The foreclosure document scandal in late 2010 led to a large-scale freeze on foreclosure processing and foreclosure sales activity, particularly in South Florida, one of the nation’s foreclosure epicenters.
At the same time, the next two years saw one of the tri-county area’s largest residential booms, with nearly 70 percent of residential resale inventory being traded since 2008, according to Condo Vultures, in many ways overshadowing the lingering problem of the foreclosure market.
Now, as foreclosure processing has begun to pick up, and foreclosure sales have increased, buyers’ attention once again seems to be turning to South Florida’s foreclosure inventory.
Foreclosure sales activity rose 42 percent in the third quarter compared to the second quarter, according to data from the analytics firm RealtyTrac, with a total of 8,167 sales from July to September. In the same period, South Florida also saw a 57 percent increase in REO (real estate-owned) sales — that is, properties owned by lenders after foreclosing on them.
“I think it could be influencing the banks to push these [distressed] properties to sale more quickly, because they realize that there’s this kind of unique time in the marketplace where there’s a lack of available inventory,” Daren Blomquist, vice president at real estate analytics firm RealtyTrac, told The Real Deal. “That could be a good time for them to go and sell their distressed inventory — and have a good amount of demand for it.”
The question is the role the dwindling inventory in the non-distressed market has played in driving those numbers: Are buyers, faced with fewer options in the non-distressed market, now turning to foreclosures? Or are banks simply responding to a strengthening market?
Jack McCabe, a real estate analyst in Deerfield Beach, said it’s the latter — that banks, seeing an improved market, are finally getting back in the game and deciding to unload properties on which they’ve been sitting for several years. “The banks have been holding back, and it’s paid off for them —the prices have gone up in certain markets in Florida over this year,” he said.
But there’s another factor at play, McCabe said: online foreclosures. In 2010, Florida moved its foreclosure system online, meaning a rash of inventory left brokers’ hands. That meant that, over time, the number of foreclosed properties actually listed on the market by brokers began to plummet. And that reduced inventory led to increased prices — giving banks a reason to put their distressed inventory back on the market.
“What’s happening now is the banks have seen some increases in prices due to the lower Realtor inventory, which has raised the price of the distressed properties they’ve been holding on to,” he said.
The change has been drastic according to Lloyd Feinberg, a Coldwell Banker broker who focuses on the bank-owned market in Hollywood and Hallandale. “I have one property that’s in a lousy location, that has a lot of issues, and we’ve got over 25 offers — it’s selling for almost double the asking price,” he said.