Nearly 8,400 South Florida Condos Enter Into Foreclosure in 2008

Nearly 8,400 South Florida condominium units valued at $1.7 billion in loans entered into foreclosure proceedings in the first half of 2008, with more than half of the properties located in Greater Fort Lauderdale, according to a new report from Condo Vultures® LLC.

Broward County, where Fort Lauderdale is located, had 4,514 units valued at $840 million enter into foreclosure proceedings between January and June, representing 51 percent of the South Florida total, according to the data.

Palm Beach County, where West Palm Beach, Delray Beach, and Boca Raton are located, ranked second in total number of foreclosures with 2,072 units valued at $364 million.

Miami-Dade County, home to Miami Beach, Sunny Isles Beach, Aventura, and Coral Gables, had a reversal of fortunes of sorts, and now has the fewest number of condos in foreclosures in the region with 1,811 units valued at $458 million. In 2007, Miami-Dade County led the tri-county South Florida region in foreclosure actions.

“Miami-Dade County was ahead of the curve in terms of foreclosure actions filed in South Florida's real estate correction,” said Peter Zalewski, a principal with the Bal Harbour, Fla.-based consultancy Condo Vultures® LLC. “Now that many of the Miami-Dade foreclosures have been auctioned off or more likely repossessed by the banks, homeowners in the neighboring counties of Broward and Palm Beach are beginning to feel the same pain that was experienced in Miami in 2007.”

Condo Vultures® created this report by compiling data provided by the circuit courts in Miami-Dade, Broward, and Palm Beach counties. This data reflects notices of default or lis pendens filed between January 1 and June 30 of 2008.

As foreclosures spike in Broward and Palm Beach counties, the later stages of the repossession process where lenders are granted title to the troubled properties by the courts is surging in Miami-Dade County.

Court-ordered repossessions - also known in the banking industry as Real Estate-Owned (REO) properties - increased in Miami-Dade County in the first half of the year to nearly to 5,370, up 223 percent from the 1,665 properties in 2007, according to the report.

South Florida experienced 11,860 REOs in the first half of the year, with 4,746 court-ordered title transfers in Broward and 1,744 in Palm Beach. By comparison, South Florida had 3,510 REOs in the first half of 2007, representing a 238 percent increase in 2008 on a year-over-year basis.

Banks generally attempt to unload newly transferred REOs quickly as the institutions are responsible not only for the upkeep of the property but the monthly expenses, including homeowners association dues, special assessments, and property taxes. These expenses are in addition to the $40,000 to $80,000 that lenders spend during the six to eight month foreclosure process to repossess a property.

“Lenders do not want to be landlords, nor do they have the personnel to handle the responsibilities,” Zalewski said. “This reality usually prompts lenders to dump their REO properties within a quarter or so after taking title. In a unpredictable market such as this, bankers realize that today’s foreclosure is tomorrow’s REO so it critical to move fast."

On a project basis, the Palm-Aire Country Club in the Broward County city of Pompano Beach has the highest number of foreclosure actions in South Florida with 71 proceedings valued at $9.6 million. Ponte Verde at Palm Beach Lakes in Palm Beach County ranks second with 58 actions totaling $11.1 million. The Edgewater Condominium in Coral Springs ranks third with 54 actions valued at $12.9 million.

A pair of Miami-Dade condo projects round out the top five rankings. The Parc Central Condominium in Aventura ranks fourth with 50 actions, and the Blue Lagoon Condominium in Miami ranks fifth with 47 actions, according to the report.

From a debt perspective, the biggest potential losses for creditors are in Miami-Dade County, where four of the top five projects are located.

The Club at Brickell Bay in Miami’s Brickell Avenue corridor has the largest amount of troubled debt at $20.6 million tied to 43 units. This is the same project that had the highest concentration of foreclosures for a single South Florida condo in 2007.

Parc Central in Aventura is second with $17.9 million, and the Vue at Brickell is third with 37 unit owners owing $17.8 million. The Beach Club in Hallandale Beach ranks fourth with 32 unit owners owing $17.7 million, and the Blue Lagoon on Northwest 7th Street in Miami ranks fifth with $14.7 million.

The CitySide Condominium in West Palm Beach has the largest amount of troubled debt in a single Palm Beach County complex with $12.3 million, according to the report.

Overall, there were 38,063 foreclosure actions valued at $9.8 billion filed in Miami-Dade, Broward, and Palm Beach counties in the first half of 2008, according to the data. Broward County had 16,778 foreclosure actions totaling $4.1 billion compared to 10,917 actions valued at $2.7 billion in Palm Beach, and 10,368 actions totaling $3.1 billion in Miami-Dade.

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