Sunny beaches, beautiful people, good food, peace, and quiet, partying, mild winters, low taxes, and high-quality living are just a few of the things people think of when someone mentions South Florida. For years, it has been a destination for celebrities, families, and sun-chasers from all around the world. South Florida cities rank as some of the most diverse in the state. It is a key international hub for the entire country. Miami International Airport served 44 million passengers in 2017 with half being international travelers. It is truly an international destination.
All the indicators suggest that South Florida is an ideal investment opportunity. However, many investors may be troubled by the “Great Recession” of 2008, a time when Florida was hit particularly hard. Thankfully, there are some key differences between that time and today. Higher incomes, stable growth, and responsible ownership all point to a sound economy in South Florida, cementing it as an ideal place for a new investment.
What’s different now?
Higher incomes
There are three key features of post-2008 wealth in Miami-Dade County that make it an excellent investment opportunity. Population growth, low unemployment, and median household income all point to a sound foundation in Florida.
Since 2008, the population in Florida has grown from approximately 18.5 million to almost 21 million as of 2017. With no sign of slowing, people continue to move to Florida in droves. Miami-Dade County’s population alone has risen by more than 270,000 residents, in the last 10 years. The demand for housing will continue to increase. A logical question would be: What happens to these people when they move to Florida?
Just prior to the recession, Miami-Dade’s unemployment rate was 3.1 percent. Unfortunately, by the time the dust settled in August of 2009 unemployment had spiked to a whopping 12.4 percent. Since that time, however, it has fallen precipitously to levels not seen since the mid-2000s. In fact, it has nearly made a complete recovery.
At the same time, between 2010 and 2016 median household income increased by 14.3 percent.
In real estate a key factor, of course, is housing prices.
Stable Growth
Prior to 2008, real-estate values were rapidly increasing across the country, particularly in South Florida. Miami-Dade saw an increase of 84 percent in just a four year period. While this sort of growth is exciting in the short term, it is completely unsustainable. This was proven when housing prices fell nearly 40 percent in just two years, bringing much of the economy down with it.
The good news is that, while recovery has been slower, it is significantly more stable. Over the past 5 years, housing prices in Miami-Dade have increased an average of 10 percent a year. This is a much more predictable, but very strong growth pattern.
Additionally, one crucial variable was present in the pre-2008 housing market that is markedly better now: mortgage default rates.
Responsible Ownership
It is now well known that mortgage defaults were one of the main catalysts for the collapse of the housing market in 2008. Many people purchased homes they simply could not afford and banks let them do it, hoping to protect themselves with “good loans”. As it turned out there were too many bad loans to protect these investments and it all came crashing down.
The recent data, however, suggests that people are farther more responsible with their credit. The Census Bureau considers a “burdened household” anyone who pays more than, “30 percent of their income towards rent or mortgage expenses.” In 2010, this number was 56 percent, in Miami-Dade. It has fallen consistently 1 percent a year so that by 2016, the number was down to 51 percent with no sign of slowing.
According to the U. S. Bureau of Economic Analysis, since 2009, personal income in Miami-Dade has risen by 41 percent.
The combination of a lower debt to income ratio, with increased wealth, show positive trends in the South Florida housing market. As people get wealthier and move to the area, demand for luxury housing will go up. But, unlike in 2008, residents are more certain to pay back their loans. This provides security of investment that was not present in the years leading up to 2008.
The Future of South Florida Investment
One indicator of a healthy economy is a strong housing market. South Florida, now more than ever, is an excellent choice for investment. Bolstered by an increasingly wealthy population, a favorable business climate, and a strong tourism industry we are seeing no signs of slowing growth.
Lower federal tax rates, Florida’s low state taxes, combined with a 75 percent increase in commercial loans, will foster significant business growth in the area. Florida’s economic foundations are strong and are only getting stronger, a wise investor will seize the opportunity to ride the climb.