Top Three Takeaways – December 8th
- Follow the money. The saying has been used for longer than I’ve been alive and it’s as relevant today as it’s ever been...especially in South Florida. While the migration from New York (and other high tax states) to Florida has been happening for nearly as long as the phrase has been used, we’ve never seen migration like we have over the past year. First it was Carl Icahn’s $12 billion behemoth Icahn Enterprises relocating from New York to Sunny Isles. Then it was Paul Signer’s $38 billion empire, Elliott Management ditching New York City for West Palm Beach. And now could it be that THE name in the financial asset management business, synonymous with Manhattan, Goldman Sachs will do the same? 2,000 employees and $1.8 trillion. That’s the size of Goldman’s asset management business and if Bloomberg’s reporting is true – the headquarters for that business will be coming to West Palm Beach in the new year. What’s funny is that on Wall Street it’s often said that the “smart money” that’s them, is most often ahead of the “retail investor”, that’s you. Well in this case, the opposite is true. If you’re a transplant from a high tax state like half of South Florida, including my parents, you were ahead of the “smart money” this time. And that leads to...
- Home prices. Increasingly I’m hearing questions from listeners wondering if it’s really a good time to buy a home because of how hot the current real-estate market is. It’s understandable. Finding an inhabitable home that’s not under contract below $500,000 isn’t the easiest thing to do right now. Plus, if you’re seeing prices anywhere from 10% to 20% higher than a year ago for similar homes it’s natural to kick yourself first and think twice before buying today. But then consider what’s driving the market. Desirability, an increased focus on one’s home during the pandemic and record low mortgage rates. So, here’s the question for you. Are interest rates likely to rise meaningfully anytime soon? Nope. Is South Florida about to become any less desirable? With over 800 transplants moving here per day, that’s a double nope. Even if the pandemic ends in the not-so-distant future are people going to immediately go back to the way life was before or have certain aspects of our society now permanently changed - like making one’s personal space at home a priority? If even two of those three remain intact in 2021, prices will continue to appreciate and those who can buy but wait will really be kicking themselves a year from now.
- History as a guide. There is literally only one time in American history in which buying a home today wasn’t better than waiting longer than a year to buy. The Great Recession which was largely caused by an overinflated housing market. So that begs the question, could the current market be setting us up for a repeat? Aside from reforms which banned the type of “liar loans” which created the subprime mortgage crisis – the answer is emphatically no. At the peak of the South Florida housing boom in 2006, fewer than 10% of all homes purchased were bought with cash. Currently 38% of all South Florida homes are purchased with cash. That’s nearly double the national average. I don’t know where exactly the market is headed from here, but it’s long been true that if you intend on being here for at least three years it’s better to buy than to rent. That’s incidentally what the “smart money” is still doing.
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