In the year since mortgage lenders discovered employees were systematically cutting corners in the foreclosure court system, banks have slowed their home repossession machines from top-speed to a near-halt. In the meantime, prices for South Florida homes have begun to rise for the first time since the crash, providing a glimpse of what the market might look like in a post-foreclosure world.
Amid soaring sales in August, median prices for existing South Florida homes rose nearly across the board:
• Condos in Miami-Dade County jumped 13 percent to $118,800.
• Condos in Broward County were up 6 percent to $79,500.
• Broward single-family homes rose 5 percent to $191,800.
• Miami-Dade single-family homes were down 1 percent to $180,900.
Even as Wednesday’s housing report by the Miami Association of Realtors showed widespread appreciation, some analysts warned that the rising prices are only a short-term reprieve from what will be an extended period of housing hardship once foreclosures get back going again.
“These foreclosures aren’t going to go away — they’re going to be settled one way or the other,” said Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach. “The robo-signing has significantly slowed the foreclosure process, but we’re already seeing a change around the state and the nation. Foreclosures were up nationwide about 33 percent last month.”
With the foreclosure engine no longer spurting out thousands of new cheap properties onto the market each month, inventory has been dropping rapidly. In the last year, the number of homes on the resale market decreased from 25,679 to 15,405 in Miami-Dade, and dropped from 21,143 to 13,476 in Broward.
That sharp decline in supply — which is helping push prices upward — can be attributed, in part, to a surge in sales driven by international buyers.
Condo sales in Miami-Dade jumped 60 percent in August to 1,311, while single-family home sales rose 49 percent to 951. In Broward, condo sales rose 21 percent to 1,398 and single-family sales were up 19 percent to 1,185.
“Already a magnet for international and for second and vacation home buyers, Miami is now attracting domestic and foreign buyers who recognize that the market has bottomed, and prices are on the upswing,” said Ralph E. De Martino, residential president of the Miami Association of Realtors.
But the surge in sales is only half the inventory story. Housing supply would not be declining as quickly if foreclosure proceedings were humming along at a more appropriate pace. Last August, before the robo-signing revelations, banks repossessed about 4,000 homes in South Florida and began readying them to be sold to new buyers. The number of monthly repossessions has since dropped to about 1,500, even though the mortgage delinquency rate has held mostly steady over the last year.
That begs the question: What will happen when banks begin to deal more directly with what has become an unprecedented backlog of delinquent mortgages?
“Sooner or later the problem has to be addressed,” said Jose Fente, a Hialeah real estate broker who sold a region-leading 373 foreclosure properties last year. “There are a ton of defaults out there that are not being dealt with.”
Fente, owner of Tropical Realty, said banks have been giving him far fewer homes to liquidate this year, despite his track record of quickly finding buyers for the properties.
McCabe said he believes lenders are afraid of selling homes that they may have repossessed using incomplete or forged documentation.
Foreclosed homes, which made up 42 percent of Miami-Dade home sales last year, accounted for just 29 percent of sales in August. In Broward, foreclosures have dropped from 35 percent of the market to 25 percent. Currently, there are only a few hundred bank-owned homes on the market in South Florida, despite the hundreds of thousands of homes that have fallen into default in the last three years.
As the banks have stalled, many homeowners and sellers have seen a sudden change of fortune, with some areas seeing double-digit appreciation in the last year.
Judy Zeder, a luxury real estate agent with Esslinger-Wooten-Maxwell Realty, said inventory has declined so sharply in places like Pinecrest, Coral Gables and Kendall that home prices there could continue to rise for the foreseeable future.
“There’s a stabilization in the market,” she said. “If [a home] is well priced, it’s off the market pretty quickly.”
The housing industry’s recent triumphs could be threatened by a second wave of foreclosures.
There are more than 75,000 cases stuck in South Florida courts, and hundreds of thousands more defaulting mortgages waiting to enter the state’s judicial foreclosure process. In Florida, it takes an average of 638 days for a lender to repossess a home, according to mortgage analytics firm Lender Processing Services.
With Gov. Rick Scott and the Florida Legislature considering a move to expedite foreclosures by taking the process out of the courts, the next wave of home repossession could hit fast and hard.
“By delaying the pain the banks have worsened the pain,” said McCabe. “We’re going to eventually see all those cases hit the market. We have a ways to go.”