The Shadow Market

It sounds ominous and that's because it is.

Mortgage holders in Broward County now have more mortgages in arrears than ever.  They have not yet foreclosed on them and no one is quite sure what the reason for that may be.  However we do know one thing.  Eventually they will foreclose and the will put them on the market.  When that happens we will be flooded with more foreclosures than we've seen to date.


But an analysis of the so-called shadow market done for The Miami Herald suggests the number of homes and condos in the pipeline to come on the market in South Florida is nearly five times larger than all residential properties currently listed for sale by Realtors. LPS Applied Analytics, a firm that supplies loan data to the federal government, did the analysis on the shadow market, which refers to properties that will eventually be listed for sale -- because they are about to enter foreclosure, are in foreclosure or already owned by banks.

Economists and real estate analysts say the forces of supply and demand mean prices have further to fall because there will be more homes on the market than people to buy them, forcing sellers -- in this case, banks that have taken homes back in foreclosures -- to further cut prices.

Example: In Tamarac banks own about 300 properties.  Only 81 of those are currently on the market.  For every home sold in Miami-Dade, lenders took back almost four through foreclosure auction, according to LPS data. In Broward, for every sale, banks took back six properties, according to LPS' analysis, which uses sales information from the public record, not Realtor data that captures only sales through agents.

In Broward, the median single-family home price fell to $200,000 from $259,300, a fall of 23 percent. The median condo price dropped to $78,000 from $129,000 last year, a 40 percent decline. Earlier this week, Fiserv, a financial information and analysis firm, forecast that Miami average home values will plunge another 30 percent by June 2010, on top of price declines of 48 percent since peaking in 2006. Prices are forecast to fall another 26 percent in Fort Lauderdale.

What does this mean for sellers?  NOW is the time to sell before the foreclosures come on the market, further reducing property values at a fast pace.