Foreign investors flush with cash stabilize Fla. home prices, hurt mortgage lending

Some signs of stabilization in Florida home prices surfaced last month as foreign investors flooded the market with cash to buy properties, a new report from FBR Capital Markets said. Analysts with FBR believe an influx of foreign money could have the dual effect of raising confidence in the banks’ reserve levels, while undermining growth on the financing side of the mortgage system. “We believe that the book values of banks holding loans in Florida are probably stable, but cash buyers are draining loans from the banking system, which is likely to result in shrinking balance sheets and negative loan growth,” FBR Capital analysts said. One reason for the recent price stabilization is the high demand for properties priced lower than $150,000, according to FBR. “Homes below the $150,000 pricing point are easy to rent at prices that make economic sense, while homes above $150,000 are less likely to rent at profitable prices,” FBR Capital said. While the lower end of the market appears to be a draw for investors, FBR did note some activity for homes priced higher than $150,000 as well. Although home prices took a promising turn recently, analysts still fret over the shadow inventory of foreclosure properties. Once the inventory is unleashed on the market, it could pushing prices lower, FBR Capital said. Write to: Kerri Panchuk.