After years of wild speculation, enormous home sales and price gains, and record numbers of new homes and condos constructed, it now appears that Florida real estate market may be in serious trouble.
While the nation as a whole saw a year-over-year decline in October housing prices, some of Florida's communities were among the nations biggest decliners. Meanwhile, the foreclosure rate for Florida has significantly spiked upward, foreshadowing continued problems for the real estate market.
Here are some of the details of the statistics recently released:
Three Florida metro areas were hit hard by price drops. In Sarasota, the median home now sells for $320,700, off a whopping 9.4 percent from last year; Palm Bay/Melbourne/Titusville prices sank 9 percent to $193,600; and Cape Coral prices plunged 8 percent to $255,400.
RealtyTrac, an online marketplace for foreclosure properties, reports that 115,568 properties entered into some stage of foreclosure in October, a 42 percent increase over last year and an incidence of one for every 1,001 U.S. households. The comparison with October of 2005 was particularly dramatic because that month in 2005 recorded the highest foreclosure rate last year, according to James Saccacio, chief executive officer of RealtyTrac.
The newest data continued a strong trend from the past three months that shows foreclosures definitely moving upward, according to Saccacio. That puts more pressure on an already strained housing market.
In the month of October 2006, Florida had 11,413 foreclosure filings. That equates to 1 in 640 household - a fifty percent increase over the past 12 months.
Here in Key West, the housing picture looks bleak. The speculation of the past 5 years has driven many local residents off the island, as affordable housing vanished from the Keys. This is the county's number one problem, yet unfortunately they seem to have been unable to find a solution. With a record number of residential properties on the market in Key West (and more continue to be built), and nearly none of them selling, prices will have to fall much further before finding solid footing.
Maybe I was right: everyone in America cannot suddenly afford a second home. The aberration was caused by banks loosening their lending practices (remember interest-only payments?) - eventually building up a pyramid that required new buyers to pay every higher prices. Once prices had reached their peak, a cascade of sellers glutted the market. It was a bit of financial trickery led by aggressive lending practices, and it very well may shake the banks themselves. They have lent too much money for too little equity.
It will be a long time before this housing bubble collapse is over.
Now where are the realtors that were practically promising their customers huge gains? I believe more than one said "You can't lose".