For most of 2012 we have been witnessing the impact that a declining condo inventory has on prices.  Well, now it seems that distressed sales are growing again in the Fort Lauderdale, Florida condominium market and are negatively impacting prices.  Our first chart takes a look at the percentage of distressed condo sales in August 2012.

In April, May and June 2012, short sale and REO condo properties were 15% of closed transactions.  In July, the percentage grew to 16% and increased to 17% of closed condo sales for August.  It is important to remember that the robo-signer litigation was settled in February and finally signed by banks and loan servicers in March of this year.  Under this settlement, these lenders have been encourage to negotiate short sales on properties before repossessing them.  Short sales are more favorable for both parties rather than a foreclosure, but they still have a negative impact on prices, as illustrated in the next chart.

Well, so much for the price recovery that the media has been declaring for the past few months.  The short-lived price rally fizzled once the distressed properties started selling again.  The Fort Lauderdale, Florida condo market has seen a 16% drop in average selling price from May until August.  My monthly market insight has been discussing this for most of 2012 and it is now coming to fruition.  The one interesting twist is that even a declining inventory cannot help prop-up the prices.

After condo inventory in the Fort Lauderdale market peaked at 6,451 available units back in September of 2010 (the month before foreclosures were halted due to the robo-signer litigation), we have seen a 55% drop in inventory as of August landing at 2,936 available units for sale.  Our fundamental economics lesson teaches us the restrictive supply and increased demand will stimulate pricing.  So what happened?

The troubled loans that have been plaguing the banking system are just now starting to clear.  The brakes have been on the foreclosure train since October of 2010.  Yes, that’s correct, 2010!  Over the next few years, lenders will continue to negotiate short sales with distressed borrowers and sell the properties at a discount to the market.  The banks will use foreclosure and REO sales if all else fails.  The average foreclosure in the state of Florida takes over 1,000 days to complete, so if that can be avoided by completing a short sale, obviously that makes more sense.  The last chart today is courtesy of Realtytrac and shows that Florida experienced an over 80% increase in foreclosure filings from May 2011 to May 2012 and is evidence that the foreclosure train is just now getting ramped-up again.

Florida is always ranked high on the wrong lists!

Allied Realty Group is located in Fort Lauderdale, Florida and our residential brokerage team serves as the exclusive broker for a variety of financial institutions in the management and sale of distressed single family and multi-family properties.  Our team will inspect, repair, market and dispose of REO properties in a manner that mitigates bank losses.

Allied Realty Group’s REO assignment territory is Broward County, Florida and we complete broker price opinions (BPO’s) for banks on a daily basis. All of our residential brokerage clients appreciate our extensive market insight since we are actively visiting properties and preparing comprehensive valuations for asset managers.