A concrete example of non-speculation: Florida’s Booming Market in 2021

In 2021, the Florida real estate market saw a very rapid and unexpected rise in prices.

This fast and intense change made some market players think that Florida was in a speculative bubble.

However, the new prices far outstripped historical average values and annual increases. In addition, buyers were willing to pay much more than a few months earlier. Probably, they partly feared that prices might rise further.

Not a bubble, but an adjustment

At first sight, it looks like a classic speculative bubble. However, it is actually an adjustment due to unique and unprecedented external factors. As a result, it probably has little to do with mere speculation.

The role of the pandemic

The primary external factor was the pandemic. In the United States, word soon spread that Florida was not suffering much from Covid-19. The lockdown was bearable, businesses were open, and restrictions were less severe. In addition, the favorable climate and the many properties with open spaces helped. Quarantine seemed more bearable in a home with a garden in the sunny State.

So a huge flow of people from North America moved to Florida. They did it not for speculation, but for a better quality of life and safety for their families. Moreover, these people moved their businesses and enrolled their children in school. At some point, they needed a home.

As a result, there was not simply an increase in demand but a shift in the demand curve. This created a totally different market scenario than before.

Such a situation, although unique and unpredictable, teaches us a lesson. When evaluating market conditions, it is never wise to consider single isolated elements. Instead, we should consider the social and general context of price dynamics. Therefore, we should try to use objective data that is as accurate as possible.