Property Value Rises Trigger Foreclosures
By Scott Blake
Experts say the economy is on the mend, yet home foreclosure filings are still on the rise in Greater Miami.
Much of the reason, they say, is because property values are rising, making it more appealing for banks and other lenders to initiate proceedings to seize financially distressed properties.
"Banks are seeing good values, so they’re trying to get their money out" of distressed properties through foreclosures, says Dan Mackler, a lead attorney with the Gunster law firm in Miami who has represented banks and investment groups in the process.
"With the banks, it’s just a numbers game," he added.
Greater Miami’s foreclosure statistics go against the national trend:
In April, the number of properties receiving a foreclosure filing nationwide was down 23% from the same time last year. But the number of properties receiving a foreclosure filing in Greater Miami was 21% higher in April than it was the same time last year, according to RealtyTrac, a California-based firm that compiles foreclosure data around the US.
Another factor in the local rise in foreclosure filings is the so-called "robo-signing" settlements against banks in the past year or so. While those cases were pending, banks were holding off on many foreclosures. And another factor is the local court system devoting more resources to work through a backlog of foreclosure litigation.
The robo-signing settlements — stemming from what authorities have called shoddy and sometimes fraudulent processing of mortgage documents to speed up foreclosures — amounts to help for homebuyers that is "too little, too late," says Ken Thomas, a Miami-based independent banking consultant and economist.
"The people who lost their homes in the depth of the crisis… a lot of their lives have been ruined," Mr. Thomas says, adding that big banks could have done more to write down the value of properties and take other steps to keep homebuyers in their homes.
Many of those people are now renters, or have moved in with relatives, or have left the area or the state in search of jobs or better living conditions, he says. For those renting, he adds, many of them will remain renters due to a combination of rising property values, stricter lending standards and a still-sluggish job market.
Interestingly, another current foreclosure trend in Greater Miami is the opposite of what’s happening nationwide.
Currently, more than 1.37 million properties in the US are in some stage of foreclosure (default, auction or bank owned) while most of them — more than 909,000 — are for sale, according to RealtyTrac.
However, of the 55,896 properties in some stage of foreclosure in Greater Miami, only a small fraction — 2,215 — are for sale, RealtyTrac reports.
Mr. Mackler says that’s because banks have tended to hold foreclosed local properties without putting them back on the market as they have waited for housing prices to rebound.
Mr. Thomas also notes, in some cases, both buyers and lenders had less incentive to quickly move forward with foreclosures: buyers wanted to stay in their homes as long as possible and lenders didn’t want to pay homeowner and condo association fees, as well as costs for maintenance, repairs and property taxes. But, in many cases, the courts have prodded them into taking action on pending cases.
Meanwhile, Greater Miami and Florida as a whole continue to have some of the highest foreclosure rates in the country — and one of the unfortunate byproducts of that trend has been a glut of vacant properties.
Nationwide, 10.7% of all housing units — 14.2 million — were vacant in the first quarter of the year due to foreclosures and other reasons. And Florida leads the nation in vacant foreclosures with 90,556, according to a recent study by RealtyTrac.
Mr. Thomas says banks seem to be becoming more receptive to finding ways to keep buyers in their homes after witnessing the negative effects on those properties and surrounding neighborhoods.
"The big banks understand a lot of the reputational loss. They’re not looking good when they kick grandma out of her home," he says. "It also hurts neighborhood values, and some of these banks own whole tracts of property, so it hurts their portfolio."
Meanwhile, the homeownership rate in the US dropped to an 18-year low in April. Experts say it signals a shift away from homeownership toward rental housing while investors — including Wall Street firms and hedge funds — have purchased hundreds of thousands of foreclosed homes at deflated prices.
In some markets, investors have been reselling previously foreclosed properties — a practice known as "flipping" — at hefty profits, driving up housing prices. That includes Miami, where property flippers have been churning out profits at an average of more than 35%, according to RealtyTrac.
By now, the local stories about all-cash purchases by affluent buyers from Latin America and elsewhere are commonplace, particularly in the downtown and beachside condominium markets.
Meanwhile, data show the highest foreclosure rates in the area have been in the suburbs around the city, places such as Kendall, Hialeah and North Miami.
"A lot of them have come from South America," Mr. Mackler says about the cash buyers. "They see [Miami properties] as a safe place to [invest] their money and let it appreciate for three or four years and sell it."
While many investors rented out their newly-purchased condos and houses, Mr. Mackler says, he is seeing more buyers moving into their properties, particularly downtown.
He and his wife bought and have lived in a condo in the Brickell Avenue corridor since 2010. He says more of the units in his building now seem to be owner-occupied, and his neighbors come from all over the world.
"You step into the elevator," he says, "and you hear [people speaking] Spanish, Portuguese, Italian, French, Russian and even some Nordic languages."To read the entire issue of Miami Today online, subscribe to e-MIAMI TODAY, an exact digital replica of the printed edition.