What the housing turnaround will look like
Cape Coral, Fla., not long ago one of the foreclosure capitals of America, is now seeing a rebound as home prices hit once-in-a-generation lows.
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JUST HOW FRENETIC the investment-buying market has become is evident at the Lee County courthouse, part of the Justice Center, a six-story concrete building in downtown Fort Myers. Every day, investors and individuals go through the security-check system and head for the county clerk’s office, where they hope to bid on foreclosures.Skip to next paragraph
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They end up in a room normally used to hold jurors waiting to be called for a trial. Instead, on this day, 60 to 70 people are filling seats to buy a home. Some sit cross-legged on the linoleum floor.
Representatives of banks congregate in one part of the room. They signal to buyers what the minimum bid is they will accept on a property.
One potential buyer, who has a cashier’s check for $5,000 stuffed in his shirt pocket, identifies about 20 professional investors around the room. Most of the other people seem to be retirees, first-time home buyers, or others just trying to acquire a property cheaply.
Even they will need to have their money in order, though: All sales have to be wrapped up by 4 p.m.
In fact, the banks make no secret of it – they prefer the equivalent of bundles of greenbacks. Realtor Marc Joseph, who does the pontoon tours of homes, says he recently sold a house for a bank. Seven bids came in, three of them for cash.
“The cash deals were the only ones we talked about,” he says.
Through May, 66 percent of the properties sold in Lee County were owned by banks and 64 percent of those were cash deals.
The professionals who come to the auctions are well prepared. Michael Cuevas of Sandbill Realty had visited several of the 132 properties being sold on this day and knew exactly how much work each would take to be ready to resell. He wasn’t buying the homes with his own money. His company represented an investor, Scott Logue.
Mr. Cuevas ended up purchasing one property, for $100,000. The 1,800-sq.-foot home, which sits at the junction of two canals, carried a delinquent mortgage of $442,000. Sandbill plans to install a pool and fix up the property. “It will probably cost us about $45,000 to get it ready for the market,” says Cuevas. “We hope to sell it for $200,000, which is not a bad profit for 60 to 90 days.”
Sandbill has purchased 11 homes so far at courthouse auctions, plus others directly from the banks. The goal, says Cuevas, is to buy and sell 20 homes a month.
The prospect of such quick profits is increasingly attracting buyers from across the country. One of Mr. Joseph’s clients is from Burlington, Vt. “He just sold his company for $1.2 billion,” he says. “He gave $10 million to each of his sons to invest, and they are buying properties. Cash is king.”
Cuevas, in fact, says Sandbill is talking to an investor about taking the concept national – getting more deep-pocketed people from around the nation to invest in Florida properties as well as foreclosures elsewhere.
“If you can get houses at these prices, it’s a no-brainer,” he says.
NONE OF THIS FRENETIC buying is to suggest that Florida has now fully recovered from one of the worst housing slumps since the Depression. Far from it. The state remains one of the hardest-hit in the nation, which is why any signs of a turnaround, however nascent, are so important.
Broward County, which includes Fort Lauderdale, has seen 40,000 foreclosures in the first five months of this year – the same total as all of last year. Some experts speculate that foreclosures there will hit 80,000 by the end of the year. Three years ago, Broward had 5,000.