With half of 2013 already in the bag, let’s run-through some of the data, starting with transaction types:

You will notice from the chart above that traditional (not distressed) transactions dipped slightly in June throughout Broward County.  They will most likely drop again when we get the July data because of the jump in interest rates that started in June.  Distressed sales remained at low levels for a total of 410 distressed transactions last month when you combine the 170 Foreclosure/REO sales and 240 short sales that were completed.

To put the low level of completed distressed sales into perspective, the next chart shows the number of new foreclosure filings in the single-family home segment compared to the closed transactions.

In June, there were 2,365 new single-family foreclosure filings, while there were only 410 distressed sales completed.  Speaking in round numbers, we will say that there 6 times as many new foreclosures filed in June than distressed property sales in the single-family home segment.  Obviously more distressed sales will need to be completed if we ever want to reduce the massive shadow inventory of 0ver 40,000 homes that are in some stage of foreclosure throughout Broward County (in the next chart).  If were are only selling 400 per month, it will take 100 months (over 8 years) to sell all of the distressed properties.  Oh wait, that doesn’t include the new foreclosure filings each month.  If the pace of new filings remains elevated, we will never dig out of the pile of foreclosures.  Keep in mind that this backlog does not include over 14,000 condo/townhouse properties in foreclosure, which will be a separate blog post and series of charts.

As for inventory, no big changes in June.  The inventory grew by 90 units to 4,225 houses listed on the market.  There is a good chance that the temporary price increases have brought a few sellers out.

This next chart sheds some light on the low level of available inventory for sale and high level of properties in foreclosure.  Why aren’t the distressed properties listed for sale?  Well, it is a combination of the following factors:

• Negative-equity has kept borrowers trapped in their homes and unable to sell.
• Banks halted foreclosures for over 2-years because of robo-signing litigation.
• Delinquent borrowers found ways to manipulate the system and remain in their house for years without paying.
• Florida is a judicial state and the average foreclosure takes close to 900 days to complete.  Those who are skilled in gaming the system go way beyond that (4-5 years).

Here is a look at the average selling price.

The temporary support in pricing has allowed some sellers that were “on the bubble” due to negative equity to enter the market for the first time in years.  As if the stockpile of distressed sales wasn’t a large enough headwind, the rise in interest rates will certainly stifle any recovery hopes.  For every $100,000 borrowed, a 1% increase in mortgage rates adds $83 per month to a payment.  This may not sound like much, but when you take into account that there are no more “liar loans” and there are strict debt to income ratios to qualify for a loan, the jump in rates shown below will put a cap on home price appreciation and will result in cancelled contracts.  The noticeable spike happened in late June, so the impact will most likely be seen in the July data.

To summarize in a few bullet points:

• Distressed property inventories will continue to grow.
• The distressed properties will eventually enter the market as short sales or foreclosures.
• More distressed property sales will drag prices back down.
• Rising interest rates will slow price gains and gradually impact prices in a negative manner.
• “Investors” who rushed into the REO to rental market will gradually dump their properties onto the market as the anticipated rates of return don’t materialize.
• This is not a housing recovery, it is merely a head-fake!