Real Estate Bottomed Out?
While MSNBC reports that Home sales rise 9.4 percent in September, much of that was due to a special program for first time home buyers, like the “Cash For Clunkers” program, that ended in September.
The Miami Herald has a different take on the situation: `Shadow market’ clouds housing recovery
The number of properties heading to the market may be much larger than anyone thought and appears likely to swamp South Florida with more deeply discounted homes, clouding the prospects for a housing recovery.
Figures from the Florida Association of Realtors released Friday show that South Florida’s median home prices have stabilized over the past several months and sales are up year-over-year as the number of properties on the market shrinks.
But an analysis of the so-called shadow market done for The Miami Herald suggests the number of homes and condos in the pipeline to come on the market in South Florida is nearly five times larger than all residential properties currently listed for sale by Realtors. LPS Applied Analytics, a firm that supplies loan data to the federal government, did the analysis on the shadow market, which refers to properties that will eventually be listed for sale — because they are about to enter foreclosure, are in foreclosure or already owned by banks.
Banks are holding a lots of houses off the market waiting for better prices, so they can cover more of their losses. The houses are empty, but they haven’t been listed yet. A South Florida realtor did his own check and found that locally more than two-thirds of the bank-owned houses hadn’t been listed for sale.
This doesn’t even include all of the commercial real estate foreclosures that have or will occur. This isn’t even close to being over.
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And the longer they hold these houses off the market, the lower their value becomes, because the banks are the world’s lousiest landlords — they don’t keep the power on (to keep the air conditioning / heating working) meaning that the pipes freeze and burst (even though the water is turned off, the pipes weren’t drained), the grass turns into a jungle, the paint peels, roof tiles blow off in tropical storms and aren’t replaced and the water soaks in and causes the drywall ceiling to collapse and the carpet to become a mold ranch, the tweakers and squatters break in and steal everything that can be unbolted or torn out even all the way down to any copper water pipes and copper wiring they can get to by smashing in the drywall, and eventually a meth cooker blows up the house or a squatter burns down the house while trying to keep warm at which point the bank collects the insurance money on it … well, if it were possible to insure an unoccupied home, anyhow. Which isn’t possible if you’re a normal human being, but for banks? Interesting to find out, eh? Is that their business plan, leave the houses unoccupied and collect the insurance once they get destroyed by meth cookers or squatters? Curious penguins want to know!
– Badtux the Landlord Penguin
.-= last blog ..And I’m BAAAACK… =-.
It is hard enough to get insurance for owner occupied properties in the state, so they can definitely not get insurance on vacant property. It is vital to have renter’s insurance in this state, because there is a high probability that your landlord has no coverage of any kind on a rental unit, unless it is a condominium.
Condominium dues and housing association fees are another problem for banks holding properties. If they don’t pay them, there will be a lien on the deed. In many places, if they don’t keep the yard up, there will be a lien by the local government.
After two months most of the utilities in Florida will pull their meters, which makes the houses obvious targets for scavengers and squatters.
The mildew will set in after a month, even without plumbing problems or roof leaks. This is Florida, and if you don’t air condition, you have to ventilate, or the mildew will cover everything. I have a friend who does rehabs, and he won’t deal with anything that has been vacant for longer than two months, it’s just too expensive.
There are new products becoming available to deal with some of the problems, but they aren’t cheap, and you can’t work in the area for two days after you use them without an air tank. They kill the mold and mildew, but you still have to deal with the staining.
They may be planning to sell the lots, more than the houses, because leaving them vacant will, as you note, make them uninhabitable.
The banks would be better off finding management companies and renting them to get some of their money back, but I doubt they realize this.