Litigation Items

• Buyers suing developers for non-performance
  
• Developers suing speculators for flipping properties in violation of contracts
  
• Subcontractors suing developers for non-payment
  
• Subcontractors suing general contractors for non-payment
  
• Class action lawsuits against single family homebuilders and condo developers for faulty roofing, HVAC, electrical, and plumbing systems
  
• Lawsuits against inspectors for not catching code violations
  
• Condo boards and individual homeowners suing developers for shoddy work
  
• Lawsuits against appraisers for inflated values
  
• Lawsuits against banks when project fundings are halted
  
• Lawsuits over completed condo units being substantially different in size, interior finishings, and quality than how they were represented pre-construction
  
• Lawsuits by anyone and everyone against anyone and everyone over various fraud allegations
  
• Of course we can’t forget countersuits by anyone and everyone against anyone and everyone over anything and everything
  

Speculators have totally vanished from the market which of course means there has been an enormous shift in the supply vs. demand ratio. To make matters worse, there are “approximately 25,000 condo units currently under construction in Miami-Dade County alone. Another 25,000 condo units have received building permits and about 50,000 more units have been announced.”

Financing has now dried up, but those 25,000 units under construction will likely be completed along with 75%-80% of the units with valid building permits. The vast majority of unapproved but announced projects will be cancelled. Even so, the completion of 75,000 units or so could make for a 5-10 year supply of condos at a normal sales rates, and sales rates are far below normal.

In addition, expect to see a "sharp increase" in prosecutions for mortgage and real estate fraud as well. Indeed bubbles have a way of exposing all kinds of fraud that people happily ignored as long as prices were rising. When the party ends, the lawsuits begin. We saw the same thing when the dot-com bubble burst. We will see it again over housing. We are going to find a tremendous amount of abuses associated with this boom and the fallout will not be in the millions of dollars either. It will be in the billions.

It’s Not Just Florida

What is happening in Florida, can and will happen in other markets such as Washington, DC, Las Vegas, San Diego, Phoenix and many other bubble markets with rising inventory.

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