It's still too early to tell for certain, but America's housing boom may be showing signs of slowing down significantly. One indication is that U.S. consumers have been acquiring less debt in recent years and seem to be more nervous about acquiring more debt in the near future, judging by the results of a recent Experian-Gallup Poll.
That debt doesn't include first mortgage debt, which is unavoidable and has continued to increase significantly over the last few years due to rising prices. Some of those price rises have been dramatic, and even startling, such as a doubling of the median price of homes in Los Angeles County in the four-year period between 2002 and 2006. For the first time in history, the median price in LA County rose above the half million dollar mark, hitting $506,000. Although the rises in most areas of the United States have been far less spectacular, the fact remains that most home buyers are paying significantly more for their mortgages than they would have just a few years ago.
The poll, called Experian-Gallup Personal Credit Index survey, indicated that more than 70% of American consumers surveyed thought the country's housing bubble is due to burst within the next year. In an interesting twist, however, more than two-thirds of those same consumers (68%) didn't think the bubble would burst in their own area during that time. Those conflicting survey results are an indication that most Americans are also conflicted about what the future may hold for the country's economy over the next twelve months.
Another sign that American consumers are nervous about an impending housing price collapse could be found in the fact that only 2% of respondents told the Experian-Gallup poll that they planned to tap into the increased value of their homes through home equity loans or lines of credit during the next six months. Another very small percentage (only 2%) said they were planning to refinance their homes during that same time period.
Those figures would seem to indicate that a large number of American homeowners don't believe that now is the time to take on any more debt. But does that mean the overall economy is slowing down and that the home price boom are over? Not necessarily, but it would seem to indicate that American consumer confidence has waned significantly. Either way, it's a safe bet that economists will be keeping a close eye on the market for trends.
In the first few years of the real estate boom in Florida, buyers went crazy at the sight of empty houses and plots for sale. Speculators bought under-construction apartments but after 2005 the frenzy subsided. Price undercutting, falling sales and auctioning of properties were as rampant as defaulting on mortgage payments and foreclosures.
While beaches, amusement parks, casinos, nightclubs in their proximity do help make lucrative sales when it comes to real estate purchases, yet buyers today are exercising more caution. For bargain hunters too, the time is right to cash in on a property and cash out eventually once the market heats up. Discounting is prominent where sellers are desperate to get the property off their hands. Massive price cuts in a bid to lure buyers result.
Southwest Florida witnesses prices for properties on golf courses or in their proximity or even closer to the waterfront steadily rising. Conservative architecture on the other hand is being pressurized and prices elsewhere are tumbling fast. Brokers involved in selling existing properties are competing with those selling newer ones and the situation is getting more difficult for the former who have to compete with upgrades and generous incentives of the latter.
While smaller cities in Florida State are faring better than those cities with not much development, they are being spared the impact of the real estate bust. Florida Keys is one area which is witnessing restrictions in new construction because of a shortfall in land available. Naturally investing in residential real estate has also fallen in response. However, there are adequate brokers willing to bet that buyers will have the purchasing power to invest in a spacious second home between Miami and Florida Keys.
In the soft market, conditions are such that there is no saying what kind of properties will be lapped up and what will remain unsold. Property auctions though allowing the sellers to get some returns on their investment are highly unpredictable. If the piece of real estate is at the lower end of the investment hotspot, there is a chance it will get sold, for a buyer can either rent it out or build on it. Speculating on a bigger property has its risks with no knowing of which way the market may turn.
Seeing this, a question that echoes in many minds is how long will this downturn continue? The higher priced and top of the pick real estate properties are queuing up and by the end of 2008 the numbers will increase. Though the purchasing power of the rich has not been affected there is a limit as to the number of residences even the millionaires will want to invest in, in Florida. So where are the buyers?
Some of the key problems of real estate investing in Florida stem from the high property taxes and home insurance premiums which soar post hurricanes. In the event of these being resolved, Florida's real estate market is all set of witness a second boom. Those of us who have been watching the trends very closely especially in Florida agree that it is just a matter of time.
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