Although a clear observation shows that the prices in the Southwest Florida real estate market are not experiencing inflation like during the last housing boom, there are experts who feel a time bomb is going to explode. For these analysts, there are already strong signs that a bubble is already inflating.
They are not just guessing, they are pointing to factors they believe is driving this phenomenon. They state that flippers and less strict lending practices are to be blamed. They also pointed out that a widespread shortage of inventory and a disturbing rise in the lack of affordability are other culprits too. For these experts, if nothing is done quickly, we may be witnessing another devastating economic bubble.
For Daren Blomquist, the vice-president of RealtyTrac, a research firm based in Irvine, California, this mix is just perfect for a bubble. He observes that in April, the overall average prices were less than the peak prices during the housing boom but have considerably heightened from their dips during the recession of 2010. For example, the prices of single-family homes, condominiums, and townhouses in Collier County have spiked by up to 60% from their low to reach an incredible $240,000. For houses in Lee, the prices rose by as much as 90%, to $142,500.
But for the homes in Collier County, the prices are still 38% under their peak and as for Lee, about 44% below the peak values. For Blomquist, these are early warning signs. He stated that these properties are not necessarily selling for what the buyers can afford.
Corporations and multi-based investors like hedge funds and banks are now commencing multi-property transactions. These can include vacant lots, condominiums, and single-family homes. These can be purchased either from the banks or from each other. In Collier, almost 50% of all the institutional investor transactions are classified under this group, while in Lee, it is 55%. At a conference in Houston last week of the National Association of Real Estate Editors, Blomquist was one of the experts who sounded a note of warning concerning an impending bubble.
For Naples-based real estate analyst, Tim O’Neill, he is also aware of the fact that investors are involved in flipper transactions, to shore up the values of their portfolios. He said the major problem with this practice is that they are artificially inflating the prices. He also warned that a similar scenario played out itself in the last boom. He said that many are engaging in this because of greed and that the warning signs are being ignored, just as it happened the last time.
A vast majority of these activities has been observed in places like the Golden Gate Estates and Golden Gate, and not even in the more expensive areas west of Interstate 75, he said. Another factor blamed also is that lenders do not seem to have a harmonized guideline any more, just as it was observed in 2005 and 2006. As for some other analysts, they do believe that small bubbles have become more noticeable.