In looking at how Florida foreclosures impact Sunshine State economics and real estate behaviors, the focus among many state leaders and economists has been on the rate of foreclosure. Lately, Florida has seen this rate rise appreciably, and also has seen its affect on other parts of the broader economy. In some cases, it’s been marked.
For quite a few years, Florida has been a real estate market highly appreciative and supportive of speculative investment and home buying. Even though Florida has put many more controls on its real estate markets that helped lose a reputation a being a place where people could sell swampland to unsuspecting buyers, it’s still the case that a bit of irrationality exists within the Florida market in general.
Fortunately for most, there are many more controls on land and property speculation in Florida than once existed, and it’s a good thing that there are, because the current steep decline in home values would have caused a general conflagration in real estate if there wasn’t. There are a number of quality federal programs aimed at helping prevent foreclosures in most markets in the state, as a matter of fact.
This should be well-appreciated, because when property and home values decline steeply they generally tend to affect much more of the economy that might be thought. With fewer homes being occupied and therefore generating property taxes and other economic activity from the people living within them, communities have less revenues to devote to schools and other services, for one.
And with less money coming in, businesses inevitably make rational decisions about their own expenditures, including human resource costs. In other words, a cycle begins to occur in which less money making its way into a wide range of pockets with even less money leaving those pockets and making its way back out into the economy.
How a community or a state can control this cycle in order to prevent it from spinning completely out of control and bringing down the whole house is a question that’s under vigorous dispute at present. Some economists advocate for allowing the so-called “free markets” to winnow out the weak while others advocate for a vigorous government response in order to get a handle on the property bust.
It still remains to be seen which way Florida will end up going, if it goes in any specific direction at all. The rate of FL foreclosures and how that rate affects economic activity is under attack from a number of different directions right now, and it may be that for Florida this is actually the best way to go about solving the issue on a rational basis.
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