Investors are gobbling up property in Florida and around the country. This past month I was interviewed on NPR about this very subject. Click Here to Read or Hear The Interview
So, is there a new housing bubble being formed? My quick answer is no. While we’ve had strong appreciation, especially in the under $300,000 part of the market, there are reasons for it. Much of it can be attributed to the 17.8% cumulative inflation since 2007, influx of people moving to the area, extreme lack of new construction, and an improved economy.
The possibilities for a bubble would be if we see a giant amount of new construction and investors purchasing them. So far that has not occurred. There has also been lax lending. FHA, which was 3% of market, is significantly higher. I’ve seen some loans go through with homeowners having low-600 credit scores and putting almost nothing down. Last would be if interest rates moved up significantly.
The one item that should be watched is if investors start pooling all of their property in a portfolio and get 100% loans for more than they paid. However, they still have a vested interest in the property value.