The Anna Maria Island Sun Newspaper

Vol. 11 No. 22 - March 2, 2011


Are we done with bubbles?

The housing bubble came and went and now we're left with the clean up, but can it happen again? Yale economist Robert Shiller's recent essay in the New York Times thinks probably not, but human nature is nothing if not unpredictable.

The current bubble that we're still digging ourselves out of may be new to this generation, but it's not the first real estate frenzy we've experienced. During the 1920s, the state of Florida was overrun with speculators buying up as much property as they could find. People were waiting to bid on property not yet built and willing to pay unheard of prices. Sound familiar?

At that time the bubble was fueled by overconfidence in the country's economy, the automobile opening up better accessibility from Northern states to Florida and, of course, Florida's advantageous climate. All of these facts drew speculators and investors to the state looking to flip properties for a fast dollar.

This scenario was certainly not dissimilar to what occurred in Florida and other Sunbelt states five years ago, where buyers were putting down large sums of money for condos and housing sub-divisions that were not yet out of the ground. By the time many of these properties were actually built, the bubble had burst, leaving buyers with property worth considerably less than their contract price or their outstanding mortgage.

In addition, occurring at the same time as the building boom, the mortgage markets, encouraged by Fannie Mae and Fannie Mac, started offering subprime mortgages with little or no money down. Suddenly, people who never thought they could afford their own home were given the resources to do so.

Also thrown into the bubbling brew were existing homeowners, who were watching their equity grow and grow and grow sometimes as much as 30 percent a year. This started the refinancing boom, which allowed people to both reduce their monthly mortgage payments with lower interest rates and withdraw equity from their home as their value increased.

All of the money pumped into the economy from a combination of the building boom and refinanced properties impacted not only home values but also home supply retail outlets. When Wall Street stepped in and packaged all the mortgages being approved it tied everything together into one big bubble that was destined to pop.

Almost everything that happened during the years that built up to the bubble started with individuals wanting more than they could afford and someone assuring them that they deserved it. Some of it was just plain old greed and some of it was a desire to have a better life. Either way, according to Schiller, "bubbles are impossible without extreme public enthusiasm."

Schiller and other economists feel it will take a while for the housing market to recover fully, but that another bubble will probably not be experienced any time soon. Shifts in public behavior take a long to manifest themselves, and two bubbles, housing and dot com, in less than 10 years will keep people cautious for a long time. In addition, there are new government regulations being instituted and even the future of Fannie Mae and Freddie Mac are in question.

Hindsight is 20/20, but we still have to ask ourselves why someone didn't figure it out sooner. At least we can now move forward and hope the economists who missed the first bubble are right about not having another one.

Real Estate Transactions
Real Estate Transfers from Jan. 1 to 31, 2011
Sponsored by Alan Galletto Island Real Estate

Sold Date | List Price | Sold Price | Address | Provision | Property Style

Anna Maria

01/21/2011 329,000 310,000 612 North Bay Blvd None SF Res
01/25/2011 1,474,000 1,050,000 103 SeaGrape Ln None SF Res

Bradenton Beach

01/31/2011 179,900 152,500 611 Gulf N Dr # D23 None Condo Res
01/14/2011 299,000 280,000 244 17th St N # 25 None Condo Res


01/27/2011 169,000 150,000 4227 126th W St None SF Res
01/24/2011 749,000 722,000 12519 Safe Harbor Dr None SF Res
01/21/2011 736,800 728,800 12310 BayPointe Ter Reo/Bank Own SF Res

Holmes Beach

01/18/2011 244,700 222,000 3402 Sixth Ave # 3 None Condo Res
01/21/2011 275,000 250,000 6400 Flotilla Dr # 11 Short Sale Condo Res
01/28/2011 349,000 310,000 6200 Flotilla Dr # 293 None Condo Res
01/20/2011 334,900 304,000 6313 Gulf Dr None Condo/TH Res
01/12/2011 699,900 500,000 5808 Gulf Dr # 109 N None Condo Res
01/05/2011 475,000 425,000 526 70th St None SF Res
01/21/2011 498,900 475,000 213 70th St None SF Res
01/14/2011 575,000 570,000 206 55th St None SF Res
01/28/2011 619,000 580,000 309 68th St None SF Res
01/14/2011 1,999,000 1,775,000 717 Key Royale Dr None SF Res
01/31/2011 359,000 345,000 307 63rd St None Duplex Inc
01/21/2011 1,000,050 1,000,050 534 70th St Cash Vacant Land


Source: Manatee County Property Appraiser’s Office

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