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The bloom is off, and we're all suffering

"At first, as in all these gambling mania, everyone gained ... A golden bait hung temptingly out before the people and, one after another, they rushed to the tulip marts, like flies around a honey pot.''

Charles Mackay, Memoirs of Extraordinary Popular Delusions and Madness of a Crowd (1843)

Yes, this happened in the Netherlands in the 17th century, when some investors paid as much for a rare tulip bulb as a house.

But doesn't it seem familiar?

It did to me last week, driving through Royal Highlands and thinking back to three years ago, to May 2005, when demand for real estate in the Tampa Bay area reached its peak.

Speculators were everywhere back then, of course, but nowhere in Hernando did their fever seem as much like a "popular delusion'' as in Royal Highlands, a 36-year-old subdivision that sprawls across northwest Hernando.

"I always describe it as putting a ham bone in a pool of piranhas,'' said June Gulbrandsen, owner of Windward Realty near Royal Highlands.

Sure, I see the subdivision's appeal: quiet roads and an absence of street lights that make for stunning views of the night sky.

It's just that these neighborhoods, especially north of Hexam Road, lack so many features buyers usually value: sewer and water lines, sidewalks, paved roads, and proximity to jobs, stores, parks and (at least for now) schools.

And yet, vacant parcels on the market for as little as $2,000 five years ago sold for 10 times that amount a year later. The following year, the average price for the 1,924 lots sold in Royal Highlands climbed to $38,386, according to the county Property Appraiser's Office.

Prices continued to rise in 2006. But the most active investors began to pull out after watching the number of sales drop to 950.

"The speculators knew,'' Gulbrandsen said.

So who got stuck? The amateurs, especially those from out of state, who paid builders for houses that often depreciated more than $50,000 by the time they were completed, said Jeanne Gavish, a Land O'Lakes real estate broker.

Though homeowners now say values are holding, "for sale'' signs are common on the dusty roads in Royal Highlands, and buyers rare; only 32 lots and 20 houses have changed hands so far this year.

"Royal Highlands has loads and loads and loads of vacant houses,'' Gavish said. "It's like a vacant-house graveyard.''

That has led to crimes such as stealing air-conditioning units, she said. Homeowners who committed to building their lives in Royal Highlands, such as Daniel Montano, 43, on Pipe Finch Road, find themselves surrounded by empty houses and rentals.

So, in a way, they got stuck, too.

Oh, yeah, so did we. The speculation-driven market pushed up property taxes. It led to the current housing collapse in the county — where only 140 permits have been issued this year — that dragged down nearly every other sector of the economy.

"Hundreds who, a few months previously had doubted there was such a thing as poverty in the land, suddenly found themselves in possession of a few bulbs nobody would buy (and) the cry of distress resounded everywhere." — Mackay

The bloom is off, and we're all suffering 05/17/08 [Last modified: Friday, May 23, 2008 11:36am]
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