Housing market strong but some sink deeper into debt

Even as overall home prices continue to rise nationally and in Southwest Florida, a stubborn problem still lingers from the crash: The most mortgage-ridden houses and condominiums are quietly sinking deeper into debt.

That’s a problem because it raises the specter of a new wave of foreclosures and abandoned homes if banks or owners give up on getting in the black anytime soon, housing authorities say.

“As far as the real estate market goes, if you ask anybody on the street, they say, ‘The real estate market’s good,’” said Sean Galaris, president of LM Funding, a Tampa-based financial service company that manages the receivables of community associations.

But a lot of homes — especially in the lower price range — exist in a kind of no man’s land, occupied by people who can’t pay their mortgages or sell for enough to clear their debts, he said.

According to real estate marketplace Zillow.com, 18.2 percent of the mortgages in the Cape Coral-Fort Myers area were underwater in the fourth quarter of 2014 — down from 19.4 percent in the third quarter and 23.8 percent in the fourth quarter of 2013.

In the Naples-Immokalee area, 14.8 percent were underwater in the fourth quarter of 2014, compared to 16.1 percent in the third quarter and 19.7 percent in the fourth quarter of 20213.

But those numbers are misleading, said Jack McCabe, a Deerfield Beach-based real estate consultant who tracks the markets here and around the state.

“There are still some great pockets of distress that are going to be difficult for people to go up in value,” he said. “I think we’re still going to see a string of short sales and foreclosures that is going to continue for a couple of years.”

Not all the distressed homes are in the low end of the market.

Ken and Lois Rankin, for example, have watched for years the slow decay of the house across the canal from their home in southwest Cape Coral.

Now they’re trying to sell their house, listed at $619,000.

But they’re getting no bites, said their real estate agent, Shelley Lachmann of Royal Shell Real Estate.

A typical response from a prospective buyer’s agent, she said, is “My client doesn’t want to look at the garbage across the canal from you.”

The biggest eyesore, she said, are three battered boats, one of them partly sunken, that are parked in the canal.

“This is supposedly a waterfront community, and this is my front yard,” Ken Rankin said in exasperation, waving his hand at the battered boats parked in front of the house, which is owned by the estate of Andreas Plattner.

The estate, which could not be reached for comment, hasn’t paid Lee County property taxes for two years and owes $17,885, according to county tax collector online records.

Not every distressed home is so obvious, Galaris said — often neighbors and developers of nearby houses will do the maintenance to keep appearances up. “The world doesn’t know about those houses.”

McCabe said that with a strong rental market, low interest rates and a lot of buyers from Europe and South America, even low-end home prices in Southwest Florida and the Miami area have been relatively stable.

Those trends won’t last forever, he said, and huge numbers of houses in those markets are owned by hedge funds or individual investors who bought low and then rented them out with the intention to sell eventually.

Already, McCabe said, some hedge funds are quietly putting a few homes up for sale to test the market.

If large numbers of rented homes are dumped on the market, he said, prices will fall and distressed homes will sink even further. “It may be a decade or more before they’re in the black.”

Connect with this reporter: @DickHogan (Twitter).