Irrational exuberance. Those famous words were uttered by Federal Reserve chairman, Alan Greenspan, during a speech on December 6, 1996 in reference to soaring stock prices. Here is the entire speech for those of you so inclined.
Irrational exuberance is alive and well in our local real estate market but not where one would expect. In the red-hot real estate market of the last 5 years, there has been plenty of justified exuberance as values have skyrocketed. We have seen some property values double in less than two years. The fortunate property owners during this period have every right to be exuberant. The local newspaper has printed countless articles about high appreciation rates and increasing home prices. Buyers have been very aggressive in accumulating properties in order to participate in this unparalleled boom and prices have continued to climb, at least until now. It has become evident in my market, Cocoa Beach and Cape Canaveral, that the pace has slowed considerably. Buyers have become fewer and more cautious. The sellers, on the other hand, are being much slower to come to terms with the slowed market. I continue to see over-priced new listings and increasing inventory of homes and condos. The unwillingness of sellers to adjust their asking price to the new slowed demand has brought us to a teetering point. It can go either way. The buyers can regain their previous zeal for properties and resume paying ever-increasing prices or sellers can get aggressive and reduce prices to attract reticent buyers. My gut feel is that the irrational exuberance today is that of the unbending sellers, clinging to the hope of ever-rising values. As always, I could be wrong. I have demonstrated that capacity in the past. In any event, I believe that buyers should negotiate aggressively and use this softening to their advantage. Good luck out there. Do your homework and don't overpay.
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