Naples, Florida is a "poster child" for the speculative frenzy that helped drive up housing costs in the Sunshine State and elsewhere. New research indicates a higher level of speculative buying in the U.S. than previously thought.
In Naples, the frenzied increase in housing prices "prompted economists at banking concern National City Corp. and the economic consulting firm Global Insight Inc. to label Naples 'the most overvalued' housing market in the U.S. in the second quarter of 2005, a dubious honor it retains. Today, prices are dropping, the number of unsold homes on the market has swelled to more than twice the national average and investors are scrambling to unload their properties."
"Economists cite individual investors for pushing prices up excessively and lenders for lowering their credit standards. Borrowers were able to purchase homes with little or no money down and often without having to verify their income and financial assets. In many areas, builders made things worse by putting up too many houses for the market to absorb."
"Many economists and housing industry executives had previously estimated that as few as 10% of the buyers in hot markets were investors. A survey by the National Association of Realtors found that 28% of buyers in 2005 were investors. At the peak of the Naples market in 2004 and 2005, as many as 50% of buyers may have been investors, local real-estate agents say."
"The Naples boom and bust also illustrates how some savvy investors can help rebalance markets, by coming back in and picking up the pieces left by previous investors."
[Editor's note: Although this article is only available to WSJ subscribers, it is available to Planetizen readers for free through the link below for a period of seven days.]
FULL STORY: Speculators Helped Fuel Florida's Housing Boom
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