There was a bubble in dirt as well...

Posted by: Dean Foust on February 8, 2007

So much ink has been spilled over the bubble in housing, but it’s now apparent that there was similar speculation in the raw land upon which developers built all those new houses. In some parts of Florida, land prices have collapsed 50% and yet buyers aren’t stepping up because they expect prices to plunge another 30%. In many cases, builders who took out options on parcels of land have chosen to walk away and swallow the losses on the option. Bloomberg has a good take on the situation, although one question is doesn’t answer is what effect the plunging land values could have on small, local banks, which are the institutions that I believe often make the loans for small builders to buy land. If those small builders lose their shirt on plunging land values, that could spell trouble. Read on…

http://www.iht.com/articles/2007/02/07/bloomberg/bxhome.php

 

About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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