When is the Bubble Going to Burst?
By Andy Weiser
January 1, 2007

It's not.  Period.  That's right, the bubble is not going to burst.  Why? Because simply put, there has never been a bubble in Fort Lauderdale.  The Real Estate market in Fort Lauderdale is and has always been, like a balloon.  Balloons expand and balloons contract. Balloons don't burst unless someone intentionally pops them

Home prices in Broward County used to break records every month and escalate at staggering double digit rates.

 The average price of a Broward County home was an astounding $402,000 in January 2005.  Condos were going up too, around 30% a year.  This frenzy fed on low interest rates and a healthy national and local economy. 

Simple supply and demand  kept prices high.   

Demand 

When people are leaving an area (think Buffalo, NY) there is no demand.  There are lots of homes on the market and prices drop.  This isn't snowy rusting Buffalo.  People want to be near the beach and away from the cold. 

And people who are mid-career are still relocating here, still restarting their lives at our half-a-beat-slower pace.  Others are staying connected to their established careers and becoming consultants for their former employers, making the most of high speed modems, video conferencing and the whole tele-commuting and virtual office phenomenon.   

Nearly all of these folks are coming with piles of cash thanks to their dramatically appreciated homes in New York, Philadelphia, Boston and other urban centers.

Baby-boomers from all over are still planning their retirements and  still buying existing homes and new construction in our area   

Supply 

What is different today  is that is now a greater selection of properties available now than at any time in the past three years.  Many people who bought preconstruction condominiums and townhouses are now in a more negotiable position now that their artificially low rate mortgages are adjusting to their real rates.   

To further constrict supply, Real Estate taxes are forcing some homeowners to stay put.   

If a homeowner sells for ten times what they paid for their home, where can they go with their bonanza?  They can buy a comparable house for roughly the same amount as their sale, or go to a smaller house and hold onto some of their cash.  Either way, the tax bill for the new home will be many times what they were paying before.   

Our property tax system rewards people for staying in a home, contributing to the supply problem.  The elderly and empty-nesters stay in larger homes than they want because moving to smaller, less expensive homes results in higher tax bills.   

National Trends  

People all over the country are predicting that the housing bubble will burst.  Theirs might.  Interest rates will  increase slightly in the near future.  That combined with increased energy costs could slow the whole national economy.   

The economy has sputtered before and caused housing prices in other parts of the country to crash.  But when their prices crashed, ours dipped, or leveled off for a short period of time.   

The demand for Fort Lauderdale housing is not totally immune to national trends.  But unlike the rest of the country, we will continue to experience an expanding and contracting balloon not a bursting bubble.

So What Can Someone Who Really Wants to Buy a First Home Do?  

Put together as much money as you can for a down payment.  Clean up your credit.  Line up a pre-approved mortgage so you know exactly how much you can spend.  Find one established full time professional Realtor you trust and stick with them.  Listen to what he or she tells you.   

If you're a first time buyer in this market, you need  all the expert advice that your Real Estate professional can offer you.

Then, buy exactly what you can afford.  Don't unreasonably overextend yourself because your mortgage broker shows you "creative" ways to finance your purchase.

Finally, don't be afraid to negotiate.  But remember that most successful Real Estate transactions happen when both sides feel that they got a fair deal. 

No matter what, expansion or contraction, as long as you buy what you can afford you'll always be better off as a property owner than a "wanna' be".