We’ve talked about this before, but the real estate market across the country is on fire. Inventory is going fast, and there are far more buyers than sellers. This is a boon especially in luxury markets like South Florida.
Or, it was. This hurricane season has already seen three major storms, with more possibly on the way. And while Miami, a major real estate hub, was spared most damage, the question still remains: did these major hurricanes tank the market in places like Miami and Houston?
Local vs Foreign Investors
Let’s talk about Floridians.
Floridians live in the United States equivalent to Australia. Everything, the weather included, seems to be out to get the human population. This is a place where alligators roam golf courses in search of their next meal.
And yet it’s prime real estate. Thousands move there every year.
Floridians view hurricanes as a matter of course. They fly in, make some trouble, and leave. Damage gets fixed and they hang on for the next season. Hurricane season doesn’t seem to be a major deterrent for locals who understand how the weather works.
But most of the investors in Miami aren’t locals. The vast majority of investments in the Miami area are foreign cash investors, buying property from Europe, Canada, and China. And for investors thousands of miles away, the idea of putting money in the way of a Category 5 hurricane isn’t very attractive.
Firms that specialize in foreign investors are currently doing damage control as they try to convince potential clients that Miami is not, in fact under water or a permanent part of the Everglades now. The worry is very real.
However, savvy investors know not to pass up a good deal, and in a market plagued by increasingly high prices, disasters like Irma can incentivise owners to lower their asking priced in order to attract investors.
We may see a slew of owners scared by the fall-off of foreign investors looking to sell to residential note buyers or other private parties at lower prices, just to off-load properties that were already for sale before the disasters.
This is a boon to private mortgage note buyers who might have found themselves priced out of luxury markets before. The window of opportunity here is short, though, so investors should take advantage while they can.
Even with foreign investors being a little more careful with their Miami investments, there’s no need for a panic.
We’ve seen this sort of thing happen before. In 2005, there were three major hurricanes in a row, and they did much the same as Irma. They disrupted the market, but didn’t do any long-term damage (that wouldn’t happen for another three years, when the economy tanked in 2008).
Instead, what was seen was an increase in hurricane readiness on bought properties. Investors were still interested in prime Miami real estate, but more willing to put down the cash in terms of structural upgrades and protections to keep their investments sturdy in the case of another large storm.
Keeping an eye on long-term trends, however, most financial experts don’t seem too worried that this years active hurricane season will damage the Miami real estate market in any long term way.
Jeff Soffer, a developer in South Florida, told NBC that he doesn’t see the recent hurricanes affecting the rising property prices. He reminded reporters that “(Hurricanes are) just a way of life. It doesn’t happen that often, and the reality is that Florida’s very well prepared for this.”
And he has a point. Those investing in Florida real estate are taking the good with the bad, and it’s not as though they aren’t aware of the risks associated with buying on a peninsula that coined the term “hurricane party”. Often, owning property on South Beach or other desirable Miami neighborhoods outweighs the potential risks of the occasional hurricane.
And if those risks can be mitigated with extra insurance or structural upgrades, all the better.
The reality is that, in the world of investing, there’s no such thing as a perfect location. Every locale has its ups and downs, its pros and cons. In the case of South Florida real estate, you gain an incredible local culture, extravagant lifestyle, and killer nightlife in exchange for the occasional tropical cyclone.
And for many investors, it’s absolutely worth it.