What To Expect In the Coming Decade - Part I - Real Estate
It is part of human nature to find order, which is why we focus on milestone dates. Dates like our 50th or 75th birthday, our 25th wedding anniversary and like many are doing in the last few weeks of this month, the end of every decade.
I have to be honest – it seems like in many ways that 2010 was last week. The year 2000 doesn’t even seem that long ago.
It’s common for us to look back. . . and forward, at the end of a decade. I recall in 1979 watching this awful retrospective on the biggest moments in television in the 1970’s. By today’s standards, the production was awful. It was filled with B movie and television actors who clearly didn’t want to be there but needed a paycheck.
But our entire family sat and watched this awful production. We reflected on what had happened and the potential for the 80’s. It’s human nature.
Personally, I prefer to look forward. It’s nice to remember the past, but the future is where we are going. I can’t make the past better, but I can certainly influence the future. We don’t drive around town looking in our rear-view mirror. We only glance there occasionally to make sure nothing behind us is going to give us any trouble.
There are several trends I’ve been watching lately that absolutely fascinate me. I want to take the next few issues of this blog to talk about them.
The first trend I am seeing deals with the future of real estate. I’m sure you recall 11 years ago when the housing market collapsed.
Some of the places hardest hit by the collapse were parts of Florida. These areas house a significant number of “snowbirds.” Perhaps you are one of them. Vacationers and retirees flock to Florida on a regular basis. As such, the percentage of rental and vacation properties is higher in Florida than in most of the US.
When the financial crisis hit, America’s disposable income dried up. There was no money for second homes or vacations. Real estate prices fell. Developments ceased developing. It was a dark time if you owned real estate in Florida.
At the same time, you could have snapped up some great properties in these areas for cheap money. And many people did. They took advantage of the low costs and bought at a fraction of what the prices were just a few years earlier.
Buyers were confident because they knew that prices would go up and that real estate would continue to boom. The downturn was only temporary. It’s almost a federal law that you have to move to Florida when you retire.
But what if that wasn’t the case? What if Florida stopped growing?
The Phoenix planned community, Sun City, opened in 1960. At the time, people waited in line for hours to get a glimpse of this new development. If you are familiar with The Villages in Florida, this was the precursor. It was a planned community for retirees. It included grocery stores and other shops, doctors’ offices, dentists; even a post office! It had everything a retiree or soon-to-be-retiree would need without ever having to leave town!
You couldn’t have selected a more perfect time to open Sun City than 1960. Over the next 50 years, millions upon millions of successful American workers would transition into retirement and desire to live in a warm, well-designed community of their peers.
Today, Sun City is thriving, but aware of a coming crisis. The community, 40,000 strong, is expected to lose a third of its residents in the next eight years according to the website Zillow. A third!
Sun City, like so many parts of Florida, is packed full of retirees. And we are all getting older and older. Over the next decade, some residents of Sun City will pass away. Others will move from these warm-weather communities back “north” closer to family. In total, it’s about one in every three residents.
That has been a normal part of the community for the last 50 years. But something odd is occurring now: The generation behind the Baby Boomers isn’t as vast. The demand for retirement housing won’t be as robust in the future. And Sun City is just a little bit worried.
What does that mean for real estate in places like Florida, Arizona, New Mexico and the Carolinas? I’m not sure. I believe the housing boom they’ve experienced in the last three decades may be waning.
Does that mean we should sell? Or not consider a move or a second home in these places? Maybe. The good news is I don’t believe this is a fast-moving trend. It will take years for this turnover to occur.
But something is going to happen. It could be that 2040 Florida looks similar to 2010 Detroit – with large formerly developed areas completely devoid of people. Or we could see an influx of a different kind of buyer – maybe immigrant groups will fill in the gaps. Or we could see a change in where Americans in general want to live. People might just move to warmer climates because they are tired of being cold regardless of their age.
We can’t see the eventual outcome – and it will likely be different outcomes for different areas but that change is coming. And it is important for us to monitor it in order to make good financial choices in the future.
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