A question on the minds of many economists is “Are Florida foreclosures presenting a crisis for Florida lately?” For sure, most economists would say yes, though they’re really not sure how hard these foreclosures are going to impact the Sunshine State, which has been a recipient of much in the way of booming real estate and employment for years, though both those markets have gone south lately.
Florida has always been known as a state that can adapt and improvise with the best of them and which benefits from a population base that’s open to entrepreneurial risks, especially in real estate. Unfortunately, land and property speculation is suffering because much of the property inventory in Florida has lost significant value, much as land or property around the country has.
This has led to a condition where property foreclosures have increased noticeably over the last year or so, and certainly more than they did back when most of the rest of the country began to be hit by steep drops in property values. California led the way, followed by New York City (Manhattan, actually), Las Vegas and other once-hot markets. All saw significant drops in the value of property. And their owners weren’t amused, it must be said.
Unfortunately, many home buyers over the last decade or so engaged in at least minor-league speculation, leveraging themselves to get into homes that they actually couldn’t afford. They did this because they assumed that home values would continue to increase and that they’d be able to get out of their homes with a nice profit before an increase in their mortgage payments occurred.
Banks and other financial lenders backed these buyers because they — just like the buyers — figured that home values really had no upper limit. Everybody thought that many of these homes would continue climbing steadily upwards and that the supply of buyers would continue on into infinity. Everybody now sees the fallacy of that belief, and many homes are listing for sale for much less than is owed on them.
For an investor these days with a ready supply of cash or good financial backing, there are a number of opportunities in such a market. What will be required, though, is a fair amount of patience that many investors in the past — when it came to Florida real estate — hadn’t been able to demonstrate adequately enough. Whether they can do that these days remains to be seen.
Many experts looking at Florida’s vast real estate market believe that it will be several years or more before any significant increases in property values will lead to a restoration of old home value levels. This means, unfortunately, that Florida foreclosures may continue to be higher than they once were in the past. For an investor, understand that buying and selling will still occur, though adjusting to the new market reality will take some work.
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