Why Isn't Florida's Housing Recovering Faster? - Housing markets across the country continue to see signs of improvement and recovery. In many places, home sales and selling prices are up, and inventory remains low, which is driving the prices even higher.
But in the Sunshine State, housing recovery has been much slower. With great weather and plenty of big cities to choose from, you’d think that buyers would be flocking to Florida. However, home sales here have been much slower than other places. Why? The answer is a complicated one, but it centers around distressed properties.
When the housing market collapsed in 2008, many homeowners could no longer afford their mortgages, and they lost their homes due to foreclosures or short sales. This caused the housing market in many metropolitan areas around the nation to be flooded with an inventory of homes.
Over the last year, that all changed. Investors knew that they could purchase homes for discounted prices, so they swooped and quickly bought as many properties as possible, planning to hold on to them until the housing market's condition improved. Since there were signs of improvement, there was finally light at the end of the tunnel. And because many of these investors made cash-only purchases, they were able to close on deals much quicker than prospective buyers who had to go through traditional channels to obtain home loans.
But with investors buying a majority of the homes available, prospective buyers looking to a purchase a home as their primary residence quickly realized that demand was up but supplies were limited. So, when they did found a home they wanted to buy, they became more willing to enter into a bidding war against other buyers. This trend had led to a rise in home prices across the nation.
How much so, you ask? Perhaps at a rate that is too high for such a short time period. According to a recent report, home prices rose 8% in December 2012, when compared to the previous year. Typically, home prices rise 3% to 4% a year. At their peak during the housing bubble in 2005, that figure was 12%.
But none of my Florida's four major metropolitan areas – Miami, Orlando, Tampa, or Jacksonville – have been among the top 15 performing markets on recent lists. Why? A stall in the court system is to blame. Like many other states, Florida's housing market has been driven by the sale of distressed properties in recent years. But unlike other states, Florida experienced a backlog because many of those foreclosures were severely delayed because of court proceedings.
Many banks in Florida got in trouble for “robo-signing” on foreclosures, which is an illegal practice. This led to years of negotiations, court cases, and now legal bank settlements.
Foreclosures are moving again, meaning Florida's housing markets are once again being flooded with homes at time when other cities have a lack of homes for sale. Because there are fewer homes on the market in these other cities, buyers are having to outbid each other to purchase them.
But in the Sunshine State, there's a plethora of homes available once again. With so many to choose from, and many priced well below what they are worth, the big price gains seen elsewhere aren't happening in Florida. So until those foreclosed homes are cleared out of the way – and the trends here can catch up with what the rest of the country is seeing – the housing market in the Sunshine State won’t be quite as sunny as other markets!
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