September 18, 2014

A New Breed Of Investor Moving Into A New Paradigm

The National Post reports on Florida. “Lured mostly by cheap prices, Canadians spent $2.2-billion on Florida real estate last year, easily making them the Sunshine State’s No. 1 international buyer of real estate. ‘We went down there on a holiday and prices were so damn low, I said to my wife ‘let’s buy,’ said Jerry Jarson, a 74-year-old retiree from Shanty Bay, Ont. The former air force officer and lawyer bought a condo two years ago in Cape Coral for US$79,900. He estimates its value has risen US$39,000 in two years. Mr. Jarson said he was able to use the equity in his Canadian home to buy his condo. ‘We never had any money but the bank has lots,’ he said about the line of credit on his Canadian home he was able to use to finance the purchase.”

The Washington Post. “Forget mortgages. In areas like Miami, the rise in foreclosures and other distressed properties attracted moneyed investors and foreign buyers who used their cash to buy homes at firesale prices. Miami’s share of cash sales hit 70 percent in 2011 and 2012, according to CoreLogic. As we reported last year, real estate executives said institutional investors — who in some cases are bidding on hundreds of homes a day — accounted for as much as 70 percent of sales in some Florida markets.”

The Miami Times. “Industry experts agree that with markets moving as rapidly as they are in South Florida, it’s only natural for people to ask if we’re in the midst of a land price bubble. ‘Miami is moving into a new dynamic, and historical perspectives will be non-relevant moving into a new paradigm,’ said CBRE Managing Director Ken Krasnow. ‘We have a new breed of investor who looks at the demand drivers,’ he said. ‘There’s a deep demand pool out there.’”

“Not everyone is sanguine about the rising cost of land, however. Demand will remain high for at least a few years, mainly because of population growth, but the trend will not last forever, said Jack McCabe, real estate analyst and CEO of McCabe Research & Consulting. In fact, he is concerned about a global recession in 2017 if not before and worries that people have short memories of what Miami – along with the rest of the country – went through not that long ago.”

“Mr. McCabe said flight capital from Latin America is inflating land and residential prices. ‘It doesn’t matter to many people fleeing distressed counties how much they pay because they just need to get their capital out of some of these countries,’ he said. ‘Will this flight capital continue to come to Miami? We don’t know.’ Mr. McCabe said Miami has the highest foreclosure rate among the nation’s largest metropolitan areas. ‘This is a very abnormal market,’ he said, ‘propped up by flight capital.’”

The Orlando Sentinel. “Home prices in the core Orlando market took a seasonal dip in August, dropping from a midpoint of $170,950 in July to $165,000 last month, according to the Orlando Regional Realtor Association. Prices typically soften after the peak of the summer buying season, but association officials said the decline was also the result of a large number of distress properties selling last month. ‘Closings on foreclosures jumped 30 percent in August,’ said association Chairman Zola Szerencses. ‘Foreclosures tend to carry discounted price tags — great opportunities for buyers — so the cumulative effect of all these sales is a restraint on the median price.’”

“The volume of sales was down, with 2,449 houses selling in August — a decline from both a month earlier and a year earlier. One concern for prices in the future is the prospect of inventory levels increasing to the point that the Orlando market becomes more of a buyers’ market than it has been during the recovery of recent years. The core Orlando market had a 5.4-month supply of homes on the market — the highest level since January 2012.”

The Sun Sentinel. “Lenders filed 238 foreclosures last month in Palm Beach County, up 10 percent from a year earlier, according to RealtyTrac. Broward filings jumped 26 percent. Scheduled auctions — when a judge sets a date for a home to be repossessed — also increased in both counties. After years of foreclosure backlogs, existing cases are moving swiftly through the courts, observers say. Jerry Tepps, a foreclosure defense lawyer in Palm Beach and Broward counties, said courts are hiring retired judges and administrators to ‘make things happen.’”

“Tepps has a few cases that will be resolved this year, only months after they were filed. ‘It used to be three or four years before they were over with,’ he said. ‘The court system has become much more aggressive in applying resources than it ever has before.’”

The Saint Peters Blog. “In the last year, foreclosure judges in Florida have been working under explicit guidelines from both the state Legislature and Supreme Court to clear court dockets by tying up old cases, mainly by giving banks tens of thousands of homes statewide. The objective of the Florida Supreme Court was to dispose of 256,000 cases every year for three years of the program, writes Alison Fitzgerald of the Center for Public Integrity. ‘They just slam the defendants,’ said attorney Margery Golant, who practices in Palm Beach and Broward Counties. ‘They deny them their rights; have hearings in absentia and just flush them down the garbage disposal.’”

“Undeniably, most unresolved cases involve homeowners who are unable to pay and are not fighting foreclosure. Many have already left their homes.”

The Tampa Bay Times. “Ricardo Lopez could barely contain his fury as he walked from the St. Petersburg courtroom in late July after Judge Karl Grube for the second time in five months set a date to sell his family home. ‘How can this happen? He didn’t even listen to you. This is a total fraud!’ the 12-year St. Petersburg police officer fumed as he paced around Matt Weidner, his lawyer, in the courthouse hallway while his wife sat rigidly behind sunglasses on a nearby bench and his two small kids’ wide eyes took in the scene. ‘I could go in and arrest that lawyer. I can call the economic crimes unit right now,’ he offered, brandishing his cell phone.’

“Lopez got to this point because he was injured in 2009, missed two months of work and got behind on his payments to JPMorgan Chase. As he recovered and began paying, he says, the bank allocated the money to his past due debt, late fees and other charges. He tried to send something extra each month, but no matter what, he remained more than 90 days late. ‘It was never an issue of can we afford the house,’ he said. ‘They wouldn’t make anything current. It was constantly past due.’”

“Finally, he stopped paying, and asked for a loan modification. At the trial in March, Weidner argued that JPMorgan couldn’t foreclose because it didn’t have an original promissory note, the only original document required in a foreclosure trial. Grube disregarded the discrepancies and allowed the document into evidence. ‘So we’re making a factual determination that this is, in fact, the original?’ Weidner asked. ‘Overruled, sir,’ Grube responded. Lopez is racing the calendar while negotiating with Bayview mortgage in hopes of keeping his home. There’s still an order in the St. Petersburg courthouse to sell his home on Sept. 29.”

Bits Bucket for September 18, 2014

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