Sub-Prime McMansions?

09 Aug

Back when the Sub-Prime crisis first hit, the Republicans sought to blame the crisis not on the financial incompetence of the banks, or the failure of the Federal Government to regulate the banking industry…

Price Reduced

Price Reduced

But poor (minority) folks who obviously took out loans they couldn’t afford.

Like damn near everything conservatives say – that was a lie, too!

LITTLE TORCH KEY, Fla. — Jack Warner leaned against his home bar and checked his watch before resuming his blank stare at the white tent outside his multimillion-dollar dream house, with its swimming pool and views of the Florida gulf, soon to be sold at auction.

“My whole life happens in two hours,” he said. “I feel like I am playing the part of Old Yeller,“ wondering if he will survive financially or perhaps just be put out of his misery, like the fictional dog. An auction, and having people traipse through a house in previews before bidding, smacks of desperation. But increasingly, people with multimillion-dollar homes who need to raise money are discovering they have few alternatives, as the luxury real estate market is especially moribund.

“We are seeing more people with homes that were on the market for $4 million to $7 million that are not selling and they are calling us,” said Jim Gall, president of Auction Company of America.

Mr. Warner, 61, bought his house and an adjacent property that once had a trailer park on Little Torch Key, north of Key West, in 1993. It was appraised at nearly $14 million just two years ago. But after losing a large amount of money, he liquidated his construction business in Elkhart, Ind. Last year, another company he owned, Lucky’s Landing, which essentially owned his Florida real estate, filed for bankruptcy protection and its assets came under court oversight.

When no buyer emerged at the listing price of $5.9 million, Mr. Warner asked the United States Bankruptcy Court in Miami to approve the property’s sale at auction. He had a lot riding on the request. To avoid personal bankruptcy, he said, the sale had to generate more than $3 million, roughly the remaining amount of the mortgages.

The gavel ultimately came down at $2.5 million. Mr. Warner’s hopes withered as he uttered softly: “O.K., I’m broke.”

Now obviously, the bankers and stock market guys who created this mess aren’t anywhere near selling their McMansions. Especially with the sort of $10 million bonuses still being handed out by Banks and investment firms to their 5,000 “most valuable” employees.

But a lot of others are being whipsawed by a failed economy, and a reduced need for the sort of services business which generates the sort of income to afford one of these monsters.

Has the market hit bottom? Probably for the low to mid market. Houses are beginning to move in the under $1 million range. However the McMansion market, which is vastly over built in many areas will likely continue to plummet.

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Posted by on August 9, 2009 in You Know It's Bad When...


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