Countrywide’s multiplier effect…

It’s been a few months since we last checked in on the sex party house a stone’s throw away from where I used to live in Holmes Beach, Fl. that we first footnoted last November. The house, which was once listed at $1.8 million and which Countrywide Financial (CFC), which is set to be acquired by Bank of America (BAC) later this month, foreclosed on for around $1.1 million, is going on the auction block next month. The starting bid? A mere $369,000.

When I drove by the house back in February, I was in shock that anyone would have valued this house at over $1 million. On Countrywide’s own REO site, the price has dropped to $729K, nearly 20% below the $904K it debuted on the site for.

When you start multiplying that kind of loss by the over 1,400 Florida properties that Countrywide currently lists on its site — the folks at this site make it easy to see the initial prices and the current ones — you have to wonder whether Bank of America really knows what it’s getting into. And then multiply that by the foreclosed homes in other states. Given the spike in short interest in Countrywide shares — 102.45 million as of May 12, compared with 76.43 million a month earlier — it’s clear that there’s some people betting that this merger may be DOA.

Later this week, I’ll be heading down to Miami. The last time I was there, back in mid-2006, I asked the Miami Herald’s real estate reporter who was buying all of those high rises I saw going up as I walked south along the boardwalk from my hotel. It will be interesting to see what that area looks like today.