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Since Florida's housing market crashed nearly a decade ago, a wave of investors offering cash to flip or rent properties has helped restore market values. Now, some homeowners who suffered foreclosure but are ready again to qualify are being priced out while rental prices rise, adding to concerns about another housing bubble. Economics correspondent Paul Solman reports.
Home prices continued their climb back during the past year, even in some of the cities that took the hardest hits during the housing crash.
But economics correspondent Paul Solman found there's a much more complicated picture behind the numbers.
Here's his story, part of our ongoing reporting Making Sense, which airs every Thursday on the NewsHour.
In Fort Myers, Florida, realtor Marc Joseph's welcome bus tour, an overview of the local housing market every Wednesday morning. And shades of the last real estate boom here, things are heating up.
MARC JOSEPH, Founder, Marc Joseph Realty:
The time to buy is now because inventory is tightening up.
Of course, in real estate-speak, now is always the time to buy.
If you're questioning if it's the right time to buy, it is definitely the right time to buy.
That was Marc Joseph five years ago, when we first met him, on what he then called Foreclosure Tours R Us, taking rubbernecking retirees around the wreckage of Southwest Florida's spectacular real estate crash.
December of 2005, up here, we hit $322,000 as the average median sales price. Since December '05, it came straight down. For the entire last year, we have been hovering at a leveling off of between $85,000 and $90,000 over the entire last year.
That was spring 2010, 24,000 foreclosure cases then backlogged in the county court. Too bad we didn't buy, because five years later, the median sales price has more than doubled, to nearly $200,000.
But Joseph's job is to move the product.
It's location, it's the timing, and it's the price.
Like this bank-owned foreclosure, last sold for $218,000 in 2005, still 50 percent off today.
This is concrete block. I cannot reproduce this for $109,000.
Or this one, last sold for $246,000 in 2005.
It's 32 cents on the last sales price because I'm only asking $77,000. So when somebody says, are there deals still out there, this is a deal. They're paying $85,000 for vacant lots in this neighborhood to put up homes.
Small wonder, says Joseph, that investors large and small are now jumping in, buying houses to rent out, or renovate for resale.
People are taking money out of their retirement plans, and they're making a move. I'm seeing it every day.
Jim Gandhi, down from Toronto, was primed to pounce.
JIM GANDHI, Toronto:
We're used to $300 a square foot. When we look at something below $100 a square foot, I mean, it's mind-boggling.
Debbie Abdale hails from Buffalo, New York.
You're going to make a lot more money doing this than leaving your money in stocks or bonds or annuities.
If you have cash, you are king right now.
In fact, cash bidding wars are erupting.
Cash. Everybody's on the same page now. Please watch your step getting off.
So, guys, what you have is a two-bedroom, one-bath, $101,000.
How much can you rent this out for?
This is $900, $950 to $1,000. You may even get $1,200 because of the desirability of where you're at.
This is going to seem like I'm just your straight man or something, but why wouldn't anybody do that?
That's what I ask myself every day.
CHRIS TAMBURELLO, Boston:
Because it comes with the couch.
Younger Gen Xers and older millennials may recognize the one celebrity on the bus, Chris Tamburello, C.T., of MTV's "Real World" and other reality shows. What was he doing here?
I'm interested in buying a few of those rentals on the lower end and finding me a fixer-upper to live in, and just kind of making my little castle, you know, my little piece of paradise.
There were fixed-up fixer-uppers on the bus tour, two former foreclosures already being flipped. This one's now on the market for $279,000, this one for $399,000, higher prices that demand higher rents to justify as investments.
But, says foreclosure expert Daren Blomquist, the renters are plentiful.
DAREN BLOMQUIST, Vice President, RealtyTrac:
These are displaced homeowners who still often need a place to live, but they can't qualify to buy, and so for now they are renters.
People like myself that are still trying to get their credit back in shape.
We met Laura Negron in 2010, translating for Marc Joseph in a cash-for-keys transaction, a sort of voluntary eviction.
It's kind of intimidating and scary that someone would just offer you $1,500 to get out of your house. It hits home.
It hit home because Negron herself was in default on her mortgage, hadn't made a payment in nearly a year.
My husband was out of work for eight months.
It's been hard. I'm sorry.
Today, Negron still works for Marc Joseph, has been promoted to real estate agent.
We had to short-sale our house. We did a bankruptcy.
And are you going to buy in the next year or two?
Absolutely. Can't wait.
Boomerang buyers like Laura Negron are further stoking the market, says Daren Blomquist.
We are seeing a first wave of buyers who lost their homes to foreclosure now qualifying and being able to purchase again. But the irony is that, in some markets, they may have been priced out because of the big investors who've come into those markets and propped up prices.
Very big investors.
We have large hedge funds in our area buying up mass amounts of houses, renting them out, and then they take them in big pools and they sell them up to the New York Stock Exchange, to the REITs, the real estate investment trusts.
What Joseph senses is, to put it bluntly, another bubble in the making.
To go from $85,000 to $200,000 in five years? My fear is the people that are in those homes, if they don't make their rent payments…
See you later.
We have a lot of see-you-laters.
And a lot of investors losing a lot money.
Daren Blomquist isn't worried yet.
But if the momentum can't be stopped in terms of that home price appreciation of 10, 20, 30 percent a year, that's where we're going to very quickly get into that danger zone for a housing bubble. And, unfortunately, human nature is such that a lot of times that momentum carries farther than it should.
Show of hands. How many people are investors here, please?
And even if momentum isn't a problem, there could be another glut if Florida's so-called shadow inventory suddenly hits the market.
You have to go out and check a property to see if it's vacant or if it's occupied.
Florida leads the nation in zombie foreclosures, where the owner can't be found, may even have died. It leads in actual foreclosures, 300,000 cases pending, 20,000 new cases a month.
Another 500,000 Florida homeowners are at least three months behind in their payments, technically delinquent. And hundreds of thousands of modified mortgages and home equity loans are about to balloon in payments. Is Marc Joseph predicting another crash? He wouldn't dare. And neither would we. But loans requiring only 3 percent down are now back, he says, and:
It's a big scary thing, because we are getting almost to where we were in 2005 at $317,000. And if we get there, how does that schoolteacher, how does that fireman, how does that police officer, how do they buy a house when it's $317,000?
Oh, we're going to get creative. We're going to give them zero down, no income verification loans. And here we go again. No, we can't do that.
This is PBS NewsHour economics correspondent Paul Solman reporting from one of the disaster areas of the last crash, Fort Myers, Florida.
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