maintenance (inside your unit).
No one wants to pay for common area maintenance so of course all the owners vote to defer it so their monthly condo fees are lower. Do that for 30 years and you suddenly owe 100K instead of maybe it costing 50K if it had been done over the years (things cost less 10 and 20 years ago).
Other owners’ water can leak into another unit, as my friend experienced. All I remember is he wasnt concerned as someone else was on the hook for it. That was more of “it was time” than any deferred maintenance.
that’s what the HOA or condo association is supposed to take care of, no?
Yes, it is. Not all of them do. No one will care for my interests better than I do.
There will be HOA’s that are better at it than others, but not one will do it as well or as carefully as I do, since I am the one most affected by it.
It’s a personal choice. Some love HOA’s, but studies show that people who live in HOA areas are typically poorer than those who self care their own place. There are a lot of variables in this but my hunch is that people who manage their own stuff tend to do that in other areas of life which leads to a greater financial net worth.
People primarily flocked to FL because it was cheaper to live there. It used to be cheaper because regulations were few or not enforced. Now the piper wants to be paid and costs to live in FL are soaring.
Its hard to find anywhere left in the US worth living in where there arent people, which usually were tied to low prices. No people = low costs. All these people who are going south to escape the norths high living costs are deluding themselves. Down south, the costs are coming for you! Give up those cigars, booze and scratch-offs, cause youre gonna be paying no matter where you go.
There’s always relatively cheaper places to live in a country. I imagine that it’s probably a lot cheaper to live in Montana or Wyoming but you lose easy access to an ocean and the weather is a bit colder than FL.
Carmen Balber and other people who agree with that idea should form an insurance company and cover these people; anyone who wants coverage
If there is money to actually be made, someone will do just that.
But if regulations and the amount you can charge someone for insurance means you can’t make a profit, then commercial businesses will not participate. And even government can’t run an enterprise at a loss forever. Eventually, the taxpayers footing the loss will get upset.
I can imagine that if no one is willing to insure people in a specific area, then they will be forced to take their chances. As such, they might decide to go back and live in a simple log cabin, which is easy to rebuild if it gets caught in a tornado, flood, fire.
Call Ajit Jain @ Berkshire Hathaway. I believe that Buffett said at their annual meeting last week that they had virtually pulled out of the Florida reinsurance market.
Meanwhile at my place in Palm Beach they’ve just finished their second redo of the balconies during the last 30 years – My understanding is that steel rebar exposed to salt air has been replaced with fiberglass. Even so, there are developers dancing around with offers to tear down and rebuild with unaffordable units.
Salt air is murder on steel (I also live in Palm Beach County).
If the rebar is exposed to salt that means they did something wrong. It’s supposed to be covered 100% by concrete to a depth of at least an inch.
After 50 years cracks in the concrete appear. All balconies were torn off and replaced.
Say what? How are developers going to recover their costs and make a profit if they build “unaffordable housing”, and fail to sell any of those units?
Captives, Associations, Risk Purchasing Groups – as old as Lloyd’s Coffee House.