Are banks skewing South Florida real estate market?

Are banks skewing South Florida real estate market?

www.miamiherald.com

South Florida home and condo prices appear to be bottoming out. Some say that banks are controlling the release of foreclosures -- the lowest-priced homes -- to the market as a way to shore up prices.

BY MONICA HATCHER
[email protected]
On the surface, South Florida's home prices appear to be bottoming out, but a dip in the number of bank-owned properties for sale is leading analysts to conclude that lenders may be slowing the flow of foreclosures to the market as a way of stanching

(visit the link for the full news article)

This is an interesting article out of the Miami Herald about how banks may be conspiring to keep property values from not just slipping during this period of record foreclosures brought on by the financial crisis by strategically limiting the number of foreclosures they file and the number of homes brought onto the market in the process.

In fact statistics show that the prices of homes and condominiums in Miami-Dade and Broward County have been rising steadily each month for the past few months.

While it makes good sense for the banks stuck with these toxic assets to keep the values of home as high as possible to recoup the investment losses in foreclosed defaulted homes, a large part of what has caused so many people to default especially in markets like South Florida, Southern California and New York/New Jersey is from so called ‘liar’ loans.

While many ‘liar’ loans were made by investors overstating their incomes to qualify for financing for a mortgage on a home to use as a ‘flip’ home for profit while the market was hot, a large percentage of liar loans were from regular people priced out of a hot real estate market that drastically inflated the prices of homes sometimes as much as 25% to 50% over the selling prices before the running up of the real estate bubble.

Strategically and artificially keeping the prices high might save banks and investors from loosing money through loans made on overpriced properties but it still places many homes outside of people working for depressed wages to buy and own a home.

With all the TARP money made available to the banks and the credit markets still frozen as most of the money is not being utilized by the banks to avoid monetizing it and creating inflation the taxpayer still gets saddled with the cost of TARP while the money sits unused in the Federal Reserve and the artificially high market price of homes brought on by real estate speculation still keeps many people from being able to afford a home at present wages and economic conditions.

Is it the right thing or the wrong thing for banks to purposefully not file foreclosure proceedings against someone currently in default simply because they don’t want to flood the market with foreclosures and in the process loose money, but also bring prices back down to where the average American’s wages can actually allow them to comfortably afford a medium priced home?


www.miamiherald.com
(visit the link for the full news article)

Over the past six months, however, intriguing trends have begun to emerge in the month-to-month numbers.

The median single-family home price in Miami-Dade has, in fact, risen for the past three months, climbing from $177,000 in April to $194,700 in May and $211,400 in June. In Broward, the median in April was $191,300, followed by $190,000 in May and $204,800 in June.

These prices are still well below their highs when the real estate bubble burst and the economy began to collapse but at a level slightly above before the real estate boom began in South Florida 4 years ago.

Ultimately it’s a good sign for Bankers and Investors still holding on to distressed properties in their portfolios but with unemployment on the rise, wages virtually stagnant and little living wage job creation actually taking place if any at all, who in fact will be able to afford these homes? Well to do investors who will utilize them as rental properties?

Hardly the American Dream scenario of owning your own home that led to much of the Clinton and Bush policies that set up the conditions for the real estate bubble, speculative flipping, and soaring prices that led to record numbers of foreclosures and defaults from paycheck to paycheck living Americans who could barely afford the home they got into when gasoline prices weren’t being driven through the roof by the same type of speculative investors that led to the erosion of their paychecks as gasoline prices effected everything from the rising cost of food to put on their tables to almost every other type of basic consumer staple.

reply to post by ProtoplasmicTraveler

where the average American’s wages can actually allow them to comfortably afford a medium priced home?

I have several homes that I bought as investments. I'm renting them I guess till the market comes back or I get them paid off. If I have to lower the rents due to deflated home prices it could be bad berries. So I see a real need out there to have stability in housing prices. If housing prices continue falling it will simply cause foreclosures as people realize they are upside down and there is no reason to continue to make payments.

I have seen what the average renter looks like and what the low end renter looks like. What I have observed is that there are an awful lot of people out there that do not have what it takes to be a house owner. There lives and life style are not together enough to do it, to be responsible, meet the payments and maintain the real estate. They need to be renters, it is a blessing for them!

I suppose to be a good democrat you somehow need to think that everyone should have the opportunity to own a house and have a mortgage. But that is totally impossible as recent events have proven. But people will forget as they always do and the government will try it again in the name of fairness or some other platitude.

reply to post by plumranch


I agree that many people lack the financial acumen and personal discipline to earn and manage the money they earn wisely. There are though a lot of people that do rent homes where they do pay sizable and respectable rents on time and display that they do at least have that basic discipline required to meet a sizable monthly obligation.

The home market for lower middle class and even middle middle class is in some cities priced way beyond their reach because of how speculation has driven up prices in some hot markets by investors.

These markets are the exception and not really the rule, but these markets are also where the bulk of the fore closure crisis exists, take the 5 or 6 key housing markets out of the equation, South Florida, Southern California, New York and New Jersey, Chigaco and Texas and you have most of the fore closures and the most of the most toxic ones right there.

Does it make sense to keep prices artificially high in those markets or to let the true market set the prices by not trying to manipulate the market?

Thats my question.

Time for a shameless bump on yet another seemingly over looked story regarding the real estate market and the ongoing financial crisis.

Yes, yes I know, according to the mainstream media and White House officials the financial crisis is officially over even though of course unemployment continues to rise, wages continue to decrease, inflation continues to tick up, but hey if you have some money in play on Wall Street it had it's best close on Friday in 6 months.

Of course the way Wall Street is going it is likely to have it's worse close in 6 months come next Friday as big money suckers the little money into the pool to chase big money only to find out they really shouldn't be in the pool.

In my humble oppinion this story illustrates why most small investors should not be in the pool when the whether gets stormy.

Between the big banks and the banksters with an ever helpful and occasional timely assist from the government clearly markets are being manipulated in a way as evidenced by this story that most people clearly don't percieve or understand.

I can't honestly say sometimes if these manipulations are bad, I can say that knowing some of the people many ATS members would refer to as the Powers that Be, that they feel such orchestrations and manipulations supposedly for the common and overall good are beyond the understanding or desire to even know on the part of the average person.

Yet in that rarified world where up often means down and down often means up, left often means right, and right often is just seemingly plain wrong how can the average person have a greater impact on the common good and the direction and destiny of their nation and the world they live in if they don't try to learn and comprehend what goes into some of the madness that just seems like madness and just seems to breed more loosers and victims than it does winners and victors?

reply to post by ProtoplasmicTraveler

Does it make sense to keep prices artificially high in those markets or to let the true market set the prices by not trying to manipulate the market?

It seems to me that the banks, credit companies, fannies and fredies can only go so far in artificially holding up prices. At some point they inevitably collapse and hopefully in a gradual fashion. Those institutions that have been caught carrying a lot of paper realize that flooding the market accomplishes little and is to be avoided whenever possible to save their posteriors.

You bring up a lot of good points about the market and how it never seems to favor the little investor. I'll admit I only sense that major manipulation occurs. For instance, who was the major international investor that did the massive put/ shorts last fall that started this whole collapse so nicely timed just before the election? Coincidence? LOL.

The little man was tempted to sell out and stay out of stocks. Those that did lost something like 50%. However, if you stayed in and invested back into the financials that were hit hardest, you did well, generally and made it all back. Most little guys didn't have the fortitude, however.

Back to RENTERS. Thank goodness some people have the bucks to pay the big rents. Apparently they consider themselves to be in such a temporary situation that they don't want to go for a mortgage? Some of my renters seem to fit that situation. I guess the other thing is if they are making a lot of under the table money that isn't taxed anyway, there is no incentive to buy property cause there is no write off. A lot of aliens would fit into that catagory, I suppose.

I have no issue with banks holding back foreclosures. That is exactly what is needed. I do think the banks should be liable for giving people loans that they couldn't afford and be forced to renegotiate at terms they can now afford. There are programs but anyone who bought or refinanced in florida the last 3 years are so far underwater they don't qualify.

What I really have a problem is with banks raising credit card rates and minimum payments to levels above what the borrower could have afforded when they were approved for the credit in the first place. I think a class action suit could have some effect in this respect. A hungry lawyer could make a name for themselves and a big bundle of cash as well, if they pursued this angle.

Originally posted by sligtlyskeptical
I have no issue with banks holding back foreclosures. That is exactly what is needed. I do think the banks should be liable for giving people loans that they couldn't afford and be forced to renegotiate at terms they can now afford. There are programs but anyone who bought or refinanced in florida the last 3 years are so far underwater they don't qualify.

What I really have a problem is with banks raising credit card rates and minimum payments to levels above what the borrower could have afforded when they were approved for the credit in the first place. I think a class action suit could have some effect in this respect. A hungry lawyer could make a name for themselves and a big bundle of cash as well, if they pursued this angle.

Hopefully some lawyer or group of lawyers will do just what you suggest.

The banks are adept at extorting money from their customers for very little to no tangible service in return for it. They tend to make matters worse for the economy and not better in the process.

Thanks for posting.

reply to post by sligtlyskeptical

What I really have a problem is with banks raising credit card rates and minimum payments to levels above what the borrower could have afforded when they were approved for the credit in the first place.

If you are referring to the recent rise in credit card charges (mine were raised from 3% to 4% in the last 2 months, that was clearly due to the efforts of Obama/ Pelosi to eliminate credit card abuse of some sort but which only resulted in increasing credit card charges for most of us. Change you can count on!