A decade ago, Florida was a hotspot in the US-wide housing market furnace. Across the country house prices rocketed but Florida saw one of the sharpest rises nationwide. Ten years later, the aftermath of the 2008 meltdown has seen Florida’s foreclosure rate top out above even Nevada. While the housing market nationwide has become a rare economic bright spot, Florida is still recovering.
The foreclosure rate across the US as a whole seems to have peaked in 2010 and has since begun to fall even in hard-hit Nevada. But in Florida it continues to rise. Florida cities account for eight of the top 20 metro areas for foreclosures. The Orlando-Kissimmee, Lakeland, Jacksonville, Tampa-St. Petersburg and Melbourne areas of Florida all have at least 28 months’ worth of foreclosed properties for sale and foreclosures account for at least 24% of all sales. Most tellingly, foreclosure activity increased at least 50% last year. And in the Palm Bay-Melbourne-Titusville metro area, tipped by foreclosure tracking firm RealtyTrac to be the best place to buy foreclosures in 2013, foreclosure activity rose 308%.
All this hasn’t necessarily resulted in a cheaper market on the ground. As prices have fallen and a spate of vacation homes has hit the market, there has been a return to home flipping, in which developers buy up properties cheap and sell them for a quick profit after carrying out improvements. Over a year ago, Warren Buffet said that family houses were ‘as attractive an investment as you can make,’ and RealtyTrac says plenty of companies and individuals have been following his advice. During the same period that foreclosure activity roles 50%, flipping activity rose 25% as giants of the industry like the Arizona-based Colony American Homes bought up housing and resold it, on average for a $29k profit per property. Many of the homes are being bought to be rented until prices rise, when their equity can be realized by sale. In the meantime they’re helping to improve the housing markets across Florida:
The slow rate of foreclosure proceedings is partly to blame for the explosion in foreclosures. Some cases spend four years going through the system to foreclosure. In fact, there’s a proposal going through the State Legislature that would give lenders only one year, instead of the current five, to pursue a judgement against a homeowner in foreclosure cases. And since Florida contains five of the ten places named by RealtyTrac as the foremost places in the US to buy foreclosed property, it sounds like the sort of measure calculated to be popular with the banks that own the properties.
However, the proposal, HB 87, would require that the banks came to foreclosure cases with all their paperwork in order. ‘We’re telling the lenders, don’t bother filing the complaint unless you’ve got it right,’ says Rep. Kathleen Passidomo, R-Naples. ‘It’s got to be done right.’ The bill passed the House Civil Justice Subcommittee by a 10-3 vote.
Many banks see this requirement as making the proposal work against them. That’s because many homes have been bought by other banks since being leased or sold and the deeds, promissory notes and other paperwork can be scattered to different institutions across the country.
Amidst the arguments over HB 87, the legal fights over individual foreclosures and the mass corporate buy-ups, is there room for a small investor or purchaser? Yes, but it’s a more complicated and competitive market than a cursory glance would suggest, for the reasons we’ve gone over. Anthony Askowitz, a broker with RE/MAX Advance Realty II in Miami, FL, elaborates: ‘The inventory of the foreclosures market is very low. It’s highly competitive for a foreclosure or a property put out as a quote ‘good deal’. Multiple offers is the norm.’
Photo credits: Matthew Paulson via Flickr