ORLANDO, Fla., May 4, 2012 – Fear of the unknown and what lurks in the shadows may be common, but it’s greatly overrated when it comes to the “shadow inventory” of Florida’s real estate market, says Florida Realtors® Chief Economist Dr. John Tuccillo.
“The fear is that the inventory of delinquent and foreclosed loans will be released onto an already weakened market,” Tuccillo says, explaining the findings of a new report conducted by the Florida Industry Data and Analysis department. “But the reality appears to be different, even in Florida where distressed properties make up a significant portion of the market.”
Tuccillo points out that lenders have no reason to flood the state’s real estate market with more homes if doing so would drive prices down and impact the lender’s profit. While some worry that lenders were holding back on purpose, Florida Realtors chief economist says that’s not the case – the large number of distressed properties on hold was “largely the result of confusion over the rules of the game, and thus missteps by the lenders.”
The study, “The Distressed Property Market and Shadow Inventory in Florida: Estimates and Analysis,” reviewed data from Multiple Listing Service (MLS) providers around the state, along with data provided by CoreLogic, a statistical analysis company.
Tuccillo says, “We looked at the recent history of distressed property listings and transactions relative to normal market data, as well as estimates for the shadow inventory, and came to some conclusions about the likely course for the future.”
Some of the study’s findings include:
- While Florida remains one of the nation’s hardest-hit states for distressed property sales, distressed property sales and listings have declined since late 2010, except for single-family-home short sales.
- Average prices for distressed and normal property sales have been stabilizing.
- In general, Realtors in Florida and lenders have learned how to cope with distressed properties in a way that stabilizes the market.
- Florida’s highest percentage of distressed property (compared to total listings) occurs in the I-4 corridor and Southeast Florida; the lowest percentage occurs in Northwest Florida.
- Florida’s shadow inventory was 550,000 units at the end of 2011, a decline of about 9 percent from its peak in the first quarter of 2010.
- Currently, the flow of new seriously delinquent (90 days or more) loans moving into the shadow inventory is offset by the roughly equal flow of distressed sales (short sales and REOs).
- The number of foreclosures and REOs was significantly lower in February of 2012 than one year earlier, suggesting slower shadow inventory growth.
Tuccillo predicts that while distressed properties will be a significant feature of the Florida real estate market over the next 10 years, it will be considered just one property type that a buyer can consider – one that has its own unique sales techniques and documentation.
The full report is available on Florida Realtors’ member website, floridarealtors.org, at https://www.floridarealtors.org/Research/index.cfm; look under Research Reports, Residential, to select “The Distressed Property Market and Shadow Inventory in Florida: Estimates and Analysis.”