Monday, June 01, 2009

In Florida, what if a real hurricane hits our ghost suburbs? by gimleteye

Miami-based AP reporter Tamara Lush, who wrote the AP story on foreclosures in Homestead, just printed another related story, "Foreclosed homes a problem during hurricane season". "Lehigh Acres and other communities at the epicenter of the nation's housing crisis are coming to realize that this year's hurricane season, beginning June 1, represents yet another pitfall. Hurricanes could make hazards of thousands of foreclosed-upon houses, and their diminished value could decrease even more." According to, there are 48917 residential properties for sale in Miami-Dade County. Of these 41494, or 85%, are in process of foreclosure. What happens and who pays if a moderately powerful hurricane strikes Miami-Dade? Let's do some more arithmetic.

Of course, if even a moderate hurricane hits South Florida, foreclosed homes are likely to be no one's immediate priority. That is a big problem.

Any home that is not properly secured could have all kinds of debris scattered around neighborhoods. Who will pay for that clean up? And how demoralizing will it be, after the storm, for neighborhoods to be surrounded by destroyed foreclosures? Once a hurricane passes, it will be imperative to make sure that minimal repairs are done to foreclosed properties to make them weather tight. Otherwise, water damage and mold could rapidly destroy remnant value and further depress neighborhood values. Another issue to consider: what happens to foreclosed condominiums breached by a hurricane, where water damage could extend directly into adjacent properties.

In a recent Miami Herald report, "... nearly nine out of every 10 sales in Homestead are distressed -- either banks selling foreclosed properties at rock-bottom prices or short sales, in which the lender allows the home to be sold for less than is owed on the mortgage. For South Florida as a whole, the number is 60 percent. To some housing experts, the numbers indicate a shift. ''We are seeing the limits of sprawl,'' said real estate analyst Michael Cannon." (Real estate bust turns South Dade suburbs into modern ghost towns, May 23, 2009)

And if a hurricane hits, we will really see the limits of sprawl.

The AP report notes that preparing foreclosed homes and securing them after the storm appears to be no one's priority. Or, at least, no one is thinking about it. Say a strong hurricane hit Miami-Dade, or even a moderate hurricane with heavy rainfall, breaching 20 percent of foreclosed homes with significant water damage. At an average price of $200,000, the losses would be $1.9 billion. Will the banks pay for the clean-up, or, will taxpayers be required to step up to help Florida?

If the county were required to "button up" foreclosed properties, how much would that cost? You can't secure a roof, shutter a house, and leave damaged drywall and furnishings inside. If the clean up cost were $20,000 per foreclosed house, the cost to Miami-Dade if a fifth of foreclosed houses were damaged enough to require work, would be $192 million.

I am not sure that anyone in local or state government has taken a close look at the issue, raised by the AP report. But with the state budget and local municipalities fighting serious deficits and scrounging for revenue, (and building a new professional baseball stadium in the case of Miami), it would be nice to know what contingency planning is in place. And if you live in a condominium, guess who will be paying a special assessment to close up foreclosed condos in your building, damaged by the storm? Foreclosures in Florida have already triggered tens of thousands of lawsuits in Florida (I couldn't find an exact number, but that would be an interesting story to report): imagine what will blow into county courts after a hurricane.

Pray that global warming will reduce subtropical hurricane activity in the Atlantic, not intensify it.

Foreclosed homes a problem during hurricane season
The Associated Press
Sunday, May 31, 2009 11:17 AM

LEHIGH ACRES, Fla. -- Mike Manikchand points toward his neighbors _ a half-dozen empty, foreclosed-upon homes, sitting on weed-strewn yards _ and he wonders: What will happen if a hurricane slams into southwest Florida this year?

His simple answer: "A lot of these places will get destroyed."

Unoccupied, these homes would be defenseless in a storm; there will be no one to put up shutters, batten down garage doors and otherwise secure homes. But that's not all. Nearby homes and their residents would also be at risk from wind-propelled debris.

Lehigh Acres and other communities at the epicenter of the nation's housing crisis are coming to realize that this year's hurricane season, beginning June 1, represents yet another pitfall. Hurricanes could make hazards of thousands of foreclosed-upon houses, and their diminished value could decrease even more.

"Here's your choice," said Julie Rochman, president of the Tampa-based Institute for Business and Home Safety. "Spend a little bit of time and money to secure the properties to withstand wind and water or not do the right thing and have the homes become damaged and are valued less."

The Associated Press Economic Stress Index _ a month-by-month analysis of foreclosure, bankruptcy and unemployment rates in more than 3,000 U.S. counties _ confirms that some of the areas most likely to be stuck by a hurricane are suffering the most in this recession.

In March, there were 281,691 homes in foreclosure in Florida and coastal counties in Alabama, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

Lee County, where Manikchand lives, is among the hardest-hit counties in the country. A 22-year-old pharmacy student, he took advantage of a dismal housing market and bought a foreclosed duplex for $36,000.

In coming months, he and millions of others along the Atlantic and Gulf coasts will dutifully track tropical weather forecasts and stockpile batteries, flashlights and tins of tuna, hoping that hurricanes blow harmlessly out to sea.

But who will secure all the foreclosed homes if a storm does approach? No one really knows.

In some cases, a property management company hired by the bank could do the work. Or it could be a real estate agent, a homeowners' association or even resourceful neighbors who clear debris from yards and board windows. Yet no state laws mandate who prepares buildings before a hurricane; even officials from the Florida Division of Emergency Management say that securing foreclosures isn't a concern.

"It's not an aspect that we really deal with," said John Cherry, the agency's external affairs director. "Our No. 1 concern is life safety."

Quick evacuation will be the priority, not securing vacant homes, if a major storm looms, others say. But shutterless homes can be a major safety hazard in a hurricane. And a region full of destroyed or heavily damaged homes would depress real estate values even further.

National Oceanic and Atmospheric Administration forecasters have projected a near normal year for hurricanes. They predicted nine to 14 named tropical storms, including four to seven hurricanes. One to three of the hurricanes are expected to be major.

Randall Webster, director of the Horry County Emergency Management Department in South Carolina, said if a storm does hit, properties in foreclosure could slow recovery if the county can't immediately find the owner, "especially if it were in a neighborhood where others around it were taking care of business and this one gets in rough shape," he said.

The issue of who cares for vacant homes during a time of crisis seems simple: The legal owner is responsible for securing the property. But communities are already struggling to get banks to mow lawns, much less put up hurricane shutters _ if they weren't swiped from the foreclosed home, along with appliances, copper wiring and air conditioners.

If the bank hasn't yet taken the title of a home, the property is in a kind of limbo, and local officials or homeowners associations may have no legal right to trespass and secure it. And many hard-hit counties don't have the money or manpower to do it.

"Simple logistics tells me (the banks) don't have the staff to follow up," said Kenneth Wilkinson, property appraiser for Lee County, which in March had the third-highest foreclosure rate in the United States, after California's Merced County and Nevada's Clark County.

There are some places that are trying to board up windows and batten down garage doors, although largely to stave off crime. Wellington, in Palm Beach County, has gone to court to receive the legal OK to board up homes. And in Cape Coral, city officials have passed an ordinance that requires the owner of a foreclosed home to pay $150 to register the address and provide a contact number for the person who will maintain the property.

Palm Beach County Commissioner Burt Aaronson has asked county attorneys to research whether it is legal to board up empty homes.

"If we board them up, we're protecting them," Aaronson said. "Hopefully we will be able to keep some of the value up."

Aaronson contends that the banks don't always maintain the homes and doesn't expect that they will in the days before a storm _ and if the county takes over that responsibility, then he wants the banks to pay.

"We want to use the full power we have as a government to levy the greatest fines that we can to penalize banks for not taking care of the properties," he said.

Horry County's Webster says there might be another way for public officials to take matters into their own hands.

"If it became deemed a public health issue or public safety hazard, the county would have some legal recourse to secure it in terms of making it off limits or safer," said Webster, whose county includes Myrtle Beach and has seen foreclosures rise over the past year.

Some banks say that they have a plan for hurricanes; JP Morgan Chase says it will use property management companies and bank field employees to make sure properties are storm-ready. And if the homes are damaged or destroyed during a storm, said Michael Fusco, a spokesman for JP Morgan Chase, the bank "acts just like a homeowner" and will file an insurance claim.

Debora Blume, a spokeswoman for Wells Fargo Bank, said her company hires local real estate agents who have been assigned to market bank-owned properties to secure homes against hurricane damage.

But one real estate agent in the Fort Myers area said the process of putting the maintenance work out to bid and then getting approval from the bank that owns the property might not be workable as a storm bears down.

"During a hurricane, we need to get out of town, not wait for approval for funding to secure a building," said Suzanne Sherer, president of the Realtors Association of Greater Fort Myers and the Beaches. "I won't have time to get a bid from a handyman."

In Lee County, metal hurricane shutters cover a few new, unsold homes. Many empty homes have swing sets in the yard, garbage cans strewn in the driveway and loose roof tiles, all of which could become projectiles during a storm.

Sherer said it would be "devastating" if a powerful storm similar to Hurricane Charley, which hit nearby Charlotte County in 2004, struck Lee County.

In Galveston, Texas, where more than 17,000 home were damaged by Hurricane Ike last year, there are still many empty homes _ but not because of foreclosures. The properties were damaged during the storm and owners don't have the money to rebuild.

"These homeowners have the biggest hurdles as far as getting back into their homes," City spokeswoman Alicia Cahill said. "A lot of the homes that were affected were lower income to moderate income families who didn't have a huge insurance policy or a lot of extra cash lying around to make repairs."

Tybee, Ga., mayor Jason Buelterman says officials there haven't considered potential problems with foreclosures during storm season. Their first priority, he said, is assuring the safety of island residents and tourists if a hurricane heads their way. Dealing with foreclosed homes will be an afterthought.

Yet residents throughout the hurricane zone are worried, especially those who live in foreclosure-dotted neighborhoods. Armando Gonzalez, 72, retired from Miami to Lehigh Acres five years ago.

He and his wife moved to a small home a few blocks from the city center, in a quiet yet thriving neighborhood. But in the last two years, his neighbors left, either because of foreclosure or job loss. Now he's the only one on his block; the home next to him has a broken window and the one across the street is only half-built.

When asked what would happen to all the nearby, dilapidated homes if a hurricane hit, Gonzalez shrugged and grinned.

"I can't do anything," he said. "Maybe I'll pray. God will save me."


Associated Press writers Kelli Kennedy in Miami, Michael Schneider in Orlando, Russ Bynum in Tybee Island, Ga., Juan A. Lozano in Galveston and Bruce Smith in Myrtle Beach, S.C. contributed to this report.

© 2009 The Associated Press
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Lee Allen said...

I know that the County has an ordinance that requires banks to secure homes (and that generally means installing shutters or boarding up windows) when they file a lis pendens. Don't think it is being enforced yet.

youbetcha' said...

Go back to the blog post where the homeowners associations are not requiring insurance on the Townhomes. (March 14, 2009)

And while we are reflecting on the subject of insurance, what about the condos that are going bankrupt?

Can you remember what Downtown Miami looked like after Katrina (or the series of her cousins) missed it? All the plywood patches on the buidlings and broken glass everywhere?

What will it look like if they get whacked with a direct hit? We will be looking at an awful lot of clean slabs 10 stories up!

My daughter lived on a 30 story building on Brickell. It horrified me because the sliding doors had no shutters. The sliding doors whistled when a heavy thunder storm approached because of the wind coming in. Cruddy building. New construction.

What will become of those places and the people who live there without homeowners or renters and windstorm insurances?

I know someone whose Condo faced the bay during Andrew; they will not consider staying there again during a storm.

Going vertically on those high-rises, each 30 foot (give or take a bit) of the building is the equivalent of a one category rise in a storm's intensity. Scary isn't it?

Anonymous said...

The news Wednesday reported foreclosed homes as a potential evacuation site in the event of a damaging hurricane.

youbetcha' said...

Do they really think the foreclosed homes will be available?

Who is going to handle the price gouging?

After hurricane Andrew people were buying properties up to live in. They were in Broward and Monroe buying houses because it was going to take so long to rebuild the damaged one. So, buyers will be competing with FEMA dollars and it will drive the real estate market up again, right when it would be be better to keep it stable.