Of late, there have been several bits of speculation and buzz that indicate that the Orlando real estate market is booming, with reports indicating decreased foreclosures, rising real estate prices, and a rising number of real estate sales. What we must ask ourselves is how stable is this current trend, and are we in promising times or living in a bubble that could end up in an economic collapse in times to come.
What’s changed over the last few decades?
In today’s economic and financial scenario, bank finance isn’t as readily available for Orlando real estate as it was decades before. As an individual investor, individuals are hard pressed to secure bank financing for real estate investments. What then happens, is that the small investors in a hurry to make sizeable profit invest their own funds, often investing entire life savings to purchase real estate in order to reap the benefits in due time.
However, this doesn’t turn out well in most cases, as these investors find themselves struggling with statutory regulations such as tax assessments and payments, insurance premiums, and other fees involved in purchasing real estate. As a result, they get trapped in a state of limbo, finding themselves without their life savings, and with a compulsion to sell at a loss to recover this money.
Additionally, investor groups are backing end users into a corner by securing real estate using cash, as the end users cannot afford to pay all associated fees and taxes since they cannot secure bank financing. Hence, investors will end up driving out these end-users or renting out properties. In case of rent, there is no appreciation in the value of the property, as property values will improve only if there are people willing to purchase them, and start living in them. With the constantly rising prices, these practices place a lot of financial strain on the already struggling end-users.
Why reports don’t tell you things the way you need to see them
Despite the recent reports about reduced foreclosures and rising prices, why is it still a bad idea to invest in Orlando real estate? This is because the reports don’t account for foreclosures that are dismissed due to lack of prosecution, which will not be accounted for until they are filed for again. Another possibility is that banks and similar financial institutions have a role in delaying foreclosures, simply to avoid the added burden of tax assessments and insurance.