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New foreclosure filings & shadow inventory in the Broward County / Fort Lauderdale area housing market

Now that the national media and real estate agents throughout the country are pounding the table (I don’t think they ever stopped) about the real estate recovery, I feel obligated to serve as the contrarian and deliver some recent data to quiet the noise a bit.  Let’s start with the new foreclosure filings in Broward County, Florida on a monthly basis:

New monthly foreclosure filings for single-family homes remains elevated, ranging between 605 new filings in February to a high of 1,310 new filings in March of this year.  This is just for houses, not condominium and townhouse properties which have ranged between 206 (February) on the low end and 526 (August) new foreclosure filings on the high end in 2012.  To put the combined figures into perspective, I have created the chart below to illustrate the trend:

With the exception of February 2012, there have been over 1,000 new foreclosure filings in Broward County, Florida throughout 2012.  October 2012 (last month) had 1,187 new foreclosure filings, so as much as a don’t want to rain on the “housing recovery” parade, the charts don’t lie and new filings will remain elevated for quite some time.

Next, let’s take a quick look at where all of the existing foreclosures are located throughout the County.  From the data run in early October reflecting 47,029  residential foreclosures until the last run on November 19 displaying 47,615 properties in foreclosure, we have seen an increase of 586 new properties in Broward County receiving a foreclosure notice (single family and condo/townhomes combined).  Last week we reported on the how the available properties for sale keeps dropping in South Florida, but it seems that the shadow inventory of homes in the foreclosure process continues to grow.  The chart below shows where they are located throughout the county.

As you will see from the chart, the Broward County cities with highest number of properties in foreclosure in November are as follows:

  • Miramar has 4,325 homes and 814 condo/townhouse properties in foreclosure
  • Fort Lauderdale has 3,867 homes and 1,047 condo/townhouse properties in foreclosure
  • Pembroke Pines has 3,769 homes and 837 condo/townhouse properties in foreclosure
  • Hollywood has 3,080 homes and 1,002 condo/townhouse properties in foreclosure

Those are just the top cities.  What is even more frightening is that if you were to research the dates of the Lis Pendens filings on these properties, most of them will date back to 2009-2010 prior to the foreclosure halt due to the robo-signing litigation.  When recent reports emerged that a “Tampa socialite” has been in foreclosure since 2009 and still throws parties on the front lawn, I had to laugh because that is the case with almost all of the foreclosures in Florida.  As a judicial state, it takes nearly 1,000 days for a lender to foreclose, and that is without the 2-year halt from the robo-signing litigation.

At Allied Realty Group, we just want our clients to have accurate market information prior to making any decisions in residential or commercial real estate.  Often times people read the headlines and are coerced into making a misinformed decision on what could be their largest investment ever.  One of the most disturbing things that I witness now is the real estate trade groups completely ignoring that foreclosures have remained off the market for over two years, hence the low inventory and temporary price stabilization. Remember not to believe the headline hype and rush into a transaction without understanding the complete picture (positive and negative factors).  Here are a few quick tips in approaching a real estate transaction:

  • Make sure you understand the true value of the property by reviewing (3) active listings in the same neighborhood, along with (3) recent sales of good comparable properties.  The best market barometer is in the recent sales, because you will be able to see the impact of short sale and REO transactions on homes in the neighborhood.  The active listings are often priced at unrealistic levels because the owner may have paid much more than the market will currently bear
  • Understand your time frame – You need to make sure that you are comfortable with real estate prices dropping for the next few years.  If somebody is telling you that prices won’t fall and will go straight-up from here, they are obviously not being realistic.
  • Make sure you have a financial “cushion” and that it won’t be exhausted with this purchase.  The last thing you want to do is to drain your savings and have nowhere to turn if your property loses value.
  • Evaluate the possibility of renting in the same neighborhood.  As more short sales and distressed properties trickle through South Florida market, pricing will continue to soften and you may be able to enter the market at a more favorable point when prices have become more stable (most likely in a few years).

I remember back in 2007-2008 well after prices peaked, there were crystal clear signs of market trouble and agents continued cramming properties down people’s throats at ridiculous valuations.  The valuations didn’t make sense then and they may never make sense again in our lifetime.  As much as I don’t want to sound like Chicken Little shouting “The Sky is Falling”, I will go on record to say that housing prices will be falling in South Florida until we clear this shadow inventory of foreclosures.  The dark cloud of foreclosure “overhang” continues to linger over the South Florida real estate market and will continue to suffocate any sustainable rally for at least a few more years.