July 10, 2014

Many Investors Will Eventually Want To Cash Out

The Wall Street Journal reports on Florida. “The volume of foreclosed properties held by Fannie Mae and Freddie Mac in the state of Florida reached a new high at the end of March, surpassing the previous peak reached at the end of 2010. Foreclosures dropped sharply throughout 2011 as banks withdrew cases to correct those foreclosure filings. Foreclosed property holdings at Fannie and Freddie dropped from around 28,000 as of October 2010 to less than 12,000 one year later. Inventories have grown steadily over the last three years, to surpass 30,000 at the end of March.”

“Many of the properties going back to Fannie and Freddie today are likely mortgages that have been delinquent for a long time. Florida loans that completed the foreclosure process in the first quarter at Fannie hadn’t made any payments in more than 1,300 days.”

The Herald Tribune. “Zombie foreclosures continue to haunt middle-class neighborhoods throughout the area, a byproduct of lengthy foreclosure timelines and changing laws in Florida. There are nearly 1,600 such homes languishing in Southwest Florida alone, one of the highest raw numbers in the U.S. Banks have yet to auction off or repossess $199.1 million worth of distressed real estate assets in Manatee and Sarasota counties, with foreclosure notices that date back to the trough of the collapse in 2009 and have continued well into the current year.”

“‘There’s a lot of distressed debt still being held by the big banks because they cannot just dump it back into the market all at once. They have to slowly release it,’ said Dean Anastos, founder of Apollo Financial Group, which buys and sells nonperforming bank notes. ‘That means we’re going to continue to see new foreclosure filings, families getting locked out of their homes, and zombie foreclosures.’”

“A fairly typical zombie in Southwest Florida can be found on Siesta Key’s Oxford Road. The owners bought the three-bedroom home in May 2005 for $1.2 million. They used a $960,000 mortgage to help finance the deal. They then acquired another $240,000 in revolving credit against the home from that bank later in 2005, official property records show. SunTrust filed its first notice of foreclosure in May 2012. Although the 2,270-square-foot house has been flagged as vacant by the Postal Service — and the owners have moved — the bank has been unable to successfully gain control of the property, which was valued by county appraisers at $493,900 last year.”

“‘Looking at who you have handling these cases across the board, it’s fast-food legal representation,’ said foreclosure attorney Charles Gallagher. ‘Many are just so overwhelmed and overtaxed, they can’t properly represent their bank client — and the properties slip through the cracks. These banks are just filing lawsuits and letting them sit on ice.’”

The Ledger. “Polk County is listed as the nation’s fifth-best area for boomer rentals in a new report by RealtyTrac, which studied population and rental income data. The top two spots went to Pasco and Hernando counties, which are part of the Tampa-St. Petersburg-Clearwater metro area. Tim Davis, franchise owner of All County Polk Property Management in Lakeland, says the company frequently rents homes to boomers. He speculated that many boomers have turned to rental housing after bad experiences during the housing market collapse.”

“‘A lot of people in that group got burned in the downturn and lost their homes to foreclosure,’ Davis said. ‘I think a lot of them may be scared to even buy a house again.’”

The Miami Herald. “Miami’s latest condo construction wave is attracting buyers from around the globe: Brazilians, Argentines, Venezuelans, French, Russians, to name a few. Miami residents? Not so much. That is primarily because condominium developers are requiring large cash deposits — typically 50 percent of the price of a unit — paid in increments during the construction process. Most Miami residents don’t have that kind of cash.”

“Indeed, few locals could afford to purchase the high-priced condominium units currently going up even if mortgage financing were available. ‘We don’t have a local market capable of making those kind of payments and progress payments,’ said Lewis M. Goodkin, president of Goodkin Consulting, a Miami-based real estate consulting firm. ‘If it weren’t for Latin American and European sales in Miami, it’s really kind of a scary thing to think about: We’d have a very weak market.’”

“In the eastern swath of Miami-Dade County where the boom is concentrated, 40 condo projects with 6,781 units are under construction, 56 others with 10,807 units are planned, with approvals to go forward, and 36 more projects with more than 8,300 units have been proposed at early stages, according to Peter Zalewski, a principal at a Miami firm that closely tracks condominium construction in South Florida.”

“One key question is what will happen in the market when a growing supply of new condos is complete. The many investors purchasing pre-construction units will eventually want to cash out of their holdings — possibly sooner rather than later. Almost half the 192 units delivered to buyers at MyBrickell were listed for sale or rent shortly after the building was completed in January, according to Zalewski. Edgardo Defortuna, president of Miami-based Fortune International, said the pre-construction condo market is logging more total sales than a year ago, but per-project sales and absorption is lower. ‘Overall demand is stronger today, but there is a lot more to choose from,’ said.”

“With the swell of new condos in the pipeline, sales of existing, or previously owned, condominiums in Miami-Dade are feeling the brunt. In May, sales of existing condominiums in Miami-Dade plunged 11 percent from a year earlier even as the inventory of existing condos for sale expanded 36 percent to total 10,941 units, according to the Miami Association of Realtors. Buyers opting for pre-construction units are paying a substantial premium over the price of an existing condo of comparable size — sometimes several hundred dollars per square foot more.”

“How long this gilded age of luxury condo construction will continue is anyone’s guess. ‘I wish I knew where in the cycle we are,’ said Miami condo kingpin Related Group CEO Jorge Pérez. ‘How long does demand last? I think a very, very long time.’”

Bits Bucket for July 10, 2014

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