The buzz in Florida is that there is a shortage of homes available for sale, which is driving up the price of homes. CNBC reports that the National Association of Realtors notes an “acute lack of supply” in some popular markets. Despite these inventory shortages, some markets are staying warm.
One of the driving forces of this market condition is an influx of investors paying above-market prices for homes for use as rentals. In some Florida communities, these well-funded investment entities are bullying others out of the market by paying 45% more for homes than their value, as reported by RealtyTrac. Florida Realtors reports that Investment firms bought over 5,200 Florida properties in 2012 and are determined to buy more this year. RealtyTrac offers a helpful tool for finding Florida foreclosure sales.
Another driving force, is what has been termed as a “shadow inventory,” which consists of homes that have become bank or that remain in the foreclosure process, which banks do not put on the market–to avoid taking a hit on the sale value. RealtyTrac reports that more than 111,000 homes in south Florida are in the “shadow inventory.” There is a similar effect on homes that have not been foreclosed. Homeowners who bought homes are unable or unwilling to sell because they would be required to bring an exorbitant amount of cash to the sale to satisfy their loan. Florida has over 90,000 pending foreclosures/zombie homes, which represents 30% of all foreclosure actions in America.
As a result of banks’ reluctance to take on more distressed properties, banks appear to be offering foreclosure alternatives more often, such as short sales and principal reductions often over $100 thousand.