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Overvaluation Also Drove Foreclosed Homes in Florida

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By : John Cutts    99 or more times read
Housing overvaluation and overbuilding are two of the major reasons for record numbers of foreclosed homes in Florida.

According to the Florida State Courts Administration, there are around 500,000 pending property foreclosure cases throughout Florida, and according to a research firm, there were more than 54,000 houses that were hit with foreclosure and default filings in February this year.

In January, more than 47,000 homes were hit with filings and in the entire year of 2009, almost 517,000 homes were thrown into the foreclosure pool.

Since the downturn, Florida has been among the top five U.S. states both in numbers and in rates of foreclosures.

According to IHS Global Insight, Florida fell by a steep rate because it shot up excessively high during the boom years. Home prices spiked to impossibly high levels far above their fair valuation.

Jeannine Cataldi, regional real estate services director for IHS, said that buyers in Florida, particularly in Miami, continued to buy even if they realized the prices were beyond their valuations.

IHS researchers said that during the last months of 2005, when overvaluation was at its peak, 36 of the 52 metro areas that were extremely overvalued were located in Florida and in California. Another 85 metro areas were significantly overvalued.

When housing prices crashed, these metro areas quickly plunged from their heights, wiping out property equities and values and throwing out record numbers of foreclosed homes in Florida.

In Miami, the average house price in 2005 was $281,300. By the last month of 2009, the price average has plunged to $180,500 and is still falling. Since the downturn, home prices in Miami have fallen by a total of 37 percent. In the list of overvalued metro markets during the boom, Miami was third, with an overvaluation of 49.4 percent.

By the first month of 2010, there were no longer extremely overvalued metro housing markets. In contrast, the nationwide housing market now is considered slightly undervalued.

The other major cause of bank owned property listing spikes in Florida was overbuilding. The rows of vacant dark condo buildings in downtown Miami and in other South Florida cities are evidence of the overwhelming supply of condo buildings that cannot be absorbed by local populations and transients.

According to Moody’s and Fiserv economists, the number of foreclosed homes in Florida will continue to surge because of the continued decline in home values until the third quarter next year.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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