If intervention continues by the feds we are just going to put off the inevitable correction until….? I know this is for the east coast and most people will say this does not pertain to me or where we are but the biggest foreclosures and pain in real estate are concentrated in the coastal states or [...]
If intervention continues by the feds we are just going to put off the inevitable correction until….? I know this is for the east coast and most people will say this does not pertain to me or where we are but the biggest foreclosures and pain in real estate are concentrated in the coastal states or west coast. (i.e. Florida, Nevada, Arizona and California) Over 50 % of the loan origination for the distressed housing is in major cities in the west or in coastal states. Do a little leg work check out www.lpsasap.com and run the numbers for the auctions in your area for today, one week and for the last 30 days then you tell me if you this we have seen the end of this. -Sean
Housing bottom? Analysts wary
For months now, it appeared that Southwest Florida real estate prices had bottomed out.
But two analyses commissioned by the Herald-Tribune suggest that a second wave of home foreclosures looms and will likely cause a new flood of homes for sale — and even lower prices, possibly lasting through 2011.
Zillow.com analyzed monthly median home values in Southwest Florida since the start of the decade.
The online home valuation service found that the rate of decline in markets from Bradenton to Punta Gorda has slowed to the point where it is statistically flat, meaning it rose or fell by about 1 percent or less from July to August.
That would seem to imply the bottom many real estate experts have noted, but Zillow’s chief economist thinks that the results only point to a respite before the new wave of foreclosures pushes prices down again.
“In Sarasota metro, there is a fair bit of supply of for-sale homes, and since we suspect that there is a high number of foreclosures ready to stream in, that will continue to keep the inventory of for-sale homes high and thus prices low,” Zillow’s Stan Humphries said. “I expect prices will dip down in the coming months.”
“This is what a bottom would look like,” Humphries noted. “You should take some comfort in the fact that these numbers look good, but I would not say it is completely behind us in Florida by any means.”
The second analysis — this one by California-based RealtyTrac Inc. — looked at foreclosures within various ZIP codes in the region.
It found that despite banks’ growing ability to both forestall and to more quickly process distressed properties, the rate of foreclosures is still growing. Foreclosures also are rising in traditionally strong segments of the Southwest Florida real estate market.
Foreclosures in downtown Sarasota and on Lido Key, for example, were up 51 percent in the third quarter from a year ago.
That could be an indication that it is no longer just investors or buyers with marginal financial strength who are suffering. Prime borrowers — those with good credit scores and traditionally strong finances — are being hit, many the victims of the region’s 12.5 percent unemployment rate.
“Rational, reasonable, intelligent people that normally take great pride in paying all of their bills on time are deciding to turn in their keys and walk away from their homes,” said Jack McCabe, a Deerfield Beach-based housing analyst who correctly predicted the housing downturn.
But many regional real estate experts do not buy this gloomy scenario.
They argue that the growing interest of buyers — demonstrated by a 30 percent increase in sales during July, a 23 percent rise in August and a 42 percent jump in September in the Sarasota-Bradenton market — will help ameliorate the effects of rising foreclosures.
Budge Huskey, the Southeast region executive vice president for Coldwell Banker’s parent NRT LLC, also has data that suggest the growth in foreclosures could dampen or lower prices in Southwest Florida.
But Huskey argues that the market’s future is unwritten because historically low interest rates will continue to govern buyers. He also notes lenders’ growing sophistication in handling distressed properties.
Rising markets
In real dollars Zillow’s analysis of the Southwest Florida real estate market found median home values actually rose in three local markets from July to August:
• By $500 to $221,700 in Punta Gorda.
• By $1,000 to $91,100 in Port Charlotte.
• By $1,200 to $120,700 in Bradenton.
The biggest decline was just $700 in Englewood.
But Zillow’s median home values — derived from a formula that includes both homes that have sold and those not on the market — have been greatly influenced by historically low interest rates and the $8,000 first-time home buyers credit set to expire at the end of November, said Humphries, the company’s chief economist.
At the same time, the list of foreclosures continues to grow in Florida.
There are more than 200,000 mortgages in the state that are substantially delinquent, but in its most pessimistic view of the potential for the Sunshine State, a California lender processing services company predicts that number could rise to 900,000.
Applied Analytics — which tracks more than 40 million mortgages nationwide — predicted that those high levels of foreclosures could persist throughout 2010.
The company expects the total to then fall slowly through 2013 to roughly 500,000.
Huskey has data that suggest a similar track for foreclosures in Southwest Florida.
“We are at delinquency and default rates that are higher than anything we’ve seen in years,” said Huskey, who works out of Sarasota. “Many buy prozac of the models suggest that defaults will peak in the second half of 2010 and into 2011.”
Huskey’s models show that there will be more loan defaults this year than in 2008.
But “the ultimate impact will be largely influenced by the direction of interest rates,” Huskey said. “Fortunately, interest rates are at historic lows, but there is a general belief that rates will begin to escalate as we move through next year.”
Although the increasing trend of delinquencies and defaults is unmistakable, Huskey believes that the final impact is uncertain.
Lenders are becoming much more effective at loan modifications and short sales, transactions where the lender agrees to accept less for a property than what is owed to avoid a foreclosure.
Banks also are better capitalized now and will control the release of foreclosures over time to minimize the losses on their balance sheets, Huskey said.
Foreclosures in some of the region’s neighborhoods have been snapped up to the point where there are more buyers than homes for sale, Huskey noted.
That may help keep inventory levels low at some price points even when the new wave of foreclosures hits, he said.
The prime problem
During the second quarter, delinquency rates on conventional prime mortgages were up in every category when compared with a year before, the Mortgage Bankers Association reported.
During the second quarter, a majority of loan delinquencies were represented by prime mortgage products.
Prime mortgages that are past due have increased from 3.73 percent in 2008 to 6.01 percent this year. Prime mortgages in foreclosure have risen from 0.61 percent of all such loans to 1.01 percent.
Prime mortgage foreclosure inventory more than doubled during the last year — from 1.42 percent to 3 percent.
RealtyTrac’s analysis for the Herald-Tribune found delinquencies and defaults rising by double-digits in most areas of the region.
Foreclosures rose by 38 percent along western Cortez Road in Manatee County and by 17 percent in Charlotte County’s Rotonda community.
That supports the case that McCabe — the Deerfield Beach housing analyst — has been making for months: that the first wave of foreclosures may be slowing, but that the new wave of foreclosures will push in, driven by a fresh crop of adjusting subprime mortgages written during the boom and by rising unemployment.
The recent “bottom” in pricing is a “short-term thing,” McCabe said.
“We are three-and-a-half years into this unfolding case and you can say there were five years of the build-up, so we’re looking at at least two more years before we work through all of this,” he said.
Foreclosures in the last 24 to 36 months were laden with subprime and investor-owned mortgages — the most risky. Nationwide, there are as many as 8 million adjustable-rate mortgages poised to reach their first-term adjustment within the next two years, and as many as 12 million during the next five years, McCabe said.
“There are a lot of foreclosures in limbo and a lot of lenders are allowing people to live in them so they do not have to assume the risk,” he said. “These are the next big shoes to drop.”
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