Are We Headed Back to a Foreclosure Bust in Miami?
From July 2017 to July 2018, the number of home foreclosures in the Miami area grew a stunning 29%, with the rate of foreclosures increasing from month to month in an upward trend that has many homeowners, real estate investors and marketing economists worried. Many people can still recall the dismal bust in foreclosure trends during the recession of 2008, and the recent upward foreclosure trend in Miami has many wondering if we are heading towards another serious foreclosure bust in the future. Let’s take a closer look at the potential causes for these rises in foreclosures, how Miami is faring as part of the overall national trend, and what the future may hold.
Hurricanes or bust?
There is little doubt that Hurricane Irma, which hit Miami last fall, had an impact on the current foreclosure rate. Over 4 million homes were impacted by the hurricane, which caused varying levels of damage to properties, ranging from minor to major damage which could cost anywhere from a few hundred to thousands of dollars to repair.
In areas of people with middle to low level incomes, repairing this type of damage to their homes is often out of their reach, and may be one of the significant reasons why foreclosure rates have only increased over the past 12 months. This is evident even in other cities impacted by hurricanes, as foreclosure rates in these cities historically rise in the next few years after a major storm causes massive property damage.
But is Hurricane Irma solely to blame? Likely not. While the hurricane damage is certainly part of the rise in foreclosures, it is not the sole reason. The percentage of foreclosures is most evident in areas like Miami-Dade, where wages have remained largely the same over the past decade despite serious increases in the cost of living, houses, apartments/condos, and utilities. With rising costs of living in all regards and no pay raises, it is not surprising that homes are being foreclosed on at an increasing rate month after month.
Miami vs. the rest of the nation
Miami is not the only city to be experiencing an increase in foreclosures. Houston, Los Angeles, Austin, San Diego and Detroit are among the cities that reported an increase in their foreclosure rate over the past 12 months.
Despite this, however, the nation is not experiencing an increasing foreclosure rate as a broad trend. Overall, the rate of foreclosures in the United States is down--by .5%, to be exact--which is the lowest national foreclosure rate reported since 2006. According to a 2018 report, about 10.1% of all mortgaged properties in the United States is considered underwater; this is actually an improved rate, as in 2012, this was 29%.
Into the future
It is unlikely that the foreclosure rate in Miami will decrease on its own, especially in cases where the foreclosures are related to living in areas with increased costs of living without an increase in general wages. Hopefully, however, the trend will not result in an foreclosure bust—but a peak that gradually reduces with improved economic fortunes and better predicative real estate trends.