Financial Implications Of The Current Recession

An article came out last Friday written by Dave Carpenter and Jeannine Aversa, business writers for the Associated Press entitled, "Slowly, Americans are Regaining Their Lost Wealth ".

On the surface, this seems like a ray of hope moving beyond this economic downturn... the worst since the Great Depression of the 1930's. It is fairly inconceivable that American Household net worth that had soared to a pre-recession peak of $65.9 trillion had fallen to its low of $48.5 trillion in the first quarter of 2009. "Net worth is the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards." That is a 26.4% drop or over a quarter of each American family's net worth over that 2 year period! To recoup to pre-recession times, the net worth would have to climb over 21% from its latest 2009 4th quarter level of $54.2 trillion.

We have seen rebounds from previous recessions spurred on by consumer confidence and therefore more spending. Americans, in general, have had the wind knocked out of their sails during the last 2 years and are naturally cautious. However, what makes us strong as a nation is that we are a land of hope, entrepreneurism and determination to make things better. That is what will pull us out of this slump and lead us forward into a new period of prosperity.

It is a little like watching the impact of this long stretch of cold weather we have experienced the last 2 months on our beautiful palm trees here in Tampa Bay. They looked so brown and bleak from the cold. Now that our beautiful weather has returned, there are new bright green sprouts reflecting the new life and beauty just around the corner.

$1 Million - Champagne Wishes & Caviar Dreams? Look What It Can Get Today!

When we relocated to the Tampa Bay area from Atlanta in 2002, we were at the early stage of the amazing journey that would take hold of property value along the beaches of Tampa Bay! At that time, there was no such thing as a condo for a million dollars. That was a price threshold that no one dared to break through. We had listings in the $900,000 range that sat on the market for months... no one was even easily stepping up to that amount.

Then, in late 2004, two things seemed to happen at once. The $1 million threshold was broken through with a vengence AND all of the sudden there were builder's cranes on every corner. Driving down Gulf Boulevard, we often laughed that the new state bird of Florida was the crane! Developers were rushing to create slick promotional packages for new developments and buyers were lined up to take advantage of the early entry deals. It was then that the idea of "flipping" took hold and sometimes a property could be sold and resold several times before it was even built! The buyer that finally closed on the unit upon completion might have paid substantially more than his next door neighbor who was an original buyer.

Over 1000 people were moving to Florida a day, and property values were moving up at such a rate that investors were flocking to buy multiple properties. Add to that the interest only low rate mortgages and 'drive by' appraisals and quickly people got in over their heads... literally without knowing it. In 2006, you could not find any new property on water for under $700,000! And there seemed an endless appetite for those properties at any price. Yet underlying this euphoria was a stream of devastating hurricanes that sent a shock wave through those considering living along the coastline. Simultaneously, property insurance skyrocketed as did property tax. Now those carrying costs grew! Density laws were forcing larger and larger residences and price points continued to climb... $2 million, $3 million. Where was the ceiling?

By the beginning of 2007, the dam was bursting! New complexes that could see the writing on the wall were rushing to get their units closed... and being sure their corporate entities were secure that they would not face the final liability. Complexes that were still under construction found that many of their buyers elected to 'walk' and leave their deposits behind. In some cases, they were the lucky ones.

The buildings built after 2004 all fell under the newer, stronger building codes and after 2005, almost all new construction was block construction rather than frame. The point is that going forward there will be very little inventory that was built in 2008 or 2009... no one was building any more. The savvy buyer today will look for waterfront buildings built in 2005-2007 at 30-40% off their original appraised values!

The Purtee Team knows which buildings should be considered (and which ones have issues)... and can help determine the best opportunity within those buildings. Contact us today to learn more! www.floridagulfproperty.com