For nearly three years I watched people buy and sell raw land and make huge profits. But then like a train barreling down the track the engine died.
I wasn’t just close to the dealings of others. I purchased a parcel of land in a subdivision of the Florida panhandle two and a half years ago. It’s a small 35 parcel development, where only 7 homes have been constructed. We had a home built on ours.
What I was witnessing burned on my conscience. As an ex-professional journalist of 20 years, I saw people investing in land, knowing some would never get the money out they had invested.
Our small development is like many others scattered all over Florida and other states. All of the other lots in the development have been sold except two. All of them except a handful have been bought and resold several times as the prices continued to rise until the sales stopped. It was like witnessing a new odd form of the Pyramid scheme.
It didn’t take long before realizing that this great land buying frenzy was not limited to just the panhandle of Florida. When I talked with friends and colleagues in other Sunbelt states they talked of similar developments. Soon I learned this great land rush was a national frenzy.
This small subdivision is like ice frozen in the warm Florida sun. It has melted down to a standstill. No one is building homes in it now. The weeds and new baby pine trees are growing on the vacant lots, where houses were to be built.
Shortly before the prices hit three and a half times what they were to start when we bought our lot, I knew the faucet would be turned off with the increasing interest rate hikes. Many new land owners would be left holding the bag.
I thought, ‘Did these people really think that the rush to buy land in the real estate market would keep up forever?’
In many ways it reminded me of the old Pyramid scheme, where one investor gets his or her investment back with a profit only after bringing another into the game. When the pipeline of investors dries up, those who are the last to get in lose their money and the Pyramid collapses.
Booming real estate markets always have their adjustments. Some are minor. Others are major adjustments. It’s the history of real estate cycles in America. When I’d tell others about what I saw occurring they’d say, “You can’t worry about what other people do.” It was their way of coping, escaping perhaps from the reality of it, as if it was an excuse.
I broke the story on the U.S. Land Fraud Scandal after more than a year of research and interviews into the issue on a variety of fronts. Perhaps I broke the story because few others were as close to it as I was.
At first I thought it was just a regional or Statewide spike, only to learn from friends in other parts of the nation that the same thing was occurring in their area. The Sunbelt states seem to have the highest level of transactions.
The U.S. Land Fraud scandal may never be as financially destructive or draining on the U.S. economy as the Savings and Loan Crisis, but it will have massive effects on hundreds of thousands of people who invested in raw land in many places in America. It will also have significant effects on our nation’s banks, and threaten financial ruin.
It took more than a year to collect the information, conduct the interviews, gather the full story to put it into its accurate perspective. During this time, I knew many who bought land and they would talk like gamblers around a Crap table, hoping to strike it rich. I know one who made more than $1 million.
The very nature of real estate investing does not lend itself to making a quick buck. Real estate investing has historically been a long haul investment. But the fever pitch of the U.S. Land Fraud scandal was charged with one fundamental aspect of investors – greed. Many people will be “left holding the bag.” Without the means or income to support payments on a loan, a massive number of foreclosures will occur.
Whether the U.S. Land Fraud scandal will ever be as large as the U.S. Savings and Loan Crisis is an open question for economists and other experts to resolve, but it’s sure to have significant impacts on our nation’s economy.
On Real Estate Add we extensively report in a series of reports on the U.S. Land Fraud scandal in an Exclusive series, the third of which looks at ways to help resolve the fraud before the land markets fully come crashing down.
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More About Mike Colpitts: Mike Colpitts is the publisher of Real Estate Add, an information driven website on real estate markets throughout the nation. For full reports on the U.S. Land Fraud Scandal visit www.realestateadd.com It’s All About Living Better. |
