South Floridas Underwater Mortgages Drop In Second Quarter

South Floridas Underwater Mortgages Drop In Second Quarter


South Florida homeowners continue to regain equity lost during the last decade's housing crisis, as the number of "seriously underwater" mortgages has declined sharply over the past three years.

At the end of the second quarter, 17.3 percent of homeowners with a mortgage — 262,591 people in Palm Beach, Broward and Miami-Dade counties — owed at least 25 percent more than the property was worth, according to the RealtyTrac Inc. research firm in Irvine, Calif.


While that's still higher than the national average of 11.9 percent, it is down from 22.4 percent (332,186 homeowners) at the end of the second quarter of 2015, RealtyTrac said.

Seriously underwater mortgages peaked in South Florida at 41.7 percent in the second quarter of 2013, the firm said.

Meanwhile, the tricounty region is seeing an increase in so-called equity-rich homeowners — people who have at least 50 percent equity in their homes. RealtyTrac said 24.7 percent of South Florida homeowners with a mortgage were equity-rich, up from 20 percent a year ago.

Home prices in South Florida have increased [year over year] for 55 consecutive months through June, and that's the main driver behind the decrease in underwater mortgages," said Daren Blomquist, a vice president at RealtyTrac.

Blomquist said some areas are still struggling. In the western Broward ZIP code of 33313, more than 41 percent of the mortgages are seriously underwater. In Miami-Dade, two ZIP codes (33034 and 33035) are above 40 percent.

"Not every single submarket is out of the woods, but for the metro as a whole, things are looking pretty good," Blomquist said. "We wouldn't declare the market back to normal until we see the percentage of underwater homes go back below 10 percent."

In Palm Beach County, 15.7 percent of mortgages were seriously underwater at the end of the second quarter, down from 20 percent a year ago. Broward was at 19 percent, compared with 24 percent in the second quarter of 2015, while Miami-Dade was at 17 percent, a decrease from 23 percent a year ago.

Cleveland leads all metro areas nationwide with 27.5 percent of mortgage holders seriously underwater. Las Vegas was No. 2, at 25.7 percent.

South Florida's housing boom ended in 2005, and prices started falling the next year, with some homes losing roughly half their value.

People who bought at near-peak prices from 2004 to 2006 soon found that they owed more on the mortgages than the homes were worth. Unable to sell, some owners moved out and let the homes fall into foreclosure, hurting values of nearby properties and deepening the downturn across the region.

"To move, you had to pay money out of pocket, and a lot of people couldn't do that," said Eli Beracha, professor of real estate investment at Florida International University. "The fact that you couldn't sell your home restricted mobility and had a negative effect on the economy as a whole."

By 2012, prices had bottomed, and an ensuing sales blitz over the next four years helped the market recover. The glut of homes for sale is now gone, and today's buyers struggle to find suitable options in their price ranges.

Real estate agents and housing analysts had hoped restored equity would lead to more owners listing their properties for sale. For-sale inventory has risen recently in Palm Beach and Miami-Dade counties, but buyers throughout South Florida — particularly those looking in the $500,000 and under price range — are frustrated.

Beverly Rothstein, an agent for RE/Max ParkCreek in Coconut Creek, said formerly underwater homeowners are more interested in selling – until they see the higher prices on homes they intend to buy.

"If they want to upgrade or even move laterally, the prices are so much higher [than they had expected]," Rothstein said. "So they sit back and say, 'Where am I going to go?'

"Yes, you have equity, but so does your neighbor."

Powers@Sun-Sentinel.com, 561-243-6529 or Twitter @paulowers


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