Florida’s Foreclosure Flu Drags On

While other states that were hard-hit in the housing crisis are starting to return briskly to market health, Florida’s foreclosure flu drags on.

You might not realize it if you happened to read recently about the booming sales of glitzy Miami Beach condos but, as reported in a recent Bloomberg article, Florida had the nation’s highest statewide foreclosure rate last year. Six of the state’s metropolitan areas, including Miami-Fort Lauderdale, ranked among the top 10 nationally in foreclosure activity last month. Home repossessions increased, and legal action over defaulted mortgages continues to clog the courts. RealtyTrac Inc. reported that, as of last year’s fourth quarter, it took an average of 853 days to complete a Florida foreclosure, more than twice the national average.

The root of the problem is that Florida requires court review of the foreclosure process. The other so-called “sand states” that saw the biggest real estate booms before the crash do not. As a result, California, Nevada and Arizona have worked off their inventories of distressed properties faster, allowing their markets to rebound ahead of, and with more strength than, those in Florida.

As was the case elsewhere, Florida’s foreclosures ramped up after the resolution of the 2010 “robo-signing” scandal. Once state prosecutors and five major banks reached a settlement last year, foreclosures across the country gained steam in a new, streamlined process. Yet in Florida, they continue to slog through an overloaded court system.

As I have written in this space before, delaying foreclosures only delayed the ultimate recovery of the housing market. Keeping people in their homes has political appeal, but houses need to get out of the hands of people who cannot afford them and into the hands of people who can.

Some Florida legislators are trying to go farther than simply not hindering the foreclosure process. State Rep. Kathleen Passidomo, a Republican representing Naples, recently introduced a bill designed to speed up the unwieldy foreclosure process. It is the third such attempt by Florida legislators in three years; last year’s version, which Passidomo also sponsored, passed the House but died in the state Senate. The current bill, which is still in committee, sheds some of the 2012 bill’s more controversial provisions, though it is still opposed by some consumer advocates.

“We need to make sure the process is as efficient as possible while at the same time giving the borrower their due process rights,” Passidomo said, according to The Miami Herald. “Unfortunately, if you don’t have an income or you can’t afford to pay anything, the property can’t just sit in limbo forever.”

Meanwhile, Gov. Rick Scott is tackling the problem from another angle. Scott’s proposed budget for the year included $6 million specifically set aside to deal with the foreclosure logjam in the courts, as well as $4.4 million to increase the judicial system’s total number of judges and support staff.

Speeding up the foreclosure process is the most constructive thing Florida can do for its housing market now. While Phoenix leads the nation with a 23 percent recovery from its low point, according to S& P/Case-Shiller data for 20 U.S. cities, Miami is Florida’s best market, with values up 9.5 percent from its bottom. The condo market in Miami has seen an especially strong recovery focused along the beach and in the downtown area, where large influxes of foreign buyers have responded to a weak dollar and the area’s signs of returning life.

Yet areas like Jacksonville and Fort Myers, which rely on American buyers to fuel their housing markets, continue to struggle. Lawrence Yun, the chief economist of the National Association of Realtors in Washington, told Bloomberg that “lower-priced areas in northern Florida cities such as Jacksonville and Tallahassee are showing ‘sluggish recovery’ compared with vacation destinations on the Atlantic and Gulf of Mexico coasts in the south.” Much of the housing recovery in Florida, such as it is, seems to be driven by those looking for investments or second homes, rather than for primary residences.

The national housing market is reviving. Florida’s will too. But the state demonstrates how efforts to hold back the foreclosure process have mostly served to prolong the housing market’s problems and delay its recovery.

About Larry M. Elkin 534 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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