Many people are likening the devastation caused by the high foreclosure rate in Homestead, Florida to that caused by Hurricane Andrew.  In 1992 Hurricane Andrew waged war on South Florida leveling everything in its destructive path.  The Hurricane was a Category 5 causing 65 deaths and over $26.6 billion in damage.  Today, the residents of Homestead look around them and see boarded up and abandoned houses, half-built concrete shells unfinished by developers, increasing neighborhood crime and squatters illegally inhabiting empty buildings.  Just like in 1992 the suffering is widespread and locals wonder when things will start to improve.

Currently about 25% of homes in Homestead are in a stage of the foreclosure process with more than 2,257 properties going into foreclosure since October 2008.  Mayor Lynda Bell says she started to have concerns about the property market back in 2007 when the median income in Homestead was around $27,000, but the median home price was more than $300,000. She blames speculators, “Speculators drove up the housing market”.

What’s next?

$3 million in federal funding has been ear-marked for the city of Homestead and its 57,000 inhabitants to buy and rehabilitate rental properties for low-income families, develop new projects and demolish damaged houses and eye-sores.  These funds are part of an overall package of more than $161 million granted to South Florida cities and counties in an attempt to stabilize falling home values and decay in neighborhoods hardest hit by the real estate downturn.

To decide how much money communities get, the U.S. Department of Housing and Urban Development used a formula accounting for the number of subprime loans, bank-owned homes and defaults. How they use the money is largely up to them, provided they create more affordable housing for low- to middle-income families.

The question of whether the federal funding scheme will be successful is still an unknown.  The grants give rise to new challenges for cities such as owning and managing property.  Cities are also responsible for the property’s upkeep, property taxes and insurance which will take more administration support which will have long-term costs associated with it. So cities really need to look at that federal funding and earmark some to take care of those support costs into the future.

Click Homestead Foreclosures for more information.