The real estate bubble is becoming America's most talked about impending disaster since Y2K. I suspect that the reality may be just as much of an anti-climax. I can't speak for other markets but I can speak with knowledge about the Cocoa Beach and Cape Canaveral market. Before the irrational exuberance of the recent condo boom, there was a normal market that consisted of primary residences and vacation homes. That market is still there and is much more healthy than the over-heated, investor-driven one that everyone is talking about. While pre-construction investors are sweating out the next drop in prices and losing sleep over impending closings, there are literally thousands of homeowners who are unconcerned with the short-term direction of property values. These are the ones who live here full time or those from out of town who use their beach places for vacations or get-aways. This is the alternative universe that is invisible to the bubble cult.
Are there problem areas in our market? Yes, most definitely. I've been cautioning about speculation in high-end condos for some time now. I suspect that there will be a lot of pain among the pre-construction investors in high-end condos this year. But at the same time, thousands of homeowners will be enjoying Cocoa Beach for it's beaches, surf, fishing, wildlife and all the other things that make this such a special place in the world. Will the speculators' departure affect this underlying market? Probably. All markets operate on supply and demand. A good analogy comes from Michael Kahn of Barron's. He said, "In the stock market, fuel is trading volume. Without volume, a price advance will soon slow down, if not stop and reverse. Momentum may keep trends going for a while, but sooner or later the market is going to require buyers to put real money where their collective mouths are and buy a lot of shares." This principle holds true in our real estate market. Fewer buyers means less or no price appreciation, at least until the current inventory is absorbed. I am already seeing drastic price reductions and expect more. During this changing time, there will be some outstanding deals to be had for those with the nerve to act.
While we wait out this next phase, I'll be enjoying all that Cocoa Beach has to offer. Hopefully, my next post will include a big fish or surf photo. Until then, as the t-shirt proclaims, "Life is good."
