Florida Real Estate – Sellers are Desperate
South Florida is seeing a big jump in the number of homeowners who are selling their properties for less than they paid, highlighting the magnitude of the region’s historic housing slump.
During the first half of this year, 23% of sellers in Broward County unloaded their homes at a loss, according to sales data analyzed by the Sun Sentinel. In Palm Beach County, the percentage was even higher-27%. That’s a significant spike from 2006, when only 2% of sellers in each county took losses.
“It’s fair to say that some people are desperate,” said Brad Hunter, a housing analyst in West Palm Beach. “But there are others who regret having bought the house at the price they paid and if they can get rid of the obligation of having to continue paying on it, they’re happy to do it.”
The winners in these fire sales are buyers who are getting houses that are much more affordable.
“There’s no way we could have afforded a house before,” said Katarina Lytle, 29, a first-time buyer who paid $205,000 for a house that had been listed a year ago at $355,000 in The Acreage. “My husband and I walked out of the closing, jumped in the truck and just screamed.”
Most people dumping properties this year bought during the peak of the housing boom in 2004 and 2005. Many strapped homeowners are negotiating so-called short sales, in which lenders take less than what is owed on the mortgages and forgive part or all of the remaining debt.
In Broward County, one in three home sales in Miramar in the first six months of 2008 went for losses, according to Sun Sentinel research, which did not include foreclosure sales. Coconut Creek, Parkland and Weston also were among the hardest-hit Broward cities.
In Palm Beach County during the same period, West Palm Beach and Palm Beach Gardens both had 34% of sellers taking less than they paid. Also hurting were the west-central communities of Royal Palm Beach and Wellington, where property values had soared during the housing boom.
South Florida is among the leaders nationwide in homes and condominiums fetching less than the sellers paid, according to Moody’s Economy.com, an influential U.S. real estate research firm. The current climate is a stunning reversal from the housing heyday of 2000 to 2005, when thousands of short-term investors were buying and selling homes in South Florida and pocketing huge profits, seemingly overnight.
That speculation drove up prices, causing buyers to squeeze into homes by using adjustable-rate mortgages and other risky loans that now are resetting with much higher interest rates. Many of the homeowners no longer can afford the properties and are losing them in foreclosure, dropping values across the board.
That’s evident in South Florida’s shrinking tax bases. Broward’s tax base for homes and condos decreased 9% from last year, to $167 billion. Palm Beach County homes and condos are valued for tax purposes at $113.9 billion, off 7% from $122.9 billion in 2007.
“We had an awful lot of stretch buying above people’s means,” said Lewis Goodkin, a Miami-based housing consultant. “And we’re really paying the price for it now.”
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