How Bad Are House Prices? Down 45% at least in North Florida

I have argued long and hard with myself about posting this post, but finally decided it had to be done. I don't want to spook the tentative recovery that may be putting up green shoots, but here's a depressing real life story about how badly the housing market crashed and is still ailing.

On Tuesday, May 19, there will be an auction of foreclosed property on the steps of the St. John's County courthouse. One item is 3.5 acres of prime land within the city limits of St. Augustine, widely considered to be one of the most desirable locations in the country during the first half of this decade, during which time St. John's County--home to The Players Championship, superb beaches, and "the nation's oldest city"--was one of the fastest growing counties in America.

The land was bought for $1.1 million in 2005 which most people considered a bargain (the bank's appraisal put the value at $1.25 million). It is probably the largest piece of undeveloped land within the city limits. About $30,000 of improvements were carried out. The bank is owed about $865,000. The land has been offered for sale since 2007, for as low as $750,000. The only offer there has been on it was for $225,00. Obviously the bank rejected that. You can see pictures of the land here.

On Tuesday, June 9, there will be another auction of foreclosed property on the steps of the St. John's County courthouse. One item is a 5 bedroom house with pool and marsh view, sitting on 1.5 acres of prime land within the city limits of St. Augustine. This property was purchased for $320,000 in 2001. Some $145,000 worth of improvements were carried out ($25,000 kitchen, $6,000 AC upgrade, $80,000 pool, $29,000 2-car garage, $4,000 studio, $1,000 tiling work).

In 2007 this property was appraised at $890,000. It has been offered for sale as low as $525,000. There have been no offers. Several people have wanted to buy it but, as the saying goes: "the banks aren't lending." In other words, right now banks aren't prepared to lend the money that honest, money-earning people need to borrow to buy property. Ergo, the banks end up owning the property. In this case the bank is owed $548,000 in principal, $583,000 with interest and fees. You can see pictures of the property here.

So, what will these two properties fetch at foreclosure auction? The answer will tell us a lot about property prices. Right now it looks like they are down at least 45% from their highs. The fact that these properties have not received a single sensible offer suggests the number may be worse, forced down by tight credit on top of all the other factors. The 5 bedroom house could sell for a price below 2001 levels when you consider what the owner has invested in it.

Stay tuned for the results.
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