A story on Miami real estate? I knew what was coming. At first, the reporting seemed okay. But when I watched it again — a 60 Minutes real estate piece that mentions the troubled downtown Miami condo Jade on Brickell — I realized part of the story really missed the mark.
Here’s the problem I have with the media in this digital age. In the 25/7 rush to scoop each other on headline news, sometimes stories lack facts. Sometimes the “facts” presented aren’t entirely factual. And sometimes the interview is angled to fit the reporter’s notion of what the story is perceived or desired to be.
Don’t get me wrong. I have a lot of respect for the media in general and participate in many interviews myself. But like so many industries pressured by the ubiquity of Web information, and in the media’s case, significant declines in ad revenue, circulation, and staff resources, haste can make waste.
How did CBS make the already bad news about Jade on Brickell worse? 60 Minutes reporter Scott Pelley toured the downtown Miami condo with local broker Peter Zalewski and portrayed it as a victim of the subprime meltdown. False! This story line actually sounds better for Jade than the reality, but it disservices the truth.
The Real Story on Miami Condos
Anyone in Miami real estate since, say, 2004, knows that Jade’s problems are because of MORTGAGE FRAUD, overspeculation, and oversupply, NOT because of subprime lending. It is well known that Jade sold at the VERY top of the market. It is also common knowledge here that the majority of Jade’s contract-holders are speculators, though no one would EVER admit it.
Jade on Brickell started closing units in 2004-2005, WELL BEFORE any hint of financial fallout. The 60 Minutes segment further misses the point by leaving out important details. For example, when people buy preconstruction condo units, they do so WITHOUT a mortgage contingency.
Flipping Miami Condos
When Miami’s condo rush was in full swing, money was cheap and easy to get. Condo sales were not hooked to the mortgage market. Cheap mortgages and subprime loans were not used as an enticement. Zalewski commented that Option Arm and Alt-A loans were “essential” for Miami condo buyers. Not the case.
Back then, obtaining a mortgage was rarely discussed because most buyers planned to flip (remember that word?) their condo BEFORE closing. Bad CBS.
I can name many high-end buildings that are or were RAMPANT with mortgage fraud. Hello! Where’s the story on that??
Jade’s issues, I repeat, are NOT from subprime lending practices, and Zalewski should have known that and pointed it out. In the 60 Minutes segment, new condos in the downtown Miami/Brickell area seem to be portrayed as a hotbed of foreclosure activity (because of the subprime collapses). They are not.
I wish CBS had asked another broker or agent for the real story and the real center of foreclosure activity in South Florida real estate. But since they didn’t, I’ll help them out: Homestead, Florida. Working class Homestead, Florida.
Some of the more interesting (and hopefully more accurate) footage in the interview comes from Whitney Tilson, who tracks U.S. mortgage information. Here are the residential real estate loans coming up for readjustment:
- Sub Prime: $1 trillion. We seem to be near the end of these resets.
- Alt-As: $1 trillion.
- Option Arms: $500-600 billion.
Then there’s the commercial real estate market, but we won’t go there right now.
From the Credit Suisse graphs on CBS, it looks as if Alt A and Option Arm loan resets won’t peak until mid-2011. Yikes. These mortgage defaults could be more numerous and longer lasting than the subprime plunge.
Don’t you love the interview with the speculator who plays victim because she “didn’t ask enough questions” about her loan terms? Oh, okay. Sign six mortgages, but don’t read your contracts. This one gets the big “Duh!”
And did you see Oscar Munoz cleaning out ONE condo? He used to be a Miami real estate agent. Now banks hire his company to empty out foreclosed properties.
Peter: There really isn’t any way to spin “vulture.” You tried, though.
Chronicling the Miami-Miami Beach condo boom and bust:
- Condo Development on Miami Coast is Hot, Hotter, Hottest (The Miami Herald).
- They’ll Take Your Houses(New Times). The latter article is kind of ironic since the Tribune Co. just filed for bankruptcy.