The Florida housing market was one of the hardest-hit areas following the real estate bubble burst, but some local areas posted quick and promising recoveries. However, a lingering shadow inventory could put the gains made during recent years at risk.
Nationally, there are a number of different estimates regarding the size of the shadow inventory. Mortgage and property data from JPMorgan Chase estimates there are close to 4.5 million distressed homes and loans in this supply. Meanwhile, Morgan Stanley claims the number is closer to 5.6 million.
Analysts from JPMorgan Chase claim while the national housing inventory may have hit its bottom, the differences seen between local areas in Florida and national averages is still quite significant.
"We are still calling for parts of Florida bottoming by the end of 2013," Chase securities analyst John Sim told HousingWire. "There's quite a bit of disparity."
Meanwhile, the most recent Standard & Poor's/Case-Shiller Home Price Index recently indicated a slight increase in Florida home prices on an annual basis. However, Aristar Funding Group chief investment officer J.T. Smith argues that market fundamentals in the Sunshine State are still off.
Florida recovery at sluggish pace
Even if half a million distressed properties are sold nationally every year, the national housing market bottom won't be reached until at least the latter half of 2014, according to Smith. Florida is expected to follow, but roughly 12 months behind this pace, he said.
"If pricing was bottoming we would see this number begin to move and it hasn't, the only movement has been through modifications, short sales, and foreclosures," he added.
While the state's housing segment remains flat, the rate of mortgage delinquencies nationally on home loans backed by the Federal Housing Administration is on the rise, according to HousingWire. This is the result of many borrowers still saddled with negative equity. At the halfway mark of 2012, there were an estimated 11.4 million borrowers underwater on their home loans.
Since property values plummeted more than 30 percent in some parts of Florida following the housing market collapse, negative equity will continue to plague the local recovery rate for quite some time. However, the recent multibillion-dollar settlement reached the nation's largest mortgage lenders and state attorneys general is expected to help these struggling homeowners.