The Florida real estate market is often regarded as a forward indicator of the disposition of the national market in times to come. To illustrate this, Florida was among the first states to feel the devastation brought about by the collapse of the real estate market in 2008. Conversely, Florida was also one of the first states to see the huge increases in home values that began in the late 1990's and continued until last year. This economy presents an interesting example of the mechanics of the housing market and of markets in general.

Florida has a large retirement-age population as well as a large affluent population who are drawn to the region for its famously-pleasant weather, Oceanside environs and diverse population. During the last ten years, the prices of Florida homes, especially in certain markets, became artificially inflated due to the same market forces that wreaked havoc on Wall Street: fast flowing credit, overvaluation and the sort of free-for-all mentality that is bound to occur every so often in anything so driven by human emotions as is the free market. After an incredible spike in home prices, Florida saw it all come crashing down.

The burst of the housing bubble had horrible consequences for the state and some who had bought near the peak found themselves in a situation where losing out on their investment was the only possible outcome. Home prices continued to fall and fall and consumers became more anxious. At least, some of them became more anxious. Those who had planned to turn this crisis into an opportunity were waiting for the right moment and, when it came, they reacted.

The South Beach, Florida market is a good example. Condominium prices bottomed out within the last few months and then, as the economy in general has seemed to begin doing, started to rise back up. The prices for these properties are still very low but their value is becoming more commensurate with their actual value than with their value calculated by the circumstances of a significantly cramped market. Today, with those prices bottomed out and beginning to rise, investors and homeowners have begun to pick up those properties again and inventories have begun to shrink. This is likely to be the scenario across the country, slow, steady recovery and a gradual return to sensible values for real estate holdings.