South Florida Speculators Outbid Average Homebuyers

You'd think that now would be the time to pick up a bargain home in South Florida. After all, there are more than 96,000 foreclosures to choose from, and that's just from the first six months of 2010, according to the Miami Herald: "Distressed properties are still dominating the market, with more than half of all homes and condos sold last month at some stage in the foreclosure process."

Floridians with modest nest eggs who were priced out of home ownership during the boom should be able to get their hands on a sweet little slice of subdivision now that prices have plummeted. Right?

Not exactly. It turns out that investors are opening their purse strings, too, beating regular buyers to the punch.
"Cash-happy investors have been scooping up these bargain basement deals at a fast clip, often before middle-income buyers can get financing," according to the Herald. The nest egg can't compare to the deep pockets of developers, speculators and investors who can self-finance, especially in the wary world of mortgage lending. And foreclosed homes tend to sell for 25 less than their non-foreclosed counterparts, hard for the cash-in-hand to resist.

While it's bad news for middle class Americans who thought they'd finally get a piece of the real estate pie, it's decent news for the Florida economy. Median sales prices in Miami-Dade county are still down from a year ago -- 4 percent lower -- but they're 3.4 percent higher than they were in May. Sales are up from a year ago, and single-family home prices are slightly higher.

The real mystery is what the investors will do with the homes. Buyers tend to be more patient, willing to wait decades to see their home values appreciate, whereas investors prefer to see a quick return on investment.

Will the homes sit empty, waiting for a new round of bank-approved buyers? Or will those middle class buyers who missed out on the first round be willing to pony up a little more for a property they missed out on initially?

We'll have to tune in next quarter to see.

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