Here is my take:

Florida and Arizona markets are missing a key ingredient compared to California and East coast metro markets: Jobs and quality of jobs. The boom was basically created by flippers from other states trying to ride the baby boomer retirement wave and sun-belt migration wave. However, a market without solid job base is fragile. Most investors bought in Florida are either rich second home investors, true retirees or greedy flippers. None of them have to buy in Florida. They all have primary homes in industrial north eastern states or western states. Buying in Florida is purely a dispensible move, not a necessity. When the boom is over, a lot of the flippers can’t hold the properties, they must take a loss and exit in mass. Florida’s job number and pay level from these jobs are very poor. Florida is basically a retirement/resort/entertainment focused state. Most jobs there are service oriented, thus pay lower wages.

The lesson we can learn from Florida is, a market with less robust jobs can rise very high during a boom, but it also can drop very low during a bust. Therefore, these markets fit whoever who wants to time it, great profit can be derived from flipping during good timing.

LA, DC, San Jose, NYC, Boston markets are very different in nature. They are industrialized and creating lots of high quality jobs. These markets may set back, but the volatility is less. Markets with robust job creation are very friendly for long term buy and hold investors.

Another reason why FL, LV and AZ rose the highest during the boom, in addition to the vacation, sun-belt effects, one key reason is the low entry barrier. These markets present opportunities for people from high price states to buy low and sell high.

In the future, the same mechanism will play out again and again, until one day, Florida and AZ markets will permanently rise to a level that price advantage is no longer present. At that time, the markets there will finally enter into a less volatile stage.