Scary shadows and zombies create a real nightmare in Florida
Real estate in Florida still has some very unique dynamics to evaluate and deal with in 2014. Our market has experienced a roller coaster effect since the beginning of the year. New construction was up in the first quarter of the year. Some reports show single family home sales were down nearly 17 percent in May. Condominium sales have been up one month and down the next.
In contrast, luxury homes are seeing increased activity, while it appears that short sales and foreclosures are decreasing. The key word is “appears.” Everything is not as it seems. In Florida it is estimated that there are still nearly 160,000 foreclosed properties. These are properties that are not on the market and not obtainable for purchase. Many of these properties are not showing up “active” or available to buy. Lenders have become strategic in the release of REO properties to the public.
Many of the largest lenders have created “servicing companies” to facilitate in removing the negative performing assets off their books. These companies, like “auction.com” for example, are often actually owned by the lenders such as Green Tree or Bank of America. This allows the banks to “appear,” there’s that word again, to have stronger balance sheets than actually exist. A stronger balance sheet gets Wall Street to pay attention to corporate earnings, projections, and potential profits. This method gives the “appearance” that the lenders quarterly performance is stronger than they really are. To me, it is just a façade, a huge shell game. This deluge of foreclosed property is called “shadow inventory.” Because these large number of properties are not actively marketed for sale or a part of the multiple listing system which is used to calculate the number of months of inventory available in a specific market. The results published may not really be accurate.
A new term (I am not making this up) is Zombie foreclosure or Zombie Houses. According to RealtyTrac, “a zombie foreclosure exists when a homeowner abandons a house that is facing a pending foreclosure action. There are approximately 55,000 of these Zombie properties right here in Florida, more than triple the nearest state of Illinois, according to RealtyTrac Florida. Zombie houses are vacant properties where the homeowner has already moved — yet the bank has not foreclosed. These are often identified by overgrown yards, neglected pools, and houses. Perhaps part of the reason that Florida has the highest number of Zombie homes in the nation is because Florida is a judicial state. The average foreclosure process in Florida still exceeds one year.
When combined with bank-owned homes, the number is estimated to exceed 200,000 in Florida in either zombie or REO mode. Zombie homes in Florida have been in foreclosure process an average of 1,095 days, according to RealtyTrac. That is three years.
Now, the good news. This is an excellent time to purchase real estate. Shadow inventory and Zombie properties may very well keep values from skyrocketing out of control. Because the lenders and servicers are strategic in the release of inventory, we are avoiding a saturation of distressed properties hitting our market at once. Our Real Estate market is recovering, but it has not recovered. We may have to deal with Shadows and Zombies for a couple more years. But, as long as we stay informed, alert, and aware we don’t have to be afraid. If you would like to discuss this topic further, or anything else about real estate, let me buy you a cup of coffee and a bagel. Call or text my cell phone 850-376-4301 or email RodneyElkins@WorldImpactRealEstate.info.