Florida Virtual Houses

What If the Housing Bubble Never Happened?

August 11th, 2009

Slow and steady housing markets now seem to be in better shape than markets that boomed and busted such as Florida and California. But does that mean that homeowners in the former bubble markets would have been better off if the housing boom never happened?

University of Central Florida finance professor Stan Smith decided to explore that question by studying Orlando metro home prices. Turns out that prices probably would be about the same today even if the area had never experienced a bubble and bust, Smith told the Orlando Sentinel.

Smith says that buyers who bought before 2005 should not have been hurt because prices went up before they went down. Orlando area prices rose 20% in 2005 and 32% in 2006, but -- on average -- they climbed just about 4.7% a year since the 1970s. "Most homeowners are within 6 percent of where they would have been had there not been a bubble," he told the newspaper. "A lot of people did buy in 2005 and 2006, and obviously they have been hurt significantly."

The strongest markets in Zillow.com's second-quarter home value report released today are primarily metros that never had housing bubbles or crashes. Many of the metros are affordable places such as Binghamton, N.Y., Fayetteville, N.C., and Little Rock, Ark. where few homeowners made fortunes on real estate and few were ruined by it.

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