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The State of the Florida Real Estate Market February 2007
By John Kavazanjian

As an investor or an individual who is about to make major financial decisions, have you ever wished that you could spot significant trends in advance of a climbing or declining market?

Volumes have been written about the growing Florida real estate market and the impending bubble or downturn in this economic marketplace in the last four years. Because I am a very active realtor and student of the South Florida marketplace, my senses tell me that recent events and underlying forces bode well for the Florida real estate market long term.

The 2005 hurricane season had a major impact on a very exuberant real estate market. Until that time the market attracted buyers, investors and speculators willing to pay rapidly rising prices for properties. The physical and psychological damage caused by the storms ushered in a massive and dramatic turnaround from a seller’s market to a buyer’s market.

In early 2006, there was uncertainty in the upcoming storm season, the rising costs of insurance coverage and the higher taxes being paid on rising acquisition prices.  Therefore, many property owners, investors and speculators began to reassess their positions in the market and placed their properties for sale.

The real estate market is just like any other market and adheres to the laws of supply and demand, so the abnormal shift in inventory hitting the market all at once, has caused prices to drop. Speculators who bet on continued rapid price appreciation instead of current cash flow, and buyers who took advantage of liberal financing terms and rates exacerbated this situation. Now, these sellers are more inclined, and in some instances desperate to sell their properties at sacrificial prices, exerting further downward pressure.

In his first thirty days of office, the new Governor of Florida, Charlie Christ, has held special legislative meetings to address the insurance crisis. The initiatives will not completely resolve the situation and the question of coverage for another catastrophic hurricane season still must be evaluated.  However, the repeated and uncontrolled rate increases have been stopped or rolled back, restoring some confidence and comfort level to the average homeowner.

In addition, Christ is now addressing the tax issue. While it is too early too tell what, if any, improvements will come from this action, the fact that it is being addressed is reassuring and of major importance to many Floridians, especially the elderly who are on fixed incomes.

The market needs to adjust to the high levels of inventory (supply) and have more willing buyers (demand) before it changes and prices begin to appreciate once again. However, if you consider the following dynamics as inventory stabilizes you will see that the real estate outlook in South Florida is very strong on a long-term basis.

• The scarcity of land available for building.
• The increased cost of new construction due to higher energy costs.
• Seventy-seven million baby-boomers turning retirement age of which a significant number will choose South Florida for either a second home or their primary residence.
• South Florida is and will continue to be the gateway to South American and some areas of European trade, investment, and finance.
• The weather, despite the occasional storm, is still the best in the USA most of the time.

So if you do your research and find properties that are undervalued, you will have the opportunity to find and acquire them at below market value and successfully enjoy future appreciation of those properties.

The real estate market over the long haul has always gone up. It is a cyclical market and very often makes adjustment.  It is my opinion that we are nearing or at the bottom of the cycle and will enter a period of a more normal 3%-9% appreciation rate once the market depletes itself of the current oversupply of inventory.

If you are thinking of buying or selling commercial real estate, business opportunities, residential income real estate, real estate investments or residential property in Boca Raton, Delray Beach, Boynton Beach, and any other Palm Beach county real estate, I would be pleased

 to meet you and learn more about your real estate needs and desires and professionally help you achieve your goals.