Despite the dramatic price increases registered by Miami, Fort Myers and other Florida resort communities over the past 12 months, the state’s foreclosure nightmare is far from over.
Some 1.1 million distressed sales are in the pipeline for Florida markets in the near future. They include some 530,000 mortgages nearly 90 days delinquent and subject to future foreclosure, about 200,000 REOs of the 444,000 properties taken back by banks through completed foreclosures since 2007 and still owned by the banks and 371,000 foreclosures tied up in the huge post-Robogate inventory now in litigation before the Florida Supreme Court.
Florida’s current and potential foreclosure inventory amounts to 6.8 times the size of the visible inventory of listings on Realtor MLS systems in the state and it will take years to clear out at today’s demand levels. Most of those distressed properties are in South Florida, the coastal resorts, and Orlando and Jacksonville, which have traditionally been the sites of most of the state’s foreclosure activity.
“Whenever I hear people talk about foreclosures ending in Florida, I don’t think they are seeing the whole picture,” says Jack McCabe, an economist and principal at McCabe Research & Consulting in South Florida. McCabe believes the price gains achieved by markets like Miami and Fort Lauderdale over the past year will be erased when foreclosures and short sales currently in process come to market.
“Foreign buyers played a huge role in creating the demand that drove up price increases in Florida resort markets over the past year, but some countries like Brazil and Canada are not enjoying as good a rate of exchange today as they were a year ago,” said McCabe, who said foreign buyers accounted for as much as 60 or 70 percent of sales in some areas and believes they probably overpaid for properties.
An advocate of principal write downs, McCabe said Florida lenders are not waiting until the Supreme Court litigation is settled but are proceeding to foreclose on owners who are not represented by legal counsel even if the lenders don’t have the paperwork to back up their foreclosures. “We’ll probably never know how many families lost their homes because they simply gave up or couldn’t afford a lawyer even though their lenders did not have the paperwork necessary to comply with state law. The state supreme court heard the case last month and the court has not indicated when a ruling is expected.