Below market rate foreclosure properties are like magnets to fixer uppers investors who want to earn huge profit for less capital. Investors and first-time homebuyers loaded with cash are flocking to Brevard County, Florida to take advantage of cheap properties.
The trend is benefiting the housing market in the region but has rendered the federal homebuying program ineffective. This is because these cash-rich buyers have the leverage over local governments when it comes to purchasing distressed houses in the same neighborhoods.
Last year, the U.S. Congress launched the Neighborhood Stabilization Program (NSP) which provides funds to various cities and counties across the country to help them purchase and renovate foreclosure houses to prevent them from becoming blights.
But a market study showed that the federal program has barely made a dent in Brevard County. Four local governments in the county spent only a small portion of the available funds under the program. In fact, the county government and cities of Melbourne and Palm Bay were not able to buy any foreclosure property. In September, Titusville purchased two apartment complexes.
Industry experts said that the failure of the NSP program in the county was due to local governments' inability to compete with cash-rich investors and first-time homebuyers in buying foreclosure houses.
As of September 29, there are 50 real-estate owned houses in Palm Bay, with a total of 174 in the whole county. And hundreds more are expected to go into foreclosure before the year ends. The city government of Palm Bay has received about $5.2 million to help it buy foreclosure houses. Meanwhile, Brevard County has barely touched the $5.3 million allotted to it under the NSP while Melbourne has dispensed $1.9 million to buy distressed properties.
Industry experts said that local governments should be buying foreclosure houses. The NSP, which is being managed by the Department of Housing and Urban Development, is designed to help city and town governments purchase foreclosure homes, renovate and then sell them to families with low income.
U.S. Representative Corrine Brown was upset that the federal grants are not being used by Florida communities to help distressed homeowners avoid foreclosures. In Palm Bay city, one out of 10 houses is at risk of foreclosure. So far, all the 601 home sale deals in Palm Bay were made by buyers of fixer uppers and first-time homebuyers and none by the city.
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