Welcome to the world of foreclosure. One in every 80 homes in Florida is currently being repossessed by banks, as the subprime mortgage crisis rips through the Sunshine State. And while this means misery for evicted home owners, it spells opportunity to others. Sal Beloise, owner of Beloise Realty real estate agency in Clearwater Beach, said they had just put a house on the market that 22 months ago they got US$1.8 million for.
"Even though it's on the bay front, we'll probably end up with a sale price around US$1.1 million," he said. "At the top end, the properties selling for US$2.5 million to US$2.8 million are now going for US$2.1 million to US$2.2 million, while properties in the interior which had gone for US$600,000 to US$900,000 are going for US$450,000."
House prices in holiday centers such as Miami, Clearwater and Orlando boomed in the years running up to 2005, stalled last year and are now falling fast as the foreclosures work through.
"It was bizarre how it came to a halt at the end of 2005. For the past 23 months it has been like someone flicked a switch and said `no more sales,'" Beloise said.
Initially Beloise blamed it on overbuilding of condos and media reports (he cites CNN) predicting that the boom couldn't last. His guess was that cheap condos bought by investors -- those priced around US$300,000 would be hit, but family homes would remain unaffected.
But the truth was that every mortgaged household was being affected by a sustained rise in interest rates, which saw the Federal Reserve raise borrowing costs 17 times in succession between 2004 and last year.
"People who had adjustable [variable] rate mortgages saw their payments doubled or even tripled," Beloise said.
The financial pain didn't stop there. It is two years since Hurricane Katrina wrecked New Orleans, but its impact still reverberates around the Gulf -- home insurance costs have rocketed. A typical household in Clearwater now faces an annual hurricane and flood insurance bill of US$4,000, while for waterfront properties the premium can be as high as US$10,000 a year.
Hard-pressed mortgage payers also face fast-escalating property taxes.
"Taxes are levied on assessment, not on what you paid for the property," Beloise said. In his area they are charged at 2 percent on the value of the home, and after the boom it meant that an owner with a property valued at US$1 million was having to pay US$20,000 a year.
"The number one issue at the last election here was about lowering property taxes and the next biggest issue was about insurance costs," Beloise said.
Given the combination of oversupply, stretched affordability, rising interest rates and soaring insurance and property taxes, it is hardly surprising that Florida's property market went into freefall. But what has made this downturn different to others is that the foreclosures are turning up in every neighborhood, not just in low-income communities.
The victims may not like it, but there is now a small industry growing and feasting on the fall in prices. US real estate expert Danielle Babb has just published a book entitled Finding Foreclosure: The Insider's Guide To Cashing In On This Hidden Market.
"In the `old days' the foreclosures were usually in bad neighborhoods, sub prime and in bad condition. Today one in every 143 households in America is in foreclosure. This means that a lot of families who took really good care of their homes -- even upgraded [especially in Southern Florida] -- are now in foreclosure. These are where the bargains are because the neighborhood value is still strong," she said. "To get some really good values, [buyers] need to find home owners in distress -- and they can do that by using a site I use to find my own investments called Realtytrac.com. Once they search a zip code, they should look up the pre-foreclosure stage."
Babb's other recommendation is to seek out distressed home owners before foreclosure.
"If the buyer contacts the home owner directly, they can often work out a bargain deal and then jointly take that deal to the bank -- the bank, not wanting to pay a 6 percent broker fee plus go through the hassles of foreclosure, will often accept the offer if it's reasonable [approximately 20 percent to 40 percent below appraised value]."
A large number of Web sites have sprung up offering to find foreclosures across the US, although as most charge for access and are keen to find users, some of the claims they make can be far-fetched. The US Mortgage News Daily says recent shocking Realtytrac foreclosure figures, reported across all the major news networks in the US, paint a misleading picture of the "crisis."
A different reading of the figures suggest arrears and repossession figures are stable in most areas and would have fallen were it not for sharp rises in just four states. But it acknowledges that one of the states with soaring foreclosures is Florida; the others are Arizona, Nevada and California.
In an odd way, the real estate agents are happy that at least the foreclosures are prompting activity after two years in which sales came to a halt.
Joanne Hiller of Island Estates in Clearwater Beach said: "There are now a lot of properties to choose from and we are starting to see investors come back to the table. We are also seeing some foreign investment."
Hiller believes the market in her area bottomed in June, although she's not predicting a rapid recovery across the state.
"Miami was the hardest hit area in Florida, because it built so many condos. It will be the last to recover. Around Clearwater I would say there is excellent value in condos and I think single family homes will come back," she said.
However, Beloise predicts a bumpy ride ahead. He says the banks are pushing through a lot of "short sale" foreclosures, which could depress prices in the short term.
"There's going to be a bumpy time as the foreclosures go through. You are going to see 10 to 15 foreclosures in one area, and that will affect the neighborhood. But this isn't going to go on for years," he said.
Over the longer term, he's confident of a full recovery.
"It really is worth buying here. I've been all round the world and the beach is unparalleled," he said.
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