South Florida Mortgage Foreclosures May Lower Surrounding Property Values

Mounting Florida mortgage defaults across the state threaten to hurt more than just those homeowners who lose their properties to lenders.

Experts say foreclosures could drag down already sluggish housing prices throughout entire neighborhoods in the South Florida housing market.

“Homeowners that are being foreclosed upon aren’t spending their Saturday afternoons mowing the yard,” said Greg McBride, a financial analyst at Bankrate.com in North Palm Beach.

“So those people who are cutting the grass, trimming the shrubs and fixing the gutters will suffer.”

That’s the worry in Plantation’s Jacaranda Lakes, where a foreclosed home is listed at $485,000, down from $619,000 earlier this year.

The roof is dirty, the bushes overgrown. Neighbors trying to sell their properties could have a hard time getting their asking prices.

Jamie Kerzner, who lives down the street, is moving to North Carolina. She originally listed her four-bedroom home at $699,000. It’s now $665,000.

“I have to sell,” she said.

In a study published last year, two housing analysts found that for every foreclosure within one-eighth of a mile of a single-family home, property values decline by about 1 percent, and even more in dense developments.

The study by Geoff Smith and Dan Immergluck is thought to be the only good look at the effect of foreclosures on property values and is based on Chicago in 1997- 1998.

Based on their study, the value of a typical Broward County home near one South Florida mortgage foreclosure could drop at least $3,820.

The median-priced home in Broward County in June was $382,000, according to the Florida Association of Realtors.

“One foreclosure may have a modest effect on nearby property values, but with four or five foreclosures, you’ll see a significant effect,” said Smith, director of the Woodstock Institute, a nonprofit housing group in Chicago.

“You see neighborhoods start to decline.”

Smith recommends that neighbors of foreclosed homes postpone selling their own properties until Florida mortgage and housing markets improve.

The number of homeowners defaulting on their home mortgages and facing foreclosure is rising steadily across South Florida.

Experts mostly blame the trouble on unconventional Florida home loans made to risky borrowers who bought houses and condos that shot up in value during the housing boom from 2000-2005.

• The number of Broward homeowners behind on mortgage payments hit 1,484 in June, more than triple last June’s 461.
• Palm Beach County late payments last month topped 1,000, nearly a fourfold increase in foreclosures from 259 a year ago.
• Actual foreclosures doubled in Broward from last year but were flat in Palm Beach County.

Experts say foreclosure filings and late payments are expected to peak this fall, leaving Florida mortgage lenders with a glut of properties to sell.

Continue reading this South Florida Sun-Sentinel article about the rising risk of Florida foreclosures …