CDK Group, Inc.

Many folks have asked me my opinion on the future of real estate in Florida. Are we experiencing a bubble here in Florida? The first thought that typically comes to mind is, Duh, of course we are experiencing a bubble.

We are/were experiencing a bubble in ANTICIPATION of the baby boomers moving to Florida. We have better than average growth in Florida, but that is not what fueled prices to all-time highs. In my opinion, the primary factor was the speculators buying properties in anticipation of the baby boomers.

It was magnified why foreigners taking advantage of the weakness of the dollar internationally. Anyone who went to auctions could tell that many of the bidders were not from around here and not from the coasts either. They were from all over the world and for many of them the dollar was trading at a level providing them a 20% discount on their purchases.

In addition, the hurricanes wiped out for differing lengths of time a fair percentage of the available housing from Captiva to Lake Wales. I've seen estimates as high as 15% of the available housing in those areas. Those kind of numbers definitely alter supply/demand.

A booming economy left many Americans flush with cash. Many who had been torched by the dot.com bubble of the late 90's. They just didn't trust the stock market to the same degree and instead diversified their investments into the investment of their forefather, real property. Many made a killing. You probably know someone.

All of these issues made investment tools like cap rates, Gross rent multipliers and cash flow analysis useless. People were not making sound financial investments, they were betting it all on the come, basically gambling on anticipated rising markets. If interest rates continue to rise and the market slumbers further, you will see many of these types on the front pages of your local newspaper under the topics of foreclosure and bankruptcy.

Thankfully, for investors like me who wish to invest in Florida investment properties for the long-term, we are seeing prices come back down to a more sustainable level. They are still much higher than they were just two years ago, but nothing near what they stood just months ago. In all honesty, housing in Florida were priced at levels 15-20% below the nationwide average just two years ago. A third-grader that just visited Disney could tell you that had to change. So, no matter what, I don't see us going all the way back from whence we came.

The fall out from the bubble we just witnessed for us has been good and bad. Property taxes are skyrocketing, thereby adding costs that will detrimentally impact the bottom line. However, rent rates are rising substantially for the first time in years. Florida has traditionally paid below nationwide average for commercial and residential rents. That has and will continue to change.

I still believe that Florida is THE place to be for long-term real property investing. Too many people love warm weather. In my opinion, this market should peak 15-20 years from now when the baby boomers are retiring in mass.