Home prices have been surging in South Florida and beyond over the past few years, with recent months bringing record-breaking numbers. However, what seemed like positive news at first glance has some housing experts fearing the worst.
Bubble or No Bubble?
The primary reasoning for the growing suspicions that our market is dealing with a bubble (a spike in housing prices brought on by high demand) is the drastic rise in home prices. On a national level, prices have leaped above 2012’s average by 50 percent. For Miami in particular, prices have climbed a whopping 141 percent from the low just 4 years ago, when the housing crisis hit bottom, and Miami’s prices had sunken by 69 percent. While this all sounds like fantastic news, it has housing experts experiencing déjà vu.
When the bubble burst back in 2008 the circumstances were different, but a housing burst will be damaging nonetheless. Poor lending practices were responsible for the last bubble seen in the U.S., and when more than 7 million homeowners ended up in foreclosure, the burst followed. Home values dropped consistently from 2008 to 2012, when things finally started looking up again. The bubble South Florida’s presumably experiencing now is said to instead be caused by a rise in foreign investors developing in the area, coupled with low interest rates.
What a Bubble Would Mean for Foreclosure Activity
Any Miami foreclosure defense attorney can tell you that a bubble burst spells bad news for homeowners. When home prices start creeping upward, people often engage in risky behaviors regarding the housing market that they otherwise wouldn’t. For instance, someone might buy a home which he can’t quite afford, with the notion that its rising equity would work to his advantage down the line. For others, such behavior may have included taking out a second mortgage to pay off debts while home values continued to climb. That said, a bubble in and of itself isn’t the real problem facing homeowners. What people need to be concerned about, rather, is a bubble burst.
When the bubble does burst, home values will likely plummet. At that point, those risky behaviors discussed earlier could quickly lead many homeowners right into foreclosure. What’s worse, a burst is difficult to predict, and much like determining whether a bubble even exists, it is always purely speculative. Homeowners should remain prepared for the possibility of a burst, even if one doesn’t seem likely. By practicing smart financial decisions and consulting with an experienced Miami foreclosure defense attorney when trouble seems to be brewing, a bubble burst doesn’t have to mean foreclosure.
If you have questions about foreclosure, our team has the answer you need to stay in your home and protect your financial future. Call a Miami foreclosure defense attorney at Graham Legal today for a free consultation.