There are different theories behind the limited housing supply in South Florida.  One theory is that the economy is so strong that you better buy a house right now so you don’t get left out.  Wow, that sounds very familiar to the scare tactics that most real estate agents used until the music stopped in 2008.  The other theory is that the foreclosure problem was never dealt with.  In fact, the surface on the foreclosure problem throughout South Florida was barely scratched.  There is still a tremendous shadow inventory of foreclosures that is now growing again.  Some alarming statistics about redefaults on loan modifications are surfacing to show that that the band-aids applied to the housing problem are popping off at a rapid rate (redefaults are being reported as high as 46% in the HAMP program alone).  First, let’s look at the new foreclosure filings in Broward County, Florida on a monthly basis:

The single family foreclosure filings increased 6% in March to 861 filings and the condo/townhouse foreclosure filings jumped 22% month over month, to 304 new filings.  The total for March 2013 was 1,165 new foreclosure filings and if you look at January 2012 through March 2013, the average is 1,321 new foreclosure filings per month.

The problem is that the level of existing foreclosures isn’t subsiding.  Since our last update in mid-February, we have seen almost a 20% increase in existing foreclosures in Broward County.  Our search results max-out at 5,000 properties, and the City of Fort Lauderdale just went “limit-up”.  Take a look at this next chart.

The “recovery” by the numbers with some of the highlights:

• Fort Lauderdale has OVER 5,000 single family homes and has 2,495 condo/townhomes in foreclosure
• Miramar currently has 4,761 single family homes and 1,010 condo/townhomes in foreclosure
• Pembroke Pines currently has 4,227 single family homes and 1,009 condo/townhomes in foreclosure
• Hollywood has 3,515 single family homes and 1,330 condo/townhomes in foreclosure
• Coral Springs has 2,497 single family homes and 1,407 condo/townhomes in foreclosure
• Pompano has 2,335 single family homes and 1,317 condo/townhomes in foreclosure
• Weston has 1,530 single family homes and 319 condo/townhomes in foreclosure

There are some areas of the country that have cleared-out distressed property inventories, or don’t have a large overhang of foreclosure inventory.  Most of the states that have seen noticeable improvement are non-judicial states, unlike Florida which is a judicial state and the average foreclosure takes 853 days to be completed.  The “recovery” that the media has been putting on the front pages will not take place in the South Florida real estate market until the banks dispose of their distressed properties that have been sitting in limbo for the past 4-5 years.

Our city by city count of existing foreclosures totaled over 54,000 single family and townhouse properties in foreclosure throughout Broward County as of April 26.  The majority of these delinquent borrowers have learned how to game the system and the real “pros” have figured-out ways to stay in a property for 4-5 years without paying for it.  I think everyone in South Florida knows of someone who knowingly does not make their mortgage payment, but somehow has plenty of money for new cars, a boat, fun vacations and new iPads for the entire family!

What needs to happen is for properties that are currently in foreclosure to make their way through the system and into the hands of people who can afford to pay for them, or actually think it is o.k. to make the mortgage payments as agreed in the loan documents.  The charts below illustrate the breakdown of real estate transactions in Broward County.  Once you see the percentage of short sales and foreclosure/REO transactions begin to increase on a monthly basis, we will finally start to make progress.  Short sales showed an increase in the single family sector last month, but continue to lag in the condo/townhouse market.  The downside will be another dip in prices, but it is a necessary evil in order to obtain a true “recovery” and will most likely take a few years given the elevated levels of distressed properties.

To put everything in perspective, there were only 4,226 single family homes listed for sale in Broward County in March, but there are over 38,000 single family properties in foreclosure.   That is a factor of 9x the existing inventory!  In simple terms, for every house listed for sale in Broward County, there are 9 that are in foreclosure.  In the condo/townhouse market, there were 6,089 active listings last month and there are over 16,000 condo/townhouse properties in foreclosure, reflecting a factor of 2.5 properties in foreclosure for each listed for sale.  Hopefully this sheds some light on the low inventory that continues to keep non-payers in their homes and prevents qualified buyers from being able to purchase a home.  The battle prospective buyers are facing is that on average, only 15% of the active listings are distressed sales, and that number is dwarfed by the shadow inventory of properties in foreclosure, but not yet available for sale.  With that being said, nothing explains these exciting numbers as well as one of our colorful charts, so here you go: