In Florida, the fallout from the robo-signer debacle last fall is still ongoing, and it is impacting one of the most important aspects of the real estate market today: foreclosures. In South Florida, foreclosure sales fell 11 percent in the first quarter of 2011 from the fourth quarter of 2010, and all indications point to buyers continuing to feel reluctant to put their money in foreclosures until they can be sure that the home won’t end up tied up in court or floating around in limbo as lenders search for the note and former homeowners – long gone – fight it out with current owners for the property[1].

Real estate agents report buyers who specifically do not want to look at foreclosed properties and note that this is opening up a window for conventional sellers who are now less willing to drop prices to compete with distressed properties. One agent hypothesized that this issue is at the source of why distressed properties held by banks have not been released on the market, noting that “we’ve been waiting [in Florida] for 14 months for foreclosures to be released in bulk, and it just hasn’t happened.”

Compared to the first quarter of 2010, national foreclosure sales were down 36 percent, and although this may be keeping prices up, some analysts fear that it is also slowing the recovery. Of course, this decrease in foreclosure sales volume is still turning out some notable numbers: foreclosures accounted for 45 percent of sales in California and Arizona, and 32 percent in Florida[2].

Do you think that this trepidation about foreclosures will be bad for the market, good for the market, or is just part of the cycle we are going through?

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[1] http://articles.sun-sentinel.com/2011-05-25/features/fl-realty-trac-quarter-one-20110525_1_foreclosure-sales-robo-signer-realtytrac

[2] http://www.delawareonline.com/article/20110527/BUSINESS/105270329/Experts-worry-low-price-foreclosures-will-impede-market?odyssey=mod|newswell|text|Home|s