Florida's latest attraction is bringing in bargain hunters by the busload

A foreclosure sign in front of a home in Florida. Photograph: Joe Raedle/Getty Images

Buyers hope to profit from the sub-prime shadow across the Sunshine State

Richard Luscombe in Miami The Guardian, Saturday March 29 2008

It's breakfast time in Orlando and thousands of people are clambering aboard tour buses all over the city ready for fun in the Florida sunshine. One group, however, won't be following the others to Disney World or the area's many other theme park attractions. They'll be taking a shopping trip in the company of estate agents and mortgage brokers, hoping to find a bargain among a selection of repossessed and run-down homes.

The growing popularity of the six-hour "foreclosure express" tour is one symptom of the worst housing crisis to afflict the Sunshine State in recent years, a slump set off by the sub-prime mortgage crisis that has sent repossessions soaring and prices into freefall.

The bus follows a pre-determined route through residential neighborhoods and stops at up to a dozen empty houses already repossessed by lenders. The passengers disembark and size up the premises as they decide whether to offer an asking price often already below the open-market value.

Tickets cost $45 (£22.50), or $65 a couple, including breakfast and lunch at a fast-food restaurant, and demand is so high that another tour is planned for the middle of April.

"It pulls everyone together," said Orlando real estate agent Janice Ziesig, who organized the first tour for 24 would-be buyers last month after adapting a similar concept she saw in California two years ago.

"It's really a rolling classroom with realtors, a lawyer, a property appraiser and a mortgage broker aboard with the buyers and investors. People can get a good idea of what's available."

In many parts of southern and central Florida, especially Orlando and Kissimmee, where most of the state's half-million Britons with second homes or rental or retirement properties are based, there is plenty available.

Recent figures from realtytrac.com showed 279,325 homes have been repossessed in Florida since January last year, making it second to California, where there were 481,392 foreclosures, among the worst-affected states.

The news for those wanting to sell their homes, particularly in Florida's larger metropolitan areas, is almost as bleak. February sales of existing homes were down 25% on a year ago, at only 8,310 statewide, according to the Florida Association of Realtors.

Three-bedroom houses in Kissimmee that sold for $240,000 a year ago can now be snapped up for $198,000, a 17.5% decrease. And prices in Miami, which were rising by more than 20% annually as recently as 2005, showed a 19.3% decline from a year ago, the biggest drop in the US alongside Las Vegas, according to the Standard & Poor's/Case-Shiller home price index.

Miami advice

"When the pendulum swings so far to the right, it has to swing that much more to the left to even things out again," said Kimberly Kirschner, chair of the Realtor Association of Greater Miami and the Beaches. "Prices went much higher than they were expected to, and even though the drop is significant they're getting back close to normal."

Even so, she says, houses that would normally take six months to sell can remain on the market for up to a year and a half.

Other industry experts blame greedy developers for fuelling the slump. Giant tower blocks of waterfront apartments sprang up everywhere, some dwarfing the classic lower-rise buildings of Miami Beach's picturesque Art Deco area, and many were left unsold or half-built when the collapse came.

"The builders just jumped right in when the condos were in demand and selling fast," said Martha Bullman, chief executive of the Realtor Association of Miami-Dade County. "But it takes a lot of time to build condominiums. By the time they got them finished, the boom was over. There were hundreds and hundreds of gorgeous apartments in spectacular buildings but the buyers didn't come."

Florida keys

Now, to make their properties stand out among the glut in a stagnant market, developers are slashing prices and offering unprecedented incentives. "They're throwing in big-screen TVs, country club fees, whatever they can do to get a deal done," said Bob Hudgens, treasurer of the Florida Association of Realtors. "What we are seeing is sellers being realistic after the speculation that fuelled the incredible appreciations in 2004 and 2005. Back then people weren't in the market for the long term - it was get in, get out and make a quick buck."

Kirschner agrees that parts of the Miami housing market are already on the road to recovery, aided by overseas buyers taking advantage of the weak US dollar. "Miami is a mega-market," she said. "We have tourism, beautiful beaches, sunshine, clean air and water, great healthcare, good universities and a lot of other things that feed our market. Add to that the number of baby-boomers entering retirement and it's sure to rise."

Britons who purchased Florida property at the peak of the market should not panic. "Most people bought as a mid- to-long-term investment, to live in a property, have it as a second home or as a retirement fund," said Lee Weaver, director of the British Homes Group in Kissimmee. "Unless they really have to sell, the advice is 100% to sit tight."

Weaver, who has 14 years' experience selling properties to Britons, says he has seen similar boom-to-bust cycles but that the underlying trend has always been upwards.

"A house bought for say $169,000 between 2000 and mid-2004, which might have peaked at $307,000 two years ago, would still be worth about $240,000 now. Property here is still a sound investment."

Home pages

The housing squeeze has led to a growth industry in foreclosure websites, which collate details of repossessed homes from mortgage lenders.

Among the most popular are realtytrac.com, which charge an average of $10 a week (£5) for unlimited searches of a nationwide database and a regular email.

Critics point out the information can be obtained free and that many of the best deals have been cherry-picked by those in the know. Other websites have been promising they can save homes threatened by repossession. Bill McCollum, the Florida attorney general, filed a lawsuit this week against three companies accused of deceiving homeowners into signing over their properties.

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