Back in November 2006, CNN/Money.com published an article titled “Top 10 Cities: Where To Buy Now”. Guess what city was Number One on that list? You guessed it! Panama City, Florida! This article breathlessly predicted that the Panama City median house price would rise by a whopping 72% within 5 years. Seventy Two Percent! They stated that the median home price in Panama City would rise from $223,000 to be $383,000 in 2011! Click here for a link to that article.
Now for a dose of reality. I am writing this in December of 2010…in other words, it’s pretty darn close to 2011. And the median house price? $147,000. That’s 52% IN THE WRONG DIRECTION!
How could they be so wrong?
I remember when that article was published. About 9 million people forwarded the article to me. Realtors phones started ringing off the hook. People from out of town, with money burning holes in their pockets and no local knowledge, flooded the county and bought like there was no tomorrow. A guy from Miami was beating my door down to buy a couple of lots in Cedar Grove. I asked him why he wanted to invest outside of his local area. “I saw it on CNN”, he hold me. “Panama City is going to explode”.
Those of us who lived here (and had been investing here for years) knew better. Bay County was already overbuilt, and values were starting to slip. The peak was behind us.
How could they be so wrong?
I have a mental image of a guy who just graduated from college, working for CNN, MBA hanging on the wall, sitting in a windowless cubicle in New York City, running market projections on software written by a 15-year-old in India. Never been within 500 miles of Panama City. Throw some sales data into some spreadsheet cells, and VIOLA! 72%. It must be true, the software says so! Go to press!
So lots of people spent lots of money in a market they didn’t know, based on information provided by authoritative people who had no clue what they were talking about. You can buy those same houses today for half what those folks paid for them, as foreclosures.
I wonder if the person that wrote that article bought any real estate in Panama City?