Pain in South Florida housing market spreads as home sales show little relief

By Paul Owers | South Florida Sun-Sentinel

August 15, 2008

Foreclosures soared across South Florida and the nation last month as the dramatic decline of the U.S. housing market continued.

There were 2,865 Broward County homeowners on the verge of losing their homes to lenders in July, double the 1,430 from a year ago, according to Foreclosuresdaily.com, a research firm based near Tampa. The number of foreclosure sales swelled to 1,648 from 381.

In Palm Beach County, 1,739 homeowners were facing foreclosure last month, up from 1,063 last July. Foreclosure sales more than doubled to 412 from 183.

Weak housing sales, falling home prices, tighter lending standards and a slowing U.S. economy have hurt many strapped homeowners. They owe more than their properties are worth and can't find buyers or refinance into more affordable loans.

The spike in foreclosures over the last two years is one reason the local housing market remains in turmoil. The Florida Association of Realtors released a second-quarter report Thursday showing sales of existing homes in Palm Beach and Broward counties were down 3 percent and 8 percent, respectively, from a year ago.

South Florida became one of the nation's foreclosure hot spots after the housing boom of 2000 to 2005, when escalating home values caused many buyers to overextend themselves. They took out short-term adjustable-rate mortgages that now are resetting with much higher interest rates.

Foreclosures in Palm Beach and Broward counties could peak in the second quarter of 2009, said Chris Lafakis, an economist for Moody's Economy.com, a West Chester, Pa., research firm.

By then, fewer adjustable-rate mortgages will be resetting and the deteriorating job market should improve, Lafakis said.

"As you get fewer resets, you have fewer people in foreclosure," he said Thursday. "We also expect the job market to find its footing next year. When more consumers have jobs, they'll be able to stay in their homes."

But West Palm Beach-based housing analyst Brad Hunter warned that a peak in foreclosure filings wouldn't mean the end of trouble for the housing market in South Florida. Banks still will have to slash prices on a large inventory of repossessed homes, hurting individual sellers, Hunter said.

"I think if you are hoping that the worst will be behind us by the middle of next year, that's a pretty optimistic scenario," Hunter said.

Nationwide, more than 272,000 homes received at least one foreclosure-related notice in July, up 55 percent from about 175,000 in the same month last year and up 8 percent from June, according to RealtyTrac Inc. of Irvine, Calif. That means one in every 464 U.S. households received a foreclosure filing last month.

President Bush last month signed housing legislation to prevent foreclosures by allowing homeowners to modify their mortgages for more affordable loans, but only if the lender agrees to take a loss on the initial loan. The law is projected to help about 400,000 households.

The number of foreclosures nationwide "could start to stabilize as early as the first quarter of next year if the government program gains any traction," said Rick Sharga, RealtyTrac's vice president for marketing.

Information from The Associated Press was used in this report.

Paul Owers can be reached at powers@sun-sentinel.com or 561-243-6529.