Danger Ahead: Real Estate Experts Say Price Spike Heightens A Bubble

bubbleIf the predictions and projections of some real estate analysts are to be trusted, then the much-dreaded bubble might just be in the offing. At the four-day National Association of Real Estate Editor’s annual conference, this was the crux of the matter, and the analysts felt free to make use of the much-feared ‘B-word’.

Although the general belief is that many homes across the country are actually under priced, like in Southwest Florida, that has not stopped the investors from making moves to that will eventually shift the prices up to a level that cannot be maintained anymore.

Even if investors get to close just 10% of the sales across the nation nowadays, they were able to take many homes in distress during the recession. This is now the time for them to reduce some of those accumulated real estate load. For some of them, the method to do this is to sell these homes among themselves at prices that are increased to elevate the values of their portfolios.

But even though this looks really clean and straightforward, it is having some unintended consequences. For instance, artificially induced double-digit jumps in the prices are now being recorded. It may show a sign of recovery but this is false. Jack McCabe, a real estate consultant based in Deerfield Beach in Florida, echoes this same view. McCabe is more direct and blunt: ‘I see trouble ahead.’

In places like the counties of Lee and Collier, the prices of homes have skyrocketed since the recession. In fact, in the Sea Grove subdivision of The Dunes of Naples, home prices have exploded to an all-time high. However, an April report released by RealtyTrac, a research firm based in California shows that they are below the peak levels that they recorded during the housing boom.

According to the report, the median home prices in Collier County were decreased 38% from a $390,000 peak in May 2006. As for Lee County, the prices were 44% below their median high of $256,000 as recorded in January 2007. The experts claim that for a condition of recovery to be sustainable, the homes have to be within the reach of the average buyer.

There are also other factors that have to be considered in the picture. As a result of the influx of foreign investments, hedge funds and very wealthy buyers interested in expanding their portfolios, there is usually very little left for the average buyers to haggle over. Whether a bubble will burst soon or not, time can only tell.