Now that the federal reserve has been lowering home interest rates many people have been speculating that another housing bubble in the Tampa Bay FL area is on the horizon. After all, isn’t that what made the market expand so fast the last time? While it is true that we are currently hovering around 45 year lows in mortgage interest rates there are aspects of the last bubble that we will not see again any time soon. The main reason for the housing bubble in the Tampa Bay market was the investor specualtion and home flippers. The flippers drove the market with no money down & interest only 100% investor financing loans. Many lenders did not even check to verify employment on these investors. They had no way to actually make payments on their flips except from a previous home flip. When the market started to flatten these investors dumped their inventory & increased the housing supply. Many investors also let their investment homes just go into foreclosure and this also increased home supplies. With supply greatly outweighting demand the market just went down…fast. Although the fed is cutting rates just like they were before the last housing bubble with the lack of available mortgage money for investors the market will not repeat & we will avoid another bubble.
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Jim is spot on with that assesment. I might add that most top financial analysts state that this crisis of defaults on once overvalued properties is not expected to turn around until 2011. That said, high inventories, less mortgage moneys available and stricter mortgage regulations will continue to force housing prices down for the next year (and probably more). In a best case scenario, your home may have hit the bottom (???) and prices will then remain flat for several years. If you’re a home ownwr and are in this for the long haul, you have nothing to worrry about. If you are a speculator or a financially unqualified home owner, you are probably already in serious trouble. For those looking to buy, you need to understand the true nature of this mortgage crisis, and make an educated determination if now is the time to buy in your market or if waiting for the bottom to continue dropping is the way to go. Speculators have nowhere to go. It will be many many years before housing markets realise the types of prices that we were seeing a couple of years ago.
Comment by Mano — February 26, 2008 @ 12:36 pm