Miami foreclosures dip, fundamentals stay grim
NEW YORK, Dec 5 (Reuters) - Foreclosure actvity in Miami dipped in November, possibly because of a rise in short sales, but the broader long-term picture remains bleak, say brokers and foreclosure experts.
The number of newly scheduled auctions on foreclosed properties in Miami were down 21 percent to 679 from October, real estate research firm PropertyShark.com said.
According to RealtyTrac, total foreclosure activity in Miami fell 37 percent in November from October to 6,473 filings.
RealtyTrac compiles the total number of properties with at least one foreclosure filing -- default notices, auction sales notices and bank repossessions -- reported during the month.
Subprime lending, speculation and overbuilding were rife in Miami during the boom years of 2002 to 2006, generating first towering price spikes followed by steep declines and a surge in foreclosures.
Miami's supply of existing housing is above average at 32.5 months, which will cause the market to lag a broader housing recovery, according to research from UBS analyst David Goldberg.
Miami right now has an especially elevated supply because it is a slow time of year and because the city has a lot of multifamily development, which has long cycle times and takes even longer than single-family development to stop during a downturn. An average city in normal times has about 6 months supply, Goldberg said.
WCI Communities Inc (WCIMQ.PK), which declared bankruptcy in August, was known for its luxury Miami condos. KB Home (KBH.N), Ryland Group Inc (RYL.N) and Lennar Corp (LEN.N) are the largest active public builders with the heaviest exposure to the state of Florida, according to a research note from Raymond James analysts Buck Horne and Paul Puryear.
If foreclosures in Miami were to level off, that would help the oversupply problem and stabilize prices. Miami's price declines, at 30 percent, are among the steepest in the state, Horne said.
The silver lining in lowered prices, of course, is their ability to bring out buyers, said Miami-area broker Frank Kowalski.
"We have sale prices that are reflective of the downturn," Kowalski said.
The low prices on offer in short sales in particular, he said, are keeping some homes out of foreclosure because buyers are motivated to reach out and make a deal before the home reaches that point. Short sales might explain some of the November dip, Kowalski said.
A short sale happens when a homeowner behind on the mortgage persuades the bank to sell it instead of taking it over, even though that means the bank takes a loss on the difference between what the homeowner owes and its likely sale price, said Warren Cleveland, a broker with Benham Real Estate who sells foreclosed properties for banks in Florida.
It is a time-consuming and contentious process, Kowalski acknowledged, but, ultimately, lenders know it is cheaper for them to negotiate a short sale than going through the foreclosure process.
"We're seeing some short sales start to work out and maybe that's keeping some of these properties off the courthouse steps," Cleveland said. Continued...
