House Forecosures: The Era Of Foreclosures

January 2nd, 2008

Of late foreclosures have become a fashion. Until 2005 the real estate market was in boom but the balloon burst in 2007. In Lee County there were 11,698 foreclosure listings till the end of November. It showed a triple jump from what it was in the previous year. The increases were marked from 2006 in both Lee and Collier Counties. November was the worst month as far as foreclosure numbers. Even though there has been a slight fall in December the general trend is the same – a steady increase in numbers.

Sometimes the numbers are jumping by four folds. If this is the way the New Year will be welcomed a great strain will be felt on the public and administrative bodies.

South West Florida is one of the worst zones. Its fall is in direct proportion to its boom during the preceding years.

Analyzing the factors, experts opine that after Hurricane Charley money began to flow in the form of insurance and help schemes. People started coming here and there were a lot of activity in the housing sector. Prices rose quickly and sharply. A house valued at $200,000 suddenly was worth $400,000. This should have set off alarm signals.

At that juncture the stock market was wobbly and people turned from it to the real estate. It led to a false sense of security. South West Florida seemed to be a good place to invest because the market price of land was lower than Orlando, Miami and Sarasota. But with the recovery of the stock market people began to withdraw their attention from the real estates.

Many of houses now under foreclosure are brand new – these had been bought by investors even before construction. Many investors left half way after forfeiting their deposits. They did not want to incur further losses by hanging around.

Short sales have picked up lately. In a short sale the bank agrees to a sale wherein the price is less than the loaned amount. As a result the prices of other neighbouring houses depreciates.

The net result of this crisis that emanated from the sub-prime ARM’s is that all are sinking with the ship – borrowers, lenders, the administration and the entire neighbourhoods. Those in the middle and lower income bracket are having to suffer the most. House prices are falling – but not falling enough to accommodate them.