Current State of U.S. Property Values

Current State of U.S. Property Values

Posted on: July 3, 2012


There has never been a better time to purchase an investment property in Florida. This is due to what some are referring to as a “negative real estate bubble”.

A typical real estate bubble is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline to levels prior to the bubble starting.

A negative real estate bubble is where the decline in values reduce even lower than the levels where the bubble originally started. Housing prices in parts of the United States, particularly in Florida, have reached unprecedented lows. In Orlando specifically, the cost to build a new home is almost double what it would cost to buy a pre-owned home.

What does this mean to potential investors? One thing: unprecedented opportunity.

For example, if an investor was to buy a pre-owned Orlando home, he or she would be paying around $55-60 per square foot. An equivalent new build, in the same area, would cost approximately $120 per square foot. Most of the new builds in the Orlando region are being built for the tourist economy, not the residential economy. Builders can’t afford to build new developments when there is no demand for them.

Therefore, in order for builders to start building again, the Florida real estate market must bounce back and it will, but the question is when?

If investors buy Florida real estate now with a long term investment structure in mind, the investor is strongly positioned to see that investment double within five to seven years (projected time for the US economy to recover). The cost per square foot must double for new builds to begin, therefore by the time the market bounces back and reaches that point, the investor’s original investment at $55-60 per square foot is now worth double.

There is much speculation as to the state of current property values in the United States and when the market will begin to bounce back. However, approaching this situation with a long-term investment in mind is the safest way to ensure investors reap the benefits of the current negative real estate bubble in Florida.

For more information about the Florida real estate market and the opportunity for foreign investment, please contact MSR Holdings Inc.

(Photo Via:westtorontorealestate)