The vaunted Sunshine State of Florida once seemed immune to most of the mundane crises that have affected much of the rest of the country — when it came to real estate, especially — but that no longer seems the case these days. Florida and Florida foreclosures as an existential crisis for the state (which is suffering from unemployment and a steady erosion in property values of late) may just be a real and hard-hitting fact.
Of course, Florida has always been a very resilient and adaptable state, with a citizenry that’s basically entrepreneurial at heart and willing to risk much on the idea that land and homes will always be a valued commodity. The problem at present isn’t that those two elements (land and property) aren’t valued, though; it’s more that they’re not valued nearly as much as they once were.
This has created a situation where foreclosures on properties have gone up markedly over the last 12 to 18 months, and it looks to be strengthening rather than lessening. Florida, for a time, was able to duck this phenomenon that was first experienced out in California, up in New York city and around Las Vegas. These areas sought huge drops in property values, really hitting their owners hard.
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.
Many banks and other lenders encouraged this practice through “no stated income” loans and the like, and they too also believed that home values had no real upper limit. As long as buyers were willing to buy, they were generally right. Nowadays? Nobody who really understands real estate can believe they fell into this fallacy of belief. Homes now are listing for sometimes less than half what is owed on them.
An investor in this sort of real estate market who has cash backing his or her operations or some sort of access to venture capital can do well, though. What will be needed is a fair amount of patience, and in greater amounts than Florida investors had in the past, to be successful. Whether they can actually demonstrate the patience or not is still a matter up for conjecture, though.
That’s because it’ll most likely be several years before property values return to their pre-drop days. Florida foreclosures have seen the state now have to face a crisis that threatens its economic well being. Fortunately, if property investors act as property investors inevitably do, much in the way of buying and selling of property will resume and the state will continue to be a place where investment money can be improved on by a savvy property investor.
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