The recently released “RealtyTrac’s U.S. Foreclosure Market Report” for February 2015 is generating a lot of buzz in the Florida media, and rightly so. According to the report, Florida has experienced a measurable easing in foreclosure activities, such as default notices, scheduled auctions, and repossessions over its previous year’s statistics. Florida’s recent 35% drop off is larger compared to other states and the steeper downward trajectory in foreclosure activities moved the Sunshine State from first to third place on the nationwide foreclosure list, falling behind Maryland and Nevada. While third place is still not the most desirable place to be, any downward movement is positive and signals improving economic conditions. The hope is that the precipitous drop is not an anomalous blip, but instead an acceleration in the trend towards more normalized, pre-recession levels.
Recently, the Foreclosure Initiative Workgroup, which is a group established by the Chair of the Florida Trial Court Budget Commission and charged with identifying barriers to foreclosure case resolution, proposing strategies to improve the foreclosure process, and developing supplemental budget requests for workforce and technology resources, released a detailed compilation of foreclosure statistics encompassing commercial and residential foreclosures reported by the clerks of court from all of Florida’s judicial circuits through September 2014. The granular statistics seem to indicate that while Florida has traveled a long way down the road to recovery, we still have a fair amount of clean up left over from the economic tsunami that surged across our state in the not so distant past. A closer look at the numbers predict that Florida’s foreclosure filings are expected to level off to around 7,000-10,000 per month for the next sixteen months. While still high, the frequency of filings is significantly less than the peak crisis years when the number of new foreclosure filings soared to as many as 400,000 per year. In June 2012, 377,707 foreclosures were pending in the Florida courts. In June 2013, that number dropped to 329,171. As of September 2014, that number plummeted by 40.95% to 134,824, largely a result of fewer new filings and a marked compression in time to final disposition through settlement, dismissal, judgment, or auction. In that same month, 6,758 new cases were filed, 14,358 existing cases were disposed and the average time from initial filing to final disposition had decreased to 651 days from a reported high of 761 days over the preceding 12 month period.
While most of these snapshots indicate positive trends, one area causing concern to market watchers is the increasing age of pending cases. Of the 134,824 cases pending as of September 2014, 57,325 (42.51%) were pending for less than one year, 37,519 (27.82%) cases were pending for more than one year but less than two years and 39,980 (29.65%) were pending for over two years. The cases pending for over two years were largely concentrated in the 9th(Orange and Osceola), 13th (Hillsborough) and 17th (Broward) Judicial Circuits, which combined, account for 39.4% of all foreclosure cases pending statewide for over two years. In each of these three circuits, the cases comprised at least 40% of their foreclosure dockets, and in at least five other Judicial Circuits, the cases comprised at least 30% of their foreclosure dockets. The backlog of older cases in these Judicial Circuits is unsurprising, as these areas were amongst the hardest hit during the crisis and courts there were flooded with new filings. To date, these circuits remain amongst the slowest to dispose of cases with an average of 665, 812 and 920 days, respectively. The great unknowns here are how and when will these stale cases be resolved and how will the surrounding market inventory absorption rates be affected when the distressed assets finally break loose from the judicial system. Only time will tell.
So what does this all mean? Overall, the analytics and trends clearly indicate that Florida has regained a large portion its economic health where the real estate industry is concerned. Defaults and foreclosure filings have been drastically reduced as well as the average time it takes to dispose of a pending case. While Florida is not yet back to historic norms, we are rapidly trending in that direction and our recovery is outpacing other areas of the country. On balance, the decline in foreclosure activities, decompressing credit markets, availability of alternative funding sources, and right-sized land values have spurred consumer and developer confidence. One need not travel far to see the sky cranes back up and running, which is always a good indication that Florida is open for business. A dollar carefully invested in our state is a dollar wisely invested.