Lenders have taken ownership of 858 properties from borrowers in Greater Miami in the first 45 days of 2008, representing a spike of 214 percent compared to the same period in 2007, according to a new report from Condo Vultures® LLC.
Lenders ended up with these Miami-Dade County properties - called Real Estate Owned or REO - after foreclosing on borrowers and not being able to sell the properties at the minimum price set at the court-ordered auction.
"Lenders that are now in possession of these properties are scrambling to figure out what to do with this real estate,” said Peter Zalewski, a principal with Condo Vultures® LLC, a Bal Harbour-based real estate consultancy. “Banks are designed to lend money not oversee and manage residential real estate. The amount of inventory reverting back to the banks is proving a challenge for many institutions.”
In January 2008, lenders took back 641 Greater Miami properties, up 252 percent from January 2007 when 182 properties were taken back. In the first 15 days of February, lenders have taken back 217, up 138 percent from the 91 properties taken in January 2007, according to the data.
At this pace, banks would take possession of 6,959 properties in the Greater Miami area in 2008. By comparison, banks took back 4,539 properties in 2007. If this pace continues, 2008 would represent a 53 percent spike in REOs compared 2007, which was already the worst year in recent memory for the loss mitigation and/or special assets departments of banks.
In the first quarter of 2007, banks took back 619 properties from borrowers in Miami-Dade County. In the second quarter, the number of REOs jumped to 1,046, and continued climbing in the third quarter to 1,344 properties. In the fourth quarter of last year, 1,530 properties were taken back by banks from borrowers.
Halfway through the first quarter of this year, banks are on pace to take back 1,716 properties in Greater Miami.
"This volume of REOs is forcing many banks to look at unloading properties at deep discounts,” Zalewski said. “The problem is financing is not as readily available so the buyers for the most part must have cash. Otherwise, there is no dealing to be done.”
Many industry watchers are optimistic the recently approved Economic Stimulus Package passed by Congress and signed into law by President Bush will jumpstart the real estate market.
A key part of the package increases the mortgage limit amount of $417,000 on conventional loans to a ratio based on median sales prices in the area where the property is located.
This is crucial because conventional loans are practically the only mortgages being written today because banks and/or originators can still sell paper off to Fannie Mae or Freddie Mac, and not have to portfolio it. Anything higher than the conforming loan amount is a jumbo mortgage and usually can only be sold off to private investors, who just aren’t buying today.
Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report
Copyright © 2008, Condo Vultures® LLC
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I came upon your site via the Wall Street Journal article. I have been following the condo market in the Fort Lauderdale area for several years. I have been reading investment journals, newspapers along with several web sites related to the market. Your site has it all. What a resource!
Coyote
Franklin, Wi
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