"How long has this been going on?"

Finally there is a consciousness shift as large as the eternal optimism of the late-comers to the "real estate boom"! A few of us began to question the strength of this phenomenal market run-up as far back as 3 years ago. To be frank, it was difficult to be heard in that regard when the air is filled with the yelps of joy of the newly minted real estate tycoons as their flips turn quickly in the air.

There is more of a sober air if not completely candid assessment of the state of the market as we read articles such as today's St. Pete Times article about the mortgage market and the effects of "creative financing" arrangments. It is my sad and pessimistic view that any projections about foreclosures and bankruptcies are clearly understated. There are thousands of homeowners who are vulnerable to the slightest blip in the rate of their mortgage and now with record increases in both real estate taxes and property insurance costs there is real danger in maintaining stability. Fundamentally everything boils down to jobs, if job creation softens and business slows (and Florida's business climate is clearly built on in-migration, construction and service industry employment) there is real desperation on the horizon.

In the meantime I am sure that there are some who hold the view that unpleasant little market blip is just temporary and that there is real opportunity in buying up foreclosures. The problem with that strategy is that this is not a little blip but maybe a bigger "blimp" obscuring the view of the end. Anything foreclosed on that was bought and or financed in the last several years was probably at or near the top of the market and has little nearterm upside. The name of this strategy is patience, there will be many opportunities won on the heap of properties likely piling up over time.

Another current investment strategy involves just renting if you cannot sell. The problem with this is that you cannot very likely cover the carrying costs and find anyone to rent; further there are now and will be more choices for the renter. If we understand this is a buyer's market and will continue that way, we must also accept that this is a renter's market too. The only investor poised to benefit is in a conventional situation with controllable costs and realistic expectations.

The problem in Florida is best illustrated by the fact that the referenced article points out the nearly quadrupling of homes on the market in Pinellas and Hillsborough Counties over the last 12 months. To that inventory will be added a substantial portion of units contracted for before construction that will not close when there is no "greater fool" to sell to at the time of occupancy permit issuance. There are already many stories on the street told by ordinary people who are walking away from deposits to avoid bigger losses.