What Florida foreclosures mean for Sunshine State real estate markets would make for a complete economics textbook that looks at how boom-and-bust economic models always assert themselves even in the greatest of economies. This means that even Florida isn’t immune to the natural cycles of economic behavior, though it managed to stave off those behaviors for quite a while, it seems.
The problem with this current bust, coming as it did and which has been causing drops in real estate values of at least 40% in the state, is that it is extremely deep and markedly widespread. This is so because much of Florida real estate valuation had no rational basis for quite some time. Homes were going up in value based solely on overheated demand that was bound to diminish sooner or later.
This drop-off is a direct result of the steep recession that became the basis for Florida’s continuing drop in real estate values. In a recession, buyers tend to hold onto what they have rather than get back out in the marketplace. When demand drops off for homes, their prices and values soon decline. In Florida, many people have been sitting on overpriced homes with no buyers in sight, it seems.
In hindsight and in looking at these properties, it becomes clear that many got into the market based on speculation that values would continue to go upwards. They bought homes on adjustable-rate mortgages or with very little equity and did not expect that the steep decline in home values would occur, leaving them with homes they couldn’t sell and without a way to make a profit from them even if they could.
The fact that many were also sitting on mortgages that were offered at an initially-low interest rate and low monthly payments that are soon scheduled to increase (sometimes greatly) means that they also have to deal with new and steep monthly payments. As a consequence, many are beginning to consider foreclosures as a way out of the bind they find themselves in.
At one time, going into foreclosure was probably the last thing any home owner would consider doing, but attitudes toward even this financial issue have begun to change among many homeowners. This might be because people now live in a more disposable culture in terms of outlook, and their homes have now become no different than anything else they dispose of eventually.
Whether this attitude will continue to cause a rise in FL foreclosures or not can’t yet be determined, but there’s a dim hope, at least, in the fact that Florida continues to benefit from a general feeling that it’s the place to be for those looking for nice weather and nice homes. If any state can pull out of such a dive, in fact, it’s Florida most experts would say.
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