South Florida Bank Repossessions up 83% Year-over-year, Driven by New Online Technologies to Clear Foreclosure Inventories Faster

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Condo Vultures reports that banks are repossessing an average of 4,000 South Florida properties per month in the first half of 2010, representing an 83 percent year-over-year increase for the tricounty region of Miami-Dade, Broward, and Palm Beach counties.

Miami-Dade led the surge, experiencing a 125 percent spike in repossessions - also known as Real Estate Owned by banks (REO) - on a year-over-year basis. Palm Beach experienced a 112 percent jump while Broward's repossessions increased 42 percent, according to the report based on Circuit Court records from Miami-Dade, Broward, and Palm Beach.

At the current pace, nearly 50,000 properties would be repossessed in South Florida in 2010, which would significantly outpace the modern day high of 30,400 repossessions that lenders took control of in 2009. Lenders repossessed nearly 26,250 properties in 2008 after taking title to 10,100 properties in 2007, according to the report.

"South Florida's real estate market is at a crossroads," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based Condo Vultures LLC. "The number of bank repossessions in 2010 is higher than at any time in at least two decades. This additional bank-owned inventory will undoubtedly be coming onto the resale market in the near future as discounted REO product.

"The flip side is, the number of new foreclosure filings in South Florida is down 34 percent in the first half of the year, putting the region on pace for less than 70,000 actions in 2010 compared to 97,000 in 2009."

Despite the spike in repossessions, bank-owned properties still represent only about six percent of the 67,000 residences on the resale market in the tricounty South Florida region as of July 12, says Condo Vultures.

South Florida's residential inventory has increased on a weekly basis for five of the last six weeks, representing a 2.7 percent jump in available product since May 31. Still, the overall resale inventory is down more than 37 percent from November 2008 when there were nearly 108,000 residences available in South Florida. 

Market conditions aside, another key reason the number of bank repossessions has increased this year is the implementation of a new online auction technology being used by the South Florida circuit courts to clear the backlog. The online auction technology now allows hundreds of properties to be auctioned off more efficiently, industry watchers said.

Before the online auction software was adopted independently in the first quarter of this year, each of three South Florida counties fulfilled the last step in the foreclosure process by holding courthouse auctions as many as five days a week in attempt to clear the backlog of properties. The problem was, only so many auctions could be held each day despite the best efforts by the court officials.

With the new improved online auction process, lenders are taking title to properties from defaulted borrowers at a much quicker pace but still not as fast as before the South Florida real estate crash, industry watchers said.

At the start of the housing crash in 2007, lenders estimated the typical foreclosure would take about six months to repossess a property at a cost of about $40,000 in the loss of debt service, damage, court courts, and attorney's fees. By 2009 as the foreclosure filings were spiking, the process extended out to an average of 18 months with an estimated cost of at least $100,000 per repossession.

Lenders repossessed 15,100 properties between April and June 2010, representing a 152 percent increase compared to the 6,000 properties repossessed during the same three month period in 2009, according to the report.

In the first quarter of 2010, lender repossessed nearly 9,200 properties, representing a 25 percent increase over the 7,300 properties taken back between January and March 2009, according to the report.

Miami-Dade, where Aventura, Coral Gables, and Miami Beach are located, has experienced more than 11,000 bank repossessions this year. After experiencing only 700 and 750 repossessions respectively in the first two months of 2010, the repossessions spiked to 1,300 in March, 1,700 in April, and 2,500 in May. In the month of June, Miami-Dade's repossessions eclipsed 4,000 in 30 days, according to the report.

Broward, where Fort Lauderdale, Hollywood, and Pompano Beach are located, has experienced a more consistent number of bank repossessions in the first half of the year. Broward's monthly repossessions have consistently ranged from 1,200 to 1,900 in 2010, according to the report.

Palm Beach, where Boca Raton, Delray Beach, and West Palm Beach are located, has experienced between 350 and 950 bank repossessions per month in the first half of 2010, according to the report. 

Since the housing market crashed in 2007, there have more 91,000 repossessions in South Florida with Miami-Dade accounting for 43 percent, Broward an additional 42 percent, and Palm Beach the remaining 15 percent, according to Condo Vultures.

"The unknown is how many of the more than 240,000 foreclosure filings initiated in South Florida since January 2007 are going to end up as bank repossessions," Zalewski said. "Right now, the ratio for repossessions-to-foreclosure-filings is about 38 percent and climbing." 

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