For the past several months I have been updating the South Florida single-family housing data and we have seen how the lack of inventory was impacting prices.  However, the August data is showing a new twist.  It appears that even with the media and various trade groups shouting that “housing has bottomed”, our local market is saying otherwise.  Let’s begin with the distressed sales.

While April, May and June had only15% of single family home sales in the Fort Lauderdale area as distressed property sales (either short sale or REO), July had 16% and August was 17%.  Although I always say that one month doesn’t make a trend, a few months worth of data may do just that.  This clearly shows that after the robo-signer settlement was reach with the major banks and mortgage loan servicers and signed in March 2012, they are now more willing to negotiate short sales, therefore increasing the distressed sale percentage.  My guess is that we will gradually see an increase in this percentage over the next 6-12 months.

Next, let’s look at the available single-family home inventory in the Fort Lauderdale, Florida market.  My data includes the MLS listed properties and dates back to January 2010.  I believe that is a good starting point since it illustrates how inventory grew throughout 2010 leading up to the halt on foreclosures in October 2010.  You will see that single-family inventory peaked at 6,451 single-family properties in September 2010 and this is not a coincidence.  Once the major banks halted foreclosures because of the robo-signer litigation in October 2010, there was a steady decline in the Fort Lauderdale area inventory.

Here is where things get interesting.  We are dealing with record low inventories and interest rates, why are prices declining?  What about all of the headlines about the housing bottom?  We all know that distressed properties usually fetch about 20% less than normal property sales, and if you look at the chart below, you will notice a significant drop in the average selling price of homes.  After peaking at $348,455 in May, the average selling price dropped a whopping 16% down to$293,936 in August.  This makes complete sense because once litigation was settled in March, it took another 30-60 days to get the banks to approve short sales and close these often lengthy and complicated short-sale transactions.

The fact of the matter is that housing has not bottomed in South Florida.  Even with record low mortgage rates and minimal inventory available, it looks like prices don’t want to rise.  The charts don’t lie, so I have included one more (thanks to Realtytrac & Zerohedge) that shows how foreclosures have been temporarily suppressed and kept off the market since 2010.

Remember that Florida is a judicial state and foreclosures take 1,000 days on average to complete.  So when you hear how many of your neighbors haven’t made a mortgage payment in over three years and still remain in their house, now you know why.  At some point these properties will reach the market either through a bank approved short sale or foreclosure.

My outlook on the Fort Lauderdale area single-family housing market is as follows:

• Distressed sales will continue to grow as a percentage of closed sales for at least the next 12 months and remain elevated for at least a few more years.  As soon as lenders clear their inventory, the market will begin to improve.  You have only seen even a fraction of the distressed properties in South Florida reach the market.
• The temporary uptick in prices over the summer in which “less borrowers are underwater” will fade with summer.  Underwater borrowers have been trapped in their homes and unable to sell their property.  The percentage of underwater borrowers will once again begin to grow as property values drop.
• Selling prices of homes will continue to be under pressure and remain under pressure for a few more years.
• The majority of mortgage modifications will face difficulty because the borrowers are lacking adequate incomes to meet the lender guidelines.
• Interest rates will remain low, but without job and income growth, the Fed’s recent QE3 will really be meaningless to the people that need help the most.

Allied Realty Group is located in Fort Lauderdale, Florida.  Our residential 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.