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New Foreclosure Wave May Swamp Florida Market

While Florida’s real estate market is showing some signs of life, industry watchers fear another major wave of foreclosures is poised to swamp the state.

With unemployment rising to 11 percent, home prices falling, and adjustable rate mortgages issued during the 2006 housing boom set to tick upward, the stage is set for more delinquencies, analysts said.

“We think there’s a lot of foreclosures that are just starting to make their way into the pipeline here,” said Amy Baker, coordinator of the Legislature’s Office of Economic and Demographic Research. “They really haven’t hit yet.”

A new report by the independent LPS Mortgage Monitor shows that 10 percent of Florida mortgages were in foreclosure in August – the highest rate in the country and almost triple the national average.

A steadily rising number of delinquent loans also have not yet plunged into foreclosure nationally, the report showed – hinting that plenty more homes could be headed that way in coming months.

LPS termed these troubled loans the “shadow foreclosure inventory,” and pointed out that it is double the number of actual of foreclosure starts. In Florida, one-in-five mortgages are in foreclosure or delinquency – almost twice the national average and the highest level in the U.S.

“Housing sales are rising,” said Tim Becker, director of the University of Florida’s Bergstrom Center for Real Estate Studies. “But foreclosures just put more homes back into the inventory of unsold homes. You’re not going to get Florida’s economy going again until you cut down this inventory.”

More than 1 million Floridians are currently out-of-work, with the construction industry among the hardest hit. Some 62,700 housing-related jobs have been lost in the past year, state officials said.

Becker said that declining home prices – while boosting sales for 13 straight months – are also contributing to the foreclosure rise. Owners whose home values have dropped significantly – leaving them “under water” – have no incentive to continue paying mortgages and may let their homes lapse into foreclosure.

Florida’s median home price for September fell to $142,000, state Realtors reported Friday. That’s down 19 percent from a year ago and $5,400 lower than August’s median sales price.
Meanwhile, a backlog of foreclosures in Florida’s court system reduces the risk that these delinquent homeowners will be.

“You’re seeing more people employ the “put option,” with their mortgages,” he said. “They’re saying “put (the loan) back on the bank.”

Still, homes are selling as prices drop – steering dollars into the state treasury through real estate transaction and sales taxes, although Florida officials acknowledge a $2.6 billion budget shortfall looms next year.

Realtors, though, said falling prices could spur an economic rebound by reigniting Florida’s population growth – which declined this year for the first time since shortly after World War II.

“It’s a buyer’s market right now,” said John Sebree, lobbyist with the Florida Association of Realtors. “Maybe people see these prices and say, `I don’t have to sell my home in Indiana to find a good deal in Florida.’”

3 Responses »

  1. Yes there are lot more foreclosures to come but their are buyers waiting for these opportunities. Florida's inventory of home has dropped from a 40 month supply to a 7 months. If you are a home owner it will still be hard to get what you may think your property is worth but for the investor it is the best of times. There is cash buyers coming in from around the world and we are just in the beginning of the baby boomers buying their retirement homes.

  2. The shadow inventory is biggest issue noone wants to face. There will be thousands of homes hitting market once banks are done with paperwork.

  3. We need something to change this crazy cycle soon.