Will the migration to Miami last, or is it just the next big bubble? | Opinion
In 2006, the U.S. experienced one of the most significant real estate housing bubbles in history, sending an alarming number of homes in Florida into foreclosure and resulting in the Great Recession. While there were other factors at play, many of us are still hyper-aware of the impacts of a climbing housing economy.
Why am I talking about this today? If you live in Florida, specifically Miami, Fort Lauderdale or West Palm Beach, my guess is you already know the answer.
It is no secret that Florida has been an attractive relocation option for companies and families due to lifestyle, culture, weather and the elephant in the room — no state income tax. In fact, CEOs like Carl Icahn have been migrating to Florida from the Northeast since well before the pandemic.
He had plenty of company. For years, South Florida has experienced a growth of more than 900 people per day that began even before the tax reform of 2017. But COVID-19 changed South Florida’s economy forever, acting as the catalyst for one of the largest migration spikes Florida has ever seen.
This pandemic has acted as an accelerator for individuals, companies, families, and small business owners who were already thinking of making the move. In fact, this quarter alone, we have seen a reduction in residential inventory of 6,095 listings across Palm Beach, Broward and Miami-Dade counties, according to the ISG Miami report for Q1 of 2021 when compared to Q4 of 2020.
Before we start talking about sustainable growth and economic bubbles, it is important to understand the two types of demographics moving here during the pandemic. The first are people in the rental market looking for temporary refuge from the COVID-19 virus. The pandemic pushed these evacuees out of states like New York, California and Illinois as they experienced higher virus pollution numbers and harsh weather. The second demographic includes those seeking relief from the 2017 tax reform. In both of these cases, the driving force is taxes (federal and state).
The pandemic’s work-from-home culture also propelled individuals and companies who were already considering a move to Florida to pull the trigger. This changed everything, as a whole, for the average person. Our real estate market has continuously experienced a huge demand in single-family homes and, as inventory dwindles and vaccinations rise, a renewed interest in condos and the commercial real estate market.
IS IT A BUBBLE?
Florida is a growth market that provides business opportunities for everyone.
When we compare 2006 to the current market, there are a few key differentiators that support the sustainability of today’s South Florida demand.
First, today’s market is fueled by U.S. residents, not Latin American buyers solely looking for a return on their investment. Florida is no longer a state where buyers flock to purchase a summer vacation home like they did 30 years ago. Today, it is a primary residence destination. Americans are buying homes, moving their cars, enrolling their children in school and setting up businesses here. While LATAM buyers were only contributing to the tourism industry, today’s buyers are starting businesses and fueling the economy. The impact of all these people moving to Florida is going to be significant.
Another key factor is the increased relocation of major hedge funds that is diversifying our economy. As these companies move to Florida, they bring thousands of executives and new jobs — and home buyers. These big moves solidify the long-term commitment by many of these companies. For Florida, this is a big deal.
Undeniably, migration to Florida is primarily driven by taxes, starting with tax reform of 2017. There is no reason to believe this basic tax structure will change in the next five years — providing sustainability for the foreseeable future.
CITY ON THE RISE
Miami Mayor Francis Suarez says South Florida is on its way to becoming the next Silicon Valley, and it’s possibly very true. Our economy is going to become far more diverse and how our communities react is a major part of South Florida’s sustainable growth. We are already seeing the diversification of jobs being created due to this migration, from tech to healthcare and education. Charter schools are reaching full capacity for fall registrations and lingering availability is a deciding factor on where families are moving. This creates a huge demand for more schools, which brings demand for more jobs.
In a work-from-home economy, traffic has become an apparent indicator of the palpability of the migration of 2020 to South Florida. The impact on the highways has been significantly noticeable year round versus its seasonal uptick — so much so, that it has driven our government officials to seek solutions from the best innovators in the world, like Elon Musk and his company The Boring Company. Several local municipalities are looking at engineering underground highways.
South Florida has been growing for years and is on the precipice of even greater, unprecedented growth. How we, the people and city officials, respond to this growth and plan for the future will be vital to its sustainability.
Craig Studnicky is CEO and Founder of RelatedISG Realty and Principal of ISG World. He moved from New York to Miami in 1992.
