We have assembled some good charts and data to illustrate the current residential real estate market in South Florida.  Today we will focus just on the single-family homes in the Greater Fort Lauderdale area.  This does not include condos or townhouses, that will be a separate post.  First-up, let’s take a look a the types of transactions closing.

You will notice that the majority of sales in May (1,031) were traditional sales.  Foreclosure/REO transactions and short sales  sales only only accounted for 429 closings combined.   Next, let’s take a look at the median prices of these transactions.

In May, the median prices in Broward County by transaction type were as follows:

• Traditional transactions – $290,000
• Foreclosure / REO transactions – $165,150
• Short sale transactions – $191,000

Meanwhile, the pace of new foreclosure filings still remains elevated.  For instance, the new filings for single-family homes averaged 953 monthly throughout 2012 and now averages 1,487 filings per month in 2013.  That is a 64% increase over last year.  How about that housing recovery?

In June alone, there were 1,489 new foreclosure filings in the single-family home market in Broward County.  Once again, this is only houses, not condos and townhouses.  If you reference our chart above of housing sales by transaction type, you see that there were only 429 distressed sales in May 2013, but there were 1,224 new foreclosure filings.  That is a ratio of about 3-1 of new filings over sales of distressed properties.  We don’t have the June sales data yet, but it is safe to say that ratio will remain intact. This next chart (assuming the same low number of distressed sales in June) illustrates the disturbing pattern.

There is a net addition to the shadow inventory each month and that is why there are currently over 40,800 single-family homes in foreclosure throughout Broward County.  If we only sell 429 distressed properties each month, it will take 95 months or close to 8 years to dispose of all these distressed properties.  The chart below is a good city-by-city snapshot of where they are all located.

Until we start to chip away at the massive shadow inventory of foreclosures, we will not see a true recovery in the South Florida housing market.  The distressed properties need to make it to the market faster.  Under current conditions, the average foreclosure takes roughly 900 days to complete in Florida.  In the interim, rates are starting to rise and that will shrink housing affordability for the pool of potential buyers.  Take a look at how rates have spiked recently:

Now for the drill down and why the South Florida housing market is facing serious headwinds:

• Increasing mortgage rates will shrink affordability.  There are no more “liar loans”.  People now have to have down payments and prove their income and ability to repay loans.  This reduces the pool of qualified buyers.
• There is a massive shadow inventory of foreclosures that haven’t been processed by the courts.
• The shadow inventory of foreclosures continues to grow.  New foreclosure filings continue to dwarf distressed sales.
• The recent dip in available inventory is a head-fake that has propped-up prices temporarily.  Foreclosure delays and trapped borrowers haven’t allowed for a true housing market.  The dynamics will start to change.
• As housing prices double-dip, the borderline negative equity borrowers will remain trapped in homes that they cannot afford and those homes will be added to already bloated shadow inventory.