By Derek Dunn-Rankin, Charlotte Sun-Herald Newspaper. Reprinted with permission.

The phenomenon of psychic wealth is the illusion that you are better off without putting any dollars in your bank account. When local homeowners got their tax notices this fall, they had an opportunity to enjoy psychic wealth. Many saw that the property appraiser reported their homestead was worth $20,000, $30,000 or $100,000 more than a year earlier. The current real estate market tells us that we are poorer than the property appraiser claimed last year. The evidence is in the selling price of today’s new and existing homes.

Having lived through a number of up-and-down cycles in Florida real estate, some things appear evident. Those who speculated beyond their comfort zone will offer attractively priced properties because they must. Those who are hanging on to get the top prices of 18 months ago will have to wait a few years. For buyers trying to determine value, looking over new construction can help in determining the value for the older home that does not have a brand-new roof, the latest in plumbing and wiring or brand-new kitchen appliances with fancy countertops. The same comparison can be helpful to sellers looking to set a price that will move their property.

Developers cannot afford to overprice their inventory and wait for prices to rise. They have debt packages that must be serviced. In recent months they have absorbed millions of dollars of losses as they gave up option payments on large tracts with future development potential. Vacant new construction needs to be moved and is being priced accordingly.

Speculative buying and the appearance of an inventory shortage is responsible for the high prices. Working things in the other direction is the slowdown of new Florida homeowners and an increase in those leaving the state. Population loss was particularly high among young families at the lower end of the income pyramid. The population growth slowdown is temporary but real. Hurricanes were part of it, disrupting lives and making a lot of housing uninhabitable. Increased valuations have led to higher taxes making ownership more costly. Added to that cost is the unreasonable escalation in homeowners insurance. Rising home costs mean the homesteader’s protection from taxable values going up more than 3 percent has new meaning. Starting over in a new home means leaving the tax break behind. This has slowed the normal flux of buying and selling from those moving to larger or smaller homes within the market. The normal movement from condo to single-family residence or in the other direction has new costs.

There are not as many buyers as two years ago, but there is a level of demand approaching our long-term growth rate. The wave of those moving away as a result of the hurricanes has run its course. Memory fades quickly. A few cold northern winters will overcome the hesitancy to retire to Florida.

Those who own their own lot should not find it difficult to get the attention of a local builder and the cost of materials is likely to be competitive. While there will no doubt be some seasonal adjustment as summer approaches, the level of activity is likely to steadily increase. The first of the baby boomer bulge are in their early 60s. Many of them will become our new neighbors.