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Lee County’s Foreclosure Trend, Its part of an age old cycle

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Services for Real Estate Pros with South West Florida Real Estate Investment Association

Lee County's Foreclosure Trend, Its part of an age old cycle

 

In 2004 and 2005, Lee County Florid experienced tremendous Growth and Demand for Real Estate. How can you blame anyone, its paradise here! This increased demand was fueled in part by Out of State Investors. With the high demand, you could buy a piece of property and resell it very quickly for a profit. This lure of easy money caused people to stop thinking rationally. In 2006 and 2007 Prices and Demand have fallen. That brings us to where we are today. It's exactly like a game of musical chairs. In 2006 the music stopped. We have had cycles like this every 10 to 14 years. We have 2 things that make this last cycle different. We have never allowed people to borrow money like in 2005. With a 620 credit score you could buy a second home with out proving income or assets without a down payment. This caused a lot of people to enter the housing market with the intent to quick flip. Many did not have the cash reserves to sustain themselves if the market turned. We have never built some many new homes on speculation. We are now in a downturn of a Real Estate market with over leveraged properties and too much inventory. Many of the sellers, now, owe more than the property is worth. Those who lack sufficient capital to pay the difference are unable to lower their price to the current market. Thus they are unable to sell. The rental market has also been affected by the oversupply. Many owners are trying to rent. This can carry them thru to the markets recovery but, if properties are overleveraged. You will not have a positive cash flow. Thus with a house that has a balance owed more than its worth, and having to write a check each month to cover the difference between the mortgage payment and the rent. Many are just giving up.

 

The Mortgage Foreclosures follow this trend. In third quarter 2006 we breeched the 100 Mark for new Foreclosure filings each month.  Fourth Quarter 2006 we averaged 300 a month in new filings. Jan. 2007 we almost Hit 500. Feb 2007 was 555. March and April were over 700. While these number seem high. There are almost 250,000 pieces of property in Lee County. We are not talking about the end of the world here. This is part of the correction. The ratio of Homesteaded Foreclosures versus, Non-Homesteaded Foreclosures is as follows. 30 percent of the foreclosures are homesteaded properties. If the Ratio was higher towards full time residents it would be time to worry. Most of these foreclosures are speculators who entered the market too late and got caught up in the downturn. These foreclosures are like when you have a fever. We will not heal till the fever breaks. While it bears watching it's not the end of the world.

 

Jeff Tumbarello is a Real Estate Investor, Founder and Vice President of SWFL REIA, and a Mortgage Broker.

To contact Jeff. Jeff@swflreia.com

SW Florida Real Estate Investor Association
The Association dedicated to providing networking, and educational training for individuals who are interested in real estate investing.
http://www.swflreia.com/

 

 

 

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