Real Estate Market Softens; Florida Home Loans Rank Second in Foreclosures

Until reccently, investors were anxious to get their hands on homes in the Southwest Florida housing market. Due to a number of reasons, that rush now appears to be on hold, if not going in the opposite direction in many cases.

Why is this the case? Listings are stacking up, prices are dropping and words that haven’t been heard much in some time are being spoken: “non-performing loans” and “foreclosures.”

While various Florida home loans are still manageable for lenders, these problem mortgages are increasing and are likely to keep doing so because of rising interest rates, adjustable-rate Florida home loan resets and a stalling out of real estate appreciation.

The state of Florida home loans

Nationally, the number of foreclosures rose by 38 percent during the first quarter, says RealtyTrac, an Internet data cruncher based in Irvine, Calif. Texas racked up the most at 40,000, but Florida came in a close second with about 30,000. Those numbers may be small, but the trend is in place.

“This goes hand-in-hand with the softening housing market and rising interest rates,” said Greg McBride of BankRate.com, which reports mortgage rates and other real estate data from North Palm Beach. “This is probably just the beginning, and certainly not the end.”

Analysts expect the foreclosure trend to accelerate through the rest of 2006 and into 2007, in large part because of the ticking time bomb represented by adjustable rate Florida home loans, whose rates are about to be reset by the lenders.

Southwest Florida Realtors, meanwhile, are faced with four times as many listed homes and three times as many condos as in July, when the market began falling apart after a brilliant longterm run-up.

The empty dwellings worry Realtor Steven DuToit. He says that as some of those sellers cave in to the pressure of two mortgages and other carrying costs, their departure will drive prices down further.

“This whole market has been driven by investors,” said DuToit of Keller-Williams Realty.

Florida home loan advice

For the last two years, Fishkind & Associates, an Orlando-based economic consulting firm for developers and major real estate investors, has been advising clients that Florida residential real estate was approaching a market top that needed to be heeded.

“Now we are past the peak and in the downside of the cycle, and all the things we said would happen are happening,” said Fishkind economist Stan Geberer. “That includes a reduction in prices, a drying up of investor activity, nonperforming loans, condominium projects that will not be built, and certain projects in certain locations seeing dramatic and significant reductions in price.”

While RealtyTrac describes the spike in national and Florida foreclosures, the Sunshine State is actually running at a slower pace now than a year ago, when the real estate market was still red hot. In the first quarter of 2006, the state reported 29,636 foreclosures, a 14 percent decline from a year earlier.

“There are properties the bank couldn’t even get sold off at auction,” said Sharga, RealtyTrac’s marketing chief. “Maybe it was overvalued, or there were two notes on it, so they couldn’t auction it, so they repossessed it.”

So, where does this leave one with a Florida home loan or one hoping to acquire a Florida home loan? It’s at least a better time to be a buyer than a seller. Those with under-performing mortgages may be looking to dump them for a reasonable price and move on.