Miami Back On Top

miami skyline

One of the most frightening phrases in the world of finance and investment is “This time is different.” I always tell clients to run away whenever they hear it.

So what should we make of the news that, as of the start of this year, the total taxable value of real estate in Miami-Dade County, Florida, one of the epicenters of the real estate bust, has climbed above even the heights that it reached before it all came crashing down?

Not much, in my opinion. Because this time really is different.

A decade ago, the real estate bubble in South Florida (and in some other hot spots like California and the desert Southwest) was fueled by easy credit and a belief that housing prices could never decline, no matter how undesirable the location of the housing in question. It was not true then – places like Buffalo and Detroit should have made this obvious – and it is not true now.

But as prices in desirable areas spiraled higher, new subdivisions sprawled far into the swamps of south Dade, which is the mostly agricultural region between Miami and the Florida Keys, and analogous places such as California’s Central Valley. These new homes were hours of gridlocked freeway removed from the places where people wanted to work, shop and relax. But since money was readily available to pay the inflated prices these new homes commanded, and since the homes could not possibly lose value – or so people thought – they sold like hotcakes. Right up until they didn’t.

The hottest markets around Miami today are the ones closest to the action, in the city’s revitalized downtown and across Biscayne Bay in Miami Beach and other shoreline communities. Until recently, the rapid rise in prices in many of these areas was fueled largely by cash buyers from overseas seeking safe havens for their wealth. A slowing global economy has put a damper on such business, but this slowdown has been partly offset by better performance in the United States and, most importantly, the growing interest in relocating to the Sunshine State among baby boomers.

Miami has emerged as a major urban center in ways that were not in evidence even a decade ago. The downtown district offers professional sports, world-class performing and fine arts, and restaurants in a variety of cuisines helmed by celebrity chefs. It also offers the sort of housing and office mix that attracts upscale young professionals who can afford to buy or rent the thousands of pricy condominiums that have been built since the bottom of the bust and those that arrived together with the crash. Transportation options are good and getting better. The Brightline high-speed rail system is expected to link downtown Miami with Fort Lauderdale and West Palm Beach next year, with planned future expansion to Orlando. A light rail link to Miami Beach is also under serious discussion, and unlike many rail projects, this one makes more sense than a bus route. There are only so many ways to get across the bay.

Traffic on the highways is still terrible, and rising prices are putting the squeeze on the many lower-paid workers who still must commute downtown from distant reaches of the county. Some locals resent being displaced from lower-cost inner-city neighborhoods by the influx of new money from elsewhere. Yet the Florida housing stock is, on balance, newer and in better condition than that of older Northern cities, and housing costs have not outstripped what the local economy can bear. Not yet, at least.

So Miami is back, newer, bigger and more glittery than ever. It remains the heart of a region that has seen many boom-and-bust real estate cycles, ever since the great 1926 hurricane put an end to the pre-Depression Florida land rush.

Yes, the market will eventually slow from its recent pace, and construction will have to take a breather. But I don’t see another crash coming any time soon, because – this time is different.

About Larry M. Elkin 552 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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