When Joel Flores learned that his girlfriend was pregnant, he decided it was time to get serious about buying his first home. After 12 years of saving up, the 38-year-old computer technician set his eye on South Florida’s depressed foreclosure market, certain he could land a steal.
But like many other middle-income Floridians looking to buy a home, he found savvy real estate investors were beating him to the punch on foreclosure properties in the under-$150,000 market.
As South Florida’s home sales have continued to outpace national trends, distressed-foreclosure properties are still dominating the south Florida real estate market, with more than half of all homes and condos sold last month at some stage in the foreclosure process or short sale. Cash happy investors have been scooping up these bargain basement deals at a fast clip, often before middle-income buyers can get financing.
According to figures released Thursday by Florida Realtors, South Florida’s sales of existing homes and condos saw increases in June compared to the same month last year, even as national sales slumped with a post-tax-credit hangover. Miami-Dade sales of single-family homes increased 1 percent to 686, and condominium sales jumped 33 percent to 855.
In Broward county, single-family home sales were down 2 percent year-over-year to 862 in June, and 1,003 condo sales represented an 8 percent increase for the year.
Year-over-year prices are down nearly across the board, and a deeper look offers up one reason for the ever falling home values: Most of sales taking place these days involve distressed, discounted properties. Short sales and purchases of bankowned properties accounted for 60 percent of home sales in Miami-Dade last month, and 56 percent of real estate sales in Broward County. Nationally, distressed properties have accounted for about 30 percent of sales this year.
With plenty of home owners still defaulting – South Florida has had 95,357 foreclosures in the first six months of 2010 – real estate investors from across the country and abroad have decided to come to the rescue, cash in hand, and often to the detriment of people needing a mortgage to buy a home.
“It’s outrageous,” Flores said. “Investors have a pretty good monopoly on it.”
Since foreclosures sell at an average discount of about 25 percent, their dominance of the local real estate market – and the presence of investors negotiating all-cash deals – have put additional downward pressure on average home prices.
Median sales prices for single-family homes in Miami-Dade were $203,300 in June 2010, down about 4 percent from June 2009. That price represents an increase of 3.4 percent from May. For Miami-Dade condos, median sales prices were $128,800 in June, down 9 percent from the same month a year earlier.
In Broward, the median single-family home sold for $209,600 in June, up 2 percent from the year before, but down 3 percent from May. Broward condos saw their median prices slip to $78,600 last month, down 6 percent for the year and 3.5 percent for the month.
Statewide, median home prices were at $143,400 in June, down 3 percent for the year. Florida condo prices found a median at $95,000, down 16 percent for the year.
The low prices and deluge of foreclosure filings have given real estate investors plenty of properties to choose from.
Tough deals
Dominguez, president of Foreclosure Investment Systems, said market forces are at play, and while those forces tend to prefer investor cash over the often-uncertain financing of the average buyer, the market may actually be protecting the novices from themselves.
He said he has watched many unprofessional buyers try to take advantage of a foreclosure deal, only to be frustrated by how difficult and unpredictable the process is. Many inexperienced buyers, he said, have had to learn the hard way that along with deep discounts, foreclosures often come with baggage – huge repair bills, complex contracts and other unexpected problems. Without proper contractors to do the repairs, most new investors run into difficulties.
“It’s a very dangerous thing to do,” he said of buying foreclosures without having full knowledge of the process. “But it’s a fair competition. Whoever offers the most takes it. If you don’t know what you’re doing, you could end up spending a lot of money.”
Flores said the discounted prices encouraged him to take the plunge into home-ownership after more than a decade of preparing for it financially. But each time he tries to pick up a low-priced home, he said, he finds savvy, well-connected investors standing between him and his property of choice. One investor even offered to buy Flores’ property of choice at auction and sell it to him at a 20 percent premium.
Condo-mania
Swarm toward Broward County condos has intensified this year. “We’ve seen a lot more with investor interest,” pointing to Broward County’s off-peak prices as the main draw. “I’d say on average they’re getting between 10 and 12 percent return on investment.”
While some investors, like Dominguez, aim for a quick flip, the Broward buyers D’Souza has worked with are using acquisitions to generate income from rental homes.
In Miami-Dade, investor interest has sparked bidding wars in the under-$100,000 market, an analysis from Esslinger-Wooten-Maxwell Realtors shows. Single-family homes selling at five-figure prices account for 20 percent of all sales and spend an average of 67 days on the market, down from 98 days last year and less time than any other price bracket. Short sales are up astronomically, with 562 single-family short sales in the second quarter of 2010, compared to just 10 in the same period last year.
The average short sale is purchased after about five months on the market, down from about 10 months a year ago. Bank-owned properties are being scooped up after an average of 37 days on the market, compared with 77 a year ago.
Flores, who has about seven months until his first child is born, said he plans to continue his search for a high-quality, low-cost foreclosure deal.
“I’m going to keep trying,” he said. “But from what I see my chances of getting a foreclosure deal are pretty low.”
Copyright © 2010 The Miami Herald, Toluse Olorunnipa. Distributed by McClatchy-Tribune Information Services.
