Ray Lopez

It’s rather an interesting question, really. A report by RealtyTrac shows foreclosures in Orlando, FL for the first six months of the year moving from being in the top 10 of US metropolitan areas for foreclosures, way down the list to number 36. It equates to a roughly 60% drop in foreclosures for Orlando real estate. And, to an extent, there is a point there, however there are other factors to consider.

Those of us who work in Orlando know that there has been a slight drop in the number of bank-owned and REO real estate properties the past few months, but it’s not nearly enough to suggest that the market will be drying up any time soon. Foreclosures are still happening and will remain in demand until conventional home prices drop to the point that the convenience they afford overshadows the cost gap between them and foreclosure homes.

So what’s going on? Most likely, this is more a reflection of how many foreclosures there actually are with banks unwilling to foreclose on seriously delinquent real estate homes in Orlando for the time and effort required to get them through the courts. However, as the previous homes start working their way through the process, it’s likely that this “shadow inventory” will find its way onto the Orlando real estate market.

While this will likely drive down home prices that have been slowly moving their way back up, regular readers of this blog will notice the repeated mentions that Orlando real estate tends to have stable pricing. Data collected has shown very little movement down and careful movement upward since the housing crisis. So while prices will fluctuate, buying real estate here in Orlando, FL is usually a better investment than other parts of the state despite the foreclosures on the market.

Now is a great time to get involved in the Orlando real estate market, whether it’s selling your home or buying a new one. Contact a local real estate agent or REALTOR to see for yourself what an incredible market it is when you’re looking to buy or sell your home.

One of the advantages to living in Orlando is that, despite everything else, home prices seem to remain reasonably stable. Even during the crisis, Orlando real estate prices showed among the least decline in the state, and now they are poised for a steady rise.

Don’t forget: Orlando is a huge area and the metropolitan area covers a lot of land. As a result, inventory in the area for homes tends to be high in general. That being said, they have been declining by several hundred every month for the past six months as more homes are actually sold. 745 homes were sold in Orlando in May, for examine, leaving the inventory at 13,109 for June. July’s numbers haven’t been released yet.

Of course, despite this, prices are staying reasonably stable, the median one being $110,000 for the past three months. This could be due to a number of factors, one of which is that bank-owned properties are still driving down the values of other homes. However, this recent plateau was after a period of growth and it’s likely that it will continue to grow as more inventory is sold off.

Orlando’s housing market continues to show signs of improvement and its trademark balance. As inventory goes down, one trend is that fewer REO properties are hitting the market. Unless there is a vast “shadow inventory” or “hidden inventory” that simply isn’t on the market for no apparent reason, odds are in favor of home prices continuing to rise to more reasonable levels.

This could be the perfect time to buy a house in the Orlando area. With prices still remarkably low but poised to rise, buying a home becomes an excellent investment right now. It’s also a point at which foreclosed homes, which tend to be incredible deals, are still available since fewer are hitting the market every month. Call your local REALTOR or real estate agent and ask them to provide you with homes in the area, and I can bet there will be a few that are not only beautiful, in within your budget.

Informed decisions lead to brighter outcomes.

We like to think that generally things work the way they're intended. When a program is arranged, we assume that the program will operate as it was designed, and if it doesn't work, then it's a failure of the program. However, it appears that this is not always the case, at least, not when it comes to the housing programs.

A federal investigation is being called for in order to see if lenders have actually been attempting to modify loans in accordance with programs such as HAMP or if they have been willfully and purposely preventing such modifications from taking place. Honestly, the answer is most likely a combination of the two. Here in Orlando, FL, we are one of 23 states that three of those lenders have suspended foreclosures in in order to investigate their own practices in advance of federal scrutiny.

Preliminary investigations from the lenders themselves seem to be pointing toward a lazy employee base that would rather sign off on a foreclosure without reading it instead of actually studying the documentation to see if a modification would be possible or even advisable. However, this doesn't explain the "clear pattern of misconduct" that Congress is seeing based on reports from consumers who find it difficult to get a response, have important documents misplaced, and are misled on practices and procedures that often result in a foreclosure.

What this ultimately means is that we might actually see a change in the housing market. The current and expected flood of REOs onto the market worries a lot of people, and with good reason, but what we're seeing here is that that flood doesn't have to be so large. Rather, there are good reasons for banks to modify loans in such a way that they don't have to keep empty houses on their books and people aren't kicked out of their homes. It opens up the possibility for short sales in several cases should a modification not be possible, and will help stabilize the housing market.

Of course, this relies heavily on the banks playing ball. It's not enough to provide incentives without oversight, so it's important that this investigation demonstrate one way or another whether banks have been avoiding loan modifications and to then proceed from there. In the meantime, while this still feels like holding back the ocean, it might help buy a little more time for home prices to level out and we can start moving back to conventional real estate.

Informed decisions lead to brighter outcomes.

Let’s be honest, nobody likes to hear that more people are getting thrown out of their homes. While foreclosures may actually be down here in Orlando, FL , they’re up to record levels overall. Even Certified Distressed Property Experts don’t always know exactly what to do with so many homes potentially coming onto the market. However, despite the terrible outcome, this is not necessarily a bad thing in the greater scheme.

Think of it like this: banks have been holding off on foreclosing on homes for a while now. The reason why they do this is because once they foreclose on a home, they are required to do one of two things: sell it, or maintain it until it’s sold. As a result, banks will often keep the bad debt on their books and refrain from actually filing for foreclosure for quite some time, often months, when they don’t think they’ll be able to sell the house in an appreciable length of time. Banks are generally unwilling to maintain a property for an extended period. It’s not their job, it’s not what they’re good at, and it costs even more money than they are already losing due to the foreclosure.

Taking that into account and extrapolating further from it, we can infer that if the banks are foreclosing on more properties than before, they are confident that they will be able to sell them quickly without having to pay for any necessary utilities, keep up with the lawn, address bug or structural issues, and all of the tiny things that go into home ownership. An increase in foreclosures is a good sign, even if it isn’t a good thing for those who are unfortunate enough to lose their homes.

In Orlando, despite a lower foreclosure rate, there are still a number of bank-owned homes that real estate agents have been working to get in the hands of new owners. The market is far from being entirely recovered, but even with a wave of new foreclosed homes going on the market, we can see signs of recovery. The fact of the matter is, this will be a slow process, and one that will include several painful steps like this. In the same way that a doctor often has to break a bone in order to re-set it correctly, there will be an uptick in foreclosures before the market settles out again and “conventional” real estate once again becomes, well, conventional.

Informed decisions lead to brighter outcomes.