2005 – 2020
From “Homebuyer Beware” to “Home Prices in Central Florida Will Double Over the Next 15 Years”
Exactly 15 years ago, in March 2005, I wrote a column for the East Orlando Sun called Homebuyer Beware, where I cautioned the consumer against buying a home during that time. A Swiss newspaper, finding that column a few years later was quoted “…he was writing the script for what happened since…”
Many lost their homes to foreclosure. Homebuilders, developers and banks went under. The world experienced its most severe and global financial crisis since the great depression in 1929. Despite the suffering, a great deal has been learned by homebuyers, homebuilders, developers and banks since. The real estate market recovered, so what is next?
Today I have different advice than I did 15 years ago: Buy a home.
Why now? Some people may say we live in an unstable world, home prices have risen in the last 10 years, what about Corona Virus and this list goes on and on.
Having been in business for more than 30 years, I cannot remember a time of being safe all around. Today most of us feel less secure because we are bombarded every minute with news from all over the world. Twenty-five years ago, Coronavirus would probably not even have been noted in the western world. We have been confronted with several epidemic viruses, such as the bird flu, the swine flu and SARS over the last 20 years. Of course, we must take these and many other threats seriously and I do not want to downplay the Coronavirus; however, I have a feeling that in 1 year from now this virus will not be in the news at all.
While the media leads us believe otherwise, I by and large think that we are living in a stable world. A world which has a more and more aging population, and a prosperity that has never been seen in history. Aging means as well that saving and planning for retirement becomes much more important than 30 years ago. There are many indications that the “state of the world” is improving constantly, life expectancy is at all-time high and poverty at all-time low.
Could this be the roaring 20’s again? Yes, it could, and particularly for central Florida real estate, I believe it will. Contrary to 2005, I am optimistic and will put my money where my mouth is. Over the last 15 years I have done business, mostly tied to real estate, in many parts of the world on every continent. When looking at the price of a home, central Florida is a BARGAIN and yes people have higher average house hold incomes in Zurich, Switzerland or Sydney, Australia, but does that justify the average per square foot price of a home to be $1,000, while here it is around $100? No, it does not.
Central Florida has come a long way! I was honored to be a part of a group of business leaders some 20 years ago on the board of the Regional Chamber of Commerce. On one of our retreats the question was posed, “What do we have to do to make central Florida the best place in the South to live, learn, work and play?” The group came up with 3 great ideas: 1. Build a world class performing arts center, 2. Build a new football stadium; and 3. Strengthen the medical industry and build a medical school. Despite a severe recession, today all 3 goals of that retreat have been accomplished.
When I started doing business in Florida more than 30 years ago, Orlando was internationally known as “one large theme park.” It was uncommon when I told someone that I lived in Orlando, they would respond with, “Really? You live in Disney?” Even when I grew up in Switzerland I did not know Orlando at all. As a child, the Florida that I was familiar with was Miami, because of Miami Vice, and Daytona Beach because of Nascar, not really Orlando. That has dramatically changed, everybody knows Orlando as the number one tourist destination in the world, as well as an economic powerhouse and more.
Central Florida, from Tampa to Orlando to Daytona Beach has done an amazing job diversifying its economy, and so has Florida as a state. Today Florida’s economy has a GDP as large as Indonesia. That translates into a value of economic activity equal to somewhere with almost 300 million in population!
At our group of companies, we often discuss where to invest in real estate. And while we have invested over the past 15 years not only in the US, but Europe, Asia and Australia, today our prime market and the vast of our project pipeline is right here at home in central Florida.
Home prices will go up and down in the next 15 years, like any span of 15 years. So again, like I wrote 15 years ago, don’t buy a home for short term gain. You need to be able to afford it in good and bad times. Today a 15- or 30-year mortgage is at 3-3.5 % (1/3 of the rate it was when I first came to Florida). Can interest rates go further down? They could. In Switzerland home mortgages are at 1% or below and bonds can be issued at negative rates. However, if you buy a home today and pay your mortgage off in 15 or 30 years, I guarantee you, you will not regret that you have made that decision. The market is right, the history is there, the growth is coming, therefore, I predict home prices in central Florida will at least double in the next 15 years!